ISG MONEY MARKET FUNDS
PROSPECTUS
CLASS A SHARES
The ISG Money Market Funds (the "Funds") are three separate series of The
Infinity Mutual Funds, Inc. (the "Company"), an open-end, management investment
company. These Funds will invest primarily in short-term securities and will
seek to maintain a stable net asset value of $1.00 per share. Each Fund has a
different investment policy.
o The PRIME MONEY MARKET FUND 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. This Fund will invest in
short-term money market instruments.
o The TREASURY MONEY MARKET FUND 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. This Fund 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.
o The TAX-EXEMPT MONEY MARKET FUND seeks to provide investors with as
high a level of current income exempt from Federal income tax as is
consistent with the preservation of capital and the maintenance of
liquidity. This Fund will invest in short-term Municipal Obligations.
First American National Bank (the "Adviser") is each Fund's investment adviser.
BISYS Fund Services Limited Partnership ("BISYS") serves as each Fund's
administrator and distributor.
By this Prospectus, each Fund is offering Class A Shares. Each Fund offers other
classes of shares pursuant to separate prospectuses, and such shares are not
offered hereby. The Funds' share classes are identical, except as to the
services offered to, and expenses borne by, each class which may affect
performance. Investors desiring to obtain information about the other classes of
Fund shares should ask their sales representative or call the number set forth
below.
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AN INVESTMENT IN A FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE FUNDS WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE.
FUND 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. FUND SHARES INVOLVE CERTAIN RISKS, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL.
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This Prospectus sets forth concisely information about the Company and the Funds
that an investor should know before investing. It should be read and retained
for future reference.
The Statement of Additional Information, dated October 16, 1998 with respect to
the Tax-Exempt Money Market Fund, and April 24, 1998 with respect to each other
Fund, 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. Each has been filed with the Securities and Exchange Commission
and is incorporated herein by reference. The Securities and Exchange Commission
maintains a Web site (http://www.sec.gov) that contains each Statement of
Additional Information, material incorporated by reference, and other
information regarding the Funds. For a free copy of the Statement of Additional
Information for any Fund, write to the Fund at 3435 Stelzer Road, Columbus, Ohio
43219-3035, or call 1-800-852-0045.
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.
NOVEMBER 9, 1998
AS REVISED, APRIL 15, 1999
<PAGE>
TABLE OF CONTENTS
PAGE
Fee Table.........................................................
Description of the Funds..........................................
Management of the Funds...........................................
How to Buy Shares.................................................
How to Redeem Shares..............................................
Exchange Privilege................................................
Dividends, Distributions and Taxes................................
Financial Highlights..............................................
Performance Information...........................................
General Information...............................................
Appendix..........................................................
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DISTRIBUTED BY: INVESTMENT ADVISER:
BISYS Fund Services Limited Partnership First American National Bank
3435 Stelzer Road 315 Deaderick Street
Columbus, Ohio 43219-3035 Nashville, Tennessee 37237
o For information about opening an account and other Fund services call:
(800) 824-3741.
For voice recorded price and yield information call: (800) 852-0045.
o To execute purchases, redemptions and exchanges and for information about
the status of your account call: (800) 852-0045.
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<PAGE>
FEE TABLE
<TABLE>
<CAPTION>
PRIME MONEY TREASURY TAX-EXEMPT
MARKET FUND MONEY MONEY MARKET
MARKET FUND FUND
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of
offering price)................................................. None None None
Maximum Deferred Sales Load (as a percentage of the
amount subject to charge)...................................... None None None
ANNUAL OPERATING EXPENSES (as a percentage of average daily net
assets)
Management Fees................................................. .25% .25% .35%
12b-1 Fees...................................................... None None None
Other Expenses.................................................. .62% .50% .57%
Total Fund Operating Expenses................................... .87% .75% .92%
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.......................................................... $ 9 $ 8 $ 9
3 Years......................................................... $ 28 $ 24 $ 29
5 Years......................................................... $ 48 $ 42 $ 51
10 Years........................................................ $107 $ 93 $113
</TABLE>
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THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS REPRESENTATIVE OF
PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5% ANNUAL RETURN, EACH FUND'S
ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL RETURN GREATER OR LESS
THAN 5%.
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The purpose of the foregoing table is to assist investors in understanding the
costs and expenses borne by the Funds, the payment of which will reduce
investors' annual return. The expenses noted above do not reflect any fee waiver
or expense reimbursement arrangements that may be in effect. Other expenses for
the Prime Money Market and Treasury Money Market Funds reflect amounts for the
fiscal year ended December 31, 1997. Other expenses for the Tax-Exempt Money
Market Fund are estimated based on amounts for the current fiscal year. Certain
Service Organizations (as defined below) and other institutions also may charge
their clients direct fees for effecting transactions in Fund shares and the
Adviser, its affiliates and certain other institutions may charge customary
account and account transaction fees, which are not Fund related, with respect
to accounts through which or for which Fund shares are purchased or redeemed;
such fees are not reflected in the foregoing table. For a further description of
the various costs and expenses incurred in a Fund's operation, as well as
expense reimbursement or waiver arrangements, see "Management of the Funds."
DESCRIPTION OF THE FUNDS
INVESTMENT OBJECTIVES
Each Fund's investment objective is set forth on the cover page of
this Prospectus. The differences in objectives and policies among the Funds
determine the types of securities in which each Fund invests and can be expected
to affect the degree of risk to which each Fund is subject and each Fund's yield
or return. Each Fund'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 Fund's outstanding voting shares. There can
be no assurance that each Fund's investment objective will be achieved.
MANAGEMENT POLICIES
Each Fund seeks to maintain a net asset value of $1.00 per share for
purchases and redemptions. To do so, each Fund uses the amortized cost method of
valuing its securities pursuant to Rule 2a-7 under the 1940 Act, which includes
various maturity, quality and diversification requirements, certain of which are
summarized below.
In accordance with Rule 2a-7, each Fund is required to maintain a
dollar-weighted average portfolio maturity of 90 days or less, purchase only
instruments having remaining maturities of 397 days or less and invest only in
U.S. dollar denominated securities determined in accordance with procedures
established by the Company's Board of Directors to present minimal credit risks
and, with respect to the Prime Money Market Fund and Tax-Exempt Money Market
Fund, which are rated in one of the two highest rating categories for debt
obligations by at least two nationally recognized statistical rating
organizations ("NRSROs") (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 Company's Board of Directors. The
NRSROs currently rating instruments of the type the Prime Money Market Fund and
Tax-Exempt Money Market Fund may purchase are Moody's Investors Service, Inc.
("Moody's"), Standard & Poor's Ratings Group ("S&P"), Duff & Phelps Credit
Rating Co. ("Duff"), Fitch IBCA Inc. ("Fitch") 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
relevant Fund's Statement of Additional Information. There can be no assurance
that each Fund will be able to maintain a stable net asset value of $1.00 per
share.
PRIME MONEY MARKET FUND--The Prime Money Market Fund 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, asset-backed securities, 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 Fund 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 Fund will not invest more than 35% of
the value of its total assets in foreign securities. Securities in which the
Prime Money Market Fund 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. See
"Appendix--Portfolio Securities." The Fund 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 Techniques." During normal market conditions, at least
25% of the Prime Money Market Fund's total assets will be invested in domestic
and/or foreign bank obligations. See "Investment Considerations and Risk
Factors--Bank Securities Risk" below.
TREASURY MONEY MARKET FUND--The Treasury Money Market Fund 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 Fund 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 Techniques."
Instruments which are issued or guaranteed as to principal and
interest by the U.S. Government constitute direct obligations of the United
States. The Treasury Money Market Fund 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 Treasury
Money Market Fund 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.
TAX-EXEMPT MONEY MARKET FUND--The Tax-Exempt Money Market Fund will
invest, as a fundamental policy, at least 80% of the value of its net assets
(except when maintaining a temporary defensive position) in short-term debt
securities the interest from which is, in the opinion of bond counsel to the
issuer, exempt from Federal income tax ("Municipal Obligations").
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. 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 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. 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 Obligations and purchased and sold
separately. See "Investment Considerations and Risk Factors--Risk of Investing
in Municipal Obligations" below, and "Appendix--Portfolio Securities--Municipal
Obligations."
The Tax-Exempt Money Market Fund may invest in industrial development
bonds which, although issued by industrial development authorities, may be
backed only by the assets and revenues of the non-governmental users. Interest
on Municipal Obligations (including certain industrial development bonds) which
are specified private activity bonds, as defined in the Internal Revenue Code of
1986, as amended (the "Code"), issued after August 7, 1986, while exempt from
Federal income tax, is a preference item for the purpose of the alternative
minimum tax. Where a regulated investment company receives such interest, a
proportionate share of any exempt-interest dividend paid by the investment
company may be treated as such a preference item to shareholders. The Tax-Exempt
Money Market Fund will invest no more than 20% of the value of its net assets in
Municipal Obligations the interest from which gives rise to a preference item
for the purpose of the alternative minimum tax and, except for temporary
defensive purposes, in other investments subject to Federal income tax.
The Tax-Exempt Money Market Fund may purchase tender option bonds and
similar securities. A tender option bond is a Municipal Obligation (generally
held pursuant to a custodial arrangement) having a relatively long maturity and
bearing interest at a fixed rate, that has been coupled with the agreement of a
third party which grants the security holder the option, at periodic intervals,
to tender the Municipal Obligation to the third party and receive the face value
thereof. See "Appendix--Portfolio Securities--Tender Option Bonds."
From time to time, on a temporary basis other than for temporary
defensive purposes (but not to exceed 20% of the value of the Fund's net assets)
or for temporary defensive purposes, the Tax-Exempt Money Market Fund may invest
in taxable money market instruments of the type in which the Prime Money Market
Fund may invest. Dividends paid by the Fund that are attributable to income
earned by it from these securities will be taxable to investors. See "Dividends,
Distributions and Taxes." If the Tax-Exempt Money Market Fund purchases taxable
money market instruments the Fund will value them using the amortized cost
method and comply with the provisions of Rule 2a-7 relating to purchases of
taxable instruments. Under normal market conditions, the Adviser anticipates
that not more than 5% of the value of the Fund's total assets will be invested
in any one category of these securities.
The Fund also may lend its portfolio securities as described under
"Appendix--Investment Techniques--Lending Portfolio Securities," which may give
rise to taxable income.
INVESTMENT CONSIDERATIONS AND RISK FACTORS
GENERAL RISK--Each Fund attempts 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 Funds because the
Funds usually do not pay brokerage commissions on purchases of short-term debt
obligations. The value of the portfolio securities held by the Fund 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 purchase cost. Similarly, if interest rates
have declined from the time a security was purchased, such security, of sold,
might be sold at a price greater than its purchase cost. In either instances, if
the security was purchased at face value and held to maturity, no gain or loss
would be realized. A security backed by the U.S. Treasury or the full faith and
credit of the United States is guaranteed only as to timely payment of interest
and principal when held to maturity. The current market prices for such
securities are not guaranteed and will fluctuate.
FOREIGN SECURITIES RISK--(Prime Money Market Fund only) Because the
Prime Money Market Fund's portfolio may contain U.S. dollar denominated
securities issued by certain foreign issuers, the Fund may be subject to
additional investment risks with respect to such 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 possible adverse
political and economic developments, seizure or nationalization of foreign
deposits, or adoption of governmental restrictions which might adversely affect
or restrict the payment of principal and interest on such securities to
investors located outside the country of the issuer.
BANK SECURITIES RISK--(Prime Money Market Fund only) The Prime Money
Market Fund usually invests at least 25% of its assets in bank obligations.
Thus, 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 Fund'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 Money Market Fund, however, will seek to minimize its
exposure to such risks by investing only in debt securities which are determined
to be of high quality.
RISK OF INVESTING IN MUNICIPAL OBLIGATIONS--(Tax-Exempt Money Market
Fund only) The Tax-Exempt Money Market Fund may invest more than 25% of the
value of its total assets in Municipal Obligations which are related in such a
way that an economic, business or political development or change affecting one
such security also would affect the other securities; for example, securities
the interest upon which is paid from revenues of similar types of projects or
securities whose issuers are located in the same state. As a result, the Fund
may be subject to greater risk as compared to a fund that does not follow this
practice.
Certain provisions in the Code relating to the issuance of Municipal
Obligations may reduce the volume of Municipal Obligations qualifying for
Federal tax exemption. One effect of these provisions could be to increase the
cost of the Municipal Obligations available for purchase by the Tax-Exempt Money
Market Fund and thus reduce its available yield. Proposals that may restrict or
eliminate the income tax exemption for interest on Municipal Obligations may be
introduced in the future. If any such proposal were enacted that would reduce
the availability of Municipal Obligations for investment by the Tax-Exempt Money
Market Fund so as to adversely affect its shareholders, the Company would
reevaluate the Fund's investment objective and policies and submit possible
changes in the Fund's structure to shareholders for their consideration. If
legislation were enacted that would treat a type of Municipal Obligation as
taxable, the Tax-Exempt Money Market Fund would treat such security as a
permissible taxable investment within the applicable limits set forth herein.
SIMULTANEOUS INVESTMENTS--Investment decisions for each Fund are made
independently from those of the other investment companies, investment advisory
accounts, custodial accounts, individual trust accounts and commingled funds
that may be advised by the Adviser. However, if such other investment companies
or managed accounts desire to invest in, or dispose of, the same securities as
the Fund, 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 a Fund or the price paid
or received by a Fund.
MANAGEMENT OF THE FUNDS
BOARD OF DIRECTORS
The business affairs of the Company are managed under the general
supervision of its Board of Directors. Each 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 Fund's investment
adviser. The Adviser is a wholly-owned subsidiary of First American
Corporation, a registered bank holding company. First American National Bank and
its affiliates provide personal trust, estate, employee benefit trust, corporate
trust and custody services to over 7,000 accounts, as well as investment
advisory services. The Adviser, and its affiliates, as of December 31, 1998, had
approximately $10 billion under trust and approximately $6 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 Funds may invest and may have deposit, loan and
commercial banking relationships with the issuers of securities purchased by a
Fund. The Adviser has informed the Company that in making its investment
decisions it does not obtain or use material inside information in its or its
affiliates' possession. The Adviser also provides research services for the
Funds through a professional staff of portfolio managers and securities
analysts. All activities of the Adviser are conducted by persons who are also
officers of one or more of the Adviser's affiliates.
The Adviser supervises and assists in the overall management of each
Fund's affairs under an Investment Advisory Agreement between the Adviser and
the Company, subject to the authority of the Company's Board of Directors in
accordance with Maryland law.
Under the terms of the Investment Advisory Agreement, the Company has
agreed to pay the Adviser a monthly fee at the annual rate set forth below as a
percentage of the relevant Fund's average daily net assets.
ANNUAL RATE OF
INVESTMENT
NAME OF FUND ADVISORY FEE PAYABLE
Prime Money Market Fund .25%*
Treasury Money Market Fund .25%
Tax-Exempt Money Market Fund .35%
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* For the fiscal year ended December 31, 1997, the Fund paid the Prime
Money Market Fund's former sub-adviser .15% and the Adviser .10% of the
value of the Fund's average daily net assets.
From time to time, the Adviser may waive receipt of its fees and/or
voluntarily assume certain expenses of a Fund, which would have the effect of
lowering the overall expense ratio of that Fund and increasing yield to its
investors. The Fund will not pay the Adviser at a later time for any amounts it
may waive, nor will the Fund reimburse the Adviser for any amounts it may
assume.
ADMINISTRATOR AND DISTRIBUTOR
BISYS Fund Services Limited Partnership, located at 3435 Stelzer Road,
Columbus, Ohio 43219-3035, serves as each Fund's administrator and distributor.
BISYS currently provides administrative services or sub-administrative services
to, and distributes the shares of, other investment companies with over $200
billion in assets. BISYS is a wholly-owned subsidiary of The BISYS Group, Inc.
Under its Administration Agreement with the Company, BISYS generally
assists in all aspects of the Funds' operations, other than providing investment
advice, subject to the overall authority of the Company's Board of Directors in
accordance with Maryland law. In connection therewith, BISYS provides the Funds
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 Funds' Custodian.
Under the terms of the Administration Agreement, the Company has
agreed to pay BISYS a monthly fee at the annual rate of .10% of the value of
each Fund's average daily net assets.
BISYS, as distributor, makes a continuous offering of each Fund'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 Fund (after such items have
been prepared and set in type by the Fund) which are used in connection with the
offering of shares, and the costs and expenses of preparing, printing and
distributing any other literature used by BISYS in connection with the offering
of such Fund's shares for sale to the public.
SHAREHOLDER SERVICES PLAN
Under a shareholder services plan adopted by the Company's Board of
Directors (the "Shareholder Services Plan"), each Fund pays BISYS for the
provision of certain services at an annual rate of .25% of the value of the
average daily net assets represented by Class A Shares. The services provided
may include personal services relating to shareholder accounts, such as
answering shareholder inquiries regarding a Fund and providing reports and other
information, and services related to the maintenance of such shareholder
accounts. The fee payable for such services is intended to be a "service fee" as
defined in the NASD Conduct Rules. Under the Shareholder Services Plan, BISYS
may make payments to certain financial institutions, securities dealers and
other industry professionals that have entered into agreements with BISYS
("Service Organizations") in respect of these services. BISYS determines the
amounts to be paid to Service Organizations. Service Organizations receive such
fees in respect of the average daily value of Class A Shares owned by their
clients. From time to time, BISYS may defer or waive receipt of fees under the
Shareholder Services Plan while retaining the ability to be paid by the Fund
under the Shareholder Services Plan thereafter. The fees payable to BISYS under
the Shareholder Services Plan are payable without regard to actual expenses
incurred.
CUSTODIAN AND TRANSFER AGENT
The Bank of New York, 90 Washington Street, New York, New York 10286,
is the Funds' Custodian. BISYS Fund Services Ohio, Inc., an affiliate of BISYS,
located at 3435 Stelzer Road, Columbus, Ohio 43219-3035, is the Funds' Transfer
and Dividend Disbursing Agent (the "Transfer Agent").
EXPENSES
All expenses incurred in the operation of the Company are borne by the
Company, except to the extent specifically assumed by others. The expenses borne
by the Company include: 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, BISYS, any
sub-investment adviser, 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 Fund'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 Fund are charged
against the assets of that Fund; other expenses of the Company are allocated
among its separate 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 PURCHASE INFORMATION
Shares may be purchased through a number of institutions, including
the Adviser and its affiliates, Service Organizations, and directly from BISYS.
When purchasing Fund shares, you must specify the Fund and that you are buying
Class A Shares. The Adviser, its affiliates and Service Organizations may
receive different levels of compensation for selling different classes of Fund
shares. Stock certificates will not be issued. It is not recommended that the
Tax-Exempt Money Market Fund be used as a vehicle for Keogh, IRA and other
qualified plans, because such plans are otherwise entitled to tax deferred
benefits. The Company reserves the right to reject any purchase order in whole
or in part, including purchases made with foreign checks and third party checks
not originally made payable to the order of the investor.
The minimum initial investment is $1,000, and subsequent investments
must be at least $100. The minimum initial investment is $100 for IRAs, and
subsequent investments for IRAs must be at least $50. For full-time or part-time
employees of the Adviser or any of its affiliates, the minimum initial
investment is $500, and subsequent investments must be at least $50. For
full-time or part-time employees of the Adviser or any of its affiliates who
elect to have a portion of their pay directly deposited into their ISG Fund
accounts, the minimum initial or subsequent investment must be at least $25. The
Adviser, its affiliates and Service Organizations 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. In addition, purchases of shares made in connection with
certain shareholder privileges may have different minimum investment
requirements. See "Shareholder Services and Privileges."
You may purchase shares by check or wire, or through TeleTrade or, a
sweep program as described below. Investors purchasing shares through the
Adviser, its affiliates or Service Organizations should contact such entity
directly for appropriate instructions, as well as for information about
conditions pertaining to the account and any related fees.
For written orders, you may send your initial or subsequent purchase
order, together with the Fund's Account Application for initial orders and your
check or money order payable to: ISG Funds (Fund Name), to ISG Funds, c/o BISYS
Fund Services, Inc., Department L-1686, Columbus, Ohio 43260-1686. For
subsequent investments, your Fund account number should appear on the check or
money order. All payments should be made in U.S. dollars and, to avoid fees and
delays, should be drawn only on U.S. banks. A charge will be imposed if a check
used for investment in your account does not clear.
For wire orders, you must call the Transfer Agent at 1-800-852-0045.
If a subsequent payment is being made, your Fund account number should be
included. Information on remitting funds in this manner, including any related
fees, may be obtained from your bank.
Subsequent investments also may be made by electronic transfer of
funds from an account maintained in a bank or other domestic financial
institution that is an Automated Clearing House member. For information on
purchasing shares through the Automated Clearing House, you must call the
Transfer Agent at 1-800-852-0045.
Management understands that the Adviser, its affiliates and some
Service Organizations may impose certain conditions on their clients which are
different from those described in this Prospectus, and, to the extent permitted
by applicable regulatory authority, may charge their clients a direct fee for
effecting transactions in Fund shares. You should consult the Adviser, its
affiliates or your Service Organization in this regard.
The Company determines each Fund's net asset value per share as of
2:00 p.m., Eastern time, on each business day (which, as used herein, shall
include each day the New York Stock Exchange is open for business, except
Columbus Day and Veterans' Day), except on days where there are not sufficient
changes in the value of the Fund's investment securities to materially affect
the Fund's net asset value and no purchase orders or redemption requests have
been received. The New York Stock Exchange 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, Thanksgiving Day and
Christmas Day. Net asset value per share of each class is computed by dividing
the value of the Fund's net assets attributable to such class (i.e., the value
of its assets less liabilities) by the total number of Fund shares of such class
outstanding. Each Fund uses the amortized cost method of valuing its
investments. See "Determination of Net Asset Value" in the Funds' Statement of
Additional Information.
Federal regulations require that an investor provide a certified Tax
Identification Number ("TIN") upon opening or reopening an account. See
"Dividends, Distributions and Taxes" and the Funds' Account Application for
further information concerning this requirement. Failure to furnish a certified
TIN to the Company could subject the investor to a $50 penalty imposed by the
Internal Revenue Service ("IRS").
TERMS OF PURCHASE
GENERAL--Fund 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. If you do
not remit Federal Funds, your payment must be converted into Federal Funds. This
usually occurs within one business day of receipt of a bank wire or within two
business days of receipt of a check drawn on a member bank of the Federal
Reserve System. Checks drawn on banks which are not members of the Federal
Reserve System may take considerably longer to convert into Federal Funds. Prior
to receipt of Federal Funds, your money will not be invested.
If your purchase order for Fund shares is received by the Transfer
Agent by 2:00 p.m., Eastern time, on a business day, shares will be purchased as
of 2:00 p.m., Eastern time, on such business day if payment is received in, or
is converted into, Federal Funds by 4:00 p.m., Eastern time, by the Transfer
Agent on that day. If your purchase order 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. If you request transactions through the
Adviser, its affiliates or a Service Organization, it is such entity'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.
TELETRADE--You may purchase shares (minimum purchase $500, maximum $50,000 per
transaction) by telephone for an existing Fund account if you have checked the
appropriate box and supplied the necessary information on the Account
Application. The proceeds will be transferred between the bank account
designated on the Account Application and your Fund account. Only a bank account
maintained in a domestic financial institution which is an Automated Clearing
House member may be so designated. TeleTrade purchases are effected at the net
asset value (plus the applicable sales load) next determined after receipt of an
order in proper form by the Transfer Agent. TeleTrade may not be available to
certain clients of the Adviser, its affiliates and certain Service
Organizations. The Company may modify or terminate TeleTrade at any time or
charge a service fee upon notice to shareholders. No such fee currently is
contemplated. If you have selected TeleTrade, you may request such a purchase of
shares by telephoning the Transfer Agent at 1-800-852-0045.
AUTOMATICALLY THROUGH "SWEEP" PROGRAMS--Certain investor accounts with the
Adviser, its affiliates and certain Service Organizations may be eligible for an
automatic investment privilege, commonly called a "sweep," under which amounts
in excess of a certain minimum held in these accounts will be invested
automatically in shares of a Fund at predetermined intervals at the next
determined net asset value. Investors desiring to use this privilege should
consult such entity at which the investor maintains an account to determine if
it is available and whether any conditions are imposed on its use. It is the
responsibility of the financial institution holding the investor's funds to
transmit such investor's order on a timely basis. The "sweep" program may be
modified or terminated at any time by the Company.
HOW TO REDEEM SHARES
GENERAL
An investor who has purchased shares through an account with the
Adviser, its affiliates or a Service Organization must redeem shares by
following instructions pertaining to such account. If such investor is also the
shareholder of record of the account on the books of the Transfer Agent, the
investor may redeem shares as described below under "Procedures." Such investors
who want to use the other redemption methods described below must arrange with
the Adviser, its affiliates or the Service Organization for delivery of the
required application(s), to the Transfer Agent. It is the responsibility of the
Adviser, its affiliates, or the Service Organization, as the case may be, to
transmit the redemption order to the Transfer Agent and credit the investor's
account with the redemption proceeds on a timely basis. Other investors may
redeem all or part of their shares in accordance with the procedures described
below.
When a request is received in proper form by the Transfer Agent or
other entity authorized to receive orders on behalf of the Fund, the Fund will
redeem the shares at the next determined net asset value as described below. If
you hold Fund shares of more than one class, any request for redemption must
specify the class of shares being redeemed. If you fail to specify the class of
shares to be redeemed or if you own fewer shares of the class than specified to
be redeemed, the redemption request may be delayed until the Transfer Agent
receives further instructions from you or your Service Organization. The Fund
ordinarily will make payment for all shares redeemed within seven days after
receipt by the Transfer Agent of a redemption request in proper form, except as
provided by the rules of the Securities and Exchange Commission. HOWEVER, IF YOU
HAVE PURCHASED SHARES BY CHECK OR BY TELETRADE AND SUBSEQUENTLY SUBMIT A
REDEMPTION REQUEST BY MAIL, THE REDEMPTION PROCEEDS WILL NOT BE TRANSMITTED TO
YOU UNTIL BANK CLEARANCE OF THE CHECK OR TELETRADE PAYMENT USED FOR INVESTMENT
WHICH MAY TAKE UP TO SEVEN BUSINESS DAYS. THE FUND WILL NOT TRANSMIT REDEMPTION
PROCEEDS PURSUANT TO A REQUEST TO REDEEM SHARES BY WIRE FOR A PERIOD OF UP TO
SEVEN BUSINESS DAYS AFTER RECEIPT BY THE TRANSFER AGENT OF THE PURCHASE CHECK OR
TELETRADE ORDER AGAINST WHICH SUCH REDEMPTION IS REQUESTED. THIS PROCEDURE DOES
NOT APPLY TO SHARES PURCHASED BY WIRE PAYMENT.
The Company imposes no charges when shares are redeemed. The Adviser,
its affiliates, and Service Organizations may charge their clients a fee for
effecting redemptions of Fund shares. The value of Fund shares redeemed may be
more or less than their original cost, depending upon the Fund's then-current
net asset value.
The Company 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.
PROCEDURES
WRITTEN ORDERS--Written requests for redemption, indicating the name
of the Fund and that Class A Shares are being redeemed, with signature
appropriately guaranteed, if required, and otherwise in accordance with the
requirements listed below, should be mailed to ISG Funds, c/o BISYS Fund
Services, Inc., Department L-1686, Columbus, Ohio 43260-1686.
WIRE REDEMPTION PRIVILEGE--After appropriate prior authorization, you
may request by telephone or in writing that redemption proceeds be transmitted
by the Transfer Agent via Federal Funds wire transfer to your bank account.
Redemption requests must be in an amount of at least $1,000. The Company
reserves the right to refuse any request for a wire transfer and may limit the
amount involved or the number of telephone redemption requests. This Privilege
may be modified or terminated at any time by the Transfer Agent or the Company.
TELETRADE--You may redeem shares (minimum $500, maximum $50,000 per
transaction) by telephone if you have checked the appropriate box and supplied
the necessary information on the Fund's Account Application. The proceeds will
be transferred between your Fund account and the bank account designated on the
Account Application. Only a bank account maintained in a domestic financial
institution which is an Automated Clearing House member may be so designated.
Redemption proceeds will be on deposit in your account at an Automated Clearing
House member bank ordinarily two days after receipt of the redemption request.
The Company may modify or terminate TeleTrade at any time or charge a service
fee upon notice to shareholders. No such fee currently is contemplated. If you
have selected TeleTrade, you may request such a redemption of shares by
telephoning the Transfer Agent at 1-800-852-0045.
AUTOMATICALLY THROUGH "SWEEP" PROGRAMS--See page __.
REDEMPTION REQUIREMENTS
Written redemption instructions, indicating the name of the Fund and
that Class A Shares are being redeemed, must be received by the Transfer Agent
in proper form and signed exactly as the shares are registered. Except as noted
below, all signatures must be guaranteed. The 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. The signature
guarantee requirement will be waived if the following conditions apply: (1) the
redemption check is payable to the shareholder(s) of record; and (2) the
redemption check is mailed to the shareholder(s) at the address of record or the
proceeds are either mailed or wired to a financial institution account
previously designated. Redemption requests by corporate and fiduciary
shareholders must be accompanied by appropriate documentation establishing the
authority of the person seeking to act on behalf of the account. You may obtain
from the Company or the Transfer Agent forms of resolutions and other
documentation which have been prepared in advance to assist compliance with the
Fund's procedures.
You may redeem or exchange Fund shares by telephone if you have
checked the appropriate box on the Fund's Account Application. By selecting a
telephone redemption or exchange privilege, an investor authorizes the Transfer
Agent to act on telephone instructions from any person representing himself or
herself to be the investor, or a representative of the investor's Service
Organization, and reasonably believed by the Transfer Agent to be genuine. The
Company will require the Transfer Agent to employ reasonable procedures, such as
requiring a form of personal identification, to confirm that instructions are
genuine and, if it does not follow such procedures, the Company or the Transfer
Agent may be liable for any losses due to unauthorized or fraudulent
instructions. Neither the Company nor the Transfer Agent will be liable for
following telephone instructions reasonably believed to be genuine.
During times of drastic economic or market conditions, investors may
experience difficulty in contacting the Transfer Agent by telephone to request a
redemption or exchange of Fund shares. In such cases, investors should consider
using the other redemption procedures described herein. Use of these other
redemption procedures may result in the investor's redemption request being
processed at a later time than it would have been if telephone redemption had
been used.
SHAREHOLDER SERVICES AND PRIVILEGES
The services and privileges described under this heading may not be
available to certain clients of the Adviser, its affiliates, and certain Service
Organizations, and the Adviser, its affiliates, and some Service Organizations
may impose certain conditions on their clients which are different from those
described in this Prospectus. Such investors should consult the Adviser, its
affiliates, or their Service Organization in this regard.
EXCHANGE PRIVILEGE
The Exchange Privilege enables you to purchase, in exchange for shares
of a Fund, shares of the same class of another Fund in the ISG Family of Funds,
to the extent such shares are offered for sale in your state of residence. If
you desire to use this Privilege, you should consult the Adviser, or its
affiliate where you maintain your account, your Service Organization or BISYS to
determine if it is available and whether any conditions are imposed on its use.
To use the Exchange Privilege, you or your Service Organization acting
on your behalf must give exchange instructions to the Transfer Agent in writing
or by telephone, or in accordance with the instructions pertaining to your
account at the Adviser or its affiliates. If you previously established the
Telephone Exchange Privilege, you may telephone exchange instructions by calling
1-800-852-0045. See "How to Redeem Shares--Redemption Requirements." Before any
exchange, you must obtain and should review a copy of the current prospectus of
the fund into which an exchange is being made. 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 Fund into which the exchange is
being made.
Shares will be exchanged at the next determined net asset value;
however, a sales load, which may be waived or reduced as described below, may be
charged with respect to exchanges of Class A Shares. If you are exchanging
shares into a fund that charges a sales load, you may qualify for share prices
which do not include the sales load or which reflect a reduced sales load, if
the shares you are exchanging were: (a) purchased with a sales load, (b)
acquired by a previous exchange from shares purchased with a sales load, or (c)
acquired through reinvestment of dividends or distributions paid with respect to
the foregoing categories of shares. No fees currently are charged shareholders
directly in connection with exchanges although the Company reserves the right,
upon not less than 60 days' written notice, to charge shareholders a nominal
administrative fee in accordance with rules promulgated by the Securities and
Exchange Commission. The Company 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 Fund 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.
AUTOMATIC INVESTMENT PLAN
The Automatic Investment Plan permits you to purchase shares (minimum
initial investment of $1,000 and minimum subsequent investments of $100 per
transaction) at regular intervals selected by you. Provided your bank or other
financial institution allows automatic withdrawals, shares may be purchased by
transferring funds from the bank account designated by you. At your option, the
account designated will be debited in the specified amount, and shares will be
purchased, once a month, on either the first or fifteenth day, or twice a month,
on both days. Only an account maintained at a domestic financial institution
which is an Automated Clearing House member may be so designated. This service
enables you to make regularly scheduled investments and may provide you with a
convenient way to invest for long-term financial goals. You should be aware,
however, that periodic investment plans do not guarantee a profit and will not
protect an investor against loss in a declining market. To establish an
Automatic Investment Plan account, you must check the appropriate box and supply
the necessary information on the Account Application. You may obtain the
necessary applications from BISYS. You may cancel your participation in the
Automatic Investment Plan or change the amount of purchase at any time by
mailing written notification to ISG Funds, c/o BISYS Fund Services, Inc.,
Department L-1686, Columbus, Ohio 43260-1686, and such notification will be
effective three business days following receipt. The Company may modify or
terminate the Automatic Investment Plan at any time or charge a service fee. No
such fee currently is contemplated.
DIRECTED DISTRIBUTION PLAN
The Directed Distribution Plan enables you to invest automatically
dividends and capital gain distributions, if any, paid by a Fund in shares of
another Fund of which you are a shareholder. Shares of the other Fund will be
purchased at the then-current net asset value. Minimum subsequent investments do
not apply. Investors desiring to participate in the Directed Distribution Plan
should check the appropriate box and supply the necessary information on the
Account Application. The Plan is available only for existing accounts and may
not be used to open new accounts. The Company may modify or terminate the
Directed Distribution Plan at any time or charge a service fee. No such fee
currently is contemplated.
AUTOMATIC WITHDRAWAL PLAN
The Automatic Withdrawal Plan permits you to request withdrawal of a
specified dollar amount (minimum of $50), on either a monthly, quarterly,
semi-annual or annual basis if you have a $5,000 minimum account. The automatic
withdrawal will be made on the first or fifteenth day, at your option, of the
period selected. To participate in the Automatic Withdrawal Plan, you must check
the appropriate box and supply the necessary information on the Account
Application. The Automatic Withdrawal Plan may be ended at any time by the
investor, the Company or the Transfer Agent.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Fund declares dividends from net investment income on each
business day. Dividends usually are paid on the last calendar day of each month.
Each Fund's earnings for Saturdays, Sundays and holidays are declared as
dividends on the preceding business day. Shares begin accruing income dividends
on the day the purchase order is effective.
Each Fund will make distributions from net realized securities gains,
if any, once a year, but may make distributions on a more frequent basis to
comply with the distribution requirements of the Code, in all events in a manner
consistent with the provisions of the 1940 Act. No Fund will make distributions
from net realized securities gains unless capital loss carryovers, if any, have
been utilized or have expired. Dividends are automatically reinvested in
additional Fund shares of the same class from which they were paid at net asset
value, unless payment in cash is requested. If all shares in an account are
redeemed at any time, all dividends to which the shareholder is entitled will be
paid along with the proceeds of the redemption. Dividends paid by each class of
shares of a Fund 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 you elect to receive distributions in cash and your distribution
checks (1) are returned to the Fund marked "undeliverable" or (2) remain
uncashed for six months, your cash election will be changed automatically and
your future dividend and capital gains distributions will be reinvested in Fund
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 Fund shares
at the net asset value determined as of the date of cancellation.
Dividends and distributions of the Tax-Exempt Money Market Fund
derived from taxable investments and from income or gain derived from securities
transactions and from the use of the investment techniques described under
"Appendix--Investment Techniques" will be subject to Federal income tax.
Dividends paid by each other Fund derived from interest, together with
distributions from any net realized short-term securities gains and all or a
portion of any gains realized from the sale or other disposition of certain
market discount bonds, generally are taxable to U.S. investors as ordinary
income for Federal income tax purposes, whether received in cash or reinvested
in additional Fund shares. Distributions from net realized long-term securities
gains, if any, generally are taxable to U.S. investors as long-term capital
gains for Federal income tax purposes, regardless of how long shareholders have
held their shares and whether such distributions are received in cash or
reinvested in additional Fund shares. The Code provides that an individual
generally will be taxed on his or her net capital gain at a maximum rate of 20%
with respect to capital gains from securities held for more than 12 months.
Dividends and distributions may be subject to state and local taxes.
Dividends and distributions attributable to interest from direct
obligations of the United States and paid by a Fund to individuals currently are
not subject to tax in most states. Dividends and distributions attributable to
interest from other securities in which the Funds may invest may be subject to
state tax. The Company will provide shareholders with a statement which sets
forth the percentage of dividends and distributions paid by the Tax-Exempt Money
Market Fund that is attributable to interest income from direct obligations of
the United States.
Although all or a substantial portion of the dividends paid by the
Tax-Exempt Money Market Fund may be excluded by shareholders of the Fund from
their gross income for Federal income tax purposes, the Tax-Exempt Money Market
Fund may purchase specified private activity bonds, the interest from which may
be (i) a preference item for purposes of the alternative minimum tax, or (ii) a
factor in determining the extent to which a shareholder's Social Security
benefits are taxable. If the Tax-Exempt Money Market Fund purchases such
securities, the portion of dividends related thereto will not necessarily be tax
exempt to an investor who is subject to the alternative minimum tax and/or tax
on Social Security benefits and may cause an investor in the Fund to be subject
to such taxes.
Dividends derived from net investment income, together with
distributions from net realized short-term securities gains and all or a portion
of any gains realized from the sale or other disposition of certain market
discount bonds, paid by a Fund to a foreign investor generally are subject to
U.S. nonresident withholding taxes at the rate of 30%, unless the foreign
investor claims the benefits of a lower rate specified in a tax treaty.
Distributions from net realized long-term securities gains paid by a Fund to a
foreign investor 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.
Notice as to the tax status of your dividends and distributions will
be mailed to you annually. You also will receive periodic summaries of your
account which will include information as to dividends and distributions from
securities gains, if any, paid during the year.
Federal regulations generally require the Company 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 Company 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, IRS individual taxpayer
identification 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.
The Adviser believes that each of the Prime Money Market Fund and
Treasury Money Market Fund has qualified for the fiscal year ended December 31,
1997 as a "regulated investment company" under the Code. See "Financial
Highlights." Each of these Funds intends to continue to so qualify if such
qualification is in the best interests of its shareholders. The Adviser expects
that the Tax-Exempt Money Market Fund will qualify as a "regulated investment
company" under the Code so long as such qualification is in the best interests
of its shareholders. Qualification as a regulated investment company relieves
the Fund of any liability for Federal income tax to the extent its earnings are
distributed in accordance with applicable provisions of the Code. Each Fund is
subject to a non-deductible 4% excise tax, measured with respect to certain
undistributed amounts of taxable investment income and capital gains.
You should consult your tax adviser regarding specific questions as to
Federal, state or local taxes.
FINANCIAL HIGHLIGHTS
Contained below for each Fund, other than the Tax-Exempt Money Market
Fund, is per share operating performance data for a Class A Share of common
stock outstanding, total investment return, ratios to average net assets and
other supplemental data for each period indicated. The information in the
financial highlights has been audited (except where noted) by KPMG Peat Marwick
LLP, the Funds' independent auditors. Further financial data, related notes and
reports of independent auditors accompany the Funds' Statement of Additional
Information, which is available upon request. No financial information is
available for the Tax-Exempt Money Market Fund which had not been offered as of
the date of the financials.
<TABLE>
<CAPTION>
ISG PRIME MONEY MARKET FUND
CLASS A SHARES
-------------------------------------------------------------------------
SIX YEAR YEAR YEAR PERIOD
MONTHS ENDED ENDED ENDED ENDED
ENDED DECEMBER DECEMBER DECEMBER DECEMBER
JUNE 30, 31, 31, 31, 31,
1998 1997 1996 1995 1994*
------------- -------------- ----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..... $1.000 $1.000 $1.000 $1.000 $1.000
------- ------ ------ ------ ------
Income from investment operations:
Net investment income.................... 0.024 0.048 0.048 0.054 0.031
----- ----- ----- ----- -----
Less distributions:
Net investment income.................... (0.024) (0.048) (0.048) (0.054) (0.031)
------- ------- ------- ------- -------
Net Asset Value, End of Period........... $1.000 $1.000 $1.000 $1.000 $1.000
====== ====== ====== ====== ======
Total Return............................. 2.41%(a) 4.90% 4.88% 5.51% 3.13%(a)
Ratios/Supplemental Data:
Net assets, end of period (000's)........ $107,989 $ 56,163 $22,836 $ 63,919 $ 82,351
Ratio of expenses to average net assets.. 0.84%(b) 0.87% 0.68% 0.65% 0.63%(b)
Ratio of net investment income
to average net assets.................... 4.82%(b) 4.82% 4.83% 5.37% 4.00%(b)
Ratio of expenses to average net
assets**................................. 0.84%(b)(c) 0.87%(c) 0.86% 0.90% 0.93%(b)
Ratio of net investment income
to average net assets**.................. 4.82%(b)(c) 4.82%(c) 4.65% 5.12% 3.76%(b)
- ------------------------
* For the period from March 29, 1994 (commencement of operations) through December 31, 1994.
** During the period certain fees were voluntarily reduced.
If such voluntary fee reductions had not occurred, the ratios would have been as indicated.
(a) Not annualized.
(b) Annualized.
(c) There were no fee waivers or expense reimbursements during the period.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ISG TREASURY MONEY MARKET FUND
CLASS A SHARES
-----------------------------------------------------------------
SIX
MONTHS YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED
JUNE DECEMBER DECEMBER DECEMBER DECEMBER
30, 31, 31 31, 31,
1998 1997 1996 1995 1994*
------------ ------------ ----------- ------------ ----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..... $1.000 $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------ ------
Income from investment operations:
Net investment income.................... 0.023 0.047 0.047 0.053 0.030
----- ----- ----- ----- -----
Less distributions:
Net investment income.................... (0.023) (0.047) (0.047) (0.053) (0.030)
-------- ------- ------- ------- -------
Net Asset Value, End of Period........... $1.000 $1.000 $1.000 $1.000 $1.000
======= ====== ====== ====== ======
Total Return............................. 2.35%(a) 4.78% 4.78% 5.41% 3.01%(a)
Ratios/Supplemental Data:
Net assets, end of period (000's)........ $85,829 $77,065 $78,308 $168,430 $139,715
Ratio of expenses to average net assets.. 0.79%(b) 0.75% 0.56% 0.50% 0.54%(b)
Ratio of net investment income to
average net assets....................... 4.70%(b) 4.68% 4.72% 5.28% 4.02%(b)
Ratio of expenses to average net
assets**................................. 0.79%(b)(c) 0.75%(c) 0.74% 0.75% 0.83%(b)
Ratio of net investment income to
average net assets**..................... 4.70%(b)(c) 4.68%(c) 4.54% 5.03% 3.73%(b)
- -------------------------------
* For the period from March 29, 1994 (commencement of operations) through December 31, 1994.
** During the period certain fees were voluntarily reduced.
If such voluntary fee reductions had not occurred, the ratios would have been as indicated.
(a) Not annualized.
(b) Annualized.
(c) There were no fee waivers or expense reimbursements during this period.
</TABLE>
PERFORMANCE INFORMATION
From time to time, each Fund 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 Fund refers to the income generated by
an investment in such Fund 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 Fund is assumed to be reinvested. The effective
yield will be slightly higher than the yield because of the compounding effect
of this assumed reinvestment.
The Tax-Exempt Money Market Fund may advertise tax equivalent yield,
which is calculated by determining the pre-tax yield which, after being taxed at
a certain rate, would be equivalent to a stated current yield calculated as
described above.
Performance will vary from time to time and past results are not
necessarily representative of future results. Investors should remember that
performance is a function of portfolio management in selecting the type and
quality of portfolio securities and is affected by operating expenses.
Performance information, such as that described above, may not provide a basis
for comparison with other investments or other investment companies using a
different method of calculating performance.
Comparative performance information may be used from time to time in
advertising or marketing each Fund's shares, including data from Lipper
Analytical Services, Inc., Morningstar, Inc., Bank Rate MonitorTM, IBC Money
Fund Averages ReportTM, and other industry publications.
GENERAL INFORMATION
The Company was incorporated under Maryland law on March 6, 1990, and
commenced operations on August 28, 1990.
The Company is authorized to issue 25 billion shares of Common Stock,
par value $.001 per share. Each Fund's shares are classified into Class A Shares
(500 million), Class B Shares (250 million, except for Treasury Money Market
Fund which does not offer Class B Shares) and Institutional Shares (500
million). Each share has one vote and shareholders will vote in the aggregate
and not by class except as otherwise required by law.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Company 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, the holders of at least 10% of the shares
outstanding and entitled to vote may require the Company to hold a special
meeting of shareholders for purposes of removing a Director from office.
Shareholders may remove a Director by the affirmative vote of a majority of the
Company'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 Company 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 shareholders vote together as a group; as to others they vote separately
by portfolio. From time to time, other portfolios may be established and sold
pursuant to other offering documents.
To date, 25 portfolios have been authorized. The other portfolios are
not being offered by this Prospectus. All consideration received by the Company
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 Company) and will be subject to the liabilities related thereto. The
income attributable to, and expenses of, 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 Company at 3435
Stelzer Road, Columbus, Ohio 43219-3035.
<PAGE>
APPENDIX
PORTFOLIO SECURITIES
To the extent set forth in this Prospectus, each Fund may invest in
the securities described below.
MONEY MARKET INSTRUMENTS
U.S. TREASURY SECURITIES--Each Fund 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,
each Fund 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. Principal
and 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
Fund will invest in such securities only when it is satisfied that the credit
risk with respect to the issuer is minimal.
BANK OBLIGATIONS--Each Fund, except the Treasury Money Market Fund,
may 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 or foreign branches of domestic banks, and domestic branches of
foreign banks, domestic savings and loan associations and other banking
institutions. With respect to such securities issued by foreign subsidiaries or
foreign branches of domestic banks, and domestic branches of foreign banks, a
Fund may be subject to additional investment risks that are different in some
respects from those incurred by a fund which invests only in debt obligations of
U.S. domestic issuers. Such risks include possible 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 or the adoption of other foreign governmental restrictions which might
adversely affect the payment of principal and interest on these securities, the
possible seizure or nationalization of foreign deposits and the possible
subordination of deposits in foreign branches to receivership expenses and U.S.
office deposits in the event of insolvency. See "Description of the
Funds--Investment Considerations and Risk Factors--Foreign Securities Risk."
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 a Fund 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--Each
Fund, except the Treasury Money Market Fund, 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 Funds will
consist only of direct obligations which, at the time of their purchase, are (a)
rated not lower than Prime-1 by Moody's, A-1 by S&P, F-1 by Fitch or Duff-1 by
Duff, or (b) issued by companies having an outstanding unsecured debt issue
currently rated not lower than Aa3 by Moody's or AA- by S&P, Fitch or Duff, or
(c) if unrated, determined by the Adviser to be of comparable quality to those
rated obligations which may be purchased by such Fund.
REPURCHASE AGREEMENTS--Each Fund may enter into repurchase agreements,
which involve the acquisition by a Fund of an underlying debt instrument,
subject to an obligation of the seller to repurchase, and such Fund to resell,
the instrument at a fixed price usually not more than one week after its
purchase. Certain costs may be incurred by a Fund 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 a Fund
may be delayed or limited. Each Fund will consider on an ongoing basis the
creditworthiness of the institutions with which it enters into repurchase
agreements.
ZERO COUPON AND STRIPPED SECURITIES--Each Fund 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.
FOREIGN GOVERNMENT OBLIGATIONS; SECURITIES OF SUPRANATIONAL
ENTITIES--Each Fund, except the Treasury Money Market Fund, 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 Adviser to be of comparable quality to the other obligations in which
such Fund 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 a Fund'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.
FLOATING AND VARIABLE RATE OBLIGATIONS--Each Fund, except the Treasury
Money Market Fund, may purchase floating and variable rate demand notes and
bonds, which are obligations ordinarily having stated maturities in excess of
397 days, but which permit the holder to demand payment of principal at any
time, or at specified intervals. Variable rate demand notes include master
demand notes which are obligations that permit the Fund to invest fluctuating
amounts, at varying rates of interest, pursuant to direct arrangements between
the Fund, as lender, and the borrower. These obligations permit daily changes in
the amount borrowed. 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 Fund'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 a Fund may invest in
obligations which are not so rated only if the Adviser determines that at the
time of investment the obligations are of comparable quality to the other
obligations in which the Fund may invest. The Adviser, on behalf of each Fund,
will consider on an ongoing basis the creditworthiness of the issuers of the
floating and variable rate demand obligations purchased by such Fund.
NOTES--Each Fund, except the Treasury Money Market Fund, may purchase
unsecured promissory notes ("Notes") which are not readily marketable and have
not been registered under the Securities Act of 1933, as amended, provided such
investments are consistent with its investment objective. No Fund will invest
more than 10% of its net assets in such Notes and in other securities that are
illiquid.
PARTICIPATION INTERESTS AND TRUST RECEIPTS--Each Fund, except the
Treasury Money Market Fund, 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. A participation interest or receipt gives the Fund an undivided
interest in the security in the proportion that the Fund'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 397 days or less. If the instrument is unrated, or has
been given a rating below that which is permissible for purchase by the Fund,
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 instruments, the Adviser, acting upon
delegated authority from the Company's Board of Directors, must have determined
that the instrument is of comparable quality to those instruments in which the
Fund 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 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 Fund, the
Adviser will consider, in accordance with procedures established by the Board of
Directors, all circumstances deemed relevant in determining whether the Fund
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 Fund will have the unconditional
right to demand payment, on not more than seven days' notice, for all or any
part of the Fund's interest in the security, plus accrued interest. As to these
instruments, the Fund intends to exercise its right to demand payment only upon
a default under the terms of the security, as needed to provide liquidity to
meet redemptions, or to maintain or improve the quality of its investment
portfolio.
GUARANTEED INVESTMENT CONTRACTS--Each Fund, except the Treasury Money
Market Fund, may make limited investments in guaranteed investment contracts
("GICs") issued by highly rated U.S. insurance companies. Pursuant to such a
contract, the Fund would make cash contributions to a deposit fund of the
insurance company's general account. The insurance company would then credit to
the Fund on a monthly basis interest which is based on an index (in most cases
the Salomon Smith Barney CD Index), but is guaranteed not to be less than a
certain minimum rate. The Prime Money Market Fund currently does not expect to
invest more than 5% of its net assets in GICs.
ILLIQUID SECURITIES--Each Fund 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, floating and variable rate demand obligations as to which the Fund
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 Fund is subject to a risk that should the Fund desire to
sell them when a ready buyer is not available at a price the Fund deems
representative of their value, the value of the Fund's net assets could be
adversely affected.
ASSET-BACKED SECURITIES--(Prime Money Market Fund only) The Prime Money Market
Fund may purchase asset-backed securities issued by special purpose entities
whose primary assets consist of a pool of mortgages, loans, receivables or other
assets. Payment of principal and interest may depend largely on the cash flows
generated by the assets backing the securities and, in certain cases, supported
by letters of credit, surety bonds or other forms of credit or liquidity
enhancements. The value of asset-backed securities also may be affected by the
creditworthiness of the servicing agent for the pool of assets, the originator
of the loans or receivables or the financial institution providing the credit
support.
MUNICIPAL OBLIGATIONS--(Tax-Exempt Money Market Fund and, to a limited extent,
Prime Money Market Fund) 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. Dividends received by
shareholders of the Prime Money Market Fund which are attributable to interest
income received by such Fund from Municipal Obligations generally will be
subject to Federal income tax. The Prime Money Market Fund currently intends to
invest no more than 5% of its assets in Municipal Obligations. However, this
percentage may be varied from time to time without shareholder approval.
TENDER OPTION BONDS--(Tax-Exempt Money Market Fund only) A tender option bond is
a Municipal Obligation (generally held pursuant to a custodial arrangement)
having a relatively long maturity and bearing interest at a fixed rate
substantially higher than prevailing short-term tax exempt rates, that has been
coupled with the agreement of a third party, such as a bank, broker-dealer or
other financial institution, pursuant to which such institution grants the
security holders the option, at periodic intervals, to tender their securities
to the institution and receive the face value thereof. As consideration for
providing the option, the financial institution receives periodic fees equal to
the difference between the Municipal Obligation's fixed coupon rate and the
rate, as determined by a remarketing or similar agent at or near the
commencement of such period, that would cause the securities, coupled with the
tender option, to trade at par on the date of such determination. Thus, after
payment of this fee, the security holder effectively holds a demand obligation
that bears interest at the prevailing short-term tax exempt rate. The Adviser,
on behalf of the Fund, will consider on an ongoing basis the creditworthiness of
the issuer of the underlying Municipal Obligation, of any custodian and of the
third party provider of the tender option. In certain instances and for certain
tender option bonds, the option may be terminable in the event of a default in
payment of principal or interest on the underlying Municipal Obligations and for
other reasons.
INVESTMENT TECHNIQUES
LENDING PORTFOLIO SECURITIES--(All Funds) From time to time, each Fund 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 331/3% of the value of the relevant Fund's total assets. In
connection with such loans, each Fund 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 Fund can increase its income through the investment of such collateral.
Each Fund continues to be entitled to payments in amounts equal to the
dividends, 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 Fund might experience risk of loss if the
institution with which it has engaged in a portfolio loan transaction breaches
its agreement with such Fund.
FORWARD COMMITMENTS--(All Funds) Each Fund may purchase securities on a
when-issued or forward commitment basis, which means that the price is fixed at
the time of commitment, but delivery and payment ordinarily take place a number
of days after the date of the commitment to purchase. Each Fund will make
commitments to purchase such securities only with the intention of actually
acquiring the securities, but the Fund may sell these securities before the
settlement date if it is deemed advisable. The Fund will not accrue income in
respect of a security purchased on a forward commitment basis prior to its
stated delivery date.
BORROWING MONEY--(All Funds) As a fundamental policy, each Fund is permitted to
borrow money in an amount up to 33 1/3% of the value of its total assets.
However, each Fund currently intends to borrow money only for temporary or
emergency (not leveraging) purposes, 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 Fund's total assets, such
Fund will not make any investments. In addition, the Prime Money Market Fund and
Treasury Money Market Fund may borrow for investment purposes on a secured basis
through entering into reverse repurchase agreements as described below.
REVERSE REPURCHASE AGREEMENTS--(Prime Money Market and Treasury Money Market
Funds only) The Prime Money Market Fund and Treasury Money Market Fund may enter
into reverse repurchase agreements with banks, brokers or dealers. Reverse
repurchase agreements involve the transfer by the Fund of an underlying debt
instrument in return for cash proceeds based on a percentage of the value of the
security. The Fund retains the right to receive interest and principal payments
on the security. The Fund 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 Fund
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, the Fund 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 Company's Directors have considered the risks to each
of the Prime Money Market Fund and Treasury Money Market Fund 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 such
Fund's investment objective and management policies.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE
COMPANY'S OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUNDS'
SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. 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.
