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As filed with the Securities and Exchange Commission on October 10, 1997
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Securities and Exchange Commission
Washington, D.C. 20549
Form N-1A
Registration Statement under the
Securities Act of 1933 [ ]
Registration No. 33-36324
Pre-Effective Amendment No. ____ [ ]
Post-Effective Amendment No. 32 [x]
Registration Statement under the
Investment Company Act of 1940 [ ]
Registration No. 811-6153
Amendment No. 34 [x]
Ranson Managed Portfolios
(Exact Name of Registrant as Specified in Declaration of Trust)
1 North Main, Minot, North Dakota 58703
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (701) 852-5292
Copies to:
Robert E. Walstad--President Mark J. Kneedy, Esq.
1 North Main Chapman and Cutler
Minot, North Dakota 58703 111 West Monroe Street
Chicago, Illinois 60603
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box):
[ ] immediately upon filing [ ] on (date) pursuant to paragraph
pursuant to paragraph (b) (a)(1)
[x] on October 11, 1997 pursuant [ ] 75 days after filing pursuant
to paragraph (b) to paragraph (a)(2)
[ ] 60 days after filing [ ] on (date) pursuant to paragraph
pursuant to paragraph (a)(1) (a)(2) of Rule 485.
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Pursuant to the provisions of Rule 24f-2 under the Investment Company Act of
1940, Registrant has elected to register an indefinite number of shares and will
file a Rule 24f-2 notice with the Commission within 180 days after July 31,
1998, the close of its current fiscal year.
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Contents
of
Registration Statement
The Registration Statement comprises the following papers and contents:
The Facing Sheet
Cross-Reference Sheet
Part A - Prospectus
Part B - The Statement of Additional Information
Part C - Other Information
Signatures
Index to Exhibits
Exhibits
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Ranson Managed Portfolios
Cross Reference Sheet
Pursuant to Rule 495(a) under the Securities Act of 1933
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Form N-1A, Part A, Item Number Heading in Prospectus
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<S><C> <C>
1 Cover Page Cover
2 Synopsis Highlights of the Fund and
Prospectus Summary; Fee and Expense
Table
3 Condensed Financial Calculation of Fund Performance Data
Information
4 General Description of The Fund; Investment Objective and
Registrant Policies
5 Management of the Fund The Fund; Dividends and Taxes; Fund
Management
5A Management's Discussion of Not Applicable
Fund Performance
6 Capital Stock and Other Description of Shares and Rights
Securities
7 Purchase of Securities Being Special Programs; Purchase of Shares
Offered
8 Redemption or Repurchase Redemption of Shares
9 Pending Legal Proceedings *
</TABLE>
<TABLE>
Heading in Statement of Additional
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Form N-1A, Part B, Item Number Information
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<S><C> <C>
10 Cover Page Cover
11 Table of Contents Table of Contents
12 General Information and The Fund and its Shares
History
13 Investment Objectives and Investment Objective, Policies and
Policies Restrictions
14 Management of the Fund Officers and Trustees
15 Control Persons and Principal The Fund and its Shares
Holders of Securities
16 Investment Advisory and Other Management and Investment Advisory
Services Agreement
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* Not applicable
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<TABLE>
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17 Brokerage Allocation and Portfolio Transactions
Other Practices
18 Capital Stock and Other Additional Information Regarding
Securities Shares and Rights
19 Purchase, Redemption and Net Asset Value, in Prospectus;
Pricing of Shares Being Purchase of Shares, in Prospectus;
Offered Redemption of Shares, in Prospectus
Heading in Statement of Additional
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Form N-1A, Part B, Item Number Information
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20 Tax Status Dividends and Taxes, in Prospectus
21 Underwriters Purchase of Shares, in Prospectus;
The Distributor, in Prospectus
22 Calculations of Performance Performance Data
Data
23 Financial Statements Report of Independent Auditors;
Statement of Assets and Liabilities
Form N-1A, Part C, Item Number Heading in Other Information
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24 Financial Statements and Financial Statements and Exhibits
Exhibits
25 Persons Controlled by or Persons Controlled by or Under
Under Common Control with Common Control with Registrant
Registrant
26 Number of Holders of Number of Holders of Securities
Securities
27 Indemnification Indemnification
28 Business and Other Business and Other Connections of
Connections of Investment Investment Advisor
Adviser
29 Principal Underwriters Principal Underwriters
30 Location of Accounts and Location of Accounts and Records
Records
31 Management Services Management Services
32 Undertakings Undertakings
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ Information contained herein is subject to completion or amendment. A +
+ registration statement relating to these securities has been filed with the +
+ Securities and Exchange Commission. These securities may not be sold nor may +
+ offers to buy be accepted prior to the time the registration statement +
+ becomes effective. This prospectus shall not constitute an offer to sell or +
+ the solicitation of an offer to buy nor shall there be any sale of these +
+ securities in any State in which such offer, solicitation or sale would be +
+ unlawful prior to registration of qualification under the securities laws of +
+ any such State. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion October 10, 1997
Prospectus
October 11, 1997
Ranson Managed Portfolios
The Illinois Municipal Fund
1 North Main
Minot, North Dakota 58703
(701) 852-5292
(800) 601-5593
E-Mail: [email protected]
http://www.integrityfunds.com
The Illinois Municipal Fund is an investment portfolio of Ranson Managed
Portfolios which is an unincorporated business trust organized under the laws of
Massachusetts on August 10, 1990. Ranson Managed Portfolios is an open-end
series non-diversified management company, known as a mutual fund. The term "the
Fund" as used herein shall refer to either Ranson Managed Portfolios or The
Illinois Municipal Fund series of Ranson Managed Portfolios as the context may
require. The investment objective of the Fund is to provide its shareholders
with as high a level of current income exempt from federal income tax and, to
the extent indicated, Illinois income tax, as is consistent with preservation of
capital. Up to 100% of the Fund's total assets may be invested in Illinois
Municipal Securities which are subject to Illinois state income taxes. Illinois
Municipal Securities refers to debt obligations of Illinois, its political
subdivisions, municipalities, agencies and authorities, the Commonwealth of
Puerto Rico, the Virgin Islands and Guam, the interest payable on which is, in
the opinion of bond counsel to the issuer, exempt from federal taxation. Under
normal market conditions, the Fund's assets will be invested in a portfolio of
Illinois Municipal Securities which, in the opinion of Ranson Capital
Corporation, will produce a higher level of current income than would be
produced by a portfolio of Illinois Municipal Securities rated in only the
highest rating category, but contains Illinois Municipal Securities which do not
present a significant risk of loss of principal due to credit characteristics.
In pursuit of this objective, the Fund invests primarily in debt obligations
issued by or on behalf of the State of Illinois, its political subdivisions and
their agencies and instrumentalities. A substantial portion of the income
produced by the Fund may be includable in the calculation of alternative minimum
taxable income. Shares of the Fund therefore would not ordinarily be a suitable
investment for investors who are subject to the alternative minimum tax.
A maximum sales load of 4.25% will be imposed on purchases (4.44% of the
net amount invested). The minimum initial investment is $1,000. See "Purchase of
Shares."
Ranson Capital Corporation (the "Manager") is the Fund's manager. ND
Resources, Inc. serves as the Fund's Transfer Agent and First Western Bank &
Trust serves as the Fund's Custodian.
THESE SECURITIES HAVE NOT BEEN APPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES
<PAGE>
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.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
READ AND RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE. THE PROSPECTUS
CONCISELY SETS FORTH INFORMATION INVESTORS SHOULD KNOW BEFORE INVESTING IN THE
FUND.
A Statement of Additional Information, dated the date of this Prospectus,
regarding the Fund (which is incorporated herein by reference) has been filed
with the Securities and Exchange Commission and is available upon request and
without charge by writing the Fund at the above mailing address or by
telephoning the Manager at either of the numbers set forth above.
Fee and Expense Table
The following tables set forth (i) the non-recurring shareholder
transaction expenses, (ii) the recurring annual Fund operating expenses and
(iii) the estimated expenses paid directly and indirectly by a shareholder with
a $1,000 investment that is subject to the maximum sales load over 1 and 3 year
periods.
<TABLE>
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Shareholder Transaction Expenses
Maximum Sales Load imposed on Purchases (as a percentage of
offering price) 4.25%
====
</TABLE>
There is no sales charge on reinvested dividends, deferred sales charge,
redemption fee or exchange fee. The Maximum Sales Load may be reduced or
eliminated as described in "Purchase of Shares" and "Special Programs."
<TABLE>
<S> <C>
Annual Fund Operating Expenses
(as a percentage of average net
assets) The Illinois Municipal Fund
(Expense after Fee Waivers)
Management Fees (Expense after Fee
Waiver) 0.20%
Rule 12b-1 Fees 0.25%
Other Expenses 0.40%
----
Total Fund Operating Expenses
(Expense after Fee Waiver) 0.85%
====
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Example
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1 Year 3 Years
Shareholder would pay the following expenses
after fee waiver on a $1,000 investment,
assuming a 5% annual return:
The Illinois Municipal Fund $51 $69
=== ===
</TABLE>
The purpose of these tables is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. The calculation presumes expenses for the current year at the
projected rate of .85% for the Fund after a partial fee waiver by the Manager.
Other Expenses are estimated to be 0.40% while Management Fees, Rule 12b-1 Fees
and Total Fund Operating Expenses for the Fund are 0.50%, 0.25% and 1.15% before
fee waiver. These expenses assume a voluntary waiver by the Manager of a
portion of its fee not required by the Management and Investment Advisory
Agreement. THESE COSTS AND EXPENSES SHOULD NOT BE CONSIDERED A REPRESENTATION
OF PAST OR FUTURE EXPENSES, AND THE ACTUAL EXPENSES INCURRED BY THE FUND, AND
THE DEGREE OF EXPENSE REIMBURSEMENT AND FEE WAIVER, IF ANY, MAY BE GREATER OR
LESS IN THE FUTURE. See "Purchase of Shares" for information relating to sales
load discounts and "Fund Management" for the level of management fees and "The
Distributor" for information relating to the Fund's Shareholder Services Plan.
Long-term shareholders may pay more than the economic equivalent of the maximum
front-end sales charge permitted by the National Association of Securities
Dealers, Inc.
Highlights of the Fund and Prospectus Summary
The highlights and summary information below should be read in conjunction
with the detailed information appearing elsewhere in this Prospectus.
The Investment Objective of the Fund is to provide its shareholders with as
high a level of current income that is exempt from federal income tax and, to
the extent indicated, Illinois income tax as is consistent with preservation of
capital. Under normal market conditions, the Fund's assets will be invested in
a portfolio of Illinois Municipal Securities which, in the opinion of Ranson
Capital Corporation, will produce a higher level of current income than would be
produced by a portfolio of Illinois Municipal Securities rated in only the
highest rating category, but contains Illinois Municipal Securities which do not
present a significant risk of loss of principal due to credit characteristics.
There is no assurance that the Fund's investment objective will be achieved.
See "Investment Objective and Policies -- Investment Objective."
The Investment Policy of the Fund is to invest in a portfolio of investment
grade municipal securities which generate interest income that is exempt from
federal income tax and, to the extent indicated, Illinois income tax. These
municipal securities (hereinafter referred to as "Illinois Municipal
Securities") generally include debt obligations of the State
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of Illinois, its political subdivisions, municipalities, agencies and
authorities, and certain industrial development and other revenue bonds, short-
term municipal notes, participation interests in municipal leases and tax-exempt
commercial paper issued by such entities. Up to 100% of the Fund's total assets
may be invested in Illinois Municipal Securities which are subject to Illinois
state income taxes. See "Investment Objective and Policies -- Illinois Municipal
Securities" for a more complete description of Illinois Municipal Securities. In
certain circumstances the Fund may enter into when-issued or delayed delivery
transactions and purchase taxable securities. The Fund may, for hedging
purposes, enter into financial futures contracts, options on such futures,
municipal bond index futures contracts and options on securities. These
investments entail certain risks. See "Investment Objective and Policies --
Futures Contracts and Options." The interest on certain Illinois Municipal
Securities in the Fund's portfolio may constitute an item of preference for
determining the federal alternative minimum tax for individuals and
corporations. See "Dividends and Taxes."
The Fund's Shares May Be Purchased through Ranson Capital Corporation and
selected dealers at the public offering price, which is equal to the net asset
value next determined, plus a sales charge of 4.25% of the public offering price
(4.44% of the net amount invested). See "Purchase of Shares."
The Minimum Initial Investment is $1,000 and the minimum additional
investment is $50. See "Purchase of Shares." The initial and minimum investments
will be less under certain conditions described under "Purchase of Shares" and
"Special Programs."
An Open Account Program will be established for each investor unless the
investor elects not to participate in such program as is provided under
"Purchase of Shares -- Open Account Program/Certificates."
Special Programs of the Fund include: a group program; a systematic
withdrawal program; a preauthorized investment program; a rights of accumulation
program; and a reinstatement privilege. See "Special Programs."
The Fund has a Shareholder Services Plan adopted pursuant to Rule 12b-1
under the Investment Company Act of 1940, pursuant to which .25% per annum of
average daily net assets will be used to pay dealers and banks selling Fund
shares for administrative and shareholder services or to pay for certain
distribution expenses. See "The Distributor."
Distributions for the Fund will be declared daily from net investment
income and will be paid monthly; net capital gains, if any, will be distributed
at least annually. See "Dividends and Taxes."
Confirmation Statements will be sent to all investors who have had purchase
or redemption activity in their account.
Redemptions can be made at net asset value, without charge. The Fund may
require redemption of shares if the value of an account is reduced to $1,000 or
less (for any reason
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other than fluctuations in the market value of the Fund's portfolio securities
or, if as a result of the amount of an investor's initial purchase the value of
such an account is $1,000 or less). See "Redemption of Shares."
The Fund's Manager and Investment Adviser is Ranson Capital Corporation
which receives a monthly management and investment advisory fee equivalent on an
annual basis to .50 of 1% of the Fund's average daily net assets. Under the
terms of the Management and Investment Advisory Agreement between the Fund and
the Manager, the Manager pays all expenses of the Fund, including the Fund's
management and investment advisory fee and the Fund's dividend disbursing,
administrative and accounting services fees (but excluding taxes and brokerage
fees and commissions, if any) that exceed 1.25% of the Fund's average daily net
assets on an annual basis up to the amount of the management and investment
advisory fee payable by the Fund to the Manager. The Manager may assume
additional Fund expenses or waive portions of its fees in its discretion. See
"Fund Management." Ranson Capital Corporation will act as the Fund's Evaluator.
The procedures of the Evaluator and its valuations are reviewed by the officers
of the Fund under the general supervision of the Board of Trustees. See "Net
Asset Value."
Risk Factors: The Fund is subject to the risks of primarily concentrating
its investments in Illinois Municipal Securities and does not have the benefit
of geographical investment diversification (see "Investment Objective and
Policies"). Also, as a non-diversified investment company, the Fund has the
ability to invest a substantial portion of its assets in particular issuers
which may be advantageous when investing in Illinois Municipal Securities, but
which involves an increased risk of loss to the Fund should an issuer be unable
to make interest or principal payments or should the market value of such
securities decline. The Fund has the ability to purchase new issues of Illinois
Municipal Securities on a "when-issued" basis as well as outstanding issues on a
delayed delivery basis, both of which involve the potential risk of loss of
principal in the event either that the value of such securities to be purchased
declines prior to the settlement date or if such securities should ultimately
not be issued or delivered and the price of comparable securities has increased,
the cost of substitute securities having comparable par amounts, ratings and
yields will be greater than was originally contracted for. Twenty five percent
or more of the Illinois Municipal Securities in the Fund's portfolio may derive
their payment from mortgage loans and/or hospitals and other health care
facilities, respectively. In addition, a substantial portion of the Illinois
Municipal Securities in the Fund's portfolio may derive their payment from
utilities, turnpikes or educational facilities, all of which entail certain
risks (see "Investment Objective and Policies -- Illinois Municipal
Securities"). The Fund may from time to time invest in participations in
municipal leases. Municipal leases are less liquid than many other municipal
securities and therefore will be subject to the risks of illiquidity referred to
in the next paragraph. Also, municipal leases are subject to the risk of "non-
appropriation" which allows the municipal lessee to terminate the lease and
eliminate its obligation to continue to make lease payments (see "Investment
Objective and Policies -- Illinois Municipal Securities").
The Fund will invest a substantial portion of its assets in investment
grade Illinois Municipal Securities. Lower quality securities involve a greater
risk of default, including
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nonpayment of principal and interest, than investment grade securities; however,
the risk of default is present in investment grade securities. Illinois
Municipal Securities rated in the lowest category of investment grade debt have
speculative characteristics. The Fund will not invest in Illinois Municipal
Securities rated below investment grade (i.e. below BBB by Standard & Poor's
Corporation or Baa by Moody's Investors Service, Inc.); however, the subsequent
downgrading of an Illinois Municipal Security below investment grade will not in
itself cause such security to be sold from the Fund's portfolio. The Fund will
not, however, hold Illinois Municipal Securities downgraded below investment
grade to the extent such securities exceed 5% of the Fund's net assets.
Investment in medium-quality debt securities (rated BBB or A by Standard &
Poor's Corporation or Baa or A by Moody's Investors Service, Inc.) involves
greater investment risk, including the possibility of issuer default or
bankruptcy, than investment in higher-quality debt securities. An economic
downturn could severely disrupt this market and adversely affect the value of
outstanding bonds and the ability of the issuers to repay principal and
interest. During a period of adverse economic changes, including a period of
rising interest rates, issuers of such bonds are more likely to experience
difficulty in servicing their principal and interest payment obligations than is
the case with higher grade bonds. In addition, an investment in the Fund should
be made with an understanding that the value of the underlying portfolio may
decline with increases in interest rates. In recent years there have been wide
fluctuations in interest rates and thus in the value of fixed-rate, long-term
debt obligations generally. The Manager cannot predict whether these
fluctuations will continue in the future. The principal trading market for the
Illinois Municipal Securities will generally be in the over-the-counter market.
As a result, the existence of a liquid trading market for the Illinois Municipal
Securities may depend on whether dealers will make a market in such securities.
There can be no assurance that a market will be made for any of the Illinois
Municipal Securities, that any market for the Illinois Municipal Securities will
be maintained or of the liquidity of the Illinois Municipal Securities in any
markets made. In addition, certain of the Illinois Municipal Securities may be
subject to extraordinary optional and/or mandatory redemptions at par if certain
events should occur. To the extent securities were purchased at a price in
excess of the par value thereof and are subsequently redeemed at par as a result
of an extraordinary redemption, the Fund would suffer a loss of principal.
The Fund may invest in financial futures contracts and related options
thereon for hedging purposes. A risk in employing futures contracts to protect
against the price volatility of portfolio securities is that the prices of
securities subject to futures contracts may not correlate perfectly with the
behavior of the cash prices of the Fund's portfolio securities. The risk of
imperfect correlation may be increased by the fact that the Fund may trade in
futures contracts on taxable securities and there is no guarantee that the
prices of taxable securities will move in a manner similar to the prices of tax-
exempt securities. Another risk is that the Manager could be incorrect in its
expectations as to the direction or extent of various interest rate movements or
the time span within which the movements take place. For example, if the Fund
sold futures contracts in anticipation of an increase in interest rates, and
then interest rates went down, causing bond prices to rise, the Fund would lose
money and incur transaction costs on the sale.
Investors May Call (800) 601-5593 for daily yield and daily net asset value
quotations and for information on account balances.
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The Fund
Ranson Managed Portfolios is an unincorporated business trust organized
under the laws of Massachusetts on August 10, 1990. It is an open-end non-
diversified series management investment company or "mutual fund." The Illinois
Municipal Fund is one of five portfolios or "series" offered at this time. Like
other mutual funds, the Fund sells its shares to investors and uses the proceeds
to invest in various securities as described in this Prospectus. The Fund is
subject to the overall direction and monitoring function of the Board of
Trustees (the "Trustees").
Information regarding the Fund is available by telephoning or writing the
Fund at the phone number or address shown on the front cover of this Prospectus.
Investment Objective and Policies
Investment Objective
The investment objective of the Fund is to provide its shareholders with as
high a level of current income exempt from federal income tax and, to the extent
indicated, Illinois income tax as is consistent with preservation of capital.
Under normal market conditions, the Fund's assets will be invested in a
portfolio of Illinois Municipal Securities which, in the opinion of Ranson
Capital Corporation, will produce a higher level of current income than would be
produced by a portfolio of Illinois Municipal Securities rated in only the
highest rating category, but contains Illinois Municipal Securities which do not
present a significant risk of loss of principal due to credit characteristics.
The Fund seeks to achieve its investment objective by investing primarily in
Illinois Municipal Securities (as further described below). At the respective
times of issuance of the Illinois Municipal Securities, certain of the issues of
the Illinois Municipal Securities may have been accompanied by an opinion of
bond counsel to the respective issuing authorities that interest on such
Illinois Municipal Securities are exempt from Illinois income tax. The Fund may
invest up to 100% of its total assets in Illinois Municipal Securities, the
interest on which is subject to Illinois income tax.
A shareholder will receive taxable income in the event of capital gains
distributions by the Fund. In addition, the Fund has not established any limit
on the percentage of its portfolio that may be invested in Illinois Municipal
Securities subject to the alternative minimum tax provisions of federal tax law,
and a substantial portion of the income produced by the Fund may be includable
in the calculation of alternative minimum taxable income. Shares of the Fund
therefore would not ordinarily be a suitable investment for investors who are
subject to the alternative minimum tax. The suitability of shares of the Fund
for these investors will depend upon a comparison of the yield likely to be
provided from the Fund with the yield from comparable tax-exempt investments not
subject to the alternative minimum tax, and with the yield from comparable fully
taxable investments, in light of each such investor's tax position.
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<PAGE>
Illinois Municipal Securities
As used in this Prospectus, the term "Illinois Municipal Securities" refers
to debt obligations of Illinois, its political subdivisions, municipalities,
agencies and authorities the interest payable on which is, in the opinion of
bond counsel to the issuer, exempt from federal income taxation. The term
"Illinois Municipal Securities" also includes obligations of the Commonwealth of
Puerto Rico, the United States Virgin Islands and Guam, the interest payable on
which is, in the opinion of bond counsel to the issuer, exempt from federal
income taxation. The Fund will not invest more than 30% of its total assets in
Illinois Municipal Securities which are obligations of the Commonwealth of
Puerto Rico, the United States Virgin Islands or Guam and will, under normal
market conditions, invest at least 65% of the value of all of its assets in
obligations of Illinois, its political subdivisions, municipalities, agencies
and authorities. Illinois law provides that to the extent dividends paid by the
Fund are derived from obligations of the Commonwealth of Puerto Rico, the United
States Virgin Islands or Guam, they shall be exempt from Illinois income tax.
Illinois Municipal Securities include debt obligations of Illinois, its
political subdivisions, municipalities, agencies and authorities issued to
obtain funds for various public purposes, including the construction or
improvement of a wide range of public facilities such as airports, bridges,
highways, hospitals, housing, jails, mass transportation, nursing homes, parks,
public buildings, recreational facilities, school facilities, streets and water
and sewer works. Other public purposes for which Illinois Municipal Securities
may be issued include the refunding of outstanding obligations, the anticipation
of taxes or state aids, the payment of judgments, the funding of student loans,
community redevelopment, the purchase of street maintenance and firefighting
equipment, or any authorized corporate purpose of the issuer except for the
payment of current expenses. In addition, certain types of industrial
development and other revenue bonds may be issued by or on behalf of public
corporations to finance privately operated housing facilities, air or water
pollution control facilities and certain local facilities for water supply, gas,
electricity or sewage or solid waste disposal. Other types of industrial
development bonds, the proceeds of which are used for the construction,
equipping, repair or improvement of privately operated industrial, commercial or
office facilities, constitute Illinois Municipal Securities, although current
federal income tax laws place substantial limitations on the size of such
issues.
Since the Fund will invest substantially all of its assets in Illinois
Municipal Securities, the Fund is susceptible to political and economic factors
affecting the issuers of Illinois Municipal Securities. In fiscal year 1995,
Illinois experienced its strongest economic growth in seven years. Illinois
payroll jobs increased 2.3% and the state achieved its lowest level of
unemployment in 21 years. During fiscal years 1995 and 1996, the state's cash
balance will have increased $300 million and unpaid Medicaid bills will be
reduced by more than $900 million. Outstanding Medicaid bills are being paid
faster than in nine of the ten previous fiscal years.
The Illinois economy continued to grow in Fiscal Year 1996 and Fiscal Year
1997, although at a slower pace. As a result, there were continued constraints
on spending growth and new programs were necessary to ensure the state's
financial situation. The Fiscal Year 1997 budget increased education funding by
$332 million, the largest increase ever without a
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<PAGE>
general tax increase. However, the Fiscal Year 1997 budget contained no other
major program expansions or reductions. The state's cash balance was about $805
million as of June 30, 1997. This amount included additional revenues of $85
million that were due to unusually strong late-year growth in income tax
revenue. In addition to the $85 million in revenue growth, the June 30, 1997
balance reflects more than $120 million in funds appropriated for specific
purposes during Fiscal Year 1997 but not yet spent.
Fiscal Year 1997 was the second year under a new state law that required
Illinois to fund its employee pension system obligations on an actuarially sound
basis. The state's pension contribution increased $109 million in Fiscal Year
1997, representing an 18% increase over Fiscal Year 1996 and raising the annual
funding for the five state systems to $723 million.
Illinois' upward economy produced a total number employed of 5,849,448 as
of May 1997. For eight consecutive months, a new employment record has been
established. This has resulted in a sharp drop in the unemployment rate to 4.4%
as of May 1997. Employment in manufacturing has rebounded steadily over the past
five years from the low point it reached during the 1991 economic downturn.
Annual growth has averaged about 10,000 new jobs the last few years.
Total personal income in the state rose 5.6% in 1996 compared to the U.S.
growth rate of 5.4%. The U.S. Department of Commerce noted that a good corn crop
helped boost personal income in corn producing states.
Illinois ranked fifth in 1995 and 1996 in international shipments with
$34.7 billion in exports. An increase of over $2 billion helped boost sales 6.3%
in 1996. While Illinois ranked third in agricultural products, manufactured
products accounted for 89% of the state's direct sales last year. Any policies
or legislation affecting the export industry may have an adverse effect on the
revenue produced by export products in Illinois.
The foregoing information constitutes only a brief summary of some of the
financial difficulties which may impact certain issuers of Illinois Municipal
Securities and does not purport to be a complete or exhaustive description of
all adverse conditions to which the issuers in the Fund are subject.
Additionally, many factors including national economic, social and environmental
policies and conditions, which are not within the control of the issuers of
Illinois Municipal Securities, could affect or could have an adverse impact on
the financial condition of the State and its various agencies and political
subdivisions. The Manager is unable to predict whether or to what extent such
factors or other factors may affect the issuers of Illinois Municipal
Securities, the market value or marketability of the Illinois Municipal
Securities or the ability of the respective issuers of the Illinois Municipal
Securities acquired by the Fund to pay interest on or principal of the Illinois
Municipal Securities.
The Fund has a fundamental investment restriction which prohibits it from
investing 25% or more of its total assets in securities of issuers in any single
industry. This restriction does not, however, place any such limitation on the
purchase of securities issued or
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guaranteed by the U.S. Government, its agencies or instrumentalities or by
Illinois, its political subdivisions, municipalities, agencies and authorities.
Over 25% of the Illinois Municipal Securities in the Fund's portfolio may
derive their payment from mortgage loans. Such Illinois Municipal Securities are
single family mortgage revenue bonds issued for the purpose of acquiring from
originating financial institutions notes secured by mortgages on residences
located within the issuer's boundaries and owned by persons of low or moderate
income. Mortgage loans are generally partially or completely prepaid prior to
their final maturities, as a result of events such as the sale of the mortgaged
premises, default condemnation or casualty loss. Because these bonds are subject
to extraordinary mandatory redemption, in whole or in part, from such
prepayments on mortgage loans, a substantial portion of such bonds will probably
be redeemed prior to their scheduled maturities or even prior to their ordinary
call dates. Extraordinary mandatory redemption without premium could also result
from the failure of the originating financial institutions to make mortgage
loans in sufficient amounts within a specified time period or, in some cases,
from the sale by the Bond issuer of the mortgage loans. These bonds were issued
under Section 103A of the Internal Revenue Code, which Section contains certain
ongoing requirements relating to the use of the proceeds of such bonds in order
for the interest on such bonds to retain its tax-exempt status. In each case the
issuer of the bonds has covenanted to comply with applicable requirements and
bond counsel to such issuer has issued an opinion that the interest on the bonds
is exempt from federal income tax under existing laws and regulations. There can
be no assurance that such ongoing requirements will be met.
Over 25% of the Illinois Municipal Securities in the Fund's portfolio may
be health care revenue bonds. Ratings of bonds issued for health care facilities
are often based on feasibility studies that contain projections of occupancy
levels, revenues and expenses. A facility's gross receipts and net income
available for debt service may be affected by future events and conditions
including, among other things, demand for services, the ability of the facility
to provide the services required, physicians' confidence in the facility,
management capabilities, competition with other hospitals, efforts by insurers
and governmental agencies to limit rates, legislation establishing state rate-
setting agencies, expenses, government regulation, the cost and possible
unavailability of malpractice insurance and the termination or restriction of
governmental financial assistance, including that associated with Medicare,
Medicaid and other similar third party payor programs. Medicare reimbursements
are currently calculated on a prospective basis utilizing a single nationwide
schedule of rates. Prior to this nationwide approach, Medicare reimbursements
were based on the actual costs incurred by the health facility. The current
legislation may adversely affect reimbursements to hospitals and other
facilities for services provided under the Medicare program.
The Illinois Municipal Securities in which the Fund invests consist of
Illinois bonds, notes, commercial paper and participation interests in municipal
leases. Illinois tax-exempt notes and commercial paper are generally used to
provide for short-term capital needs and ordinarily have a maturity of up to one
year. These include notes issued in anticipation of tax revenue, revenue from
other government sources or revenue from bond offerings and short-term,
unsecured commercial paper, which is often used to finance seasonal working
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<PAGE>
capital needs or to provide interim construction financing. Illinois tax-exempt
leases are obligations of state and local government units incurred to lease or
purchase equipment or other property utilized by such governments. The Fund will
not originate leases as a lessor, but will instead purchase a participation
interest in the regular payment stream of the underlying lease from a bank,
equipment lessor or other third party. 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. Tax-exempt industrial development bonds are in most cases
revenue bonds and generally do not carry the pledge of the credit of the issuing
municipality. The revenues from which such bonds are paid generally constitute
an obligation of the corporate entity on whose behalf the bonds are issued.
Although the participations in municipal leases which the Fund may purchase
(hereinafter called "lease obligations") do not constitute general obligations
of the municipality for which the municipality's taxing power is pledged, a
lease obligation is ordinarily backed by the municipality's covenant to budget
for, appropriate and make the payments due under the lease obligation. However,
certain lease obligations contain "non-appropriation" clauses which provide that
the municipality has no obligation to make lease payments in future years unless
money is appropriated for such purpose on a yearly basis. In addition to the
"nonappropriation" risk, these securities represent a relatively new type of
financing that has not yet developed the depth of marketability associated with
more conventional bonds. Although "non-appropriation" lease obligations are
secured by the leased property, disposition of the property in the event of
foreclosure might prove difficult. The Fund will only purchase lease obligations
which are rated in the top category by either Standard & Poor's Corporation or
Moody's Investor Service, Inc. The Fund will not invest more than 15% of its net
investment assets in lease obligations (including, but not limited to those
lease obligations which contain "non-appropriation clauses"), or any other
illiquid securities.
The Fund will only purchase lease obligations which are covered by an
existing opinion of legal counsel experienced in municipal lease transactions
that, as of the date of issue or purchase of each participation interest in a
municipal lease, the interest payable on such obligation is exempt from federal
income tax and, to the extent indicated, Illinois income tax and that the
underlying lease was the valid and binding obligation of the governmental
issuer.
Investment Policies
It is a fundamental policy of the Fund, which may not be changed without
the approval of the majority of the Fund's shares, that under normal
circumstances at least 80% of the Fund's assets will be invested in Illinois
Municipal Securities which generate income that is exempt, in the opinion of
bond counsel, from federal income tax. While the Fund attempts, under normal
market conditions, to invest all of its assets in Illinois Municipal Securities,
and, under normal market conditions, must invest at least 65% of the value of
all
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of its assets in Illinois Municipal Securities (excluding obligations of the
Commonwealth of Puerto Rico, the United States Virgin Islands or Guam), the Fund
may temporarily invest up to 100% of its assets in taxable fixed-income
securities or hold up to 100% of its assets in cash during periods of abnormal
market conditions that dictate taking a defensive posture by investing in such
taxable obligations or cash. In addition, pending the investment or reinvestment
in Illinois Municipal Securities of proceeds of sales of shares or sales of
portfolio securities or in order to avoid the necessity of liquidating portfolio
investments to meet shareholder's redemption requests, the Fund may invest up to
20% of its assets in taxable fixed income securities or cash.
The Illinois Municipal Securities in which the Fund invests consist of
securities rated within the following grades assigned by Moody's Investors
Service, Inc. ("Moody's"): Aaa, Aa, A and Baa for bonds; MIG-1 and MIG-2 for
notes; Prime-1 and Prime-2 for commercial paper; or Standard & Poor's
Corporation ("S&P"): AAA, AA, A and BBB for bonds; SP-1 and SP-2 for notes; A-1
or A-2 for commercial paper. The risk of default, including nonpayment of
principal and interest, on securities rated below the three highest grades is
somewhat higher than the risk of default on securities rated within the three
highest grades. The Fund may also invest in Illinois tax-exempt industrial
development bonds, if the securities, at the time of purchase, are rated
investment grade quality by either Moody's or S&P. The Fund will not invest in
Illinois Municipal Securities rated below investment grade by either S&P or
Moody's. While ratings at the time of purchase will determine which Illinois
Municipal Securities may be acquired by the Fund, a subsequent reduction in
rating will not require the Fund to dispose of the securities. The Fund will
not, however, hold Illinois Municipal Securities downgraded below investment
grade to the extent such securities exceed 5% of the Fund's net assets. The Fund
will purchase unrated Illinois Municipal Securities which have been determined
to be of investment grade quality at the time of purchase by the Fund's Manager
pursuant to guidelines established and maintained in good faith by the Board of
Trustees of the Fund. Many issuers of tax-exempt securities which have
characteristics of rated securities choose not to have their obligations rated.
Although securities which are not rated are not necessarily of lower quality,
the market for them may not be as broad as for rated securities, since many
investors rely on rating agencies for credit appraisal. As a fundamental policy,
the Fund may not invest more than 30% of its assets in unrated Illinois
Municipal Securities. Also, the Fund will not invest more than 15% of the Fund's
net assets in lease obligations, or in any other illiquid securities.
Taxable obligations which the Fund may purchase for temporary liquidity
purposes, or for temporary defensive purposes, may include: obligations of the
U.S. Government, its agencies or instrumentalities; other debt securities of
issuers having, at the time of purchase, a rating within the four highest grades
of Moody's or S & P; commercial paper rated Prime-1 or better by Moody's or A-1
or better by S & P; certificates of deposit of domestic banks, including foreign
branches of domestic banks, which have capital, surplus and undivided profits of
over $100 million; time deposits; bankers' acceptances, repurchase agreements
and obligations of Illinois with respect to any of the foregoing investments.
Interest earned from taxable obligations will be taxable to investors.
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The Fund also may purchase floating and variable rate demand notes from
municipal and nongovernmental issuers. These notes normally have a stated
maturity in excess of one year, but permit the holder to demand payment of
principal plus accrued interest upon a specified number of days notice.
Frequently, such obligations are secured by letters of credit or other credit
support arrangements provided by banks. Use of letters of credit or other credit
support arrangements will generally not adversely affect the tax-exempt status
of these obligations. The Manager will rely upon the opinion of the issuer's
bond counsel to determine whether such notes are exempt from federal and
Illinois income taxation. The issuer of floating and variable rate demand notes
nominally has a corresponding right, after a given period, to prepay in its
discretion the outstanding principal amount of the note plus accrued interest
upon a specified number of days notice to the noteholders. The interest rate on
a floating rate demand note is based on a known lending rate, such as a bank's
prime rate, and is adjusted automatically each time such rate is adjusted. The
interest rate on a variable rate demand note is adjusted at specified intervals,
based upon a known lending rate. The Manager will monitor the creditworthiness
of the issuers of floating and variable rate demand notes. The Fund will not
invest in derivative financial instruments other than in connection with its
hedging activities.
The yields on Illinois Municipal Securities are dependent on a variety of
factors, including general money market conditions, the financial condition of
the issuer, general conditions of the Illinois municipal obligations market, the
size of a particular offering, the maturity of the obligation and the rating of
the issue or issuer. The ratings of Moody's and S&P represent their opinions as
to the quality of the Illinois Municipal Securities which they undertake to
rate. It should be emphasized, however, that ratings are general, and not
absolute, standards of quality. Consequently, Illinois Municipal Securities of
the same maturity, interest rate and rating may have different yields, while
Illinois Municipal Securities of the same maturity and interest rate with
different ratings may have the same yield. Subsequent to their purchase by the
Fund, particular Illinois Municipal Securities or other investments may cease to
be rated or their ratings may be reduced below the minimum rating required for
purchase by the Fund.
Medium-quality Illinois Municipal Securities (rated BBB or A by S&P or Baa
or A by Moody's) are obligations of issuers that are considered to possess
adequate, but not outstanding, capacities to service the obligations. Illinois
Municipal Securities rated in the lowest category of investment grade debt
(rated BBB by S&P or Baa by Moody's) may have speculative characteristics.
Because many issuers of medium-quality Municipal Securities choose not to have
their obligations rated by a rating agency, up to 30% of the Illinois Municipal
Securities in the Fund's portfolio may be unrated. The Fund will only purchase
unrated Illinois Municipal Securities which have been determined to be of
investment grade quality at the time of purchase by the Fund's Manager pursuant
to guidelines established and maintained in good faith by the Board of Trustees
of the Fund. Investment in medium-quality debt securities involves greater
investment risk, including the possibility of issuer default or bankruptcy, than
investment in higher-quality debt securities. An economic downturn could
severely disrupt this market and adversely affect the value of outstanding bonds
and the ability of the issuers to repay principal and interest. During a period
of adverse economic changes, including a period of rising interest rates,
issuers of such bonds
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are more likely to experience difficulty in servicing their principal and
interest payment obligations than is the case with higher grade bonds. Medium
quality debt securities tend to be less marketable than higher-quality debt
securities because the market for them is less broad. The market for unrated
debt securities is even narrower. During periods of thin trading in these
markets, the spread between bid and asked prices is likely to increase
significantly, and the Fund may have greater difficulty selling the medium-
quality debt securities in its portfolio.
The Fund is a non-diversified investment company, but intends to comply
with Subchapter M of the Internal Revenue Code. Because of the relatively small
number of issuers of investment grade Illinois Municipal Securities, the Fund
will probably use its ability as a non-diversified fund to invest a substantial
portion of its assets in the securities of certain issuers which the Fund's
Manager deems to be attractive investments, rather than invest in securities of
a large number of issuers merely to satisfy diversification requirements.
Although the Fund's Manager believes that the ability to invest a substantial
portion of the investments of the Fund in particular issuers is advantageous
when investing in Illinois Municipal Securities, such concentration involves an
increased risk of loss to the Fund should the issuer be unable to make interest
or principal payments or should the market value of such securities decline.
Investment in a non-diversified investment company such as the Fund may
therefore entail greater risks than investment in a "diversified" fund.
The Fund may invest up to 10% of its total assets in the securities of
other investment companies. Any investment by the Fund in securities issued by
other investment companies will result in the duplication of certain fees and
expenses.
Futures Contracts and Options
The Fund may invest in financial futures contracts ("futures contracts")
and related options thereon for hedging purposes. It is not the intent of the
Manager to speculate in futures contracts and related options as an aggressive
investment strategy, but rather as described below. The Fund may sell a futures
contract or a call option thereon or purchase a put option on such futures
contract if the Manager anticipates that interest rates will rise, as a hedge
against a decrease in the value of the Fund's portfolio securities. If the
Manager anticipates that interest rates will decline, the Fund may purchase a
futures contract or a call option thereon or sell a put option on such futures
contract to protect against an increase in the price of the securities the Fund
intends to purchase. These futures contracts and related options thereon will
be used only as a hedge against anticipated interest rate changes. A futures
contract sale creates an obligation by the Fund, as seller, to deliver the
specific type of instrument called for in the contract at a specified future
time for a specified price. Purchase of a futures contract creates an
obligation by the Fund, as purchaser, to take delivery of the specific type of
financial instrument at a specified future time at a specified price. A
purchaser or seller of a futures contract is required to make daily payments of
cash to reflect the change in the value of the underlying contract. The
specific securities delivered or taken, respectively, at settlement date would
not be determined until or near that date. The determination would be in
accordance with the rules of the exchange on which the futures contract sale or
purchase was effected.
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<PAGE>
Although the terms of futures contracts specify actual delivery or receipt
of securities, in most instances the contracts are closed out before the
settlement date without the making or taking of delivery of the securities.
Closing out of a futures contract is effected by entering into an offsetting
purchase or sale transaction prior to the expiration of the contract.
Unlike a futures contract, which requires the parties to buy and sell a
security on a set date unless offset, an option on a futures contract entitles
its purchaser to decide on or before a future date whether to enter into such a
contract (a long position in the case of a call option and a short position in
the case of a put option). If the purchaser decides not to enter into the
contract, the premium paid for the option on the contract is lost if it expires.
Since the cost of the option is fixed, there are no daily payments of cash by
the purchaser to reflect the change in the value of the underlying contract as
there are by a purchaser or seller of a futures contract. The seller of the
option, however, may be required to make daily maintenance margin payments to
reflect the change in value of the underlying contract. The value of the option
is reflected in the net asset value of the Fund.
A risk in employing futures contracts to protect against the price
volatility of portfolio securities is that the prices of securities subject to
futures contracts may not correlate perfectly with the behavior of the cash
prices of the Fund's portfolio securities. The risk of imperfect correlation may
be increased by the fact that the Fund may trade in futures contracts on taxable
securities and there is no guarantee that the prices of taxable securities will
move in a manner similar to the prices of tax-exempt securities. The correlation
may be distorted in part by the fact that the futures market is influenced by
short-term traders seeking to profit from the difference between a contract or
security price objective and their cost of borrowed funds. Such distortions
generally are minor and should diminish as the contract approaches maturity.
Another risk is that the Manager could be incorrect in its expectations as
to the direction or extent of various interest rate movements or the time span
within which the movements take place. For example, if the Fund sold futures
contracts in anticipation of an increase in interest rates, and then interest
rates went down, causing bond prices to rise, the Fund would lose money,
including transaction costs, on the sale.
The Fund may not enter into futures contracts or purchase related options
thereon if immediately thereafter the amount committed to initial margin plus
the amount paid for premiums for unexpired options on futures contracts exceed
5% of the value of the Fund's total assets. Similarly, the Fund may not purchase
or sell futures contracts or related options thereon if, immediately thereafter,
more than one-third of its net assets would be hedged.
Forward Commitments
The Fund may purchase new issues of Illinois Municipal Securities and other
securities on a "when-issued" or delayed delivery basis, with delivery and
payment for the securities normally taking place within 45 days after the date
of the commitment to purchase. The payment obligation and the interest rate that
will be received on such securities are fixed at
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the time the buyer enters into the commitment. The Fund may enter into such
"forward commitments" if it holds, and maintains until the settlement date in a
segregated account with its custodian, cash or high-grade, short-term
obligations in an amount sufficient to meet the purchase price. There is no
percentage limitation on the Fund's total assets which may be invested in
forward commitments. Forward commitments involve a risk of loss if the value of
the Illinois Municipal Security or other security to be purchased declines prior
to the settlement date, which risk is in addition to the risk of decline in the
value of the Fund's other assets. Although the Fund will generally enter into
forward commitments with the intention of acquiring Illinois Municipal
Securities or other securities for its portfolio, the Fund may dispose of a
commitment prior to settlement if the Manager deems it appropriate to do so. The
Fund may realize short-term profits or losses upon the sale of forward
commitments, which profits or losses may constitute capital gains or ordinary
income depending upon a number of factors, including the number of sales of such
commitments.
Portfolio Turnover
Portfolio transactions will be undertaken principally to accomplish the
FundOs objective in relation to anticipated movements in the general level of
interest rates, but the Fund may also engage in short-term trading consistent
with its objective. Securities may be sold in anticipation of a market decline
(a rise in interest rates) or purchased in anticipation of a market rise (a
decline in interest rates) and later sold. In addition, a security may be sold
and another purchased at approximately the same time to take advantage of what
the Manager believes to be a temporary disparity in the normal yield
relationship between the two securities. Yield disparities may occur for reasons
not directly related to the investment quality of particular issues or the
general movement of interest rates, due to such factors as changes in the
overall demand for or supply of various types of Illinois Municipal Securities
or changes in the investment objectives of investors.
The Fund's investment policies may lead to frequent changes in investments,
particularly in periods of rapidly fluctuating interest rates. A change in
securities held by the Fund is known as "portfolio turnover" and may involve
the payment by the Fund of dealer mark-ups or underwriting commissions, and
other transaction costs, on the sale of securities, including Illinois Municipal
Securities, as well as on the reinvestment of the proceeds in other securities.
The Fund anticipates that its annual portfolio turnover rate will not exceed
75%. Portfolio turnover rate for a fiscal year is the ratio of the lesser of the
dollar amount of the purchases or sales of portfolio securities to the monthly
average of the value of portfolio securities excluding securities whose
maturities at acquisition were one year or less. The Fund's portfolio turnover
rate will not be a limiting factor when the Fund deems it desirable to sell or
purchase securities. Frequent changes in the Fund's portfolio securities may
result in higher transaction costs for the Fund. See "Portfolio Transactions" in
the Fund's Statement of Additional Information.
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Repurchase Agreements
The Fund may enter into repurchase agreements with respect to not more than
10% of its total assets (taken at current value), except when investing for
temporary defensive purposes during times of adverse market conditions. A
repurchase agreement is a contract under which the Fund would acquire a security
for a relatively short period and the seller would agree to repurchase such
security at the Fund's cost plus interest within a specified time (generally one
day). Under the Investment Company Act of 1940, repurchase agreements are
considered loans by the Fund. The Fund will not enter into any repurchase
agreement in an amount which would jeopardize the Fund's status as a regulated
investment company or its ability to distribute tax-exempt dividends. Although
the Fund may enter into repurchase agreements with respect to any securities
which it may acquire consistent with its investment policies and restrictions,
it is the Fund's present intention to enter into repurchase agreements only with
respect to obligations of the U.S. Government or its agencies or
instrumentalities and with respect to Illinois Municipal Securities. The Fund's
custodian will hold the securities underlying any repurchase agreement in a
segregated account. In investing in repurchase agreements, the Fund's risk is
limited to the ability of the seller to pay the agreed-upon price at the
maturity of the repurchase agreement. In the opinion of the Manager, the risk is
not material, since in the event of default, barring extraordinary
circumstances, the Fund would be entitled to sell the underlying securities or
otherwise receive adequate protection under federal bankruptcy laws for its
interest in such securities. To the extent that proceeds from any sale upon a
default are less than the repurchase price, however, the Fund could suffer a
loss. In addition, the Fund may incur certain delays in obtaining direct
ownership of the collateral.
The Fund's Board of Trustees may change any of the foregoing policies that
are not fundamental without an affirmative vote of a "majority of the Fund's
outstanding voting shares" as defined in "Investment Objective, Policies and
Restrictions" in the Fund's Statement of Additional Information.
Net Asset Value
The net asset value per share of the Fund is determined by calculating the
total value of the Funds' assets, deducting total liabilities, and dividing the
result by the number of shares outstanding. Fixed income securities are valued
at the mean between the quoted bid and asked price. Securities for which
quotations are not readily available (which will constitute a majority of the
securities held by the Fund) are valued at fair value as determined by Ranson
Capital Corporation (the "Evaluator") pursuant to procedures adopted by the
Board of Trustees using methods which include consideration of the following:
yields or prices of municipal bonds of comparable quality, type of issue,
coupon, maturity and rating, indications as to value from dealers and general
market conditions. The Evaluator may employ electronic data processing
techniques and/or a matrix system to determine valuations. The procedures
utilized by the Evaluator and its valuations are reviewed by the officers of the
Fund under the general supervision of the Board of Trustees and are periodically
reviewed by the Board of Trustees. Short-term securities with remaining
maturities of less than 60 days are valued at amortized cost. Other assets are
valued at fair
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value as determined in good faith by the Trustees of the Fund. The net asset
value of the Fund is computed once daily as of 3:15 p.m. Central time on each
day that the New York Stock Exchange is open for trading. The public offering
price based thereon becomes effective as of the time of such computation. The
New York Stock Exchange is closed on weekends and on the following days: New
Year's Day, Washington's Birthday, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. The Fund reserves the right to
calculate the net asset value and to adjust the public offering price based
thereon more frequently than once each day if deemed desirable.
Purchase of Shares
Shares may be purchased at the public offering price through any securities
dealer having a sales agreement with Ranson Capital Corporation (the
"Distributor"). Shares may also be purchased through banks and certain other
financial institutions that have agency agreements with the Distributor. These
financial institutions will receive transaction fees that are the same as
commissions to dealers and may charge their customers service fees relating to
investments in the Fund. Purchase requests should be addressed to the dealer or
agent from which this Prospectus was received which has a sales agreement with
the Distributor. Such dealer or agent may place a telephone order with the
Transfer Agent for the purchase of Fund shares. It is a dealer's or broker's
responsibility to promptly forward payment and registration instructions (or
completed applications) to the Transfer Agent for shares being purchased.
Reference should be made to the wire order to ensure proper settlement of the
trade. Payment must be received within three business days of the order or the
trade may be cancelled and the dealer or broker placing the trade will be liable
for any losses. The public offering price is the net asset value per share next
determined plus a sales charge that will be a percentage of the public offering
price and will vary as shown below. Current sales charge rates are:
Sales Charge
<TABLE>
<CAPTION>
As a Percentage of Dealer Allowance
As a Percentage of Net Asset Value as Percentage of
Offering Price Invested Offering Price
<S> <C> <C> <C>
Amount of Purchase
Less than $50,000 4.25% 4.44% 3.60%
$50,000 but less than $100,000 3.75% 3.90% 3.15%
$100,000 but less than $250,000 3.25% 3.36% 2.75%
$250,000 but less than $500,000 2.50% 2.56% 2.00%
$500,000 but less than $1,000,000 1.50% 1.52% 1.40%
$1,000,000 or more 0.75% 0.76% 0.70%
</TABLE>
The minimum initial investment is $1,000 and there is a $50 minimum on all
additional investments (excluding reinvestment of dividends and capital gains).
The Fund reserves the right to redeem Fund accounts that are reduced to a value
of less than $1,000 (for any reason other than fluctuation in the market value
of the Fund's portfolio securities or if as a result of the amount of an
investor's initial purchase, the value of such an account is $1,000 or less).
Should the Fund elect to exercise this right, the investor will be notified
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in writing before such redemption is processed that the value of the investor's
account is less than $1,000 and that the investor will have sixty days to
increase the account to at least the $1,000 minimum amount before the account is
redeemed.
Shares of the Fund may be sold at net asset value to the officers and
Trustees of the Fund and to any employees of Ranson Capital Corporation or to
members of their immediate families. Immediate family members shall include
spouse, children, father, mother, brothers or sisters. Shares of the Fund may
also be sold at their net asset value to broker-dealers having sales agreements
with Ranson Capital Corporation and registered representatives and other
employees of such broker-dealers, including their spouses and children; to
financial institutions having sales agreements with Ranson Capital Corporation
and employees of such financial institutions, including their spouses and
children; and to any broker-dealer, financial institution, or other qualified
firm which receives no commissions for selling shares to its clients.
From time to time the Distributor may implement programs under which
dealers and their representatives may be eligible to participate in which such
firms may win nominal awards for certain sales efforts or under which the
Distributor will reallow additional concessions to any dealer that sponsors
sales contests or recognition programs conforming to criteria established by the
Distributor or participates in sales programs sponsored by the Distributor.
These programs will not change the price that an investor pays for shares or the
amount that the Fund will receive from such sale. In addition, the Fund and the
Distributor may pay firms that sell the Fund's shares an annual service fee for
administrative and shareholder services, as described under "The Distributor."
Letters of Intent
An investor may qualify for a reduced sales charge immediately by stating
his or her intention to invest in one or more series of the Fund, during a 13-
month period, an amount that would qualify for a reduced sales charge and by
signing a nonbinding Letter of Intent which may be signed at any time within 90
days after the first investment to be included under the Letter of Intent.
After signing the Letter of Intent, each investment made by an investor will be
entitled to the sales charge applicable to the total investment indicated in the
Letter of Intent. If an investor does not complete the purchases under the
Letter of Intent within the 13-month period, the sales charge will be adjusted
upward, corresponding to the amount actually purchased. When an investor signs
a Letter of Intent, shares of a series of the Fund with a value of up to 5% of
the amount specified in the Letter of Intent will be restricted. If the total
purchases made by an investor under the Letter of Intent, less redemptions,
equals or exceeds the amount specified in the Letter of Intent, the restriction
on the shares will be removed. In addition, if the total purchases exceed the
amount specified and qualify for a further quantity discount, the Distributor
will make a retroactive price adjustment and will apply the adjustment to
purchase additional shares at the then current applicable offering price. If an
investor does not complete purchases under a Letter of Intent, the sales charge
is adjusted upward, and if after written notice to the investor, he or she does
not pay the increased sales charge, sufficient restricted shares will be
redeemed at the current net asset value to pay such charge. In connection with
the determination of
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sales charges applicable to the purchase of shares of the Fund, the Letter of
Intent program will take into account investments in shares of any other mutual
fund carrying a sales load of which Ranson Capital Corporation is the
Distributor.
Concurrent Purchases
An investor or his or her dealer or agent must notify the Transfer Agent
whenever a quantity discount is applicable to purchases. Upon such
notification, an investor will receive the lowest applicable sales charge.
Quantity discounts may be modified or terminated by the Distributor at any time.
For more information about quantity discounts, contact the dealer or agent from
which this Prospectus was obtained or the Distributor.
Open Account Program/Certificates
All investors in the Fund will be enrolled in an Open Account Program when
they make their first investment in the Fund, unless they elect otherwise.
Investors may then make additional purchases whenever they wish, but they are
not obligated to make any additional investments. Whenever investors make an
investment in the Fund, full and fractional shares will be purchased for their
account at the next determined public offering price applicable to their
purchase after the Fund receives their order.
If an investor elects not to be enrolled in the Open Account Program by
notifying the Transfer Agent in written form, he or she will be sent share
certificates representing the full shares of the Fund and will be required to
surrender the certificates to redeem such shares. Fund share certificates will
be mailed within 10 days of an investor's request. Certificates will not be
sent outside of the United States. Investors should promptly notify the Fund if
certificates are not received. The Fund will not file a mail loss claim later
than one year after the issuance of Fund share certificates. After one year,
investors requesting replacement certificates may be required to post an
insurance bond in the amount of 2% of the market value of the certificated
shares.
Special Programs
Redemptions From Other Funds
Shares of the Fund may be purchased at net asset value where the amount
invested is documented to the Fund to be proceeds from the redemption of shares
of mutual funds which do not impose a contingent deferred sales charge or
redemption fee and where the investor paid an initial sales charge. Purchases
must be made within 60 days of redemption date. The Fund reserves the right to
modify or terminate this privilege at any time without notice.
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Group Program
The Fund has a group investment and reinvestment program (the "Group
Program") which allows investors to purchase shares of a Series of the Fund with
a lower minimum initial investment and with a lower sales charge if the investor
and the Group Program of which he or she is a participant meet the cost saving
criteria set forth below.
Description of Group Program. If the investor's Group Program (such as an
employee investment program) meets the requirements described below, a series of
the Fund will modify the $1,000 initial investment requirement to such minimum
investment as may be determined by the Fund. The sales charge set forth under
"Purchase of Shares" for each purchase by a participant of a Group Program will
be based on (i) the combined current purchases of such group of shares together
with (ii) the combined net asset value of shares of such group at the time of
such investment. The dealer or agent, if any, through which the Group Program
was initiated will be entitled to a dealer concession or agency commission based
on the sales charges paid by participants of such Group Program.
Criteria for the Group Program. The cost savings criteria to the Fund that
must be met in order for a Group Program to qualify for the benefits set forth
above are:
(a) The administrator of an investor's investment program must have
entered into an agreement with the Distributor.
(b) Such agreement must provide that the administrator must submit a
single order and make payment with a single remittance for all investments
during each investment period (e.g., each pay period or distribution
period) by all investors who choose to invest through the Group Program.
(c) Such agreement must provide that the administrator will provide
the Transfer Agent with appropriate backup data for each participating
investor in a computerized format compatible with the Transfer Agent's
processing system.
Additional Criteria for the Group Program. As further requirements for
obtaining these special benefits under the Group Program, the Fund requires that
investments be in the form of an Open Account (with no share certificates being
issued), that all dividends and other distributions be reinvested in additional
shares without any systematic withdrawal program described herein and that the
minimum new investment in shares of the Fund by each participant in an employee
investment program be at least $25 per month. The Fund reserves the right to
modify or terminate this program at any time without notice.
Systematic Withdrawal Program
The owner of $5,000 or more of shares of the Fund (which may not be in
certificated form) may provide for the payment from his or her account of any
requested dollar amount to his or her designated payee monthly, quarterly or
annually. Sufficient shares will be redeemed from the investor's account for
the designated amount so that the payee will
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receive it approximately the first of each month. Dividend distributions
automatically will be reinvested under this program. Depending upon the size of
the payments requested, redemptions for the purpose of making such payments may
reduce or even exhaust the account. The program may be terminated at any time by
the investor. If an investor desires to utilize this program, he or she may so
indicate on the Account Application included with this Prospectus.
It ordinarily will be disadvantageous to an investor to purchase shares
(except through reinvestment of distributions) while participating in a
systematic withdrawal program because he or she will be paying a sales charge to
purchase shares at the same time that shares are being redeemed upon which such
investor may already have paid a sales charge. Therefore, the Fund will not
knowingly permit an investor to make additional investments of less than $5,000
if an investor is at the same time making systematic withdrawals at a rate
greater than the dividend distributions being paid on such investor's shares.
The Fund reserves the right to amend or terminate the systematic withdrawal
program on thirty days' notice, and investors may withdraw from the program at
any time. The Fund reserves the right to modify or terminate this program at
any time.
Preauthorized Investment Program
An investor may establish an automatic investment program with his or her
Fund account. With the Preauthorized Investment Program, monthly investments
(minimum $50) are made automatically from an investor's account at a bank,
savings and loan or credit union into such investor's Fund account. By
enrolling in the Preauthorized Investment Program, the investor authorizes the
Fund and its agents to take money out of his or her predesignated bank, savings
and loan or credit union account and invest that money in his or her Fund
account. If an investor also has expedited wire transfer redemption privileges
with his or her Fund account, such investor must designate the same bank,
savings and loan or credit union account for both the Preauthorized Investment
Program and wire redemption programs. Any account owner may terminate this
privilege simply by sending written notice to the Transfer Agent. Termination
will become effective as soon as the Transfer Agent has had a reasonable time to
act upon the request. The Preauthorized Investment Program may not be used with
passbook savings accounts. The redemption proceeds of Fund shares purchased by
the Preauthorized Investment Program may be delayed up to 15 days after this
purchase date. If an investor desires to utilize this program, he or she may so
indicate on the Account Application included with this Prospectus. The Fund
reserves the right to modify or terminate this program at any time.
Rights of Accumulation
A purchase of shares may qualify for a cumulative quantity discount. The
applicable sales charge will be based on the total of:
(a) the investor's current purchase; and
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(b) the net asset value (at the close of business on the previous
day) of the shares of the Fund held by an investor.
For example, if an investor owned shares worth $40,000 at the current net
asset value and purchased an additional $10,000 of shares, the sales charge for
the $10,000 purchase would be at the rate applicable to a single $50,000
purchase.
To qualify for the cumulative quantity discount on a purchase through a
broker-dealer, when each purchase is made, the investor or broker-dealer must
provide the Fund with sufficient information to verify that the purchase
qualifies for the discount.
Reinstatement Privilege
An investor who has redeemed shares of the Fund may reinvest up to the full
amount of such redemption at net asset value at the time of reinvestment. An
investor using this privilege a year or more after such investor redeemed shares
of the Fund must file a new account application and provide proof that such
investor was a shareholder of the Fund. See "Dividends and Taxes" regarding the
potential tax implications of exercising this privilege. The Fund reserves the
right to modify or terminate this privilege at any time without notice.
Redemption of Shares
Upon receipt of a redemption request in proper form addressed to the
Transfer Agent, shares of the Fund will be redeemed by the Fund. It is a
broker's or dealer's responsibility to promptly forward the redemption requests
to the Transfer Agent for shares being redeemed in order for shareholders to
receive the next determined net asset value. The redemption price for shares of
the Fund is based on the net asset value per share next determined after receipt
of the redemption request. Redemption requests must be in writing, accompanied
by any issued certificates (for investor protection, certificates should be sent
by registered mail). Redemption requests and any certificates or stock power
must be endorsed by all registered owners with signatures guaranteed by a member
firm of a national securities exchange or by a commercial bank, savings and loan
association or trust company. Further documentation may be requested from
corporations, executors, administrators, trustees or guardians.
Alternatively, an investor may place an order to sell shares (whether in
certificate or book entry form) through his or her dealer or agent which has a
sales agreement with the Distributor and from which this Prospectus was
received, which dealer or agent will telephone such request to the Distributor.
The investor will receive the net asset value next determined after the
Distributor receives such sell order from the dealer or agent. The Fund does
not charge for this transaction.
Whether shares are redeemed by the Fund or sold through an investor's
dealer or agent, a check for the proceeds ordinarily will be mailed to an
investor or his or her dealer
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or agent within three business days after a redemption request or repurchase
order and Share certificates (if any) are received in proper form as set forth
above.
If a request to redeem shares is received shortly after the purchase of
such shares, the Fund will not mail the proceeds until checks received for the
purchase of shares have cleared, which may take up to 15 days from the purchase
date. The proceeds of a redemption may be more or less than the cost of the
shares.
The right of redemption or resale of the Fund shares may be suspended or
the date of payment postponed during any period when the New York Stock Exchange
is closed.
Dividends and Taxes
Dividends
The Fund will declare distributions on a daily basis to shareholders of
record on the date of each declaration and will pay such distributions on a
monthly basis. The monthly distribution will be composed of the investment
income earned by the Fund less the expenses of the Fund plus all or a portion of
net short-term capital gains (such net short-term capital gains reduced by net
long-term capital losses, if any, and carryover capital losses from previous
years) realized by the Fund on transactions in securities. The Fund will also
declare and make distributions of net long-term capital gains, if any, at least
annually. Net long-term capital gain distributions consist of the realized
long-term capital gains on transactions in securities of the Fund, net of
certain realized capital losses and less certain carryover capital losses from
previous years.
The Fund automatically will credit monthly distributions and any capital
gain distributions to an investor's account in additional shares of the Fund
valued at net asset value on the date such distributions are payable, without
sales charge, unless an investor elects to the Transfer Agent of the Fund to
have distributions received in cash. Distributions that are reinvested are
treated as cash distributions for income tax purposes. If an investor elects to
change the method of distribution, such change will be effective only with
regard to distributions for which the payment date is seven or more business
days after the Transfer Agent has received the written request.
A check will be generated on the date on which distributions are payable
for dividends to be received in cash. An investor can expect to receive this
check within seven days. If the U. S. Postal Service cannot deliver the check,
or if the checks remain uncashed for six months, the dollar amount of such
distributions will be held in a non-interest bearing account for the benefit of
the investor and all future dividends found to be undeliverable or uncashed for
six months will be similarly held.
Distribution checks may be sent to parties other than the investor. The
Transfer Agent of the Fund can provide investors with a "Dividend Order" form
for such purposes.
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After the Transfer Agent receives this completed form with a signature
guarantee, distribution checks will be sent to the bank or other person
designated as an investor.
Taxes
The Fund intends to qualify each year as a regulated investment company
under Subchapter M of the Internal Revenue Code (the "Code"). If the Fund so
qualifies and timely distributes to shareholders 90% or more of its taxable
income (without regard to its net capital gain, i.e., the excess of its long-
term capital gain over its net short-term capital loss), it will not be subject
to federal income tax on the portion of its taxable income (including any net
capital gain) that it distributes to shareholders. In addition, to the extent
the Fund distributes to shareholders at least 98% of its taxable income
(including any net capital gain), it will not be subject to the 4% excise tax on
certain undistributed income of "regulated investment companies." The Fund
intends to timely distribute its taxable income (including any net capital
gains) to avoid the imposition of federal income tax or the excise tax. If in
any year the Fund should fail to qualify under Subchapter M for tax treatment as
a regulated investment company, the Fund would incur a regular corporate federal
income tax upon its taxable income for that year, and distributions to
shareholders of the Fund would be taxable to such shareholders as ordinary
income to the extent of the earnings and profits of the Fund, including
distributions that would otherwise qualify as exempt-interest dividends. In
addition, the Fund intends to invest in sufficient municipal securities so that
it will qualify to pay "exempt-interest dividends" (as defined in the Code) to
shareholders; the Fund's dividends payable from net tax-exempt interest earned
from municipal securities will qualify as exempt-interest dividends if, at the
close of each quarter of the taxable year of the Series, at least 50% of the
value of the Fund's total assets consists of tax-exempt municipal securities.
Exempt-interest dividends distributed to shareholders generally are
excluded from gross income for federal income tax purposes, except in the case
of certain substantial users of facilities financed with proceeds of bonds owned
by the Fund and related persons of such substantial users. Such exempt-interest
dividends may be taken into account in determining the alternative minimum tax,
as discussed hereinafter. The percentage of income that is tax-exempt is
applied uniformly to all distributions made during each calendar year and thus
is an annual average for the Fund rather than a day-by-day determination for
each shareholder whether received in shares or in cash. The percentage of all
distributions of earnings other than exempt-interest dividends paid by the Fund,
such as net investment income received from investments in debt securities other
than tax-exempt municipal securities, and any net realized short-term capital
gains (including certain amounts deemed distributed) will generally be taxable
to the shareholders as ordinary income. Any distribution of net related long-
term capital gains (including amounts deemed distributed) which are properly
designated as capital gain dividends by the Fund will generally be subject to
federal taxation as long-term capital gains ("long-term capital gain
distributions"), regardless of the length of time the investor has held such
shares. As discussed below, the Taxpayer Relief Act of 1997 (the "1997 Act")
reduces the maximum stated marginal tax rate for capital gains for non-corporate
taxpayers for certain investments held for more than 18 months to 20% (10% in
the case of certain taxpayers in the lowest tax bracket), while the maximum
stated marginal
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tax rate for other long-term capital gains of non-corporate taxpayers remains at
28%. The 1997 Act provides that the application of these rules in the case of
pass-through entities such as the Fund will be prescribed in future U.S.
Treasury Regulations. Accordingly, shareholders should consult with their own
tax advisors as to the tax rate applicable to capital gain dividends.
Distributions to shareholders will be taxed to shareholders in the manner
described above, regardless of whether the shareholder reinvests such
distributions in additional shares.
"The Revenue Reconciliation Act of 1993" (the "1993 Tax Act") subjects tax-
exempt municipal securities to the market discount rules of the Code effective
for municipal securities purchased after April 30, 1993. In general, market
discount is the amount (if any) by which the stated redemption price at maturity
exceeds an investor's purchase price (except to the extent that such difference,
if any, is attributable to original issue discount not yet accrued), subject to
a statutory de minimis rule. Market discount can arise based on the price the
Fund pays for municipal securities. Under the 1993 Tax Act, accretion of market
discount is taxable as ordinary income; under prior law the accretion had been
treated as capital gain. Market discount that accretes while the Fund holds a
municipal security would be recognized as ordinary income by the Fund when
principal payments are received on the municipal security, or upon sale or at
redemption (including early redemption), unless the Fund elects to include
market discount in taxable income as it accrues. Distributions to shareholders
of the Fund, to the extent of any market discount that is included in the Fund's
taxable income, would be taxable to shareholders as ordinary income.
For both individuals and corporations, interest paid on certain "private
activity bonds" issued on or after August 8, 1986 shall be treated as an item of
tax preference and may, therefore, be subject to the alternative minimum tax.
To the extent provided by regulations to be issued by the Secretary of the
Treasury, exempt-interest dividends paid by the Fund will be treated as interest
on private activity bonds to the extent of the proportionate amount of interest
on such private activity bonds received by the Fund. Such exempt-interest
dividends constitute a tax preference item subject to both the individual and
corporate alternative minimum tax. The Fund will annually supply shareholders
with a report indicating the percentage of Fund income attributable to bonds
subject to the alternative minimum tax.
Exempt-interest dividends received by a shareholder which are not with
respect to certain "private activity bonds" are not treated as a tax preference
item. However, for certain corporate shareholders such dividends will be
included in the computation of an adjustment item used in determining such
corporation's alternative minimum tax. The adjustment item is 75% of the excess
of such corporate shareholder's "adjusted current earnings" over its other
alternative minimum taxable income with certain adjustments. Although exempt-
interest dividends received by a shareholder will not be included in the gross
income of corporations for federal income tax purposes, "adjusted current
earnings" include all tax-exempt interest, including exempt-interest dividends
received from the Fund. Corporate shareholders are advised to consult their tax
advisors with respect to the tax consequences of the alternative minimum tax and
the branch profits tax under Section 884 of the Code.
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All taxpayers are required to disclose to the Internal Revenue Service on
their tax returns the amount of tax-exempt interest earned during the year
including exempt-interest dividends from the Fund.
For taxpayers other than corporations, net capital gains (which is defined
as net long-term capital gain over net short-term capital loss for the taxable
year) are subject to a maximum marginal stated tax rate of either 28% or 20%,
depending upon the holding period of the capital assets. In particular, net
capital gain, excluding net gain from property held more than one year but not
more than 18 months and gain on certain other assets, is subject to a maximum
marginal stated tax rate of 20% (10% in the case of certain taxpayers in the
lowest tax bracket). Net capital gain that is not taxed at the maximum marginal
stated tax rate of 20% (or 10%) as described in the preceding sentence, is
generally subject to a maximum marginal stated tax rate of 28%. The date on
which a share is acquired (i.e., the "trade date") is excluded for purposes of
determining the holding period of the share. Generally, capital gain or loss is
long-term if the holding period for the asset is more than one year, and is
short-term if the holding period for the asset is one year or less. Net short-
term capital gain is taxed at the same rates as ordinary income. It should be
noted that legislative proposals are introduced from time to time that affect
tax rates and could affect relative differences at which ordinary income and
capital gains are taxed.
The 1997 Act includes provisions that treat certain transactions designed
to reduce or eliminate risk of loss and opportunities for gain (e.g., short
sales, offsetting notional principal contracts, futures or forward contracts, or
similar transactions) as constructive sales for purposes of recognition of gain
(but not loss) and for purposes of determining the holding period. Shareholders
should consult their own tax advisors with regard to any such constructive sales
rules.
The hedging activities and transactions in options and futures contracts of
the Fund are subject to special tax provisions that may accelerate or defer
recognition of certain taxable gains or losses, or alter the holding periods of
certain of the Fund's securities, or convert capital gain into ordinary income
and convert short-term capital losses into long-term capital losses. These
rules could therefore affect the amount, timing and character of distributions
to shareholders. Recognition of unrealized taxable gains by the Fund under the
"mark to market" rules of the Code may increase the difficulty of compliance
with requirements which must be satisfied in order for the Fund to continue to
qualify as a regulated investment company, thus requiring the Fund to limit its
hedging activities.
Although dividends generally will be treated as distributed when paid,
dividends declared in October, November or December, payable to shareholders of
record on a specified date in one of those months and paid during January of the
following year will be treated as having been distributed by the Fund (and
received by the shareholders) on December 31 of the year such dividends are
declared.
Distributions from the Fund will not generally be eligible for the
dividends received deduction for corporations.
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The Fund is required by law to withhold a specified percentage of taxable
dividends and certain other payments, including redemption payments, paid to
non-corporate investors who do not certify to the Fund their correct taxpayer
identification number (in the case of individuals, their social security number)
and in certain other circumstances as may be required by the Code.
Under Section 86 of the Code, up to 50% of a social security recipient's
benefits may be included in taxable income for a benefit recipient if the sum of
his adjusted gross income, income from tax-exempt sources such as tax-exempt
bonds and distributions made by the Fund plus 50% of his social security
benefits exceeds certain base amounts. Exempt interest dividends from the Fund
are still excluded from gross income to the extent described above; it is only
included in the calculation of whether a recipient's income exceeds certain
established amounts.
Redemption of shares of the Fund will be a taxable transaction for federal
income tax purposes and such investors will generally recognize gain or loss in
an amount equal to the difference between the basis of the shares and the amount
received. Assuming that investors hold such shares as a capital asset, the gain
or loss will be a capital gain or loss and will generally be long-term if
investors have held such shares for a period of more than one year. In the case
of shareholders holding shares of the Fund for six months or less and
subsequently selling those shares at a loss after receiving an exempt-interest
dividend, the loss will be disallowed to the extent of the exempt-interest
dividends received. If such loss is not entirely disallowed, it will be treated
as a long-term capital loss to the extent any long-term capital gain
distribution is made with respect to such shares during the six-month period or
less that the investor owns the shares. If a loss is realized on the redemption
of Fund shares, the reinvestment in additional Fund shares or the acquisition of
a contract or option to acquire securities that are substantially identical to
Fund shares within 30 days before or after the redemption may be subject to the
"wash sale" rules of the Code, resulting in a postponement of the recognition of
such loss for federal income tax purposes. In addition, an investor cannot take
into account any sales or similar charge incurred in acquiring shares of the
Fund (a "load charge," such charge does not include amounts paid with respect to
the reinvestment of mutual fund share dividends) in computing gain or loss on
the sale of shares of the Fund if the investor sells such shares within 90 days
of the date the shares are acquired and the investor obtains and subsequently
exercises the right to reinvest in shares of any mutual fund without the payment
of a load charge or with the payment of a reduced charge (however, such charges
shall be treated as incurred in connection with the reinvestment in shares).
In addition, it should be noted that capital gains may be recharacterized
as ordinary income in the case of certain financial transactions that are
"conversion transactions" effective for transactions entered into after April
30, 1993. Shareholders of the Fund should consult with their tax advisors
regarding the potential effect of this provision on their investment in shares
of the Fund.
Interest on indebtedness which is incurred to purchase or carry shares of a
mutual fund which distributes exempt-interest dividends during the year is not
deductible for
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federal income tax purposes. Further, the Fund may not be an appropriate
investment for persons who are "substantial users" of facilities financed by
industrial development bonds held by the Fund or are "related persons" to such
users; such persons should consult their tax advisors before investing in the
Fund.
Under the code, certain miscellaneous itemized deductions, such as
investment expenses, tax return preparation fees and employee business expenses,
will be deductible by individuals only to the extent they exceed 2% of adjusted
gross income. Miscellaneous itemized deductions subject to this limitation
under present law do not include expenses incurred by the Fund so long as the
shares are held by or for 500 or more persons at all times during the taxable
year or another exception is met. In the event the shares are held by fewer
than 500 persons, additional taxable income may be realized by the individual
(and other noncorporate) shareholders in excess of the distributions received by
the Fund.
State and Local Tax Aspects. Dividends which are derived from interest on
debt obligations of Illinois, its political subdivisions, municipalities,
agencies and authorities, whether or not the interest on such debt obligations
is exempt from the Illinois income tax, will be taxable for Illinois income tax
purposes to shareholders of the Fund. However, to the extent that exempt-
interest dividends are derived from interest on obligations of the Commonwealth
of Puerto Rico, the United States Virgin Islands or Guam that is exempt from
Illinois income tax, such dividends will also qualify as exempt from the
Illinois income tax. As discussed earlier, the Fund may invest up to 100% of
its total assets in Illinois Municipal Securities which are subject to Illinois
state income taxes. Any exempt-interest dividends and dividends taxable for
federal income tax purposes as ordinary income will be taxable for Illinois
income tax purposes to the shareholders of the Fund. Distributions treated as
long-term capital gains for federal income tax purposes will generally receive
the same characterization under Illinois law.
As described above with respect to Illinois income taxation, the exemption
from federal income tax for exempt-interest dividends does not necessarily
result in exemption for such dividends under the income or other tax laws of any
state or local taxing authority. Taxpayers should consult their own advisors
regarding the consequences under such taxes with respect to the purchase,
ownership, and disposition of shares of the Fund.
The tax discussion set forth above is for general information only.
Annually, shareholders of the Fund receive information as to the tax status of
distributions made by the Fund in each calendar year. The foregoing relates to
federal income taxation to United States persons and to Illinois income taxation
as in effect as of the date of this Prospectus. Investors should consult their
own tax advisors regarding the federal, state, local, foreign and other tax
consequences of an investment in the Fund, including the effects of any change,
including any proposed change, in the tax laws.
Description of Shares and Rights
The Fund's Agreement and Declaration of Trust ("Trust Agreement") permits
its Trustees to issue an unlimited number of shares, without par value, from
each Series that is
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designated by the Board of Trustees. Each share of a Series represents an equal
proportionate interest in the assets and liabilities belonging to the Series
with each other share of such Series and is entitled to such dividends and
distributions out of the income belonging to the Series as are declared by the
Trustees. The shares do not have cumulative voting rights nor any preemptive
rights. In case of a liquidation, subject to the rights of creditors, the
holders of the shares of the Series being liquidated will be entitled to receive
a distribution out of the net assets belonging to the Series being liquidated.
Should additional Series be designated by the Board of Trustees, the net asset
value of the shares of each of such Series will be computed based only upon the
net assets of each such Series.
Under Massachusetts law, if certain conditions prevail, shareholders of a
Massachusetts business trust could be deemed to have the same type of personal
liability for the obligations of the Fund as does a partner of a partnership.
The Trust Agreement contains an express disclaimer of liability on the part of
Fund shareholders and provides that the Fund shall assume the defense on behalf
of its shareholders. Thus, the risk of Fund shareholder liability is slight and
limited to a circumstance where a Series itself is unable to meet its
obligations.
As a Massachusetts business trust, the Fund is not required to and does not
intend to hold annual shareholders' meetings. However, the Trust Agreement
provides for Fund shareholder voting with respect to certain matters, including:
(a) the election or removal of Trustees if a meeting is called for that purpose;
(b) any contract as to which shareholder approval is required by the Investment
Company Act of 1940, as amended (the "1940 Act"); (c) any termination or
reorganization of the Fund or any Series of the Fund to the extent provided in
the Trust Agreement; and (d) any amendment of the Trust Agreement (other than
amendments designating new Series, changing the name of the Fund or any Series
of the Fund, supplying any omission, curing any ambiguity, or curing, correcting
or supplementing any provisions inconsistent with the 1940 Act or the Code).
Meetings of shareholders may be called upon written application specifying the
purpose of the meeting by shareholders holding at least 25% (or 10% if the
purpose of the meeting is to determine if a Trustee is to be removed from
office) of the shares then outstanding. In connection with the shareholders'
right to remove a Trustee, shareholders will be assisted with their
communications in such matter.
Fund Management
The business and affairs of the Fund will be managed under the direction of
the Board of Trustees. The Trustees are subject to the fiduciary
responsibilities imposed by the laws of the Commonwealth of Massachusetts.
Subject to the Trustees' authority, Ranson Capital Corporation, a Kansas
corporation, 1 North Main, Minot, North Dakota 58703, the Manager, will
supervise and implement the Fund's investment activities and will be responsible
for overall management of the Fund's business affairs. Ranson Capital
Corporation is also the investment adviser of the Fund and will perform certain
evaluations of the securities held by the Fund. The Fund will pay the Manager a
monthly management and investment advisory fee equivalent on an annual basis to
.50 of 1% of its average daily net assets.
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Overall portfolio management strategy for the Fund is determined by the
Manager under the general supervision and direction of Robert E. Walstad, the
President of the Fund and the Manager since January 5, 1996. Mr. Walstad is
also the President of five other open-end funds and of ND Money Management,
Inc., their investment adviser, and has supervised and directed the management
of their portfolios since they commenced operations. Mr. Walstad started in the
securities business with Paine Webber in 1972 as a retail broker. He became
branch manager with Dean Witter Reynolds in 1977 and spent ten years in that
capacity. In 1987, Mr. Walstad founded ND Holdings, which is also sponsor of
Integrity Mutual Funds. The day-to-day management of the Fund, including credit
analysis and the execution of portfolio transactions, is the responsibility of a
portfolio management team, consisting of Monte L. Avery and W. Dan Korgel.
Mr. Avery started in the securities business with Paine Webber in 1981 as a
retail broker transferring to Dean Witter in 1982. In 1988, Mr. Avery joined
First American Bank & Trust (Minot, ND) to help start their Invest Center. He
transferred back to Dean Witter in 1993 until joining ND Holdings in 1995.
Mr. Avery is responsible for the daily pricing of the Integrity Mutual Funds as
well as their portfolio trading. He is also portfolio manager for the Integrity
Fund of Funds. Mr. Korgel was employed in the trust banking business for 12
years prior to joining ND Holdings. He was with the trust department of First
American Bank & Trust (Minot, ND) for two years as head of investments and
operations. He joined ND Holdings in May 1988, and is the portfolio manager of
four of the mutual funds which are sponsored by ND Holdings. He is responsible
for the daily portfolio management of those funds. He is also Corporate
Treasurer for ND Holdings. All portfolio management decisions are subject to
weekly review by Mr. Walstad and to quarterly review by the Fund's Board of
Trustees.
The Manager is a broker-dealer registered with the Securities and Exchange
Commission and a wholly-owned subsidiary of ND Holdings, Inc., a North Dakota
corporation. The Manager was formed in 1990 and is also the investment adviser
for The Kansas Municipal Fund, The Kansas Insured Intermediate Fund, The
Nebraska Municipal Fund and The Oklahoma Municipal Fund, which had on June 30,
1997 current net asset values of approximately $127,000,000, $25,000,000,
$28,000,000 and $6,000,000, respectively. The Manager has not retained the
right to withdraw from the Fund the use of the name "Ranson," but the Manager
may grant the use of the name "Ranson" to another investment company.
Under the terms of the Management and Investment Advisory Agreement, the
Manager has agreed to pay all expenses of the Fund, including the Fund's
management and investment advisory fee and the Fund's administrative and
accounting services fees (but excluding taxes and brokerage fees and
commissions, if any) that exceed 1.25% of the Fund's average daily net assets on
an annual basis up to the amount of the investment advisory and management fee
payable by the Fund to the Manager. Reimbursements by the Manager for such Fund
expenses will be paid monthly based on annualized year to date expenses. All
other expenses shall be paid by the Fund. From time to time and subject to
discontinuance at any time, the Manager may voluntarily assume certain expenses
of the Fund. This will have the effect of lowering the overall expense ratio of
the Fund and of increasing yield to investors. The Fund's expenses include,
among others, taxes, brokerage fees and commissions, if any, fees of
Disinterested Trustees, expenses of Trustees' and
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<PAGE>
shareholders' meetings, insurance premiums, expenses of redemption of shares,
expenses of issue and sale of shares (to the extent not borne by the
Distributor), expenses of printing and mailing certificates, association
membership dues, charges of the Fund's custodian, and bookkeeping, auditing and
legal expenses, and the fees and expenses of registering the Fund and its shares
with the Securities and Exchange Commission, registering or qualifying its
shares under state securities laws and the expenses of preparing and mailing
prospectuses and reports to shareholders.
ND Resources, Inc. ("Resources"), a wholly-owned subsidiary of ND Holdings,
Inc., a North Dakota corporation, acts as the Fund's administrative and
accounting services agent. For these services, Resources receives an
administrative and accounting services fee payable monthly from the Fund equal
to the sum of (i) $2,000 per month and (ii) 0.05% of the Fund's average daily
net assets on an annual basis for the Fund's first $50 million of average daily
net assets, 0.04% of the Fund's average daily net assets on an annual basis for
the Fund's next $50 million of average daily net assets, 0.03% of the Fund's
average daily net assets on an annual basis for the Fund's next $100 million of
average daily net assets, 0.02% of the Fund's average daily net assets on an
annual basis for the Fund's next $300 million of average daily net assets, and
0.01% of the Fund's average daily net assets on an annual basis for the Fund's
average daily net assets in excess of $500 million, together with reimbursement
of Resources' out-of-pocket expenses. This fee and reimbursement are in
addition to the investment advisory and management fee received by the Manager,
which is also indirectly owned by ND Holdings, Inc., from the Fund.
The Board of Trustees has the authority, without shareholder approval, to
determine who will perform the following services for the Fund: securities
evaluator; custodian of the Fund's securities and cash; and, dividend
disbursing, administrative and accounting services agent.
In effecting purchases and sales of the Fund's portfolio securities, the
Manager and the Fund may place orders with and pay brokerage commissions to
brokers which are affiliated with the Fund, the Manager, the Distributor or
selected dealers participating in the offering of the Fund's shares. In
addition, in selecting among firms to handle a particular transaction, the
Manager and the Fund may take into account whether the firm has sold or is
selling shares of the Fund. Subject to rules adopted by the Securities and
Exchange Commission, the Fund may also purchase municipal securities from other
members of underwriting syndicates of which the Distributor or other affiliates
of the Fund are members.
The Distributor
Shares of the Fund are offered on a continuous basis through Ranson Capital
Corporation, a Kansas Corporation, 1 North Main, Minot, North Dakota 58703.
Pursuant to a Distribution and Services Agreement, the Distributor will purchase
shares of the Fund for resale to the public, either directly or through
securities dealers or agents, and is obligated to purchase only those shares for
which it has received purchase orders. In addition to agreements with
securities dealers, the Distributor may enter into agreements with banks or
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<PAGE>
bank affiliates with respect to the sale of shares of the Fund. Under the Glass-
Steagall Act, banks and bank affiliates are prohibited from underwriting Fund
shares; however, the Glass-Steagall Act does permit certain agency transactions
and the banking regulators have not indicated that these particular agency
transactions are not permitted under such Act. In the event the Glass-Steagall
Act should prevent banks or bank affiliates from acting in any capacity or
providing investor administrative and shareholder services, the Fund's Trustees
will consider what action, if any, is appropriate in order to provide efficient
services to the Fund. It is anticipated that a termination of a relationship
with a bank or bank affiliate would not result in a loss to investors or a
change in net asset value.
Under the Distribution and Services Agreement between the Fund and the
Distributor, the Distributor pays the expenses of distribution of the Fund's
shares, including preparation and distribution of literature relating to the
Fund and its investment performance and advertising and public relations
material. The Fund bears the expenses of registration of its shares with the
Securities and Exchange Commission and of sending prospectuses to existing
shareholders. The Distributor will permit their officers and employees to serve
without compensation as Trustees and officers of the Fund if duly elected to
such positions. The Fund will pay the cost of qualifying and maintaining
qualification of the shares for sale under the securities laws of the various
states if necessary. In addition, under the plan adopted pursuant to Rule 12b-1
under the Investment Company Act of 1940 and under which the Fund will pay some
costs of the distribution of its shares, the Fund will pay the Distributor .25%
of the average daily net assets of the Fund (which may exceed the distribution
expenses incurred by the Distributor) and the Distributor may in turn pay firms
that sell the Fund's shares an annual service fee of up to .25% of average daily
net assets of customer accounts in existence for more than one year to
compensate such firms for providing administrative and shareholder services
(which amount may exceed the actual cost of providing such administrative and
shareholder services) or use some or all of such payment to pay other
distribution expenses which otherwise would be payable by the Distributor.
The Distribution and Services Agreement continues in effect from year to
year if specifically approved at least annually by the shareholders or Board of
Trustees of the Fund and by the Fund's disinterested Trustees in compliance with
the Investment Company Act of 1940. The agreement may be terminated without
penalty upon sixty days' written notice by the Fund or ninety days' written
notice by the Distributor and will automatically terminate if it is assigned.
Shareholder Services and Reports
First Western Bank & Trust serves as Custodian of the Fund and will have
custody of all securities and cash of the Fund and will attend to the collection
of principal and income and payment for and collection of proceeds of securities
bought and sold by the Fund.
ND Resources, Inc. is the Transfer Agent for the Fund and will perform
bookkeeping, data processing and administrative services related to the
maintenance of shareholder accounts. When an investor makes an initial
investment in the Fund, an account will be opened on the Fund's books and the
investor will receive a confirmation of the opening of
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<PAGE>
the account. An investor will receive monthly statements giving details of all
activity in his or her account and will receive a statement whenever investments
in or withdrawals from such account are made. The statement with tax information
for the year will be mailed to investors by January 31 and will also be filed
with the Internal Revenue Service.
As a rule, the Fund will not issue share certificates. However, upon
written request to the Transfer Agent, a share certificate will be issued for
any or all of the full shares credited to an investor's account. Share
certificates which have been issued may be returned at any time.
Investors will receive annual financial statements, together with a report
of independent auditors, and semiannual unaudited financial statements.
Investors will also receive notices of shareholders' meetings. Shareholder
inquiries regarding their account should be directed to the Transfer Agent.
Calculation of Fund Performance Data
From time to time, the Fund may advertise several types of performance
information. These are "current yield," "tax equivalent yield," "average annual
total return" and "total return." Each of these figures is based upon historical
results and is not necessarily representative of the future performance of the
Fund.
Current yield is determined by annualizing net investment income earned per
share for a stated period (normally one month or thirty days) and dividing the
result by the maximum public offering price at the end of the evaluation period.
Tax equivalent yield is determined by dividing that portion of current
yield which is tax-exempt by one minus a stated combined state and federal
income tax rate and adding that portion of the current yield, if any, that is
not tax-exempt.
The Fund's distribution return is computed by dividing the income per share
by the number of days in the current month, and the quotient is multiplied by
365. The result is divided by the average offering price per share on the last
day of the month.
Average annual total return and total return figures measure both the net
investment income generated by the Fund and the effect of any realized or
unrealized appreciation or depreciation of the underlying investments in the
portfolio of the Fund for the period in question, assuming the reinvestment of
all dividends and capital gains distributions. Thus, these figures reflect the
change in the value of an investment in the Fund during a specified period.
Average annual total return will be quoted for at least the one, five and ten
year periods ending on a recent calendar quarter (or if such periods have not
yet elapsed, at the end of a shorter period corresponding to the life of the
Fund). Average annual total return figures are annualized and, therefore,
represent the average annual percentage change over the period in question.
Total return figures are not annualized and represent the aggregate percentage
or dollar value change over the period in question.
-34-
<PAGE>
From time to time, the Fund's performance may be compared to that of the
Consumer Price Index or various unmanaged bond indexes and may also be compared
to the performance of other fixed income or government bond mutual funds or
mutual fund indexes as reported by entities such as Lipper Analytical Services,
Inc. ("Lipper"). Lipper is a widely recognized independent mutual fund
reporting service. Lipper performance calculations are based upon changes in
net asset value with all dividends reinvested and do not include the effect of
any sales charges.
The Fund's shares are sold at net asset value plus a maximum sales charge
of 4.25% of the offering price. While the maximum sales charge is normally
reflected in the Fund's performance figures, certain total return calculations
may not include such charge and those results would be reduced if it were
included. The Fund's returns and net asset value will fluctuate. Shares of the
Fund are redeemable by an investor at the then current net asset value, which
may be more or less than original cost.
Summary of Procedures
The following summary is intended as a reference guide for investors. It
is not intended to be comprehensive. Investors should read the main body of the
Prospectus and consult with their dealer, agent or the Fund's customer service
representatives as necessary.
Purchases
Initial investments of $1,000 or more and an account application
(indicating phone order information as applicable) should be mailed to the
dealer or agent from which this Prospectus was received which has a sales
agreement with the Distributor or directly mailed to the Transfer Agent.
Investors qualifying for reduced initial minimum investments or reduced sales
charges should indicate their qualification on the application. Additional
investments should be sent to the same address. Investors should include the
purchase form from the bottom of their monthly statement and should include
their account number on the check.
Checks should be made payable to The Illinois Municipal Fund.
Redemptions
Redemption Requests must be signed by all registered owners, accompanied by
signature guarantee(s). Fund shares held in certificate form must be submitted
in proper form to effect redemption. The Transfer Agent may request such other
documentation from corporations, executors, administrators, trustees or
guardians as is deemed necessary to determine the authority of the individual
making the request.
Redemption Requests and Other Transfer Agent Inquiries should be sent to
the Fund, c/o the Transfer Agent.
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<PAGE>
Other
Address Changes: A new address should be indicated on the remittance
advice on the bottom of an investor's monthly statement (or on a copy of the
monthly statement) and mailed to the Transfer Agent at the above address. All
other requests must be signature guaranteed.
Registration Changes: A new account is opened whenever there is a change
in registration. Therefore, the procedures for redemption by mail should be
followed indicating the requested registration changes. Shares will be
transferred to the new account at net asset value on the same date as the
closing of the old account.
Sales Information, Performance Data, Prior Days'
Offering Price and Net Asset Value
Call (701) 852-5292 Or (800) 601-5593
For Information on Account Balances and all Other Inquiries
Call (800) 601-5593
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<PAGE>
Initial Application Ranson Managed Portfolios--
The Illinois Municipal Fund
Account Application
Mail To: The Illinois Municipal Fund, P.O. Box 759, Minot, North Dakota 58702
- --------------------------------------------------------------------------------
1. Account Registration (Please print)-Note: The name(s) and address shown
below must read exactly in accordance with the registration of Shareholder
Account (if any) currently on file.
[_] Individual or joint* account
_______________________________ _______________________________
Name Joint Owner's name
*Joint tenants with rights of survivorship, unless you specify otherwise.
[_] Check here if purchaser is employee of Broker/Dealer.
[_] Gift or transfer to a minor (UGMA/UTMA)
___________________ as custodian for ____________________under the _________
Custodian's name Minor's name State
Uniform Gifts/Transfers to Minors Act
[_] Trust
__________________________________________ as trustee(s) of ________________
Trustee's name(s) Name of trust agreement Date of trust
agreement
Please include copy of first and last page of trust agreement.
[_] Corporation/other entity
___________________________________ _______________________________________
Name of corporation or other entity Type of organization (i.e. corporation,
non-profit, partnership)
Please attach a certified copy of your corporate resolution showing the
person(s) authorized to act on this account.
Address: _______________________ City, State, Zip: _______________________
Day telephone number: _________________________
- --------------------------------------------------------------------------------
2. Initial Investment
_____ Check Enclosed for $__________ (Minimum Initial Investment is $1,000,
thereafter $50.) Make Check Payable to The Illinois Municipal Fund.
_____ The Dealer Firm Named Below Ordered My Initial Purchase of _____
Shares by Wire on ______________
Date
_____ Reinvestment of [_] Principal and Interest [_] Principal Only
- --------------------------------------------------------------------------------
3. Dividend and Distribution Options. All dividends and capital gains
reinvested unless indicated.
Dividends Capital Gains
[_] Reinvest [_] Reinvest
[_] Cash [_] Cash
All cash distributions to shareowner of record unless indicated below
Name ________________________________________________________________
Address _____________________________________________________________
City ___________________________________ State ___________ Zip ______
Account number (if applicable) _________________ Attach voided check if
payable to your bank account.
- --------------------------------------------------------------------------------
4. Letter of Intent
I request establishment of a Letter of Intent to purchase shares of Ranson
Managed Portfolios--The Illinois Municipal Fund as described in this
Prospectus. These shares will be purchased over a thirteen-month period; the
aggregate amount of these purchases will be at least equal to the amount
indicated below:
____ $50,000 ____ $100,000 ____ $250,000 ____ $500,000 ____ $1,000,000
____ This is an amended Letter of Intent
- --------------------------------------------------------------------------------
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<PAGE>
- --------------------------------------------------------------------------------
5. Rights of Accumulation
If this account qualifies for a reduced sales charge under the Rights of
Accumulation as described in this Prospectus, please give the following
information:
Account Number of Related Accounts Relationship to Investor
__________________________________ _______________________________
__________________________________ _______________________________
__________________________________ _______________________________
- --------------------------------------------------------------------------------
6. Systematic Withdrawal Plan
_____ Systematic Withdrawal (Available only for accounts of $5,000 or
more)--Redeem sufficient shares on or about the 24th of the month and send
check to the owner listed above: _____ Monthly: _____ Quarterly (Jan.,
Apr., July & Oct.) for $________ (Minimum $50). The first redemption to
take place on the 24th of (indicate month) __________ (Note: All
distributions from the Fund must be reinvested)
_____ Payment to a Different Payee or Account (Optional)--If systematic
withdrawal checks are to be payable to person or address other than as
registered above, make checks payable to:
Name _____________________________________________________________________
Address __________________________________________________________________
City ________________________________ State ____________ Zip ________
Account Number _________________________ (if applicable)
- --------------------------------------------------------------------------------
7. Preauthorized Investment Program
I hereby authorize the Transfer Agent to draw from my account monthly
beginning on the [_] 5th or [_] 20th of ____________________
Amount (minimum $50) Name of Bank ABA Number
_______________________ _____________________ _____________________
Bank Address Bank Account No.
____________________________________ ____________________________________
Name shown on bank records
__________________________________________________________________________
Attached is one of unsigned checks marked "Void" to ensure the correct
encoding.
__________________________________ __________________________________
Signature Date Signature Co-depositor Date
- --------------------------------------------------------------------------------
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<PAGE>
- --------------------------------------------------------------------------------
8. Your Signature and Tax Certifications
See enclosed substitute Instructions and Important Notice. The Fund
reserves the right to refuse to open an account without either a certified
taxpayer identification number ("TIN") or a certification of foreign
status. Failure to provide the tax certifications in this section may
result in backup withholding on payments relating to your account and/or in
your inability to qualify for treaty withholding rates.
________________________________ OR ________________________________
Social Security Number Employer Identification Number
I am a citizen of: [_] U.S. [_] _______ My Country of residence for tax
purpose is: [_] U.S. [_] _______
Check one of the following:
[_] The number shown above is my correct TIN. I am not subject to backup
withholding due to underreporting of interest or dividend income either
because no notification has been received from the IRS or because the
IRS has notified me that I am no longer subject to backup withholding.
(If you are subject to backup withholding, please cross out the second
sentence.)
[_] Awaiting TIN. A TIN has not been issued to me, but I am in the process
of applying for a TIN from either the appropriate Internal Revenue
Service Center or Social Security Administration Office. I understand
that if I do not provide a TIN to the Fund within 60 days, the Fund is
required to commence backup withholding until I provide a certified TIN.
I am not subject to backup withholding due to underreporting of interest
or dividend income either because no notification has been received from
the IRS or because the IRS has notified me that I am no longer subject
to backup withholding. (If you are subject to backup withholding, please
cross out the third sentence.)
[_] Exempt Recipient. I am an Exempt Recipient. The instructions give a list
of the most common Exempt Recipients. (You should still provide a TIN.)
[_] Exempt Foreign Person. I am an Exempt Person as explained in the
instructions.
Under the penalties of perjury, I certify that (1) the information provided
on this application is true, correct and complete, (2) I have read the
prospectus for the Fund in which I am investing and agree to the terms
thereof, and (3) I am of legal age or an emancipated minor.
Date: ________________________
_______________________________ _______________________________
Signature Signature
- --------------------------------------------------------------------------------
9. Broker/Dealer Use Only: (Please Print) Ranson Dealer #
We hereby submit this application for the purchase of shares of The Illinois
Municipal Fund indicated in accordance with the terms of our selling
agreement with Ranson Managed Portfolios and with the prospectus for The
Illinois Municipal Fund. We agree to notify Distributor of any purchase made
under a letter of intent or right of accumulation.
Wire Order Only: The attached check for $___________ should be applied
against wire order
Confirmation Number ______________ Dated ___________ For __________ Shares
Securities Dealer Name ____________________________________________________
Main Office Address
Branch #_____________ Rep #__________ Representative Name __________________
Branch Address _______________________________ Telephone Number ____________
Authorized Signature, Securities Dealer _____________________ Title ________
[_] Check here if purchaser is employee of Broker/Dealer.
____________ Account No. ____________ Salesman's Last Name ________ R.R. No.
Accepted: Ranson Managed Portfolios By ______________________ Date _________
- --------------------------------------------------------------------------------
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<PAGE>
- --------------------------------------------------------------------------------
10. Additional Information
Each time there is a transaction in a shareholder account, the shareholder
will receive a confirmation statement showing the current transaction.
Certificates can be issued for full shares only. These certificates will be
sent to the shareholder only upon specific request.
The method of delivery of share certificates is at the option and risk of
the shareholder. If sent by mail, registered and insured mail is suggested.
All correspondence regarding shareholder accounts should be addressed to
the Fund, c/o ND Resources, Inc., P.O. Box 759, Minot, North Dakota 58702.
This form is not authorized for distribution to prospective purchasers of
shares of the portfolio in states where such shares are not qualified for
sale.
- --------------------------------------------------------------------------------
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<PAGE>
================================================================================
Fund Manager and Investment Adviser
RANSON CAPITAL CORPORATION
1 North Main
Minot, North Dakota 58703
Transfer Agent
ND RESOURCES, INC.
1 North Main
Minot, North Dakota 58703
Custodian
First Western Bank & Trust
900 South Broadway
Minot, North Dakota 58701
Independent Auditors
BRADY, MARTZ & ASSOCIATES, P.C.
24 West Central Avenue
Minot, North Dakota 58701
Legal Counsel
CHAPMAN AND CUTLER
111 West Monroe Street
Chicago, Illinois 60603
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
FEE AND EXPENSE TABLE..........................................................2
HIGHLIGHTS OF THE FUND AND PROSPECTUS SUMMARY..................................3
THE FUND.......................................................................7
INVESTMENT OBJECTIVE AND POLICIES..............................................7
NET ASSET VALUE...............................................................17
PURCHASE OF SHARES............................................................18
SPECIAL PROGRAMS..............................................................20
REDEMPTION OF SHARES..........................................................23
DIVIDENDS AND TAXES...........................................................24
DESCRIPTION OF SHARES AND RIGHTS..............................................29
FUND MANAGEMENT...............................................................30
THE DISTRIBUTOR...............................................................32
SHAREHOLDER SERVICES AND REPORTS..............................................33
CALCULATION OF FUND PERFORMANCE DATA..........................................34
SUMMARY OF PROCEDURES.........................................................35
</TABLE>
================================================================================
RANSON MANAGED
PORTFOLIOS
THE ILLINOIS
MUNICIPAL FUND
---------------------------
PROSPECTUS
Dated: October 11, 1997
---------------------------
Distributor
RANSON CAPITAL CORPORATION
1 North Main
Minot, North Dakota 58703
================================================================================
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES+
+EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE +
+SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFICER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OF QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion, October 10, 1997
Statement of Additional Information
Ranson Managed Portfolios
The Illinois Municipal Fund
The Illinois Municipal Fund is an investment portfolio of Ranson Managed
Portfolios, a management investment company. The term "the Fund" as used herein
shall refer to either Ranson Managed Portfolios or The Illinois Municipal Fund
series of Ranson Managed Portfolios as the context may require. The investment
objective of The Illinois Municipal Fund is to provide its shareholders with as
high a level of current income exempt from federal income tax and Illinois
income tax, to the extent indicated, as is consistent with preservation of
capital. Certain Illinois Municipal Securities (as defined in the Prospectus)
will be subject to Illinois state income taxes. Under normal market conditions,
the Fund's assets will be invested in a portfolio of Illinois Municipal
Securities which, in the opinion of Ranson Capital Corporation, will produce a
higher level of current income than would be produced by a portfolio of Illinois
Municipal Securities rated in only the highest rating category, but contains
Illinois Municipal Securities which do not present a significant risk of loss of
principal due to credit characteristics. Up to 100% of the Fund's total assets
may be invested in Illinois Municipal Securities which are subject to Illinois
state income taxes. The Fund's manager is Ranson Capital Corporation.
This Statement of Additional Information is not a prospectus but shall be
read in conjunction with the Prospectus for the Fund dated October 11, 1997 (the
"Prospectus"). A copy of the Prospectus may be obtained without charge by
calling the Fund at 701/852-5292.
The Prospectus and this Statement of Additional Information omit certain of
the information contained in the registration statement filed with the
Securities and Exchange Commission, Washington, D.C. These items may be obtained
from the Commission upon payment of the fee prescribed, or inspected at the
Commission office at no charge.
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
The Fund and Its Shares...................................................... 2
Investment Objective, Policies and Restrictions.............................. 2
Officers and Trustees........................................................ 7
Compensation Table........................................................... 9
Custodian.................................................................... 9
Independent Auditors.........................................................10
Management and Investment Advisory Agreement.................................10
Portfolio Transactions.......................................................10
Additional Information Regarding Shares and Rights...........................11
Expenses of the Fund.........................................................14
Performance Data.............................................................14
</TABLE>
This Statement of Additional Information is dated October 11, 1997.
<PAGE>
The Fund and Its Shares
The Illinois Municipal Fund is a newly-organized series of Ranson Managed
Portfolios, an open-end non-diversified management investment company organized
as an unincorporated business trust under the laws of Massachusetts on August
10, 1990.
Prior to the sale of shares of the Fund to the public, all shares of the
fund were owned by Ranson Capital Corporation. Since the Fund is newly formed,
as of the date of this Statement of Additional Information, Ranson Capital
Corporation controls 100% of the shares of the Fund.
Investment Objective, Policies and Restrictions
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Investment Objective and
Policies."
The investment objective of the Fund is to provide its shareholders with as
high a level of current income that is exempt from federal income tax and
Illinois income tax, to the extent indicated, as is consistent with preservation
of capital. Under normal market conditions, the Fund's assets will be invested
in a portfolio of Illinois Municipal Securities which, in the opinion of Ranson
Capital Corporation, will produce a higher level of current income than would be
produced by a portfolio of Illinois Municipal Securities rated in only the
highest rating category, but contains Illinois Municipal Securities which do not
present a significant risk of loss of principal due to credit characteristics.
Up to 100% of the Fund's total assets may be invested in Illinois Municipal
Securities which are subject to Illinois state income taxes.
The investment policy of the Fund is to invest at least 80% of its assets
in a portfolio of Illinois Municipal Securities which generate interest income
that is exempt from federal income tax and, to the extent indicated, Illinois
income tax. Illinois Municipal Securities generally include debt obligations of
the State of Illinois, its political subdivisions, municipalities, agencies and
authorities, and certain industrial development and other revenue bonds, short-
term municipal notes, municipal leases and commercial paper issued by such
entities and obligations of the Commonwealth of Puerto Rico, the United States
Virgin Islands and Guam.
Futures Contracts, Options on Futures and Municipal Bond Index Futures.
The Fund may purchase or sell financial futures contracts ("futures contracts")
and related options thereon. These futures contracts and related options
thereon will be used only as a hedge against anticipated interest rate changes.
In general a futures contract sale creates an obligation by the Fund, as seller,
to deliver the specific type of instrument called for in the contract at a
specified future time for a specified price. A futures contract purchase would
generally create an obligation by the Fund, as purchaser, to take delivery of
the specific type of financial instrument at a specified future time at a
specified price. The specific securities delivered or taken, respectively, at
settlement date would not be determined until on or near
-2-
<PAGE>
that date. The determination would be in accordance with the rules of the
exchange on which the futures contract sale or purchase was effected.
Although the terms of futures contracts specify actual delivery or receipt
of securities, in most instances the contracts are closed out before the
settlement date without the making or taking of delivery of the securities.
Closing out a futures contract is usually effected by entering into an
offsetting transaction. An offsetting transaction for a futures contract sale
is effected by the Fund entering into a futures contract purchase for the same
aggregate amount of the specific type of financial instrument at the same
delivery date. If the price in the sale exceeds the price in the offsetting
purchase, the Fund immediately is paid the difference and thus realizes a gain.
If the offsetting purchase price exceeds the sale price, the Fund pays the
difference and realizes a loss. Similarly, the closing out of a futures
contract purchase is effected by the Fund entering into a futures contract sale.
If the offsetting sale price exceeds the purchase price, the Fund realizes a
gain, and if the offsetting sale price is less than the purchase price, the Fund
realizes a loss.
Unlike a futures contract, which requires the parties to buy and sell an
instrument on a set date, an option on a futures contract entitles its holder to
decide on or before a future date whether to enter into such a contract (a long
position in the case of a call option and a short position in the case of a put
option). If the holder decides not to enter into the contract, the premium paid
for the contract is lost. Since the cost of the option is fixed, there are no
daily payments of cash by the purchaser to reflect the change in the value of
the underlying contract as discussed below for futures contracts. The seller of
the option, however, may be required to make daily maintenance margin payments
to reflect the change in the value of the underlying contract. The value of the
option is reflected in the net asset value of the Fund.
The Fund is required to maintain margin deposits with brokerage firms
through which it effects futures contracts and options thereon. The initial
margin requirements vary according to the type of the underlying instrument. In
addition, due to current industry practice, daily variations in gains and losses
on open contracts are required to be reflected in cash in the form of variation
margin payments. The Fund may be required to make additional margin payments
during the term of the contract.
Currently, futures contracts can be purchased on debt securities such as
U.S. Treasury Bills and Bonds, U.S. Treasury Notes with maturities between 6-1/2
and 10 years, Certificates of the Government National Mortgage Association, Bank
Certificates of Deposit and on a municipal bond index (see below). The Fund may
purchase or sell interest rate futures contracts covering these types of
financial instruments as well as new types of contracts that become available in
the future.
Financial futures contracts and related options contracts are traded in an
auction environment on the floors of several futures Exchanges--principally, the
Chicago Board of Trade, the Chicago Mercantile Exchange and the New York Futures
Exchange.
-3-
<PAGE>
A risk in employing futures contracts to protect against the price
volatility of portfolio securities is that the prices of securities subject to
futures contracts may not correlate perfectly with the behavior of the cash
prices of the Fund's portfolio securities. The correlation may be distorted in
part by the fact that the futures market is influenced by short-term traders
seeking to profit from the difference between a contract or security price
objective and their cost of borrowed funds. This would reduce the value of
futures contracts for hedging purposes over a short time period. The
correlation may be further distorted since the futures contracts that are being
used to hedge are not based on municipal obligations.
Another risk is that the Manager could be incorrect in its expectations as
to the direction or extent of various interest rate movements or the time span
within which the movements take place. For example, if the Fund sold futures
contracts in anticipation of an increase in interest rates, and then interest
rates went down, causing bond prices to rise, the Fund would lose money,
including transaction costs, on the sale.
In addition to the risks associated with investing in options on
securities, there are particular risks associated with trading in options on
futures. In particular, the ability to establish and close out positions on
such options will be subject to the development and maintenance of a liquid
market in such options. It is not certain that this market will develop.
A substantial majority (i.e., approximately 75%) of all anticipatory hedge
transactions (transactions in which the Fund does not own, at the time of the
transaction, but expects to acquire the securities corresponding to the relevant
futures contract) involving the purchase of futures contracts, call options or
written put options thereon will be completed by the purchase of securities
which are the subject of the hedge.
The Fund may not enter into futures contracts or related options thereon
if, immediately thereafter, the amount committed to initial margin plus the
amount paid for option premiums on open contracts exceeds 5% of the value of the
Fund's total assets. In instances involving the purchase of futures contracts
by the Fund, an amount equal to the gross market value of the futures contract
will be deposited in a segregated account of cash and cash equivalents and
thereby ensure that the use of such futures is unleveraged. The Fund may not
purchase or sell futures contracts or related positions if, immediately
thereafter, more than one-third of its net assets would be hedged.
The Fund may utilize trading in municipal bond index futures contracts for
hedging purposes. The strategy in employing such contracts will be similar to
that discussed above with respect to financial futures and options thereon. A
municipal bond index is a method of reflecting in a single number the market
value (based on an average of quotations from certain dealers) of many different
municipal bonds. The index fluctuates in response to changes in the market
values of the bonds included within the index. Unlike futures contracts on
particular financial instruments, futures on a municipal bond index will be
settled in cash if held until the close of trading in the contract. However, as
in any other futures contract, a position in the contract may be closed out by
purchase or sale of an
-4-
<PAGE>
offsetting contract for the same delivery month prior to expiration of the
contract. Because trading in municipal bond index futures contracts has been
taking place only for a short time, the Fund's ability to utilize such contracts
will be dependent upon the development and maintenance of a market in such
contract.
The Securities and Exchange Commission generally requires that when
investment companies, such as the Fund, effect transactions of the foregoing
nature, such funds must either segregate cash or high quality, readily
marketable portfolio securities with its custodian in the amount of its
obligation under such transactions, or cover such obligations by maintaining
positions in portfolio securities, futures contracts or options that would serve
to satisfy or offset the risk of such obligations. When effecting transactions
of the foregoing nature, the Fund will comply with such segregation or cover
requirements.
Investment Restrictions. Fundamental investment restrictions limiting the
investments of the Fund provide that the Fund may not:
1. Borrow money, except from banks for temporary or emergency (not
leveraging) purposes and then in an amount not exceeding 10% of the value
of the Fund's total assets (including the amount borrowed). The Fund will
not borrow for leveraging purposes, and securities will not be purchased
while borrowings are outstanding. Interest paid on any money borrowed will
reduce the Fund's net income.
2. Pledge, hypothecate, mortgage or otherwise encumber its assets,
in excess of 10% of the value of its total assets (taken at the lower of
cost or current value) and then only to secure borrowings for temporary or
emergency purposes.
3. Purchase securities on margin, except such short-term credits as
may be necessary for the clearance of purchases and sales of securities.
The deposit of initial or maintenance margin by the Fund in connection with
financial futures contracts and related options transactions, including
municipal bond index futures contracts or related options transactions, is
not considered the purchase of a security on margin.
4. Make short sales of securities or maintain a short position for
the account of the Fund including any short sales "against the box."
5. Underwrite the securities of other issuers, except to the extent
that, in connection with the disposition of its portfolio investments it
may be deemed to be an underwriter under federal securities laws.
6. Purchase or sell real estate, but this shall not prevent the Fund
from investing in securities which are secured by real estate or interests
therein.
7. Purchase or sell commodities or commodity contracts except to the
extent the options and futures contracts the Fund may trade in are
considered to be commodities or commodities contracts.
-5-
<PAGE>
8. Make loans to others except through the purchase of qualified
debt obligations and the entry into repurchase agreements.
9. Invest 25% or more of its total assets in the securities of
issuers in any single industry; provided that there shall be no such
limitation on the purchase of securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities or by Illinois, its political
subdivisions, municipalities, agencies and authorities. (The Fund may,
from time to time, invest 25% or more of its assets in a particular segment
of the municipal bond market; however, the Fund will not invest 25% or more
of its assets in industrial development bonds in a single industry.)
10. Invest in securities of any issuer if, to the knowledge of the
Fund, officers and Trustees of the Fund or officers and directors of the
Manager who beneficially own more than 1/2 of 1% of the securities of that
issuer together own more than 5%.
11. Purchase securities restricted as to resale, if, as a result
such investment would exceed 5% of the value of the Fund's net assets.
12. Invest in (a) securities which at the time of such investment
are not readily marketable, including participation interests in municipal
leases, (b) securities the disposition of which is restricted under federal
securities laws (as described in fundamental restriction (11) above) and
(c) repurchase agreements maturing in more than seven days, if, as a
result, more than 10% of such Fund's net assets (taken at current value)
would be invested in securities described in (a), (b) and (c) above.
13. Invest more than 5% of its total assets in securities of any
one issuer, except that this limitation shall not apply to securities of
the U.S. Government, its agencies and instrumentalities and except that
with respect to 50% of the Fund's total assets the Fund may invest up to
25% of its total assets in securities of any one issuer.
The Fund may not change any of these investment restrictions without the
approval of the lesser of (i) more than 50% of the Fund's outstanding shares or
(ii) 67% of the Fund's shares present or represented by proxy at a meeting at
which the holders of more than 50% of the outstanding shares are present or
represented by proxy. With the exception of the percentage restrictions set
forth in fundamental restrictions (1) and (12) above, which may not be exceeded
at any time, as long as the percentage restrictions described above are
satisfied at the time of the investment or borrowing, the Fund will be
considered to have abided by those restrictions even if, at a later time, a
change in values or net assets causes an increase or decrease in percentage
beyond that allowed.
The following investment restrictions of the Fund may be changed by the
Board of Trustees of the Fund.
-6-
<PAGE>
The Fund will not:
1. Invest more than 5% of its total assets in the securities of any
other single investment company, nor more than 10% of its total assets in
the securities of two or more other investment companies, except as part of
a merger, consolidation or acquisition of assets.
2. Buy or sell oil, gas or other mineral leases, rights or royalty
contracts.
An advisory fee will be charged for assets invested in securities of other
investment companies. However, the Fund will not invest more than 10% of its
total assets in such securities.
OFFICERS AND TRUSTEES
The officers and Trustees of the Fund, their principal occupations for the
last five years and their affiliations, if any, with Ranson Capital Corporation
(the Manager and Distributor) are as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
POSITION(S) HELD PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE WITH FUND(1) DURING PAST 5 YEARS(2)
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
Lynn W. Aas Trustee Retired; Attorney; Director, ND Tax-Free Fund,
904 NW 27th Inc., ND Insured Income Fund, Inc., Montana
Minot, North Dakota 58701 Tax-Free Fund, Inc., Integrity Fund of Funds,
76 Inc., and South Dakota Tax-Free Fund, Inc.;
Director, First Western Bank & Trust
- ----------------------------------------------------------------------------------------------------------------
Orlin W. Backes Trustee Attorney; Director, ND Tax-Free Fund, Inc., ND
15 2nd Ave. SW, Suite 305 Insured Income Fund, Inc., Montana Tax-Free
Minot, North Dakota 58701 Fund, Inc., and South Dakota Tax-Free Fund,
62 Inc. and Integrity Fund of Funds, Inc.;
Director, First Western Bank & Trust
- ----------------------------------------------------------------------------------------------------------------
Arthur A. Link Trustee Director, ND Tax-Free Fund, Inc., ND Insured
2001 Grimsrud Drive Income Fund, Inc., Montana Tax-Free Fund,
Bismarck, North Dakota 58701 Inc., South Dakota Tax-Free Fund, Inc. and
83 Integrity Fund of Funds, Inc.; Director; Bank
Center First; Formerly Governor of
the State of North Dakota
- ----------------------------------------------------------------------------------------------------------------
Peter A. Quist* Vice President Director and Vice President, ND Holdings, Inc.;
1 North Main and Secretary Director, Vice President and Secretary, ND
Minot, North Dakota 58703 Money Management, Inc., ND Capital, Inc.,
63 ND Resources, Inc., ND Tax-Free Fund, Inc.,
ND Insured Income Fund, Inc., Montana
Tax-Free Fund, Inc., South Dakota Tax-Free
Fund, Inc., Integrity Fund of Funds, Inc. and
Ranson Capital Corporation
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
-7-
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Robert E. Walstad* Trustee, Chairman Director and President, ND Holdings, Inc.,
1 North Main President Director, President and Treasurer, ND Money
Minot, North Dakota 58703 and Treasurer Management, Inc., ND Capital, Inc., ND
52 Resources, Inc., ND Tax-Free Fund, Inc., ND
Insured Income Fund, Inc., Montana Tax-Free
Fund, Inc., Integrity Fund of Funds, Inc., and
South Dakota Tax-Free Fund, Inc.; Director,
President, CEO and Treasurer, Ranson Capital
Corporation
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
-8-
<PAGE>
____________________
* "Interested persons" of the Fund as that term is defined in the Investment
Company Act of 1940.
(1) The Trustees were elected at a joint special meeting of the shareholders of
the Fund complex of Ranson Managed Portfolios held on December 11, 1995,
but did not assume office until the closing of the Stock Purchase Agreement
between the shareholders of The Ranson Company, Inc., and ND Holdings,
Inc., on January 5, 1996. Prior to that time, the Board of Trustees
consisted of J. Joseph Hannah, H. Dene Heskett, Harrison F. Johnson,
Kevin F. Mitchelson, John A. Ranson and John S. Ranson.
(2) Lynn W. Aas and Orlin W. Backes were elected to the boards of directors of
the above-named funds (the "ND Fund") in 1994 and 1995, respectively.
Arthur A. Link has served on the boards of directors of the ND Funds since
their inceptions. Peter A. Quist has served as a director and as the Vice
President and Secretary of the ND Funds since their inceptions, except that
he was not elected to the board of directors of South Dakota Tax-Free Fund,
Inc., until 1995. Robert E. Walstad has served as a director and as the
President and Treasurer of the ND Funds since their inceptions. Mssrs.
Quist and Walstad were elected as directors and officers of Ranson Capital
Corporation on January 5, 1996.
COMPENSATION TABLE (2)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
AGGREGATE COMPENSATION TOTAL COMPENSATION
NAME OF PERSON FROM THE ILLINOIS FROM REGISTRANT
POSITION (1) MUNICIPAL FUND SERIES AND FUND COMPLEX
- -----------------------------------------------------------------------
<S> <C> <C>
Lynn W. Aas $500 $10,000
- -----------------------------------------------------------------------
Orlin W. Backes $500 $10,000
- -----------------------------------------------------------------------
Arthur A. Link $500 $10,000
- -----------------------------------------------------------------------
*Robert E. Walstad $ 0 $ 0
- -----------------------------------------------------------------------
</TABLE>
____________________
* "Interested persons" as defined in the Investment Company Act of 1940.
(1) Each of the named persons acted in the capacity of a Trustee.
(2) The compensation of any Trustee who is not an "interested person" as that
term is defined in the Investment Company Act of 1940 is paid by the Fund.
Until the closing of the Stock Purchase Agreement (see note (1) above),
Trustees who were not interested persons of the Manager or the Distributor
(the "Disinterested Trustees") were paid $500 plus expenses per meeting of
the Board of Trustees and committees thereof attended by such Trustee.
None of the Trustees who are interested persons received compensation for
services as Trustees. Each of the Disinterested Trustees will be paid a
fee of $10,000 for the calendar year ending December 31, 1997, plus any
expenses incurred in attending meetings. The $10,000 fee is apportioned
among the nine funds comprised in the Integrity Mutual Funds group on the
basis of gross assets, subject to a minimum fee of $500 per Disinterested
Trustee per fund.
As of June 30, 1997, the officers and Trustees of the Fund owned, as a
group, less than 1% of the shares of the Fund.
CUSTODIAN
First Western Bank & Trust, 900 South Broadway, Minot, North Dakota 58701,
is the Custodian of the Fund and has custody of all securities and cash of the
Fund. The Custodian, among other things, attends to the collection of principal
and income, and payment for and collection of proceeds of securities bought and
sold by the Fund.
-9-
<PAGE>
INDEPENDENT AUDITORS
Shareholders will receive annual financial statements, together with a
report of independent auditors, and semi-annual unaudited financial statements
of the Fund. The independent auditors for the Fund are Brady, Martz &
Associates, P.C., 24 West Central Avenue, Minot, North Dakota 58701. The
independent auditors will report on the Fund's annual financial statements,
review certain regulatory reports and the Fund's income tax returns, and perform
other professional accounting, auditing, tax and advisory services when engaged
to do so by the Fund.
MANAGEMENT AND INVESTMENT ADVISORY AGREEMENT
The Management and Investment Advisory Agreement (the "Agreement") between
the Manager and the Fund provides that the Manager will supply investment
research and portfolio management, including the selection of securities for the
Fund to purchase, hold or sell, and the selection of brokers through whom the
Fund's portfolio transactions are executed. The Manager also administers the
business affairs of the Fund, furnished offices, necessary facilities and
equipment, provides administrative services, and permits its officers and
employees to serve without compensation as directors and officers of the Fund if
duly elected to such positions. Fees and expense limitations under the
Agreement are described in the Prospectus.
The Agreement will continue in effect from year to year if specifically
approved by the Fund's Trustees or the Fund's shareholders and by the Fund's
Disinterested Trustees in compliance with the requirements of the Investment
Company Act of 1940 (the "1940 Act"). The Agreement may be terminated without
penalty upon 60 days' written notice by either party and will automatically
terminate in the event of assignment.
Ranson Capital Corporation serves as the Manager and is a wholly-owned
subsidiary of ND Holdings, Inc., a North Dakota corporation.
PORTFOLIO TRANSACTIONS
The Manager will place orders for portfolio transactions for the Fund with
broker-dealer firms giving consideration to the quality, quantity and nature of
each firm's professional services. These services include execution, clearance
procedures, wire service quotations and statistical and other research
information provided to the Fund and the Manager including quotations necessary
to determine the value of the Fund's net assets. Any research benefits derived
are available for all clients of the Manager. Since statistical and other
research information is only supplementary to the research efforts of the
Manager and still must be analyzed and reviewed by one of its staff, the receipt
of research information is not expected to materially reduce the Manager's
expenses. In selecting among the firms believed to meet the criteria for
handling a particular transaction, the Manager may take into consideration that
certain firms have sold or are selling shares of the Fund and that certain
-10-
<PAGE>
firms provide market, statistical or other research information to the Fund and
the Manager, and may select firms that are affiliated with the Fund or the
Manager.
If it is believed to be in the best interests of the Fund, the Manager may
place portfolio transactions with brokers who provide the types of service
described above, even if it means the Fund will have to pay a higher commission
(or, if the broker's profit is part of the cost of the security, will have to
pay a higher price for the security) than would be the case if no weight were
given to the broker's furnishing of these services. This will be done, however,
only if, in the opinion of the Manager, the amount of additional commission or
increased cost is reasonable in relation to the value of the services.
If purchases or sales of securities of the Fund and of one or more other
portfolios of the Fund, investment companies or clients supervised by the
Manager are considered at or about the same time, transactions in such
securities will be allocated among the several portfolios of the Fund,
investment companies and clients in a manner deemed equitable to all by the
Manager, taking into account the respective sizes of the funds and the amount of
securities to be purchased or sold. Although it is possible that in some cases
this procedure could have a detrimental effect on the price or volume of the
security as far as the Fund is concerned, it is also possible that the ability
to participate in volume transactions and to negotiate lower brokerage
commissions will be beneficial to the Fund. The Fund expects that its portfolio
transactions in Illinois Municipal Securities will generally be effected on a
principal (as opposed to agency) basis and, accordingly, does not expect to
incur significant brokerage commissions.
While the Manager will be primarily responsible for the placement of the
Fund's business, the policies and practices in this regard must be consistent
with the foregoing and will at all times be subject to review by the Trustees of
the Fund.
The Board of Trustees has adopted certain policies incorporating the
standards of Rule 17e-1 issued by the Securities and Exchange Commission under
the 1940 Act which requires that the commissions paid to the Distributor and
other affiliates of the Fund must be reasonable and fair compared to the
commissions, fees or other remuneration received or to be received by other
brokers in connection with comparable transactions involving similar securities
during a comparable period of time. The Rule and procedures also contain review
requirements and require the Manager to furnish reports to the Board of Trustees
and to maintain records in connection with such reviews. After consideration of
all factors deemed relevant, the Board of Trustees will consider from time to
time whether the advisory fee will be reduced by all or a portion of the
brokerage commission given to affiliated brokers.
ADDITIONAL INFORMATION REGARDING SHARES AND RIGHTS
The Fund is a non-diversified, open-end investment company established
under Massachusetts law by an Agreement and Declaration of Trust ("Trust
Agreement") dated August 10, 1990, and is the type of organization commonly
known as a "Massachusetts business trust." It is a series company as
contemplated under Rule 18f-2 under the 1940 Act, having five series of shares
offered at this time which are known as "The Kansas Municipal
-11-
<PAGE>
Fund," "The Kansas Insured Intermediate Fund," "The Nebraska Municipal Fund,"
"The Oklahoma Municipal Fund" and "The Illinois Municipal Fund." The Trust
Agreement provides that each shareholder, by virtue of becoming such, will be
held to have expressly assented and agreed to the terms of the Trust Agreement
and to have become a party thereto.
The Trust Agreement permits the Trustees to issue an unlimited number of
full and fractional shares, without par value, from each portfolio. Each share
of a portfolio represents an equal proportionate interest in the assets and
liabilities belonging to such portfolio with each other share of such portfolio
and is entitled to such dividends and distributions out of the income belonging
to such portfolio as are declared by the Trustees. The shares do not have
cumulative voting rights nor any preemptive rights. In case of a liquidation,
subject to the rights of creditors, the holders of shares of each portfolio
being liquidated will be entitled to receive as a series a distribution out of
the net assets belonging only to that portfolio. Under the Trust Agreement,
expenses attributable to any specific portfolio (whether start-up for a new
portfolio or on-going operating expenses) will be borne by that portfolio. Any
general expenses of the Fund not readily identifiable as belonging to a
particular portfolio are allocated by or under the direction of the Trustees in
such manner as the Trustees determine to be fair and equitable, usually in
proportion to the portfolio's relative net assets. The net asset value of the
shares of any portfolio will be computed based only upon the net assets of such
portfolio.
As a general matter, the Fund will not hold annual or other meetings of the
Fund's shareholders. This is because the Trust Agreement provides for Fund
shareholders voting only (a) for the election or removal of one or more Trustees
if a meeting is called for that purpose; (b) with respect to any contract as to
which shareholder approval is required by the 1940 Act (such as the Fund's
Management and Investment Advisory Agreement and the Distribution and Services
Agreement); (c) with respect to any termination or reorganization of the Fund or
any portfolio to the extent and as provided in the Trust Agreement; (d) with
respect to any amendment of the Trust Agreement (other than amendments
establishing and designating new portfolios, changing the name of the Fund or
the name of any portfolio, supplying any omission, curing any ambiguity, or
curing, correcting or supplementing any provision thereof which is internally
inconsistent with the 1940 Act or with the requirements of the Internal Revenue
Code and applicable regulations for the Fund to obtain the most favorable
treatment thereunder available to regulated investment companies), which
amendments require approval by more than 50% of the shares entitled to vote; (e)
to the same extent as the stockholders of a Massachusetts business corporation
as to whether or not a court action, proceeding or claim should or should not be
brought or maintained derivatively or as a class action on behalf of the Fund or
the shareholders, and (f) with respect to such additional matters relating to
the Fund as may be required by the 1940 Act (such as changes in the Fund's
investment policies and restrictions), the Trust Agreement, the by-laws of the
Fund, or any registration of the Fund with the Securities and Exchange
Commission or any state, or as the Trustees may consider necessary or desirable.
Each Trustee serves until the next meeting of shareholders, if any, called
for the purpose of considering the election or reelection of such Trustee or of
a successor to such Trustee, and until the election and qualification of his
successor, if any, elected at such
-12-
<PAGE>
meeting, or until such Trustee sooner dies, resigns, retires or is removed by
the shareholders or two-thirds of the Trustees.
The Trust Agreement provides that on any matter submitted to a vote of the
shareholders, all Fund shares entitled to vote, irrespective of portfolio, shall
be voted in the aggregate and not by portfolio except that (a) as to any matter
with respect to which a separate vote of any portfolio is required by the 1940
Act, such requirements as to a separate vote by that portfolio shall apply in
lieu of the aggregate voting as described above, and (b) when the Trustees have
determined that the matter affects only the interests of one or more portfolios,
then only shareholders of the affected portfolios shall be entitled to vote
thereon.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted by the provisions of the 1940 Act or applicable state law, or
otherwise, to the holders of the outstanding voting securities of an investment
company with separate portfolios like this Fund shall not be deemed to have been
effectively acted upon unless approved by the holders of a majority of the
outstanding shares (as defined below) of each portfolio "affected by" such
matter. Rule 18f-2 further provides that a portfolio shall be deemed to be
affected by a matter unless the interests of each portfolio in the matter are
substantially identical or the matter does not affect any interests of such
portfolio. The Rule specifically exempts the selection of independent auditors,
the approval of principal underwriting contracts and the election of trustees
from such separate voting requirements and specifically provides that any
required approval of the Fund's Management and Investment Advisory Agreement and
the Distribution and Services Agreement is subject to such separate voting
requirements. In addition, changes in the Fund's investment policies are also
subject to separate voting requirements.
The Trust Agreement provides that the presence at a meeting of shareholders
in person or by proxy of shareholders entitled to vote at least thirty percent
(30%) of the votes entitled to be cast on a matter (or if voting is to be by
portfolio, shareholders of each portfolio entitled to vote at least thirty
percent (30%) of the votes entitled to be cast by each portfolio) shall
constitute a quorum. This permits a meeting of shareholders of the Fund to take
place even if less than a majority of the shareholders are present on its
scheduled date. Shareholders would in such a case be permitted to take action
which does not require a larger vote than a majority of a quorum (the election
of Trustees and the ratification of the selection of independent public
accountants are examples). Some matters requiring a larger vote under the Trust
Agreement, such as termination or reorganization of the Fund and certain
amendments of the Trust Agreement, would not be affected by this provision. This
is also true with respect to matters which under the 1940 Act require the vote
of a majority of the outstanding voting shares (as defined below) of the Fund or
a particular portfolio.
As used in the Prospectus and this Statement of Additional Information, the
term "majority of the outstanding shares" of either the Fund or a particular
portfolio of the Fund means the vote of the lesser of (i) 67% or more of the
shares of the Fund or such portfolio present or represented by proxy at a
meeting, if the holders of more than 50% of the
-13-
<PAGE>
outstanding shares of the Fund or of such portfolio are present or represented
by proxy, or (ii) more than 50% of the outstanding shares of the Fund or such
portfolio.
Under the terms of the Trust Agreement, a Trustee is liable for his own
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office, and for nothing else, and shall
not be liable for errors of judgment or mistakes of fact or of law. The Trust
Agreement provides for indemnification by the Fund of the Trustees and the
officers of the Fund except with respect to any matter as to which such person
did not act in good faith in the reasonable belief that his action was in or not
opposed to the best interests of the Fund (or the predecessor corporation) but
such person may not be indemnified against any liability to the Fund or the Fund
shareholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office. The Trust Agreement also provides that
any agreement or undertaking by the Trustees on behalf of the Fund is binding
upon the Fund only and not on the Trustees personally.
Expenses of the Fund
The Fund's expenses include, among others, management and investment
advisory fees, 12b-1 fees, accounting and administrative fees, taxes, brokerage
fees and commissions, if any, fees of Disinterested Trustees, expenses of
Trustees' and shareholders' meetings, insurance premiums, expenses of redemption
of shares, expenses of issue and sale of shares (to the extent not borne by the
Distributors), expenses of printing and mailing certificates, association
membership dues, charges of the Fund's custodian, and bookkeeping, auditing and
legal expenses, and the fees and expenses of registering the Fund and its shares
with the Securities and Exchange Commission, registering or qualifying its
shares under state securities laws and the expenses of preparing and mailing
prospectuses and reports to shareholders.
Performance Data
As described in the prospectus, the Fund's historical performance may be
shown in the form of "current yield," "tax equivalent yield," "average annual
total return" and "total return" figures. These various measures of performance
are described below.
Current yield is determined in accordance with a standardized method
prescribed by rules of the Securities and Exchange Commission by annualizing net
investment income earned per share for a stated period (normally one month or
thirty days) and dividing the result by the maximum public offering price at the
end of the evaluation period. The Securities and Exchange a rules for
calculating current yield require the use of certain standardized accounting
practices which are not necessarily consistent with those used by the Fund in
the preparation of its audited financial statements or federal tax return. The
Fund's current yield figure is based upon historical results and is not
necessarily representative of future performance.
-14-
<PAGE>
Tax equivalent yield is determined by dividing that portion of current
yield which is tax-exempt by one minus a stated income tax rate and adding that
portion of current yield, if any, that is not tax-exempt.
The Fund's distribution return is computed by dividing the income per share
by the number of days in the current month, and the quotient is multiplied by
365. The result is divided by the average offering price per share on the last
day of the month.
The Fund's average annual total return quotation is computed in accordance
with a standardized method prescribed by rules of the Securities and Exchange
Commission. The average annual total return for the Fund for a specific period
is found by first taking a hypothetical $1,000 investment ("initial investment")
in the Fund's shares on the first day of the period reduced by the maximum sales
charge in effect on that date and computing the "redeemable value" of that
investment at the end of the period. The redeemable value is then divided by the
initial investment, and the quotient is taken to the Nth root (N representing
the number of years in the period) and 1 is subtracted from the result, which is
then expressed as a percentage. The calculation assumes that all income and
capital gains dividends paid by the Fund have been reinvested at net asset value
on the reinvestment dates during the period.
The Fund's total return quotation is computed by aggregating the percentage
or dollar value change over the period in question, exclusive of the initial
sales charge.
The Fund's performance figures are based upon historical results and are
not necessarily representative of future performance. The Fund's shares are sold
at net asset value plus a maximum sales charge of 4.25% of the offering price.
Returns and net asset value will fluctuate. Factors affecting the Fund's
performance include general market conditions, operating expenses and investment
management. Any additional fees charged by a dealer or other financial services
firm would reduce the returns described in this section. Shares of the Fund are
redeemable at net asset value, which may be more or less than original cost.
-15-
<PAGE>
Part C Other Information
Item 24. Financial Statements and Exhibits.
(a) Financial Statements:
(i) Financial Statements included in Part A of the Registration
Statement:
None.
(ii) Financial Statements included in Part B of the Registration
Statement:
None
Schedules 2, 3, 4, 5, 6 and 7 have been omitted as the required
information is not present.
(b) Exhibits:
1. Agreement and Declaration of Trust dated August 10, 1990
(incorporated by reference to Form N-1A [File No. 33-36324]
filed on behalf of Ranson Managed Portfolios--The Kansas
Municipal Fund).
2. By-Laws (incorporated by reference to Form N-1A [File No.
33-36324] filed on behalf of Ranson Managed Portfolios--
The Kansas Municipal Fund).
3. Inapplicable.
4. Inapplicable.
5. Form of Management and Investment Advisory Agreement between
Registrant and Ranson Capital Corporation (incorporated by
reference to Post-effective Amendment No. 11 to the
Registration Statement).
6. (a) Form of Distribution and Services Agreement between
Registrant and Ranson Capital Corporation (incorporated by
reference to Post-effective Amendment No. 11 to the
Registration Statement).
(b) Dealer Agreement (incorporated by reference to
Post-effective Amendment No. 11 to the Registration
Statement).
7. Inapplicable.
8. Form of Custodian Agreement between Ranson Managed
Portfolios and First Western Bank & Trust (incorporated by
reference to Post-Effective Amendment No. 25 to the
Registration Statement).
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9. Administrative and Accounting Services Agreement between
Registrant and ND Resources, Inc. (incorporated by reference
to Post-Effective Amendment No. 25 to the Registration
Statement).
10. Opinion of Chapman and Cutler.
11. Inapplicable
12. Inapplicable.
13. Inapplicable.
14. Shareholder Services Plan (incorporated by reference to
Post-effective Amendment No. 11 to the Registration
Statement).
15. Inapplicable
16. Inapplicable.
Item 25. Persons Controlled by or under Common Control with Registrant.
Since The Illinois Municipal Fund portfolio of Registrant is newly formed
and has not yet commenced its public offering of its shares, there are no
outstanding shares of The Illinois Municipal Fund portfolio of Registrant. To
the best of Registrant's knowledge, as of June 30, 1997, no person is directly
or indirectly controlled by or under common control with The Illinois Municipal
Fund portfolio of Registrant.
Item 26. Number of Holders of Securities.
As of June 30, 1997, the number of record holders of Registrant was as
follows:
The Kansas Municipal Fund: 4,319
The Kansas Insured Intermediate Fund: 754
The Nebraska Municipal Fund: 1,237
The Oklahoma Municipal Fund: 122
The Illinois Municipal Fund: 0
-----
Item 27. Indemnification.
The following is a summary of the rights of indemnification set forth in
the Agreement and Declaration of Trust of Registrant (see Exhibit 1). Article
VIII of the Agreement and Declaration of Trust of Registrant provides generally
that any person who is or has been a trustee or officer of Registrant (including
persons who serve at the request of Registrant as directors, trustees or
officers of another organization and including persons who served as officers
and directors of the Registrant) shall be indemnified by Registrant to the
fullest extent permitted by law against liabilities and expenses reasonably
incurred by such person in connection with any claim, suit or proceeding in
which such person becomes involved as a party or otherwise by virtue of being or
having been such a trustee, director or officer and against amounts incurred in
settlement thereof. It is further provided in such Agreement and Declaration of
Trust that no indemnification shall be provided in the event that it is
determined that such person was engaged in willful misfeasance, bad faith, gross
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<PAGE>
negligence or reckless disregard of the duties involved in the conduct of his
office or that such person did not act in good faith in the reasonable belief
that his action was in the best interests of Registrant. In the event of a
settlement or other disposition not involving a final determination of the
foregoing matters by a court or other body, no indemnification shall be provided
unless such determination is made by a vote of a majority of the "disinterested"
trustees acting on the matter or a written opinion of independent legal counsel.
The right to indemnification as so provided may be insured against by policies
maintained by the Registrant and shall continue as to any person who has ceased
to be a trustee or officer of Registrant.
Expenses of preparation and presentation of a defense by a person claiming
indemnification may be advanced by Registrant provided generally that such
person undertakes to repay any such advances if it is ultimately determined that
he is not entitled to indemnification and provided that either such undertaking
is secured by appropriate security or a majority of the "disinterested" trustees
acting on the matter or independent legal counsel in a written opinion
determines that there is reason to believe that such person ultimately will be
found entitled to indemnification.
The Agreement and Declaration of Trust provides further that in the event
that any shareholder or former shareholder shall be found to be personally
liable solely by reason of his being a shareholder and not because of acts or
omissions of such person, such shareholder shall be entitled out of assets of
the Registrant to be indemnified against all loss and expense arising from such
liability (provided there is no liability to reimburse any shareholder for taxes
paid by reason of such shareholder's ownership of shares or for losses suffered
by reason of any changes in value of any of Registrant's assets).
The Agreement and Declaration of Trust (Article IV, Section 2(o)) provides
specifically that the trustees have the power to purchase and pay for insurance
out of assets of Registrant as they deem necessary or appropriate for the
conduct of its business including policies insuring shareholders, trustees,
officers, employees, agents, investment managers, principal underwriters or
independent contracts or Registrant against claims or liabilities arising by
reason of such persons holding or having held any such office or position with
Registrant or by reason of any action alleged to have been taken or omitted by
such person in such office or position including any action taken or omitted
that may be determined to constitute negligence whether or not the Registrant
would have the power to indemnify such person against such liability.
The provisions with respect to indemnification in the Agreement and
Declaration of Trust of Registrant do not affect any rights of indemnification
that persons other than those specifically covered may have whether under
contract or otherwise under law.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to trustees, officers, and controlling persons of the
Registrant pursuant to the provisions of Registrant's Agreement and Declaration
of Trust, or otherwise, Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In
the event that a claim for indemnification against such liability
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<PAGE>
(other than the payment by the Registrant of expenses incurred or paid by a
trustee, officer or controlling person of Registrant in the successful defense
of any action, suit or proceeding) as asserted by such trustee, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question of whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
Item 28. Business and Other Connections of Investment Advisor.
The names of the directors and officers of the Manager and their
businesses, professions, vocations and employment during the past two fiscal
years, either for their own account or as directors, officers, employees,
partners or trustees, are as follows:
<TABLE>
<CAPTION>
(3)
(1) (2)
Other Business
Name and Principal Affiliation with Profession Vocation or
Business Address* Investment Advisor Employment Connection**
- --------------------------------------------------------------------------------
<S> <C> <C>
Richard D. Olson Assistant Vice President -
1 North Main Sales
Minot, ND 58703
Peter A. Quist Director, Vice President and Director and Vice
1 North Main Secretary President, ND Holdings,
Minot, ND 58703 Inc.; Director, Vice
President and Secretary,
ND Money Management,
Inc., ND Capital, Inc.,
ND Resources, Inc., ND
Tax-Free Fund, Inc., ND
Insured Income Fund,
Inc., Montana Tax-Free
Fund, Inc., South Dakota
Tax-Free Fund, Inc.,
Integrity Fund of Funds,
Inc.; Vice President and
Secretary, Ranson Managed
Portfolios
Shannon D. Radke Assistant Vice President -
1 North Main Finance
Minot, ND 58703
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>
Robert E. Walstad Director, President, CEO Director and President,
1 North Main and Treasurer ND Holdings, Inc.;
Minot, ND 58703 Director, President and
Treasurer, ND Money
Management, Inc., ND
Capital, Inc., ND
Resources, Inc., ND
Tax-Free Fund, Inc., ND
Insured Income Fund,
Inc., Montana Tax-Free
Fund, Inc., South Dakota
Tax Free Fund, Inc. and
Integrity Fund of Funds,
Inc.; Trustee, Chairman,
President and Treasurer,
Ranson Managed Portfolios
</TABLE>
Item 29. Principal Underwriters.
(a) Ranson Capital Corporation acts as investment advisor and manager of
The Kansas Municipal Fund, The Kansas Insured Intermediate Fund, The Nebraska
Municipal Fund and The Oklahoma Municipal Fund having net assets of
approximately $127,000,000, $25,000,000, $28,000,000 and $6,000,000,
respectively, as of June 30, 1997.
(b) The information required by the following table is provided with
respect to each director, officer or partner of each principal underwriter named
in the answer to Item 21.
Ranson Capital Corporation
<TABLE>
(1) (2) (3)
Name and Principal Positions and Offices with Positions and Offices
Business Address Ranson Capital Corporation with Registrant
- --------------------------------------------------------------------------------
<S> <C> <C>
1 North Main
Minot, ND 58703
Richard D. Olson Assistant Vice President -
Sales
Peter A. Quist Director, Vice President Vice President and
and Secretary Secretary
Shannon D. Radke Assistant Vice President -
Finance
Robert E. Walstad Director, President, CEO Trustee, Chairman,
and Treasurer President
and Treasurer
</TABLE>
Item 30. Location of Accounts and Records.
All accounts, books and documents of Registrant are maintained at the
offices of Ranson Managed Portfolios, 1 North Main, Minot, North Dakota 58703
and with the
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<PAGE>
Custodian at First Western Bank & Trust, 900 South Broadway, Minot, North Dakota
58701,
Item 31. Management Services.
Inapplicable.
Item 31. Undertakings.
(a) Registrant hereby undertakes to file a post-effective amendment, using
financial statements which need not be certified, within four to six months from
the effective date of Registrant's 1933 Act Registration Statement.
(b) Registrant hereby undertakes, if requested to do so by the holders of
at least 10% of Registrant's outstanding shares, to call a meeting of
shareholders for the purpose of voting upon the question of removal of a trustee
or trustees and to assist in communications with other shareholders as required
by Section 16(c) of the 1940 Act.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant certifies that it has duly caused
this Post-Effective Amendment to be signed on its behalf by the undersigned duly
authorized in the City of Minot, and State of North Dakota on the 10th day of
October, 1997.
RANSON MANAGED PORTFOLIOS
By /s/ Robert E. Walstad
-------------------------
Robert E. Walstad
President
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment to Registration Statement No. 33-36324 has been signed below
on behalf of the following persons in the capacities indicated on the 10th day
of October, 1997:
<TABLE>
<CAPTION>
Signatures Title
<S> <C>
/s/ Lynn W. Aas Trustee
- -----------------------------------
Lynn W. Aas
/s/ Orlin W. Backes Trustee
- -----------------------------------
Orlin W. Backes
/s/ Arthur A. Link Trustee
- -----------------------------------
Arthur A. Link
/s/ Robert E. Walstad Trustee, Chairman of the Board, President
- ----------------------------------- and Treasurer
Robert E. Walstad
</TABLE>
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<PAGE>
EXHIBIT INDEX
1. Agreement and Declaration of Trust dated August 10, 1990 (incorporated by
reference to Form N-lA [File No. 33-36324] filed on behalf of Ranson
Managed Portfolios - The Kansas Municipal Fund).
2. By-Laws (incorporated by reference to Form N-1A [File No. 33-36324] filed
on behalf of Ranson Managed Portfolios - The Kansas Municipal Fund).
3. Inapplicable.
4. Inapplicable.
5. Form of Management and Investment Advisory Agreement between Registrant and
Ranson Capital Corporation (incorporated by reference to Post-effective
Amendment No. 11 to the Registration Statement).
6. (a) Form of Distribution and Services Agreement between Registrant
and Ranson Capital Corporation (incorporated by reference to Post-
effective Amendment No. 11 to the Registration Statement).
(b) Dealer Agreement (incorporated by reference to Post-effective
Amendment No. 11 to the Registration Statement).
7. Inapplicable.
8. Form of Custodian Agreement between Ranson Managed Portfolios and First
Western Bank & Trust (incorporated by reference to Post-Effective Amendment
No. 25 to the Registration Statement).
9. Administrative and Accounting Services Agreement between Registrant and ND
Resources, Inc. (incorporated by reference to Post-Effective Amendment No.
25 to the Registration Statement).
10. Opinion of Chapman and Cutler.
11. Inapplicable.
12. Inapplicable.
13. Inapplicable.
14. Shareholder Services Plan (incorporated by reference to Post-effective
Amendment No. 11 to the Registration Statement).
15. Inapplicable.
16. Inapplicable.
<PAGE>
Chapman and Cutler
111 West Monroe Street
Chicago, Illinois 60603
October 10, 1997
Ranson Managed Portfolios
1 North Main
Minot, North Dakota 58703
Re: Ranson Managed Portfolios
Gentlemen:
This opinion is being furnished in connection with the registration of
shares of beneficial interest ("Shares") of the Illinois Municipal Fund (the
"Fund"), a series of the Ranson Managed Portfolios ("Ranson"), a Massachusetts
business trust, pursuant to an amendment to the Registration Statement on Form
N-1A (the "Registration Statement") under the Securities Act of 1933, as
amended, to be filed by Ranson with the Securities and Exchange Commission.
In connection therewith, we have examined such documents, corporate
records, instruments and matters of law as we have deemed necessary or
appropriate for the purpose of rendering the opinions expressed herein, and are
familiar with the corporate proceedings taken by Ranson in connection with the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals, and the conformity to original documents of all documents
submitted to us as certified or photostatic copies.
Based upon and subject to the foregoing, after having given due regard to
such issues of law as we deem relevant and assuming that:
1. the Registration Statement remains effective, and the Prospectus which
is a part thereof and your Prospectus delivery procedures with respect thereto
fulfill all the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940 throughout all periods relevant to this opinion;
2. all offers and issuance of Shares of the Fund registered under the
Registration Statement are conducted in a manner complying with the terms of the
Registration Statement; and
3. all offers and issuance of Shares of the Fund registered under the
Registration Statement are conducted in compliance with the securities laws of
the states having jurisdiction thereof;
We are of the opinion that the Shares of the Fund covered by the
Registration Statement will be, when issued, legally and validly issued, fully
paid and non-assessable (except for the potential liability of shareholders
described in the Fund's prospectus under the caption "Description of Shares and
Rights").
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement relating to the Shares referred to above, to the use of
our name and to the reference to our firm and said Registration Statement.
Respectfully submitted,
/s/ Chapman and Cutler
