<PAGE>
As filed with the Securities and Exchange Commission on December 19, 1997
Securities Act File No. 33-59840
Investment Company Act of 1940 File No. 811-7582
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 6
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 8
-------------------------------------------
THE VALIANT FUND
(Exact Name of Registrant)
1776 HERITAGE DRIVE
NORTH QUINCY, MA 02171
(Address of Principal Executive Office)
Registrant's Telephone Number (617) 985-0987
Susan M. Schwartz Timothy Diggins, Esq.
1776 Heritage Drive and Ropes & Gray
North Quincy, MA 02171 One International Place
Boston, MA 02110
(Names and Addresses of Agents for Service)
-------------------------------------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: AS SOON AS PRACTICABLE AFTER THIS
REGISTRATION STATEMENT BECOMES EFFECTIVE. IT IS PROPOSED THAT THIS FILING WILL
BECOME EFFECTIVE:
___ ON __________ PURSUANT TO PARAGRAPH (A) OF RULE 485
___ 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A) OF RULE 485
_X_ IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (B) OF RULE 485
___ ON __________ PURSUANT TO PARAGRAPH (B) OF RULE 485
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<PAGE>
THE VALIANT FUND
Cross-Reference Sheet
FORM N-1A
ITEM NO. PROSPECTUS CAPTION
-------- ------------------
1 . . . . . . . . . Prospectus Cover Page
2 . . . . . . . . . Expense Information
3 . . . . . . . . . Financial Highlights
4(a). . . . . . . . Prospectus Cover Page; Investment Objectives and Policies;
Organization and Capitalization of the Trust
4(b) and 4(c) . . . Investment Objectives and Policies; Investment Restrictions;
Certain Investment Strategies, Policies and Risk
Considerations
5(a). . . . . . . . Management of the Portfolios
5(b). . . . . . . . Management of the Portfolios; Management Fees and Expenses;
Investment Objectives and Policies
5(c)-5(e) . . . . . Management Fees and Other Expenses
5(f). . . . . . . . Not Applicable
6(a) and 6(b) . . . Organization and Capitalization of the Trust;
Management of the Portfolios
6(c) and 6(d) . . . Not applicable
6(e). . . . . . . . Cover Page; Organization and Capitalization of the Trust
6(f) and 6(g) . . . Purchases and Redemptions; Distributions and Taxes
7 . . . . . . . . . Purchases and Redemptions
7(a). . . . . . . . Organization and Capitalization of the Trust
7(b). . . . . . . . Valuation of Shares
7(c)-7(e) . . . . . Purchases and Redemptions; Organization and Capitalization
of the Trust
7(f). . . . . . . . Management Fees and Other Expenses
8(a). . . . . . . . Purchases and Redemptions
8(b). . . . . . . . Not Applicable
8(c). . . . . . . . Purchases and Redemptions
8(d). . . . . . . . Not Applicable
9 . . . . . . . . . Not Applicable
<PAGE>
FORM N-1A
ITEM NO. CAPTION IN STATEMENT OF ADDITIONAL INFORMATION
-------- ----------------------------------------------
10(a) and 10(b) . . Cover Page
11. . . . . . . . . Table of Contents
12. . . . . . . . . Not Applicable
13(a)-13(c) . . . . Investment Policies and Limitations
13(d) . . . . . . . Not Applicable
14(a) and 14(b) . . Trustees and Officers; Investment Advisory Agreements
14(c) . . . . . . . Not applicable
14(c) . . . . . . . Trustees and Officers
15(c) . . . . . . . Not Applicable
16(a) and 16(b) . . Investment Advisory Agreements
16(c)-16(e) . . . . Not Applicable
16(f) . . . . . . . Administration Agreement and Other Contracts
16(g) . . . . . . . Not Applicable
16(h) . . . . . . . Description of the Trust
16(i) . . . . . . . Not Applicable
17(a) and 17(b) . . Not Applicable
17(c) . . . . . . . Portfolio Transactions
17(d) . . . . . . . Not Applicable
17(e) . . . . . . . Not Applicable
18. . . . . . . . . Description of the Trust
19(a) and 19(b) . . Valuation of Portfolio Securities; Additional Purchase and
Redemption Information
19(c) . . . . . . . Not Applicable
20. . . . . . . . . Distributions and Taxes
21. . . . . . . . . Administration Agreement and Other Contracts
22. . . . . . . . . Performance
23. . . . . . . . . Financial Statements
<PAGE>
PART A
PROSPECTUSES
THE VALIANT FUND
POST-EFFECTIVE AMENDMENT NO. 6
Prospectuses included in this filing:
- The Valiant Fund Prospectus for Class A shares of all Portfolios;
- The Valiant Fund Prospectus for Class B shares of all Portfolios;
- The Valiant Fund Prospectus for Class C shares of all Portfolios;
- The Valiant Fund Prospectus for Class D shares of all Portfolios.
<PAGE>
THE VALIANT FUND
1776 Heritage Drive
North Quincy, MA 02171
The Valiant Fund (the "Trust") is an open-end investment company comprised of
four separate investment portfolios (the "Portfolios") offering Class A
shares, Class B shares, Class C shares and Class D shares:
U.S. TREASURY MONEY MARKET PORTFOLIO GENERAL MONEY MARKET PORTFOLIO
U.S. TREASURY INCOME PORTFOLIO TAX-EXEMPT MONEY MARKET PORTFOLIO
The investment objective of each Portfolio is to obtain as high a level of
current income as is consistent with the preservation of capital and
liquidity. The Tax-Exempt Money Market Portfolio seeks primarily income
exempt from federal income tax. The Trust offers banks and other
institutional investors an economical and convenient means of investing in
professionally managed money market funds.
The Trust offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes of shares are identical, except as to the services
offered to and the expenses borne by each class. Class B shares, Class C
shares and Class D shares each bear certain costs pursuant to their
respective Distribution and Shareholder Servicing Plans adopted in accordance
with Rule 12b-1 under the Investment Company Act of 1940 (the "1940 Act").
THIS PROSPECTUS RELATES ONLY TO THE CLASS A SHARES.
Each Portfolio is designed exclusively for investment of short-term monies
held in institutional accounts. Shares of the Portfolios may be purchased by
banks and other institutional investors that have entered into service
agreements with Integrity Investments, Inc. (the "Distributor"),
1-800-828-2176.
This Prospectus sets forth concisely the information about the Trust that a
prospective investor ought to know before investing. Please read it
carefully and retain it for future reference. Certain additional information
is contained in a Statement of Additional Information ("SAI") dated December
19, 1997, as revised from time to time, which has been filed with the
Securities and Exchange Commission, is incorporated herein by reference and
is available upon request and without charge by calling the Distributor at
the telephone number shown above.
INVESTMENTS IN THE PORTFOLIOS ARE NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE CAN BE NO ASSURANCE THAT A PORTFOLIO WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY
DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY, AND
INVOLVE INVESTMENT RISKS INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
PROSPECTUS - DECEMBER 19, 1997
1
<PAGE>
CONTENTS
Expense Information....................................................... 3
Financial Highlights...................................................... 5
Investment Objectives and Policies........................................ 9
Who Should Invest......................................................... 10
Purchases and Redemptions................................................. 11
Management of the Portfolios.............................................. 13
Management Fees and Other Expenses........................................ 13
Valuation of Shares....................................................... 15
Distributions and Taxes................................................... 15
Performance Information................................................... 17
Organization and Capitalization of the Trust.............................. 17
Investment Restrictions................................................... 18
Certain Investment Strategies, Policies and Risk Considerations........... 18
Appendix.................................................................. 23
2
<PAGE>
EXPENSE INFORMATION
U.S. TREASURY U.S. TREASURY GENERAL MONEY TAX-EXEMPT
MONEY MARKET INCOME MARKET MONEY MARKET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- --------- ---------
Class A Class A Class A Class A
Shareholder
Transaction
Expenses
- ------------
Maximum Sales
Load Imposed
on Purchases None None None None
Sales Load
Imposed on
Reinvested
Dividends None None None None
Maximum
Deferred
Sales Load None None None None
Redemption
Fees None None None None
Annual Fund
Operating
Expenses (as
a percentage
of average
net assets)
- --------------
Management Fees 0.20% 0.20% 0.20% 0.20%
12b-1 Fees* 0.00% 0.00% 0.00% 0.00%
Other Expenses
(after expense
reimbursement) 0.00% 0.00% 0.00% 0.00%
----- ----- ----- -----
Total Fund
Operating
Expenses (after
expense
reimbursement) 0.20% 0.20% 0.20% 0.20%
----- ----- ----- -----
----- ----- ----- -----
____________________________
* The Trust has adopted a Distribution and Shareholder Servicing Plan (the
"Plan") for the Class A shares, but no payments under the Plan have been
authorized or will be made during the current fiscal year for the Class A
shares. See "Management Fees and Other Expenses" for further information on
the Plan.
Four classes of shares of the Trust are being offered by each Portfolio:
Class A, Class B, Class C and Class D shares. The classes are identical,
except that Class B shares, Class C shares and Class D shares are subject to
differing annual distribution and service fees. Class A shares are currently
not subject to an annual distribution and service fee. The Class B, Class C
and Class D shares' distribution and service fees will cause the Class B,
Class C and Class D shares to have a higher expense ratio and to pay lower
dividends than Class A shares, the Class C and Class D shares to have a
higher expense ratio and to pay lower dividends than the
3
<PAGE>
Class B shares, and the Class D shares to have a higher expense ratio and to
pay lower dividends than Class C shares. This Prospectus describes only the
Class A shares. An investor may obtain prospectuses relating to the Class B
shares, the Class C shares and Class D shares, respectively, by calling the
Distributor at 1-800-828-2176.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that the investor will bear directly or
indirectly. Management fees are paid by each Portfolio to Integrity
Management & Research, Inc. (the "Manager") for managing its investments and
business affairs. All operating expenses are paid by each Portfolio and are
not charged directly to an investor's account. There are no sales or
redemption fees. However, certain institutional investors may charge their
customers fees in addition to those described herein. See "Purchases and
Redemptions." The Manager has declared voluntary expense limitations for
the Class A shares of each Portfolio of 0.20% of average daily net assets of
the Class A shares. The Manager will voluntarily reimburse any expenses
above these expense limitations. Without the effect of the expense
reimbursements: "Other Expenses" and "Total Operating Expenses" for the
Class A shares would be 0.03% and 0.23%, respectively, for the U.S. Treasury
Income Portfolio and 0.00% and 0.20%, respectively, for each of the other
Portfolios. The expense limitations are voluntary but will remain in effect
through December 1998. The expense limitations may be removed at any time
thereafter with 90 days' prior notice to existing shareholders.
Non-recurring or extraordinary expenses are generally excluded in the
determination of expense ratios of the Portfolios for purposes of determining
any required expense reimbursement. Quotations of yield for any period when
an expense limitation is in effect will be greater than if the limitation had
not been in effect. For more information, see "Management Fees and Other
Expenses," and "Purchases and Redemptions."
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period.
1 Year 3 Years 5 Years 10 Years
U.S. Treasury Money Market Portfolio $2 $6 $11 $26
U.S. Treasury Income Portfolio $2 $6 $11 $26
General Money Market Portfolio $2 $6 $11 $26
Tax-Exempt Money Market Portfolio $2 $6 $11 $26
THE EXAMPLES ARE BASED ON ASSUMED PERFORMANCE LEVELS AND SHOULD NOT BE
CONSIDERED REPRESENTATIONS OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY
BE GREATER OR LESSER THAN THOSE SHOWN.
4
<PAGE>
FINANCIAL HIGHLIGHTS
The following information has been audited by Price Waterhouse LLP,
independent accountants, whose report thereon was unqualified. This
information is part of the Trust's financial statements which are included in
the Trust's Annual Report to Shareholders and incorporated by reference in
the SAI. The following information should be read in conjunction with the
financial statements and notes thereto.
U.S. TREASURY MONEY MARKET PORTFOLIO- CLASS A
For a share outstanding throughout each period.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED(1)
8/31/97 8/31/96 8/31/95 8/31/94
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period....... $1.000 $1.000 $1.000 $1.000
------- ------ ------ -------
Income from investment operations:
Net investment income.................... 0.052 0.053 0.054 0.012
------- ------ ------ -------
Less distributions:
Dividends from net investment income..... (0.052) (0.053) (0.054) (0.012)
------ ------ ------ ------
Net asset value, end of period............ $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------
------ ------ ------ ------
Total return(a)........................... 5.30% 5.45% 5.60% 1.19%
Ratios/supplemental data:
Net assets, end of period (000's)......... $23,063 $85,260 $30,183 $25
Ratios to average net assets:
Net investment income................... 5.12% 5.21% 5.79% 4.06%(b)
Operating expenses...................... 0.20% 0.20% 0.20% 0.20%(b)
Operating expenses before
reimbursement/waivers................... 0.20% 0.20% 0.21% 0.26%(b)
</TABLE>
_________________
(1) The Portfolio commenced Class A share operations on May 17, 1994.
(a) Total returns for periods less than one year are not annualized and had the
Manager and Trustees not reimbursed and waived certain expenses,
respectively, total returns would have been lower.
(b) Annualized.
5
<PAGE>
U.S. TREASURY INCOME PORTFOLIO- CLASS A
For a share outstanding throughout each period.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
8/31/97* 8/31/96* 8/31/95* 8/31/94*
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.... $1.000 $1.000 $1.000 $1.000
------- ------ ------ -------
Income from investment operations:
Net investment income................. 0.005 0.004 0.004 0.001
------- ------- ------- -------
Less Distributions:
Dividends from net investment income.. (0.005) (0.004) (0.004) (0.001)
------- ------- ------- -------
Net asset value, end of period.......... $1.000 $1.000 $1.000 $1.000
------- ------- ------- -------
------- ------- ------- -------
Total return(a)......................... 0.54% 0.35% 0.39% 0.12%
Ratios/supplemental data:
Net assets, end of period (000's)....... $25 $25 $25 $25
Ratios to average net assets:
Net investment income................. 4.24% 4.15% 4.47% 2.96%(b)
Operating expenses.................... 0.20% 0.20% 0.20% 0.20%(b)
Operating expenses before
reimbursements/waivers................ 0.23% 0.35% 0.29% 0.22%(b)
</TABLE>
_________________
* The Portfolio operated from December 13, 1996 to January 30, 1997,
December 11, 1995 to January 10, 1996, December 12, 1994 to
January 11, 1995 and December 28, 1993 to January 12, 1994.
(a) Total returns for periods less than one year are not annualized and had
the Manager and Trustees not reimbursed and waived certain expenses,
respectively, total returns would have been lower.
(b) Annualized.
6
<PAGE>
GENERAL MONEY MARKET PORTFOLIO- CLASS A
For a share outstanding throughout each period.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
8/31/97 8/31/96 8/31/95 8/31/94(1)
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.... $1.000 $1.000 $1.000 $1.000
------- ------- ------- -------
Income from investment operations:
Net investment income................. 0.053 0.053 0.056 0.033
------- ------- ------- -------
Less distributions:
Dividends from net investment income.. (0.053) (0.053) (0.056) (0.033)
------- ------- ------- -------
Net asset value, end of period.......... $1.000 $1.000 $1.000 $1.000
------- ------- ------- -------
------- ------- ------- -------
Total return(a)......................... 5.40% 5.52% 5.81% 3.33%
Ratios/supplemental data:
Net assets, end of period (000's)....... $568,715 $334,069 $375,965 $167,016
Ratios to average net assets:
Net investment income................. 5.33% 5.36% 5.70% 3.70%(b)
Operating expenses.................... 0.20% 0.20% 0.20% 0.20%(b)
Operating expenses before
reimbursements/waivers................ 0.20% 0.20% 0.20% 0.21%(b)
</TABLE>
_________________
(1) The Portfolio commenced Class A shares operations on September 21, 1993.
(a) Total returns for periods less than one year are not annualized and had the
Manager and Trustees not reimbursed and waived certain expenses,
respectively, total returns would have been lower.
(b) Annualized.
7
<PAGE>
TAX-EXEMPT MONEY MARKET PORTFOLIO- CLASS A
For a share outstanding throughout each period.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
8/31/97 8/31/96 8/31/95 8/31/94(1)
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.... $1.000 $1.000 $1.000 $1.000
------- ------- ------- -------
Income from investment operations:
Net investment income................. 0.034 0.034 0.035 0.021
------- ------- ------- -------
Less distributions:
Dividends from net investment income.. (0.034) (0.034) (0.035) (0.021)
------- ------- ------- -------
Net asset value, end of period......... $1.000 $1.000 $1.000 $1.000
------- ------- ------- -------
------- ------- ------- -------
Total return(a)......................... 3.42% 3.43% 3.67% 2.11%
Ratios/supplemental data:
Net assets, end of period (000's)..... $282,368 $279,867 $283,654 $258,130
Ratios to average net assets:
Net investment income................. 3.38% 3.34% 3.50% 2.38%(b)
Operating expenses.................... 0.20% 0.20% 0.20% 0.20%(b)
Operating expenses before
reimbursements/waivers................ 0.20% 0.20% 0.20% 0.22%(b)
</TABLE>
_________________
(1) The Portfolio commenced Class A shares operations on October 7, 1993.
(a) Total returns for periods less than one year are not annualized and had
the Manager and Trustees not reimbursed and waived certain expenses,
respectively, total returns would have been lower.
(b) Annualized.
8
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of each Portfolio is to obtain as high a level of
current income as is consistent with the preservation of capital and
liquidity. The Tax-Exempt Money Market Portfolio seeks primarily income
exempt from federal income tax. There is no assurance that a Portfolio will
achieve its investment objective. A Portfolio's investment objective is
fundamental and may not be changed at any time without shareholder approval.
Unless otherwise indicated, a Portfolio's investment policies are not
fundamental and may be changed at any time without shareholder approval. As
a matter of non-fundamental policy, the Portfolios will only purchase
securities, in addition to U.S. Government Obligations (as defined below),
that are rated in the highest category by at least one nationally recognized
statistical rating organization ("NRSRO") or, if unrated, are determined by
the sub-adviser to be of equivalent quality. (See "Management of the
Portfolios" for information about the sub-adviser, and see the Appendix for a
description of NRSRO ratings.)
THE U.S. TREASURY MONEY MARKET PORTFOLIO invests all of its assets in
securities issued or guaranteed by the United States Government or its
agencies, authorities or instrumentalities ("U.S. Government Obligations")
which are backed by the full faith and credit of the United States and
repurchase agreements collateralized by such U.S. Government Obligations.
Under normal market conditions, at least 65% of its total assets will be
invested in direct U.S. Treasury obligations and repurchase agreements
collateralized by U.S. Treasury obligations. Income earned from U.S.
Government Obligations is generally exempt from state and local income tax.
Income earned from repurchase agreement transactions generally is not exempt
from state and local income tax. (See "Distributions and Taxes.")
The U.S. Treasury Money Market Portfolio has been rated "AAAm" by Standard &
Poor's Corporation ("S&P") and "Aaa" by Moody's Investors Service, Inc.
("Moody's"). Such quality rating is based on, among other things, an
analysis of the Portfolio's investment strategies, operational policies and
management. S&P and Moody's also may undertake an ongoing analysis and
assessment of these criteria in order to update the Portfolio's rating.
THE U.S. TREASURY INCOME PORTFOLIO invests all of its assets in U.S.
Government Obligations which are backed by the full faith and credit of the
United States, the interest income from which generally will not be subject
to state income tax. (See "Distributions and Taxes.") Under normal market
conditions, at least 65% of its total assets will be invested in U.S.
Treasury obligations such as U.S. Treasury bills, notes and bonds.
THE GENERAL MONEY MARKET PORTFOLIO invests in U.S. dollar-denominated
short-term debt securities including:
-- Obligations of domestic and foreign banks or thrift organizations (such
as bankers' acceptances, time deposits and certificates of deposit);
-- Corporate debt obligations, including commercial paper, notes and bonds
with remaining maturities of 397 days or less;
-- U.S. Government Obligations and repurchase agreements backed by U.S.
Government Obligations; and
-- Cash.
9
<PAGE>
More than 25% of the value of the total assets of the Portfolio may be
invested in domestic banking industry obligations. The Portfolio may
purchase securities that are subject to restrictions on resale.
THE TAX-EXEMPT MONEY MARKET PORTFOLIO invests in high-quality, short-term,
fixed, variable or floating rate municipal securities and in high-quality,
long-term municipal securities whose features give them interest rates,
maturities and prices similar to short-term instruments ("Municipal
Securities").
Municipal Securities are obligations issued by or on behalf of state and
local governments and public authorities (including states, territories and
possessions of the United States, the District of Columbia, cities, counties,
municipalities, municipal agencies and regional districts and their political
subdivisions, agencies, authorities and instrumentalities), the interest from
which, in the opinion of bond counsel for the issuers of the obligations at
the time of their issuance, is exempt from federal income tax.
The Portfolio's investments in Municipal Securities may include tax, revenue
and bond anticipation notes; tax-exempt commercial paper; and general
obligation or revenue bonds (including securities such as municipal lease
obligations and resource recovery bonds). The Portfolio may purchase
obligations that are subject to restrictions on resale. The Portfolio will
not invest in Municipal Securities whose interest is subject to the federal
alternative minimum tax ("AMT") for individuals (known as "private activity
obligations").
Municipal Securities are issued to raise money for various public purposes,
including general purpose financing for state and local governments as well
as financing for specific projects or public facilities. Municipal
Securities may be backed by the full taxing power of a municipality or by the
revenues from a specific project or the credit of a private organization.
Some Municipal Securities are insured by private insurance companies, while
others may be supported by letters of credit furnished by domestic or foreign
banks.
Distributions from the Tax-Exempt Money Market Portfolio will in general be
exempt from regular federal income taxes. As a temporary defensive measure,
when market conditions so warrant, the Tax-Exempt Money Market Portfolio may
invest its assets without limitation in any of the money market instruments
which are permissible investments for the General Money Market Portfolio. To
the extent that the Tax-Exempt Money Market Portfolio earns taxable income
from any of its investments, the income would be distributed as a taxable
dividend.
WHO SHOULD INVEST
Each Portfolio is designed exclusively for investment of short-term monies
held by banks and other institutional investors.
The advantages offered by the Portfolios include large scale purchasing power
and diversification, which can help avoid the greater expense of executing a
large number of small transactions. Each Portfolio also makes it possible
for institutional investors to participate in a more diversified portfolio
than the size of their investments might otherwise permit. Also, investment
in the Portfolios can relieve institutions of many management and
administrative burdens usually associated with the direct purchase and sale
of money market instruments, including: selecting portfolio investments,
obtaining favorable terms at which to buy and sell, scheduling and monitoring
maturities and reinvestments, safe-keeping of securities, and portfolio
recordkeeping.
10
<PAGE>
It should be noted that the Portfolios are not FDIC insured.
PURCHASES AND REDEMPTIONS
PURCHASES
Shares of the Portfolios may be purchased by institutions that have entered
into service agreements with the Distributor and opened accounts with the
Trust. Call 1-800-828-2176 for information. Establishment of an account
requires that certain documents and applications be signed before the
investment can be processed. Fees in addition to those described herein may
be charged by some institutions which establish accounts on behalf of their
customers.
The minimum initial investment in each Portfolio is $1,000,000. Institutions
may satisfy the minimum investment by aggregating their fiduciary accounts.
Subsequent investments may be in any amount. If an account balance falls
below $100,000 due to redemption, the Portfolio may close the account.
Investors will be notified if the minimum balance is not being maintained and
will be allowed 30 days to make additional investments before the account is
closed. Any involuntary redemptions will be effected at the price at 3:00
p.m. (Eastern time) for the U.S. Treasury Money Market Portfolio and the
General Money Market Portfolio and at noon (Eastern time) for the U.S.
Treasury Income Portfolio and the Tax-Exempt Money Market Portfolio.
Purchase orders must be transmitted to the Portfolio's transfer agent, State
Street Bank and Trust Company (the "Transfer Agent"). Each Portfolio
requires advance notification of all wire purchases. Purchases may be made
only by wire.
A purchase order for shares in the U.S. Treasury Money Market Portfolio or
General Money Market Portfolio received by the Transfer Agent by 3:00 p.m.
(Eastern time), or for shares in the U.S. Treasury Income Portfolio or the
Tax-Exempt Money Market Portfolio received by the Transfer Agent by noon
(Eastern time), on a day the New York Stock Exchange ("NYSE") and both the
Boston and New York Federal Reserve Banks are open ("Business Day") will be
executed at the net asset value per share next determined after receipt of
the order and will receive the dividend declared on the day of purchase,
provided that the Trust's Custodian, State Street Bank and Trust Company,
receives the wire by the close of the Federal Reserve wire system on that
Business Day. See "Valuation of Shares."
Each Portfolio reserves the right to reject any purchase order. Purchase
orders may be refused if, for example, they are of a size that could disrupt
management of a Portfolio. Purchases by exchange are not permitted.
REDEMPTIONS
Shareholders may redeem all or a portion of their shares on any Business Day.
Shares will be redeemed at the net asset value next calculated after the
Transfer Agent has received the redemption request. If an account is closed,
any accrued dividends will be paid within 10 days of the beginning of the
following month.
Shares may be redeemed, and the redemption proceeds wired, on the same day if
telephone redemption instructions are received by the Transfer Agent by 3:00
p.m. (Eastern time) on the day of redemption for the U.S. Treasury Money
Market Portfolio and for the General Money Market Portfolio, or by noon
(Eastern
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time) on the day of redemption for the U.S. Treasury Income Portfolio and for
the Tax-Exempt Money Market Portfolio. Shares redeemed and wired on the same
day will not receive the dividend declared on the day of redemption. A
shareholder whose redemption instructions are received by the Transfer Agent
after 3:00 p.m. (Eastern time) with respect to the U.S. Treasury Money Market
Portfolio or General Money Market Portfolio or after noon (Eastern time) with
respect to the U.S. Treasury Income Portfolio or the Tax-Exempt Money Market
Portfolio will receive the dividend declared on the day on which the
redemption instructions were received and will receive wired redemption
proceeds on the next Business Day. Shareholders may change the bank account
designated to receive an amount redeemed at any time by sending a letter of
instruction with a signature guarantee to the Transfer Agent, State Street
Bank and Trust Company, at P.O. Box 1978, Boston, Massachusetts 02105.
If making immediate payment of redemption proceeds could adversely affect a
Portfolio, shareholders may be paid up to seven days after receipt of the
redemption request. Also, when the NYSE or either the Boston or New York
Federal Reserve Bank is closed (or when trading is restricted) for any reason
other than its respective customary weekend or holiday closing, or under any
emergency circumstances as determined by the Securities and Exchange
Commission ("SEC") to merit such action, redemption or payment may be
suspended or postponed.
Shares also may be redeemed by mail by submitting an order addressed to: The
Valiant Fund, P.O. Box 1978, Boston, Massachusetts 02105. If transactions by
telephone cannot be executed (e.g., during times of unusual market activity),
orders should be placed by mail. In case of suspension of the right of
redemption, a shareholder may either withdraw its request for redemption or
receive payment based on the net asset value next determined after the
termination of the suspension.
The Trust reserves the right to refuse a wire or telephone redemption if the
Manager or the Transfer Agent believes it is advisable to do so. Upon 60
days' prior notice to existing shareholders, procedures for redeeming shares
by wire or telephone may be modified or terminated at any time by the Trust
or the Transfer Agent.
ADDITIONAL INFORMATION
SHAREHOLDER SERVICES
Shareholders should verify the accuracy of all transactions immediately upon
receipt of their confirmation statements. Neither the Trust nor the Transfer
Agent will be liable for following instructions communicated by telephone
that it reasonably believes to be genuine. The privilege to initiate
transactions by telephone is made available to shareholders automatically.
The Trust will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine, including: requiring some form of
personal identification prior to acting upon instructions received by
telephone, providing written confirmation of such transactions or tape
recording of telephone instructions. If it does not employ reasonable
procedures to confirm that telephone instructions are genuine, the Trust or
the Transfer Agent may be liable for any losses due to unauthorized or
fraudulent instructions.
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To allow the Portfolios to be managed effectively, shareholders are urged to
initiate all trades (investments and redemptions of shares) as early in the
day as possible and to notify the Trust by calling the Transfer Agent at
least one day in advance of trades in excess of $10,000,000. In making trade
requests, the name of the shareholder and the account number(s) must be
supplied.
STATEMENTS AND REPORTS
Shareholders will receive a monthly statement and a confirmation after every
transaction that affects the share balance or the account registration. A
statement with tax information will be mailed by January 31st following each
tax year and also will be filed with the Internal Revenue Service. At least
twice a year, shareholders will receive the Portfolios' financial statements.
MANAGEMENT OF THE PORTFOLIOS
The overall responsibility for supervision of the affairs of the Trust vests
in the Board of Trustees of the Trust. The Manager is responsible for the
management of the Trust's day-to-day business affairs and has general
responsibility for the management of the investments of the Portfolios. The
Manager, at its expense, has contracted with David L. Babson & Co. Inc. (the
"Sub-Adviser") to manage the investments of the Portfolios subject to the
requirements of the Investment Company Act of 1940, as amended (the "1940
Act").
Richard F. Curcio, who is the Manager's President and Chairman of the Board
and President, Chairman of the Board and a Trustee of the Trust, indirectly
owns or controls all of the outstanding shares of common stock of the
Manager. Mr. Curcio has 18 years of experience in mutual fund industry
marketing, sales and operations. Located at 1800 Second Street, Suite 757,
Sarasota, Florida 34236, the Manager was organized in Florida on September
24, 1992.
The Sub-Adviser, a Massachusetts corporation, is located at One Memorial
Drive, Cambridge, Massachusetts 02142. Founded in 1940, the Sub-Adviser
provides investment advice to individuals, state and local government
agencies, pension and profit sharing plans, trusts, estates, banks and other
organizations, and also serves as the investment adviser to The Babson Funds
(a family of mutual funds). The Sub-Adviser is a subsidiary of Massachusetts
Mutual Life Insurance Company.
The Sub-Adviser is authorized to make investment decisions and engage in
portfolio transactions on behalf of the Trust, subject to such general or
specific instructions as may be given by the Trustees and/or the Manager. The
payment of fees to the Sub-Adviser is the sole responsibility of the Manager.
MANAGEMENT FEES AND OTHER EXPENSES
Under its Management Agreement with the Trust, the Manager performs certain
administrative and management services for the Trust and pays the
compensation, if any, of officers and Trustees who are affiliated with the
Manager or the Sub-Adviser and pays all the Portfolio expenses with the
following exceptions: the fees and expenses of those Trustees who are not
"interested persons" of the Trust; interest on borrowings; taxes; expenses
incurred pursuant to the Trust's distribution and shareholder servicing
plans; and such extraordinary nonrecurring expenses as may arise, including
litigation to which the Trust may be a party.
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For its services to the Portfolios, the Manager receives fees paid monthly
and computed at an annual rate of 0.20% of the average daily net asset value
of each of the Portfolios. The Manager is solely responsible for the payment
of all fees to the Sub-Adviser.
For its services to the Portfolios, the Sub-Adviser is paid by the Manager a
monthly fee computed at an annual rate based upon the aggregate average daily
net assets of the Trust, as follows: 0.10% of the first $500 million of net
assets and 0.05% of net assets over $500 million. The Sub-Adviser has
voluntarily agreed to reduce its fees from 0.05% to 0.04% of net assets over
$2 billion.
ADMINISTRATOR. State Street Bank and Trust Company ("State Street" or the
"Administrator"), 225 Franklin Street, Boston, MA 02110, is the Administrator
of the Trust.
The Administrator assists in each Portfolio's administration and operation,
including providing office space and various services in connection with the
regulatory requirements applicable to each Portfolio. The Administrator may
utilize the resources of its affiliates in performing certain of these
responsibilities, at no additional cost to the Trust. The Administrator's
fee is paid by the Manager.
DISTRIBUTION AND SHAREHOLDER SERVICING PLAN
Integrity Investments, Inc., 1800 Second Street, Suite 757, Sarasota, Florida
34236, is the Trust's Distributor. The Trust has adopted a Distribution and
Shareholder Servicing Plan (the "Plan") which provides for payment of up to
0.35% of each Portfolio's average daily net assets of the Class A shares, the
purpose of which is to promote distribution of the Portfolios' shares and to
enhance the provision of shareholder services. No payments under the Plan
have been authorized or will be made for the Class A shares during the
calendar year 1998.
Under the Plan, each Portfolio, subject to Trustee authorization, may pay the
Distributor a monthly fee to compensate it for expenses it bears and services
it provides in the distribution of shares and the provision of shareholder
support services. The Plan also provides that certain Service Providers
(defined under the Plan as any broker, dealer, bank or other institution) may
receive compensation for providing continuing personal services to
Shareholders as well as administrative services with respect to shareholder
accounts. Such payments are used to compensate the Distributor and any
Service Providers for the services outlined above.
The Distributor shall determine the amounts to be paid to Service Providers.
Each Service Provider is required to disclose to its clients any compensation
payable to it by the Trust pursuant to the Plan and any other compensation
payable by its clients in connection with the investment of their assets in
Trust shares.
The Plan recognizes that the Manager, the Sub-Adviser and the Distributor may
use their fees from each Portfolio or other resources to pay expenses
associated with activities primarily intended to result in the sale of the
shares of the Portfolio. Under its Distribution Agreement with the Trust,
the Distributor bears certain distribution-related expenses of the
Portfolios, such as the cost and expense of printing and distributing copies
of prospectuses which are used in connection with the offering of shares to
prospective investors.
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CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT
State Street serves as the Trust's custodian ("Custodian") and holds all
portfolio securities and cash assets of the Trust. It also calculates net
asset value per share and maintains general accounting records for each
Portfolio. The Custodian is authorized to deposit securities in securities
depositories or to use the services of subcustodians. State Street also
serves as the Trust's Transfer Agent and dividend disbursing agent and
maintains the Trust's shareholder records. State Street's fees are paid by
the Manager.
VALUATION OF SHARES
All income, expenses (other than expenses incurred by a class pursuant to its
distribution and shareholder servicing plan) and realized and unrealized
gains and losses are allocated to each class proportionately on a daily basis
for purposes of determining the net asset value of each class.
Net asset value per share is determined as of 3:00 p.m. (Eastern time) for
the U.S. Treasury Money Market Portfolio and the General Money Market
Portfolio and as of noon (Eastern time) for the U.S. Treasury Income
Portfolio and the Tax-Exempt Money Market Portfolio. Net asset value per
share is determined on each day the NYSE and the Boston and the New York
Federal Reserve Banks are open. Currently, the days on which the Trust is
closed (other than weekends) are New Year's Day, Martin Luther King, Jr. Day
(observed), President's Day (observed), Good Friday, Memorial Day (observed),
Independence Day, Labor Day, Columbus Day (observed), Veteran's Day,
Thanksgiving Day and Christmas Day. Net asset value per share for purposes
of pricing sales and redemptions is calculated by dividing the value of all
securities and other assets belonging to a Portfolio, less the Portfolio's
liabilities, by the number of outstanding shares of that Portfolio.
The securities owned by each Portfolio are valued based upon the amortized
cost method. Pursuant to this method, a security is valued by reference to a
Portfolio's acquisition cost as adjusted for amortization of premium or
accretion of discount. Although the Trust seeks to maintain the net asset
value per share of each Portfolio at $1.00, there can be no assurance that
the net asset value per share will not vary.
DISTRIBUTIONS AND TAXES
Dividends out of net investment income will be declared daily and paid
monthly. Dividends for the U.S. Treasury Money Market Portfolio and the
General Money Market Portfolio are declared at 3:00 p.m. (Eastern time) to
shareholders of record at that time, and dividends for the U.S. Treasury
Income Portfolio and the Tax-Exempt Money Market Portfolio are declared at
noon (Eastern time) to shareholders of record at that time. Distributions of
net long-term capital gains, if any, for the year are made annually. All
income dividends are paid in cash and will automatically be made by wire to
institutional investors, which may elect to reinvest them in additional
shares.
Each Portfolio intends to continue to qualify as a "regulated investment
company" under Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"). As regulated investment companies, the Portfolios will not be
subject to federal income taxes on the net investment income and long-term
capital gains that are distributed to shareholders or deemed to have been
distributed to shareholders.
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Dividends derived from net investment income for the U.S. Treasury Money
Market Portfolio, U.S. Treasury Income Portfolio and General Money Market
Portfolio and from short-term capital gains, if any, are taxable to each such
Portfolio's shareholders, unless they are exempt from Federal income taxes,
as ordinary income. Distributions are taxable when they are paid, except
that distributions declared in October, November or December and paid in
January of the following year are taxable as if paid on December 31st.
Distributions of tax-exempt income by the Tax-Exempt Money Market Portfolio
are not subject to regular federal income taxes. If the Tax-Exempt Money
Market Portfolio earns federally taxable income from any of its investments,
it will be distributed as a taxable dividend. The Portfolio does not intend
to invest in Municipal Securities whose interest is subject to the federal
alternative minimum tax ("AMT") for individuals (known as "private activity
obligations").
Since all investment income is expected to be derived from earned interest,
it is anticipated that no part of any distribution will be eligible for the
dividends received deduction for corporations.
OTHER TAX INFORMATION
The information above is only a summary of some of the tax consequences
generally affecting each Portfolio and its shareholders, and no attempt has
been made to discuss individual tax consequences. In addition to federal
tax, distributions may be subject to state and local taxes. Shareholders
should make their own determination whether a Portfolio is suitable for
investment given their particular situation.
State law varies on whether mutual fund dividends that are derived in whole
or in part from interest on U.S. Government Obligations are exempt from state
income taxation. The Portfolios will provide shareholders annually with
information relating to the composition of their distributions to permit
shareholders to determine whether and to what extent the dividend income they
receive from the Portfolio may be exempt from their state's income tax.
Shareholders should consult their tax adviser as to whether any portion of
the dividends they receive from the Portfolio is exempt from state income
taxes and on any other specific questions concerning state or federal tax
treatment.
Annual statements as to the current federal tax status of distributions, if
applicable, are mailed to shareholders by January 31st following each tax
year.
When an investor signs its account application, it will be asked to certify
that its taxpayer identification number is correct and that it is not subject
to backup withholding for failing to report income to the Internal Revenue
Service ("IRS"). If the investor does not comply with IRS regulations, the
IRS can require each Portfolio to withhold a percentage of distributions.
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PERFORMANCE INFORMATION
From time to time each Portfolio may advertise its current yield and
effective yield for each class of shares in advertisements or in reports or
other communications with shareholders. A Portfolio's performance may be
compared to other investments or relevant indices.
Both yield figures are based on historical earnings and are not intended to
indicate future performance. Each Portfolio's current yield for a class of
shares refers to the net income generated by an investment in that class over
a seven-day period expressed as an annual percentage rate. In addition to
the current yield, each Portfolio may quote yields in advertising based on
any historical seven-day period. The effective yield assumes that the income
earned from the investment is reinvested. The effective yield will be
slightly higher than the current yield because of the compounding effect on
this assumed reinvestment.
The Tax-Exempt Money Market Portfolio also may quote its tax equivalent yield
and tax equivalent effective yield, which shows the taxable yield or taxable
effective yield an investor would have to earn, before taxes, to equal the
Portfolio's tax-free yield or tax-free effective yield. When a tax
equivalent yield or tax equivalent effective yield is calculated, the yield
is increased using a stated income tax rate. See the SAI for more
information concerning performance calculations.
ORGANIZATION AND CAPITALIZATION OF THE TRUST
The Trust was established as a Massachusetts business trust under the laws of
The Commonwealth of Massachusetts by an Agreement and Declaration of Trust
dated January 29, 1993 (the "Trust Declaration"). A copy of the Trust
Declaration is on file with the Secretary of The Commonwealth of
Massachusetts. The Trust, a diversified, open-end management investment
company, is not required to hold annual meetings of shareholders and does not
intend to hold shareholder meetings unless required by the 1940 Act. Holders
of shares representing 10% or more of the outstanding shares of the Trust may
call a meeting for the purpose of voting on the removal of one or more
Trustees. Special meetings may be called for the purpose of conducting
specific items of Trust business.
Shareholders receive one vote for each dollar (or a proportionate fractional
vote for each fraction of a dollar) of net asset value per share owned. The
shares of each Portfolio are classified into four classes. Each Portfolio
votes separately with respect to issues affecting only that Portfolio.
Holders of a particular class of shares have the exclusive right to vote on
matters submitted to shareholders pertaining only to that class. Pursuant to
the Trust Declaration, the Trustees have the authority to create additional
Portfolios and to issue additional classes of shares for each Portfolio of
the Trust, subject to receipt of any required regulatory approval.
Shareholders may direct any questions they may have about the Trust to the
Distributor at 1-800-828-2176.
Any person or organization owning 25% or more of the outstanding shares of a
Portfolio may be presumed to "control" (as that term is defined in the 1940
Act) such Portfolio. As of November 20, 1997 Sun Bank National Association,
P.O. Box 105504, Atlanta, GA 30348 owned a controlling interest in the U.S.
Treasury Money Market Portfolio; First Union National Bank, 1525 West Wt.
Harris Boulevard, Charlotte, NC 28288 owned a controlling interest in the
General Money Market Portfolio and Tax-Exempt Money Market Portfolio; and
Integrity Investments, Inc., 1800 Second Street, Sarasota, FL 34236 owned a
controlling interest in the U.S. Treasury Income Portfolio.
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The Trust has adopted a code of ethics which contains a policy on personal
securities transactions by "access persons." That policy complies, in all
material respects, with the recommendations of the Investment Company
Institute.
INVESTMENT RESTRICTIONS
The following is a description of certain investment restrictions which are
fundamental and may not be changed with respect to a Portfolio without the
approval of a majority of the outstanding shares of the Portfolio. For a
description of certain other investment restrictions, reference should be
made to the SAI. The restrictions do not apply to U.S. Government
Obligations.
1. No Portfolio will invest 25% or more of the value of its total assets in a
particular industry, except that up to 100% of the assets of the General
Money Market Portfolio may be invested in domestic banking industry
obligations.
2. As to 75% of the value of its total assets, a Portfolio will not invest
more than 5% of the value of its total assets in the securities of any one
issuer or acquire more than 10% of the voting securities of any issuer; the
remaining 25% of the assets may be invested in the securities of one or
more issuers without regard to such limitations.
3. Under normal market conditions, at least 80% of the value of the Tax-Exempt
Money Market Portfolio's total assets will be invested in Municipal
Securities.
These limitations apply as of the time of purchase. If through market action
the percentage limitations are exceeded, the Portfolios will not be required
to reduce the amount of their holdings in such investments.
The General Money Market Portfolio operates in accordance with a
non-fundamental operating policy which complies with Rule 2a-7 promulgated
under the 1940 Act and is more restrictive than investment restriction number
2 above. Under Rule 2a-7 the Portfolio may not (with certain exceptions)
invest more than 5% of its total assets in the securities of a single issuer.
See "Investment Policies and Limitations" in the SAI.
CERTAIN INVESTMENT STRATEGIES, POLICIES AND RISK CONSIDERATIONS
QUALITY AND MATURITY
Each Portfolio may purchase only high quality obligations that the
Sub-Adviser believes present minimal credit risks. To be considered high
quality, a security must be a U.S. Government Obligation; or rated in
accordance with applicable rules in one of the two highest rating categories
for short-term obligations by at least two NRSROs (or by one, if only one
rating service has rated the security); or, if unrated, judged to be of
equivalent quality by the Sub-Adviser. As a matter of non-fundamental
policy, the Portfolios will only purchase securities, in addition to U.S.
Government Obligations, that are rated in the highest rating category by at
least one NRSRO or, if unrated, are determined to be of equivalent quality.
(See the Appendix for a description of NRSRO ratings).
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Each Portfolio must limit its investments to obligations with remaining
maturities of 397 days or less and must maintain a dollar-weighted average
maturity of 90 days or less.
Each Portfolio's ability to achieve its investment objective depends, at
least in part, on the quality and maturity of its investments. The
Portfolios invest in high quality obligations, but an investment in any of
the Portfolios involves risks. Although each Portfolio's policies are
designed to maintain a stable net asset value of $1.00 per share, all money
market instruments can change in value when interest rates or an issuer's
creditworthiness changes, or if an issuer or guarantor of a security fails to
pay interest or principal when due. If these changes in value were
substantial, a Portfolio's net asset value could deviate from $1.00.
Unless otherwise indicated, each Portfolio may invest in the securities and
engage in the transactions described below.
AFFILIATED BANK TRANSACTIONS
Pursuant to an exemptive order from the SEC, each Portfolio may engage in
certain transactions with banks that are, or may be considered to be,
"affiliated persons" of the Portfolio under the 1940 Act. Such transactions
may be entered into only pursuant to procedures established, and periodically
reviewed, by the Board of Trustees. These transactions may include
repurchase agreements with U.S. banks having short-term debt instruments
rated high quality by at least one NRSRO (or if unrated, determined by the
Sub-Adviser to be of comparable quality); purchases, as principal, of
short-term obligations of such banks and their bank holding companies and
affiliates; transactions in Municipal Securities; transactions in bankers'
acceptances; and transactions in U.S. Government Obligations with affiliated
banks that are primary dealers in these securities.
REPURCHASE AGREEMENTS (APPLICABLE TO U.S. TREASURY MONEY MARKET PORTFOLIO,
GENERAL MONEY MARKET PORTFOLIO AND TAX-EXEMPT MONEY MARKET PORTFOLIO ONLY)
Each Portfolio, except the U.S. Treasury Income Portfolio, may enter into
repurchase agreements that allow the Portfolio to purchase U.S. Government
Obligations, with an agreement that the seller will repurchase the obligation
at an agreed upon price and date. No more than 10% of a Portfolio's net
assets taken at current value will be invested in repurchase agreements
extending for more than seven days. If a seller defaults on the obligation
to repurchase, the Portfolios may incur a loss or other costs.
REVERSE REPURCHASE AGREEMENTS (APPLICABLE TO GENERAL MONEY MARKET PORTFOLIO
AND TAX-EXEMPT MONEY MARKET PORTFOLIO ONLY)
The General Money Market Portfolio and the Tax-Exempt Money Market Portfolio
may enter into reverse repurchase agreements, which are transactions where a
Portfolio temporarily transfers possession of a portfolio instrument to
another party, such as a bank or broker-dealer, in return for cash. At the
same time, the Portfolio agrees to repurchase the instrument at an agreed
upon time and price, which includes interest. The General Money Market
Portfolio expects that it will engage in reverse repurchase agreements when
it is able to invest the cash so acquired at a rate higher than the cost of
the agreement, which would increase income earned by such Portfolio, or for
liquidity purposes. Engaging in reverse repurchase agreements may involve an
element of leverage, and no Portfolio will purchase a security while
borrowings (including reverse repurchase agreements) representing more than
5% of its total assets are outstanding. The Tax-Exempt Money Market
Portfolio will engage in reverse repurchase agreements for temporary or
emergency purposes only and not for leverage or investment.
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FORWARD COMMITMENTS AND "WHEN-ISSUED" SECURITIES
Each Portfolio may also enter into forward commitment agreements and purchase
"when-issued" securities. Forward commitments are contracts to purchase
securities for a fixed price at a specified future date beyond customary
settlement time with no interest accruing to the Portfolio until the
settlement date. Forward commitments involve a risk of loss if the value of
the security to be purchased declines prior to the settlement date.
Municipal Securities are often issued on a when-issued basis. The yield of
such securities is fixed at the time a commitment to purchase is made, with
actual payment and delivery of the security generally taking place 15 to 45
days later. Under some circumstances, the purchase of when-issued securities
may act to leverage the Portfolio.
LENDING OF SECURITIES
For the purpose of realizing additional income, the Portfolios may lend
portfolio securities to broker-dealers or financial institutions up to not
more than 10% of their respective total assets taken at current value. While
any such loan is outstanding, each such Portfolio will continue to receive
amounts equal to the interest or dividends paid by the issuer on the
securities, as well as interest (less any rebates to be paid to the borrower)
on the investment of the collateral or fees from the borrower. Each
Portfolio will have a right to call each loan and obtain the securities.
Lending portfolio securities involves certain risks, including possible
delays in receiving additional collateral or in the recovery of the
securities or possible loss of rights in the collateral should the borrower
fail financially. Loans will be made in accordance with guidelines
established by the Board of Trustees.
LETTERS OF CREDIT
Issuers or financial intermediaries who provide demand features or standby
commitments often support their ability to buy obligations on demand by
obtaining letters of credit ("LOCs") or other guarantees from domestic or
foreign banks. LOCs also may be used as credit supports for Municipal
Securities. The Sub-Adviser may rely upon its evaluation of a bank's credit
in determining whether to purchase an instrument supported by an LOC. In
evaluating a foreign bank's credit, the Sub-Adviser will consider whether
adequate public information about the bank is available and whether the bank
may be subject to unfavorable political or economic developments, currency
controls or other governmental restrictions that might affect the bank's
ability to honor its credit commitment.
ZERO COUPON BONDS
Each Portfolio may purchase zero coupon bonds. Regular interest payments are
not made on zero coupon bonds; instead these bonds are sold at a deep
discount from their face value and are redeemed at face value when they
mature. Each Portfolio will purchase only those zero coupon bonds which have
a remaining maturity of one year or less. As a result, such bonds are
expected to pay out a return on a regular basis as they mature. Because zero
coupon bonds do not pay current income, their prices tend to be more volatile
in response to interest rate changes than bonds which pay interest regularly.
In calculating its daily dividend, a Portfolio takes into account as income
a portion of the difference between a zero coupon bond's purchase price and
its face value.
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A broker-dealer creates a derivative zero coupon bond by separating the
interest and principal components of a U.S. Treasury security and selling
them as two individual securities. CATS (Certificates of Accrual on Treasury
Securities), TIGRs (Treasury Investment Growth Receipts), and TRs (Treasury
Receipts) are examples of derivative zero coupon bonds.
The Federal Reserve Bank creates STRIPS (Separate Trading of Registered
Interest and Principal of Securities) by separating the interest and
principal components of an outstanding U.S. Treasury bond and selling them as
individual securities. Bonds issued by the Resolution Funding Corporation and
the Financing Corporation can also be separated in this fashion.
U.S. GOVERNMENT OBLIGATIONS
U.S. Government Obligations are debt obligations issued or guaranteed by the
U.S. Treasury or by an agency or instrumentality of the U.S. Government. Not
all U.S. Government Obligations are backed by the full faith and credit of
the United States. Obligations may be supported only by the agency's right
to borrow money from the U.S. Treasury under certain circumstances or by the
credit of the agency. There is no guarantee that the U.S. Government will
support these types of obligations, and therefore they involve more risk than
U.S. Government Obligations backed by the full faith and credit of the United
States.
VARIABLE AND FLOATING RATE INSTRUMENTS
Each Portfolio may purchase variable and floating rate demand instruments and
other securities that possess a floating or variable interest rate adjustment
formula. These instruments permit the Portfolios to demand payment of the
principal balance plus unpaid accrued interest upon a specified number of
days' notice to the issuer or its agent. The demand feature may be backed by
a bank letter of credit or guarantee issued with respect to such instrument.
The Portfolios' Sub-Adviser, on behalf of the Manager, intends to exercise
the demand only (1) to attain a more optimal portfolio structure, (2) upon a
default under the terms of the debt security, (3) as needed to provide
liquidity to the Portfolios, or (4) to maintain the respective quality
standard of the Portfolios' investment portfolio. The Portfolios'
Sub-Adviser will determine which variable or floating rate demand instruments
to purchase in accordance with procedures approved by the Trustees to
minimize credit risks.
MUNICIPAL LEASE OBLIGATIONS (APPLICABLE TO TAX-EXEMPT MONEY MARKET PORTFOLIO
ONLY)
Municipal lease obligations are issued by a state and local government or
authority to acquire land and a wide variety of equipment and facilities.
These obligations typically are not fully backed by the municipality's
credit, and the interest payable on these obligations may become taxable if
the lease is assigned. If funds are not appropriated for the following
year's lease payments, a lease may terminate, with the possibility of default
on the lease obligation and significant loss to the Portfolio. Such risk of
non-appropriation is unique to municipal lease obligations. The SEC Staff
has taken the position that open-end investment companies may treat these
obligations as liquid under guidelines established by the Board of Trustees.
Determination concerning the liquidity and proper valuation of these
obligations will include: the frequency of trades and quotes for the
obligation, the number of dealers willing to purchase or sell the security
and the number of potential buyers, the willingness of dealers to make a
market in the securities, the nature of the marketplace trades and the
likelihood that its marketability will be maintained throughout the time the
instrument is held by
21
<PAGE>
the Portfolio. The Board will be responsible for determining the credit
quality of any unrated lease obligations held by the Portfolio, on an ongoing
basis, including an assessment of the likelihood that the lease will not be
canceled. The high quality municipal lease obligations in which the
Tax-Exempt Money Market Portfolio intends to invest generally are not
expected by the Board to present liquidity risks. Lease obligations will be
valued based on a standard spread that relates to general obligation
securities whose value is determined using a pricing service. Certificates of
participation in municipal lease obligations or installment sales contracts
entitle the holder to a proportionate interest in the lease-purchase payments
made. Certificates of participation typically are issued by municipalities
and by banks and other financial institutions.
MUNICIPAL SECURITIES (APPLICABLE TO TAX-EXEMPT MONEY MARKET PORTFOLIO ONLY)
Municipal Securities include general obligation securities, which are backed
by the full taxing power of a municipality, or revenue securities, which are
backed by the revenues of a specific tax, project or facility. Resource
recovery bonds, a type of revenue obligation, are used to finance the
construction of waste burning facilities. Such bonds may be subject to
special risks because the project uses technology or an economic plan that is
not yet proven, or requires operating permits from environmental authorities.
Industrial development bonds are a type of revenue bond backed by the credit
and security of a private issuer and may involve greater risk. Tax and
revenue anticipation notes are issued by municipalities in expectation of
future tax or other revenues, and are payable from those specific taxes or
revenues. Bond anticipation notes normally provide interim financing in
advance of an issue of bonds or notes, the proceeds of which are used to
repay the anticipation notes.
Although the Tax-Exempt Money Market Portfolio presently does not intend to
do so on a regular basis, it may invest more than 25% of its assets in
Municipal Securities which are related in such a way that an economic,
business, or political development or change affecting one security would
likewise affect the other Municipal Securities. To the extent that the
Portfolio's assets are concentrated in Municipal Securities that are so
related, the Portfolio will be subject to the peculiar risks presented by
such Municipal Securities, such as negative developments in a particular
industry or state, to a greater extent than it would be if the Portfolio's
assets were not so concentrated.
RESTRICTED SECURITIES (APPLICABLE TO GENERAL MONEY MARKET PORTFOLIO AND
TAX-EXEMPT MONEY MARKET PORTFOLIO ONLY)
The General Money Market Portfolio and the Tax-Exempt Money Market Portfolio
may purchase securities which cannot be sold to the public without
registration under the Securities Act of 1933 (restricted securities). Unless
registered for sale, these securities can only be sold in privately
negotiated transactions or pursuant to an exemption from registration.
Provided that the security has a demand feature of seven days or less, or a
dealer or institutional trading market exists which in the opinion of the
Sub-Adviser, subject to Board guidelines, affords liquidity, these restricted
securities are not treated as illiquid securities for purposes of each
Portfolio's restriction on not investing more than 10% of its net assets in
illiquid securities.
SPECIAL CONSIDERATIONS OF FOREIGN INVESTMENTS (APPLICABLE TO GENERAL MONEY
MARKET PORTFOLIO ONLY)
The General Money Market Portfolio may invest in U.S. dollar-denominated
obligations of foreign branches of U.S. banks (Eurodollars), U.S. branches
and agencies of foreign banks (Yankee dollars), and foreign branches of
foreign banks. Euro and Yankee dollar investments involve risks that are
different from
22
<PAGE>
investments in securities of U.S. banks. These risks may include future
unfavorable political and economic developments, possible withholding taxes,
seizure of foreign deposits, currency controls, interest limitations or other
governmental restrictions which might affect payment of principal or
interest. Additionally, there may be less public information available about
foreign banks and their branches. Foreign branches of foreign banks are not
regulated by U.S. banking authorities, and generally are not bound by
accounting, auditing and financial reporting standards comparable to U.S.
banks. Although the Sub-Adviser carefully considers these factors when
making investments, and subject to its policy on concentration, the Portfolio
does not limit the amount of its assets which can be invested in any one type
of instrument or in any foreign country. The Portfolio will not invest 25%
or more of its assets in Euro and Yankee dollar investments and obligations
of foreign branches of foreign banks.
APPENDIX
NRSRO RATINGS
Description of Moody's Investors Service, Inc. ("Moody's") and Standard &
Poor's Corporation ("S&P") commercial paper and bond ratings:
SHORT-TERM DEBT RATINGS
MOODY'S EMPLOYS THREE DESIGNATIONS, ALL JUDGED TO BE INVESTMENT GRADE, TO
INDICATE THE RELATIVE REPAYMENT CAPACITY OF RATED ISSUERS. THE HIGHEST
DESIGNATION IS AS FOLLOWS:
Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following
characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structures with moderate reliance on debt and
ample asset protection.
- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
- Well-established access to a range of financial markets and assured sources
of alternate liquidity.
S&P SHORT-TERM DEBT RATINGS ARE GRADED INTO FOUR CATEGORIES, RANGING FROM "A"
FOR THE HIGHEST QUALITY OBLIGATIONS TO "D" FOR THE LOWEST. THE HIGHEST
RATINGS IN THE "A" CATEGORY ARE DESCRIBED AS FOLLOWS:
"A"-Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are further refined
with the designations 1, 2 and 3 to indicate the relative degree of safety.
"A-1"-This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics will be noted with a plus (+)
sign designation.
23
<PAGE>
MUNICIPAL OBLIGATIONS
Moody's ratings for state and municipal and other short-term obligations will
be designated Moody's Investment Grade ("MIG"). This distinction is in
recognition of the differences between short-term credit risk and long-term
risk. Factors affecting the liquidity of the borrower are uppermost in
importance in short-term borrowing, while various factors of the first
importance in short-term borrowing risk are of lesser importance in the long
run. The highest MIG quality rating is defined as follows:
MIG-1-Notes bearing this designation are of the best quality, enjoying strong
protection from established cash flows of funds for their servicing or from
established and broad-based access to the market for refinancing, or both.
A short-term rating may also be assigned to an issue having a demand feature.
Such ratings will be designated as VMIG to reflect such characteristics as
payment upon periodic demand rather than fixed maturity dates and payment
relying on external liquidity. Additionally, investors should be alert to
the fact that the source of payment may be limited to the external liquidity
with no or limited legal recourse to the issuer in the event the demand is
not met. A VMIG-1 rating carries the same definition as MIG-1.
S&P'S HIGHEST QUALITY RATING FOR SHORT-TERM STATE AND MUNICIPAL NOTES IS
DEFINED AS FOLLOWS:
SP-1- Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be
given a plus (+) designation.
24
<PAGE>
THE VALIANT FUND
1776 Heritage Drive
North Quincy, MA 02171
The Valiant Fund (the "Trust") is an open-end investment company comprised
of four separate investment portfolios (the "Portfolios") offering Class A
shares, Class B shares, Class C shares and Class D shares:
U.S. TREASURY MONEY MARKET PORTFOLIO GENERAL MONEY MARKET PORTFOLIO
U.S. TREASURY INCOME PORTFOLIO TAX-EXEMPT MONEY MARKET PORTFOLIO
The investment objective of each Portfolio is to obtain as high a level of
current income as is consistent with the preservation of capital and
liquidity. The Tax-Exempt Money Market Portfolio seeks primarily income
exempt from federal income tax. The Trust offers banks and other
institutional investors an economical and convenient means of investing in
professionally managed money market funds.
The Trust offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes of shares are identical, except as to the services
offered to and the expenses borne by each class. Class B shares, Class C
shares and Class D shares each bear certain costs pursuant to their
respective Distribution and Shareholder Servicing Plans adopted in accordance
with Rule 12b-1 under the Investment Company Act of 1940 (the "1940 Act").
THIS PROSPECTUS RELATES ONLY TO THE CLASS B SHARES.
Each Portfolio is designed exclusively for investment of short-term monies
held in institutional accounts. Shares of the Portfolios may be purchased
by banks and other institutional investors that have entered into service
agreements with Integrity Investments, Inc. (the "Distributor"), 1-800-828-2176.
This Prospectus sets forth concisely the information about the Trust that a
prospective investor ought to know before investing. Please read it
carefully and retain it for future reference. Certain additional
information is contained in a Statement of Additional Information ("SAI")
dated December 19, 1997, as revised from time to time, which has been filed
with the Securities and Exchange Commission, is incorporated herein by
reference and is available upon request and without charge by calling the
Distributor at the telephone number shown above.
INVESTMENTS IN THE PORTFOLIOS ARE NEITHER INSURED NOR GUARANTEED BY THE
U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE THAT A PORTFOLIO WILL BE ABLE
TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY, AND
INVOLVE INVESTMENT RISKS INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROSPECTUS - DECEMBER 19, 1997
1
<PAGE>
CONTENTS
Expense Information .............................................. 3
Financial Highlights .............................................. 5
Investment Objectives and Policies ............................... 7
Who Should Invest ................................................. 8
Purchases and Redemptions ........................................ 9
Management of the Portfolios ..................................... 11
Management Fees and Other Expenses ................................ 11
Valuation of Shares ............................................... 13
Distributions and Taxes ........................................... 13
Performance Information .......................................... 15
Organization and Capitalization of the Trust ...................... 15
Investment Restrictions ......................................... 16
Certain Investment Strategies, Policies and Risk Considerations ... 16
Appendix .......................................................... 21
2
<PAGE>
EXPENSE INFORMATION
<TABLE>
<CAPTION>
U.S. TREASURY U.S. TREASURY GENERAL MONEY TAX-EXEMPT MONEY
MONEY MARKET INCOME MARKET MARKET
PORTFOLIO PORTFOLIO** PORTFOLIO PORTFOLIO**
--------- ----------- --------- -----------
Class B Class B Class B Class B
<S> <C> <C> <C> <C>
Shareholder
Transaction Expenses
- --------------------
Maximum Sales
Load Imposed on Purchases None None None None
Sales Load Imposed on
Reinvested Dividends None None None None
Maximum Deferred
Sales Load None None None None
Redemption Fees None None None None
Annual Fund
Operating Expenses
(as a percentage of
average net assets)
- --------------------
Management Fees 0.20% 0.20% 0.20% 0.20%
12b-1 Fees* 0.25% 0.25% 0.25% 0.25%
Other Expenses (after
expense reimbursement) 0.00% 0.00% 0.00% 0.00%
----- ----- ----- -----
Total Fund Operating
Expenses (after
expense reimbursement) 0.45% 0.45% 0.45% 0.45%
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
______________
* The Trust has adopted a Distribution and Shareholder Servicing Plan (the
"Plan") for the Class B shares. Payments under the Plan for Class B shares
are authorized at the rate of 0.25% of the average daily net assets of Class
B shares. See "Management Fees and Other Expenses" for further information
on the Plan.
** As of the date of this Prospectus, the U.S. Treasury Income Portfolio
Class B shares and the Tax-Exempt Money Market Portfolio Class B shares
have not commenced operations.
Four classes of shares of the Trust are being offered by each Portfolio:
Class A, Class B, Class C and Class D shares. The classes are identical,
except that Class B shares, Class C shares and Class D shares are subject
to differing annual distribution and service fees. Class A shares are
currently not subject to an annual
3
<PAGE>
distribution and service fee. The Class B, Class C and Class D shares'
distribution and service fees will cause the Class B, Class C and Class D
shares to have a higher expense ratio and to pay lower dividends than Class A
shares, the Class C and Class D shares to have a higher expense ratio and to
pay lower dividends than the Class B shares, and the Class D shares to have a
higher expense ratio and to pay lower dividends than Class C shares. This
Prospectus describes only the Class B shares. An investor may obtain
prospectuses relating to the Class A shares, the Class C shares and Class D
shares, respectively, by calling the Distributor at 1-800-828-2176.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that the investor will bear directly or
indirectly. Management fees are paid by each Portfolio to Integrity
Management & Research, Inc. (the "Manager") for managing its investments and
business affairs. All operating expenses are paid by each Portfolio and are
not charged directly to an investor's account. There are no sales or
redemption fees. However, certain institutional investors may charge their
customers fees in addition to those described herein. See "Purchases and
Redemptions." The Manager has declared voluntary expense limitations for
the Class B shares of each Portfolio of 0.45% of average daily net assets of
the Class B shares. The Manager will voluntarily reimburse any expenses
above these expense limitations. Although as of the date of this Prospectus
the Class B shares of the Tax-Exempt Money Market Portfolio and the U.S.
Treasury Income Portfolio have not commenced operations based on the
experience of the Class A shares of those Portfolios without the effect of
the expense reimbursements: "Other Expenses" and "Total Operating Expenses"
for the Class B shares would be 0.03% and 0.63%, respectively, for the U.S.
Treasury Income Portfolio and 0.00% and 0.45%, respectively, for each of the
other Portfolios. The expense limitations are voluntary but will remain in
effect through December 1998. The expense limitations may be removed at any
time thereafter with 90 days' prior notice to existing shareholders.
Non-recurring or extraordinary expenses are generally excluded in the
determination of expense ratios of the Portfolios for purposes of determining
any required expense reimbursement. Quotations of yield for any period when
an expense limitation is in effect will be greater than if the limitation had
not been in effect. For more information, see "Management Fees and Other
Expenses," and "Purchases and Redemptions."
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming (1)
5% annual return and (2) redemption at the end of each time period.
1 Year 3 Years 5 Years 10 Years
U.S. Treasury Money Market Portfolio $5 $14 $25 $57
U.S. Treasury Income Portfolio $5 $14 $25 $57
General Money Market Portfolio $5 $14 $25 $57
Tax-Exempt Money Market Portfolio $5 $14 $25 $57
THE EXAMPLES ARE BASED ON ASSUMED PERFORMANCE LEVELS AND SHOULD NOT BE
CONSIDERED REPRESENTATIONS OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY
BE GREATER OR LESSER THAN THOSE SHOWN.
4
<PAGE>
FINANCIAL HIGHLIGHTS
The following information has been audited by Price Waterhouse LLP,
independent accountants, whose report thereon was unqualified. This
information is part of the Trust's financial statements which are included in
the Trust's Annual Report to Shareholders and incorporated by reference in
the SAI. As of the date of this Prospectus, the Tax-Exempt Money Market
Portfolio Class B shares and the U.S. Treasury Income Portfolio Class B
shares had not commenced operations. The following information should be
read in conjunction with the financial statements and notes thereto.
U.S. TREASURY MONEY MARKET PORTFOLIO- CLASS B
For a share outstanding throughout each period.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
8/31/97 8/31/96 8/31/95 8/31/94 (1)
------- ------- ------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------
Income from investment operations:
Net investment income................................. 0.049 0.050 0.052 0.011
------ ------ ------ ------
Less Distributions:
Dividends from net investment income.................. (0.049) (0.050) (0.052) (0.011)
------ ------ ------ ------
Net asset value, end of period.............................. $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------
------ ------ ------ ------
Total return (a) ........................................... 5.04% 5.18% 5.34% 1.12%
Ratios/supplemental data:
Net assets, end of period (000's)........................... $300,437 $126,327 $76,114 $13,355
Ratios to average net assets:
Net investment income .............................. 4.93% 5.01% 5.41% 3.87%(b)
Operating expenses. ................................ 0.45% 0.45% 0.45% 0.45%(b)
Operating expenses before reimbursements/waivers. .. 0.45% 0.45% 0.46% 0.50%(b)
</TABLE>
- -------------------
(1) The Portfolio commenced Class B shares operations on May 17, 1994.
(a) Total returns for periods less than one year are not annualized and
had the Manager and Trustees not reimbursed and waived certain expenses,
respectively, total returns would have been lower.
(b) Annualized.
5
<PAGE>
GENERAL MONEY MARKET PORTFOLIO- CLASS B
For a share outstanding throughout each period.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
8/31/97 8/31/96 8/31/95 8/31/94 (1)
------- ------- ------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period....................... $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------
Income from investment operations:
Net investment income................................ 0.050 0.051 0.053 0.009
------ ------ ------ ------
Less distributions:
Dividends from net investment income................. (0.050) (0.051) (0.053) (0.009)
------ ------ ------ ------
Net asset value, end of period............................. $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------
------ ------ ------ ------
Total return(a) ........................................... 5.14% 5.26% 5.54% 0.92%
Ratios/supplemental data:
Net assets, end of period (000's).......................... $9,155 $8,734 $9,461 $9,520
Ratios to average net assets:
Net investment income ............................. 5.02% 5.11% 5.33% 3.99%(b)
Operating expenses................................. 0.45% 0.45% 0.45% 0.45%(b)
Operating expenses before reimbursements/waivers... 0.45% 0.45% 0.45% 0.46%(b)
</TABLE>
- ------------------------
(1) The Portfolio commenced Class B shares operations on May 17, 1994.
(a) Total returns for periods less than one year are not annualized and
had the Manager and Trustees not reimbursed and waived certain expenses,
respectively, total returns would have been lower.
(b) Annualized.
6
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of each Portfolio is to obtain as high a level of
current income as is consistent with the preservation of capital and
liquidity. The Tax-Exempt Money Market Portfolio seeks primarily income
exempt from federal income tax. There is no assurance that a Portfolio will
achieve its investment objective. A Portfolio's investment objective is
fundamental and may not be changed at any time without shareholder approval.
Unless otherwise indicated, a Portfolio's investment policies are not
fundamental and may be changed at any time without shareholder approval. As
a matter of non-fundamental policy, the Portfolios will only purchase
securities, in addition to U.S. Government Obligations (as defined below),
that are rated in the highest category by at least one nationally recognized
statistical rating organization ("NRSRO") or, if unrated, are determined by
the sub-adviser to be of equivalent quality. (See "Management of the
Portfolios" for information about the sub-adviser, and see the Appendix for a
description of NRSRO ratings.)
THE U.S. TREASURY MONEY MARKET PORTFOLIO invests all of its assets in
securities issued or guaranteed by the United States Government or its
agencies, authorities or instrumentalities ("U.S. Government Obligations")
which are backed by the full faith and credit of the United States and
repurchase agreements collateralized by such U.S. Government Obligations.
Under normal market conditions, at least 65% of its total assets will be
invested in direct U.S. Treasury obligations and repurchase agreements
collateralized by U.S. Treasury obligations. Income earned from U.S.
Government Obligations is generally exempt from state and local income tax.
Income earned from repurchase agreement transactions generally is not exempt
from state and local income tax. (See "Distributions and Taxes.")
The U.S. Treasury Money Market Portfolio has been rated "AAAm" by Standard &
Poor's Corporation ("S&P") and "Aaa" by Moody's Investors Service, Inc.
("Moody's"). Such quality rating is based on, among other things, an
analysis of the Portfolio's investment strategies, operational policies and
management. S&P and Moody's also may undertake an ongoing analysis and
assessment of these criteria in order to update the Portfolio's rating.
THE U.S. TREASURY INCOME PORTFOLIO invests all of its assets in U.S.
Government Obligations which are backed by the full faith and credit of the
United States, the interest income from which generally will not be subject
to state income tax. (See "Distributions and Taxes.") Under normal market
conditions, at least 65% of its total assets will be invested in U.S.
Treasury obligations such as U.S. Treasury bills, notes and bonds.
THE GENERAL MONEY MARKET PORTFOLIO invests in U.S. dollar-denominated
short-term debt securities including:
-- Obligations of domestic and foreign banks or thrift organizations
(such as bankers' acceptances, time deposits and certificates of
deposit);
-- Corporate debt obligations, including commercial paper, notes and
bonds with remaining maturities of 397 days or less;
-- U.S. Government Obligations and repurchase agreements backed by U.S.
Government Obligations; and
-- Cash.
7
<PAGE>
More than 25% of the value of the total assets of the Portfolio may be
invested in domestic banking industry obligations. The Portfolio may
purchase securities that are subject to restrictions on resale.
THE TAX-EXEMPT MONEY MARKET PORTFOLIO invests in high-quality, short-term,
fixed, variable or floating rate municipal securities and in high-quality,
long-term municipal securities whose features give them interest rates,
maturities and prices similar to short-term instruments ("Municipal
Securities").
Municipal Securities are obligations issued by or on behalf of state and
local governments and public authorities (including states, territories and
possessions of the United States, the District of Columbia, cities, counties,
municipalities, municipal agencies and regional districts and their political
subdivisions, agencies, authorities and instrumentalities), the interest from
which, in the opinion of bond counsel for the issuers of the obligations at
the time of their issuance, is exempt from federal income tax.
The Portfolio's investments in Municipal Securities may include tax, revenue
and bond anticipation notes; tax-exempt commercial paper; and general
obligation or revenue bonds (including securities such as municipal lease
obligations and resource recovery bonds). The Portfolio may purchase
obligations that are subject to restrictions on resale. The Portfolio will
not invest in Municipal Securities whose interest is subject to the federal
alternative minimum tax ("AMT") for individuals (known as "private activity
obligations").
Municipal Securities are issued to raise money for various public purposes,
including general purpose financing for state and local governments as well
as financing for specific projects or public facilities. Municipal
Securities may be backed by the full taxing power of a municipality or by the
revenues from a specific project or the credit of a private organization.
Some Municipal Securities are insured by private insurance companies, while
others may be supported by letters of credit furnished by domestic or foreign
banks.
Distributions from the Tax-Exempt Money Market Portfolio will in general be
exempt from regular federal income taxes. As a temporary defensive measure,
when market conditions so warrant, the Tax-Exempt Money Market Portfolio may
invest its assets without limitation in any of the money market instruments
which are permissible investments for the General Money Market Portfolio. To
the extent that the Tax-Exempt Money Market Portfolio earns taxable income
from any of its investments, the income would be distributed as a taxable
dividend.
WHO SHOULD INVEST
Each Portfolio is designed exclusively for investment of short-term monies
held by banks and other institutional investors.
The advantages offered by the Portfolios include large scale purchasing power
and diversification, which can help avoid the greater expense of executing a
large number of small transactions. Each Portfolio also makes it possible
for institutional investors to participate in a more diversified portfolio
than the size of their investments might otherwise permit. Also, investment
in the Portfolios can relieve institutions of many management and
administrative burdens usually associated with the direct purchase and sale
of money market instruments, including: selecting portfolio investments,
obtaining favorable terms at which to buy and sell, scheduling and monitoring
maturities and reinvestments, safe-keeping of securities, and portfolio
recordkeeping.
8
<PAGE>
It should be noted that the Portfolios are not FDIC insured.
PURCHASES AND REDEMPTIONS
PURCHASES
Shares of the Portfolios may be purchased by institutions that have entered
into service agreements with the Distributor and opened accounts with the
Trust. Call 1-800-828-2176 for information. Establishment of an account
requires that certain documents and applications be signed before the
investment can be processed. Fees in addition to those described herein may
be charged by some institutions which establish accounts on behalf of their
customers.
The minimum initial investment in each Portfolio is $1,000,000. Institutions
may satisfy the minimum investment by aggregating their fiduciary accounts.
Subsequent investments may be in any amount. If an account balance falls
below $100,000 due to redemption, the Portfolio may close the account.
Investors will be notified if the minimum balance is not being maintained and
will be allowed 30 days to make additional investments before the account is
closed. Any involuntary redemptions will be effected at the price at 3:00
p.m. (Eastern time) for the U.S. Treasury Money Market Portfolio and the
General Money Market Portfolio and at noon (Eastern time) for the U.S.
Treasury Income Portfolio and the Tax-Exempt Money Market Portfolio.
Purchase orders must be transmitted to the Portfolio's transfer agent, State
Street Bank and Trust Company (the "Transfer Agent"). Each Portfolio
requires advance notification of all wire purchases. Purchases may be made
only by wire.
A purchase order for shares in the U.S. Treasury Money Market Portfolio or
General Money Market Portfolio received by the Transfer Agent by 3:00 p.m.
(Eastern time), or for shares in the U.S. Treasury Income Portfolio or the
Tax-Exempt Money Market Portfolio received by the Transfer Agent by noon
(Eastern time), on a day the New York Stock Exchange ("NYSE") and both the
Boston and New York Federal Reserve Banks are open ("Business Day") will be
executed at the net asset value per share next determined after receipt of
the order and will receive the dividend declared on the day of purchase,
provided that the Trust's Custodian, State Street Bank and Trust Company,
receives the wire by the close of the Federal Reserve wire system on that
Business Day. See "Valuation of Shares."
Each Portfolio reserves the right to reject any purchase order. Purchase
orders may be refused if, for example, they are of a size that could disrupt
management of a Portfolio. Purchases by exchange are not permitted.
REDEMPTIONS
Shareholders may redeem all or a portion of their shares on any Business Day.
Shares will be redeemed at the net asset value next calculated after the
Transfer Agent has received the redemption request. If an account is closed,
any accrued dividends will be paid within 10 days of the beginning of the
following month.
Shares may be redeemed, and the redemption proceeds wired, on the same day if
telephone redemption instructions are received by the Transfer Agent by 3:00
p.m. (Eastern time) on the day of redemption for the U.S. Treasury Money
Market Portfolio and for the General Money Market Portfolio, or by noon
(Eastern
9
<PAGE>
time) on the day of redemption for the U.S. Treasury Income Portfolio and for
the Tax-Exempt Money Market Portfolio. Shares redeemed and wired on the same
day will not receive the dividend declared on the day of redemption. A
shareholder whose redemption instructions are received by the Transfer Agent
after 3:00 p.m. (Eastern time) with respect to the U.S. Treasury Money Market
Portfolio or General Money Market Portfolio or after noon (Eastern time) with
respect to the U.S. Treasury Income Portfolio or the Tax-Exempt Money Market
Portfolio will receive the dividend declared on the day on which the
redemption instructions were received and will receive wired redemption
proceeds on the next Business Day. Shareholders may change the bank account
designated to receive an amount redeemed at any time by sending a letter of
instruction with a signature guarantee to the Transfer Agent, State Street
Bank and Trust Company, at P.O. Box 1978, Boston, Massachusetts 02105.
If making immediate payment of redemption proceeds could adversely affect a
Portfolio, shareholders may be paid up to seven days after receipt of the
redemption request. Also, when the NYSE or either the Boston or New York
Federal Reserve Bank is closed (or when trading is restricted) for any reason
other than its respective customary weekend or holiday closing, or under any
emergency circumstances as determined by the Securities and Exchange
Commission ("SEC") to merit such action, redemption or payment may be
suspended or postponed.
Shares also may be redeemed by mail by submitting an order addressed to: The
Valiant Fund, P.O. Box 1978, Boston, Massachusetts 02105. If transactions by
telephone cannot be executed (e.g., during times of unusual market activity),
orders should be placed by mail. In case of suspension of the right of
redemption, a shareholder may either withdraw its request for redemption or
receive payment based on the net asset value next determined after the
termination of the suspension.
The Trust reserves the right to refuse a wire or telephone redemption if the
Manager or the Transfer Agent believes it is advisable to do so. Upon 60
days' prior notice to existing shareholders, procedures for redeeming shares
by wire or telephone may be modified or terminated at any time by the Trust
or the Transfer Agent.
ADDITIONAL INFORMATION
SHAREHOLDER SERVICES
Shareholders should verify the accuracy of all transactions immediately upon
receipt of their confirmation statements. Neither the Trust nor the Transfer
Agent will be liable for following instructions communicated by telephone
that it reasonably believes to be genuine. The privilege to initiate
transactions by telephone is made available to shareholders automatically.
The Trust will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine, including: requiring some form of
personal identification prior to acting upon instructions received by
telephone, providing written confirmation of such transactions or tape
recording of telephone instructions. If it does not employ reasonable
procedures to confirm that telephone instructions are genuine, the Trust or
the Transfer Agent may be liable for any losses due to unauthorized or
fraudulent instructions.
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To allow the Portfolios to be managed effectively, shareholders are urged to
initiate all trades (investments and redemptions of shares) as early in the
day as possible and to notify the Trust by calling the Transfer Agent at
least one day in advance of trades in excess of $10,000,000. In making trade
requests, the name of the shareholder and the account number(s) must be
supplied.
STATEMENTS AND REPORTS
Shareholders will receive a monthly statement and a confirmation after every
transaction that affects the share balance or the account registration. A
statement with tax information will be mailed by January 31st following each
tax year and also will be filed with the Internal Revenue Service. At least
twice a year, shareholders will receive the Portfolios' financial statements.
MANAGEMENT OF THE PORTFOLIOS
The overall responsibility for supervision of the affairs of the Trust vests
in the Board of Trustees of the Trust. The Manager is responsible for the
management of the Trust's day-to-day business affairs and has general
responsibility for the management of the investments of the Portfolios. The
Manager, at its expense, has contracted with David L. Babson & Co. Inc. (the
"Sub-Adviser") to manage the investments of the Portfolios subject to the
requirements of the Investment Company Act of 1940, as amended (the "1940
Act").
Richard F. Curcio, who is the Manager's President and Chairman of the Board
and President, Chairman of the Board and a Trustee of the Trust, indirectly
owns or controls all of the outstanding shares of common stock of the
Manager. Mr. Curcio has 18 years of experience in mutual fund industry
marketing, sales and operations. Located at 1800 Second Street, Suite 757,
Sarasota, Florida 34236, the Manager was organized in Florida on September
24, 1992.
The Sub-Adviser, a Massachusetts corporation, is located at One Memorial
Drive, Cambridge, Massachusetts 02142. Founded in 1940, the Sub-Adviser
provides investment advice to individuals, state and local government
agencies, pension and profit sharing plans, trusts, estates, banks and other
organizations, and also serves as the investment adviser to The Babson Funds
(a family of mutual funds). The Sub-Adviser is a subsidiary of Massachusetts
Mutual Life Insurance Company.
The Sub-Adviser is authorized to make investment decisions and engage in
portfolio transactions on behalf of the Trust, subject to such general or
specific instructions as may be given by the Trustees and/or the Manager. The
payment of fees to the Sub-Adviser is the sole responsibility of the Manager.
MANAGEMENT FEES AND OTHER EXPENSES
Under its Management Agreement with the Trust, the Manager performs certain
administrative and management services for the Trust and pays the
compensation, if any, of officers and Trustees who are affiliated with the
Manager or the Sub-Adviser and pays all the Portfolio expenses with the
following exceptions: the fees and expenses of those Trustees who are not
"interested persons" of the Trust; interest on borrowings; taxes; expenses
incurred pursuant to the Trust's distribution and shareholder servicing
plans; and such extraordinary nonrecurring expenses as may arise, including
litigation to which the Trust may be a party.
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For its services to the Portfolios, the Manager receives fees paid monthly
and computed at an annual rate of 0.20% of the average daily net asset value
of each of the Portfolios. The Manager is solely responsible for the payment
of all fees to the Sub-Adviser.
For its services to the Portfolios, the Sub-Adviser is paid by the Manager a
monthly fee computed at an annual rate based upon the aggregate average daily
net assets of the Trust, as follows: 0.10% of the first $500 million of net
assets and 0.05% of net assets over $500 million. The Sub-Adviser has
voluntarily agreed to reduce its fees from 0.05% to 0.04% of net assets over
$2 billion.
ADMINISTRATOR. State Street Bank and Trust Company ("State Street" or the
"Administrator"), 225 Franklin Street, Boston, MA 02110, is the Administrator
of the Trust.
The Administrator assists in each Portfolio's administration and operation,
including providing office space and various services in connection with the
regulatory requirements applicable to each Portfolio. The Administrator may
utilize the resources of its affiliates in performing certain of these
responsibilities, at no additional cost to the Trust. The Administrator's
fee is paid by the Manager.
DISTRIBUTION AND SHAREHOLDER SERVICING PLAN
Integrity Investments, Inc., 1800 Second Street, Suite 757, Sarasota, Florida
34236, is the Trust's Distributor. The Trust has adopted a Distribution and
Shareholder Servicing Plan (the "Plan") which provides for payment of up to
0.35% of each Portfolio's average daily net assets of the Class B shares, the
purpose of which is to promote distribution of the Portfolios' shares and to
enhance the provision of shareholder services. Payments under the Plan are
authorized and are being made at the rate of 0.25% of each Portfolio's
average daily net assets for the Class B shares.
Under the Plan, each Portfolio, subject to Trustee authorization, may pay the
Distributor a monthly fee to compensate it for expenses it bears and services
it provides in the distribution of shares and the provision of shareholder
support services. The Plan also provides that certain Service Providers
(defined under the Plan as any broker, dealer, bank or other institution) may
receive compensation for providing continuing personal services to
Shareholders as well as administrative services with respect to shareholder
accounts. Such payments are used to compensate the Distributor and any
Service Providers for the services outlined above.
The Distributor shall determine the amounts to be paid to Service Providers.
Each Service Provider is required to disclose to its clients any compensation
payable to it by the Trust pursuant to the Plan and any other compensation
payable by its clients in connection with the investment of their assets in
Trust shares. The fees payable to the Distributor under the Plan for
advertising, marketing and distributing Class B shares and for payments to
Service Providers are payable without regard to actual expenses incurred by
the Distributor.
The Plan recognizes that the Manager, the Sub-Adviser and the Distributor may
use their fees from each Portfolio or other resources to pay expenses
associated with activities primarily intended to result in the sale of the
shares of the Portfolio. Under its Distribution Agreement with the Trust,
the Distributor bears certain distribution-related expenses of the
Portfolios, such as the cost and expense of printing and distributing copies
of prospectuses which are used in connection with the offering of shares to
prospective investors.
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CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT
State Street serves as the Trust's custodian ("Custodian") and holds all
portfolio securities and cash assets of the Trust. It also calculates net
asset value per share and maintains general accounting records for each
Portfolio. The Custodian is authorized to deposit securities in securities
depositories or to use the services of subcustodians. State Street also
serves as the Trust's Transfer Agent and dividend disbursing agent and
maintains the Trust's shareholder records. State Street's fees are paid by
the Manager.
VALUATION OF SHARES
All income, expenses (other than expenses incurred by a class pursuant to its
distribution and shareholder servicing plan) and realized and unrealized
gains and losses are allocated to each class proportionately on a daily basis
for purposes of determining the net asset value of each class.
Net asset value per share is determined as of 3:00 p.m. (Eastern time) for
the U.S. Treasury Money Market Portfolio and the General Money Market
Portfolio and as of noon (Eastern time) for the U.S. Treasury Income
Portfolio and the Tax-Exempt Money Market Portfolio. Net asset value per
share is determined on each day the NYSE and the Boston and the New York
Federal Reserve Banks are open. Currently, the days on which the Trust is
closed (other than weekends) are New Year's Day, Martin Luther King, Jr. Day
(observed), President's Day (observed), Good Friday, Memorial Day (observed),
Independence Day, Labor Day, Columbus Day (observed), Veteran's Day,
Thanksgiving Day and Christmas Day. Net asset value per share for purposes
of pricing sales and redemptions is calculated by dividing the value of all
securities and other assets belonging to a Portfolio, less the Portfolio's
liabilities, by the number of outstanding shares of that Portfolio.
The securities owned by each Portfolio are valued based upon the amortized
cost method. Pursuant to this method, a security is valued by reference to a
Portfolio's acquisition cost as adjusted for amortization of premium or
accretion of discount. Although the Trust seeks to maintain the net asset
value per share of each Portfolio at $1.00, there can be no assurance that
the net asset value per share will not vary.
DISTRIBUTIONS AND TAXES
Dividends out of net investment income will be declared daily and paid
monthly. Dividends for the U.S. Treasury Money Market Portfolio and the
General Money Market Portfolio are declared at 3:00 p.m. (Eastern time) to
shareholders of record at that time, and dividends for the U.S. Treasury
Income Portfolio and the Tax-Exempt Money Market Portfolio are declared at
noon (Eastern time) to shareholders of record at that time. Distributions of
net long-term capital gains, if any, for the year are made annually. All
income dividends are paid in cash and will automatically be made by wire to
institutional investors, which may elect to reinvest them in additional
shares.
Each Portfolio intends to continue to qualify as a "regulated investment
company" under Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"). As regulated investment companies, the Portfolios will not be
subject to federal income taxes on the net investment income and long-term
capital gains that are distributed to shareholders or deemed to have been
distributed to shareholders.
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Dividends derived from net investment income for the U.S. Treasury Money
Market Portfolio, U.S. Treasury Income Portfolio and General Money Market
Portfolio and from short-term capital gains, if any, are taxable to each such
Portfolio's shareholders, unless they are exempt from Federal income taxes,
as ordinary income. Distributions are taxable when they are paid, except
that distributions declared in October, November or December and paid in
January of the following year are taxable as if paid on December 31st.
Distributions of tax-exempt income by the Tax-Exempt Money Market Portfolio
are not subject to regular federal income taxes. If the Tax-Exempt Money
Market Portfolio earns federally taxable income from any of its investments,
it will be distributed as a taxable dividend. The Portfolio does not intend
to invest in Municipal Securities whose interest is subject to the federal
alternative minimum tax ("AMT") for individuals (known as "private activity
obligations").
Since all investment income is expected to be derived from earned interest,
it is anticipated that no part of any distribution will be eligible for the
dividends received deduction for corporations.
OTHER TAX INFORMATION
The information above is only a summary of some of the tax consequences
generally affecting each Portfolio and its shareholders, and no attempt has
been made to discuss individual tax consequences. In addition to federal
tax, distributions may be subject to state and local taxes. Shareholders
should make their own determination whether a Portfolio is suitable for
investment given their particular situation.
State law varies on whether mutual fund dividends that are derived in whole
or in part from interest on U.S. Government Obligations are exempt from state
income taxation. The Portfolios will provide shareholders annually with
information relating to the composition of their distributions to permit
shareholders to determine whether and to what extent the dividend income they
receive from the Portfolio may be exempt from their state's income tax.
Shareholders should consult their tax adviser as to whether any portion of
the dividends they receive from the Portfolio is exempt from state income
taxes and on any other specific questions concerning state or federal tax
treatment.
Annual statements as to the current federal tax status of distributions, if
applicable, are mailed to shareholders by January 31st following each tax
year.
When an investor signs its account application, it will be asked to certify
that its taxpayer identification number is correct and that it is not subject
to backup withholding for failing to report income to the Internal Revenue
Service ("IRS"). If the investor does not comply with IRS regulations, the
IRS can require each Portfolio to withhold a percentage of distributions.
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PERFORMANCE INFORMATION
From time to time each Portfolio may advertise its current yield and
effective yield for each class of shares in advertisements or in reports or
other communications with shareholders. A Portfolio's performance may be
compared to other investments or relevant indices.
Both yield figures are based on historical earnings and are not intended to
indicate future performance. Each Portfolio's current yield for a class of
shares refers to the net income generated by an investment in that class over
a seven-day period expressed as an annual percentage rate. In addition to
the current yield, each Portfolio may quote yields in advertising based on
any historical seven-day period. The effective yield assumes that the income
earned from the investment is reinvested. The effective yield will be
slightly higher than the current yield because of the compounding effect on
this assumed reinvestment.
The Tax-Exempt Money Market Portfolio also may quote its tax equivalent yield
and tax equivalent effective yield, which shows the taxable yield or taxable
effective yield an investor would have to earn, before taxes, to equal the
Portfolio's tax-free yield or tax-free effective yield. When a tax
equivalent yield or tax equivalent effective yield is calculated, the yield
is increased using a stated income tax rate. See the SAI for more
information concerning performance calculations.
ORGANIZATION AND CAPITALIZATION OF THE TRUST
The Trust was established as a Massachusetts business trust under the laws of
The Commonwealth of Massachusetts by an Agreement and Declaration of Trust
dated January 29, 1993 (the "Trust Declaration"). A copy of the Trust
Declaration is on file with the Secretary of The Commonwealth of
Massachusetts. The Trust, a diversified, open-end management investment
company, is not required to hold annual meetings of shareholders and does not
intend to hold shareholder meetings unless required by the 1940 Act. Holders
of shares representing 10% or more of the outstanding shares of the Trust may
call a meeting for the purpose of voting on the removal of one or more
Trustees. Special meetings may be called for the purpose of conducting
specific items of Trust business.
Shareholders receive one vote for each dollar (or a proportionate fractional
vote for each fraction of a dollar) of net asset value per share owned. The
shares of each Portfolio are classified into four classes. Each Portfolio
votes separately with respect to issues affecting only that Portfolio.
Holders of a particular class of shares have the exclusive right to vote on
matters submitted to shareholders pertaining only to that class. Pursuant to
the Trust Declaration, the Trustees have the authority to create additional
Portfolios and to issue additional classes of shares for each Portfolio of
the Trust, subject to receipt of any required regulatory approval.
Shareholders may direct any questions they may have about the Trust to the
Distributor at 1-800-828-2176.
Any person or organization owning 25% or more of the outstanding shares of a
Portfolio may be presumed to "control" (as that term is defined in the 1940
Act) such Portfolio. As of November 20, 1997 Sun Bank National Association,
P.O. Box 105504, Atlanta, GA 30348 owned a controlling interest in the U.S.
Treasury Money Market Portfolio; First Union National Bank, 1525 West Wt.
Harris Bouelvard, Charlotte, NC 28288 owned a controlling interest in the
General Money Market Portfolio and Tax-Exempt Money Market Portfolio; and
Integrity Investments, Inc., 1800 Second Street, Sarasota, FL 34236 owned a
controlling interest in the U.S. Treasury Income Portfolio.
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The Trust has adopted a code of ethics which contains a policy on personal
securities transactions by "access persons." That policy complies, in all
material respects, with the recommendations of the Investment Company
Institute.
INVESTMENT RESTRICTIONS
The following is a description of certain investment restrictions which are
fundamental and may not be changed with respect to a Portfolio without the
approval of a majority of the outstanding shares of the Portfolio. For a
description of certain other investment restrictions, reference should be
made to the SAI. The restrictions do not apply to U.S. Government
Obligations.
1. No Portfolio will invest 25% or more of the value of its total assets
in a particular industry, except that up to 100% of the assets of the
General Money Market Portfolio may be invested in domestic banking
industry obligations.
2. As to 75% of the value of its total assets, a Portfolio will not
invest more than 5% of the value of its total assets in the securities
of any one issuer or acquire more than 10% of the voting securities of
any issuer; the remaining 25% of the assets may be invested in the
securities of one or more issuers without regard to such limitations.
3. Under normal market conditions, at least 80% of the value of the
Tax-Exempt Money Market Portfolio's total assets will be invested in
Municipal Securities.
These limitations apply as of the time of purchase. If through market action
the percentage limitations are exceeded, the Portfolios will not be required
to reduce the amount of their holdings in such investments.
The General Money Market Portfolio operates in accordance with a
non-fundamental operating policy which complies with Rule 2a-7 promulgated
under the 1940 Act and is more restrictive than investment restriction number
2 above. Under Rule 2a-7 the Portfolio may not (with certain exceptions)
invest more than 5% of its total assets in the securities of a single issuer.
See "Investment Policies and Limitations" in the SAI.
CERTAIN INVESTMENT STRATEGIES, POLICIES AND RISK CONSIDERATIONS
QUALITY AND MATURITY
Each Portfolio may purchase only high quality obligations that the
Sub-Adviser believes present minimal credit risks. To be considered high
quality, a security must be a U.S. Government Obligation; or rated in
accordance with applicable rules in one of the two highest rating categories
for short-term obligations by at least two NRSROs (or by one, if only one
rating service has rated the security); or, if unrated, judged to be of
equivalent quality by the Sub-Adviser. As a matter of non-fundamental
policy, the Portfolios will only purchase securities, in addition to U.S.
Government Obligations, that are rated in the highest rating category by at
least one NRSRO or, if unrated, are determined to be of equivalent quality.
(See the Appendix for a description of NRSRO ratings).
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Each Portfolio must limit its investments to obligations with remaining
maturities of 397 days or less and must maintain a dollar-weighted average
maturity of 90 days or less.
Each Portfolio's ability to achieve its investment objective depends, at
least in part, on the quality and maturity of its investments. The
Portfolios invest in high quality obligations, but an investment in any of
the Portfolios involves risks. Although each Portfolio's policies are
designed to maintain a stable net asset value of $1.00 per share, all money
market instruments can change in value when interest rates or an issuer's
creditworthiness changes, or if an issuer or guarantor of a security fails to
pay interest or principal when due. If these changes in value were
substantial, a Portfolio's net asset value could deviate from $1.00.
Unless otherwise indicated, each Portfolio may invest in the securities and
engage in the transactions described below.
AFFILIATED BANK TRANSACTIONS
Pursuant to an exemptive order from the SEC, each Portfolio may engage in
certain transactions with banks that are, or may be considered to be,
"affiliated persons" of the Portfolio under the 1940 Act. Such transactions
may be entered into only pursuant to procedures established, and periodically
reviewed, by the Board of Trustees. These transactions may include
repurchase agreements with U.S. banks having short-term debt instruments
rated high quality by at least one NRSRO (or if unrated, determined by the
Sub-Adviser to be of comparable quality); purchases, as principal, of
short-term obligations of such banks and their bank holding companies and
affiliates; transactions in Municipal Securities; transactions in bankers'
acceptances; and transactions in U.S. Government Obligations with affiliated
banks that are primary dealers in these securities.
REPURCHASE AGREEMENTS (APPLICABLE TO U.S. TREASURY MONEY MARKET PORTFOLIO,
GENERAL MONEY MARKET PORTFOLIO AND TAX-EXEMPT MONEY MARKET PORTFOLIO ONLY)
Each Portfolio, except the U.S. Treasury Income Portfolio, may enter into
repurchase agreements that allow the Portfolio to purchase U.S. Government
Obligations, with an agreement that the seller will repurchase the obligation
at an agreed upon price and date. No more than 10% of a Portfolio's net
assets taken at current value will be invested in repurchase agreements
extending for more than seven days. If a seller defaults on the obligation
to repurchase, the Portfolios may incur a loss or other costs.
REVERSE REPURCHASE AGREEMENTS (APPLICABLE TO GENERAL MONEY MARKET PORTFOLIO
AND TAX-EXEMPT MONEY MARKET PORTFOLIO ONLY)
The General Money Market Portfolio and the Tax-Exempt Money Market Portfolio
may enter into reverse repurchase agreements, which are transactions where a
Portfolio temporarily transfers possession of a portfolio instrument to
another party, such as a bank or broker-dealer, in return for cash. At the
same time, the Portfolio agrees to repurchase the instrument at an agreed
upon time and price, which includes interest. The General Money Market
Portfolio expects that it will engage in reverse repurchase agreements when
it is able to invest the cash so acquired at a rate higher than the cost of
the agreement, which would increase income earned by such Portfolio, or for
liquidity purposes. Engaging in reverse repurchase agreements may involve an
element of leverage, and no Portfolio will purchase a security while
borrowings (including reverse repurchase agreements) representing more than
5% of its total assets are outstanding. The Tax-Exempt Money Market
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Portfolio will engage in reverse repurchase agreements for temporary or
emergency purposes only and not for leverage or investment.
FORWARD COMMITMENTS AND "WHEN-ISSUED" SECURITIES
Each Portfolio may also enter into forward commitment agreements and purchase
"when-issued" securities. Forward commitments are contracts to purchase
securities for a fixed price at a specified future date beyond customary
settlement time with no interest accruing to the Portfolio until the
settlement date. Forward commitments involve a risk of loss if the value of
the security to be purchased declines prior to the settlement date.
Municipal Securities are often issued on a when-issued basis. The yield of
such securities is fixed at the time a commitment to purchase is made, with
actual payment and delivery of the security generally taking place 15 to 45
days later. Under some circumstances, the purchase of when-issued securities
may act to leverage the Portfolio.
LENDING OF SECURITIES
For the purpose of realizing additional income, the Portfolios may lend
portfolio securities to broker-dealers or financial institutions up to not
more than 10% of their respective total assets taken at current value. While
any such loan is outstanding, each such Portfolio will continue to receive
amounts equal to the interest or dividends paid by the issuer on the
securities, as well as interest (less any rebates to be paid to the borrower)
on the investment of the collateral or fees from the borrower. Each Portfolio
will have a right to call each loan and obtain the securities. Lending
portfolio securities involves certain risks, including possible delays in
receiving additional collateral or in the recovery of the securities or
possible loss of rights in the collateral should the borrower fail
financially. Loans will be made in accordance with guidelines established by
the Board of Trustees.
LETTERS OF CREDIT
Issuers or financial intermediaries who provide demand features or standby
commitments often support their ability to buy obligations on demand by
obtaining letters of credit ("LOCs") or other guarantees from domestic or
foreign banks. LOCs also may be used as credit supports for Municipal
Securities. The Sub-Adviser may rely upon its evaluation of a bank's credit
in determining whether to purchase an instrument supported by an LOC. In
evaluating a foreign bank's credit, the Sub-Adviser will consider whether
adequate public information about the bank is available and whether the bank
may be subject to unfavorable political or economic developments, currency
controls or other governmental restrictions that might affect the bank's
ability to honor its credit commitment.
ZERO COUPON BONDS
Each Portfolio may purchase zero coupon bonds. Regular interest payments are
not made on zero coupon bonds; instead these bonds are sold at a deep
discount from their face value and are redeemed at face value when they
mature. Each Portfolio will purchase only those zero coupon bonds which have
a remaining maturity of one year or less. As a result, such bonds are
expected to pay out a return on a regular basis as they mature. Because zero
coupon bonds do not pay current income, their prices tend to be more volatile
in response to interest rate changes than bonds which pay interest regularly.
In calculating its daily dividend, a
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Portfolio takes into account as income a portion of the difference between a
zero coupon bond's purchase price and its face value.
A broker-dealer creates a derivative zero coupon bond by separating the
interest and principal components of a U.S. Treasury security and selling
them as two individual securities. CATS (Certificates of Accrual on Treasury
Securities), TIGRs (Treasury Investment Growth Receipts), and TRs (Treasury
Receipts) are examples of derivative zero coupon bonds.
The Federal Reserve Bank creates STRIPS (Separate Trading of Registered
Interest and Principal of Securities) by separating the interest and
principal components of an outstanding U.S. Treasury bond and selling them as
individual securities. Bonds issued by the Resolution Funding Corporation
and the Financing Corporation can also be separated in this fashion.
U.S. GOVERNMENT OBLIGATIONS
U.S. Government Obligations are debt obligations issued or guaranteed by the
U.S. Treasury or by an agency or instrumentality of the U.S. Government. Not
all U.S. Government Obligations are backed by the full faith and credit of
the United States. Obligations may be supported only by the agency's right
to borrow money from the U.S. Treasury under certain circumstances or by the
credit of the agency. There is no guarantee that the U.S. Government will
support these types of obligations, and therefore they involve more risk than
U.S. Government Obligations backed by the full faith and credit of the United
States.
VARIABLE AND FLOATING RATE INSTRUMENTS
Each Portfolio may purchase variable and floating rate demand instruments and
other securities that possess a floating or variable interest rate adjustment
formula. These instruments permit the Portfolios to demand payment of the
principal balance plus unpaid accrued interest upon a specified number of
days' notice to the issuer or its agent. The demand feature may be backed by
a bank letter of credit or guarantee issued with respect to such instrument.
The Portfolios' Sub-Adviser, on behalf of the Manager, intends to exercise
the demand only (1) to attain a more optimal portfolio structure, (2) upon a
default under the terms of the debt security, (3) as needed to provide
liquidity to the Portfolios, or (4) to maintain the respective quality
standard of the Portfolios' investment portfolio. The Portfolios'
Sub-Adviser will determine which variable or floating rate demand instruments
to purchase in accordance with procedures approved by the Trustees to
minimize credit risks.
MUNICIPAL LEASE OBLIGATIONS (APPLICABLE TO TAX-EXEMPT MONEY MARKET PORTFOLIO
ONLY)
Municipal lease obligations are issued by a state and local government or
authority to acquire land and a wide variety of equipment and facilities.
These obligations typically are not fully backed by the municipality's
credit, and the interest payable on these obligations may become taxable if
the lease is assigned. If funds are not appropriated for the following
year's lease payments, a lease may terminate, with the possibility of default
on the lease obligation and significant loss to the Portfolio. Such risk of
non-appropriation is unique to municipal lease obligations. The SEC Staff has
taken the position that open-end investment companies may treat these
obligations as liquid under guidelines established by the Board of Trustees.
Determination concerning the liquidity and proper valuation of these
obligations will include: the frequency of trades and
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quotes for the obligation, the number of dealers willing to purchase or sell
the security and the number of potential buyers, the willingness of dealers
to make a market in the securities, the nature of the marketplace trades and
the likelihood that its marketability will be maintained throughout the time
the instrument is held by the Portfolio. The Board will be responsible for
determining the credit quality of any unrated lease obligations held by the
Portfolio, on an ongoing basis, including an assessment of the likelihood
that the lease will not be canceled. The high quality municipal lease
obligations in which the Tax-Exempt Money Market Portfolio intends to invest
generally are not expected by the Board to present liquidity risks. Lease
obligations will be valued based on a standard spread that relates to general
obligation securities whose value is determined using a pricing service.
Certificates of participation in municipal lease obligations or installment
sales contracts entitle the holder to a proportionate interest in the
lease-purchase payments made. Certificates of participation typically are
issued by municipalities and by banks and other financial institutions.
MUNICIPAL SECURITIES (APPLICABLE TO TAX-EXEMPT MONEY MARKET PORTFOLIO ONLY)
Municipal Securities include general obligation securities, which are backed
by the full taxing power of a municipality, or revenue securities, which are
backed by the revenues of a specific tax, project or facility. Resource
recovery bonds, a type of revenue obligation, are used to finance the
construction of waste burning facilities. Such bonds may be subject to
special risks because the project uses technology or an economic plan that is
not yet proven, or requires operating permits from environmental authorities.
Industrial development bonds are a type of revenue bond backed by the credit
and security of a private issuer and may involve greater risk. Tax and
revenue anticipation notes are issued by municipalities in expectation of
future tax or other revenues, and are payable from those specific taxes or
revenues. Bond anticipation notes normally provide interim financing in
advance of an issue of bonds or notes, the proceeds of which are used to
repay the anticipation notes.
Although the Tax-Exempt Money Market Portfolio presently does not intend to
do so on a regular basis, it may invest more than 25% of its assets in
Municipal Securities which are related in such a way that an economic,
business, or political development or change affecting one security would
likewise affect the other Municipal Securities. To the extent that the
Portfolio's assets are concentrated in Municipal Securities that are so
related, the Portfolio will be subject to the peculiar risks presented by
such Municipal Securities, such as negative developments in a particular
industry or state, to a greater extent than it would be if the Portfolio's
assets were not so concentrated.
RESTRICTED SECURITIES (APPLICABLE TO GENERAL MONEY MARKET PORTFOLIO AND
TAX-EXEMPT MONEY MARKET PORTFOLIO ONLY)
The General Money Market Portfolio and the Tax-Exempt Money Market Portfolio
may purchase securities which cannot be sold to the public without
registration under the Securities Act of 1933 (restricted securities). Unless
registered for sale, these securities can only be sold in privately
negotiated transactions or pursuant to an exemption from registration.
Provided that the security has a demand feature of seven days or less, or a
dealer or institutional trading market exists which in the opinion of the
Sub-Adviser, subject to Board guidelines, affords liquidity, these restricted
securities are not treated as illiquid securities for purposes of each
Portfolio's restriction on not investing more than 10% of its net assets in
illiquid securities.
20
<PAGE>
SPECIAL CONSIDERATIONS OF FOREIGN INVESTMENTS (APPLICABLE TO GENERAL MONEY
MARKET PORTFOLIO ONLY)
The General Money Market Portfolio may invest in U.S. dollar-denominated
obligations of foreign branches of U.S. banks (Eurodollars), U.S. branches
and agencies of foreign banks (Yankee dollars), and foreign branches of
foreign banks. Euro and Yankee dollar investments involve risks that are
different from investments in securities of U.S. banks. These risks may
include future unfavorable political and economic developments, possible
withholding taxes, seizure of foreign deposits, currency controls, interest
limitations or other governmental restrictions which might affect payment of
principal or interest. Additionally, there may be less public information
available about foreign banks and their branches. Foreign branches of
foreign banks are not regulated by U.S. banking authorities, and generally
are not bound by accounting, auditing and financial reporting standards
comparable to U.S. banks. Although the Sub-Adviser carefully considers these
factors when making investments, and subject to its policy on concentration,
the Portfolio does not limit the amount of its assets which can be invested
in any one type of instrument or in any foreign country. The Portfolio will
not invest 25% or more of its assets in Euro and Yankee dollar investments
and obligations of foreign branches of foreign banks.
APPENDIX
NRSRO RATINGS
Description of Moody's Investors Service, Inc. ("Moody's") and Standard &
Poor's Corporation ("S&P") commercial paper and bond ratings:
SHORT-TERM DEBT RATINGS
MOODY'S EMPLOYS THREE DESIGNATIONS, ALL JUDGED TO BE INVESTMENT GRADE, TO
INDICATE THE RELATIVE REPAYMENT CAPACITY OF RATED ISSUERS. THE HIGHEST
DESIGNATION IS AS FOLLOWS:
Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following
characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structures with moderate reliance on debt
and ample asset protection.
- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
- Well-established access to a range of financial markets and assured
sources of alternate liquidity.
S&P SHORT-TERM DEBT RATINGS ARE GRADED INTO FOUR CATEGORIES, RANGING FROM "A"
FOR THE HIGHEST QUALITY OBLIGATIONS TO "D" FOR THE LOWEST. THE HIGHEST
RATINGS IN THE "A" CATEGORY ARE DESCRIBED AS FOLLOWS:
"A"-Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are further refined
with the designations 1, 2 and 3 to indicate the relative degree of safety.
21
<PAGE>
"A-1"-This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics will be noted with a plus (+)
sign designation.
MUNICIPAL OBLIGATIONS
Moody's ratings for state and municipal and other short-term obligations will
be designated Moody's Investment Grade ("MIG"). This distinction is in
recognition of the differences between short-term credit risk and long-term
risk. Factors affecting the liquidity of the borrower are uppermost in
importance in short-term borrowing, while various factors of the first
importance in short-term borrowing risk are of lesser importance in the long
run. The highest MIG quality rating is defined as follows:
MIG-1-Notes bearing this designation are of the best quality, enjoying strong
protection from established cash flows of funds for their servicing or from
established and broad-based access to the market for refinancing, or both.
A short-term rating may also be assigned to an issue having a demand feature.
Such ratings will be designated as VMIG to reflect such characteristics as
payment upon periodic demand rather than fixed maturity dates and payment
relying on external liquidity. Additionally, investors should be alert to
the fact that the source of payment may be limited to the external liquidity
with no or limited legal recourse to the issuer in the event the demand is
not met. A VMIG-1 rating carries the same definition as MIG-1.
S&P'S HIGHEST QUALITY RATING FOR SHORT-TERM STATE AND MUNICIPAL NOTES IS
DEFINED AS FOLLOWS:
SP-1- Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be
given a plus (+) designation.
22
<PAGE>
THE VALIANT FUND
1776 Heritage Drive
North Quincy, MA 02171
The Valiant Fund (the "Trust") is an open-end investment company comprised of
four separate investment portfolios (the "Portfolios") offering Class A
shares, Class B shares, Class C shares and Class D shares:
U.S. TREASURY MONEY MARKET PORTFOLIO GENERAL MONEY MARKET PORTFOLIO
U.S. TREASURY INCOME PORTFOLIO TAX-EXEMPT MONEY MARKET PORTFOLIO
The investment objective of each Portfolio is to obtain as high a level of
current income as is consistent with the preservation of capital and
liquidity. The Tax-Exempt Money Market Portfolio seeks primarily income
exempt from federal income tax. The Trust offers banks and other
institutional investors an economical and convenient means of investing in
professionally managed money market funds.
The Trust offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes of shares are identical, except as to the services
offered to and the expenses borne by each class. Class B shares, Class C
shares and Class D shares each bear certain costs pursuant to their
respective Distribution and Shareholder Servicing Plans adopted in accordance
with Rule 12b-1 under the Investment Company Act of 1940 (the "1940 Act").
THIS PROSPECTUS RELATES ONLY TO CLASS C SHARES.
Each Portfolio is designed exclusively for investment of short-term monies
held in institutional accounts. Shares of the Portfolios may be purchased by
banks and other institutional investors that have entered into service
agreements with Integrity Investments, Inc. (the "Distributor"),
1-800-828-2176.
This Prospectus sets forth concisely the information about the Trust that a
prospective investor ought to know before investing. Please read it
carefully and retain it for future reference. Certain additional information
is contained in a Statement of Additional Information ("SAI") dated December
19, 1997, as revised from time to time, which has been filed with the
Securities and Exchange Commission, is incorporated herein by reference and
is available upon request and without charge by calling the Distributor at
the telephone number shown above.
INVESTMENTS IN THE PORTFOLIOS ARE NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE CAN BE NO ASSURANCE THAT A PORTFOLIO WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY
DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY, AND
INVOLVE INVESTMENT RISKS INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
PROSPECTUS - DECEMBER 19, 1997
1
<PAGE>
CONTENTS
Expense Information. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Investment Objectives and Policies . . . . . . . . . . . . . . . . . . . 5
Who Should Invest. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Purchases and Redemptions. . . . . . . . . . . . . . . . . . . . . . . . 7
Management of the Portfolios . . . . . . . . . . . . . . . . . . . . . . 9
Management Fees and Other Expenses . . . . . . . . . . . . . . . . . . . 9
Valuation of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Distributions and Taxes. . . . . . . . . . . . . . . . . . . . . . . . . 11
Performance Information. . . . . . . . . . . . . . . . . . . . . . . . . 13
Organization and Capitalization of the Trust . . . . . . . . . . . . . . 13
Investment Restrictions. . . . . . . . . . . . . . . . . . . . . . . . . 14
Certain Investment Strategies, Policies and Risk Considerations. . . . . 14
Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2
<PAGE>
EXPENSE INFORMATION
<TABLE>
<CAPTION>
U.S. TREASURY MONEY U.S. TREASURY GENERAL MONEY TAX-EXEMPT MONEY
MARKET INCOME MARKET MARKET
PORTFOLIO** PORTFOLIO** PORTFOLIO** PORTFOLIO**
----------- ----------- ----------- ------------
Class C Class C Class C Class C
<S> <C> <C> <C> <C>
Shareholder
Transaction Expenses
- ----------------------
Sales Load Imposed
on Purchases None None None None
Sales Load Imposed
on Reinvested
Dividends None None None None
Deferred Sales Load None None None None
Redemption Fees None None None None
Annual Fund
Operating Expenses
(as a percentage of
average net assets)
- -----------------------
Management Fees 0.20% 0.20% 0.20% 0.20%
12b-1 Fees* 0.40% 0.40% 0.40% 0.40%
Other Expenses (after expense
reimbursement) 0.00% 0.00% 0.00% 0.00%
----- ----- ----- -----
Total Fund Operating
Expenses (after expense
reimbursement) 0.60% 0.60% 0.60% 0.60%
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
- ----------------------------
* The Trust has adopted a Distribution and Shareholder Servicing Plan for the
Class C Shares (the "Plan"). Payments under the Plan are authorized at the
rate of 0.40% of the average daily net assets. See "Management Fees and
Other Expenses" for further information on the Plan.
**As of the date of this Prospectus, the Class C shares of each of the
Portfolios have not commenced operations.
Four classes of shares of the Trust are being offered by each Portfolio:
Class A, Class B, Class C and Class D shares. The classes are identical,
except that Class B shares, Class C shares and Class D shares are subject to
differing annual distribution and service fees. Class A shares are currently
not subject to an annual distribution and service fee. The Class B, Class C
and Class D shares' distribution and service fees will cause the Class B,
Class C and Class D shares to have a higher expense ratio and to pay lower
dividends than Class A shares, the Class C and Class D shares to have a
higher expense ratio and to pay lower dividends than the Class B shares, and
the Class D shares to have a higher expense ratio and to pay lower dividends
than the Class C shares. This Prospectus describes only the Class C shares.
An investor may obtain prospectuses relating to the Class A and Class B
shares and Class D shares, respectively, by calling the Distributor at
1-800-828-2176.
3
<PAGE>
The purpose of this table is to assist an investor in understanding the
various costs and expenses that the investor will bear directly or
indirectly. Management fees are paid by each Portfolio to Integrity
Management & Research, Inc. (the "Manager") for managing its investments and
business affairs. All operating expenses are paid by each Portfolio and are
not charged directly to an investor's account. There are no sales or
redemption fees. However, certain institutional investors may charge their
customers fees in addition to those described herein. See "Purchases and
Redemptions." The Manager has declared voluntary expense limitations for the
Class C shares of each Portfolio of 0.60% of average daily net assets of
Class C shares. The Manager will voluntarily reimburse any expenses above
the expense limitations. Although as of the date of this Prospectus the
Class C shares of each of the Portfolios have not commenced operations based
on the experience of the Class A shares of those Portfolios without the
effect of the expense reimbursements: "Other Expenses" and "Total Operating
Expenses" would be 0.03% and 0.78%, respectively, for the U.S. Treasury
Income Portfolio and 0.00% and 0.60%, respectively, for each of the other
Portfolios. The expense limitations are voluntary but will remain in effect
through December 1998. The expense limitations may be removed at any time
thereafter with 90 days' prior notice to existing shareholders.
Non-recurring or extraordinary expenses are generally excluded in the
determination of expense ratios of the Portfolios for purposes of determining
any required expense reimbursement. Quotations of yield for any period when
an expense limitation is in effect will be greater than if the limitation had
not been in effect. For more information, see "Management Fees and Other
Expenses," and "Purchases and Redemptions."
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period.
1 Year 3 Years 5 Years 10 Years
U.S. Treasury Money Market Portfolio $6 $19 $34 $75
U.S. Treasury Income Portfolio $6 $19 $34 $75
General Money Market Portfolio $6 $19 $34 $75
Tax-Exempt Money Market Portfolio $6 $19 $34 $75
THE EXAMPLES ARE BASED ON ASSUMED PERFORMANCE LEVELS AND SHOULD NOT BE
CONSIDERED REPRESENTATIONS OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE
GREATER OR LESSER THAN THOSE SHOWN.
4
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of each Portfolio is to obtain as high a level of
current income as is consistent with the preservation of capital and
liquidity. The Tax-Exempt Money Market Portfolio seeks primarily income
exempt from federal income tax. There is no assurance that a Portfolio will
achieve its investment objective. A Portfolio's investment objective is
fundamental and may not be changed at any time without shareholder approval.
Unless otherwise indicated, a Portfolio's investment policies are not
fundamental and may be changed at any time without shareholder approval. As
a matter of non-fundamental policy, the Portfolios will only purchase
securities, in addition to U.S. Government Obligations (as defined below),
that are rated in the highest category by at least one nationally recognized
statistical rating organization ("NRSRO") or, if unrated, are determined by
the sub-adviser to be of equivalent quality. (See "Management of the
Portfolios" for information about the sub-adviser, and see the Appendix for a
description of NRSRO ratings.)
THE U.S. TREASURY MONEY MARKET PORTFOLIO invests all of its assets in
securities issued or guaranteed by the United States Government or its
agencies, authorities or instrumentalities ("U.S. Government Obligations")
which are backed by the full faith and credit of the United States and
repurchase agreements collateralized by such U.S. Government Obligations.
Under normal market conditions, at least 65% of its total assets will be
invested in direct U.S. Treasury obligations and repurchase agreements
collateralized by U.S. Treasury obligations. Income earned from U.S.
Government Obligations is generally exempt from state and local income tax.
Income earned from repurchase agreement transactions generally is not exempt
from state and local income tax. (See "Distributions and Taxes.")
The U.S. Treasury Money Market Portfolio has been rated "AAAm" by Standard &
Poor's Corporation ("S&P") and "Aaa" by Moody's Investors Service, Inc.
("Moody's"). Such quality rating is based on, among other things, an
analysis of the Portfolio's investment strategies, operational policies and
management. S&P and Moody's also may undertake an ongoing analysis and
assessment of these criteria in order to update the Portfolio's rating.
THE U.S. TREASURY INCOME PORTFOLIO invests all of its assets in U.S.
Government Obligations which are backed by the full faith and credit of the
United States, the interest income from which generally will not be subject
to state income tax. (See "Distributions and Taxes.") Under normal market
conditions, at least 65% of its total assets will be invested in U.S.
Treasury obligations such as U.S. Treasury bills, notes and bonds.
THE GENERAL MONEY MARKET PORTFOLIO invests in U.S. dollar-denominated
short-term debt securities including:
-- Obligations of domestic and foreign banks or thrift organizations (such
as bankers' acceptances, time deposits and certificates of deposit);
-- Corporate debt obligations, including commercial paper, notes and bonds
with remaining maturities of 397 days or less;
-- U.S. Government Obligations and repurchase agreements backed by U.S.
Government Obligations; and
-- Cash.
5
<PAGE>
More than 25% of the value of the total assets of the Portfolio may be
invested in domestic banking industry obligations. The Portfolio may
purchase securities that are subject to restrictions on resale.
THE TAX-EXEMPT MONEY MARKET PORTFOLIO invests in high-quality, short-term,
fixed, variable or floating rate municipal securities and in high-quality,
long-term municipal securities whose features give them interest rates,
maturities and prices similar to short-term instruments ("Municipal
Securities").
Municipal Securities are obligations issued by or on behalf of state and
local governments and public authorities (including states, territories and
possessions of the United States, the District of Columbia, cities, counties,
municipalities, municipal agencies and regional districts and their political
subdivisions, agencies, authorities and instrumentalities), the interest from
which, in the opinion of bond counsel for the issuers of the obligations at
the time of their issuance, is exempt from federal income tax.
The Portfolio's investments in Municipal Securities may include tax, revenue
and bond anticipation notes; tax-exempt commercial paper; and general
obligation or revenue bonds (including securities such as municipal lease
obligations and resource recovery bonds). The Portfolio may purchase
obligations that are subject to restrictions on resale. The Portfolio will
not invest in Municipal Securities whose interest is subject to the federal
alternative minimum tax ("AMT") for individuals (known as "private activity
obligations").
Municipal Securities are issued to raise money for various public purposes,
including general purpose financing for state and local governments as well
as financing for specific projects or public facilities. Municipal
Securities may be backed by the full taxing power of a municipality or by the
revenues from a specific project or the credit of a private organization.
Some Municipal Securities are insured by private insurance companies, while
others may be supported by letters of credit furnished by domestic or foreign
banks.
Distributions from the Tax-Exempt Money Market Portfolio will in general be
exempt from regular federal income taxes. As a temporary defensive measure,
when market conditions so warrant, the Tax-Exempt Money Market Portfolio may
invest its assets without limitation in any of the money market instruments
which are permissible investments for the General Money Market Portfolio. To
the extent that the Tax-Exempt Money Market Portfolio earns taxable income
from any of its investments, the income would be distributed as a taxable
dividend.
WHO SHOULD INVEST
Each Portfolio is designed exclusively for investment of short-term monies
held by banks and other institutional investors.
The advantages offered by the Portfolios include large scale purchasing power
and diversification, which can help avoid the greater expense of executing a
large number of small transactions. Each Portfolio also makes it possible
for institutional investors to participate in a more diversified portfolio
than the size of their investments might otherwise permit. Also, investment
in the Portfolios can relieve institutions of many management and
administrative burdens usually associated with the direct purchase and sale
of money market instruments, including: selecting portfolio investments,
obtaining favorable terms at which to buy and sell, scheduling and monitoring
maturities and reinvestments, safe-keeping of securities, and portfolio
recordkeeping.
6
<PAGE>
It should be noted that the Portfolios are not FDIC insured.
PURCHASES AND REDEMPTIONS
PURCHASES
Shares of the Portfolios may be purchased by institutions that have entered
into service agreements with the Distributor and opened accounts with the
Trust. Call 1-800-828-2176 for information. Establishment of an account
requires that certain documents and applications be signed before the
investment can be processed. Fees in addition to those described herein may
be charged by some institutions which establish accounts on behalf of their
customers.
The minimum initial investment in each Portfolio is $1,000,000. Institutions
may satisfy the minimum investment by aggregating their fiduciary accounts.
Subsequent investments may be in any amount. If an account balance falls
below $100,000 due to redemption, the Portfolio may close the account.
Investors will be notified if the minimum balance is not being maintained and
will be allowed 30 days to make additional investments before the account is
closed. Any involuntary redemptions will be effected at the price at 3:00
p.m. (Eastern time) for the U.S. Treasury Money Market Portfolio and the
General Money Market Portfolio and at noon (Eastern time) for the U.S.
Treasury Income Portfolio and the Tax-Exempt Money Market Portfolio.
Purchase orders must be transmitted to the Portfolio's transfer agent, State
Street Bank and Trust Company (the "Transfer Agent"). Each Portfolio
requires advance notification of all wire purchases. Purchases may be made
only by wire.
A purchase order for shares in the U.S. Treasury Money Market Portfolio or
General Money Market Portfolio received by the Transfer Agent by 3:00 p.m.
(Eastern time), or for shares in the U.S. Treasury Income Portfolio or the
Tax-Exempt Money Market Portfolio received by the Transfer Agent by noon
(Eastern time), on a day the New York Stock Exchange ("NYSE") and both the
Boston and New York Federal Reserve Banks are open ("Business Day") will be
executed at the net asset value per share next determined after receipt of
the order and will receive the dividend declared on the day of purchase,
provided that the Trust's Custodian, State Street Bank and Trust Company,
receives the wire by the close of the Federal Reserve wire system on that
Business Day. See "Valuation of Shares."
Each Portfolio reserves the right to reject any purchase order. Purchase
orders may be refused if, for example, they are of a size that could disrupt
management of a Portfolio. Purchases by exchange are not permitted.
REDEMPTIONS
Shareholders may redeem all or a portion of their shares on any Business Day.
Shares will be redeemed at the net asset value next calculated after the
Transfer Agent has received the redemption request. If an account is closed,
any accrued dividends will be paid within 10 days of the beginning of the
following month.
Shares may be redeemed, and the redemption proceeds wired, on the same day if
telephone redemption instructions are received by the Transfer Agent by 3:00
p.m. (Eastern time) on the day of redemption for the U.S. Treasury Money
Market Portfolio and for the General Money Market Portfolio, or by noon
(Eastern
7
<PAGE>
time) on the day of redemption for the U.S. Treasury Income Portfolio and for
the Tax-Exempt Money Market Portfolio. Shares redeemed and wired on the same
day will not receive the dividend declared on the day of redemption. A
shareholder whose redemption instructions are received by the Transfer Agent
after 3:00 p.m. (Eastern time) with respect to the U.S. Treasury Money Market
Portfolio or General Money Market Portfolio or after noon (Eastern time) with
respect to the U.S. Treasury Income Portfolio or the Tax-Exempt Money Market
Portfolio will receive the dividend declared on the day on which the
redemption instructions were received and will receive wired redemption
proceeds on the next Business Day. Shareholders may change the bank account
designated to receive an amount redeemed at any time by sending a letter of
instruction with a signature guarantee to the Transfer Agent, State Street
Bank and Trust Company, at P.O. Box 1978, Boston, Massachusetts 02105.
If making immediate payment of redemption proceeds could adversely affect a
Portfolio, shareholders may be paid up to seven days after receipt of the
redemption request. Also, when the NYSE or either the Boston or New York
Federal Reserve Bank is closed (or when trading is restricted) for any reason
other than its respective customary weekend or holiday closing, or under any
emergency circumstances as determined by the Securities and Exchange
Commission ("SEC") to merit such action, redemption or payment may be
suspended or postponed.
Shares also may be redeemed by mail by submitting an order addressed to: The
Valiant Fund, P.O. Box 1978, Boston, Massachusetts 02105. If transactions by
telephone cannot be executed (e.g., during times of unusual market activity),
orders should be placed by mail. In case of suspension of the right of
redemption, a shareholder may either withdraw its request for redemption or
receive payment based on the net asset value next determined after the
termination of the suspension.
The Trust reserves the right to refuse a wire or telephone redemption if the
Manager or the Transfer Agent believes it is advisable to do so. Upon 60
days' prior notice to existing shareholders, procedures for redeeming shares
by wire or telephone may be modified or terminated at any time by the Trust
or the Transfer Agent.
ADDITIONAL INFORMATION
SHAREHOLDER SERVICES
Shareholders should verify the accuracy of all transactions immediately upon
receipt of their confirmation statements. Neither the Trust nor the Transfer
Agent will be liable for following instructions communicated by telephone
that it reasonably believes to be genuine. The privilege to initiate
transactions by telephone is made available to shareholders automatically.
The Trust will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine, including: requiring some form of
personal identification prior to acting upon instructions received by
telephone, providing written confirmation of such transactions or tape
recording of telephone instructions. If it does not employ reasonable
procedures to confirm that telephone instructions are genuine, the Trust or
the Transfer Agent may be liable for any losses due to unauthorized or
fraudulent instructions.
8
<PAGE>
To allow the Portfolios to be managed effectively, shareholders are urged to
initiate all trades (investments and redemptions of shares) as early in the
day as possible and to notify the Trust by calling the Transfer Agent at
least one day in advance of trades in excess of $10,000,000. In making trade
requests, the name of the shareholder and the account number(s) must be
supplied.
STATEMENTS AND REPORTS
Shareholders will receive a monthly statement and a confirmation after every
transaction that affects the share balance or the account registration. A
statement with tax information will be mailed by January 31st following each
tax year and also will be filed with the Internal Revenue Service. At least
twice a year, shareholders will receive the Portfolios' financial statements.
MANAGEMENT OF THE PORTFOLIOS
The overall responsibility for supervision of the affairs of the Trust vests
in the Board of Trustees of the Trust. The Manager is responsible for the
management of the Trust's day-to-day business affairs and has general
responsibility for the management of the investments of the Portfolios. The
Manager, at its expense, has contracted with David L. Babson & Co. Inc. (the
"Sub-Adviser") to manage the investments of the Portfolios subject to the
requirements of the Investment Company Act of 1940, as amended (the "1940
Act").
Richard F. Curcio, who is the Manager's President and Chairman of the Board
and President, Chairman of the Board and a Trustee of the Trust, indirectly
owns or controls all of the outstanding shares of common stock of the
Manager. Mr. Curcio has 18 years of experience in mutual fund industry
marketing, sales and operations. Located at 1800 Second Street, Suite 757,
Sarasota, Florida 34236, the Manager was organized in Florida on
September 24, 1992.
The Sub-Adviser, a Massachusetts corporation, is located at One Memorial
Drive, Cambridge, Massachusetts 02142. Founded in 1940, the Sub-Adviser
provides investment advice to individuals, state and local government
agencies, pension and profit sharing plans, trusts, estates, banks and other
organizations, and also serves as the investment adviser to The Babson Funds
(a family of mutual funds). The Sub-Adviser is a subsidiary of Massachusetts
Mutual Life Insurance Company.
The Sub-Adviser is authorized to make investment decisions and engage in
portfolio transactions on behalf of the Trust, subject to such general or
specific instructions as may be given by the Trustees and/or the Manager. The
payment of fees to the Sub-Adviser is the sole responsibility of the Manager.
MANAGEMENT FEES AND OTHER EXPENSES
Under its Management Agreement with the Trust, the Manager performs certain
administrative and management services for the Trust and pays the
compensation, if any, of officers and Trustees who are affiliated with the
Manager or the Sub-Adviser and pays all the Portfolio expenses with the
following exceptions: the fees and expenses of those Trustees who are not
"interested persons" of the Trust; interest on borrowings; taxes; expenses
incurred pursuant to the Trust's distribution and shareholder servicing
plans; and such extraordinary nonrecurring expenses as may arise, including
litigation to which the Trust may be a party.
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For its services to the Portfolios, the Manager receives fees paid monthly
and computed at an annual rate of 0.20% of the average daily net asset value
of each of the Portfolios. The Manager is solely responsible for the payment
of all fees to the Sub-Adviser.
For its services to the Portfolios, the Sub-Adviser is paid by the Manager a
monthly fee computed at an annual rate based upon the aggregate average daily
net assets of the Trust, as follows: 0.10% of the first $500 million of net
assets and 0.05% of net assets over $500 million. The Sub-Adviser has
voluntarily agreed to reduce its fees from 0.05% to 0.04% of net assets over
$2 billion.
ADMINISTRATOR. State Street Bank and Trust Company ("State Street" or the
"Administrator"), 225 Franklin Street, Boston, MA 02110, is the Administrator
of the Trust.
The Administrator assists in each Portfolio's administration and operation,
including providing office space and various services in connection with the
regulatory requirements applicable to each Portfolio. The Administrator may
utilize the resources of its affiliates in performing certain of these
responsibilities, at no additional cost to the Trust. The Administrator's
fee is paid by the Manager.
DISTRIBUTION AND SHAREHOLDER SERVICING PLAN
Integrity Investments, Inc., 1800 Second Street, Suite 757, Sarasota, Florida
34236, is the Trust's Distributor. The Trust has adopted a Distribution and
Shareholder Servicing Plan for the Class C Shares (the "Plan") which provides
for payment of up to 0.50% of each Portfolio's average daily net assets, the
purpose of which is to promote distribution of the Portfolios' shares and to
enhance the provision of shareholder services. Payments under the Plan are
authorized and will be made at the rate of 0.40% of each Portfolio's average
daily net assets for the Class C shares.
Under the Plan, each Portfolio, subject to Trustee authorization, may pay the
Distributor a monthly fee to compensate it for expenses it bears and services
it provides in the distribution of shares and the provision of shareholder
support services. The Plan also provides that certain Service Providers
(defined under the Plan as any broker, dealer, bank or other institution) may
receive compensation for providing continuing personal services to
Shareholders as well as administrative services with respect to shareholder
accounts. Such payments are used to compensate the Distributor and any
Service Providers for the services outlined above.
The Distributor shall determine the amounts to be paid to Service Providers.
Each Service Provider is required to disclose to its clients any compensation
payable to it by the Trust pursuant to the Plan and any other compensation
payable by its clients in connection with the investment of their assets in
Trust shares. The fees payable to the Distributor under the Plan for
advertising, marketing and distributing Class C shares and for payments to
Service Providers are payable without regard to actual expenses incurred by
the Distributor.
The Plan recognizes that the Manager, the Sub-Adviser and the Distributor may
use their fees from each Portfolio or other resources to pay expenses
associated with activities primarily intended to result in the sale of the
shares of the Portfolio. Under its Distribution Agreement with the Trust,
the Distributor bears certain distribution-related expenses of the
Portfolios, such as the cost and expense of printing and distributing copies
of prospectuses which are used in connection with the offering of shares to
prospective investors.
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CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT
State Street serves as the Trust's custodian ("Custodian") and holds all
portfolio securities and cash assets of the Trust. It also calculates net
asset value per share and maintains general accounting records for each
Portfolio. The Custodian is authorized to deposit securities in securities
depositories or to use the services of subcustodians. State Street also
serves as the Trust's Transfer Agent and dividend disbursing agent and
maintains the Trust's shareholder records. State Street's fees are paid by
the Manager.
VALUATION OF SHARES
All income, expenses (other than expenses incurred by a class pursuant to its
distribution and shareholder servicing plan) and realized and unrealized
gains and losses are allocated to each class proportionately on a daily basis
for purposes of determining the net asset value of each class.
Net asset value per share is determined as of 3:00 p.m. (Eastern time) for
the U.S. Treasury Money Market Portfolio and the General Money Market
Portfolio and as of noon (Eastern time) for the U.S. Treasury Income
Portfolio and the Tax-Exempt Money Market Portfolio. Net asset value per
share is determined on each day the NYSE and the Boston and the New York
Federal Reserve Banks are open. Currently, the days on which the Trust is
closed (other than weekends) are New Year's Day, Martin Luther King, Jr. Day
(observed), President's Day (observed), Good Friday, Memorial Day (observed),
Independence Day, Labor Day, Columbus Day (observed), Veteran's Day,
Thanksgiving Day and Christmas Day. Net asset value per share for purposes
of pricing sales and redemptions is calculated by dividing the value of all
securities and other assets belonging to a Portfolio, less the Portfolio's
liabilities, by the number of outstanding shares of that Portfolio.
The securities owned by each Portfolio are valued based upon the amortized
cost method. Pursuant to this method, a security is valued by reference to a
Portfolio's acquisition cost as adjusted for amortization of premium or
accretion of discount. Although the Trust seeks to maintain the net asset
value per share of each Portfolio at $1.00, there can be no assurance that
the net asset value per share will not vary.
DISTRIBUTIONS AND TAXES
Dividends out of net investment income will be declared daily and paid
monthly. Dividends for the U.S. Treasury Money Market Portfolio and the
General Money Market Portfolio are declared at 3:00 p.m. (Eastern time) to
shareholders of record at that time, and dividends for the U.S. Treasury
Income Portfolio and the Tax-Exempt Money Market Portfolio are declared at
noon (Eastern time) to shareholders of record at that time. Distributions of
net long-term capital gains and disposition gain, if any, for the year are
made annually. All income dividends are paid in cash and will automatically
be made by wire to institutional investors, which may elect to reinvest them
in additional shares.
Each Portfolio intends to continue to qualify as a "regulated investment
company" under Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"). As regulated investment companies, the Portfolios will not be
subject to federal income taxes on the net investment income and long-term
capital gains that are distributed to shareholders or deemed to have been
distributed to shareholders.
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Dividends derived from net investment income for the U.S. Treasury Money
Market Portfolio, U.S. Treasury Income Portfolio and General Money Market
Portfolio and from short-term capital gains, if any, are taxable to each such
Portfolio's shareholders, unless they are exempt from Federal income taxes,
as ordinary income. Distributions are taxable when they are paid, except
that distributions declared in October, November or December and paid in
January of the following year are taxable as if paid on December 31st.
Distributions of tax-exempt income by the Tax-Exempt Money Market Portfolio
are not subject to regular federal income taxes. If the Tax-Exempt Money
Market Portfolio earns federally taxable income from any of its investments,
it will be distributed as a taxable dividend. The Portfolio does not intend
to invest in Municipal Securities whose interest is subject to the federal
alternative minimum tax ("AMT") for individuals (known as "private activity
obligations").
Since all investment income is expected to be derived from earned interest,
it is anticipated that no part of any distribution will be eligible for the
dividends received deduction for corporations.
OTHER TAX INFORMATION
The information above is only a summary of some of the tax consequences
generally affecting each Portfolio and its shareholders, and no attempt has
been made to discuss individual tax consequences. In addition to federal
tax, distributions may be subject to state and local taxes. Shareholders
should make their own determination whether a Portfolio is suitable for
investment given their particular situation.
State law varies on whether mutual fund dividends that are derived in whole
or in part from interest on U.S. Government Obligations are exempt from state
income taxation. The Portfolios will provide shareholders annually with
information relating to the composition of their distributions to permit
shareholders to determine whether and to what extent the dividend income they
receive from the Portfolio may be exempt from their state's income tax.
Shareholders should consult their tax adviser as to whether any portion of
the dividends they receive from the Portfolio is exempt from state income
taxes and on any other specific questions concerning state or federal tax
treatment.
Annual statements as to the current federal tax status of distributions, if
applicable, are mailed to shareholders by January 31st following each tax
year.
When an investor signs its account application, it will be asked to certify
that its taxpayer identification number is correct and that it is not subject
to backup withholding for failing to report income to the Internal Revenue
Service ("IRS"). If the investor does not comply with IRS regulations, the
IRS can require each Portfolio to withhold a percentage of distributions.
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PERFORMANCE INFORMATION
From time to time each Portfolio may advertise its current yield and
effective yield for each class of shares in advertisements or in reports or
other communications with shareholders. A Portfolio's performance may be
compared to other investments or relevant indices.
Both yield figures are based on historical earnings and are not intended to
indicate future performance. Each Portfolio's current yield for a class of
shares refers to the net income generated by an investment in that class over
a seven-day period expressed as an annual percentage rate. In addition to
the current yield, each Portfolio may quote yields in advertising based on
any historical seven-day period. The effective yield assumes that the income
earned from the investment is reinvested. The effective yield will be
slightly higher than the current yield because of the compounding effect on
this assumed reinvestment.
The Tax-Exempt Money Market Portfolio also may quote its tax equivalent yield
and tax equivalent effective yield, which shows the taxable yield or taxable
effective yield an investor would have to earn, before taxes, to equal the
Portfolio's tax-free yield or tax-free effective yield. When a tax
equivalent yield or tax equivalent effective yield is calculated, the yield
is increased using a stated income tax rate. See the SAI for more
information concerning performance calculations.
ORGANIZATION AND CAPITALIZATION OF THE TRUST
The Trust was established as a Massachusetts business trust under the laws of
The Commonwealth of Massachusetts by an Agreement and Declaration of Trust
dated January 29, 1993 (the "Trust Declaration"). A copy of the Trust
Declaration is on file with the Secretary of The Commonwealth of
Massachusetts. The Trust, a diversified, open-end management investment
company, is not required to hold annual meetings of shareholders and does not
intend to hold shareholder meetings unless required by the 1940 Act. Holders
of shares representing 10% or more of the outstanding shares of the Trust may
call a meeting for the purpose of voting on the removal of one or more
Trustees. Special meetings may be called for the purpose of conducting
specific items of Trust business.
Shareholders receive one vote for each dollar (or a proportionate fractional
vote for each fraction of a dollar) of net asset value per share owned. The
shares of each Portfolio are classified into four classes. Each Portfolio
votes separately with respect to issues affecting only that Portfolio.
Holders of a particular class will have the exclusive right to vote on
matters submitted to shareholders pertaining only to that class. Pursuant to
the Trust Declaration, the Trustees have the authority to create additional
Portfolios and to issue additional classes of shares for each Portfolio of
the Trust, subject to receipt of any required regulatory approval.
Shareholders may direct any questions they may have about the Trust to the
Distributor at 1-800-828-2176.
Any person or organization owning 25% or more of the outstanding shares of a
Portfolio may be presumed to "control" (as that term is defined in the 1940
Act) such Portfolio. As of November 20, 1997 Sun Bank National Association,
P.O. Box 105504, Atlanta, GA 30348 owned a controlling interest in the U.S.
Treasury Money Market Portfolio; First Union National Bank, 1525 West Wt.
Harris Boulevard, Charlotte, NC 28288 owned a controlling interest in the
General Money Market Portfolio and Tax-Exempt Money Market Portfolio; and
Integrity Investments, Inc., 1800 Second Street, Sarasota, FL 34236 owned a
controlling interest in the U.S. Treasury Income Portfolio.
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The Trust has adopted a code of ethics which contains a policy on personal
securities transactions by "access persons." That policy complies, in all
material respects, with the recommendations of the Investment Company
Institute.
INVESTMENT RESTRICTIONS
The following is a description of certain investment restrictions which are
fundamental and may not be changed with respect to a Portfolio without the
approval of a majority of the outstanding shares of the Portfolio. For a
description of certain other investment restrictions, reference should be
made to the SAI. The restrictions do not apply to U.S. Government
Obligations.
1. No Portfolio will invest 25% or more of the value of its total assets in a
particular industry, except that up to 100% of the assets of the General
Money Market Portfolio may be invested in domestic banking industry
obligations.
2. As to 75% of the value of its total assets, a Portfolio will not invest
more than 5% of the value of its total assets in the securities of any one
issuer or acquire more than 10% of the voting securities of any issuer; the
remaining 25% of the assets may be invested in the securities of one or
more issuers without regard to such limitations.
3. Under normal market conditions, at least 80% of the value of the Tax-Exempt
Money Market Portfolio's total assets will be invested in Municipal
Securities.
These limitations apply as of the time of purchase. If through market action
the percentage limitations are exceeded, the Portfolios will not be required
to reduce the amount of their holdings in such investments.
The General Money Market Portfolio operates in accordance with a
non-fundamental operating policy which complies with Rule 2a-7 promulgated
under the 1940 Act and is more restrictive than investment restriction number
2 above. Under Rule 2a-7 the Portfolio may not (with certain exceptions)
invest more than 5% of its total assets in the securities of a single issuer.
See "Investment Policies and Limitations" in the SAI.
CERTAIN INVESTMENT STRATEGIES, POLICIES AND RISK CONSIDERATIONS
QUALITY AND MATURITY
Each Portfolio may purchase only high quality obligations that the
Sub-Adviser believes present minimal credit risks. To be considered high
quality, a security must be a U.S. Government Obligation; or rated in
accordance with applicable rules in one of the two highest rating categories
for short-term obligations by at least two NRSROs (or by one, if only one
rating service has rated the security); or, if unrated, judged to be of
equivalent quality by the Sub-Adviser. As a matter of non-fundamental
policy, the Portfolios will only purchase securities, in addition to U.S.
Government Obligations, that are rated in the highest rating category by at
least one NRSRO or, if unrated, are determined to be of equivalent quality.
(See the Appendix for a description of NRSRO ratings).
Each Portfolio must limit its investments to obligations with remaining
maturities of 397 days or less and must maintain a dollar-weighted average
maturity of 90 days or less.
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Each Portfolio's ability to achieve its investment objective depends, at
least in part, on the quality and maturity of its investments. The
Portfolios invest in high quality obligations, but an investment in any of
the Portfolios involves risks. Although each Portfolio's policies are
designed to maintain a stable net asset value of $1.00 per share, all money
market instruments can change in value when interest rates or an issuer's
creditworthiness changes, or if an issuer or guarantor of a security fails to
pay interest or principal when due. If these changes in value were
substantial, a Portfolio's net asset value could deviate from $1.00.
Unless otherwise indicated, each Portfolio may invest in the securities and
engage in the transactions described below.
AFFILIATED BANK TRANSACTIONS
Pursuant to an exemptive order from the SEC, each Portfolio may engage in
certain transactions with banks that are, or may be considered to be,
"affiliated persons" of the Portfolio under the 1940 Act. Such transactions
may be entered into only pursuant to procedures established, and periodically
reviewed, by the Board of Trustees. These transactions may include
repurchase agreements with U.S. banks having short-term debt instruments
rated high quality by at least one NRSRO (or if unrated, determined by the
Sub-Adviser to be of comparable quality); purchases, as principal, of
short-term obligations of such banks and their bank holding companies and
affiliates; transactions in Municipal Securities; transactions in bankers'
acceptances; and transactions in U.S. Government Obligations with affiliated
banks that are primary dealers in these securities.
REPURCHASE AGREEMENTS (APPLICABLE TO U.S. TREASURY MONEY MARKET PORTFOLIO,
GENERAL MONEY MARKET PORTFOLIO AND TAX-EXEMPT MONEY MARKET PORTFOLIO ONLY)
Each Portfolio, except the U.S. Treasury Income Portfolio, may enter into
repurchase agreements that allow the Portfolio to purchase U.S. Government
Obligations, with an agreement that the seller will repurchase the obligation
at an agreed upon price and date. No more than 10% of a Portfolio's net
assets taken at current value will be invested in repurchase agreements
extending for more than seven days. If a seller defaults on the obligation
to repurchase, the Portfolios may incur a loss or other costs.
REVERSE REPURCHASE AGREEMENTS (APPLICABLE TO GENERAL MONEY MARKET PORTFOLIO
AND TAX-EXEMPT MONEY MARKET PORTFOLIO ONLY)
The General Money Market Portfolio and the Tax-Exempt Money Market Portfolio
may enter into reverse repurchase agreements, which are transactions where a
Portfolio temporarily transfers possession of a portfolio instrument to
another party, such as a bank or broker-dealer, in return for cash. At the
same time, the Portfolio agrees to repurchase the instrument at an agreed
upon time and price, which includes interest. The General Money Market
Portfolio expects that it will engage in reverse repurchase agreements when
it is able to invest the cash so acquired at a rate higher than the cost of
the agreement, which would increase income earned by such Portfolio, or for
liquidity purposes. Engaging in reverse repurchase agreements may involve an
element of leverage, and no Portfolio will purchase a security while
borrowings (including reverse repurchase agreements) representing more than
5% of its total assets are outstanding. The Tax-Exempt Money Market
Portfolio will engage in reverse repurchase agreements for temporary or
emergency purposes only and not for leverage or investment.
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FORWARD COMMITMENTS AND "WHEN-ISSUED" SECURITIES
Each Portfolio may also enter into forward commitment agreements and purchase
"when-issued" securities. Forward commitments are contracts to purchase
securities for a fixed price at a specified future date beyond customary
settlement time with no interest accruing to the Portfolio until the
settlement date. Forward commitments involve a risk of loss if the value of
the security to be purchased declines prior to the settlement date.
Municipal Securities are often issued on a when-issued basis. The yield of
such securities is fixed at the time a commitment to purchase is made, with
actual payment and delivery of the security generally taking place 15 to 45
days later. Under some circumstances, the purchase of when-issued securities
may act to leverage the Portfolio.
LENDING OF SECURITIES
For the purpose of realizing additional income, the Portfolios may lend
portfolio securities to broker-dealers or financial institutions up to not
more than 10% of their respective total assets taken at current value. While
any such loan is outstanding, each such Portfolio will continue to receive
amounts equal to the interest or dividends paid by the issuer on the
securities, as well as interest (less any rebates to be paid to the borrower)
on the investment of the collateral or fees from the borrower. Each
Portfolio will have a right to call each loan and obtain the securities.
Lending portfolio securities involves certain risks, including possible
delays in receiving additional collateral or in the recovery of the
securities or possible loss of rights in the collateral should the borrower
fail financially. Loans will be made in accordance with guidelines
established by the Board of Trustees.
LETTERS OF CREDIT
Issuers or financial intermediaries who provide demand features or standby
commitments often support their ability to buy obligations on demand by
obtaining letters of credit ("LOCs") or other guarantees from domestic or
foreign banks. LOCs also may be used as credit supports for Municipal
Securities. The Sub-Adviser may rely upon its evaluation of a bank's credit
in determining whether to purchase an instrument supported by an LOC. In
evaluating a foreign bank's credit, the Sub-Adviser will consider whether
adequate public information about the bank is available and whether the bank
may be subject to unfavorable political or economic developments, currency
controls or other governmental restrictions that might affect the bank's
ability to honor its credit commitment.
ZERO COUPON BONDS
Each Portfolio may purchase zero coupon bonds. Regular interest payments are
not made on zero coupon bonds; instead these bonds are sold at a deep
discount from their face value and are redeemed at face value when they
mature. Each Portfolio will purchase only those zero coupon bonds which have
a remaining maturity of one year or less. As a result, such bonds are
expected to pay out a return on a regular basis as they mature. Because zero
coupon bonds do not pay current income, their prices tend to be more volatile
in response to interest rate changes than bonds which pay interest regularly.
In calculating its daily dividend, a Portfolio takes into account as income
a portion of the difference between a zero coupon bond's purchase price and
its face value.
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A broker-dealer creates a derivative zero coupon bond by separating the
interest and principal components of a U.S. Treasury security and selling
them as two individual securities. CATS (Certificates of Accrual on Treasury
Securities), TIGRs (Treasury Investment Growth Receipts), and TRs (Treasury
Receipts) are examples of derivative zero coupon bonds.
The Federal Reserve Bank creates STRIPS (Separate Trading of Registered
Interest and Principal of Securities) by separating the interest and
principal components of an outstanding U.S. Treasury bond and selling them as
individual securities. Bonds issued by the Resolution Funding Corporation and
the Financing Corporation can also be separated in this fashion.
U.S. GOVERNMENT OBLIGATIONS
U.S. Government Obligations are debt obligations issued or guaranteed by the
U.S. Treasury or by an agency or instrumentality of the U.S. Government. Not
all U.S. Government Obligations are backed by the full faith and credit of
the United States. Obligations may be supported only by the agency's right
to borrow money from the U.S. Treasury under certain circumstances or by the
credit of the agency. There is no guarantee that the U.S. Government will
support these types of obligations, and therefore they involve more risk than
U.S. Government Obligations backed by the full faith and credit of the United
States.
VARIABLE AND FLOATING RATE INSTRUMENTS
Each Portfolio may purchase variable and floating rate demand instruments and
other securities that possess a floating or variable interest rate adjustment
formula. These instruments permit the Portfolios to demand payment of the
principal balance plus unpaid accrued interest upon a specified number of
days' notice to the issuer or its agent. The demand feature may be backed by
a bank letter of credit or guarantee issued with respect to such instrument.
The Portfolios' Sub-Adviser, on behalf of the Manager, intends to exercise
the demand only (1) to attain a more optimal portfolio structure, (2) upon a
default under the terms of the debt security, (3) as needed to provide
liquidity to the Portfolios, or (4) to maintain the respective quality
standard of the Portfolios' investment portfolio. The Portfolios'
Sub-Adviser will determine which variable or floating rate demand instruments
to purchase in accordance with procedures approved by the Trustees to
minimize credit risks.
MUNICIPAL LEASE OBLIGATIONS (APPLICABLE TO TAX-EXEMPT MONEY MARKET PORTFOLIO
ONLY)
Municipal lease obligations are issued by a state and local government or
authority to acquire land and a wide variety of equipment and facilities.
These obligations typically are not fully backed by the municipality's
credit, and the interest payable on these obligations may become taxable if
the lease is assigned. If funds are not appropriated for the following
year's lease payments, a lease may terminate, with the possibility of default
on the lease obligation and significant loss to the Portfolio. Such risk of
non-appropriation is unique to municipal lease obligations. The SEC Staff
has taken the position that open-end investment companies may treat these
obligations as liquid under guidelines established by the Board of Trustees.
Determination concerning the liquidity and proper valuation of these
obligations will include: the frequency of trades and quotes for the
obligation, the number of dealers willing to purchase or sell the security
and the number of potential buyers, the willingness of dealers to make a
market in the securities, the nature of the marketplace trades and the
likelihood that its marketability will be maintained throughout the time the
instrument is held by
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the Portfolio. The Board will be responsible for determining the credit
quality of any unrated lease obligations held by the Portfolio, on an ongoing
basis, including an assessment of the likelihood that the lease will not be
cancelled. The high quality municipal lease obligations in which the
Tax-Exempt Money Market Portfolio intends to invest generally are not
expected by the Board to present liquidity risks. Lease obligations will be
valued based on a standard spread that relates to general obligation
securities whose value is determined using a pricing service. Certificates of
participation in municipal lease obligations or installment sales contracts
entitle the holder to a proportionate interest in the lease-purchase payments
made. Certificates of participation typically are issued by municipalities
and by banks and other financial institutions.
MUNICIPAL SECURITIES (APPLICABLE TO TAX-EXEMPT MONEY MARKET PORTFOLIO ONLY)
Municipal Securities include general obligation securities, which are backed
by the full taxing power of a municipality, or revenue securities, which are
backed by the revenues of a specific tax, project or facility. Resource
recovery bonds, a type of revenue obligation, are used to finance the
construction of waste burning facilities. Such bonds may be subject to
special risks because the project uses technology or an economic plan that is
not yet proven, or requires operating permits from environmental authorities.
Industrial development bonds are a type of revenue bond backed by the credit
and security of a private issuer and may involve greater risk. Tax and
revenue anticipation notes are issued by municipalities in expectation of
future tax or other revenues, and are payable from those specific taxes or
revenues. Bond anticipation notes normally provide interim financing in
advance of an issue of bonds or notes, the proceeds of which are used to
repay the anticipation notes.
Although the Tax-Exempt Money Market Portfolio presently does not intend to
do so on a regular basis, it may invest more than 25% of its assets in
Municipal Securities which are related in such a way that an economic,
business, or political development or change affecting one security would
likewise affect the other Municipal Securities. To the extent that the
Portfolio's assets are concentrated in Municipal Securities that are so
related, the Portfolio will be subject to the peculiar risks presented by
such Municipal Securities, such as negative developments in a particular
industry or state, to a greater extent than it would be if the Portfolio's
assets were not so concentrated.
RESTRICTED SECURITIES (APPLICABLE TO GENERAL MONEY MARKET PORTFOLIO AND
TAX-EXEMPT MONEY MARKET PORTFOLIO ONLY)
The General Money Market Portfolio and the Tax-Exempt Money Market Portfolio
may purchase securities which cannot be sold to the public without
registration under the Securities Act of 1933 (restricted securities). Unless
registered for sale, these securities can only be sold in privately
negotiated transactions or pursuant to an exemption from registration.
Provided that the security has a demand feature of seven days or less, or a
dealer or institutional trading market exists which in the opinion of the
Sub-Adviser, subject to Board guidelines, affords liquidity, these restricted
securities are not treated as illiquid securities for purposes of each
Portfolio's restriction on not investing more than 10% of its net assets in
illiquid securities.
SPECIAL CONSIDERATIONS OF FOREIGN INVESTMENTS (APPLICABLE TO GENERAL MONEY
MARKET PORTFOLIO ONLY)
The General Money Market Portfolio may invest in U.S. dollar-denominated
obligations of foreign branches of U.S. banks (Eurodollars), U.S. branches
and agencies of foreign banks (Yankee dollars), and foreign branches of
foreign banks. Euro and Yankee dollar investments involve risks that are
different from
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investments in securities of U.S. banks. These risks may include future
unfavorable political and economic developments, possible withholding taxes,
seizure of foreign deposits, currency controls, interest limitations or other
governmental restrictions which might affect payment of principal or
interest. Additionally, there may be less public information available about
foreign banks and their branches. Foreign branches of foreign banks are not
regulated by U.S. banking authorities, and generally are not bound by
accounting, auditing and financial reporting standards comparable to U.S.
banks. Although the Sub-Adviser carefully considers these factors when
making investments, and subject to its policy on concentration, the Portfolio
does not limit the amount of its assets which can be invested in any one type
of instrument or in any foreign country. The Portfolio will not invest 25%
or more of its assets in Euro and Yankee dollar investments and obligations
of foreign branches of foreign banks.
APPENDIX
NRSRO RATINGS
Description of Moody's Investors Service, Inc. ("Moody's") and Standard &
Poor's Corporation ("S&P") commercial paper and bond ratings:
SHORT-TERM DEBT RATINGS
MOODY'S EMPLOYS THREE DESIGNATIONS, ALL JUDGED TO BE INVESTMENT GRADE, TO
INDICATE THE RELATIVE REPAYMENT CAPACITY OF RATED ISSUERS. THE HIGHEST
DESIGNATION IS AS FOLLOWS:
Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following
characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structures with moderate reliance on debt and
ample asset protection.
- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
- Well-established access to a range of financial markets and assured sources
of alternate liquidity.
S&P SHORT-TERM DEBT RATINGS ARE GRADED INTO FOUR CATEGORIES, RANGING FROM "A"
FOR THE HIGHEST QUALITY OBLIGATIONS TO "D" FOR THE LOWEST. THE HIGHEST
RATINGS IN THE "A" CATEGORY ARE DESCRIBED AS FOLLOWS:
"A"-Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are further refined
with the designations 1, 2 and 3 to indicate the relative degree of safety.
"A-1"-This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics will be noted with a plus (+)
sign designation.
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MUNICIPAL OBLIGATIONS
Moody's ratings for state and municipal and other short-term obligations will
be designated Moody's Investment Grade ("MIG"). This distinction is in
recognition of the differences between short-term credit risk and long-term
risk. Factors affecting the liquidity of the borrower are uppermost in
importance in short-term borrowing, while various factors of the first
importance in short-term borrowing risk are of lesser importance in the long
run. The highest MIG quality rating is defined as follows:
MIG-1-Notes bearing this designation are of the best quality, enjoying strong
protection from established cash flows of funds for their servicing or from
established and broad-based access to the market for refinancing, or both.
A short-term rating may also be assigned to an issue having a demand feature.
Such ratings will be designated as VMIG to reflect such characteristics as
payment upon periodic demand rather than fixed maturity dates and payment
relying on external liquidity. Additionally, investors should be alert to
the fact that the source of payment may be limited to the external liquidity
with no or limited legal recourse to the issuer in the event the demand is
not met. A VMIG-1 rating carries the same definition as MIG-1.
S&P'S HIGHEST QUALITY RATING FOR SHORT-TERM STATE AND MUNICIPAL NOTES IS
DEFINED AS FOLLOWS:
SP-1- Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be
given a plus (+) designation.
20
<PAGE>
THE VALIANT FUND
1776 Heritage Drive
North Quincy, MA 02171
The Valiant Fund (the "Trust") is an open-end investment company comprised of
four separate investment portfolios (the "Portfolios") offering Class A shares,
Class B shares, Class C shares and Class D shares:
U.S. TREASURY MONEY MARKET PORTFOLIO GENERAL MONEY MARKET PORTFOLIO
U.S. TREASURY INCOME PORTFOLIO TAX-EXEMPT MONEY MARKET PORTFOLIO
The investment objective of each Portfolio is to obtain as high a level of
current income as is consistent with the preservation of capital and liquidity.
The Tax-Exempt Money Market Portfolio seeks primarily income exempt from federal
income tax. The Trust offers banks and other institutional investors an
economical and convenient means of investing in professionally managed money
market funds.
The Trust offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes of shares are identical, except as to the services
offered to and the expenses borne by each class. Class B shares, Class C shares
and Class D shares each bear certain costs pursuant to their respective
Distribution and Shareholder Servicing Plans adopted in accordance with Rule
12b-1 under the Investment Company Act of 1940 (the "1940 Act"). THIS
PROSPECTUS RELATES ONLY TO CLASS D SHARES.
Each Portfolio is designed exclusively for investment of short-term monies held
in institutional accounts. Shares of the Portfolios may be purchased by banks
and other institutional investors that have entered into service agreements with
Integrity Investments, Inc. (the "Distributor"), 1-800-828-2176.
This Prospectus sets forth concisely the information about the Trust that a
prospective investor ought to know before investing. Please read it carefully
and retain it for future reference. Certain additional information is contained
in a Statement of Additional Information ("SAI") dated December 19, 1997, as
revised from time to time, which has been filed with the Securities and Exchange
Commission, is incorporated herein by reference and is available upon request
and without charge by calling the Distributor at the telephone number shown
above.
INVESTMENTS IN THE PORTFOLIOS ARE NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE CAN BE NO ASSURANCE THAT A PORTFOLIO WILL BE ABLE TO MAINTAIN
A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY
DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY, AND INVOLVE
INVESTMENT RISKS INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
PROSPECTUS - DECEMBER 19, 1997
1
<PAGE>
CONTENTS
Expense Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Investment Objectives and Policies . . . . . . . . . . . . . . . . . . . . .6
Who Should Invest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Purchases and Redemptions . . . . . . . . . . . . . . . . . . . . . . . . .8
Management of the Portfolios . . . . . . . . . . . . . . . . . . . . . . . 10
Management Fees and Other Expenses . . . . . . . . . . . . . . . . . . . . 10
Valuation of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Distributions and Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . 12
Performance Information. . . . . . . . . . . . . . . . . . . . . . . . . . 14
Organization and Capitalization of the Trust . . . . . . . . . . . . . . . 14
Investment Restrictions. . . . . . . . . . . . . . . . . . . . . . . . . . 15
Certain Investment Strategies, Policies and Risk Considerations. . . . . . 15
Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2
<PAGE>
EXPENSE INFORMATION
<TABLE>
<CAPTION>
U.S. TREASURY MONEY U.S. TREASURY GENERAL MONEY TAX-EXEMPT MONEY
MARKET INCOME MARKET MARKET
PORTFOLIO PORTFOLIO** PORTFOLIO** PORTFOLIO**
--------- --------- --------- ---------
Class D Class D Class D Class D
<S> <C> <C> <C> <C>
Shareholder
Transaction Expenses
- --------------------
Sales Load Imposed
on Purchases None None None None
Sales Load Imposed
on Reinvested
Dividends None None None None
Deferred Sales Load None None None None
Redemption Fees None None None None
Annual Fund
Operating Expenses
(as a percentage of
average net assets)
- -------------------
Management Fees 0.20% 0.20% 0.20% 0.20%
12b-1 Fees* 0.50% 0.50% 0.50% 0.50%
Other Expenses (after expense
reimbursement) 0.00% 0.00% 0.00% 0.00%
----- ----- ----- -----
Total Fund Operating
Expenses (after expense
reimbursement) 0.70% 0.70% 0.70% 0.70%
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
_____________________________________
* The Trust has adopted a Distribution and Shareholder Servicing Plan for the
Class D Shares (the "Plan"). Payments under the Plan are authorized at the rate
of 0.50% of the average daily net assets. See "Management Fees and Other
Expenses" for further information on the Plan.
**As of the date of this Prospectus, the Class D shares of General Money Market
Portfolio, U.S. Treasury Income Portfolio and Tax-Exempt Portfolio have not
commenced operations.
Four classes of shares of the Trust are being offered by each Portfolio: Class
A, Class B, Class C and Class D shares. The classes are identical, except that
Class B shares, Class C shares and Class D shares are subject to differing
annual distribution and service fees. Class A shares are currently not subject
to an annual distribution and service fee. The Class B, Class C and Class D
shares' distribution and service fees will cause the Class B, Class C and Class
D shares to have a higher expense ratio and to pay lower dividends than Class A
shares, the Class C and Class D shares to have a higher expense ratio and to pay
lower dividends than the Class B shares, and the Class D shares to have a higher
expense ratio and to pay lower dividends than the Class C shares. This
Prospectus describes only the Class D shares. An investor may obtain
prospectuses relating to the Class A and Class B shares and Class C shares,
respectively, by calling the Distributor at 1-800-828-2176.
3
<PAGE>
The purpose of this table is to assist an investor in understanding the
various costs and expenses that the investor will bear directly or
indirectly. Management fees are paid by each Portfolio to Integrity
Management & Research, Inc. (the "Manager") for managing its investments and
business affairs. All operating expenses are paid by each Portfolio and are
not charged directly to an investor's account. There are no sales or
redemption fees. However, certain institutional investors may charge their
customers fees in addition to those described herein. See "Purchases and
Redemptions." The Manager has declared voluntary expense limitations for the
Class D shares of each Portfolio of 0.70% of average daily net assets of the
Class D shares. The Manager will voluntarily reimburse any expenses above
the expense limitations. Although as of the date of this Prospectus the
Class D shares of General Money Market Portfolio, U.S. Treasury Income
Portfolio and Tax-Exempt Portfolio have not commenced operations based on the
experience of the Class A shares of those Portfolios without the effect of
the expense reimbursements: "Other Expenses" and "Total Operating Expenses"
would be 0.03% and 0.88%, respectively, for the U.S. Treasury Income
Portfolio and 0.00% and 0.70%, respectively, for each of the other
Portfolios. The expense limitations are voluntary but will remain in effect
through December 1998. The expense limitations may be removed at any time
thereafter with 90 days' prior notice to existing shareholders.
Non-recurring or extraordinary expenses are generally excluded in the
determination of expense ratios of the Portfolios for purposes of determining
any required expense reimbursement. Quotations of yield for any period when
an expense limitation is in effect will be greater than if the limitation had
not been in effect. For more information, see "Management Fees and Other
Expenses," and "Purchases and Redemptions."
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period.
1 Year 3 Years 5 Years 10 Years
U.S. Treasury Money Market Portfolio $7 $22 $39 $87
U.S. Treasury Income Portfolio $7 $22 $39 $87
General Money Market Portfolio $7 $22 $39 $87
Tax-Exempt Money Market Portfolio $7 $22 $39 $87
THE EXAMPLES ARE BASED ON ASSUMED PERFORMANCE LEVELS AND SHOULD NOT BE
CONSIDERED REPRESENTATIONS OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE
GREATER OR LESSER THAN THOSE SHOWN.
4
<PAGE>
FINANCIAL HIGHLIGHTS
The following information has been audited by Price Waterhouse LLP,
independent accountants, whose report thereon was unqualified. This
information is part of the Trust's financial statements which are included in
the Trust's Annual Report to Shareholders and incorporated by reference in
the SAI. As of the date of this Prospectus, General Money Market Portfolio,
U.S. Treasury Income Portfolio and Tax-Exempt Portfolio had not commenced
Class D Shares operations. The following information should be read in
conjunction with the financial statements and notes thereto.
U.S. TREASURY MONEY MARKET PORTFOLIO-CLASS D
For a share outstanding throughout the period.
YEAR ENDED PERIOD ENDED
8/31/97 8/31/96(1)
------- -------
Net asset value, beginning of period......... $1.000 $1.000
------ ------
Income from investment operations:
Net investment income.................. 0.047 0.015
------ ------
Less distributions:
Dividends from net investment income... (0.047) (0.015)
------ ------
Net asset value, end of period............... $1.000 $1.000
------ ------
------ ------
Total return (a) ............................ 4.78% 1.55%
Ratios/supplemental data:
Net assets, end of period (000's)............ $101,401 $35,549
Ratios to average net assets:
Net investment income.................... 4.69% 4.68%(b)
Operating expenses ...................... 0.70% 0.70%(b)
Operating expenses before
reimbursements/waivers................... 0.70% 0.70%(b)
_______________
(1) The Portfolio commenced Class D shares operations on May 1, 1996.
(a) Total return for period less than one year is not annualized and had the
Manager not reimbursed and waived certain expenses, total return would
have been lower.
(b) Annualized.
5
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of each Portfolio is to obtain as high a level of
current income as is consistent with the preservation of capital and
liquidity. The Tax-Exempt Money Market Portfolio seeks primarily income
exempt from federal income tax. There is no assurance that a Portfolio will
achieve its investment objective. A Portfolio's investment objective is
fundamental and may not be changed at any time without shareholder approval.
Unless otherwise indicated, a Portfolio's investment policies are not
fundamental and may be changed at any time without shareholder approval. As
a matter of non-fundamental policy, the Portfolios will only purchase
securities, in addition to U.S. Government Obligations (as defined below),
that are rated in the highest category by at least one nationally recognized
statistical rating organization ("NRSRO") or, if unrated, are determined by
the sub-adviser to be of equivalent quality. (See "Management of the
Portfolios" for information about the sub-adviser, and see the Appendix for a
description of NRSRO ratings.)
THE U.S. TREASURY MONEY MARKET PORTFOLIO invests all of its assets in
securities issued or guaranteed by the United States Government or its
agencies, authorities or instrumentalities ("U.S. Government Obligations")
which are backed by the full faith and credit of the United States and
repurchase agreements collateralized by such U.S. Government Obligations.
Under normal market conditions, at least 65% of its total assets will be
invested in direct U.S. Treasury obligations and repurchase agreements
collateralized by U.S. Treasury obligations. Income earned from U.S.
Government Obligations is generally exempt from state and local income tax.
Income earned from repurchase agreement transactions generally is not exempt
from state and local income tax. (See "Distributions and Taxes.")
The U.S. Treasury Money Market Portfolio has been rated "AAAm" by Standard &
Poor's Corporation ("S&P") and "Aaa" by Moody's Investors Service, Inc.
("Moody's"). Such quality rating is based on, among other things, an
analysis of the Portfolio's investment strategies, operational policies and
management. S&P and Moody's also may undertake an ongoing analysis and
assessment of these criteria in order to update the Portfolio's rating.
THE U.S. TREASURY INCOME PORTFOLIO invests all of its assets in U.S.
Government Obligations which are backed by the full faith and credit of the
United States, the interest income from which generally will not be subject
to state income tax. (See "Distributions and Taxes.") Under normal market
conditions, at least 65% of its total assets will be invested in U.S.
Treasury obligations such as U.S. Treasury bills, notes and bonds.
THE GENERAL MONEY MARKET PORTFOLIO invests in U.S. dollar-denominated
short-term debt securities including:
-- Obligations of domestic and foreign banks or thrift organizations (such as
bankers' acceptances, time deposits and certificates of deposit);
-- Corporate debt obligations, including commercial paper, notes and bonds
with remaining maturities of 397 days or less;
-- U.S. Government Obligations and repurchase agreements backed by U.S.
Government Obligations; and
-- Cash.
6
<PAGE>
More than 25% of the value of the total assets of the Portfolio may be
invested in domestic banking industry obligations. The Portfolio may
purchase securities that are subject to restrictions on resale.
THE TAX-EXEMPT MONEY MARKET PORTFOLIO invests in high-quality, short-term,
fixed, variable or floating rate municipal securities and in high-quality,
long-term municipal securities whose features give them interest rates,
maturities and prices similar to short-term instruments ("Municipal
Securities").
Municipal Securities are obligations issued by or on behalf of state and
local governments and public authorities (including states, territories and
possessions of the United States, the District of Columbia, cities, counties,
municipalities, municipal agencies and regional districts and their political
subdivisions, agencies, authorities and instrumentalities), the interest from
which, in the opinion of bond counsel for the issuers of the obligations at
the time of their issuance, is exempt from federal income tax.
The Portfolio's investments in Municipal Securities may include tax, revenue
and bond anticipation notes; tax-exempt commercial paper; and general
obligation or revenue bonds (including securities such as municipal lease
obligations and resource recovery bonds). The Portfolio may purchase
obligations that are subject to restrictions on resale. The Portfolio will
not invest in Municipal Securities whose interest is subject to the federal
alternative minimum tax ("AMT") for individuals (known as "private activity
obligations").
Municipal Securities are issued to raise money for various public purposes,
including general purpose financing for state and local governments as well
as financing for specific projects or public facilities. Municipal
Securities may be backed by the full taxing power of a municipality or by the
revenues from a specific project or the credit of a private organization.
Some Municipal Securities are insured by private insurance companies, while
others may be supported by letters of credit furnished by domestic or foreign
banks.
Distributions from the Tax-Exempt Money Market Portfolio will in general be
exempt from regular federal income taxes. As a temporary defensive measure,
when market conditions so warrant, the Tax-Exempt Money Market Portfolio may
invest its assets without limitation in any of the money market instruments
which are permissible investments for the General Money Market Portfolio. To
the extent that the Tax-Exempt Money Market Portfolio earns taxable income
from any of its investments, the income would be distributed as a taxable
dividend.
WHO SHOULD INVEST
Each Portfolio is designed exclusively for investment of short-term monies
held by banks and other institutional investors.
The advantages offered by the Portfolios include large scale purchasing power
and diversification, which can help avoid the greater expense of executing a
large number of small transactions. Each Portfolio also makes it possible
for institutional investors to participate in a more diversified portfolio
than the size of their investments might otherwise permit. Also, investment
in the Portfolios can relieve institutions of many management and
administrative burdens usually associated with the direct purchase and sale
of money market instruments, including: selecting portfolio investments,
obtaining favorable terms at which to buy and sell, scheduling and monitoring
maturities and reinvestments, safe-keeping of securities, and portfolio
recordkeeping.
7
<PAGE>
It should be noted that the Portfolios are not FDIC insured.
PURCHASES AND REDEMPTIONS
PURCHASES
Shares of the Portfolios may be purchased by institutions that have entered
into service agreements with the Distributor and opened accounts with the
Trust. Call 1-800-828-2176 for information. Establishment of an account
requires that certain documents and applications be signed before the
investment can be processed. Fees in addition to those described herein may
be charged by some institutions which establish accounts on behalf of their
customers.
The minimum initial investment in each Portfolio is $1,000,000. Institutions
may satisfy the minimum investment by aggregating their fiduciary accounts.
Subsequent investments may be in any amount. If an account balance falls
below $100,000 due to redemption, the Portfolio may close the account.
Investors will be notified if the minimum balance is not being maintained and
will be allowed 30 days to make additional investments before the account is
closed. Any involuntary redemptions will be effected at the price at 3:00
p.m. (Eastern time) for the U.S. Treasury Money Market Portfolio and the
General Money Market Portfolio and at noon (Eastern time) for the U.S.
Treasury Income Portfolio and the Tax-Exempt Money Market Portfolio.
Purchase orders must be transmitted to the Portfolio's transfer agent, State
Street Bank and Trust Company (the "Transfer Agent"). Each Portfolio
requires advance notification of all wire purchases. Purchases may be made
only by wire.
A purchase order for shares in the U.S. Treasury Money Market Portfolio or
General Money Market Portfolio received by the Transfer Agent by 3:00 p.m.
(Eastern time), or for shares in the U.S. Treasury Income Portfolio or the
Tax-Exempt Money Market Portfolio received by the Transfer Agent by noon
(Eastern time), on a day the New York Stock Exchange ("NYSE") and both the
Boston and New York Federal Reserve Banks are open ("Business Day") will be
executed at the net asset value per share next determined after receipt of
the order and will receive the dividend declared on the day of purchase,
provided that the Trust's Custodian, State Street Bank and Trust Company,
receives the wire by the close of the Federal Reserve wire system on that
Business Day. See "Valuation of Shares."
Each Portfolio reserves the right to reject any purchase order. Purchase
orders may be refused if, for example, they are of a size that could disrupt
management of a Portfolio. Purchases by exchange are not permitted.
REDEMPTIONS
Shareholders may redeem all or a portion of their shares on any Business Day.
Shares will be redeemed at the net asset value next calculated after the
Transfer Agent has received the redemption request. If an account is closed,
any accrued dividends will be paid within 10 days of the beginning of the
following month.
Shares may be redeemed, and the redemption proceeds wired, on the same day if
telephone redemption instructions are received by the Transfer Agent by 3:00
p.m. (Eastern time) on the day of redemption for the U.S. Treasury Money
Market Portfolio and for the General Money Market Portfolio, or by noon
(Eastern
8
<PAGE>
time) on the day of redemption for the U.S. Treasury Income Portfolio and for
the Tax-Exempt Money Market Portfolio. Shares redeemed and wired on the same
day will not receive the dividend declared on the day of redemption. A
shareholder whose redemption instructions are received by the Transfer Agent
after 3:00 p.m. (Eastern time) with respect to the U.S. Treasury Money Market
Portfolio or General Money Market Portfolio or after noon (Eastern time) with
respect to the U.S. Treasury Income Portfolio or the Tax-Exempt Money Market
Portfolio will receive the dividend declared on the day on which the
redemption instructions were received and will receive wired redemption
proceeds on the next Business Day. Shareholders may change the bank account
designated to receive an amount redeemed at any time by sending a letter of
instruction with a signature guarantee to the Transfer Agent, State Street
Bank and Trust Company, at P.O. Box 1978, Boston, Massachusetts 02105.
If making immediate payment of redemption proceeds could adversely affect a
Portfolio, shareholders may be paid up to seven days after receipt of the
redemption request. Also, when the NYSE or either the Boston or New York
Federal Reserve Bank is closed (or when trading is restricted) for any reason
other than its respective customary weekend or holiday closing, or under any
emergency circumstances as determined by the Securities and Exchange
Commission ("SEC") to merit such action, redemption or payment may be
suspended or postponed.
Shares also may be redeemed by mail by submitting an order addressed to: The
Valiant Fund, P.O. Box 1978, Boston, Massachusetts 02105. If transactions by
telephone cannot be executed (e.g., during times of unusual market activity),
orders should be placed by mail. In case of suspension of the right of
redemption, a shareholder may either withdraw its request for redemption or
receive payment based on the net asset value next determined after the
termination of the suspension.
The Trust reserves the right to refuse a wire or telephone redemption if the
Manager or the Transfer Agent believes it is advisable to do so. Upon 60
days' prior notice to existing shareholders, procedures for redeeming shares
by wire or telephone may be modified or terminated at any time by the Trust
or the Transfer Agent.
ADDITIONAL INFORMATION
SHAREHOLDER SERVICES
Shareholders should verify the accuracy of all transactions immediately upon
receipt of their confirmation statements. Neither the Trust nor the Transfer
Agent will be liable for following instructions communicated by telephone
that it reasonably believes to be genuine. The privilege to initiate
transactions by telephone is made available to shareholders automatically.
The Trust will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine, including: requiring some form of
personal identification prior to acting upon instructions received by
telephone, providing written confirmation of such transactions or tape
recording of telephone instructions. If it does not employ reasonable
procedures to confirm that telephone instructions are genuine, the Trust or
the Transfer Agent may be liable for any losses due to unauthorized or
fraudulent instructions.
9
<PAGE>
To allow the Portfolios to be managed effectively, shareholders are urged to
initiate all trades (investments and redemptions of shares) as early in the
day as possible and to notify the Trust by calling the Transfer Agent at
least one day in advance of trades in excess of $10,000,000. In making trade
requests, the name of the shareholder and the account number(s) must be
supplied.
STATEMENTS AND REPORTS
Shareholders will receive a monthly statement and a confirmation after every
transaction that affects the share balance or the account registration. A
statement with tax information will be mailed by January 31st following each
tax year and also will be filed with the Internal Revenue Service. At least
twice a year, shareholders will receive the Portfolios' financial statements.
MANAGEMENT OF THE PORTFOLIOS
The overall responsibility for supervision of the affairs of the Trust vests
in the Board of Trustees of the Trust. The Manager is responsible for the
management of the Trust's day-to-day business affairs and has general
responsibility for the management of the investments of the Portfolios. The
Manager, at its expense, has contracted with David L. Babson & Co. Inc. (the
"Sub-Adviser") to manage the investments of the Portfolios subject to the
requirements of the Investment Company Act of 1940, as amended (the "1940
Act").
Richard F. Curcio, who is the Manager's President and Chairman of the Board
and President, Chairman of the Board and a Trustee of the Trust, indirectly
owns or controls all of the outstanding shares of common stock of the
Manager. Mr. Curcio has 18 years of experience in mutual fund industry
marketing, sales and operations. Located at 1800 Second Street, Suite 757,
Sarasota, Florida 34236, the Manager was organized in Florida on September
24, 1992.
The Sub-Adviser, a Massachusetts corporation, is located at One Memorial
Drive, Cambridge, Massachusetts 02142. Founded in 1940, the Sub-Adviser
provides investment advice to individuals, state and local government
agencies, pension and profit sharing plans, trusts, estates, banks and other
organizations, and also serves as the investment adviser to The Babson Funds
(a family of mutual funds). The Sub-Adviser is a subsidiary of Massachusetts
Mutual Life Insurance Company.
The Sub-Adviser is authorized to make investment decisions and engage in
portfolio transactions on behalf of the Trust, subject to such general or
specific instructions as may be given by the Trustees and/or the Manager.
The payment of fees to the Sub-Adviser is the sole responsibility of the
Manager.
MANAGEMENT FEES AND OTHER EXPENSES
Under its Management Agreement with the Trust, the Manager performs certain
administrative and management services for the Trust and pays the
compensation, if any, of officers and Trustees who are affiliated with the
Manager or the Sub-Adviser and pays all the Portfolio expenses with the
following exceptions: the fees and expenses of those Trustees who are not
"interested persons" of the Trust; interest on borrowings; taxes; expenses
incurred pursuant to the Trust's distribution and shareholder servicing
plans; and such extraordinary nonrecurring expenses as may arise, including
litigation to which the Trust may be a party.
10
<PAGE>
For its services to the Portfolios, the Manager receives fees paid monthly
and computed at an annual rate of 0.20% of the average daily net asset value
of each of the Portfolios. The Manager is solely responsible for the payment
of all fees to the Sub-Adviser.
For its services to the Portfolios, the Sub-Adviser is paid by the Manager a
monthly fee computed at an annual rate based upon the aggregate average daily
net assets of the Trust, as follows: 0.10% of the first $500 million of net
assets and 0.05% of net assets over $500 million. The Sub-Adviser has
voluntarily agreed to reduce its fees from 0.05% to 0.04% of net assets over
$2 billion.
ADMINISTRATOR. State Street Bank and Trust Company ("State Street" or the
"Administrator"), 225 Franklin Street, Boston, MA 02110, is the Administrator
of the Trust.
The Administrator assists in each Portfolio's administration and operation,
including providing office space and various services in connection with the
regulatory requirements applicable to each Portfolio. The Administrator may
utilize the resources of its affiliates in performing certain of these
responsibilities, at no additional cost to the Trust. The Administrator's
fee is paid by the Manager.
DISTRIBUTION AND SHAREHOLDER SERVICING PLAN
Integrity Investments, Inc., 1800 Second Street, Suite 757, Sarasota, Florida
34236, is the Trust's Distributor. The Trust has adopted a Distribution and
Shareholder Servicing Plan for the Class D Shares (the "Plan") which provides
for payment of up to 0.50% of each Portfolio's average daily net assets, the
purpose of which is to promote distribution of the Portfolios' shares and to
enhance the provision of shareholder services. Payments under the Plan are
authorized and will be made at the rate of 0.50% of each Portfolio's average
daily net assets for the Class D shares.
Under the Plan, each Portfolio, subject to Trustee authorization, may pay the
Distributor a monthly fee to compensate it for expenses it bears and services
it provides in the distribution of shares and the provision of shareholder
support services. The Plan also provides that certain Service Providers
(defined under the Plan as any broker, dealer, bank or other institution) may
receive compensation for providing continuing personal services to
Shareholders as well as administrative services with respect to shareholder
accounts. Such payments are used to compensate the Distributor and any
Service Providers for the services outlined above.
The Distributor shall determine the amounts to be paid to Service Providers.
Each Service Provider is required to disclose to its clients any compensation
payable to it by the Trust pursuant to the Plan and any other compensation
payable by its clients in connection with the investment of their assets in
Trust shares. The fees payable to the Distributor under the Plan for
advertising, marketing and distributing Class D shares and for payments to
Service Providers are payable without regard to actual expenses incurred by
the Distributor.
The Plan recognizes that the Manager, the Sub-Adviser and the Distributor may
use their fees from each Portfolio or other resources to pay expenses
associated with activities primarily intended to result in the sale of the
shares of the Portfolio. Under its Distribution Agreement with the Trust,
the Distributor bears certain distribution-related expenses of the
Portfolios, such as the cost and expense of printing and distributing copies
of prospectuses which are used in connection with the offering of shares to
prospective investors.
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CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT
State Street serves as the Trust's custodian ("Custodian") and holds all
portfolio securities and cash assets of the Trust. It also calculates net
asset value per share and maintains general accounting records for each
Portfolio. The Custodian is authorized to deposit securities in securities
depositories or to use the services of subcustodians. State Street also
serves as the Trust's Transfer Agent and dividend disbursing agent and
maintains the Trust's shareholder records. State Street's fees are paid by
the Manager.
VALUATION OF SHARES
All income, expenses (other than expenses incurred by a class pursuant to its
distribution and shareholder servicing plan) and realized and unrealized
gains and losses are allocated to each class proportionately on a daily basis
for purposes of determining the net asset value of each class.
Net asset value per share is determined as of 3:00 p.m. (Eastern time) for
the U.S. Treasury Money Market Portfolio and the General Money Market
Portfolio and as of noon (Eastern time) for the U.S. Treasury Income
Portfolio and the Tax-Exempt Money Market Portfolio. Net asset value per
share is determined on each day the NYSE and the Boston and the New York
Federal Reserve Banks are open. Currently, the days on which the Trust is
closed (other than weekends) are New Year's Day, Martin Luther King, Jr. Day
(observed), President's Day (observed), Good Friday, Memorial Day (observed),
Independence Day, Labor Day, Columbus Day (observed), Veteran's Day,
Thanksgiving Day and Christmas Day. Net asset value per share for purposes
of pricing sales and redemptions is calculated by dividing the value of all
securities and other assets belonging to a Portfolio, less the Portfolio's
liabilities, by the number of outstanding shares of that Portfolio.
The securities owned by each Portfolio are valued based upon the amortized
cost method. Pursuant to this method, a security is valued by reference to a
Portfolio's acquisition cost as adjusted for amortization of premium or
accretion of discount. Although the Trust seeks to maintain the net asset
value per share of each Portfolio at $1.00, there can be no assurance that
the net asset value per share will not vary.
DISTRIBUTIONS AND TAXES
Dividends out of net investment income will be declared daily and paid
monthly. Dividends for the U.S. Treasury Money Market Portfolio and the
General Money Market Portfolio are declared at 3:00 p.m. (Eastern time) to
shareholders of record at that time, and dividends for the U.S. Treasury
Income Portfolio and the Tax-Exempt Money Market Portfolio are declared at
noon (Eastern time) to shareholders of record at that time. Distributions of
net long-term capital gains and disposition gain, if any, for the year are
made annually. All income dividends are paid in cash and will automatically
be made by wire to institutional investors, which may elect to reinvest them
in additional shares.
Each Portfolio intends to continue to qualify as a "regulated investment
company" under Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"). As regulated investment companies, the Portfolios will not be
subject to federal income taxes on the net investment income and long-term
capital gains that are distributed to shareholders or deemed to have been
distributed to shareholders.
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Dividends derived from net investment income for the U.S. Treasury Money
Market Portfolio, U.S. Treasury Income Portfolio and General Money Market
Portfolio and from short-term capital gains, if any, are taxable to each such
Portfolio's shareholders, unless they are exempt from Federal income taxes,
as ordinary income. Distributions are taxable when they are paid, except
that distributions declared in October, November or December and paid in
January of the following year are taxable as if paid on December 31st.
Distributions of tax-exempt income by the Tax-Exempt Money Market Portfolio
are not subject to regular federal income taxes. If the Tax-Exempt Money
Market Portfolio earns federally taxable income from any of its investments,
it will be distributed as a taxable dividend. The Portfolio does not intend
to invest in Municipal Securities whose interest is subject to the federal
alternative minimum tax ("AMT") for individuals (known as "private activity
obligations").
Since all investment income is expected to be derived from earned interest,
it is anticipated that no part of any distribution will be eligible for the
dividends received deduction for corporations.
OTHER TAX INFORMATION
The information above is only a summary of some of the tax consequences
generally affecting each Portfolio and its shareholders, and no attempt has
been made to discuss individual tax consequences. In addition to federal
tax, distributions may be subject to state and local taxes. Shareholders
should make their own determination whether a Portfolio is suitable for
investment given their particular situation.
State law varies on whether mutual fund dividends that are derived in whole
or in part from interest on U.S. Government Obligations are exempt from state
income taxation. The Portfolios will provide shareholders annually with
information relating to the composition of their distributions to permit
shareholders to determine whether and to what extent the dividend income they
receive from the Portfolio may be exempt from their state's income tax.
Shareholders should consult their tax adviser as to whether any portion of
the dividends they receive from the Portfolio is exempt from state income
taxes and on any other specific questions concerning state or federal tax
treatment.
Annual statements as to the current federal tax status of distributions, if
applicable, are mailed to shareholders by January 31st following each tax
year.
When an investor signs its account application, it will be asked to certify
that its taxpayer identification number is correct and that it is not subject
to backup withholding for failing to report income to the Internal Revenue
Service ("IRS"). If the investor does not comply with IRS regulations, the
IRS can require each Portfolio to withhold a percentage of distributions.
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PERFORMANCE INFORMATION
From time to time each Portfolio may advertise its current yield and
effective yield for each class of shares in advertisements or in reports or
other communications with shareholders. A Portfolio's performance may be
compared to other investments or relevant indices.
Both yield figures are based on historical earnings and are not intended to
indicate future performance. Each Portfolio's current yield for a class of
shares refers to the net income generated by an investment in that class over
a seven-day period expressed as an annual percentage rate. In addition to
the current yield, each Portfolio may quote yields in advertising based on
any historical seven-day period. The effective yield assumes that the income
earned from the investment is reinvested. The effective yield will be
slightly higher than the current yield because of the compounding effect on
this assumed reinvestment.
The Tax-Exempt Money Market Portfolio also may quote its tax equivalent yield
and tax equivalent effective yield, which shows the taxable yield or taxable
effective yield an investor would have to earn, before taxes, to equal the
Portfolio's tax-free yield or tax-free effective yield. When a tax
equivalent yield or tax equivalent effective yield is calculated, the yield
is increased using a stated income tax rate. See the SAI for more
information concerning performance calculations.
ORGANIZATION AND CAPITALIZATION OF THE TRUST
The Trust was established as a Massachusetts business trust under the laws of
The Commonwealth of Massachusetts by an Agreement and Declaration of Trust
dated January 29, 1993 (the "Trust Declaration"). A copy of the Trust
Declaration is on file with the Secretary of The Commonwealth of
Massachusetts. The Trust, a diversified, open-end management investment
company, is not required to hold annual meetings of shareholders and does not
intend to hold shareholder meetings unless required by the 1940 Act. Holders
of shares representing 10% or more of the outstanding shares of the Trust may
call a meeting for the purpose of voting on the removal of one or more
Trustees. Special meetings may be called for the purpose of conducting
specific items of Trust business.
Shareholders receive one vote for each dollar (or a proportionate fractional
vote for each fraction of a dollar) of net asset value per share owned. The
shares of each Portfolio are classified into four classes. Each Portfolio
votes separately with respect to issues affecting only that Portfolio.
Holders of a particular class will have the exclusive right to vote on
matters submitted to shareholders pertaining only to that class. Pursuant to
the Trust Declaration, the Trustees have the authority to create additional
Portfolios and to issue additional classes of shares for each Portfolio of
the Trust, subject to receipt of any required regulatory approval.
Shareholders may direct any questions they may have about the Trust to the
Distributor at 1-800-828-2176.
Any person or organization owning 25% or more of the outstanding shares of a
Portfolio may be presumed to "control" (as that term is defined in the 1940
Act) such Portfolio. As of November 20, 1997 Sun Bank National Association,
P.O. Box 105504, Atlanta, GA 30348 owned a controlling interest in the U.S.
Treasury Money Market Portfolio; First Union National Bank, 1525 West Wt.
Harris Bouelvard, Charlotte, NC 28288 owned a controlling interest in the
General Money Market Portfolio and Tax-Exempt Money Market Portfolio; and
Integrity Investments, Inc., 1800 Second Street, Sarasota, FL 34236 owned a
controlling interest in the U.S. Treasury Income Portfolio.
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The Trust has adopted a code of ethics which contains a policy on personal
securities transactions by "access persons." That policy complies, in all
material respects, with the recommendations of the Investment Company
Institute.
INVESTMENT RESTRICTIONS
The following is a description of certain investment restrictions which are
fundamental and may not be changed with respect to a Portfolio without the
approval of a majority of the outstanding shares of the Portfolio. For a
description of certain other investment restrictions, reference should be
made to the SAI. The restrictions do not apply to U.S. Government
Obligations.
1. No Portfolio will invest 25% or more of the value of its total assets in a
particular industry, except that up to 100% of the assets of the General
Money Market Portfolio may be invested in domestic banking industry
obligations.
2. As to 75% of the value of its total assets, a Portfolio will not invest
more than 5% of the value of its total assets in the securities of any one
issuer or acquire more than 10% of the voting securities of any issuer; the
remaining 25% of the assets may be invested in the securities of one or
more issuers without regard to such limitations.
3. Under normal market conditions, at least 80% of the value of the Tax-Exempt
Money Market Portfolio's total assets will be invested in Municipal
Securities.
These limitations apply as of the time of purchase. If through market action
the percentage limitations are exceeded, the Portfolios will not be required
to reduce the amount of their holdings in such investments.
The General Money Market Portfolio operates in accordance with a
non-fundamental operating policy which complies with Rule 2a-7 promulgated
under the 1940 Act and is more restrictive than investment restriction number
2 above. Under Rule 2a-7 the Portfolio may not (with certain exceptions)
invest more than 5% of its total assets in the securities of a single issuer.
See "Investment Policies and Limitations" in the SAI.
CERTAIN INVESTMENT STRATEGIES, POLICIES AND RISK CONSIDERATIONS
QUALITY AND MATURITY
Each Portfolio may purchase only high quality obligations that the
Sub-Adviser believes present minimal credit risks. To be considered high
quality, a security must be a U.S. Government Obligation; or rated in
accordance with applicable rules in one of the two highest rating categories
for short-term obligations by at least two NRSROs (or by one, if only one
rating service has rated the security); or, if unrated, judged to be of
equivalent quality by the Sub-Adviser. As a matter of non-fundamental
policy, the Portfolios will only purchase securities, in addition to U.S.
Government Obligations, that are rated in the highest rating category by at
least one NRSRO or, if unrated, are determined to be of equivalent quality.
(See the Appendix for a description of NRSRO ratings).
Each Portfolio must limit its investments to obligations with remaining
maturities of 397 days or less and must maintain a dollar-weighted average
maturity of 90 days or less.
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Each Portfolio's ability to achieve its investment objective depends, at
least in part, on the quality and maturity of its investments. The
Portfolios invest in high quality obligations, but an investment in any of
the Portfolios involves risks. Although each Portfolio's policies are
designed to maintain a stable net asset value of $1.00 per share, all money
market instruments can change in value when interest rates or an issuer's
creditworthiness changes, or if an issuer or guarantor of a security fails to
pay interest or principal when due. If these changes in value were
substantial, a Portfolio's net asset value could deviate from $1.00.
Unless otherwise indicated, each Portfolio may invest in the securities and
engage in the transactions described below.
AFFILIATED BANK TRANSACTIONS
Pursuant to an exemptive order from the SEC, each Portfolio may engage in
certain transactions with banks that are, or may be considered to be,
"affiliated persons" of the Portfolio under the 1940 Act. Such transactions
may be entered into only pursuant to procedures established, and periodically
reviewed, by the Board of Trustees. These transactions may include
repurchase agreements with U.S. banks having short-term debt instruments
rated high quality by at least one NRSRO (or if unrated, determined by the
Sub-Adviser to be of comparable quality); purchases, as principal, of
short-term obligations of such banks and their bank holding companies and
affiliates; transactions in Municipal Securities; transactions in bankers'
acceptances; and transactions in U.S. Government Obligations with affiliated
banks that are primary dealers in these securities.
REPURCHASE AGREEMENTS (APPLICABLE TO U.S. TREASURY MONEY MARKET PORTFOLIO,
GENERAL MONEY MARKET PORTFOLIO AND TAX-EXEMPT MONEY MARKET PORTFOLIO ONLY)
Each Portfolio, except the U.S. Treasury Income Portfolio, may enter into
repurchase agreements that allow the Portfolio to purchase U.S. Government
Obligations, with an agreement that the seller will repurchase the obligation
at an agreed upon price and date. No more than 10% of a Portfolio's net
assets taken at current value will be invested in repurchase agreements
extending for more than seven days. If a seller defaults on the obligation
to repurchase, the Portfolios may incur a loss or other costs.
REVERSE REPURCHASE AGREEMENTS (APPLICABLE TO GENERAL MONEY MARKET PORTFOLIO
AND TAX-EXEMPT MONEY MARKET PORTFOLIO ONLY)
The General Money Market Portfolio and the Tax-Exempt Money Market Portfolio
may enter into reverse repurchase agreements, which are transactions where a
Portfolio temporarily transfers possession of a portfolio instrument to
another party, such as a bank or broker-dealer, in return for cash. At the
same time, the Portfolio agrees to repurchase the instrument at an agreed
upon time and price, which includes interest. The General Money Market
Portfolio expects that it will engage in reverse repurchase agreements when
it is able to invest the cash so acquired at a rate higher than the cost of
the agreement, which would increase income earned by such Portfolio, or for
liquidity purposes. Engaging in reverse repurchase agreements may involve an
element of leverage, and no Portfolio will purchase a security while
borrowings (including reverse repurchase agreements) representing more than
5% of its total assets are outstanding. The Tax-Exempt Money Market
Portfolio will engage in reverse repurchase agreements for temporary or
emergency purposes only and not for leverage or investment.
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FORWARD COMMITMENTS AND "WHEN-ISSUED" SECURITIES
Each Portfolio may also enter into forward commitment agreements and purchase
"when-issued" securities. Forward commitments are contracts to purchase
securities for a fixed price at a specified future date beyond customary
settlement time with no interest accruing to the Portfolio until the
settlement date. Forward commitments involve a risk of loss if the value of
the security to be purchased declines prior to the settlement date.
Municipal Securities are often issued on a when-issued basis. The yield of
such securities is fixed at the time a commitment to purchase is made, with
actual payment and delivery of the security generally taking place 15 to 45
days later. Under some circumstances, the purchase of when-issued securities
may act to leverage the Portfolio.
LENDING OF SECURITIES
For the purpose of realizing additional income, the Portfolios may lend
portfolio securities to broker-dealers or financial institutions up to not
more than 10% of their respective total assets taken at current value. While
any such loan is outstanding, each such Portfolio will continue to receive
amounts equal to the interest or dividends paid by the issuer on the
securities, as well as interest (less any rebates to be paid to the borrower)
on the investment of the collateral or fees from the borrower. Each
Portfolio will have a right to call each loan and obtain the securities.
Lending portfolio securities involves certain risks, including possible
delays in receiving additional collateral or in the recovery of the
securities or possible loss of rights in the collateral should the borrower
fail financially. Loans will be made in accordance with guidelines
established by the Board of Trustees.
LETTERS OF CREDIT
Issuers or financial intermediaries who provide demand features or standby
commitments often support their ability to buy obligations on demand by
obtaining letters of credit ("LOCs") or other guarantees from domestic or
foreign banks. LOCs also may be used as credit supports for Municipal
Securities. The Sub-Adviser may rely upon its evaluation of a bank's credit
in determining whether to purchase an instrument supported by an LOC. In
evaluating a foreign bank's credit, the Sub-Adviser will consider whether
adequate public information about the bank is available and whether the bank
may be subject to unfavorable political or economic developments, currency
controls or other governmental restrictions that might affect the bank's
ability to honor its credit commitment.
ZERO COUPON BONDS
Each Portfolio may purchase zero coupon bonds. Regular interest payments are
not made on zero coupon bonds; instead these bonds are sold at a deep
discount from their face value and are redeemed at face value when they
mature. Each Portfolio will purchase only those zero coupon bonds which have
a remaining maturity of one year or less. As a result, such bonds are
expected to pay out a return on a regular basis as they mature. Because zero
coupon bonds do not pay current income, their prices tend to be more volatile
in response to interest rate changes than bonds which pay interest regularly.
In calculating its daily dividend, a Portfolio takes into account as income
a portion of the difference between a zero coupon bond's purchase price and
its face value.
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A broker-dealer creates a derivative zero coupon bond by separating the
interest and principal components of a U.S. Treasury security and selling
them as two individual securities. CATS (Certificates of Accrual on Treasury
Securities), TIGRs (Treasury Investment Growth Receipts), and TRs (Treasury
Receipts) are examples of derivative zero coupon bonds.
The Federal Reserve Bank creates STRIPS (Separate Trading of Registered
Interest and Principal of Securities) by separating the interest and
principal components of an outstanding U.S. Treasury bond and selling them as
individual securities. Bonds issued by the Resolution Funding Corporation and
the Financing Corporation can also be separated in this fashion.
U.S. GOVERNMENT OBLIGATIONS
U.S. Government Obligations are debt obligations issued or guaranteed by the
U.S. Treasury or by an agency or instrumentality of the U.S. Government. Not
all U.S. Government Obligations are backed by the full faith and credit of
the United States. Obligations may be supported only by the agency's right
to borrow money from the U.S. Treasury under certain circumstances or by the
credit of the agency. There is no guarantee that the U.S. Government will
support these types of obligations, and therefore they involve more risk than
U.S. Government Obligations backed by the full faith and credit of the United
States.
VARIABLE AND FLOATING RATE INSTRUMENTS
Each Portfolio may purchase variable and floating rate demand instruments and
other securities that possess a floating or variable interest rate adjustment
formula. These instruments permit the Portfolios to demand payment of the
principal balance plus unpaid accrued interest upon a specified number of
days' notice to the issuer or its agent. The demand feature may be backed by
a bank letter of credit or guarantee issued with respect to such instrument.
The Portfolios' Sub-Adviser, on behalf of the Manager, intends to exercise
the demand only (1) to attain a more optimal portfolio structure, (2) upon a
default under the terms of the debt security, (3) as needed to provide
liquidity to the Portfolios, or (4) to maintain the respective quality
standard of the Portfolios' investment portfolio. The Portfolios'
Sub-Adviser will determine which variable or floating rate demand instruments
to purchase in accordance with procedures approved by the Trustees to
minimize credit risks.
MUNICIPAL LEASE OBLIGATIONS (APPLICABLE TO TAX-EXEMPT MONEY MARKET PORTFOLIO
ONLY)
Municipal lease obligations are issued by a state and local government or
authority to acquire land and a wide variety of equipment and facilities.
These obligations typically are not fully backed by the municipality's
credit, and the interest payable on these obligations may become taxable if
the lease is assigned. If funds are not appropriated for the following
year's lease payments, a lease may terminate, with the possibility of default
on the lease obligation and significant loss to the Portfolio. Such risk of
non-appropriation is unique to municipal lease obligations. The SEC Staff
has taken the position that open-end investment companies may treat these
obligations as liquid under guidelines established by the Board of Trustees.
Determination concerning the liquidity and proper valuation of these
obligations will include: the frequency of trades and quotes for the
obligation, the number of dealers willing to purchase or sell the security
and the number of potential buyers, the willingness of dealers to make a
market in the securities, the nature of the marketplace trades and the
likelihood that its marketability will be maintained throughout the time the
instrument is held by
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the Portfolio. The Board will be responsible for determining the credit
quality of any unrated lease obligations held by the Portfolio, on an ongoing
basis, including an assessment of the likelihood that the lease will not be
canceled. The high quality municipal lease obligations in which the
Tax-Exempt Money Market Portfolio intends to invest generally are not
expected by the Board to present liquidity risks. Lease obligations will be
valued based on a standard spread that relates to general obligation
securities whose value is determined using a pricing service. Certificates of
participation in municipal lease obligations or installment sales contracts
entitle the holder to a proportionate interest in the lease-purchase payments
made. Certificates of participation typically are issued by municipalities
and by banks and other financial institutions.
MUNICIPAL SECURITIES (APPLICABLE TO TAX-EXEMPT MONEY MARKET PORTFOLIO ONLY)
Municipal Securities include general obligation securities, which are backed
by the full taxing power of a municipality, or revenue securities, which are
backed by the revenues of a specific tax, project or facility. Resource
recovery bonds, a type of revenue obligation, are used to finance the
construction of waste burning facilities. Such bonds may be subject to
special risks because the project uses technology or an economic plan that is
not yet proven, or requires operating permits from environmental authorities.
Industrial development bonds are a type of revenue bond backed by the credit
and security of a private issuer and may involve greater risk. Tax and
revenue anticipation notes are issued by municipalities in expectation of
future tax or other revenues, and are payable from those specific taxes or
revenues. Bond anticipation notes normally provide interim financing in
advance of an issue of bonds or notes, the proceeds of which are used to
repay the anticipation notes.
Although the Tax-Exempt Money Market Portfolio presently does not intend to
do so on a regular basis, it may invest more than 25% of its assets in
Municipal Securities which are related in such a way that an economic,
business, or political development or change affecting one security would
likewise affect the other Municipal Securities. To the extent that the
Portfolio's assets are concentrated in Municipal Securities that are so
related, the Portfolio will be subject to the peculiar risks presented by
such Municipal Securities, such as negative developments in a particular
industry or state, to a greater extent than it would be if the Portfolio's
assets were not so concentrated.
RESTRICTED SECURITIES (APPLICABLE TO GENERAL MONEY MARKET PORTFOLIO AND
TAX-EXEMPT MONEY MARKET PORTFOLIO ONLY)
The General Money Market Portfolio and the Tax-Exempt Money Market Portfolio
may purchase securities which cannot be sold to the public without
registration under the Securities Act of 1933 (restricted securities). Unless
registered for sale, these securities can only be sold in privately
negotiated transactions or pursuant to an exemption from registration.
Provided that the security has a demand feature of seven days or less, or a
dealer or institutional trading market exists which in the opinion of the
Sub-Adviser, subject to Board guidelines, affords liquidity, these restricted
securities are not treated as illiquid securities for purposes of each
Portfolio's restriction on not investing more than 10% of its net assets in
illiquid securities.
SPECIAL CONSIDERATIONS OF FOREIGN INVESTMENTS (APPLICABLE TO GENERAL MONEY
MARKET PORTFOLIO ONLY)
The General Money Market Portfolio may invest in U.S. dollar-denominated
obligations of foreign branches of U.S. banks (Eurodollars), U.S. branches
and agencies of foreign banks (Yankee dollars), and foreign branches of
foreign banks. Euro and Yankee dollar investments involve risks that are
different from
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investments in securities of U.S. banks. These risks may include future
unfavorable political and economic developments, possible withholding taxes,
seizure of foreign deposits, currency controls, interest limitations or other
governmental restrictions which might affect payment of principal or
interest. Additionally, there may be less public information available about
foreign banks and their branches. Foreign branches of foreign banks are not
regulated by U.S. banking authorities, and generally are not bound by
accounting, auditing and financial reporting standards comparable to U.S.
banks. Although the Sub-Adviser carefully considers these factors when
making investments, and subject to its policy on concentration, the Portfolio
does not limit the amount of its assets which can be invested in any one type
of instrument or in any foreign country. The Portfolio will not invest 25%
or more of its assets in Euro and Yankee dollar investments and obligations
of foreign branches of foreign banks.
APPENDIX
NRSRO RATINGS
Description of Moody's Investors Service, Inc. ("Moody's") and Standard &
Poor's Corporation ("S&P") commercial paper and bond ratings:
SHORT-TERM DEBT RATINGS
MOODY'S EMPLOYS THREE DESIGNATIONS, ALL JUDGED TO BE INVESTMENT GRADE, TO
INDICATE THE RELATIVE REPAYMENT CAPACITY OF RATED ISSUERS. THE HIGHEST
DESIGNATION IS AS FOLLOWS:
Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following
characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structures with moderate reliance on debt and
ample asset protection.
- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
- Well-established access to a range of financial markets and assured sources
of alternate liquidity.
S&P SHORT-TERM DEBT RATINGS ARE GRADED INTO FOUR CATEGORIES, RANGING FROM "A"
FOR THE HIGHEST QUALITY OBLIGATIONS TO "D" FOR THE LOWEST. THE HIGHEST
RATINGS IN THE "A" CATEGORY ARE DESCRIBED AS FOLLOWS:
"A"-Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are further refined
with the designations 1, 2 and 3 to indicate the relative degree of safety.
"A-1"-This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics will be noted with a plus (+)
sign designation.
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MUNICIPAL OBLIGATIONS
Moody's ratings for state and municipal and other short-term obligations will
be designated Moody's Investment Grade ("MIG"). This distinction is in
recognition of the differences between short-term credit risk and long-term
risk. Factors affecting the liquidity of the borrower are uppermost in
importance in short-term borrowing, while various factors of the first
importance in short-term borrowing risk are of lesser importance in the long
run. The highest MIG quality rating is defined as follows:
MIG-1-Notes bearing this designation are of the best quality, enjoying strong
protection from established cash flows of funds for their servicing or from
established and broad-based access to the market for refinancing, or both.
A short-term rating may also be assigned to an issue having a demand feature.
Such ratings will be designated as VMIG to reflect such characteristics as
payment upon periodic demand rather than fixed maturity dates and payment
relying on external liquidity. Additionally, investors should be alert to
the fact that the source of payment may be limited to the external liquidity
with no or limited legal recourse to the issuer in the event the demand is
not met. A VMIG-1 rating carries the same definition as MIG-1.
S&P'S HIGHEST QUALITY RATING FOR SHORT-TERM STATE AND MUNICIPAL NOTES IS
DEFINED AS FOLLOWS:
SP-1- Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be
given a plus (+) designation.
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THE VALIANT FUND
U.S. Treasury Money Market Portfolio
U.S. Treasury Income Portfolio
General Money Market Portfolio
Tax-Exempt Money Market Portfolio
Class A, Class B, Class C and Class D Shares
STATEMENT OF ADDITIONAL INFORMATION
DECEMBER 19, 1997
This Statement of Additional Information ("SAI") is not a prospectus and
should be read in conjunction with the current Prospectuses for The Valiant
Fund: U.S. Treasury Money Market Portfolio, U.S. Treasury Income Portfolio,
General Money Market Portfolio and Tax-Exempt Money Market Portfolio (dated
December 19, 1997). Please retain this SAI for future reference. To obtain
additional copies of this SAI or of the Prospectuses, please call Integrity
Investments, Inc. (the "Distributor") at 1-800-828-2176.
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TABLE OF CONTENTS PAGE
Investment Policies and Limitations. . . . . . . . . . . 3
Portfolio Transactions . . . . . . . . . . . . . . . . . 13
Valuation of Portfolio Securities. . . . . . . . . . . . 14
Performance. . . . . . . . . . . . . . . . . . . . . . . 14
Additional Purchase and Redemption Information . . . . . 16
Dividends, Capital Gains Distributions and Taxes . . . . 17
Trustees and Officers. . . . . . . . . . . . . . . . . . 18
Investment Advisory Agreements . . . . . . . . . . . . . 20
Administration Agreement and Other Contracts . . . . . . 20
Description of the Trust . . . . . . . . . . . . . . . . 22
INVESTMENT ADVISER
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Integrity Management & Research, Inc. (the "Manager")
SUB-ADVISER
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David L. Babson & Co. Inc. (the "Sub-Adviser")
DISTRIBUTOR
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Integrity Investments, Inc. (the "Distributor")
ADMINISTRATOR/CUSTODIAN/TRANSFER AGENT
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State Street Bank and Trust Company (the "Administrator," "Custodian" and
"Transfer Agent")
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INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in the
Prospectuses. Unless otherwise noted, whenever an investment policy or
limitation states a maximum percentage of a Portfolio's assets that may be
invested in any security or other assets, or sets forth a policy regarding
quality standards, such standard or percentage limitation will be determined
immediately after and as a result of the Portfolio's acquisition of such
security or other asset. Any later increase or decrease resulting from a
change in values, net assets or other circumstances, will not be considered
when determining whether the investment complies with the Portfolio's
investment policies and limitations.
Fundamental policies and investment limitations may not be changed with
respect to any Portfolio without approval by a "majority of the outstanding
voting securities" (as defined in the Investment Company Act of 1940 (the
"1940 Act")) of that Portfolio. The investment policies and limitations
described in this Statement of Additional Information are not fundamental and
may be changed without shareholder approval, except for the investment
limitations specifically identified as fundamental below.
U.S. TREASURY MONEY MARKET PORTFOLIO
THE FOLLOWING ARE THE U.S. TREASURY MONEY MARKET PORTFOLIO'S FUNDAMENTAL
LIMITATIONS. THE PORTFOLIO MAY NOT:
(1) with respect to 75% of the Portfolio's total assets, purchase the
securities of any issuer (other than securities issued or guaranteed by the
U.S. Government or any of its agencies or instrumentalities) if, as a result,
(a) more than 5% of the Portfolio's total assets would be invested in the
securities of that issuer; or (b) the Portfolio would hold more than 10% of
the outstanding voting securities of that issuer;
(2) issue senior securities, except as permitted under the 1940 Act;
(3) borrow money, except that the Portfolio may borrow money for temporary or
emergency purposes (not for leveraging or investment) provided that the
amount does not exceed 33% of the Portfolio's total assets (including the
amount borrowed) less liabilities (other than borrowings). Any borrowings
that come to exceed this amount will be reduced within three days (not
including Sundays and holidays) to the extent necessary to comply with this
33% limitation;
(4) underwrite securities issued by others, except to the extent that the
Portfolio may be considered an underwriter within the meaning of the
Securities Act of 1933, as amended ("1933 Act") in the disposition of
restricted securities;
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. Government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the Portfolio's total
assets would be invested in the securities of companies whose principal
business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result of ownership of
securities or other instruments (but this shall not prevent the Portfolio
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(7) purchase or sell physical commodities (unless acquired as a result of
ownership of securities or other instruments) or commodity contracts,
including futures contracts;
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(8) lend any security or make any other loan if, as a result, more than 10%
of its total assets would be lent to other parties, but this limit does not
apply to purchases of debt securities or to repurchase agreements; or
(9) purchase the securities of other investment companies, except in
connection with a merger, consolidation, reorganization or acquisition of
assets or in accordance with the 1940 Act.
THE FOLLOWING LIMITATIONS OF THE U.S. TREASURY MONEY MARKET PORTFOLIO ARE NOT
FUNDAMENTAL AND MAY BE CHANGED WITHOUT SHAREHOLDER APPROVAL.
(i) The Portfolio does not currently intend during the coming year to
purchase the voting securities of any issuer.
(ii) The Portfolio does not currently intend during the coming year to sell
securities short, unless it owns or has the right, without payment of
additional consideration, to obtain securities equivalent in kind and amount
to the securities sold short.
(iii) The Portfolio does not currently intend during the coming year to
purchase securities on margin, except that the Portfolio may obtain such
short-term credits as are necessary for the clearance of transactions.
(iv) The Portfolio may borrow money only from a bank. The Portfolio will not
purchase any security while borrowings representing more than 5% of its total
assets are outstanding.
(v) The Portfolio does not currently intend during the coming year to
purchase any security or enter into a repurchase agreement if, as a result,
more than 10% of its net assets would be invested in repurchase agreements
not entitling the holder to payment of principal and interest within seven
days and in securities that are illiquid by virtue of legal or contractual
restrictions on resale or the absence of a readily available market.
(vi) The Portfolio does not currently intend during the coming year to make
loans, but this limit does not apply to purchases of debt securities or to
repurchase agreements.
(vii) The Portfolio does not currently intend during the coming year to
invest in oil, gas, or other mineral exploration or development programs or
leases.
(viii) The Portfolio does not currently intend during the coming year to
purchase the securities of any issuer if those officers and Trustees of the
Trust and those officers and directors of the Manager or the Sub-Adviser who
individually own more than 1/2 of 1% of the securities of such issuer together
own more than 5% of such issuer's securities.
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U.S. TREASURY INCOME PORTFOLIO
THE FOLLOWING ARE THE U.S. TREASURY INCOME PORTFOLIO'S FUNDAMENTAL
LIMITATIONS. THE PORTFOLIO MAY NOT:
(1) with respect to 75% of the Portfolio's total assets, purchase the
securities of any issuer (other than securities issued or guaranteed by the
U.S. Government or any of its agencies or instrumentalities) if, as a result,
(a) more than 5% of the Portfolio's total assets would be invested in the
securities of that issuer; or (b) the Portfolio would hold more than 10% of
the outstanding voting securities of that issuer;
(2) issue senior securities, except as permitted under the 1940 Act;
(3) borrow money, except that the Portfolio may (i) borrow money for
temporary or emergency purposes (not for leveraging or investment) and (ii)
engage in reverse repurchase agreements for any purpose; provided that (i)
and (ii) in combination do not exceed 33% of the Portfolio's total assets
(including the amount borrowed) less liabilities (other than borrowings).
Any borrowings that come to exceed this amount will be reduced within three
days (not including Sundays and holidays) to the extent necessary to comply
with this 33% limitation;
(4) underwrite securities issued by others, except to the extent that the
Portfolio may be considered an underwriter within the meaning of the 1933 Act
in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. Government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the Portfolio's total
assets would be invested in the securities of companies whose principal
business activities are in the same industry;
(6) purchase or sell real estate, unless acquired as a result of ownership of
securities or other instruments (but this shall not prevent the Portfolio
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(7) purchase or sell physical commodities (unless acquired as a result of
ownership of securities or other instruments) or commodity contracts,
including futures contracts;
(8) lend any security or make any other loan if, as a result, more than 10%
of its total assets would be lent to other parties, but this limit does not
apply to purchases of debt securities or to repurchase agreements; or
(9) purchase the securities of other investment companies except in
connection with a merger, consolidation, reorganization or acquisition of
assets or in accordance with the 1940 Act.
THE FOLLOWING LIMITATIONS OF THE U.S. TREASURY INCOME PORTFOLIO ARE NOT
FUNDAMENTAL AND MAY BE CHANGED WITHOUT SHAREHOLDER APPROVAL.
(i) The Portfolio does not currently intend during the coming year to
purchase the voting securities of any issuer.
(ii) The Portfolio does not currently intend during the coming year to sell
securities short, unless it owns or has the right, without payment of
additional consideration, to obtain securities equivalent in kind and amount
to the securities sold short.
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(iii) The Portfolio does not currently intend during the coming year to
purchase securities on margin, except that the Portfolio may obtain such
short-term credits as are necessary for the clearance of transactions.
(iv) The Portfolio may borrow money only (a) from a bank or (b) by engaging
in reverse repurchase agreements with any party (reverse repurchase
agreements are treated as borrowings for purposes of fundamental investment
limitation (3)). The Portfolio will not purchase any security while
borrowings representing more than 5% of its total assets are outstanding.
(v) The Portfolio does not currently intend during the coming year to
purchase any security or enter into a repurchase agreement if, as a result,
more than 10% of its net assets would be invested in repurchase agreements
not entitling the holder to payment of principal and interest within seven
days and in securities that are illiquid by virtue of legal or contractual
restrictions on resale or the absence of a readily available market.
(vi) The Portfolio does not currently intend during the coming year to make
loans, but this limit does not apply to purchases of debt securities or to
repurchase agreements.
(vii) The Portfolio does not currently intend during the coming year to
invest in oil, gas, or other mineral exploration or development programs or
leases.
(viii) The Portfolio does not currently intend during the coming year to
purchase the securities of any issuer if those officers and Trustees of the
Trust and those officers and directors of the Manager or the Sub-Adviser who
individually own more than 1/2 of 1% of the securities of such issuer
together own more than 5% of such issuer's securities.
Notwithstanding paragraph (3) and paragraphs (iv) through (vi) above, as a
matter of nonfundamental policy, the Portfolio will not engage in repurchase
agreement or reverse repurchase agreement transactions.
GENERAL MONEY MARKET PORTFOLIO
THE FOLLOWING ARE THE GENERAL MONEY MARKET PORTFOLIO'S FUNDAMENTAL
LIMITATIONS. THE PORTFOLIO MAY NOT:
(1) with respect to 75% of the Portfolio's total assets, purchase the
securities of any issuer (other than securities issued or guaranteed by the
U.S. Government or any of its agencies or instrumentalities) if, as a result,
(a) more than 5% of the Portfolio's total assets would be invested in the
securities of that issuer; or (b) the Portfolio would hold more than 10% of
the outstanding voting securities of that issuer;
(2) issue senior securities, except as permitted under the 1940 Act;
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(3) borrow money, except that the Portfolio may (i) borrow money for
temporary or emergency purposes (not for leveraging or investment) and (ii)
engage in reverse repurchase agreements for any purpose; provided that (i)
and (ii) in combination do not exceed 33% of the Portfolio's total assets
(including the amount borrowed) less liabilities (other than borrowings).
Any borrowings that come to exceed this amount will be reduced within three
days (not including Sundays and holidays) to the extent necessary to comply
with this 33% limitation;
(4) underwrite securities issued by others, except to the extent that the
Portfolio may be considered an underwriter within the meaning of the 1933 Act
in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. Government or any of its agencies or
instrumentalities, or by domestic issuers which are banks, bank holding
companies or similar banking institutions) if, as a result, more than 25% of
the Portfolio's total assets would be invested in the securities of companies
whose principal business activities are in the same industry;
(6) purchase or sell real estate, unless acquired as a result of ownership of
securities or other instruments (but this shall not prevent the Portfolio
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(7) purchase or sell physical commodities (unless acquired as a result of
ownership of securities or other instruments) or commodity contracts,
including futures contracts;
(8) lend any security or make any other loan if, as a result, more than 10%
of its total assets would be lent to other parties, but this limit does not
apply to purchases of debt securities or to repurchase agreements; or
(9) purchase the securities of other investment companies except in
connection with a merger, consolidation, reorganization or acquisition of
assets or in accordance with the 1940 Act.
As a result of Rule 2a-7 promulgated under the 1940 Act (the "Rule"), the
entire portfolio (except with respect to U.S. Government securities) of the
General Money Market Portfolio is subject to the 5% limitation contained in
investment limitation (1) above. However, in accordance with the Rule, the
General Money Market Portfolio will be able to invest more than 5% (but no
more than 25%) of its total assets in the securities of a single issuer for
a period of up to three business days after the purchase thereof, provided
that the Portfolio may not hold more than one such investment at any one
time. The Portfolio operates in accordance with a non-fundamental operating
policy which complies with the Rule. Investment limitation (1) above would
give the Portfolio the ability to invest, with respect to 25% of the
Portfolio's assets, more than 5% of its assets in any one issuer in the event
that the Rule were to be amended in the future.
THE FOLLOWING LIMITATIONS OF THE GENERAL MONEY MARKET PORTFOLIO ARE NOT
FUNDAMENTAL AND MAY BE CHANGED WITHOUT SHAREHOLDER APPROVAL.
(i) The Portfolio does not currently intend during the coming year to
purchase the voting securities of any issuer.
(ii) The Portfolio does not currently intend during the coming year to sell
securities short, unless it owns or has the right, without payment of
additional consideration, to obtain securities equivalent in kind and amount
to the securities sold short.
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(iii) The Portfolio does not currently intend during the coming year to
purchase securities on margin, except that the Portfolio may obtain such
short-term credits as are necessary for the clearance of transactions.
(iv) The Portfolio may borrow money only (a) from a bank or (b) by engaging
in reverse repurchase agreements with any party (reverse repurchase
agreements are treated as borrowings for purposes of fundamental investment
limitation (3)). The Portfolio will not purchase any security while
borrowings representing more than 5% of its total assets are outstanding.
(v) The Portfolio does not currently intend during the coming year to
purchase any security or enter into a repurchase agreement if, as a result,
more than 10% of its net assets would be invested in repurchase agreements
not entitling the holder to payment of principal and interest within seven
days and in securities that are illiquid by virtue of legal or contractual
restrictions on resale or the absence of a readily available market.
(vi) The Portfolio does not currently intend during the coming year to make
loans, but this limit does not apply to purchases of debt securities or to
repurchase agreements.
(vii) The Portfolio does not currently intend during the coming year to
invest in oil, gas, or other mineral exploration or development programs or
leases.
(viii) The Portfolio does not currently intend during the coming year to
purchase the securities of any issuer if those officers and Trustees of the
Trust and those officers and directors of the Manager or the Sub-Adviser who
individually own more than 1/2 of 1% of the securities of such issuer
together own more than 5% of such issuer's securities.
TAX-EXEMPT MONEY MARKET PORTFOLIO
THE FOLLOWING ARE THE TAX-EXEMPT MONEY MARKET PORTFOLIO'S FUNDAMENTAL
LIMITATIONS. THE PORTFOLIO MAY NOT:
(1) with respect to 75% of the Portfolio's total assets, purchase the
securities of any issuer (other than securities issued or guaranteed by the
U.S. Government or any of its agencies or instrumentalities) if, as a result,
(a) more than 5% of the Portfolio's total assets would be invested in the
securities of that issuer, or (b) the Portfolio would hold more than 10% of
the outstanding voting securities of that issuer;
(2) issue senior securities, except as permitted under the 1940 Act;
(3) borrow money, except that the Portfolio may (i) borrow money for
temporary or emergency purposes (not for leveraging or investment) and (ii)
engage in reverse repurchase agreements; provided that (i) and (ii) in
combination do not exceed 33% of the Portfolio's total assets (including the
amount borrowed) less liabilities (other than borrowings). Any borrowings
that come to exceed this amount will be reduced within three days (not
including Sundays and holidays) to the extent necessary to comply with this
33% limitation;
(4) underwrite securities issued by others, except to the extent that the
Portfolio may be considered an underwriter within the meaning of the 1933 Act
in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. Government or any of its agencies or
instrumentalities, or tax-exempt obligations issued or guaranteed by a U.S.
territory or possession or a state or local government, or a political
subdivision of any of the foregoing) if, as a result,
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more than 25% of the Portfolio's total assets would be invested in securities
of companies whose principal business activities are in the same industry;
(6) buy or sell real estate, unless acquired as a result of ownership of
securities or other instruments (but this shall not prevent the Portfolio
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(7) purchase or sell physical commodities (unless acquired as a result of
ownership of securities or other instruments) or commodity contracts,
including futures contracts;
(8) lend any security or make any other loan if, as a result, more than 10%
of its total assets would be lent to other parties, but this limit does not
apply to purchases of debt securities or to repurchase agreements; or
(9) purchase the securities of other investment companies except in
connection with a merger, consolidation, reorganization or acquisition of
assets or in accordance with the 1940 Act.
THE FOLLOWING LIMITATIONS OF THE TAX-EXEMPT MONEY MARKET PORTFOLIO ARE NOT
FUNDAMENTAL AND MAY BE CHANGED WITHOUT SHAREHOLDER APPROVAL.
(i) The Portfolio does not currently intend during the coming year to
purchase the voting securities of any issuer.
(ii) The Portfolio does not currently intend during the coming year to sell
securities short, unless it owns or has the right, without payment of
additional consideration, to obtain securities equivalent in kind and amount
to the securities sold short.
(iii) The Portfolio does not currently intend during the coming year to
purchase securities on margin, except that the Portfolio may obtain such
short-term credits as are necessary for the clearance of transactions.
(iv) The Portfolio may borrow money only (a) from a bank or (b) by engaging
in reverse repurchase agreements with any party (reverse repurchase
agreements are treated as borrowings for purposes of fundamental investment
limitation (3)). The Portfolio will not purchase any security while
borrowings representing more than 5% of its total assets are outstanding.
(v) The Portfolio does not currently intend during the coming year to
purchase any security or enter into a repurchase agreement if, as a result,
more than 10% of its net assets would be invested in repurchase agreements
not entitling the holder to payment of principal and interest within seven
days and in securities that are illiquid by virtue of legal or contractual
restrictions on resale or the absence of a readily available market.
(vi) The Portfolio does not currently intend during the coming year to make
loans, but this limit does not apply to purchases of debt securities or to
repurchase agreements.
(vii) The Portfolio does not currently intend during the coming year to
invest in oil, gas, or other mineral exploration or development programs or
leases.
(viii) The Portfolio does not currently intend during the coming year to
purchase the securities of any issuer if those officers and Trustees of the
Trust and those officers and directors of the Manager who individually
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own more than 1/2 of 1% of the securities of such issuer together own more
than 5% of such issuer's securities.
INVESTMENT POLICIES OF THE PORTFOLIOS
DELAYED DELIVERY TRANSACTIONS. Each Portfolio may buy and sell securities on
a delayed delivery or when-issued basis. These transactions involve a
commitment by each Portfolio to purchase or sell specific securities at a
predetermined price and/or yield, with payment and delivery taking place
after the customary settlement period for that type of security (which may be
more than seven days in the future). Typically, no interest accrues to the
purchaser until the security is delivered.
When purchasing securities on a delayed delivery basis, each Portfolio
assumes the rights and risks of ownership, including the risk of price and
yield fluctuations. Because each Portfolio is not required to pay for
securities until the delivery date, these risks are in addition to the risks
associated with the Portfolios' other investments. If each Portfolio remains
substantially fully invested at a time when delayed delivery purchases are
outstanding, the delayed delivery purchases may result in a form of leverage.
If the other party to a delayed delivery transaction fails to deliver or pay
for the securities, each Portfolio could miss a favorable price or yield
opportunity, or could suffer a loss. When delayed delivery purchases are
outstanding, each Portfolio will set aside cash or appropriate liquid assets
in a segregated custodial account to cover its purchase obligations. Each
Portfolio may renegotiate delayed delivery transactions after they are
entered into, and may sell underlying securities before they are delivered,
which may result in capital gains or losses.
VARIABLE AND FLOATING RATE DEMAND OBLIGATIONS are obligations that bear
variable or floating interest rates and carry rights that permit holders to
demand payment of the unpaid principal balance plus accrued interest from the
issuers or certain financial intermediaries. Floating rate securities have
interest rates that change whenever there is a change in a designated base
rate while variable rate instruments provide for a specified periodic
adjustment in the interest rate. These formulas are designed to result in a
market value for such obligations that approximates their par value. A
demand instrument with a conditional demand feature must have received both a
short-term and a long-term high quality rating, or, if unrated, have been
determined to be of comparable quality, and a demand instrument with an
unconditional demand feature may be acquired solely in reliance upon a
short-term high quality rating or, if unrated, upon a finding of comparable
short-term quality, pursuant to procedures adopted by the Trustees.
A variable rate instrument that matures in 397 days or less may be deemed to
have a maturity equal to the period remaining until the next readjustment of
the interest rate. A variable rate instrument that matures in greater than
397 days but that is subject to a demand feature that is 397 days or less may
be deemed to have a maturity equal to the longer of the period remaining
until the next readjustment of the interest rate or the period remaining
until the principal amount can be recovered through demand. A floating rate
instrument that is subject to a demand feature may be deemed to have a
maturity equal to the period remaining until the principal amount may be
recovered through demand. Each Portfolio may purchase a demand instrument
with a remaining final maturity in excess of 397 days only if the demand
feature can be exercised on no more than 30 days' notice (a) at any time or
(b) at specific intervals not exceeding 397 days.
STANDBY COMMITMENTS are puts that entitle holders to same-day settlement at
an exercise price equal to the amortized cost of the underlying security plus
accrued interest, if any, at the time of exercise. The Tax-Exempt Money
Market Portfolio may acquire standby commitments to enhance the liquidity of
portfolio securities, but only when the issuers of the commitments present
minimal risk of default.
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Ordinarily, the Tax-Exempt Money Market Portfolio will not transfer a standby
commitment to a third party, although it could sell the underlying Municipal
Security to a third party at any time. Standby commitments will not affect
the dollar-weighted average maturity of the Portfolio, or the valuation of
the securities underlying the commitments. The Portfolio may purchase
standby commitments separate from, or in conjunction with, the purchase of
securities subject to such commitments, in which case, the Portfolio would
pay a higher price for the securities acquired, thus reducing their yield to
maturity.
Standby commitments are subject to certain risks, including the ability of
issuers to pay for securities at the time the commitments are exercised. The
fact that standby commitments are not marketable by the Portfolio, and that
the maturities of the underlying securities may be different from those of
the commitments, also present potential risks.
MUNICIPAL LEASE OBLIGATIONS. The Tax-Exempt Money Market Portfolio may
invest a portion of its assets in municipal leases and participation
interests therein. A participation interest gives the Portfolio a specified,
undivided interest in the obligation in proportion to its purchased interest
in the total amount of the obligation. These obligations, which may take the
form of a lease, an installment purchase, or a conditional sales contract,
are issued by state and local governments and authorities to acquire land and
a wide variety of equipment and facilities. Generally, the Portfolio will
not hold such obligations directly as a lessor of the property, but will
purchase a participation interest in a municipal obligation. Such
participation interests may be purchased from a municipality or from a bank
or other third party.
Municipal leases frequently have risks distinct from those associated with
general obligation or revenue bonds. Leases, installment purchase, or
conditional sale contracts (which normally provide for title to the leased
asset to pass to the governmental issuer) have evolved as a means for
governmental issuers to acquire property and equipment without meeting their
constitutional and statutory requirements for the issuance of debt. Many
leases and contracts include "non-appropriation clauses" providing that the
governmental issuer has no obligation to make future payments under the lease
or contract unless money is appropriated for such purpose by the appropriate
legislative body on a yearly or other periodic basis. Non-appropriation
clauses free the issuer from debt issuance limitations.
In determining the liquidity of a municipal lease obligation, the Sub-Adviser
will differentiate between simple or direct municipal leases and municipal
lease-backed securities, the latter of which may take the form of a
lease-backed revenue bond, a tax-exempt asset-backed security or any other
investment structure using a municipal lease-purchase agreement as its base.
While the former may present liquidity issues, the latter are based on a
well-established method of securing payment of a municipal lease obligation.
MUNICIPAL SECURITIES include general obligation securities, which are backed
by the full taxing power of a municipality, or revenue securities, which are
backed by revenues of a project or facility. Industrial development bonds
are a type of revenue bond backed by the credit and security of a private
issuer and may involve greater risk. Bond anticipation notes normally
provide interim financing in advance of an issue of bonds or notes, the
proceeds of which are used to repay anticipation notes. Tax and revenue
anticipation notes are issued by municipalities in expectation of future tax
or other revenues, and are payable from those specific taxes or revenues.
Tax-exempt commercial paper is issued by municipalities to help finance
short-term capital or operating needs.
TAX-EXEMPT MONEY MARKET PORTFOLIO FEDERALLY TAXABLE OBLIGATIONS. The
Tax-Exempt Money Market Portfolio does not intend to invest in securities
whose interest is federally taxable; however, from time to time, the
Portfolio may invest a portion of its assets on a temporary defensive basis
in fixed-income obligations whose interest is subject to federal income tax.
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Should the Portfolio invest in taxable obligations, it would purchase
securities which in the judgment of the Sub-Adviser are of high quality.
These would include obligations issued or guaranteed by the U.S. Government,
its agencies or instrumentalities, obligations of domestic banks and
repurchase agreements. The Portfolio will purchase taxable obligations only
if they meet its quality requirements as set forth in the Prospectuses.
Proposals are introduced before Congress from time to time to restrict or
eliminate the federal income tax exemption for interest on Municipal
Securities. If such proposals were enacted, the availability of Municipal
Securities and the value of the Portfolio's holdings would be affected and
the Trustees would reevaluate the Tax-Exempt Money Market Portfolio's
investment objective and policies.
The Tax-Exempt Money Market Portfolio anticipates being as fully invested as
practicable in Municipal Securities. However, as a result of maturities of
portfolio securities, or sales of the Portfolio's shares, or in order to meet
redemption requests, there may be occasions when the Portfolio may hold cash
that is not earning income.
REPURCHASE AGREEMENTS are transactions in which a Portfolio purchases a
security and simultaneously commits to resell that security at an agreed upon
price and date within a number of days (usually not more than seven) from the
date of purchase.
All Portfolios, except the U.S. Treasury Income Portfolio, may enter into a
repurchase agreement with respect to any security in which it is authorized
to invest even though the underlying security matures in more than one year.
The resale price reflects the purchase price plus an agreed upon market rate
of interest which is unrelated to the coupon rate or maturity of the
purchased security. A repurchase agreement involves the obligation of the
seller to pay the agreed upon price. This obligation is in effect secured by
the underlying security having a value at least equal to the amount of the
agreed upon resale price and marked to market daily. A Portfolio will limit
repurchase agreements to those with parties whose creditworthiness has been
reviewed and found satisfactory by the Sub-Adviser.
REVERSE REPURCHASE AGREEMENTS permit each Portfolio, other than the U.S.
Treasury Money Market Portfolio and the U.S. Treasury Income Portfolio, to
earn additional income by selling securities to banks and primary dealers
while agreeing to repurchase them at an agreed upon time and price. Reverse
repurchase agreements involve the sale of securities held by a Portfolio
pursuant to an agreement to repurchase the securities at an agreed-upon
price, date and interest payment. A Portfolio may enter into reverse
repurchase agreements when it is able to purchase other securities which will
produce more income than the cost of the agreement, or for liquidity
purposes. When effecting reverse repurchase transactions, securities which
are a permitted investment for the Portfolio (i.e., obligations of domestic
and foreign banks or thrift organizations, corporate debt obligations,
including commercial paper, notes and bonds with remaining maturities of one
year or less and U.S. Government Obligations with respect to the General
Money Market Portfolio and the Tax-Exempt Money Market Portfolio; and
Municipal Securities with respect to the Tax-Exempt Money Market Portfolio)
and are of a dollar amount equal in value to the securities subject to the
agreement will be maintained in a segregated account with the Portfolio's
custodian. Reverse repurchase agreements are considered to be borrowings and
would therefore be subject to a Portfolio's fundamental borrowing limitation
(3). The Tax-Exempt Money Market Portfolio will only engage in reverse
repurchase agreements for temporary or emergency purposes and not for
leverage or investment.
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<PAGE>
In event of the bankruptcy of the other party to a reverse repurchase
agreement the Portfolio could experience delays in recovering securities. To
the extent that the value of securities may have decreased in the meantime, a
Portfolio could experience a loss. The creditworthiness of the other party
to a reverse repurchase transaction must be reviewed and found satisfactory
by the Sub-Adviser.
RESTRICTED SECURITIES. The General Money Market Portfolio and Tax-Exempt
Money Market Portfolio may purchase restricted securities that are not
registered for sale to the general public, but which provide the Portfolio
with the right to receive payment of principal and interest without penalty
on demand (demand feature) or can be resold to institutional investors.
Institutional trading in restricted securities is relatively new, and the
liquidity of the Portfolio's investments could be impaired if trading does
not develop or declines. Provided that the security has a demand feature or
a dealer or institutional trading market exists, these restricted securities
are not treated as illiquid securities.
PORTFOLIO TRANSACTIONS
The Sub-Adviser makes decisions to buy and sell securities for each
Portfolio, selects broker-dealers and negotiates commission rates. The
selection of broker-dealers is generally made based upon the price, quality
of execution services and/or research provided. Portfolio securities are
normally purchased directly from the issuer or from a market maker for the
securities. Since purchases and sales of portfolio securities by the
Portfolios are usually principal transactions, the Portfolios incur little or
no brokerage commissions. The purchase price paid to dealers serving as
market makers may include a spread between the bid and asked prices. The
Portfolios may also purchase securities from underwriters at prices which
include a commission paid by the issuer to the underwriter.
Each Portfolio requires that investments mature (or are deemed to mature)
within 397 days or less. The amortized cost method of valuing portfolio
securities requires that each Portfolio maintain an average weighted
portfolio maturity of 90 days or less. Both policies may result in
relatively high portfolio turnover, but since brokerage commissions are not
normally paid on money market instruments, the high rate of portfolio
turnover is not expected to have a material effect on the Portfolios' net
income or expenses. Each Portfolio may seek to profit from short-term
trading, and may not always hold portfolio securities to maturity.
The Sub-Adviser's primary consideration in effecting a security transaction
is to obtain the best net price and the most favorable execution of the
order. To the extent that the executions and prices offered by more than one
dealer are comparable, the Sub-Adviser may, at its discretion, effect
transactions with dealers that furnish statistical, research or other
information or services which are deemed by the Sub-Adviser to be beneficial
to the Portfolios' investment program. Certain research services furnished
by dealers may be useful to the Sub-Adviser's clients other than the
Portfolios. Similarly, any research services received by the Sub-Adviser
through placement of portfolio transactions of other clients may be of value
to the Sub-Adviser in fulfilling its obligations to the Portfolios. The
Sub-Adviser is of the opinion that the material received is beneficial in
supplementing its research and analysis, and therefore, may benefit the
Portfolios by improving the quality of its investment advice. The advisory
fee paid by the Portfolios is not reduced because of the receipt of such
services.
The Sub-Adviser and its affiliates may manage other investment accounts, some
of which may have objectives similar to that of the Portfolios. It is
possible that at times, identical securities will be acceptable for one or
more of such investment accounts. However, the position of each account in
the securities of the same issue may vary and the length of time that each
account may choose to hold its investment in the securities of the same issue
may likewise vary. Also, the timing and amount of purchase by each account
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<PAGE>
may be determined by its cash position. If the purchase or sale of
securities consistent with the investment policies of each Portfolio and one
or more of these accounts is considered at or about the same time,
transactions in such securities will be allocated in good faith among the
Portfolios and such accounts in a manner deemed equitable by the Sub-Adviser.
The Sub-Adviser may combine such transactions, in accordance with applicable
laws and regulations, in order to obtain the best net price and most
favorable execution. The allocation and combination of simultaneous
securities purchases on behalf of each Portfolio would be made in the same
way that such purchases are allocated among or combined with those of other
such investment accounts. Simultaneous transactions could adversely affect
the ability of each Portfolio to obtain or dispose of the full amount of
security which it seeks to purchase or sell.
VALUATION OF PORTFOLIO SECURITIES
Each Portfolio values its investments on the basis of amortized cost, which
involves valuing an instrument at its cost and thereafter assuming a constant
accretion to maturity of any discount or amortization to maturity of any
premium. The amortized cost value of an instrument may be higher or lower
than the price a Portfolio would receive if it sold the instrument. During
periods of declining interest rates, each Portfolio's yields based on
amortized cost may tend to be higher than a yield based on market prices and
estimates of market prices. A new shareholder in a Portfolio would then be
able to obtain a somewhat higher yield than would result from investment in a
fund using solely market quotations to determine its net asset value per
share while existing shareholders would receive less investment income. In a
period of rising interest rates, the converse would apply. The valuation of
a Portfolio's instruments based upon amortized cost and the maintenance of
its net asset value per share at $1.00 is permitted in accordance with Rule
2a-7 under the 1940 Act. Each Portfolio must adhere to certain conditions
under Rule 2a-7 which are summarized in the Prospectuses.
The Trustees have established procedures designed to stabilize each
Portfolio's net asset value per share calculated on the basis of amortized
cost. The Trustees review each Portfolio's holdings, at such intervals as
they may deem appropriate, to determine whether net asset value per share
calculated by using available market quotations would deviate from $1.00.
The Trustees have agreed to take such corrective action as they may deem
necessary and appropriate, if any such deviation would result in material
dilution or otherwise would be unfair to shareholders. This may include
selling portfolio instruments prior to maturity to realize capital gains or
losses or to shorten average portfolio maturity, withholding dividends,
redeeming shares in kind, or establishing net asset value per share by using
available market quotations.
PERFORMANCE
From time to time, each Portfolio of the Trust advertises its yield and
effective yield for each class of shares in advertisements or in reports or
other communications with shareholders and others. Both yield figures are
based on historical earnings and are not intended to indicate future
performance.
The standardized annualized seven-day yield for each Portfolio for a class of
shares is computed by: (1) determining the net change exclusive of capital
changes, in the value of a hypothetical pre-existing account in a Portfolio
having a balance of one share of the relevant class at the beginning of a
seven-day period, for which the yield is to be quoted, (2) dividing the net
change in account value by the value of the account at the beginning of the
base period to obtain the base period return, and (3) annualizing the results
(i.e., multiplying the base period return by 365/7). The net change in the
value of the account in each Portfolio includes the value of additional
shares purchased with dividends from the original share and dividends
declared on both the original share and any such additional shares, and all
fees that are charged by a Portfolio to all shareholder accounts in
proportion to the length of the base period, other than nonrecurring
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<PAGE>
account and sales charges. For any account fees that vary with the size of
the account, the amount of fees charged would be computed with respect to the
Portfolio's mean (or median) account size. The capital changes to be
excluded from the calculation of the net change in account value are realized
gains and losses from the sale of securities and unrealized appreciation and
depreciation. The yields for each Portfolio for the seven-day period ended
August 31, 1997 were:
PORTFOLIO YIELD
--------- -----
U.S. Treasury Money Market Portfolio - Class A 5.38%
U.S. Treasury Money Market Portfolio - Class B 5.14%
U.S. Treasury Money Market Portfolio- Class D 4.88%
General Money Market Portfolio - Class A 5.44%
General Money Market Portfolio - Class B 5.19%
Tax-Exempt Money Market Portfolio - Class A 3.21%
The effective compound yield quotation for each Portfolio and class is
computed by adding 1 to the unannualized base period return (calculated as
described above), raising the sum to a power equal to 365 divided by 7, and
subtracting 1 from the result. The effective yields for each Portfolio for
the seven-day period ended August 31, 1997 were:
PORTFOLIO YIELD
--------- -----
U.S. Treasury Money Market Portfolio - Class A 5.53%
U.S. Treasury Money Market Portfolio - Class B 5.27%
U.S. Treasury Money Market Portfolio- Class D 5.00%
General Money Market Portfolio - Class A 5.58%
General Money Market Portfolio - Class B 5.32%
Tax-Exempt Money Market Portfolio - Class A 3.27%
In addition to the current yield, the Portfolios may quote yields in
advertising based on any historical seven day period.
Yield information may be useful in reviewing each Portfolio's performance and
for providing a basis for comparison with other investment alternatives.
Each Portfolio's yield will fluctuate, unlike investments which pay a fixed
yield for a stated period of time. Investors should give consideration to
the quality and maturity of portfolio securities of the respective investment
companies when comparing investments.
In addition, the Tax-Exempt Money Market Portfolio may calculate a "tax
equivalent yield" and "tax equivalent effective yield" for each class of
shares. The tax equivalent yield shows the taxable yield an investor would
have to earn, before taxes, to equal the class's tax-free yield. The tax
equivalent yield for the class is computed by dividing that portion of the
class's yield which is tax-exempt by one minus a stated income tax rate and
adding the product to that portion, if any, of the class's computed yield
that is not tax-exempt. The tax equivalent yield for the Tax-Exempt Money
Market Portfolio Class A shares for the seven days ended August 31, 1997 was
5.26%. The tax equivalent effective yield for the class is computed by
dividing that portion of the class's effective yield which is tax-exempt by
one minus a stated income tax rate and adding the product to that portion, if
any, of the class's computed effective yield that is not tax-exempt. The tax
equivalent effective yield for the Tax-Exempt Money Market Portfolio Class A
shares for the seven days ended August 31, 1997 was 5.36%. Tax equivalent
and tax equivalent effective yields assume the payment of federal income
taxes at a rate of 39% or another applicable stated rate. Of course, no
assurance can be given that any of the classes of shares of the Tax-Exempt
Money Market Portfolio will achieve any
15
<PAGE>
specific tax-exempt yield. While the Portfolio invests principally in
obligations the interest from which is exempt from federal income tax, other
income received by the Portfolio may be taxable.
From time to time, in advertisements or in reports to shareholders, the
yields of the Portfolios, as a measure of their performance, may be quoted
and compared to those of other mutual funds with similar investment
objectives and to other relevant indexes or to rankings prepared by
independent services or other financial or industry publications that monitor
the performance of mutual funds. The Portfolios may compare their performance
or the performance of securities in which they may invest to: IBC/Donoghue's
Money Fund Average TM/Total Institutions Only Average; Government Only
Institutions Only; and Tax-Free Institutions Only, which are average yields
of various types of money market funds that include the effect of compounding
distributions. The Portfolios' yield data may be reported in national
financial publications including, but not limited to, "Money Magazine",
"Forbes", "Barron's", "The Wall Street Journal" and "The New York Times", or
in publications of a local or regional nature.
Each Portfolio may also compare its performance to other mutual funds,
especially to those with similar investment objectives. These comparisons
may be based on data published by IBC/Donoghue's Money Fund Report-Registered
Trademark- of Holliston, MA 01746, or by Lipper Analytical Services, Inc.
(Lipper, sometimes referred to as Lipper Analytical Services), an independent
service located in Summit, New Jersey that monitors the performance of mutual
funds. Each Portfolio may compare its performance to the yields or averages
of other money market securities as reported by the Federal Reserve Bulletin,
by TeleRate, a financial information network, or by Salomon Brothers Inc., a
broker-dealer firm; and other fixed-income investments such as Certificates
of Deposit (CDs). The principal value and interest rate of CDs and money
market securities are fixed at the time of purchase whereas each Portfolio's
yield will fluctuate. Unlike some CDs and certain other money market
securities, money market mutual funds, and the Portfolios in particular, are
not insured by the FDIC. Investors should give consideration to the quality
and maturity of the portfolio securities of the respective investment
companies when comparing investment alternatives. The Portfolios may
reference the growth and variety of money market mutual funds and the
Manager's or Sub-Adviser's skill and participation in the industry.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
If the Trustees determine that existing conditions make cash payment
undesirable, redemption payments may be made in whole or in part in
securities or other property, valued for this purpose as they are valued in
computing each Portfolio's net asset value per share. Shareholders receiving
securities or other property on redemption may realize a gain or loss for tax
purposes and will incur any costs of sale, as well as the associated
inconveniences.
The Trust is open for business and its net asset value per share is
calculated every day that both the Boston and New York Federal Reserve Banks
and the New York Stock Exchange (NYSE) are open. On any day when either the
Boston or New York Federal Reserve Bank or the NYSE closes early, the right
is reserved to advance the time on that day by which purchase and redemption
orders must be received. To the extent that the Portfolios' securities are
traded in other markets on days when the Boston and New York Federal Reserve
Bank or the NYSE is closed, the Portfolios' net asset value per share may be
affected when investors may not purchase or redeem shares.
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<PAGE>
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
DIVIDENDS. Dividends from the Trust will not normally qualify for the
dividends-received deduction available to corporations, since the Portfolios'
income is primarily derived from interest income and short-term capital
gains. Depending upon state law, a portion of each Portfolio's dividends
attributable to interest income derived from U.S. Government Obligations may
be exempt from state and local taxation. The Portfolios will provide
information on the portion of each Portfolio's dividends, if any, that
qualifies for this exemption.
Dividends derived from the Tax-Exempt Money Market Portfolio's tax-exempt
income are not subject to federal income tax, but must be reported to the IRS
by shareholders. Exempt-interest dividends are included in income for
purposes of computing the portion of social security and railroad retirement
benefits that may be subject to federal tax. If the Portfolio earns taxable
income or capital gains from its investments, these amounts will be
designated as taxable distributions. Dividends derived from taxable
investment income and short-term capital gains are taxable as ordinary income.
The Tax-Exempt Money Market Portfolio will send a tax statement showing the
amount of tax-exempt distributions for the previous calendar year by January
31st.
Each Portfolio's distributions are taxable when they are paid, except that
distributions declared in October, November or December and paid in January
of the following year are taxable as if paid on December 31st.
CAPITAL GAINS DISTRIBUTIONS. The Portfolios may distribute short-term
capital gains once a year or more often as necessary to maintain their net
asset value per share at $1.00 or to comply with distribution requirements
under federal tax law. The Portfolios do not anticipate earning long-term
capital gains on securities held.
TAX STATUS OF THE TRUST. Each Portfolio intends to continue to qualify as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended (the "Code"), so that each Portfolio will not be liable for federal
income or excise taxes on net investment income, net long-term or capital
gains to the extent that these are distributed to shareholders in accordance
with applicable provisions of the Code.
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<PAGE>
TRUSTEES AND OFFICERS
The Trustees and executive officers of the Trust are listed below. Each
Trustee that is an "interested person" (as defined by the 1940 Act) by virtue
of his affiliation with the Trust, or the Manager or the Distributor, is
indicated by an asterisk (*).
<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE POSITION(S) HELD WITH PRINCIPAL OCCUPATION DURING PAST FIVE
REGISTRANT YEARS
<S> <C> <C>
John S. Culbertson Trustee Retired. Trust Consultant with Fidelity
1995 Lake Marshall Drive Investments Institutional Services Co. from
Gibsonia, PA 15044 1990 to 1993.
67
Rufus C. Cushman, Jr. Trustee Retired. Money Manager with Fidelity
10 Corn Point Road Management & Research Corp. from 1968
Marblehead, MA 01945 through 1994.
64
Richard F. Curcio* President, Trustee, Founded Integrity Investments, Inc. (a
1800 Second Street Chairman of the Board broker/dealer) and Integrity Management
Suite 757 of Trustees & Research, Inc. (an investment adviser)
Sarasota, FL 34236 in 1992, and is currently President and
50 Director of each. Senior Vice President/Regional
Manager for Fidelity Institutional Services Company
from 1987 to 1992. Associated with Fidelity
Distributors from 1979 to 1992.
H. Willis Day, Jr. Trustee Retired. Former Senior Vice President of
35 Beach Avenue Southeast Bank, FLA, N.A.
Kennebunk Beach, ME 04043
72
Roger F. Dumas Trustee Private investor since 1987.
151 Tremont Street
Boston, MA 02111
62
Kenneth J. Phelps* Trustee President, Principal and
5545 Cross Gate Court, N.W. Director of Reliance Trust
Atlanta, GA 30327 Company, Atlanta, GA since
56 1992. Chairman, Chief
Executive Officer and Director,
C&S/Sovran Trust Company, Inc. from 1987
to 1992.
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>
Susan M. Schwartz Vice President, Operations Manager of
1800 Second Street Secretary and Treaurer Integrity Investments, Inc.
Suite 757 since 1993. Account Officer of
Sarasota, FL 33236 Fidelity Investments from 1985 to 1993.
34
Robert Melley Vice President, Senior Vice President of
1800 Second Street Assistant Secretary and Integrity Investments, Inc.
Suite 757 Assistant Treasurer since April 1994. Senior
Sarasota, FL 33236 Vice President of Fidelity
59 Distributors, Inc. from 1981 to 1994.
</TABLE>
The Trust pays each Trustee who is not affiliated with the Manager or the
Sub-Adviser (the "Independent Trustees") an annual fee of $1,000 plus $1,000
for each meeting attended and reimburses travel and other expenses incurred
in attending such meetings. The Trust's officers and Trustees who are
affiliated with the Manager or the Sub-Adviser are paid by the Manager.
During the fiscal year ended August 31, 1997, the Trust paid an aggregate of
$ 22,143 to the Independent Trustees. The following table shows compensation
by Trustee for the fiscal year ended August 31, 1997.
COMPENSATION TABLE
<TABLE>
<CAPTION>
AGGREGATE PENSION OR RETIREMENT ESTIMATED ANNUAL
NAME OF PERSON, COMPENSATION FROM BENEFITS ACCRUED AS BENEFITS UPON
POSITION THE TRUST PART OF FUND EXPENSES RETIREMENT
<S> <C> <C> <C>
John S. Culbertson
Trustee $7,143 None None
Rufus C. Cushman
Trustee $5,000 None None
Richard F. Curcio
President, Trustee,
Chairman of the
Board of Trustees None None None
H. Willis Day, Jr.
Trustee $5,000 None None
Roger F. Dumas
Trustee $5,000 None None
Kenneth J. Phelps
Trustee None None None
</TABLE>
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<PAGE>
As of November 20, 1997, the Trustees and officers of the Trust, as a group,
owned less than 1% of the outstanding shares of any class of any Portfolio of
the Trust except that the Trustees and officers of the Trust, as a group, may
be deemed to have beneficially owned 100% of the Class B shares of the
Tax-Exempt Money Market Portfolio, the Class B shares of the U.S. Treasury
Income Portfolio, the Class C and D shares of the General Money Market
Portfolio and Class C of the U.S. Treasury Money Market Portfolio.
INVESTMENT ADVISORY AGREEMENTS
Each Portfolio employs the Manager to furnish investment advisory and other
services to the Portfolio. Under the Management Agreement with each
Portfolio, the Manager is authorized to appoint one or more sub-advisers at
the Manager's expense. David L. Babson & Co. Inc. acts as Sub-Adviser and,
subject to the supervision of the Trustees and of the Manager, directs the
investments of each Portfolio in accordance with its investment objective,
policies and limitations.
The Manager pays all the Portfolio expenses with the following exceptions:
the fees and expenses of the Trustees who are not "interested persons" of the
Trust; interest on borrowings; taxes; expenses incurred by Class B, Class C
and Class D shares pursuant to the Distribution and Shareholder Servicing
Plans, if any; and such extraordinary non-recurring expenses as may arise,
including litigation to which the Trust may be party, and any obligation it
may have to indemnify its officers and Trustees with respect to such
litigation.
For managing its investment and business affairs, each Portfolio pays to the
Manager the fees set forth in the Prospectuses. The Manager pays the
Sub-Adviser the fee set forth in the Prospectuses.
For the fiscal year ended August 31, 1997, the U.S. Treasury Money Market
Portfolio, the U.S. Treasury Income Portfolio, the General Money Market
Portfolio and the Tax-Exempt Money Market Portfolio paid the Manager
$823,706, $33,215, $975,895 and $528,012, respectively. For the fiscal year
ended August 31, 1996, the U.S. Treasury Money Market Portfolio, the U.S.
Treasury Income Portfolio, the General Money Market Portfolio and the
Tax-Exempt Money Market Portfolio paid the Manager $385,690, $8,578, $958,106
and $572,477, respectively. For the fiscal year ended August 31, 1995, the
U.S. Treasury Money Market Portfolio, the U.S. Treasury Income Portfolio, the
General Money Market Portfolio and the Tax-Exempt Money Market Portfolio paid
the Manager $114,123, $14,278, $777,404 and $514,748, respectively.
For the fiscal year ended August 31, 1997, the Sub-Adviser received $293,764,
$11,785, $345,965 and $188,730 for advisory services to the U.S. Treasury
Money Market Portfolio, the U.S. Treasury Income Portfolio, the General Money
Market Portfolio and the Tax-Exempt Money Market Portfolio, respectively.
For the fiscal year ended August 31, 1996, the Sub-Adviser received $145,722,
$6,319, $363,469 and $217,873 for advisory services to the U.S. Treasury
Money Market Portfolio, the U.S. Treasury Income Portfolio, the General Money
Market Portfolio and the Tax-Exempt Money Market Portfolio, respectively.
For the fiscal year ended August 31, 1995, the Sub-Adviser received $47,388,
$5,934, $327,604 and $220,688 for advisory services to the U.S. Treasury
Money Market Portfolio, the U.S. Treasury Income Portfolio, the General Money
Market Portfolio and the Tax-Exempt Money Market Portfolio, respectively.
ADMINISTRATION AGREEMENT AND OTHER CONTRACTS
ADMINISTRATOR, CUSTODIAN, TRANSFER AGENT. State Street Bank and Trust
Company, 225 Franklin Street, Boston, MA 02110 ("State Street",
"Administrator", "Custodian" or "Transfer Agent") is the administrator,
custodian and transfer agent for each Portfolio under administration,
custodian and transfer agency agreements with respect to each Portfolio.
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<PAGE>
State Street assists in each Portfolio's administration and operation,
including providing facilities for maintaining each Portfolio's organization,
supervising relations with the custodians, transfer and pricing agents,
accountants, underwriters and other persons dealing with the Portfolio,
maintaining (or providing for the maintenance of) the Trust's records and the
registration of each Portfolio's shares under federal and state law,
developing management and shareholder services for the Portfolios and
furnishing reports, evaluations and analyses on a variety of subjects to the
Trustees and calculating the net asset value per share and dividends of each
Portfolio.
State Street takes no part in determining the investment policies of the
Trust or in deciding which securities are purchased or sold by the Trust.
The Trust, however, may invest in obligations of State Street and may
purchase or sell securities from or to State Street.
DISTRIBUTOR. Integrity Investments, Inc. (the "Distributor"), located at
1800 Second Street, Suite 757, Sarasota, Florida 34236, sells shares of each
Portfolio as agent on behalf of the Trust at no additional cost to the Trust.
DISTRIBUTION AND SHAREHOLDER SERVICING PLANS. The Trustees of the Trust have
adopted a Distribution and Shareholder Servicing Plan for the Class A shares
and Class B shares, a Distribution and Shareholder Servicing Plan for the
Class C shares and a Distribution and Shareholder Servicing Plan for the
Class D shares (collectively, the "Plans") of each Portfolio of the Trust
pursuant to Rule 12b-1 (the "Rule") under the 1940 Act. The Rule provides in
substance that a mutual fund may not engage directly or indirectly in
financing any activity that is intended primarily to result in the sale of
shares of the fund except pursuant to a plan adopted by the fund under the
Rule. The Trustees have adopted the Plans to allow each Portfolio to incur
certain expenses that might be considered to constitute direct or indirect
payment of distribution expenses. Under the Plans, each Portfolio, subject
to Trustee authorization, may pay the Distributor a monthly fee to compensate
it for expenses it bears and services it provides in the distribution of
shares and the provisions of shareholder support services. The fees that may
be paid by the respective classes of the Portfolios under the Plans are set
forth in the respective Prospectuses. For the fiscal year ended August 31,
1997 the Class B shares of the U.S. Treasury Money Market Portfolio and the
General Money Market Portfolio paid distribution costs of $667,392 and
$23,621, respectively and the Class D shares of the U.S. Treasury Money
Market Portfolio paid distribution costs of $414,622. For the fiscal year
ended August 31, 1996 the Class B shares of the U.S. Treasury Money Market
Portfolio and the General Money Market Portfolio paid distribution costs of
$287,521 and $23,561, respectively and the Class D shares of the U.S.
Treasury Money Market Portfolio paid distribution costs of $33,641. For the
fiscal year ended August 31, 1995 the Class B shares of the U.S. Treasury
Money Market Portfolio and the General Money Market Portfolio paid
distribution costs of $112,468 and $25,267, respectively. The Plans also
recognize that the Manager, the Sub-Adviser and the Distributor may each use
its fees and other resources to pay expenses associated with the promotion
and administration of activities primarily intended to result in the sale of
shares. Distribution-related services include, but are not limited to, the
following: advertising the availability of services and products; designing
material to send to customers and developing methods of making such materials
accessible to customers; providing information about the product needs of
customers; providing facilities to solicit sales and to answer questions from
prospective and existing investors about the Portfolios; receiving and
answering correspondence from prospective investors, including requests for
sales literature, prospectuses and statements of additional information;
displaying and making sales literature and prospectuses available on the
service organization's premises; acting as liaison between shareholders and
the Portfolios, including obtaining information from the Portfolios and
providing performance and other information about the Portfolios; and
providing additional personal services and/or shareholder account maintenance
services or additional distribution-related services.
21
<PAGE>
The Plans have been approved by the Trustees. As required by the Rule, the
Trustees considered all pertinent factors relating to the implementation of
the Plans prior to their approval, and have determined that there is a
reasonable likelihood that the Plans will benefit Class A, Class B, Class C
and Class D shares of each Portfolio and its shareholders. To the extent
that the Plans give the Manager and Distributor greater flexibility in
connection with the distribution of shares of the Portfolios, additional
sales of the Portfolios' shares may result.
The Glass-Steagall Act generally prohibits federally and state chartered or
supervised banks from engaging in the business of underwriting, selling or
distributing securities. Although the scope of this prohibition under the
Glass-Steagall Act has not been fully defined, in the opinion of the Trust
and the Manager, it should not prohibit banks from being paid for investment
advisory, shareholder servicing, administrative services and recordkeeping,
nor should it prevent the Manager or the Portfolios from compensating third
parties for performing such functions. If, because of changes in law or
regulation, or because of new interpretations of existing law, a bank or the
Trust were prevented from continuing these arrangements, it is expected that
the Trustees would make other arrangements for these services and that
shareholders would not suffer adverse financial consequences. In addition,
state securities laws on this issue may differ from the interpretations of
federal law expressed herein, and banks and other financial institutions may
be required to register as dealers pursuant to state law.
DESCRIPTION OF THE TRUST
TRUST ORGANIZATION. The U.S. Treasury Money Market Portfolio, U.S. Treasury
Income Portfolio, General Money Market Portfolio and Tax-Exempt Money Market
Portfolio are portfolios of The Valiant Fund, an open-end management
investment company organized on January 29, 1993. There are presently four
Portfolios of the Trust, each of which offers Class A, Class B, Class C and
Class D shares. The Declaration of Trust permits the Trustees to create
additional portfolios and classes.
The assets of the Trust received for the issue or sale of shares of each
Portfolio and all income, earnings, profits and proceeds thereof, subject
only to the rights of creditors, are especially allocated to such Portfolio,
and constitute the underlying assets of such Portfolio. The underlying
assets of each Portfolio are segregated on the books of account, and are to
be charged with the liabilities with respect to such Portfolio and with a
share of the general expenses of the Trust. Expenses with respect to the
Trust are to be allocated in proportion to the asset value of the respective
Portfolios except where allocations of direct expense or class specific
expense can otherwise be fairly made. The officers of the Trust, subject to
the general supervision of the Trustees, have the power to determine which
expenses are allocable to a given Portfolio or class thereof, or which are
general or allocable to all of the Portfolios. In the event of the
dissolution or liquidation of the Trust, shareholders of each class of each
Portfolio are entitled to receive the underlying assets of such class of such
Portfolio available for distribution.
SHAREHOLDER AND TRUSTEE LIABILITY. The Trust is an entity of the type
commonly known as a "Massachusetts business trust." Under Massachusetts law,
shareholders of such trust may, under certain circumstances, be held
personally liable for the obligations of the Trust. The Declaration of Trust
provides that the Trust shall not have any claim against shareholders except
for the payment of the purchase price of shares and requires that each
agreement, obligation or instrument entered into or executed by the Trust or
the Trustees shall include a provision limiting the obligations created
thereby to the Trust and its assets. The Declaration of Trust provides for
indemnification out of each Portfolio's property of any shareholders held
personally liable for the obligations of the Portfolio. The Declaration of
Trust also provides that each Portfolio shall, upon request, assume the
defense of any claim made against any shareholder for any act or
22
<PAGE>
obligation of the Portfolio and satisfy any judgment thereon. Thus, the risk
of a shareholder incurring financial loss on account of shareholder liability
is limited to circumstances in which the Portfolio itself would be unable to
meet its obligations. The Trustees believe that, in view of the above, the
risk of personal liability to shareholders is remote.
The Declaration of Trust further provides that the Trustees, if they have
exercised reasonable care, will not be liable for any neglect or wrongdoing,
but nothing in the Declaration of Trust protects a Trustee against any
liability 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.
VOTING RIGHTS. Each Portfolio's capital consists of shares of beneficial
interest. The shares have no preemptive or conversion or exchange rights;
the voting and dividend rights, and the right of redemption are described in
the Prospectuses. Shares are fully paid and nonassessable, except as set
forth under the heading "Shareholder and Trustee Liability" above. Holders
of shares representing 10% or more of the votes represented by all
outstanding shares of the Trust or a Portfolio may, as set forth in the
By-Laws, call meetings of the Trust or a Portfolio or Class for any purpose
related to the Trust or a Portfolio, as the case may be, including, in the
case of a meeting of the entire Trust, the purpose of voting on removal of
one or more Trustees. The Trust or any Portfolio may be terminated upon the
sale of its assets to another open-end management investment company, if
approved by vote of the holders of shares representing a majority of the
votes represented by all outstanding shares of the Trust or the Portfolio.
If not so terminated, the Trust and the Portfolios will continue indefinitely.
PRINCIPAL HOLDERS OF SECURITIES. As of November 20, 1997, to the knowledge
of the Trust's Management, the following persons owned of record or
beneficially 5% or more of the outstanding shares of any class of a Portfolio.
General Money Market Portfolio-Class A: First Union National Bank, 1525 West
Wt. Harris Boulevard, Charlotte, NC 28288, 86.50%.
General Money Market Portfolio-Class B: Reliance Trust Company, 3295
Northcrest Road, Northwest, Atlanta, GA 30340, 100%.
U.S. Treasury Money Market Portfolio-Class A: Citizens Trust Company, 870
Westminister Street, Providence, RI 02903, 25.83%; Reliance Trust Company,
P.O. Box 48449, Atlanta, GA 30362, 59.66%; State Street Bank and Trust
Company, 108 Myrtle Street, North Quincy, MA 02171, 14.39%.
U.S. Treasury Money Market-Class B: Sun Bank National Association, P.O. Box
105504, Atlanta, GA 30348, 97.23%.
U.S. Treasury Money Market Portfolio-Class D: First Union National Bank,
1525 West Wt. Harris Boulevard, Charlotte, NC 28288, 81.15%; Reliance Trust
Company, P.O. Box 48449, Atlanta, GA 30362, 18.85%.
Tax-Exempt Money Market Portfolio-Class A: First Union National Bank, 1525
West Wt. Harris Boulevard, Charlotte, NC 28288, 99.45%.
23
<PAGE>
Integrity Investments, Inc., 1800 Second Street, Sarasota, FL 34236, owned
100% of : the Class C and Class D shares of the General Money Market
Portfolio, the Class B shares of the Tax-Exempt Money Market Portfolio, the
Class C shares of the U.S. Treasury Money Market Portfolio and the Class A
and B shares of the U.S. Treasury Income Portfolio.
INDEPENDENT ACCOUNTANTS. Price Waterhouse LLP, 160 Federal Street, Boston,
Massachusetts 02110, serves as the Trust's independent accountants providing
services including (1) audit of annual financial statements, (2) assistance
and consultation in connection with SEC filings, and (3) review of the annual
federal income tax returns filed on behalf of the Portfolios.
FINANCIAL STATEMENTS. The Trust's audited financial statements for the
fiscal year ended August 31, 1997, including the notes thereto and the report
of Price Waterhouse LLP thereon are incorporated herein by reference from the
Trust's 1997 Annual Report to Shareholders. A copy of the 1997 Annual Report
to Shareholders accompanies the delivery of this SAI.
24
<PAGE>
PART C
The Valiant Fund
OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
A. FINANCIAL STATEMENTS INCLUDED IN THIS POST-EFFECTIVE AMENDMENT
Audited financial statements for the period ended August 31, 1997
as follows:
Portfolio of Investments
Statements of Assets and Liabilities
Statements of Operations
Statements of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
Report of Independent Accountants
B. EXHIBITS
1 Agreement and Declaration of Trust, dated January 29, 1993, as
amended was previously filed in Pre-Effective Amendment No. 2 on
July 29, 1993 and is incorporated herein by reference.*
2 Bylaws, dated January 29, 1993, as amended were previously filed
in Post-Effective Amendment No. 1 on December 29, 1993 and is
incorporated herein by reference.*
3 None
4 None
5(a) Form of Notice with respect to the Management Agreement was
previously filed in Post-Effective Amendment No. 2 on March 12,
1993 and is incorporated herein by reference.*
5(b) Management Agreement between Integrity Management & Research,
Inc. ("Manager") and the Registrant dated July 29, 1993 was
previously filed in Post-Effective Amendment No. 1 on December
29, 1993 and is incorporated herein by reference.*
5(c) Form of Notice with respect to the Sub-Adviser Agreement was
previously filed in Post-Effective Amendment No. 2 on March 12,
1993 and is incorporated herein by reference.*
- ---------------------
* Exhibit is being refiled electronically pursuant to Regulation
S-TSection 232.102
<PAGE>
5(d) Form of Sub-Adviser Agreement between the Manager and David L.
Babson & Co. Inc. dated as of June 30, 1995 was previously filed
in Post-Effective Amendment No. 4 on October 31, 1995 and is
incorporated herein by reference.*
6(a) Form of Notice with respect to the Distribution Agreement was
previously filed in Post-Effective Amendment No. 2 on March 12,
1993 and is incorporated herein by reference.*
6(b) Distribution Agreement between the Manager, Integrity
Investments, Inc., and the Registrant dated July 29, 1993 was
previously filed in Post-Effective Amendment No. 1 on
December 29, 1993 and is incorporated herein by reference.*
7 None.
8 Custody Contract between State Street Bank and Trust Company, the
Manager and the Registrant dated September 1, 1994 was previously
filed in Post-Effective Amendment No. 3 on November 17, 1994
and is incorporated herein by reference.*
9(a) Administration Agreement between State Street Bank and Trust
Company, the Manager and the Registrant dated September 1, 1994
was previously filed in Post-Effective Amendment No. 3 on
November 17, 1994 and is incorporated herein by reference.*
9(b) Transfer Agency and Service Agreement between State Street Bank
and Trust Company, the Manager and the Registrant dated September
1, 1994 was previously filed in Post-Effective Amendment No. 3 on
November 17, 1994 and is incorporated herein by reference.*
10 Opinion and consent of Counsel was previously filed in Pre-
Effective Amendment No. 1 on June 4, 1993 and is incorporated
herein by reference.*
11 Consent of Independent Accountants.
12 Financial Statements - See A above.
13 Subscription Agreement dated June 1, 1993 was previously filed in
Pre-Effective Amendment No. 1 on June 14, 1993 and is
incorporated herein by reference.*
14 None.
15(a)Form of Distribution and Shareholder Servicing Plan for Class D
Shares was previously filed in Post-Effective Amendment No. 4 on
October 31, 1995 and is incorporated herein by reference.*
- ---------------------
* Exhibit is being refiled electronically pursuant to Regulation
S-TSection 232.102
<PAGE>
15(b) Form of Distribution and Shareholder Servicing Plan for Class C
Shares was previously filed in Post-Effective Amendment No. 4 on
October 31, 1995 and is incorporated herein by reference*
15(c) Form of Amendment No. 2 to the Distribution and Shareholder
Servicing Plan was previously filed in Post-Effective Amendment
No. 4 on October 31, 1995 and is incorporated herein by
reference.*
15(d) Amendment No. 1 to the Distribution and Shareholder Servicing
Plan the form of which was previously filed in Post-Effective
Amendment No. 2 on March 12, 1993 and is incorporated herein by
reference.*
15(e) Distribution and Shareholder Servicing Plan dated July 29, 1993
was previously filed in Post-Effective Amendment No. 1 on
December 29, 1993 and is incorporated herein by reference.*
16 Schedule for Computation of Performance Quotation was previously
filed in Post-Effective Amendment No. 3 on November 17, 1994 and
is incorporated herein by reference.*
17 Financial Data Schedule.
18 Form of Plan for Multiple Classes of Shares was previously filed
in Post-Effective Amendment No. 4 on October 31, 1995 and is
incorporated herein by reference.*
19(b) Powers of Attorney, previously filed in Post-Effective Amendment
No. 3 on November 17, 1994 and Post-Effective Amendment No. 4 on
October 31, 1995 and is incorporated herein by reference.*
Item 25. PERSONS UNDER COMMON CONTROL WITH REGISTRANT
Registrant is not controlled by or under common control with any
person.
Item 26. NUMBER OF HOLDERS OF SECURITIES
Number of Record
Title of Class Holders as of
Shares Beneficial Interest November 20, 1997
-------------------------- -----------------
U.S. Treasury Money Market Portfolio Class A shares 7
U.S. Treasury Money Market Portfolio Class B shares 5
U.S. Treasury Money Market Portfolio Class C shares 1
U.S. Treasury Money Market Portfolio Class D shares 3
U.S. Treasury Income Portfolio Class A shares 2
U.S. Treasury Income Portfolio Class B shares 3
- ---------------------
* Exhibit is being refiled electronically pursuant to Regulation
S-TSection 232.102
<PAGE>
Number of Record
Title of Class Holders as of
Shares Beneficial Interest November 20, 1997
-------------------------- -----------------
U.S. Treasury Income Portfolio Class C shares 0
U.S. Treasury Income Portfolio Class D shares 0
General Money Market Portfolio Class A shares 23
General Money Market Portfolio Class B shares 4
General Money Market Portfolio Class C shares 1
General Money Market Portfolio Class D shares 1
Tax-Exempt Money Market Portfolio Class A shares 6
Tax-Exempt Money Market Portfolio Class B shares 4
Item 27. INDEMNIFICATION
Article VIII of Registrant's Agreement and Declaration of Trust
provides that each of its Trustees and each Officer (and his
heirs, executors, and administrators) may be indemnified against
all liabilities and expense arising out of the defense or
disposition of any action, suit, or other proceeding in which such
person may be or may have been involved by reason of being or
having been such a Trustee or Officer, except with respect to any
matter as to which such person otherwise would be subject by
reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of such
person's office.
Insofar as indemnification for liability arising under the
1933 Act may be permitted to Trustees, Officers and Controlling
Persons of registrant pursuant to the foregoing provisions, 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 1933 Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by 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) is asserted by such Trustee,
Officer or controlling Person in connection with the securities
being registered, Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed
in the 1933 Act and will be governed by the final adjudication of
such issue.
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISERS
(a) The description of Integrity Management & Research,
Inc. (the "Manager") under the caption "Management of the
Portfolios" in the Prospectus which is Part A to this Registration
Statement is incorporated herein by reference. The information as
to the officers and directors of the Manager is included in its
Form ADV filed by the Manager with the Securities and Exchange
Commission pursuant to the Investment Advisers Act of 1940, as
amended (File No. 801-42708) and is incorporated herein by
reference.
<PAGE>
(b) The description of David L. Babson & Co. Inc. (the "Sub-Adviser")
under the caption "Management of the Portfolios" in the Prospectus
which is Part A to this Registration Statement is incorporated
herein by reference. The information as to the officers and
directors of the Sub-Adviser is included in its Form ADV filed by
the Sub-Adviser with the Securities and Exchange Commission
pursuant to the Investment Advisers Act of 1940, as amended (File
No. 801-24) and is incorporated herein by reference.
Item 29. PRINCIPAL UNDERWRITERS
(a) Integrity Investments, Inc. (the "Underwriter") does not act as the
principal underwriter of any other investment company.
(b) The following table presents certain information with respect to
each director and officer of the Distributor.
POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME AND PRINCIPAL ADDRESS WITH UNDERWRITER WITH REGISTRANT
- -------------------------- --------------------- ---------------------
Richard Curcio President, Director President, Chairman of
Integrity Investments, Inc. Board of Trustees
1800 Second Street, Suite 757
Sarasota, Florida 34236
(c) Not applicable
Item 30. LOCATION OF ACCOUNTS AND RECORDS
Each account, book or other document required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act of
1940 and Rule 31a-1 thereunder is maintained at the offices of State
Street Bank and Trust Company, 1776 Heritage Drive, North Quincy,
Massachusetts 02171 in its capacity as custodian and administrator
and 150 Newport Ave., North Quincy, Massachusetts 02171 in its
capacity as transfer agent.
Item 31. MANAGEMENT SERVICES
Not applicable
Item 32. UNDERTAKINGS
Not applicable
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for the effectiveness of this amendment to the Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has
duly caused this amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of North
Quincy and Commonwealth of Massachusetts on the 19th day of December 1997.
The Valiant Fund
By: Richard F. Curcio*
------------------------------
Richard F. Curcio, President
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registration Statement has been signed below by the following persons in the
capacities indicated on the 19th day of December 1997.
SIGNATURE TITLE
- ---------- ------
SUSAN M. SCHWARTZ Vice President, Treasurer and Secretary
- -------------------------
Susan M. Schwartz
JOHN S. CULBERTSON* Trustee
- -------------------------
John S. Culbertson
RICHARD F. CURCIO* Trustee and President
- -------------------------
Richard F. Curcio
RUFUS C. CUSHMAN, JR.* Trustee
- -------------------------
Rufus C. Cushman, Jr.
HENRY W. DAY, JR.* Trustee
- -------------------------
Henry W. Day, Jr.
ROGER F. DUMAS* Trustee
- -------------------------
Roger F. Dumas
KENNETH J. PHELPS* Trustee
- -------------------------
Kenneth J. Phelps
*By: SUSAN M. SCHWARTZ
-------------------------
Susan M. Schwartz
Attorney-in-Fact
<PAGE>
EXHIBITS
To
The Valiant Fund
Post-Effective Amendment No. 6
Exhibit 1 Agreement and Declaration of Trust
Exhibit 2 Bylaws
Exhibit 5(a) Form of Notice with respect to the Management Agreement
Exhibit 5(b) Management Agreement between Integrity Management &
Research, Inc. ("Manager") and The Valiant Fund
Exhibit 5(c) Form of Notice with respect to the Sub-Adviser Agreement
Exhibit 5(d) Form of Sub-Adviser Agreement between the Manager and
David L. Babson & Co. Inc.
Exhibit 6(a) Form of Notice with respect to the Distribution Agreement
Exhibit 6(b) Distribution Agreement between the Manager, Integrity
Investments, Inc., and The Valiant Fund
Exhibit 8 Custody Contract between State Street Bank and Trust
Company, the Manager and the Valiant Fund
Exhibit 9(a) Administration Agreement between State Street Bank and
Trust Company, the Manager and The Valiant Fund
Exhibit 9(b) Transfer Agency and Service Agreement between State
Street Bank and Trust Company, the Manager and The Valiant
Fund
Exhibit 10 Opinion and consent of Counsel
Exhibit 11 Consent of Independent Accountants
Exhibit 12 Financial Statements
Exhibit 13 Subscription Agreement
Exhibit 15(a) Form of Distribution and Shareholder Servicing Plan for
Class D Shares
Exhibit 15(b) Form of Distribution and Shareholder Servicing Plan for
Class C Shares
<PAGE>
Exhibit 15(c) Form of Amendment No. 2 to the Distribution and
Shareholder Servicing Plan
Exhibit 15(d) Amendment No. 1 to the Distribution and Shareholder
Servicing Plan
Exhibit 15(e) Distribution and Shareholder Servicing Plan
Exhibit 16 Schedule for Computation of Performance Quotation
Exhibit 17 Financial Data Schedule.
Exhibit 18 Form of Plan for Multiple Classes of Shares
Exhibit 19(b) Powers of Attorney
<PAGE>
EXHIBIT 1
Agreement and Declaration of Trust
<PAGE>
THE VALIANT FUND
---------------------------------------
AGREEMENT AND DECLARATION OF TRUST
AS AMENDED
---------------------------------------
AGREEMENT AND DECLARATION OF TRUST made at Worcester, Massachusetts,
this 29th day of January, 1993 by Richard C. Butt (hereinafter with any
additional and successor trustees referred to as the "Trustees") and by the
holders of shares of beneficial interest to be issued hereunder as
hereinafter provided.
WITNESSETH that
WHEREAS, this Trust has been formed to carry on the business of an
investment company; and
WHEREAS, the Trustees have agreed to manage all property coming into
their hands as trustees of a Massachusetts business trust in accordance with
the provisions hereinafter set forth.
NOW, THEREFORE, the Trustees hereby declare that they will hold all
cash, securities and other assets, which they may from time to time acquire
in any manner as Trustees hereunder, IN TRUST to manage and dispose of the
same upon the following terms and conditions for the pro rata benefit of the
holders from time to time of Shares in this Trust as hereinafter set forth.
ARTICLE I
NAMES AND DEFINITIONS
NAME
SECTION 1. This Trust shall be known as "The Valiant Fund", and the
Trustees shall conduct the business of the Trust under that name or any other
name as they may from time to time determine.
DEFINITIONS
SECTION 2. Whenever used herein, unless otherwise required by the
context or specifically provided:
<PAGE>
(a) The "Trust" refers to the Massachusetts business trust established
by this Agreement and Declaration of Trust, as amended from time to time;
(b) "Trustees" refers to the Trustee or Trustees of the Trust named
herein for elected in accordance with Article IV;
(c) "Shares" means the equal proportionate transferable units of
interest into which the beneficial interest in the Trust shall be divided
from time to time or, if more than one series of Shares is authorized by the
Trustees, the equal proportionate units into which each series of Shares
shall be divided from time to time or, if more than one class of Shares of
any series is authorized by the Trustees, the equal proportionate units into
which each class of such series of Shares shall be divided from time to time;
(d) "Shareholders" means a record owner of Shares;
(e) The "1940 Act" refers to the Investment Company Act of 1940 and the
rules and regulations thereunder, all as amended from time to time;
(f) The terms "Affiliated Person," "Assignment," "Commission,"
"Interested Person," "Principal Underwriter" and "Majority Shareholder Vote"
(the 67% or 50% requirement of the third sentence of Section 2(a)(42) of the
1940 Act, whichever may be applicable) shall have the meanings given them in
the 1940 Act;
(g) "Declaration of Trust" shall mean this Agreement and Declaration of
Trust as amended or restated from time to time; and
(h) "Bylaws" shall mean the Bylaws of the Trust as amended from time to
time.
ARTICLE II
PURPOSE
The purpose of the Trust is to engage in the business of a management
investment company and to provide investors a managed investment primarily in
securities, commodities and debt instruments.
ARTICLE III
SHARES
DIVISION OF BENEFICIAL INTEREST
SECTION 1. The Shares of the Trust shall be issued in one or more
series as the Trustees may, without Shareholder approval, authorize. The
Trustees may, without Shareholder approval, divide the Shares of any series
into two or more classes, Shares of each such class having such
2
<PAGE>
preferences or special or relative rights or privileges (including conversion
rights, if any) as the Trustees may determine and as are not inconsistent
with any provision of the Declaration of Trust. Each series shall be
preferred over all other series in respect of the assets allocated to that
series. The beneficial interest in each series shall at all times be divided
into Shares, without par value, each of which shall, except as the Trustees
may otherwise authorize in the case of any series that is divided into two or
more classes, represent an equal proportionate interest in the series with
each other Share of the same series, none having priority or preference over
another. The number of Shares authorized shall be unlimited, and the Shares
so authorized may be represented in part by fractional shares. The Trustees
may from time to time divide or combine the Shares of any series or class
into a greater or lesser number without thereby changing the proportionate
beneficial interests in the series or class.
OWNERSHIP OF SHARES
SECTION 2. The ownership of Shares shall be recorded on the books of
the Trust or its transfer or similar agent. No certificates certifying the
ownership of Shares shall be issued except as the Trustees may otherwise
determine from time to time. The Trustees may make such rules as they
consider appropriate for the issuance of Share certificates, the transfer of
Shares and similar matters. The record books of the Trust as kept by the
Trust or any transfer or similar agent of the Trust, as the case may be,
shall be conclusive as to who are the Shareholders of each series and class
as to the number of Shares of each series and class held from time to time by
each Shareholder.
INVESTMENTS IN THE TRUST; ASSETS OF THE SERIES
SECTION 3. The Trustees may accept investments in the Trust from such
persons and on such terms and, subject to any requirements of law, for such
consideration, which may consist of cash or tangible or intangible property
or a combination thereof, as they from time to time authorize.
All consideration received by the Trust for the issue or sale of Shares
of each series, together with all income, earnings, profits and proceeds
thereof, including any proceeds derived from the sale, exchange or
liquidation thereof, and any funds or payments derived from any reinvestment
of such proceeds in whatever form the same may be, shall irrevocably belong
to the series of Shares with respect to which the same were received by the
Trust for all purposes, subject only to the rights of creditors, and shall be
so handled upon the books of account of the Trust and are herein referred to
as "assets of" such series.
NO PREEMPTIVE RIGHTS; DERIVATIVE ACTIONS
SECTION 4. Shareholders shall have no preemptive or other right to
receive, purchase or subscribe for any additional Shares or other securities
issued by the Trust. No action may be brought by a Shareholder on behalf of
the Trust or a particular series of the Trust unless a prior demand regarding
such matter has been made on the Trustees and the Shareholders of the Trust
or such series.
3
<PAGE>
STATUS OF SHARES AND LIMITATION OF PERSONAL LIABILITY
SECTION 5. Shares shall be deemed to be personal property giving only
the rights provided in this instrument. Every Shareholder by virtue of
having become a Shareholder shall be held to have expressly assented and
agreed to the terms hereof and to have become a party hereto. The death of a
Shareholder during the continuance of the Trust shall not operate to
terminate the same nor entitle the representative of any deceased Shareholder
to an accounting or to take any action in court or elsewhere against the
Trust or the Trustees, but only to the rights of said decedent under this
Trust. Ownership of Shares shall not entitle the Shareholder to any title in
or to the whole or any part of the Trust property or right to call for a
partition or division of the same or for an accounting, nor shall the
ownership of Shares constitute the Shareholders partners. Neither the Trust
nor the Trustees, nor any officer, employee or agent of the Trust, shall have
any power to bind personally any Shareholder, nor except as specifically
provided herein to call upon any Shareholder for the payment of any sum of
money or assessment whatsoever other than such as the Shareholder may at any
time personally agree to pay.
ARTICLE V
THE TRUSTEES
ELECTION; REMOVAL
SECTION 1. The number of Trustees shall be fixed by the Trustees,
except that, subsequent to any sale of Shares pursuant to a public offering,
there shall be not less than three Trustees. Any vacancies occurring in the
Board of Trustees may be filled by the Trustees if, immediately after filling
any such vacancy, at least two-thirds of the Trustees then holding office
shall have been elected to such office by the Shareholders. In the event
that at any time less than a majority of the Trustees then holding office
were elected to such office by the Shareholders, the Trustees shall call a
meeting of Shareholders for the purpose of electing Trustees. Each Trustee
elected by the Shareholders or by the Trustees shall serve until the next
meeting of Shareholders called for the purpose of electing Trustees and until
the election and qualification of his or her successor, or until he or she
sooner dies, resigns or is removed. The initial Trustees, each of whom shall
serve until the first meeting of Shareholders at which Trustees are elected
and until his or her successor is elected and qualified, or until he or she
sooner dies, resigns or is removed, shall be Richard C. Butt and such other
persons as the Trustee or Trustees then in office shall, prior to any sale of
Shares pursuant to a public offering, appoint. By vote of a majority of the
Trustees then in office, the Trustees may remove a Trustee with or without
cause. At any meeting called for the purpose, a Trustee may be removed, with
or without cause, by vote of the holders of two-thirds of the votes
represented by outstanding Shares.
4
<PAGE>
EFFECT OF DEATH, RESIGNATION, ETC. OF A TRUSTEE
SECTION 2. The death, declination, resignation, retirement, removal or
incapacity of the Trustees, or any one of them, shall not operate to annul
the Trust or to revoke any existing agency created pursuant to the terms of
this Declaration of Trust.
POWERS
SECTION 3. Subject to the provisions of this Declaration of Trust, the
business of the Trust shall be managed by the Trustees, and they shall have
all powers necessary or convenient to carry out that responsibility. Without
limiting the foregoing, the Trustees may adopt Bylaws not inconsistent with
this Declaration of Trust providing for the conduct of the business of the
Trust and may amend and repeal them to the extent that such Bylaws do not
reserve that right of the Shareholders; they may fill vacancies in their
number, including vacancies resulting from increases in their number, and may
elect and remove such officers and appoint and terminate such agents as they
consider appropriate; they may appoint from their own number, and terminate,
any or more committees consisting of two or more Trustees, including an
executive committee which may, when the Trustees are not in session, exercise
some or all of the power and authority of the Trustees as the Trustees may
determine; they may appoint an advisory board, the members of which shall not
be Trustees and need not be Shareholders; they may employ one or more
custodians of the assets of the Trust and may authorize such custodians to
employ subcustodians and to deposit all or any part of such assets in a
system or systems, for the central handling of securities, retain a transfer
agent or a Shareholder services agent, or both, provide for the distribution
of Shares by the Trust, through one or more principal underwriters or
otherwise, retain an administrator to provide administration services, set
record dates for the determination of Shareholders with respect to various
matters, and in general delegate such authority as they consider desirable to
any officer of the Trust, to any committee of the Trustees and to any agent
or employee of the Trust or to any such custodian or underwriter.
Without limiting the foregoing, the Trustees shall have the power and
authority:
(a) To invest and reinvest in securities, options, futures
contracts, options on futures contracts and other property, and
to hold cash uninvested;
(b) To sell, exchange, lend, pledge, mortgage, hypothecate, write
options on and lease any or all of the assets of the Trust;
(c) To vote or give assent, or exercise any rights of ownership,
with respect to stock or other securities or property; and to execute
and deliver proxies or powers of attorney to such person or persons as
the Trustees shall deem proper, granting to such person or persons such
power and discretion with relation to securities or property as the
Trustees shall deem proper;
5
<PAGE>
(d) To exercise powers and rights of subscription or otherwise which
in any manner arise out of ownership of securities or other assets;
(e) To hold any security or property in a form not indicating any
trust, whether in bearer, unregistered or other negotiable form, or in the
name of the Trustees or of the Trust or in the name of the custodian,
subcustodian or other depository or a nominee or nominees or otherwise;
(f) Subject to the provisions of Article III, Section 3, to
allocate assets, liabilities and expenses of the Trust to a particular
series of Shares or to apportion the same among two or more series,
provided that any liabilities or expenses incurred by a particular
series of Shares shall be payable solely out of the assets of that
series; and to the extent necessary or appropriate to give effect to the
preferences and special or relative rights and privileges of any classes
of Shares, to allocate assets, liabilities, income and expenses of a
series to a particular class of Shares of that series or to apportion
the same among two or more classes of Shares of that series;
(g) To consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or issuer,
any security of which is or was held in the Trust; to consent to any
contract, lease, mortgage, purchase or sale of property by such
corporations or issuer, and to pay calls or subscriptions with respect
to any security held in the Trust;
(h) To join with other security holders in acting through a
committee, depositary, voting trustee or otherwise, an in that connection
to deposit any security with, or transfer any security to, any such
committee, depositary, or trustee, and to delegate to them such power and
authority with relation to any security (whether or not so deposited or
transferred) as the Trustees shall deem proper, and to agree to pay, and
pay, such portion of the expenses and compensation of such committee,
depositary or trustee as the Trustees shall deem proper;
(i) To compromise, arbitrate or otherwise adjust claims in favor of
or against the Trust on any matter in controversy, including but not
limited to claims for taxes;
(j) To enter into joint ventures, general or limited partnerships
and any other combinations or associations;
(k) To borrow funds, securities or other assets;
(l) To endorse or guarantee the payment of any notes or other
obligations of any person; to make contracts of guaranty or suretyship, or
otherwise assume liability for payment thereof; and to mortgage and pledge
the Trust property or any part thereof to secure any of or all of such
obligations or obligations incurred pursuant to subparagraph (k) hereof;
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(m) To purchase and pay for entirely out of Trust property
such insurance as they may deem necessary or appropriate for the conduct
of the business, including, without limitations, insurance policies
insuring the assets of the Trust and payment of distributions and
principal on its portfolio investments, and insurance policies insuring
the Shareholders, Trustees, officers, employees, agents, investment
advisers or managers, principal underwriters or independent contractors
of the Trust individually against all claims and liabilities of every
nature arising by reason of holding, being or having held any such
office or position, or by reason of any action alleged to have been
taken or omitted by any such person as Shareholder, Trustee, officer,
employee, agent, investment adviser or manager, principal underwriter or
independent contractor, including any action taken or omitted that may
be determined to constitute negligence, whether or not the Trust would
have the power to indemnify such person against such liability; and
(n) To pay pensions for faithful service, as deemed appropriate by
the Trustees, and to adopt, establish and carry out pension, profit-
sharing, share bonus, share purchase, savings, thrift and other retirement,
incentive and benefit plans, trusts and provisions, including the
purchasing of life insurance and annuity contracts as a means of providing
such retirement and other benefits, for any and all of the Trustees,
officers, employees and agents of the Trust.
The Trustees shall not in any way be bound or limited by any present or
future law or custom in regard to investments by Trustees. Except as
otherwise provided herein or from time to time in the Bylaws, any action to
be taken by the Trustees may be taken by a majority of the Trustees present
at a meeting of the Trustees (a quorum being present), within or without
Massachusetts, including any meeting held by means of a conference telephone
or other communications equipment by means of which all persons participating
in the meeting can hear each other at the same time, and participation by
such means shall constitute presence in person at a meeting, or by written
consents of a majority of the Trustees then in office.
PAYMENT OF EXPENSE BY TRUST
SECTION 4. The Trustees are authorized to pay or to cause to be paid
out of the principal or income of the Trust, or partly out of principal and
partly out of income, as they deem fair, all expenses, fees , charges, taxes
and liabilities incurred or arising in connection with the Trust, or in
connection with the management thereof, including, but not limited to, the
Trustees' compensation and such expenses and charges for the services of the
Trust's officers, employees, investment adviser or manager, principal
underwriter, auditor, counsel, custodian, transfer agent, Shareholder
services agent and such other agents or independent contractors, and such
other expenses and charges, as the Trustees may deem necessary or proper to
incur, PROVIDED, HOWEVER, that all expenses, fees, charges, taxes and
liabilities incurred or arising in connection with a particular series of
Shares, as determined by the Trustees, shall be payable solely out of the
assets of that series.
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OWNERSHIP OF ASSETS OF THE TRUST
SECTION 5. Title to all of the assets of each series of Shares and of the
Trust shall at all times be considered as vested in the Trustees.
ADVISORY, MANAGEMENT AND DISTRIBUTION
SECTION 6. Subject to a favorable Majority Shareholder Vote, the
Trustees may, at any time and from time to time, contract for exclusive or
nonexclusive advisory and/or management services with Integrity Management &
Research, Inc., a Florida corporation, or any other partnership, corporation,
trust, association or other organization (the "Adviser"), every such contract
to comply with such requirements and restrictions as be set forth in the
Bylaws; and any such contract may contain such other terms interpretive of or
in addition to said requirements and restrictions as the Trustees may
determine, including, without limitation, authority to determine from time to
time what investments shall be purchased, held, sold or exchanged and what
portion, if any, of the assets of the Trust shall be held uninvested, and to
make changes in the Trust's investments. The Trustees may also, at any time
and from time to time, contract with the Adviser or any other corporation,
trust, association or other organization, appointing it exclusive or
nonexclusive distributor or principal underwriter for the Shares, every such
contract to comply with such requirements and restrictions as may be set
forth in the Bylaws; and any such contract may contain such other terms
interpretive of or in addition to said requirements and restrictions as the
Trustees may determine.
The fact that:
(i) any of the Shareholders, Trustees or officers of the Trust is a
shareholder, director, officer, partner, trustee, employee, manager,
adviser, principal underwriter or distributor or agent of or for any
corporation, trust, association or other organization, or of or for any
parent or affiliate of any organization, with which an advisory or
management contract, or principal underwriter's or distributor's contract,
or transfer, shareholders services or other agency contract may have been
or may hereafter be made, or that any organization, or any parent or
affiliate thereof, is a Shareholder or has an interest in the Trust, or
that
(ii) any corporation, trust, association or other organization with
which an advisory or management contract or principal underwriter's or
distributor's contract, or transfer, Shareholder services or other agency
contract may have been or may hereafter be made also has an advisory or
management contract, or principal underwriter's or distributor's contract,
or transfer, shareholders services or other agency contract with one or
more other corporations, trusts, associations or other organizations, or
has other business or interests
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shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing
the same or create any liability or accountability to the Trust or its
Shareholders.
ARTICLE V
SHAREHOLDERS' VOTING POWERS AND MEETINGS
VOTING POWERS
SECTION 1. The Shareholders shall have power to vote only (i) for the
election of Trustees as provided in Article IV, Section 1, (ii) with respect
to any Adviser as provided in Article IV, Section 6, (iii) with respect to
any termination of this Trust to the extent and as provided in Article IX,
Section 4, (iv) with respect to any amendment of this Declaration of Trust to
the extent and as provided in Article IX, Section 7 and (v) with respect to
such additional matters relating to the Trust as may be required by law, this
Declaration of Trust, the Bylaws or any registration of the Trust with the
Securities and Exchange Commission (or any successor agency) or any state, or
as the Trustees may consider necessary or desirable. Holders of Shares of
each series or class shall be entitled to one vote for each dollar (or a
proportionate fractional vote for each fraction of a dollar) of net asset
value per Share of each series or class for each Share held as to any matter
on which such Shares are entitled to vote. Notwithstanding any other
provision of this Declaration of Trust, on any matter submitted to a vote of
Shareholders, all Shares of the Trust then entitled to vote shall be voted in
the aggregate as a single class without regard to series or class except:
(1) when required by the 1940 Act or when the Trustees shall have determined
that the matter affects one or more series or classes materially differently,
Shares shall be voted by individual series or class; and (2) when the
Trustees have determined that the matter affects only the interests of one or
more series or classes, then only Shareholders of such series or classes
shall be entitled to vote thereon. There shall be no cumulative voting in
the election of Trustees.
Shares may be voted in person or by proxy. A proxy with respect to
Shares held in the name of two or more persons shall b valid if executed by
any one of them unless at or prior to exercise of the proxy the Trust
receives a specific written notice to the contrary from any one of them. A
proxy purporting to be executed by or on behalf of a Shareholder shall be
deemed valid unless challenged at or prior to its exercise and the burden of
proving invalidity shall rest on the challenger. At all meetings of
Shareholders, unless inspectors of election have been appointed, all
questions relating to the qualification of voters and the validity of proxies
and the acceptance or rejection of votes shall be decided by the chairman of
the meeting. Unless otherwise specified in the proxy, the proxy shall apply
to all Shares of each series of the Trust owned by the Shareholder.
Until Shares are issued, the Trustees may exercise all rights of
Shareholders and may take any action required by law, this Declaration of
Trust or the Bylaws to be taken by Shareholders.
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VOTING POWERS AND MEETINGS
SECTION 2. Meetings of Shareholders of the Trust or of any series or
class may be called by the Trustees or such other person or persons as may be
specified in the Bylaws and held from time to time for the purpose of taking
action upon any matter requiring the vote or the authority of the
Shareholders of the Trust or any series or class as herein provided or upon
any other matter deemed by the Trustees to be necessary or desirable.
Meetings of Shareholders of the Trust or of any series or class shall be
called by the Trustees or such other person or persons as may be specified in
the Bylaws upon written application. The Shareholders shall be entitled to
at least seven days' written notice of any meeting of the Shareholders.
QUORUM AND REQUIRED VOTE
SECTION 3. Shares representing thirty percent of the votes entitled to
vote shall be a quorum for the transaction of business at a Shareholders'
meeting, except that where any provision of law or of the Declaration of
Trust permits or requires that holders of any series or class shall vote as a
series or class, then Shares representing thirty percent of the votes of that
series or class entitled to vote shall be necessary to constitute a quorum
for the transaction of business by that series or class. Any lesser number,
however, shall be sufficient for adjournments. Any adjourned session or
sessions may be held within a reasonable time after the date set for the
original meeting without the necessity of further notice. Except when a
larger vote is required by any provision of this Declaration of Trust or the
Bylaws, Shares representing a majority of the votes voted shall decide any
questions and a plurality shall elect a Trustee, provided that where any
provision of law or of this Declaration of Trust permits or requires that the
holders of any series or class shall vote as a series or class, then a
majority of the Shares of that series or class voted on the matter (or a
plurality with respect to the election of a Trustee) shall decide that matter
insofar as that series or class is concerned.
ACTION BY WRITTEN CONSENT
SECTION 4. Any action taken by Shareholders may be taken without a
meeting if a majority of Shareholders entitled to vote on the matter (or such
larger proportion thereof as shall be required by any express provision of
this Declaration of Trust or the Bylaws) consent to the action in writing and
such written consents are filed with the records of the meetings of
Shareholders. Such consent shall be treated for all purposes as a vote at a
meeting of Shareholders.
ADDITIONAL PROVISIONS
SECTION 5. The Bylaws may include further provisions for Shareholder's
votes and meetings and related matters.
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ARTICLE VI
DISTRIBUTIONS, REDEMPTIONS AND REPURCHASES,
AND DETERMINATION OF NET ASSET VALUE
DISTRIBUTIONS
SECTION 1. The Trustees may, but need not, each year distribute to the
Shareholders of each series or class such income and gains, accrued or
realized, as the Trustees may determine, after providing for actual and
accrued expenses and liabilities (including such reserves as the Trustees may
establish) determined in accordance with good accounting practices. The
Trustees shall have full discretion to determine which items shall be treated
as income and which items as capital and their determination shall be binding
upon the Shareholders. Distributions of each year's income of each series,
if any be made, may be made in one or more payments, which shall be in
Shares, in cash or otherwise and on a date or dates and as of a record date
or dates determined by the Trustees. At any time and from time to time in
their discretion, the Trustees may distribute to the Shareholders of any one
or more series or classes as of a record date or dates determined by the
Trustees, in Shares, in cash or otherwise, all or part of any gains realized
on the sale or disposition of property of the series or otherwise, or all or
part of any other principal of the Trust attributable to the series. In the
case of any series not divided into two or more classes of Shares, each
distribution pursuant to this Section 1 shall be made ratably according to
the number of Shares of the series held by the several Shareholders on the
applicable record date thereof, provided that no distribution need be made on
Shares purchased pursuant to orders received, or for which payment is made,
after such time or times as the Trustees may determine. In the case of any
series divided into two or more classes, each distribution pursuant to this
Section 1 may be made in whole or in such parts as the Trustees may determine
to the Shareholders of any one or more classes, and the distribution to the
Shareholders of any class shall be made ratably according to the number of
Shares of the class (but need not be made ratably according to the number of
Shares of the series, considered without regard to class) held by the several
Shareholders on the record date thereof, provided that no distribution need
be made on Shares purchased pursuant to orders received, or for which payment
is made, after such time or times as the Trustees may determine. Any such
distribution paid in Shares will be paid at the net asset value thereof as
determined in accordance with Section 7 of this Article VI.
REDEMPTIONS AND REPURCHASES
SECTION 2. Any holder of Shares of the Trust may by presentation of a
written request, together with his or her certificates, if any, for such
Shares, in proper form for transfer, at the office of the Trust or at a
principal office of a transfer agent appointed by the Trust, redeem his or
her Shares for the net asset value thereof determined and computed in
accordance with the provisions of this Section 2 and the provisions of
Section 7 of this Article VI.
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Upon receipt by the Trust or its transfer agent of such written request
for redemption of Shares, such Shares shall be redeemed at the net asset
value per share of the appropriate series next determined after such Shares
are tendered in proper order for transfer to the Trust or determined as of
such other time fixed by the Trustees as may be permitted or required by the
1940 Act, provided that no such tender shall be required in the case of
Shares for which a certificate or certificates have not been issued, and in
such case such Shares shall be redeemed at the net asset value per share of
the appropriate series next determined after such request has been received
in proper form or determined at such other time fixed by the Trustees as may
be permitted or required by the 1940 Act.
The obligation of the Trust to redeem its Shares of each series or class
as set forth above in this Section 2 shall be subject to the conditions that
during any time of emergency, as hereinafter defined, such obligation may be
suspended by the Trust by or under authority of the Trustees for such period
or periods during such time of emergency as shall be determined by or under
authority of the Trustees. If there is such a suspension, any Shareholder
may withdraw any demand for redemption and any tender for Shares which has
been received by the Trust during any such period and any tender of Shares,
the applicable net asset value of which would but for such suspension be
calculated as of a time during such period. Upon such withdrawal, the Trust
shall return to the Shareholder the certificates therefor, if any. For the
purposes of any such suspension, "time of emergency" shall mean, either with
respect to all Shares or any series of Shares, any period during which:
a. the New York Stock Exchange is closed other than for customary
weekend and holiday closings; or
b. the Trustees or authorized officers of the Trust shall have
determined, in compliance with any applicable rules and regulations of the
Securities and Exchange Commission, either that trading on the New York
Stock Exchange is restricted, or that an emergency exists as a result of
which (i) disposal by the Trust of securities owned by it is not reasonably
practicable or (ii) it is not reasonably practicable for the Trust fairly
to determine the current value of its net assets; or
c. the suspension or postponement of such obligations is permitted by
order of the Securities and Exchange Commission.
The Trust may also purchase, repurchase or redeem Shares in accordance
with such other methods, upon such other terms and subject to such other
conditions as the Trustees may from time to time authorize at a price not
exceeding the net asset value of such Shares in effect when the purchase or
repurchase or any contract to purchase or repurchase is made.
PAYMENT IN KIND
SECTION 3. Subject to any generally applicable limitation imposed by the
Trustees, any payment on redemption of Shares may if authorized by the Trustees,
be made wholly or partly in kind, instead of cash. Such payment in kind shall
be made by distributing securities or other
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property constituting, in the opinion of the Trustees, a fair representation
of the various types of securities and other property then held by the series
of Shares being redeemed (but not necessarily involving a portion of each of
the series' holdings) and taken at their value used in determining the net
asset value of the Shares in respect of which payment is made.
REDEMPTIONS AT THE OPTION OF THE TRUST
SECTION 4. The Trust shall have the right at its option and at any time
to redeem Shares of any Shareholder at the net asset value thereof as
determined in accordance with Section 7 of Article VI of this Declaration of
Trust: (i) if at such time such Shareholder owns fewer Shares than, or
Shares having an aggregate net asset value of less than, an amount determined
from time to time by the Trustees; or (ii) to the extent that such
Shareholder owns Shares of a particular series of Shares equal to or in
excess of a percentage of the outstanding Shares of that series (determined
without regard to class) determined from time to time by the Trustees; or
(iii) to the extent that such Shareholder owns Shares of the Trust
representing a percentage equal to or in excess of such percentage of the
aggregate number of outstanding Shares of the Trust or the aggregate net
asset value of the Trust determined from time to time by the Trustees.
DIVIDENDS, DISTRIBUTIONS, REDEMPTIONS AND REPURCHASES
SECTION 5. No dividend or distribution (including, without limitation,
any distribution paid upon termination of the Trust or of any series) with
respect to, nor any redemption or repurchase of, the Shares of any series (or
of any class) shall be effected by the Trust other than from the assets of
such series (or of the series of which such class is a part).
ADDITIONAL PROVISIONS RELATING TO REDEMPTIONS AND REPURCHASES
SECTION 6. The completion of redemption of Shares shall constitute a
full discharge of the Trust and the Trustees with respect to such shares, and
the Trustees may require that any certificate or certificates issued by the
Trust to evidence the ownership of such Shares shall be surrendered to the
Trustees for cancellation or notation.
DETERMINATION OF NET ASSET VALUE
SECTION 7. The term "net asset value" of the Shares of each series or
class shall mean: (i) the value of all the assets of such series or class;
(ii) less the total liabilities of such series or class; (iii) divided by the
number of Shares of such series or class outstanding, in each case at the
time of each determination. The "number of Shares of such series or class
outstanding" for the purposes of such computation shall be exclusive of any
Shares of such series or class to be redeemed and not then redeemed as to
which the redemption price has been determined, but shall include Shares of
such series or class presented for repurchase and not then repurchased and
Shares of such series or class to be redeemed and not then redeemed as which
the redemption price has not been determined and Shares of such series or
class the sale of which has been
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confirmed. Any fractions involved in the computation of net asset value per
share shall be adjusted to the nearer cent unless the Trustees shall
determine to adjust such fractions to a fraction of a cent.
The Trustees, or any officer or officers or agent of this Trust
designated for the purpose by the Trustees, shall determine the net asset
value of the Shares of each series or class, and the Trustees shall fix the
times as of which the net asset value of the Shares of each series or class
shall be determined and shall fix the periods during which any such net asset
value shall be effective as to sales, redemptions and repurchases of, and
other transactions in, the Shares of such series or class, except as such
times and periods for any such transaction may be fixed by other provisions
of this Declaration of Trust or by the Bylaws.
In valuing the portfolio investments of any series or class for
determination of net asset value per share of such series or class:
(a) Each security for which market quotations are readily available shall
be valued at current market value determined by methods specified by
the Board of Trustees;
(b) Each other security, including any security within (a) for which the
specified price does not appear to represent a dependable quotation
for such security as of the time of valuation, shall be valued at a
fair value as determined in good faith by the Trustees;
(c) Any cash on hand shall be valued at the face amount thereof;
(d) Any cash on deposit, accounts receivable, and cash dividends and
interest declared or accrued and not yet received, any prepaid
expenses, and any other current asset shall be valued at the face
amount thereof, unless the Trustees shall determine that any such
item is not worth its face amount, in which case such asset shall be
valued at a fair value determined in good faith by the Trustees; and
(e) Any other asset shall be valued at a fair value determined in good
faith by the Trustees.
Notwithstanding the foregoing, short-term debt obligations, commercial paper
and repurchase agreements may be, but need not be, valued on the basis of
quoted yields for securities of comparable maturity, quality and type, or on
the basis of amortized cost.
Liabilities of any series or class for accounts payable for investments
purchased and for Shares tendered for redemption and not then redeemed as to
which the redemption price has been determined shall be stated at the amounts
payable therefor. In determining the net asset value of any series or class,
the person or persons making such determination on behalf of the Trust may
include in liabilities such reserves, estimated accrued expenses and
contingencies as such person
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or persons may in its, his or their best judgment deem fair and reasonable
under the circumstances. Any income dividends and gain distributions payable
by the Trust shall be deducted as of such time or times on record date
therefor as the Trustees shall determine.
The manner of determining the net assets of any series or class or of
determining the net asset value of the Shares of any series or class may from
time to time be altered as necessary or desirable in the judgment of the
Trustees to conform to any other method prescribe or permitted by any
applicable law or regulation.
Determinations under this Section 7 made in good faith and in accordance
with the provisions of the 1940 Act shall be binding on all parties concerned.
ARTICLE VII
COMPENSATION AND LIMITATION OF LIABILITY OF TRUSTEES
COMPENSATION
SECTION 1. The Trustees as such shall be entitled to reasonable
compensation from the Trust; they may fix the amount of their compensation.
Nothing herein shall in any way prevent the employment of any Trustee for
advisory, management, legal, accounting, investment banking or other services
and payment for the same by the Trust.
LIMITATION OF LIABILITY
SECTION 2. The Trustees shall not be responsible or liable in any event
for any neglect or wrongdoing of any officer, agent , employee, adviser or
principal underwriter of the Trust, nor shall any Trustee be responsible for
the act or omission of any other Trustee, but nothing herein contained shall
protect any Trustee against any liability to which he or she 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 or her office.
Every note, bond, contract, instrument, certificate, Share or
undertaking and every other act or thing whatsoever executed or done by or on
behalf of the Trust or the Trustees or any of them in connection with the
Trust shall be conclusively deemed to have been executed or done only in or
with respect to their or his or her capacity as Trustees or Trustee, and such
Trustees or Trustee shall not be personally liable thereon.
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ARTICLE VIII
INDEMNIFICATION
TRUSTEES, OFFICERS, ETC.
SECTION 1. The Trust shall indemnify each person who is or has been a
Trustee or officer (including persons who serve at the Trust's request as
directors, officers or trustees of another organization in which the Trust
has any interest as a shareholder, creditor or otherwise) (hereinafter
referred to as a "Covered Person") against all liabilities and expenses,
including but not limited to amounts paid in satisfaction of judgments, in
compromise or as fines and penalties, and counsel fees and expenses
reasonably incurred by any Covered Person in connection with the defense or
disposition of any action, suit or other proceeding, whether civil, criminal,
administrative or investigative, and any appeal therefrom, before any court
or administrative or legislative body, in which such Covered Person may be or
may have been involved as a party or otherwise or with which such person may
be or may have been threatened, while in office or thereafter, by reason of
being or having been such a Covered Person, except that no Covered Person
shall be indemnified against any liability to the Trust or its Shareholders
to which such Covered Person would otherwise by subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of such Covered Person's office.
Expenses, including counsel fees and expenses so incurred by any such
Covered Person (but excluding amounts paid in satisfaction of judgments, in
compromise or as fines or penalties), may be paid from time to time by the
Trust in advance of the final disposition of any such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such Covered
Person to repay amounts so paid to the Trust if it is ultimately determined
that indemnification of such expenses is not authorized under this Article,
PROVIDED THAT (a) such Covered Person shall provide security for his
undertaking, (b) the Trust shall be insured against losses arising by reason
of such Covered Person's failure to fulfill his undertaking or (c) a majority
of the Trustees who are disinterested persons and who are not Interested
Persons (provided that a majority of such Trustees then in office act on the
matter), or independent legal counsel in a written opinion, shall determine,
based on a review of readily available facts (but not a full trial-type
inquiry), that there is reason to believe such Covered Person ultimately will
be entitled to indemnification.
COMPROMISE PAYMENT
SECTION 2. As to any matter disposed of (whether by a compromise payment,
pursuant to a consent decree or otherwise) without an adjudication in a decision
on the merits by a court, or by any other body before which the proceeding was
brought, that such Covered Person is liable to the Trust or its Shareholders by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of such Covered Person's office,
indemnification shall be provided if (a) approved as in the best interest of the
Trust, after notice that it involves such indemnification, by at least a
majority of the Trustees who are disinterested persons and are not Interested
Persons (provided that a majority of such Trustees then in office
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act on the matter), upon a determination, based upon a review of readily
available facts (but not a full trial-type inquiry) that such Covered Person
is not liable to the Trust or its Shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of such Covered Person's office, or (b) there has
been obtained an opinion in writing of independent legal counsel, based upon
a review of readily available facts (but not a full-trial type inquiry) to
the effect that such indemnification would not protect such Covered Person
against any liability to the Trust to which such Covered Person 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.
Any approval pursuant to this Section shall not prevent the recovery
from any Covered Person of any amount paid to such Covered Person in
accordance with this Section as indemnification if such Covered Person is
subsequently adjudicated by a court of competent jurisdiction to have been
liable to the Trust or its Shareholders by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of such Covered Person's office.
INDEMNIFICATION NOT EXCLUSIVE; DEFINITIONS
SECTION 3. The right of indemnification hereby provided shall not be
exclusive of or affect any other rights to which any such Covered Person may
be entitled. As used in this Article VIII, the term "Covered Person" shall
include such person's heirs, executors and administrators, and a
"disinterested person" is a person against whom none of the actions, suits or
other proceedings in question or another action, suit or other proceeding on
the same or similar grounds is then or has been pending. Nothing contained
in this article shall affect any rights to indemnification to which personnel
of the Trust, other than Trustees and officers, and other persons may be
entitled by contract or otherwise under law, nor the power of the Trust to
purchase and maintain liability insurance on behalf of such persons.
SHAREHOLDERS
SECTION 4. In case any Shareholder or former Shareholder shall be held
to be personally liable solely by reason of his or her being or having been a
Shareholder and not because of his or her acts or omissions or for some other
reason, the Shareholder or former Shareholder (or his or her heirs,
executors, administrators or other legal representatives or, in the case of a
corporation or other entity, its corporate or other general successor) shall
be entitled to be held harmless from and indemnified against all loss and
expense arising form such liability, but only out of the assets of the
particular series of Shares of which he or she is or was a Shareholder.
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ARTICLE IX
MISCELLANEOUS
TRUSTEES, SHAREHOLDERS, ETC. NOT PERSONALLY LIABLE; NOTICE
SECTION 1. All persons extending credit to, contracting with or having
any claim against the Trust or a particular series of Shares shall look only
to the assets of the Trust or the assets of that particular series of Shares
for payment under such credit, contract or claim; and neither the
Shareholders nor the Trustees, nor any of the Trust's officers, employees or
agents, whether past, present or future, shall be personally liable therefor.
Nothing in this Declaration of Trust shall protect any Trustee against any
liability to which such Trustee would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee.
Every note, bond, contract, instrument, certificate or undertaking made
or issued by the Trustees or by any officers or officer shall give notice
that this Declaration of Trust is on file with the Secretary of State of The
Commonwealth of Massachusetts and shall recite that the same was executed or
made by or on behalf of the Trust or by them as Trustees or Trustee or as
officers or officer and not individually and that the obligations of such
instrument are not binding upon any of them or the Shareholders individually
but are binding only upon the assets and property of the Trust, and may
contain such further recital as he or she or they may deem appropriate, but
the omission thereof shall not operate to bind any Trustees or Trustee or
officers or officer or Shareholders or Shareholder individually.
TRUSTEE'S GOOD FAITH ACTION, EXPERT ADVICE, NO BOND OR SURETY
SECTION 2. The exercise by the Trustees of their powers and discretions
hereunder shall be binding upon everyone interested. A Trustee shall be
liable for his or her own willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of the office of
Trustee, and for nothing else, and shall not be liable for errors of judgment
or mistakes of fact or law. The Trustees may take advice of counsel or other
experts with respect to the meaning and operation of this Declaration of
Trust, and shall be under no liability for any act or omission in accordance
with such advice or for failing to follow such advice. The Trustees shall
not be required to give any bond as such, nor any surety if a bond is
required.
LIABILITY OF THIRD PERSONS DEALING WITH TRUSTEES
SECTION 3. No person dealing with the Trustees shall be bound to make any
inquiry concerning the validity of any transaction made or to be made by the
Trustees or to see to the application of any payments made or property
transferred to the Trust or upon its order.
18
<PAGE>
DURATION AND TERMINATION OF THE TRUST
SECTION 4. Unless terminated as provided herein, the Trust shall
continue without limitation of time. The Trust may be terminated at any time
by vote of the holders of a majority of the votes represented by outstanding
Shares of each series entitled to vote or by the Trustees by written notice
to the Shareholders. Any series of Shares may be terminated at any time by
vote of the holders of a majority of the votes represented by outstanding
Shares of such series entitled to vote or by the Trustees by written notice
to the Shareholders of such series.
Upon termination of the Trust or of any one or more series of Shares,
after paying or otherwise providing for all charges, taxes, expenses and
liabilities, whether due or accrued or anticipated as may be determined by
the Trustees, the Trust shall in accordance with such procedures as the
Trustees consider appropriate reduce the remaining assets to distributable
form in cash or shares or other securities, or any combination thereof, and
distribute the proceeds to the Shareholders of the series involved, ratably
according to the number of Shares of such series held by several Shareholders
of such series on the date of termination, except to the extent otherwise
required or permitted by the preferences and special or relative rights and
privileges or any classes of Shares of that series, provided that any
distribution to the Shareholders of a particular class of Shares shall be
made to such Shareholders pro rata in proportion to the number of Shares of
such class held by each of them.
FILING OF COPIES, REFERENCES, HEADINGS
SECTION 5. The original or a copy of this instrument and of each
amendment hereto shall be kept at the office of the Trust where it may be
inspected by any Shareholder. A copy of this instrument and of each
amendment hereto shall be filed by the Trust with the Secretary of State of
The Commonwealth of Massachusetts and with the Clerk of the City of
Worcester, as well as any other governmental office where such filing may
from time to time be required. Anyone dealing with the Trust may rely on a
certificate by an officer of the Trust as to whether or not any such
amendments have been made and as to any matters in connection with the Trust
hereunder; and, with the same effect as if it were the original, may rely on
a copy certified by an officer of the Trust to be a copy of this instrument
or any such amendments. In this instrument and in any such amendment,
references to this instrument, and all expressions such as "herein," "hereof"
and "hereunder," shall be deemed to refer to this instrument as amended or
affected by any such amendments. Headings are placed herein for convenience
of reference only and shall not be taken as a part hereof or control or
affect the meaning, construction or effect of this instrument. This
instrument may be executed in any number or counterparts, each of which shall
be deemed an original.
APPLICABLE LAW
SECTION 6. This Declaration of Trust is made in The Commonwealth of
Massachusetts, and it is created under and is to be governed by and construed
and administered according to the
19
<PAGE>
laws of said Commonwealth. The Trust shall be of the type commonly called a
Massachusetts business trust, and without limiting the provisions hereof, the
Trust may exercise all powers which are ordinarily exercised by such a trust.
AMENDMENTS
SECTION 7. This Declaration of Trust may be amended at any time by an
instrument in writing signed by a majority of the then Trustees when
authorized so to do by a vote of the holders of a majority of the votes
represented by outstanding Shares entitled to vote, except that an amendment
which shall affect the holders of one or more series or classes of Shares but
not the holders of all outstanding series and classes shall be authorized by
vote of the holders of a majority of the votes represented by outstanding
Shares entitled to vote of each series and class affected and no vote of
Shareholders of a series or class not affected shall be required. Amendments
having the purpose of changing the name of the Trust or of supplying any
omission, curing any ambiguity or curing, correcting or supplementing any
defective or inconsistent provision contained herein shall not require
authorization by Shareholder vote.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand in the
City of Worcester, Massachusetts for himself and his assigns, as of this 29th
day of January, 1993.
/s/ Richard C. Butt
------------------------------------------
Richard C. Butt as Trustee and not
individually
THE COMMONWEALTH OF MASSACHUSETTS
Worcester ss. January 29, 1993
Then personally appeared the above-named Trustee and acknowledged the
foregoing instrument to be his free act and deed, before me,
/s/ Irene Nosel
------------------------------------------
Notary Public Irene Nosel
My commission expires: July 29, 1999
(Notary's Seal)
20
<PAGE>
THE VALIANT FUND
WRITTEN INSTRUMENT AMENDING AGREEMENT AND DECLARATION OF TRUST
The undersigned, being at least a majority of the Trustees of The Valiant
Fund, a Massachusetts business trust organized pursuant to an Agreement and
Declaration of Trust (the "Declaration") dated January 29, 1993, do hereby
amend Article IV, Section 3 of the Declaration striking out the last
paragraph of said Section 3 in its entirety and inserting in lieu thereof the
following:
The Trustees shall not in any way be bound or limited by any present or
future law or custom in regard to investments by Trustees. Except as
otherwise provided herein or from time to time in the Bylaws, any action to
be taken by the Trustees may be taken by a majority of the Trustees present
at a meeting of the Trustees (a quorum being present), within or without
Massachusetts, including any meeting held by means of a conference telephone
or other communications equipment by means of which all persons participating
in the meeting can hear each other at the same time, and participation by
such means shall constitute presence in person at a meeting, or by written
consents of a majority of the Trustees then in office. The Trustees may not
use a meeting held by means of a conference telephone or other communications
equipment or written consents as described in the preceding sentence to
approve any agreement with an investment adviser or principal underwriter or
a distribution plan adopted pursuant to Rule 12b-1 of the 1940 Act.
This instrument may be executed in several counterparts, each of which shall
be deemed an original, but all taken together shall constitute one instrument.
IN WITNESS WHEREOF, the undersigned have this 16th day of July, 1993, signed
these presents.
/s/ Richard F. Curcio
- ------------------------------ ------------------------------
Richard F. Curcio, Trustee Kenneth J. Phelps, Trustee
340 Sorrento Ranches Dr. 295 Crosstree Lane, N.W.
Nokomis, FL 34275 Atlanta, GA 30328
- ------------------------------ ------------------------------
Richard M. Smith, Trustee H. Willis Day, Jr., Trustee
4 Sudbury Road 35 Beach Avenue
Wellesley Hills, MA 02181 Kennebunk Beach, Maine 04043
- ------------------------------
Roger F. Dumas, Trustee
151 Tremont Street
Boston, MA 02110
<PAGE>
THE VALIANT FUND
WRITTEN INSTRUMENT AMENDING AGREEMENT AND DECLARATION OF TRUST
The undersigned, being at least a majority of the Trustees of The Valiant
Fund, a Massachusetts business trust organized pursuant to an Agreement and
Declaration of Trust (the "Declaration") dated January 29, 1993, do hereby
amend Article IV, Section 3 of the Declaration striking out the last
paragraph of said Section 3 in its entirety and inserting in lieu thereof the
following:
The Trustees shall not in any way be bound or limited by any present or
future law or custom in regard to investments by Trustees. Except as
otherwise provided herein or from time to time in the Bylaws, any action to
be taken by the Trustees may be taken by a majority of the Trustees present
at a meeting of the Trustees (a quorum being present), within or without
Massachusetts, including any meeting held by means of a conference telephone
or other communications equipment by means of which all persons participating
in the meeting can hear each other at the same time, and participation by
such means shall constitute presence in person at a meeting, or by written
consents of a majority of the Trustees then in office. The Trustees may not
use a meeting held by means of a conference telephone or other communications
equipment or written consents as described in the preceding sentence to
approve any agreement with an investment adviser or principal underwriter or
a distribution plan adopted pursuant to Rule 12b-1 of the 1940 Act.
This instrument may be executed in several counterparts, each of which shall
be deemed an original, but all taken together shall constitute one instrument.
IN WITNESS WHEREOF, the undersigned have this 16th day of July, 1993, signed
these presents.
/s/ Kenneth J. Phelps
- ------------------------------ ------------------------------
Richard F. Curcio, Trustee Kenneth J. Phelps, Trustee
340 Sorrento Ranches Dr. 295 Crosstree Lane, N.W.
Nokomis, FL 34275 Atlanta, GA 30328
- ------------------------------ ------------------------------
Richard M. Smith, Trustee H. Willis Day, Jr., Trustee
4 Sudbury Road 35 Beach Avenue
Wellesley Hills, MA 02181 Kennebunk Beach, Maine 04043
- ------------------------------
Roger F. Dumas, Trustee
151 Tremont Street
Boston, MA 02110
<PAGE>
THE VALIANT FUND
WRITTEN INSTRUMENT AMENDING AGREEMENT AND DECLARATION OF TRUST
The undersigned, being at least a majority of the Trustees of The Valiant
Fund, a Massachusetts business trust organized pursuant to an Agreement and
Declaration of Trust (the "Declaration") dated January 29, 1993, do hereby
amend Article IV, Section 3 of the Declaration striking out the last
paragraph of said Section 3 in its entirety and inserting in lieu thereof the
following:
The Trustees shall not in any way be bound or limited by any present or
future law or custom in regard to investments by Trustees. Except as
otherwise provided herein or from time to time in the Bylaws, any action to
be taken by the Trustees may be taken by a majority of the Trustees present
at a meeting of the Trustees (a quorum being present), within or without
Massachusetts, including any meeting held by means of a conference telephone
or other communications equipment by means of which all persons participating
in the meeting can hear each other at the same time, and participation by
such means shall constitute presence in person at a meeting, or by written
consents of a majority of the Trustees then in office. The Trustees may not
use a meeting held by means of a conference telephone or other communications
equipment or written consents as described in the preceding sentence to
approve any agreement with an investment adviser or principal underwriter or
a distribution plan adopted pursuant to Rule 12b-1 of the 1940 Act.
This instrument may be executed in several counterparts, each of which shall
be deemed an original, but all taken together shall constitute one instrument.
IN WITNESS WHEREOF, the undersigned have this 16th day of July, 1993, signed
these presents.
- ------------------------------ ------------------------------
Richard F. Curcio, Trustee Kenneth J. Phelps, Trustee
340 Sorrento Ranches Dr. 295 Crosstree Lane, N.W.
Nokomis, FL 34275 Atlanta, GA 30328
/s/ Richard M. Smith
- ------------------------------ ------------------------------
Richard M. Smith, Trustee H. Willis Day, Jr., Trustee
4 Sudbury Road 35 Beach Avenue
Wellesley Hills, MA 02181 Kennebunk Beach, Maine 04043
- ------------------------------
Roger F. Dumas, Trustee
151 Tremont Street
Boston, MA 02110
<PAGE>
THE VALIANT FUND
WRITTEN INSTRUMENT AMENDING AGREEMENT AND DECLARATION OF TRUST
The undersigned, being at least a majority of the Trustees of The Valiant
Fund, a Massachusetts business trust organized pursuant to an Agreement and
Declaration of Trust (the "Declaration") dated January 29, 1993, do hereby
amend Article IV, Section 3 of the Declaration striking out the last
paragraph of said Section 3 in its entirety and inserting in lieu thereof the
following:
The Trustees shall not in any way be bound or limited by any present or
future law or custom in regard to investments by Trustees. Except as
otherwise provided herein or from time to time in the Bylaws, any action to
be taken by the Trustees may be taken by a majority of the Trustees present
at a meeting of the Trustees (a quorum being present), within or without
Massachusetts, including any meeting held by means of a conference telephone
or other communications equipment by means of which all persons participating
in the meeting can hear each other at the same time, and participation by
such means shall constitute presence in person at a meeting, or by written
consents of a majority of the Trustees then in office. The Trustees may not
use a meeting held by means of a conference telephone or other communications
equipment or written consents as described in the preceding sentence to
approve any agreement with an investment adviser or principal underwriter or
a distribution plan adopted pursuant to Rule 12b-1 of the 1940 Act.
This instrument may be executed in several counterparts, each of which shall
be deemed an original, but all taken together shall constitute one instrument.
IN WITNESS WHEREOF, the undersigned have this 16th day of July, 1993, signed
these presents.
- ------------------------------ ------------------------------
Richard F. Curcio, Trustee Kenneth J. Phelps, Trustee
340 Sorrento Ranches Dr. 295 Crosstree Lane, N.W.
Nokomis, FL 34275 Atlanta, GA 30328
/s/ H. Willis Day, Jr.
- ------------------------------ ------------------------------
Richard M. Smith, Trustee H. Willis Day, Jr., Trustee
4 Sudbury Road 35 Beach Avenue
Wellesley Hills, MA 02181 Kennebunk Beach, Maine 04043
- ------------------------------
Roger F. Dumas, Trustee
151 Tremont Street
Boston, MA 02110
<PAGE>
THE VALIANT FUND
WRITTEN INSTRUMENT AMENDING AGREEMENT AND DECLARATION OF TRUST
The undersigned, being at least a majority of the Trustees of The Valiant
Fund, a Massachusetts business trust organized pursuant to an Agreement and
Declaration of Trust (the "Declaration") dated January 29, 1993, do hereby
amend Article IV, Section 3 of the Declaration striking out the last
paragraph of said Section 3 in its entirety and inserting in lieu thereof the
following:
The Trustees shall not in any way be bound or limited by any present or
future law or custom in regard to investments by Trustees. Except as
otherwise provided herein or from time to time in the Bylaws, any action to
be taken by the Trustees may be taken by a majority of the Trustees present
at a meeting of the Trustees (a quorum being present), within or without
Massachusetts, including any meeting held by means of a conference telephone
or other communications equipment by means of which all persons participating
in the meeting can hear each other at the same time, and participation by
such means shall constitute presence in person at a meeting, or by written
consents of a majority of the Trustees then in office. The Trustees may not
use a meeting held by means of a conference telephone or other communications
equipment or written consents as described in the preceding sentence to
approve any agreement with an investment adviser or principal underwriter or
a distribution plan adopted pursuant to Rule 12b-1 of the 1940 Act.
This instrument may be executed in several counterparts, each of which shall
be deemed an original, but all taken together shall constitute one instrument.
IN WITNESS WHEREOF, the undersigned have this 16th day of July, 1993, signed
these presents.
- ------------------------------ ------------------------------
Richard F. Curcio, Trustee Kenneth J. Phelps, Trustee
340 Sorrento Ranches Dr. 295 Crosstree Lane, N.W.
Nokomis, FL 34275 Atlanta, GA 30328
- ------------------------------ ------------------------------
Richard M. Smith, Trustee H. Willis Day, Jr., Trustee
4 Sudbury Road 35 Beach Avenue
Wellesley Hills, MA 02181 Kennebunk Beach, Maine 04043
/s/ Roger F. Dumas
- ------------------------------
Roger F. Dumas, Trustee
151 Tremont Street
Boston, MA 02110
<PAGE>
EXHIBIT 2
Bylaws
<PAGE>
BYLAWS OF THE VALIANT FUND
SECTION 1. AGREEMENT AND DECLARATION OF TRUST AND PRINCIPAL OFFICE
1.1 AGREEMENT AND DECLARATION OF TRUST. These Bylaws shall be subject to
the Agreement and Declaration of Trust, as from time to time in effect (the
"Declaration of Trust"), of The Valiant Fund, a Massachusetts business trust
established by the Declaration of Trust (the "Trust").
1.2 PRINCIPAL OFFICE OF THE TRUST. The principal office of the Trust shall
be located in Worcester, Massachusetts.
SECTION 2. SHAREHOLDERS
2.1 SHAREHOLDER MEETINGS. A meeting of the shareholders of the Trust or of
any one or more series or classes of shares may be called at any time by the
Trustees, by the chairman, the president or, if the Trustees, the chairman
and the president shall fail to call any meeting of shareholders for a period
of 30 days after written application of one or more shareholders who hold
shares representing at least ten percent of all of the votes represented by
all outstanding shares of the Trust, if shareholders of all series are
required under the Declaration of Trust to vote in the aggregate and not by
individual series at such meeting, or any series or class, if shareholders of
such series of class are entitled under the Declaration of Trust to vote by
individual series or class at such meeting, then such shareholders may call
such meeting. If the meeting is a meeting of the shareholders of one or more
series of classes of shares, but not a meeting of all shareholders of the
Trust, then only the shareholders of such one or more series of classes shall
be entitled to notice of and to vote at the meeting. Each call of a meeting
shall state the place, date, hour and purposes of the meeting.
2.2 PLACE OF MEETINGS. All meetings of the shareholders shall be held at
the principal office of the Trust, or, to the extent permitted by the
Declaration of Trust, at such other place within the United States as shall
be designated by the Trustees or the president of the Trust.
2.3 NOTICE OF MEETINGS. A written notice of each meeting of shareholders,
stating the place, date and hour and the purposes of the meeting, shall be
given at least seven days before the meeting to each shareholder entitled to
vote thereat by leaving such notice with him or her or at his or her
residence or usual place of business or by mailing it, postage prepaid, and
addressed to such shareholder at his or her address as it appears in the
records of the Trust. Such notice shall be given by the secretary or an
assistant secretary or by an officer designated by the Trustees. No notice
of any meeting of shareholders need be given to a shareholder if a written
waiver of notice, executed before or after the meeting by such shareholder or
his or her attorney thereunto duly authorized, is filed with the records of
the meeting.
<PAGE>
2.4 BALLOTS. No ballot shall be required for any election unless requested
by a shareholder present or represented at the meeting and entitled to vote
in the election.
2.5 PROXIES. Shareholders entitled to vote may vote either in person or by
proxy in writing dated not more than six months before the meeting named
therein, which proxies shall be filed with the secretary or other person
responsible to record the proceedings of the meeting before being voted.
Unless otherwise specifically limited by their terms, such proxies shall
entitle the holders thereof to vote at any adjournment of such meeting but
shall not be valid after the final adjournment of such meeting.
SECTION 3. TRUSTEES
3.1 COMMITTEES AND ADVISORY BOARD. The Trustees may appoint from their
number an executive committee and other committees. Except as the Trustees
may otherwise determine, any such committee may make rules for conduct of its
business. The Trustees may appoint an advisory board to consist of not less
than two nor more than five members. The members of the advisory board shall
be compensated in such manner as the Trustees may determine and shall confer
with and advise the Trustees may determine and shall confer with and advise
the Trustees regarding the investments and other affairs of the Trust. Each
member of the advisory board shall hold office until the first meeting of the
Trustees following the next meeting of the shareholders and until his or her
successor is elected and qualified, or until he or she sooner dies, resigns,
is removed or becomes disqualified, or until the advisory board is sooner
abolished by the Trustees.
3.2 REGULAR MEETINGS. Regular meetings of the Trustees may be held without
call or notice at such places and at such times as the Trustees may from time
to time determine, provided that notice of the first regular meeting
following any such determination shall be given to absent Trustees.
3.3 SPECIAL MEETINGS. Special meetings of the Trustees may be held at any
time and at any place designated in the call of the meeting, when called by
the chairman, the president or the treasurer or by two or more Trustees,
sufficient notice thereof being given to each Trustee by the secretary or an
assistant secretary of by the officer or one of the Trustees calling the
meeting.
3.4 NOTICE. It shall be sufficient notice to a Trustee to send notice by
mail at least forty-eight hours or by telegram at least twenty-four hours
before the meeting addressed to the Trustee at his or her usual or last known
business or residence address or to give notice to him or her in person or by
telephone at least twenty-four hours before the meeting. Notice of a meeting
need not be given to any Trustee if a written waiver of notice, executed by
him or her before or after the meeting, is filed with the records of the
meeting, or to any Trustee who attends the meeting without protesting prior
thereto or at its commencement the lack of notice to him or her. Neither
notice of a meeting nor a waiver of a notice need specify the purposes of the
meeting.
2
<PAGE>
3.5 QUORUM. At any meeting of the Trustees one-third of the Trustees then
in office shall constitute a quorum; provided, however, a quorum shall not be
less than two. Any meeting may be adjourned from time to time by a majority
of the votes cast upon the question, whether or not a quorum is present, and
the meeting may be held as adjourned without further notice.
SECTION 4. OFFICERS AND AGENTS
4.1 ENUMERATION; QUALIFICATION. The officers of the Trust shall be a
chairman, a president, a treasurer, a secretary and such other officers, if
any, as the Trustees from time to time may in their discretion elect or
appoint. The Trust may also have such agents, if any, as the Trustees from
time to time may in their discretion appoint. Any officer may be but none
need be a Trustee or shareholder. Any two or more offices may be held by the
same person.
4.2 POWERS. Subject to the other provisions of these Bylaws, each officer
shall have, in addition to the duties and powers herein and in the
Declaration of Trust set forth, such duties and powers as commonly incident
to his or her office as if the Trust were organized as a Massachusetts
business corporation and such other duties and powers as the Trustees may
from time to time designate, including without limitation the power to make
purchases and sales of portfolio securities pursuant to recommendations of
the Trust's investment adviser in accordance with the policies and objectives
of the Trust set forth in its prospectus and with such general or specific
instructions as the Trustees may from time to time have issued.
4.3 ELECTION. The chairman, the president, the treasurer and the secretary
shall be elected annually by the Trustees. Other officers, if any, may be
elected or appointed by the Trustees at any time.
4.4 TENURE. The chairman, the president, the treasurer and the secretary
shall hold office until their respective successors are chosen and qualified,
or in each case until he or she sooner dies, resigns, is removed or becomes
disqualified. Each other officer shall hold office at the pleasure of the
Trustees. Each agent shall retain his or her authority at the pleasure of
the Trustees.
4.5 CHAIRMAN. The chairman shall be the chief executive officer of the
Trust and shall preside at all meetings of the Trustees and shareholders.
4.6 VICE CHAIRMAN. In the absence of the chairman, or in the event of the
chairman's inability or refusal to act, the vice chairman (or in the event
there may be more than one vice chairman, the vice chairman in the order
designated, or in the absence of any designations, then in the order of their
appointment), if any, shall preside at all meetings of the Trustees and
shareholders.
4.7 PRESIDENT. The president shall be the chief operating officer of the
Trust. In the absence of the chairman, or in the event of the chairman's
inability or refusal to act, the president shall perform the duties of the
chairman (except that the president shall not preside at a meeting of the
3
<PAGE>
Trustees or shareholders if there is a vice chairman present) and when so
acting shall have all the powers of the chairman.
4.8 VICE PRESIDENTS. In the absence of the president, or in the event of
the president's inability or refusal to act, the vice president (or in the
event there be more than one vice president, the vice presidents in the order
designated, or in the absence of any designation, then in the order of their
election) shall perform the duties of the president, and when so acting shall
have all the powers of the president. Any vice president shall have such
other duties and powers as shall be designated from time to time by the
Trustees, the chairman or the president.
4.9 TREASURER. The treasurer shall be the chief financial and accounting
officer of the Trust and subject to any arrangement made by the Trustees with
a bank or trust company or other organization as custodian or transfer or
shareholder services agent, shall be in charge of its valuable papers an its
books of the account and accounting records, and shall have such duties and
powers as shall be designated from time to time by the Trustees, the chairman
or president. Any assistant treasurer shall have such duties and powers as
shall be designated from time to time by the Trustees.
4.10 SECRETARY. The secretary shall record all proceedings of the
shareholders and the Trustees in books to be kept therefor, which books shall
be kept at the principal office of the Trust. In the absence of the
secretary from any meeting of shareholders or Trustees, an assistant
secretary, or if there be none or he or she is absent, a temporary clerk
chosen at the meeting, shall record the proceedings thereof in the aforesaid
books.
SECTION 5. RESIGNATIONS AND REMOVALS
Any Trustee, officer or advisory board member may resign at any time by
delivering his or her resignation in writing to the president, the treasurer
or the secretary or to a meeting of the Trustees. The Trustees may remove
any officer elected by them with or without cause by the vote of a majority
of the Trustees then in office. Except to the extent expressly provided in a
written agreement with the Trust, no Trustee, officer or advisory board
member resigning, and no officer or advisory board member removed, shall have
any right to any compensation for any period following his or her resignation
or removal, or any right to damages on account of such removal.
SECTION 6. VACANCIES
A vacancy in any office may be filled at any time. Each successor shall hold
office for the unexpired term, and in the case of the chairman, the
president, the treasurer and the secretary, until his or her successor is
chosen and qualified, or in each case until he or she sooner dies, resigns,
is removed or becomes disqualified.
4
<PAGE>
SECTION 7. SHARES OF BENEFICIAL INTEREST
7.1 SHARE CERTIFICATES. No certificates certifying the ownership of shares
shall be issued except as the Trustees may otherwise authorize. In the event
that the Trustees authorize the issuance of share certificates, subject to
the provisions of Section 7.3, each shareholder shall be entitled to a
certificate stating the number of shares owned by him or her, in such form as
shall be prescribed from time to time by the Trustees. Such certificate
shall be signed by the chairman, the president or a vice president and by the
treasurer or an assistant treasurer. Such signatures may be facsimiles if
the certificate is signed by a transfer agent or by a registrar, other than a
Trustee, officer or employee of the Trust. In case any officer who has
signed or whose facsimile signature has been placed on such certificate shall
have ceased to be such officer before such certificate is issued, it may be
issued by the Trust with the same effect as if he or she were such officer at
the time of its issue.
In lieu of issuing certificates for shares, the Trustees or the transfer
agent may either issue receipts therefor or keep accounts upon the books of
the Trust for the record holders of such shares, who shall in either case be
deemed, for purposes hereunder, to the holder of certificates for such shares
as if they had accepted such certificates and shall be held to have expressly
assented and agreed to the terms hereof.
7.2 LOSS OF CERTIFICATES. In the case of the alleged loss or destruction or
the mutilation of a share certificate, a duplicate certificate may be issued
in place thereof, upon such terms as the Trustees may prescribe.
7.3 DISCONTINUANCE OF ISSUANCE OF CERTIFICATES. The Trustees may at any
time discontinue the issuance of share certificates and may, by written
notice to each shareholder, require the surrender of share certificates to
the Trust for cancellation. Such surrender and cancellation shall not affect
the ownership of shares in the Trust.
SECTION 8. RECORD DATE AND CLOSING TRANSFER BOOKS
The Trustees may fix in advance a time, which shall not be more than 60 days
before the date of any meeting of shareholders or the date for the payment of
any dividend or making of any other distribution to shareholders, as the
record date for determining the shareholders having the right to notice and
to vote and the number of votes entitled to be cast at such meeting and any
adjournment thereof or the right to receive such dividend or distribution,
and in such case only shareholders of record on such record date shall have
such right, notwithstanding any transfer of shares on the books of the Trust
after the record date; or without fixing such record date the Trustees may
for any of such purposes close the transfer books for all or any part of such
period.
5
<PAGE>
SECTION 9. SEAL
The seal of the Trust shall, subject to alteration by the Trustees, consist
of a flat-faced circular die with the word "Massachusetts," together with the
name of the Trust and the year of its organization, cut or engraved thereon;
but, unless otherwise required by the Trustees, the seal shall not be
necessary to be placed on, and its absence shall not impair the validity of,
any document, instrument or other paper executed and delivered by or on
behalf of the Trust.
SECTION 10. EXECUTION OF PAPERS
Except as the Trustees may generally or in particular cases authorize the
execution thereof in some other manner, all deeds, leases, transfers,
contracts, bonds, notes, checks, drafts and other obligations made, accepted
or endorsed by the Trust shall be signed, and all transfers of securities
standing in the name of the Trust shall be executed, by the chairman, the
president or by one of the vice presidents or by the treasurer of by
whomsoever else shall be designated for that purpose by the vote of the
Trustees and need not bear the seal of the Trust.
SECTION 11. FISCAL YEAR
Except as from time to time otherwise provided by the Trustees, the fiscal
year of the Trust shall end on December 31.
SECTION 12. AMENDMENTS
These Bylaws may be amended or repealed, in whole or in part, by a majority
of the Trustees then in office at any meeting of the Trustees, or by one or
more writings signed by such a majority.
6
<PAGE>
EXHIBIT 5(a)
Form of Notice with Respect to Management Agreement
<PAGE>
FORM OF NOTICE
Notice, effective________________ with respect to the Management Agreement
(the "Agreement") between Integrity Management & Research, Inc. (the
"Manager") and The Valiant Fund (the "Trust") dated July 29, 1993.
The Trust hereby gives notice that;
(i) the U.S. Government Money Market Portfolio has been renamed the U.S.
Treasury Income Portfolio.
This Notice is not intended to, and does not, alter or amend the Agreement,
which remains in full force and effect.
Integrity Management & Research, Inc.
By:_____________________________
The Valiant Fund
By:______________________________
<PAGE>
EXHIBIT 5(b)
Management Agreement between Integrity Management & Research, Inc.
and The Valiant Fund
<PAGE>
MANAGEMENT AGREEMENT
Integrity Management & Research, Inc. (the "Manager") and The Valiant Fund
("Trust") hereby confirm their Agreement covering services as hereinafter set
forth. The terms and provisions of this Agreement shall take effect on July
29, 1993.
1. The Trust hereby retains the Manager as investment adviser for the
following series of shares of the Trust: U.S. Treasury Money Market
Portfolio, U.S. Government Money Market Portfolio, General Money Market
Portfolio and Tax-Exempt Money Market Portfolio, and such other series of
shares as the Trust and the Manager may from time to time agree on (as set
forth in a notice attached hereto stating the name of any other series
with the applicable compensation schedule), each such series of shares
being hereinafter referred to as a "Fund". The Manager shall also manage,
supervise and conduct the other affairs and business of the Trust and
matters incidental thereto, subject always to the provisions of the
Trust's Agreement and Declaration of Trust, Bylaws and of the provisions
of the Investment Company Act of 1940 as amended ("1940 Act") and any
other applicable laws and regulations. In providing and performing such
services, the Manager will function in cooperation with and subject always
to the direction and control of the Trustees of the Trust and in
cooperation with the Trust's authorized officers and representatives.
2. INVESTMENT ADVISORY SERVICES. The Manager agrees to act as the investment
adviser for , and to manage the investment assets of each Fund and to make
purchases and sales of securities for the Fund's account. The Manager
shall assume responsibility for the management of the portfolio securities
of each Fund and the making and execution of all investment decisions for
each Fund.
A. Investment of each Fund's assets shall be in accordance with the
objectives and policies of each Fund as set forth in the current
Registration Statement of the Trust filed with the Securities and
Exchange Commission (the "SEC"), and any applicable federal and
state law.
B. The Manager shall report to the Trustees of the Trust (the
"Trustees") at such times and in such detail as the Trustees may
from time to time determine to be appropriate in order to permit
the Trustees to determine the adherence by the Manager to the
investment policies and legal requirements of each Fund.
C. The Manager shall place all orders for the purchase and sale of
portfolio investments for the account of the Funds with issuers,
brokers or dealers selected by the Manager which may include brokers
or dealers affiliated with the Manager. In the selection of such
brokers or dealers and the placing of such orders, the Manager shall
always seek best execution (except to the extent permitted by the
next sentence hereof), which is to place portfolio transactions
where the Trust can obtain the most favorable combination of price
and execution services in particular transactions or provided on a
continuous basis by a broker or dealer,
<PAGE>
and to deal directly with a principal market maker in connection with
over-the-counter transactions, except when it is believed that best
execution is obtainable elsewhere. Subject to such policies as the
Trustees may determine, the Manager shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement or
otherwise solely by reason of its having caused the Trust to pay a
broker or dealer that provides brokerage and research services an
amount of commission for effecting a portfolio investment transaction
which is in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction, if the
Manager determines in good faith that such excess amount of
commission was reasonable in relation to the value of the brokerage
and research services provided by such broker or dealer, viewed in
terms of either that particular transaction or the overall
responsibilities of the Manager and its affiliates with respect to
the Trust and to other clients as to which the Manager or any
affiliate of the Manager exercises investment discretion.
D. Subject to the provisions of the Trust's Agreement and Declaration of
Trust and the 1940 Act, the Manager, at its expense, may select and
contract with one or more investment advisers (the "Sub-Advisers") to
provide to the Manager such investments advice relating to the assets
of a Fund and related services as the Manager may from time to time
deem appropriate, or delegate any or all of its functions hereunder
to one or more Sub-Advisers, provided that the Trustees shall approve
any such contract with a Sub-Adviser. So long as any Sub-Adviser
serves as investment adviser to any Fund pursuant to a Sub-Adviser
Agreement in substantially the form attached attached hereto as
Exhibit A (the "Sub-Adviser Agreement"), the obligation of the
Manager under this Agreement with respect to managing the investment
portfolio of such Fund shall be, subject in any event to the control
of the Trustees, to determine and review with such Sub-Adviser the
investment objectives, policies and restrictions and placing of all
orders for the purchase and sale of portfolio securities for such
Fund, all as further described in the Sub-Adviser Agreement. The
Manager will compensate any Sub-Adviser of any Fund for its service
to such Fund. The Manager may terminate the services of any
Sub-Adviser at any time, subject to the approval of the Trustees,
and shall at all time assume the responsibilities of such Sub-Adviser
unless and until a successor Sub-Adviser is selected.
3. MANAGEMENT SERVICES. The Manager will perform (or arrange for the
performance) the management and administrative services set forth below.
A. Subject to the supervision of the Trustees, and unless otherwise
provided herein, the Manager shall be responsible for the following
day to day business activities of the Trust and shall perform all
services appropriate thereto: (i) providing for members of its
organization to serve without salaries as Trustees, officers or
agents of the Trust; (ii) on behalf of the Funds of the Trust,
supervising relations with, and monitoring the performance of,
custodians, depositories, transfer and pricing agents, accountants,
attorneys, underwriters, brokers and dealers, insurers
2
<PAGE>
and other persons in any capacity deemed to be necessary or
desirable; (iii) conducting shareholder relations; and
(iv) investigating the development of management and shareholder
services (and, if appropriate, assisting in the development and
implementation of such services) designed to enhance the value or
convenience of the Funds of the Trust as investment vehicles.
B. The Manager shall also furnish such reports, evaluations, information
or analyses to the Trust as the Trustees may request from time to
time or as the Manager may deem to be desirable. The Manager shall
make recommendations to the Trustees with respect to Fund policies,
and shall carry out such policies as are adopted by the Trustees.
The Manager shall, subject to review by the Trustees, furnish such
other services as the Manager shall from time to time determine to be
necessary or useful under this Agreement. Should the Trust have
occasion to call upon the Manager for services not herein
contemplated or through the Manager to arrange for services of
others, the Manager will act for the Trust upon request to the best
of its ability, the compensation for its services to be agreed upon
with respect to each such occasion as it arises.
C. The Manager will not furnish the Trust the following services under
this Agreement:
(i) determinations of the Trust's net assets and the net asset
value per share of its shares ("pricing");
(ii) maintenance of accounts, books and records as required by
Section 31(a) of the 1940 Act and the rules thereunder
("bookkeeping"); and
(iii) provision of custodian services, transfer agent services,
dividend disbursement and reinvestment services, shareholder
services, shareholder recordkeeping services or administrative
services not set forth in this Section 3.
4. EXPENSES OF THE TRUST. It is understood that the Manager will pay all of
the Trust's expenses other than those expressly stated to be payable by
the Trust hereunder. The expenses payable by the Trust shall include:
(i) interest and taxes; (ii) fees and expenses of its Trustees other than
those who are "interested persons" of the Trust or the Manager or any Sub-
Adviser; (iii) such non-recurring or extraordinary expenses as may arise,
including those relating to actions, suits or proceedings to which the
Trust is a party and the legal obligation which the Trust may have to
indemnify the Trust's Trustees and officers with respect thereto; and (iv)
fees and expenses of the Trust pursuant to a plan adopted by the Trust
under Rule 12b-1 of the 1940 Act.
3
<PAGE>
5. COMPENSATION. As full compensation for the services furnished and
expenses borne by the Manager herein, the Trust will pay a monthly fee to
the Manager computed and paid monthly at an annual rate of the average
daily net assets of each Fund, as indicated below:
ANNUAL FEES
U.S. Treasury Money Market Portfolio .20%
U.S. Government Money Market Portfolio .20%
General Money Market Portfolio .20%
Tax-Exempt Money Market Portfolio .20%
The fee computed with respect to the net assets of each Fund shall be paid
from the assets of such Fund. The average daily net assets of each Fund
shall be determined by taking an average of all of the determinations of
net asset value during each month at the close of business on each
business day during such month while this Agreement is in effect. The
fee for each month shall be payable within five (5) business days after
the end of the month.
In the event that expenses of any Fund for any fiscal year should exceed
the expense limitation on investment company expenses imposed by any
statute or regulatory authority of any jurisdiction in which shares of the
Fund are then qualified for offer and sale, the compensation due the
Manager for such period shall be reduced by the amount of such excess by a
reduction or refund thereof, subject to readjustment during the Fund's
fiscal year. In the event that the expenses with respect to any Fund
should exceed any expense limitation which the Manager may, by written
notice to the Trust, voluntarily declare to be effective, subject to such
terms and conditions as the Manager may prescribe in the notice, the
compensation due the Manager shall be reduced, and, if necessary, the
Manager shall bear expenses with respect to the Fund, to the extent
required by the expense limitation.
If the Manager shall for any period less than a full month, the foregoing
compensation shall be prorated according to the proportion which such
period bears to a full month.
6. LIMITATION OF LIABILITY. The Manager shall be under no liability to the
Trust or its Shareholders or creditors for any matter or thing in
connection with the performance of any of the Manager's services hereunder
or for any losses sustained or that may be sustained in the purchase, sale
or retention of any investment for the Funds of the Trust made by it in
good faith; provided, however, that nothing herein contained shall be
construed to protect the Manager against any liability to the Trust by
reason of the Manager's own willful misfeasance, bad faith, or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties hereunder.
4
<PAGE>
7. AMENDMENT. This Agreement may be amended at any time by mutual consent of
the parties, provided that such amendment shall have been approved (i) by
vote of a majority of the outstanding voting securities of the Fund
affected by such amendment, and (ii) by vote of a majority of the Trustees
of the Trust who are not interested persons of the Manager or any Sub-
Adviser or of the Trust, cast in person at a meeting called for the
purpose of voting on such approval.
8. TERMINATION. This Agreement shall be effective as of the date executed,
and shall remain in full force and effect as to the Fund continuously
thereafter, until terminated as provided below.
A. Unless terminated as herein provided, this Agreement shall remain in
full force and effect for two years from the date hereof, and shall
continue in full force and effect for successive periods of one year
thereafter, but only so long as such continuance is specifically
approved at least annually (i) by the Trustees or by the affirmative
vote of a majority of the outstanding voting securities of a Fund, and
(ii) by a vote of a majority of the Trustees who are not interested
persons of the Trust or of the Manager or of any Sub-Adviser, by vote
cast in person at a meeting called for the purpose of voting on such
approval; provided, however, that if the continuance of this Agreement
is submitted to the shareholders of a Fund for their approval and such
shareholders fail to approve such continuance of this Agreement as
provided herein, the Manager may continue to serve hereunder in a
manner consistent with the 1940 Act and the rules and regulations
thereunder.
B. This Agreement may be terminated as to any Fund without the payment
of any penalty by vote of the Trustees or by vote of a majority of
the outstanding voting securities of such Fund at any annual or
special meeting or by the Manager on sixty days' written notice.
C. This Agreement shall automatically terminate in the event of its
assignment.
9. AGREEMENT AND DECLARATION OF TRUST. A copy of the Trust's Agreement and
Declaration of Trust is on file with the Secretary of State of The
Commonwealth of Massachusetts, and notice is hereby given that this
instrument is executed by the Trustees as Trustees and not individually,
and that the obligations of this instrument are not binding upon any of
the Trustees, officers or shareholders individually but are binding only
upon the assets and property of the Trust.
10. OTHER AGREEMENTS. It is understood that any of the shareholders,
Trustees, officers and employees of the Trust may be a shareholder,
partner, director, officer or employee of, or be otherwise interested in,
the Manager, and in any person controlled by or under common control with
the Manager, and that the Manger and any person controlled by or under
common control with the Manager may have any interest in the Trust. It
is also understood that the Manager and persons controlled by or under
common control with the
5
<PAGE>
Manager have and may have advisory, management service or other contracts
with other organizations and persons and may have other interests and
businesses.
11. MISCELLANEOUS. The Manager, its director, officers and its employees
retain the right to engage in other business, and to render portfolio
management, investment advisory or other services of any kind to any other
corporation, firm, individual or association. Neither the Manager nor any
officer, director, or shareholder of the Manager shall act as principal or
receive any compensation in connection with the purchase or sale of
securities by or on behalf of the Trust other than the compensation
provided in this Agreement.
The Manager is an independent contractor and not an agent of the Trust.
The Trust recognizes the Manager's control of the name "The Valiant Fund"
and agrees that its right to use this name is non-exclusive and can be
terminated by the Manager at any time. The use of such name will be
terminated automatically if at any time the Manager or affiliate of the
Manager ceases to be investment adviser for the Trust.
12. For the purposes of this Agreement, the terms "vote of a majority of the
outstanding voting securities", "interested person" and "assignment" shall
have their respective meanings defined in the 1940 Act, subject, however,
to such exemptions as may be grated by the SEC under said Act; the term
"specifically approved at least annually" shall be construed in the same
manner consistent with the 1940 Act and the rules and regulations
thereunder; and the term "brokerage and research services" shall have the
meaning given in the Securities Exchange Act of 1934 and the rules and
regulations thereunder.
This Agreement shall be effective on the date executed. Executed this 29th day
of July, 1993.
INTEGRITY MANAGEMENT & RESEARCH, INC.
/s/ Irene Nosel By: /s/ Richard F. Curcio
- --------------- ---------------------
witness
THE VALIANT FUND
/s/ Irene Nosel By: /s/ Richard F. Curcio
- --------------- ---------------------
witness
6
<PAGE>
EXHIBIT 5(c)
Form of Notice with Respect to Sub-Adviser Agreement
<PAGE>
FORM OF NOTICE
Notice, effective________________ with respect to the Sub-Adviser Agreement
between Integrity Management & Research, Inc. (the "Manager") and David L.
Babson & Co., Inc. (the "Sub-Adviser") dated July 29, 1993.
The Trust hereby gives notice that;
(i) the U.S. Government Money Market Portfolio has been renamed the U.S.
Treasury Income Portfolio.
This Notice is not intended to, and does not, alter or amend the Agreement,
which remains in full force and effect.
Integrity Management & Research, Inc.
By:_____________________________
David L. Babson & Co., Inc.
By:______________________________
Acknowledged by
The Valiant Fund
By:_______________
<PAGE>
EXHIBIT 5(d)
SubAdviser Agreement between Integrity Management & Research, Inc.
and David L. Babson & Co. Inc.
<PAGE>
SUB-ADVISER AGREEMENT
Sub-Adviser Agreement executed as of June 30, 1995 between Integrity
Management & Research, Inc. (the "Manager") and David L. Babson & Co. Inc.
(the "Sub-Adviser").
Witnesseth:
That in consideration of the mutual covenants herein contained, it is
agreed as follows:
1. SERVICES TO BE RENDERED BY SUB-ADVISER TO THE TRUST
(a) Subject always to the control of the Trustees of The Valiant Fund
(the "Trust"), a Massachusetts business trust, the Sub-Adviser, at its
expense, will furnish continuously an investment program for each of
the following series of shares of the Trust: U.S. Treasury Money
Market Portfolio, U.S. Treasury Income Portfolio (formerly, U.S.
Government Money Market Portfolio), General Money Market Portfolio,
and Tax-Exempt Money Market Portfolio and such other series of shares
as the Trust, the Manager and the Sub-Adviser may from time to time
agree on (as set forth in a notice attached hereto stating the name of
any other series, with the applicable compensation schedule),
(together, the "Funds"). The Sub-Adviser will make investment
decisions on behalf of each of the Funds, and place all orders for the
purchase and sale of portfolio securities. In the performance of its
duties, the Sub-Adviser will comply with the provisions of the
Agreement and Declaration of Trust and Bylaws of the Trust and the
objectives and policies of each of the Funds, as set forth in the
current Registration Statement of the Trust filed with the Securities
and Exchange Commission ("SEC") and any applicable federal and state
laws, and will comply with other policies which the Trustees of the
Trust (the "Trustees") or the Manager, as the case may be, may from
time to time determine and which are furnished to the Sub-Adviser.
The Sub-Adviser shall make its officers and employees available to the
Manager from time to time at reasonable times to review investment
policies of the Funds and to consult with the Manager regarding the
investment affairs of the Funds.
In the performance of its duties hereunder, the Sub-Adviser is
and shall be an independent contractor and, unless otherwise expressly
provided or authorized, shall have no authority to act for or
represent the Trust in any way or otherwise be deemed to be an agent
of the Trust.
(b) The Sub-Adviser shall place all orders for the purchase and sale
of portfolio investments for each Fund with issuers, brokers or
dealers selected by the Sub-Adviser which may include brokers or
dealers affiliated with the Sub-Adviser. In the selection of such
brokers or dealers and the placing of such orders, the Sub-Adviser
always shall seek best execution, (except to the extent permitted by
the next sentence hereof) which is to place portfolio transactions
where each Fund can obtain the most favorable combination of price and
execution services in particular transactions or provided on a
continuing basis by a broker or dealer, and to deal directly with a
principal market maker in connection
<PAGE>
with over-the-counter transactions, except when it is believed that best
execution is obtainable elsewhere. Subject to such policies as the
Trustees may determine, the Sub-Adviser shall not be deemed to have
acted unlawfully or to have breached any duty created by this Agreement
or otherwise solely by reason of its having caused the Trust to pay a
broker or dealer that provides brokerage and research services an
amount of commission for effecting a portfolio investment transaction
in excess of the amount of commission another broker or dealer would
have charged for effecting that transaction, if the Sub-Adviser
determines in good faith that such excess amount of commission was
reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either
that particular transaction or the overall responsibilities of the
Sub-Adviser and its affiliates with respect to the Trust and to other
clients of the Sub-Adviser as to which the Sub-Adviser or any
affiliate of the Sub-Adviser exercises investment discretion.
2. OTHER AGREEMENTS
It is understood that any of the shareholders, Trustees, officers and
employees of the Trust may be a shareholder, partner, director, officer
or employee of, or be otherwise interested in, the Sub-Adviser, and in
any person controlled by or under common control with the Sub-Adviser,
and that the Sub-Adviser and any person controlled by or under common
control with the Sub-Adviser may have an interest in the Trust. It
is also understood that the Sub-Adviser and persons controlled by or
under common control with the Sub-Adviser have and may have advisory,
management service or other contracts with other organizations and
persons, and may have other interests and businesses.
3. COMPENSATION TO BE PAID BY THE MANAGER TO THE SUB-ADVISER
The Manager will pay to the Sub-Adviser as compensation for the Sub-
Adviser's services rendered and for the expenses borne by the
Sub-Advisers pursuant to Section 1, a fee, determined as described in
Schedule A which is attached hereto and made a part hereof.
Such a fee shall be paid by the Manager and not by the Trust.
4. AMENDMENTS OF THIS AGREEMENT
This Agreement (including Schedule A hereto) shall not be amended as
to any Fund unless such amendment is approved at a meeting by the
affirmative vote of a majority of the outstanding voting securities of
the Fund, and by the vote, cast in person at a meeting called for the
purpose of voting on such approval, of a majority of the Trustees who
are not interested persons of the Trust, or of the Manager or of the
Sub-Adviser.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS AGREEMENT
This Agreement shall be effective as of the date executed, and shall
remain in full force and effect as to each Fund continuously
thereafter, until terminated as provided below.
<PAGE>
A. Unless terminated as herein provided, this Agreement shall remain
in full force and effect for one year from the date hereof, and
shall continue in full force and effect for successive periods of
one year thereafter, but only so long as such continuance is
specifically approved at least annually (i) by the Trustees or by
the affirmative vote of holders of a majority of the votes
represented by the outstanding voting securities of a Fund, and
(ii) by a vote of a majority of the Trustees who are not
interested persons of the Trust or of the Manager or of any Sub-
Adviser, by vote cast in person at a meeting called for the
purpose of voting on such approval; provided, however, that if
the continuance of this Agreement is submitted to the
shareholders of a Fund for their approval and such shareholders
fail to approve such continuance of this Agreement as provided
herein, the Sub-Adviser may continue to serve hereunder as the
Sub-Adviser to such Fund in a manner consistent with the
Investment Company Act of 1940, as amended ("1940 Act") and the
rules and regulations thereunder.
B. This Agreement may be terminated as to any Fund without the
payment of any penalty by the Manager, subject to the approval of
the Trustees, by vote of the Trustees, or by vote of a majority
of the outstanding voting securities of such Fund at any annual
or special meeting or by the Sub-Adviser on sixty days' written
notice.
6. CERTAIN DEFINITIONS
For the purposes of this Agreement, the "affirmative vote of a
majority of the outstanding voting securities" means the
affirmative vote, at a duly called and held meeting of
shareholders, (a) of the holders of 67% or more of the shares of
a Fund present (in person or by proxy) and entitled to vote at
such meeting are present or represented by proxy; or (b) of the
holders of more than 50% of the outstanding shares of the Fund,
if the holders of more than 50% of the outstanding shares of the
Fund entitled to vote at such meeting, whichever is less.
For the purposes of this Agreement, the terms "control",
"interested person" and "assignment" shall have their respective
meanings defined in the 1940 Act and rules and regulations
thereunder, subject, however, to such exemptions as may be granted
by the SEC under said Act; the term "specifically approved at
least annually" shall be construed in a manner consistent
with the 1940 Act and the rules and regulations thereunder; and
the term "brokerage and research services" shall have the meaning
given in the Securities Exchange Act of 1934 and the rules and
regulations thereunder.
7. LIMITATION OF LIABILITY OF SUB-ADVISER
The Sub-Adviser shall be under no liability to the Manager, the
Trust or its Shareholders or creditors for any matter or thing in
connection with the performance of any of the Sub-Adviser's
services hereunder or for any losses sustained or that may be
sustained in the purchase, sale or retention of any investment
for the Funds of the Trust made by it in good faith; provided,
however, that nothing herein contained shall be construed
to protect the Sub-Adviser against any liability to the Manager or
the Trust by reason of the Sub-Adviser's own willful misfeasance,
bad
<PAGE>
faith or gross negligence in the performance of its duties or
by reason of its reckless disregard of its obligations
and duties hereunder.
8. LIMITATIONS OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS
A copy of the Trust's Agreement and Declaration of Trust is on
file with the Secretary of The Commonwealth of Massachusetts,
and notice is hereby given that this instrument is executed by
the Trustees as Trustees and not individually and that the
obligations of this instrument are not binding upon any of
the Trustees, officers or shareholders individually but
are binding only upon the assets and property of the
appropriate Fund.
IN WITNESS WHEREOF, Integrity Management & Research, Inc. has
caused this instrument to be signed in duplicate on its behalf by
its duly authorized representative and David L. Babson & Co. Inc.
has caused this instrument to be signed in duplicate on its
behalf by its duly authorized representative, all as of the day
and year first above written.
INTEGRITY MANAGEMENT & RESEARCH, INC.
By/s/ Susan Beauregard
-------------------------
DAVID L. BABSON & CO. INC.
By /s/ Ronald E. Gwozdz
-------------------------
Accepted and Agreed to
as of the day and year
first above written:
THE VALIANT FUND
By /s/ SB
--------------------
<PAGE>
SCHEDULE A
The Manager will pay to the Sub-Adviser as full
compensation for the Sub-Adviser's services rendered a monthly
fee, computed and paid monthly at an annual rate based
on the aggregate average daily net assets of the U.S. Treasury
Money Market Portfolio, U.S. Treasury Income Portfolio
(formerly, U.S. Government Money Market Portfolio),
General Money Market Portfolio and Tax-Exempt Money Market
Portfolio under the following schedule. The fee for each
month shall be payable within ten (10) business days after
the end of the month.
ASSETS RATE
First $500 million .10%
Over $500 million .05%
The average daily net assets of each Fund shall
be determined by taking an average of all of the determinations
of net asset value during each month at the close of business
on each business day during such month while this Agreement is
in effect.
If the Sub-Adviser shall serve for any period less than a
full month, the foregoing compensation shall be prorated
according to the proportion which such period bears to a
full month.
<PAGE>
EXHIBIT 6(a)
Form of Notice with respect to Distribution Agreement
<PAGE>
FORM OF NOTICE
Notice, effective ________________ with respect to the Distribution Agreement
by and among Integrity Management & Research, Inc. ("Integrity Management").
The Valiant Fund ("Valiant" or the "Trust") and Integrity Investments, Inc.
(the "Distributor") dated July 29, 1993.
The Trust hereby gives notice that;
(i) the U.S. Government Money Market Portfolio has been renamed the U.S.
Treasury Income Portfolio.
This Notice is not intended to, and does not, alter or amend the Agreement,
which remains in full force and effect.
Integrity Management & Research, Inc.
By:_____________________________
The Valiant Fund
By:______________________________
Integrity Investments, Inc.
By:______________________________
<PAGE>
EXHIBIT 6(b)
Distribution Agreement between Integrity Management & Research, Inc.,
Integrity Investments, Inc. and The Valiant Fund
<PAGE>
DISTRIBUTION AGREEMENT
THIS AGREEMENT is made as of this 29th day of July, 1993 by and between
INTEGRITY MANAGEMENT & RESEARCH, INC., ("Integrity Management"), a Florida
corporation, THE VALIANT FUND ("Valiant or the "Trust"), a Massachusetts
business trust, and INTEGRITY INVESTMENTS, INC., a Florida corporation
("Distributor.")
WITNESSETH
WHEREAS, Valiant is a Massachusetts business trust, registered as an
open-end, diversified management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, Integrity Management is responsible for the management of the
business affairs and the investments of the portfolios of Valiant pursuant to
that certain Management Agreement dated July 29, 1993, between Valiant and
Integrity Management; and
WHEREAS, Valiant is currently offering units of beneficial interest (the
"Shares"), representing interests in the following investment portfolios:
U.S. Treasury Money Market Portfolio, U.S. Government Money Market Portfolio,
General Money Market Portfolio, Tax-Exempt Money Market Portfolio
(individually a "Fund" and collectively the "Funds"); and
WHEREAS, Valiant desires to retain the Distributor as distributor for the
Funds to provide for the sale and distribution of the Shares, and the
Distributor is prepared to provide such services;
NOW THEREFORE, in consideration of the premises and mutual covenants set
forth herein and intending to be legally bound hereby the parties hereto
agree as follows:
1. SERVICE AS DISTRIBUTOR
1.1 The Distributor will act as agent for the distribution of the Shares
covered by the registration statement and prospectus then in effect under the
Securities Act of 1933.
1.2 The Distributor agrees to use appropriate efforts to solicit orders
for the sale of the Shares and will undertake such advertising and promotion
as it believes reasonable in connection with such solicitation.
1.3 The Distributor shall, at its own expense, finance appropriate
activities which it deems reasonable which are primarily intended to result
in the sale of the Shares, including, but not limited to, advertising,
compensation of underwriters, dealers and sales personnel, the printing and
mailing of prospectuses to other than current shareholders, and the printing
and mailing of sales literature.
<PAGE>
1.4 All activities by the Distributor and its agents and employees as
distributor of Shares shall comply with all applicable laws, rules and
regulation, including, without limitation, all rules and regulations made or
adopted pursuant to the 1940 Act by the Securities and Exchange Commission or
any securities association registered under the Securities Exchange Act of
1934.
1.5 The Distributor will provide one or more persons, during normal
business hours, to respond to telephone questions with respect to the Funds.
1.6 The Distributor will transmit any orders received by it for purchase
or redemption of the Shares to Valiant's transfer agent and custodian.
1.7 Whenever in their judgment such action is warranted by unusual
market, economic or political conditions, or by abnormal circumstances of any
kind, Valiant's officers may decline to accept any orders, for, or make any
sales of the Shares until such time as those officers deem it advisable to
accept such orders and to make such sales.
1.8 The Distributor will act only on its own behalf as principal if it
chooses to enter into selling agreements with selected dealers or others.
1.9 Valiant agrees at its own expense to execute any and all documents
and to furnish any and all information and otherwise to take all actions that
may be reasonably necessary in connection with the qualification of the
Shares for sale in such states as the Distributor may designate.
1.10 Valiant shall furnish from time to time, for use in connection with
the sale of the Shares such written information with respect to the Funds and
the Shares as the Distributor may reasonably request; and Valiant warrants
that the statements contained in any such information shall fairly show or
represent what they purport to show or represent. Valiant shall also furnish
the Distributor upon request with: (a) unaudited semi-annual statements of
the Fund's books and accounts, (b) quarterly earnings statements of the
Funds, (c) a monthly itemized list of the securities in the Funds, (d)
monthly balance sheets as soon as practicable after the end of each month,
and (e) from time to time such additional information regarding the Funds'
financial condition as the Distributor may reasonably request.
1.11 Valiant represents to the Distributor that all registration
statements and prospectuses filed by Valiant with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "1933 Act"),
with respect to the Shares have been prepared in conformity with the
requirements of the 1933 Act and rules and regulations of the Securities and
Exchange Commission thereunder. As used in this agreement the terms
"registration statement" and "prospectus" shall mean any registration
statement and prospectus filed with the Securities and Exchange Commission
and any amendments and supplements thereto, including statements of
additional information incorporated therein by reference, which at any time
shall have been filed with the Securities and Exchange Commission. Valiant
represents and warrants to the Distributor that any registration statement
and prospectus when such registration statement
2
<PAGE>
becomes effective, will contain all statements required to be stated therein
in conformity with the 1933 Act and the rules and regulations of the
Securities and Exchange Commission; that all statements of fact contained in
any such registration statement and prospectus will be true and correct when
such registration statement becomes effective; and that neither any
registration statement nor any prospectus when such registration statement
becomes effective will include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading to a purchaser of the Shares. Valiant
may, but shall not be obligated to, propose from time to time such amendment
or amendments to any registration statement and such supplement or
supplements to any prospectus, as, in the light of future developments, may,
in the opinion of Valiant's counsel, be necessary or advisable. Valiant
shall promptly notify the Distributor of any advice given to it by Valiant's
counsel regarding the necessity or advisability so to amend or supplement
such registration statement or prospectus. Valiant shall not file any
amendment to any registration statement or supplement to any prospectus
without giving the Distributor reasonable notice thereof in advance;
provided, however, that nothing contained in this agreement shall in any way
limit Valiant's right to file at any time such amendments to any registration
statement and/or statements to any prospectus, of whatever character, as
Valiant may deem advisable, such right being in all respects absolute and
unconditional.
1.12 Valiant authorizes the Distributor and dealers to use the current
prospectus in the form furnished from time to time in connection with the
sale of the Shares. Valiant agrees to indemnify, defend and hold the
Distributor, its several officers and directors, and any person who controls
the Distributor within the meaning of Section 15 of the 1933 Act, free and
harmless from and against any and all claims, demands, liabilities and
expenses (including the cost of investigating or defending such claims,
demands or liabilities and any counsel fees incurred in connection therewith)
which the Distributor, its officers and directors, or any such controlling
person, may incur under the 1933 Act, or under common law or otherwise,
arising out of or based upon any untrue statement, or alleged untrue
statement, of a material fact contained in any registration statement or any
prospectus or arising out of or based upon any omission, or alleged omission,
to state a material fact required to be stated in either any registration
statement or any prospectus or necessary to make the statements in either
thereof not misleading; provided, however, that Valiant's agreement to
indemnify the Distributor, its officers or directors, and any such
controlling person shall not be deemed to cover any claims, demands,
liabilities or expenses arising out of any statements or representations
contained in any registration statement or in any prospectus that were
furnished in writing to Valiant or its counsel by the Distributor and used in
the answers to the registration statement or in the corresponding statements
made in the prospectus, or arising out of or based upon any omission or
alleged omission to state a material fact in connection with the giving of
such information required to be stated in such answers or necessary to make
the answers not misleading; and further provided that Valiant's agreement to
indemnify the Distributor and Valiant's representations and warranties
hereinbefore set forth in paragraph 1.11 shall not be deemed to cover any
liability to Valiant or its shareholders to which the Distributor would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of the
Distributor's reckless disregarding of its obligations and duties under this
Agreement. Valiant's agreement to indemnify the Distributor, its officers
and directors, or any such controlling person, as aforesaid,
3
<PAGE>
is expressly conditioned upon Valiant's being notified of any action brought
against the Distributor, its officers and directors, or any such controlling
person, such notification to be given by letter or by telegram addressed to
Valiant at its principal office in Worcester, Massachusetts and sent to
Valiant by the person against whom such action is brought, within 10 days
after the summons or other first legal process shall have been served. The
failure so to notify Valiant of any such action shall not relieve Valiant
from any liability which Valiant may have to the person against whom such
action is brought by reason of any such untrue, or allegedly untrue,
statement of omission, or alleged omission, otherwise than on account of
Valiant's indemnity agreement contained in this paragraph 1.12. Valiant will
be entitled to assume the defense of any suit brought to enforce any such
claim, demand or liability, but in such case, such defense shall be conducted
by counsel of good standing chosen by Valiant and approved by the
Distributor, which approval shall not be unreasonably withheld. In the event
Valiant elects to assume the defense of any such suit and retain counsel of
good standing approved by the Distributor, the defendant or defendants in
such suit shall bear the fees and expenses of any additional counsel retained
by them; but in case Valiant does not elect to assume the defense of any such
suit, or in case the Distributor reasonably does not approve of counsel
chosen by Valiant, Valiant will reimburse the Distributor, its officers and
directors, or the controlling person or persons named as defendant or
defendants in such suit, for the fees and expenses of any counsel retained by
the Distributor or them. Valiant's indemnification agreement contained in
this paragraph 1.12 and Valiant's representations and warranties in this
Agreement shall remain operative in full force and effect regardless of any
investigation made by or on behalf of the Distributor, its officers and
directors, or any controlling person, and shall survive the delivery of any
Shares. This agreement of indemnity will inure exclusively to the
Distributor's benefit, to the benefit of its several officers and directors,
and their respective estates, and to the benefit of the controlling persons
and their successors. Valiant agrees promptly to notify the Distributor of
the commencement of any litigation or proceedings against Valiant or any of
its officers or trustees in connection with the issue and sale of any Shares.
1.13 The Distributor agrees to indemnify, defend and hold Valiant, its
several officers and trustees, and any person who controls Valiant within the
meaning of Section 15 of the 1933 Act, free and harmless from and against any
and all claims, demands, liabilities and expenses (including the costs of
investigating or defending such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which Valiant, its officers or
trustees or any such controlling person, may incur under the 1933 Act, or
under common law or otherwise, but only to the extent that such liability or
expense incurred by Valiant, its officers or trustees, or such controlling
person resulting from such claims or demands, shall arise out of or be based
upon any untrue, or alleged untrue, statement of a material fact contained in
information furnished in writing by the Distributor to Valiant or its counsel
and used in the answers to any of the items of the registration statement or
in the corresponding statements made in the prospectus, or shall arise out of
or be based upon any omission, or alleged omission, to state a material fact
in connection with such information furnished in writing by the Distributor
to Valiant or its counsel required to be stated in such answers or necessary
to make such information not misleading. The agreement of the Distributor to
indemnify Valiant, its officers and trustees, and any such controlling
person, as aforesaid, is expressly conditioned upon the Distributor's being
notified of any action brought against Valiant, its officers or trustees, or
any such controlling person, such
4
<PAGE>
notification to be given by letter or telegram addressed to the Distributor
at its principal offices in Sarasota, Florida, and sent to the Distributor by
the person against whom such action is brought, within 10 days after the
summons or other first legal process shall have been served. The failure so
to notify the Distributor of any such action shall not relieve the
Distributor from any liability which the Distributor may have to Valiant, its
officers or trustees, or to such controlling person by reason of any such
untrue or alleged untrue statement, or omission or alleged omission,
otherwise than on account of the Distributor's indemnity agreement contained
in this paragraph 1.13. The Distributor shall have the right of first
control of the defense of such action, with counsel of its own choosing,
satisfactory to Valiant, if such action is based solely upon such alleged
misstatement or omission on the Distributor's part, and in any other event,
Valiant, its officers or trustees or such controlling person shall each have
the right to participate in the defense or preparation of the defense of any
such action. In the event the Distributor elects to assume the defense of
any such suit and retain counsel of good standing approved by Valiant, the
defendant or defendants in such suit shall bear the fees and expenses of any
additional counsel retained by any of them; but in case the Distributor does
not elect to assume the defense of any such suit, or in the case Valiant
reasonably does not approve of counsel chosen by the Distributor, the
Distributor will reimburse Valiant, its officers and trustees, or the
controlling person or persons named as defendant or defendants in such suit,
for the fees and expenses of any counsel retained by Valiant or them. The
Distributor's indemnification agreement contained in this paragraph 1.13 and
the Distributor's representations and warranties in this Agreement shall
remain operative in full force and effect regardless of any investigation
made by or on behalf of Valiant, its officers and Trustees, or any
controlling person, and shall survive the delivery of any Shares. This
agreement of indemnity will inure exclusively to Valiant's benefit, to the
benefit of its several officers and Trustees, and their respective estates,
and to the benefit of the controlling persons and their successors. The
Distributor agrees promptly to notify Valiant of the commencement of any
litigation or proceedings against the Distributor or any of its officers or
directors in connection with the issue and sale of any Shares.
1.14 No Shares shall be offered by either the Distributor or Valiant
under any of the provisions of this Agreement and no orders for the purchase
or sale of Shares hereunder shall be accepted by Valiant if and so long as
effectiveness of the registration statement then in effect or any necessary
amendments thereto shall be suspended under any provisions of the 1933 Act,
if and so long as a current prospectus as required by Section 10(a)(2) of
said Act, is not on file with the Securities and Exchange Commission;
provided, however, that nothing contained in this paragraph 1.14 shall in any
way restrict or have any application to or bearing upon Valiant's obligation
to repurchase Shares from any shareholder in accordance with the provisions
of Valiant's prospectus or Declaration of Trust.
1.15 Valiant agrees to advise the Distributor as soon as reasonably
practical by a notice in writing delivered to the Distributor:
(a) of any request by the Securities and Exchange Commission for
amendments to the registration statement or prospectus then in effect
or for additional information;
5
<PAGE>
(b) in the event of the issuance by the Securities and Exchange Commission
of any stop order suspending the effectiveness of the registration
statement or prospectus then in effect or the initiation by service of
process on Valiant of any proceeding for that purpose;
(c) of the happening of any event that makes untrue any statement of a
material fact made in the registration statement or prospectus then in
effect or which requires the making of a change in such registration
statement or prospectus in order to make the statements therein not
misleading; and
(d) of all action of the Securities and Exchange Commission with respect
to any amendment to any registration statement or prospectus which may
from time to time be filed with the Securities and Exchange
Commission.
For purposes of this section, informal requests by or acts of the Staff
of the Securities and Exchange Commission shall not be deemed actions of or
requests by the Securities and Exchange Commission.
1.16 The Distributor agrees on behalf of itself and its employees to
treat confidentially and as proprietary information of Valiant all records
and other information relative the Valiant and its prior, present or
potential shareholders, and not to use such records and information for any
purpose other than performance of its responsibilities and duties hereunder,
except after prior notification to and approval in writing by Valiant, which
approval shall not be unreasonably withheld and may not be withheld where the
Distributor may be exposed to civil or criminal contempt proceedings for
failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by Valiant.
1.17 This Agreement shall be governed by the laws of The Commonwealth of
Massachusetts.
1.18 The names "The Valiant Fund" and "Trustees of The Valiant Fund"
refer respectively to the Trust created and the Trustees as trustee but not
individually or personally, acting form time to time under a Declaration of
Trust dated January 29, 1993 which is hereby referred to and a copy of which
is on file at the office of the State Secretary of the Commonwealth of
Massachusetts and at the principal office of the Trust. The obligations of
the "The Valiant Fund" entered into in the name or on behalf thereof by any
of the Trustees, representatives or agents are made not individually, but in
such capacities, and are not binding upon any of the Trustees, Shareholders,
or representatives of the Trust personally, but bind only the Trust Property,
and all persons dealing with any class of Shares of the Trust must look
solely to the Trust Property belonging to such class for the enforcement of
any claims against the Trust.
1.19 The Distributor shall not be liable for any error of judgment or
mistake of law or for any loss suffered by Valiant or Integrity Management in
connection with the performance by the Distributor of its services hereunder,
except for a loss resulting from willful misfeasance, bad
6
<PAGE>
faith or gross negligence on the part of the Distributor in the performance
of its duties or from reckless disregard by it of its obligations and duties
under this Agreement.
2. COMPENSATION
As sole compensation for the services rendered by the Distributor during
the term of this Agreement, Integrity Management will pay the Distributor
such fees as the parties may agree from time to time in writing. The
Distributor may also receive payments for distribution assistance and support
services pursuant to Valiant's Distribution and Shareholder Servicing Plan
dated July 29, 1993.
3. TERM
This Agreement shall become effective on July 29, 1993 and, unless sooner
terminated as provided herein, shall continue until July 29, 1995 and
thereafter shall continue automatically for successive annual periods ending
on July 29th of each year, provided such continuance is specifically approved
at least annually by (i) Valiant's Board of Trustees or (ii) by a vote of a
majority (as defined in the 1940 Act) of the outstanding voting securities of
the Fund, PROVIDED that in either event the continuance is also approved by a
majority of Valiant's trustees who are not parties to this Agreement and who
are not interested persons (as defined in the 1940 Act) of any party to this
Agreement, by vote cast in person at a meeting called for the purpose of
voting on such approval. This agreement is terminable without penalty, on
sixty days' notice, by Valiant's Board of Trustees, by vote of a majority (as
defined in the 1940 Act) of the outstanding voting securities of the Fund, or
by the Distributor or Integrity Management. This Agreement will also
terminate automatically in the event of its assignment (as defined in the
1940 Act).
4. COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one
and the same instrument.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first
above written.
INTEGRITY MANAGEMENT & RESEARCH, INC.
Attest: /s/ Irene Nosel By: /s/ Richard F. Curcio
--------------- ---------------------
INTEGRITY INVESTMENTS, INC.
Attest: /s/ Irene Nosel By: /s/ Richard F. Curcio
--------------- ---------------------
THE VALIANT FUND
Attest: /s/ Irene Nosel By: /s/ Richard F. Curcio
--------------- ---------------------
8
<PAGE>
EXHIBIT 8
Custody Contract between State Street Bank and Trust Company
and
The Valiant Fund
and
Integrity Management & Research, Inc.
<PAGE>
CUSTODIAN CONTRACT
Between
THE VALIANT FUND
and
STATE STREET BANK AND TRUST COMPANY
and
INTEGRITY MANAGEMENT & RESEARCH, INC.
<PAGE>
TABLE OF CONTENTS
PAGE
1. Employment of Custodian and Property to be Held By It. . . . . . . . . .1
2. Duties of the Custodian with Respect to Property
of the Fund Held by the Custodian. . . . . . . . . . . . . . . . . . . .2
2.1 Holding Securities. . . . . . . . . . . . . . . . . . . . . . . . .2
2.2 Delivery of Securities. . . . . . . . . . . . . . . . . . . . . . .2
2.3 Registration of Securities. . . . . . . . . . . . . . . . . . . . .4
2.4 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . .4
2.5 Availability of Federal Funds . . . . . . . . . . . . . . . . . . .5
2.6 Collection of Income. . . . . . . . . . . . . . . . . . . . . . . .5
2.7 Payment of Fund Monies. . . . . . . . . . . . . . . . . . . . . . .5
2.8 Liability for Payment in Advance of Receipt of
Securities Purchased. . . . . . . . . . . . . . . . . . . . . . . .6
2.9 Appointment of Agents . . . . . . . . . . . . . . . . . . . . . . .6
2.10 Deposit of Fund Assets in Securities System . . . . . . . . . . . .7
2.11 Fund Assets Held in the Custodian's Direct
Paper System. . . . . . . . . . . . . . . . . . . . . . . . . . . .8
2.12 Segregated Account. . . . . . . . . . . . . . . . . . . . . . . . .9
2.13 Ownership Certificates for Tax Purposes . . . . . . . . . . . . . .9
2.14 Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
2.15 Communications Relating to Portfolio
Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
3. Payments for Repurchases or Redemptions and Sales
of Shares of the Fund. . . . . . . . . . . . . . . . . . . . . . . . . 10
4. Proper Instructions. . . . . . . . . . . . . . . . . . . . . . . . . . 10
5. Actions Permitted Without Express Authority. . . . . . . . . . . . . . 11
6. Evidence of Authority. . . . . . . . . . . . . . . . . . . . . . . . . 11
7. Duties of Custodian With Respect to the Books of Account
and Calculation of Net Asset Value and Net Income. . . . . . . . . . . 11
8. Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9. Opinion of Fund's Independent Accountants. . . . . . . . . . . . . . . 12
10. Reports to Fund by Independent Public Accountants. . . . . . . . . . . 12
<PAGE>
11. Compensation of Custodian. . . . . . . . . . . . . . . . . . . . . . . 12
12. Responsibility of Custodian. . . . . . . . . . . . . . . . . . . . . . 12
13. Effective Period, Termination and Amendment. . . . . . . . . . . . . . 13
14. Successor Custodian. . . . . . . . . . . . . . . . . . . . . . . . . . 14
15. Interpretive and Additional Provisions . . . . . . . . . . . . . . . . 14
16. Additional Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
17. Massachusetts Law to Apply . . . . . . . . . . . . . . . . . . . . . . 15
18. Prior Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
19. Shareholder Communications Election. . . . . . . . . . . . . . . . . . 15
20. Limitation of Liability of Trustees. . . . . . . . . . . . . . . . . . 16
<PAGE>
CUSTODIAN CONTRACT
This Contract between The Valiant Fund, a business trust organized and
existing under the laws of Massachusetts , having its principal place of
business at 1776 Heritage Drive, North Quincy, MA 02171-9110, hereinafter
called the "Fund", and State Street Bank and Trust Company, a Massachusetts
trust company, having its principal place of business at 225 Franklin Street,
Boston, Massachusetts, 02110, hereinafter called the "Custodian", and
Integrity Management & Research, Inc., a Florida corporation having its
principal place of business at 1800 Second Street, Suite 757, Sarasota,
Florida 34236, hereinafter called "Integrity Management".
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series, with
each such series representing interests in a separate portfolio of securities
and other assets; and
WHEREAS, the Fund intends to initially offer shares in 4 series, the
U.S. Treasury Money Market Portfolio, U.S. Treasury Income Portfolio, General
Money Market Portfolio and Tax Exempt Money Market Portfolio (such series
together with all other series subsequently established by the Fund and made
subject to this Contract in accordance with paragraph 17, being herein
referred to as the "Portfolio(s)");
WHEREAS, Integrity Management is responsible for bearing the custody
expenses of the Trust pursuant to a Management Agreement dated July 29, 1993
between the Trust and Integrity Management;
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT
The Fund hereby employs the Custodian as the custodian of the assets of
the Portfolios of the Fund pursuant to the provisions of the Declaration of
Trust. The Fund on behalf of the Portfolio(s) agrees to deliver to the
Custodian all securities and cash of the Portfolios, and all payments of
income, payments of principal or capital distributions received by it with
respect to all securities owned by the Portfolio(s) from time to time, and
the cash consideration received by it for such new or treasury shares of
beneficial interest of the Fund representing interests in the Portfolios,
("Shares") as may be issued or sold from time to time. The Custodian shall
not be responsible for any property of a Portfolio held or received by the
Portfolio and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article 4),
the Custodian shall on behalf of the applicable Portfolio(s) from time to
time employ one or more sub-custodians, but only in accordance with an
applicable vote by the Board of Trustees of the Fund on behalf of the
applicable Portfolio(s), and provided that the Custodian shall have no more
or less responsibility or
<PAGE>
liability to the Fund on account of any actions or omissions of any
sub-custodian so employed than any such sub-custodian has to the Custodian.
2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD BY
THE CUSTODIAN
2.1 HOLDING SECURITIES. The Custodian shall hold and physically
segregate for the account of each Portfolio all non-cash property,
including all securities owned by such Portfolio, other than (a)
securities which are maintained pursuant to Section 2.10 in a
clearing agency which acts as a securities depository or in a
book-entry system authorized by the U.S. Department of the Treasury,
collectively referred to herein as "Securities System" and (b)
commercial paper of an issuer for which State Street Bank and Trust
Company acts as issuing and paying agent ("Direct Paper") which is
deposited and/or maintained in the Direct Paper System of the
Custodian pursuant to Section 2.11.
2.2 DELIVERY OF SECURITIES. The Custodian shall release and deliver
securities owned by a Portfolio held by the Custodian or in a
Securities System account of the Custodian or in the Custodian's
Direct Paper book entry system account ("Direct Paper System
Account") only upon receipt of Proper Instructions from the Fund on
behalf of the applicable Portfolio, which may be continuing
instructions when deemed appropriate by the parties, and only in the
following cases:
1) Upon sale of such securities for the account of the Portfolio
and receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the
Portfolio;
3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.10 hereof;
4) To the depository agent in connection with tender or other
similar offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable; provided
that, in any such case, the cash or other consideration is to be
delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the name
of the Portfolio or into the name of any nominee or nominees of
the Custodian or into the name or nominee name of any agent
appointed pursuant to Section 2.9 or into the name or nominee
name of any sub-custodian appointed pursuant to Article 1; or
for exchange for a different number of bonds, certificates or
other evidence representing the same aggregate face amount or
number of units; PROVIDED that, in any such case, the new
securities are to be delivered to the Custodian;
2
<PAGE>
7) Upon the sale of such securities for the account of the
Portfolio, to the broker or its clearing agent, against a
receipt, for examination in accordance with "street delivery"
custom; provided that in any such case, the Custodian shall have
no responsibility or liability for any loss arising from the
delivery of such securities prior to receiving payment for such
securities except as may arise from the Custodian's own
negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment
of the securities of the issuer of such securities, or pursuant
to provisions for conversion contained in such securities, or
pursuant to any deposit agreement; provided that, in any such
case, the new securities and cash, if any, are to be delivered
to the Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that,
in any such case, the new securities and cash, if any, are to be
delivered to the Custodian;
10) For delivery in connection with any loans of securities made by
the Portfolio, BUT ONLY against receipt of adequate collateral
as agreed upon from time to time by the Custodian and the Fund
on behalf of the Portfolio, which may be in the form of cash or
obligations issued by the United States government, its agencies
or instrumentalities, except that in connection with any loans
for which collateral is to be credited to the Custodian's
account in the book-entry system authorized by the U.S.
Department of the Treasury, the Custodian will not be held
liable or responsible for the delivery of securities owned by
the Portfolio prior to the receipt of such collateral;
11) For delivery as security in connection with any borrowings by the
Fund on behalf of the Portfolio requiring a pledge of assets by
the Fund on behalf of the Portfolio, BUT ONLY against receipt of
amounts borrowed;
12) For delivery in accordance with the provisions of any agreement
among the Fund on behalf of the Portfolio, the Custodian and a
broker-dealer registered under the Securities Exchange Act of
1934 (the "Exchange Act") and a member of The National
Association of Securities Dealers, Inc. ("NASD"), relating to
compliance with the rules of The Options Clearing Corporation
and of any registered national securities exchange, or of any
similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Portfolio
of the Fund;
13) For delivery in accordance with the provisions of any agreement
among the Fund on behalf of the Portfolio, the Custodian, and a
Futures Commission Merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of the
Commodity Futures Trading Commission and/or any Contract Market,
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or any similar organization or organizations, regarding account
deposits in connection with transactions by the Portfolio of the
Fund;
14) Upon receipt of instructions from the transfer agent ("Transfer
Agent") for the Fund, for delivery to such Transfer Agent or to
the holders of shares in connection with distributions in kind,
as may be described from time to time in the currently effective
prospectus and statement of additional information of the Fund,
related to the Portfolio ("Prospectus"), in satisfaction of
requests by holders of Shares for repurchase or redemption; and
15) For any other proper corporate purpose, BUT ONLY upon receipt
of, in addition to Proper Instructions from the Fund on behalf
of the applicable Portfolio, a certified copy of a resolution
of the Board of Trustees or of the Executive Committee signed
by an officer of the Fund and certified by the Secretary or an
Assistant Secretary, specifying the securities of the Portfolio
to be delivered, setting forth the purpose for which such
delivery is to be made, declaring such purpose to be a proper
corporate purpose, and naming the person or persons to whom
delivery of such securities shall be made.
2.3 REGISTRATION OF SECURITIES. Securities held by the Custodian (other
than bearer securities) shall be registered in the name of the
Portfolio or in the name of any nominee of the Fund on behalf of the
Portfolio or of any nominee of the Custodian which nominee shall be
assigned exclusively to the Portfolio, UNLESS the Fund has authorized
in writing the appointment of a nominee to be used in common with
other registered investment companies having the same investment
adviser as the Portfolio, or in the name or nominee name of any agent
appointed pursuant to Section 2.9 or in the name or nominee name of
any sub-custodian appointed pursuant to Article 1. All securities
accepted by the Custodian on behalf of the Portfolio under the terms
of this Contract shall be in "street name" or other good delivery
form. If, however, the Fund directs the Custodian to maintain
securities in "street name", the Custodian shall utilize its best
efforts only to timely collect income due the Fund on such securities
and to notify the Fund on a best efforts basis only of relevant
corporate actions including, without limitation, pendency of calls,
maturities, tender or exchange offers.
2.4 BANK ACCOUNTS. The Custodian shall open and maintain a separate bank
account or accounts in the name of each Portfolio of the Fund,
subject only to draft or order by the Custodian acting pursuant to
the terms of this Contract, and shall hold in such account or
accounts, subject to the provisions hereof, all cash received by it
from or for the account of the Portfolio, other than cash maintained
by the Portfolio in a bank account established and used in accordance
with Rule 17f-3 under the Investment Company Act of 1940. Funds held
by the Custodian for a Portfolio may be deposited by it to its credit
as Custodian in the Banking Department of the Custodian or in such
other banks or trust companies as it may in its discretion deem
necessary or desirable; PROVIDED, however, that every such bank or
trust company shall be qualified to act as a custodian under the
Investment Company Act of 1940 and that each
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such bank or trust company and the funds to be deposited with each
such bank or trust company shall on behalf of each applicable
Portfolio be approved by vote of a majority of the Board of Trustees
of the Fund. Such funds shall be deposited by the Custodian in its
capacity as Custodian and shall be withdrawable by the Custodian
only in that capacity.
2.5 AVAILABILITY OF FEDERAL FUNDS. Upon mutual agreement between the
Fund on behalf of each applicable Portfolio and the Custodian, the
Custodian shall, upon the receipt of Proper Instructions from the
Fund on behalf of a Portfolio, make federal funds available to such
Portfolio as of specified times agreed upon from time to time by the
Fund and the Custodian in the amount of checks received in payment
for Shares of such Portfolio which are deposited into the Portfolio's
account.
2.6 COLLECTION OF INCOME. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other
payments with respect to registered securities held hereunder to
which each Portfolio shall be entitled either by law or pursuant to
custom in the securities business, and shall collect on a timely
basis all income and other payments with respect to bearer securities
if, on the date of payment by the issuer, such securities are held
by the Custodian or its agent thereof and shall credit such income,
as collected, to such Portfolio's custodian account. Without
limiting the generality of the foregoing, the Custodian shall detach
and present for payment all coupons and other income items requiring
presentation as and when they become due and shall collect interest
when due on securities held hereunder. Income due each Portfolio on
securities loaned pursuant to the provisions of Section 2.2 (10)
shall be the responsibility of the Fund. The Custodian will have no
duty or responsibility in connection therewith, other than to
provide the Fund with such information or data as may be necessary
to assist the Fund in arranging for the timely delivery to the
Custodian of the income to which the Portfolio is properly entitled.
2.7 PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions from the
Fund on behalf of the applicable Portfolio, which may be continuing
instructions when deemed appropriate by the parties, the Custodian
shall pay out monies of a Portfolio in the following cases only:
1) Upon the purchase of domestic securities, options, futures
contracts or options on futures contracts for the account of the
Portfolio but only (a) against the delivery of such securities
or evidence of title to such options, futures contracts or
options on futures contracts to the Custodian (or any bank,
banking firm or trust company doing business in the United
States or abroad which is qualified under the Investment Company
Act of 1940, as amended, to act as a custodian and has been
designated by the Custodian as its agent for this purpose)
registered in the name of the Portfolio or in the name of a
nominee of the Custodian referred to in Section 2.3 hereof or in
proper form for transfer; (b) in the case of a purchase effected
through a Securities System, in accordance with the conditions
set forth in Section 2.10 hereof; (c) in the case of a purchase
involving the Direct Paper System, in accordance with the
conditions set forth in Section 2.11; (d) in the case of
repurchase agreements entered into between the Fund on behalf
of the Portfolio and the Custodian, or another bank, or a
broker-dealer which is a member of NASD, (i)
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against delivery of the securities either in certificate form or
through an entry crediting the Custodian's account at the
Federal Reserve Bank with such securities or (ii) against
delivery of the receipt evidencing purchase by the Portfolio of
securities owned by the Custodian along with written evidence of
the agreement by the Custodian to repurchase such securities
from the Portfolio or (e) for transfer to a time deposit account
of the Fund in any bank, whether domestic or foreign; such
transfer may be effected prior to receipt of a confirmation from
a broker and/or the applicable bank pursuant to Proper
Instructions from the Fund as defined in Article 5;
2) In connection with conversion, exchange or surrender of
securities owned by the Portfolio as set forth in Section 2.2
hereof;
3) For the redemption or repurchase of Shares issued by the
Portfolio as set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred by the
Portfolio, including but not limited to the following payments
for the account of the Portfolio: interest, taxes, management,
accounting, transfer agent and legal fees, and operating
expenses of the Fund whether or not such expenses are to be in
whole or part capitalized or treated as deferred expenses;
5) For the payment of any dividends on Shares of the Portfolio
declared pursuant to the governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper purpose, BUT ONLY upon receipt of, in
addition to Proper Instructions from the Fund on behalf of the
Portfolio, a certified copy of a resolution of the Board of
Trustees or of the Executive Committee of the Fund signed by an
officer of the Fund and certified by its Secretary or an
Assistant Secretary, specifying the amount of such payment,
setting forth the purpose for which such payment is to be made,
declaring such purpose to be a proper purpose, and naming the
person or persons to whom such payment is to be made.
2.8 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED.
Except as specifically stated otherwise in this Contract, in any and
every case where payment for purchase of securities for the account
of a Portfolio is made by the Custodian in advance of receipt of the
securities purchased in the absence of specific written instructions
from the Fund on behalf of such Portfolio to so pay in advance, the
Custodian shall be absolutely liable to the Fund for such securities
to the same extent as if the securities had been received by the
Custodian.
2.9 APPOINTMENT OF AGENTS. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or
trust company which is itself qualified
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under the Investment Company Act of 1940, as amended, to act as a
custodian, as its agent to carry out such of the provisions of this
Article 2 as the Custodian may from time to time direct; PROVIDED,
however, that the appointment of any agent shall not relieve the
Custodian of its responsibilities or liabilities hereunder.
2.10 DEPOSIT OF FUND ASSETS IN SECURITIES SYSTEMS. The Custodian may
deposit and/or maintain securities owned by a Portfolio in a clearing
agency registered with the Securities and Exchange Commission under
Section 17A of the Securities Exchange Act of 1934, which acts as a
securities depository, or in the book-entry system authorized by the
U.S. Department of the Treasury and certain federal agencies,
collectively referred to herein as "Securities System" in accordance
with applicable Federal Reserve Board and Securities and Exchange
Commission rules and regulations, if any, and subject to the
following provisions:
1) The Custodian may keep securities of the Portfolio in a
Securities System provided that such securities are represented
in an account ("Account") of the Custodian in the Securities
System which shall not include any assets of the Custodian other
than assets held as a fiduciary, custodian or otherwise for
customers;
2) The records of the Custodian with respect to securities of the
Portfolio which are maintained in a Securities System shall
identify by book-entry those securities belonging to the
Portfolio;
3) The Custodian shall pay for securities purchased for the account
of the Portfolio upon (i) receipt of advice from the Securities
System that such securities have been transferred to the
Account, and (ii) the making of an entry on the records of the
Custodian to reflect such payment and transfer for the account
of the Portfolio. The Custodian shall transfer securities sold
for the account of the Portfolio upon (i) receipt of advice
from the Securities System that payment for such securities has
been transferred to the Account, and (ii) the making of an
entry on the records of the Custodian to reflect such transfer
and payment for the account of the Portfolio. Copies of all
advices from the Securities System of transfers of securities
for the account of the Portfolio shall identify the Portfolio,
be maintained for the Portfolio by the Custodian and be provided
to the Fund at its request. Upon request, the Custodian shall
furnish the Fund on behalf of the Portfolio confirmation of each
transfer to or from the account of the Portfolio in the form of
a written advice or notice and shall furnish to the Fund on
behalf of the Portfolio copies of daily transaction sheets
reflecting each day's transactions in the Securities System for
the account of the Portfolio;
4) The Custodian shall provide the Fund for the Portfolio with any
report obtained by the Custodian on the Securities System's
accounting system, internal accounting control and procedures
for safeguarding securities deposited in the Securities System;
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<PAGE>
5) The Custodian shall have received from the Fund on behalf of the
Portfolio the initial or annual certificate, as the case may be,
required by Article 14 hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for the benefit of the
Portfolio for any loss or damage to the Portfolio resulting from
use of the Securities System by reason of any negligence,
misfeasance or misconduct of the Custodian or any of its agents
or of any of its or their employees or from failure of the
Custodian or any such agent to enforce effectively such rights
as it may have against the Securities System; at the election
of the Fund, it shall be entitled to be subrogated to the rights
of the Custodian with respect to any claim against the
Securities System or any other person which the Custodian may
have as a consequence of any such loss or damage if and to the
extent that the Portfolio has not been made whole for any such
loss or damage.
2.11 FUND ASSETS HELD IN THE CUSTODIAN'S DIRECT PAPER SYSTEM. The
Custodian may deposit and/or maintain securities owned by a Portfolio
in the Direct Paper System of the Custodian subject to the following
provisions:
1) No transaction relating to securities in the Direct Paper System
will be effected in the absence of Proper Instructions from the
Fund on behalf of the Portfolio;
2) The Custodian may keep securities of the Portfolio in the Direct
Paper System only if such securities are represented in an
account ("Account") of the Custodian in the Direct Paper System
which shall not include any assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise for
customers;
3) The records of the Custodian with respect to securities of the
Portfolio which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the
Portfolio;
4) The Custodian shall pay for securities purchased for the account
of the Portfolio upon the making of an entry on the records of
the Custodian to reflect such payment and transfer of securities
to the account of the Portfolio. The Custodian shall transfer
securities sold for the account of the Portfolio upon the making
of an entry on the records of the Custodian to reflect such
transfer and receipt of payment for the account of the
Portfolio;
5) The Custodian shall furnish the Fund on behalf of the Portfolio
confirmation of each transfer to or from the account of the
Portfolio, in the form of a written advice or notice, of Direct
Paper on the next business day following such transfer and shall
furnish to the Fund on behalf of the Portfolio copies of daily
transaction sheets reflecting each day's transaction in the
Securities System for the account of the Portfolio;
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6) The Custodian shall provide the Fund on behalf of the Portfolio
with any report on its system of internal accounting control as
the Fund may reasonably request from time to time.
2.12 SEGREGATED ACCOUNT. The Custodian shall upon receipt of Proper
Instructions from the Fund on behalf of each applicable Portfolio
establish and maintain a segregated account or accounts for and on
behalf of each such Portfolio, into which account or accounts may be
transferred cash and/or securities, including securities maintained
in an account by the Custodian pursuant to Section 2.10 hereof, (i)
in accordance with the provisions of any agreement among the Fund on
behalf of the Portfolio, the Custodian and a broker-dealer registered
under the Exchange Act and a member of the NASD (or any futures
commission merchant registered under the Commodity Exchange Act),
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange (or
the Commodity Futures Trading Commission or any registered contract
market), or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the
Portfolio, (ii) for purposes of segregating cash or government
securities in connection with options purchased, sold or written by
the Portfolio or commodity futures contracts or options thereon
purchased or sold by the Portfolio, (iii) for the purposes of
compliance by the Portfolio with the procedures required by
Investment Company Act Release No. 10666, or any subsequent release
or releases of the Securities and Exchange Commission relating to the
maintenance of segregated accounts by registered investment
companies and (iv) for other proper corporate purposes, BUT ONLY, in
the case of clause (iv), upon receipt of, in addition to Proper
Instructions from the Fund on behalf of the applicable Portfolio, a
certified copy of a resolution of the Board of Trustees or of the
Executive Committee signed by an officer of the Fund and certified by
the Secretary or an Assistant Secretary, setting forth the purpose
or purposes of such segregated account and declaring such purposes to
be proper corporate purposes.
2.13 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian shall execute
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to securities of each Portfolio held by it and
in connection with transfers of securities.
2.14 PROXIES. The Custodian shall, with respect to the securities held
hereunder, cause to be promptly executed by the registered holder of
such securities, if the securities are registered otherwise than in
the name of the Portfolio or a nominee of the Portfolio, all
proxies, without indication of the manner in which such proxies are
to be voted, and shall promptly deliver to the Portfolio such
proxies, all proxy soliciting materials and all notices relating to
such securities.
2.15 COMMUNICATIONS RELATING TO PORTFOLIO SECURITIES. Subject to the
provisions of Section 2.3, the Custodian shall transmit promptly to
the Fund for each Portfolio all written information (including,
without limitation, pendency of calls and maturities of securities
and expirations of rights in connection therewith and notices of
exercise of call and put options written by
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the Fund on behalf of the Portfolio and the maturity of futures
contracts purchased or sold by the Portfolio) received by the
Custodian from issuers of the securities being held for the
Portfolio. With respect to tender or exchange offers, the Custodian
shall transmit promptly to the Portfolio all written information
received by the Custodian from issuers of the securities whose tender
or exchange is sought and from the party (or his agents) making the
tender or exchange offer. If the Portfolio desires to take action
with respect to any tender offer, exchange offer or any other similar
transaction, the Portfolio shall notify the Custodian at least three
business days prior to the date on which the Custodian is to take
such action.
3. PAYMENTS FOR REPURCHASES OR REDEMPTIONS AND SALES OF SHARES OF THE FUND
From such funds as may be available for the purpose but subject to the
limitations of the Declaration of Trust and any applicable votes of the Board
of Trustees of the Fund pursuant thereto, the Custodian shall, upon receipt
of instructions from the Transfer Agent, make funds available for payment to
holders of Shares who have delivered to the Transfer Agent a request for
redemption or repurchase of their Shares. In connection with the redemption
or repurchase of Shares of a Portfolio, the Custodian is authorized upon
receipt of instructions from the Transfer Agent to wire funds to or through a
commercial bank designated by the redeeming shareholders. In connection with
the redemption or repurchase of Shares of the Fund, the Custodian shall honor
checks drawn on the Custodian by a holder of Shares, which checks have been
furnished by the Fund to the holder of Shares, when presented to the
Custodian in accordance with such procedures and controls as are mutually
agreed upon from time to time between the Fund and the Custodian.
The Custodian shall receive from the distributor for the Shares or from
the Transfer Agent of the Fund and deposit into the account of the
appropriate Portfolio such payments as are received for Shares of that
Portfolio issued or sold from time to time by the Fund. The Custodian will
provide timely notification to the Fund on behalf of each such Portfolio and
the Transfer Agent of any receipt by it of payments for Shares of such
Portfolio.
4. PROPER INSTRUCTIONS
Proper Instructions as used herein means a writing signed or initialed
by one or more person or persons as the Board of Trustees shall have from
time to time authorized. Each such writing shall set forth the specific
transaction or type of transaction involved, including a specific statement
of the purpose for which such action is requested. Oral instructions will be
considered Proper Instructions if the Custodian reasonably believes them to
have been given by a person authorized to give such instructions with respect
to the transaction involved. The Fund shall cause all oral instructions to
be confirmed in writing. Upon receipt of a certificate of the Secretary or
an Assistant Secretary as to the authorization by the Board of Trustees of
the Fund accompanied by a detailed description of procedures approved by the
Board of Trustees, Proper Instructions may include communications effected
directly between electro-mechanical or electronic devices provided that the
Board of Trustees and the Custodian are satisfied that such procedures afford
adequate safeguards for the Portfolios' assets. For purposes of this
Section, Proper Instructions
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shall include instructions received by the Custodian pursuant to any
three-party agreement which requires a segregated asset account in accordance
with Section 2.12.
5. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
The Custodian may in its discretion, without express authority from the
Fund on behalf of each applicable Portfolio:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under
this Contract, PROVIDED that all such payments shall be
accounted for to the Fund on behalf of the Portfolio;
2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection, in the name of the Portfolio, checks,
drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection
with the sale, exchange, substitution, purchase, transfer and
other dealings with the securities and property of the Portfolio
except as otherwise directed by the Board of Trustees of the
Fund.
6. EVIDENCE OF AUTHORITY
The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper believed
by it to be genuine and to have been properly executed by or on behalf of the
Fund. The Custodian may receive and accept a certified copy of a vote of the
Board of Trustees of the Fund as conclusive evidence (a) of the authority of
any person to act in accordance with such vote or (b) of any determination or
of any action by the Board of Trustees pursuant to the Declaration of Trust
as described in such vote, and such vote may be considered as in full force
and effect until receipt by the Custodian of written notice to the contrary.
7. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND
CALCULATION OF NET ASSET VALUE AND NET INCOME
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of Trustees of the Fund to keep
the books of account of each Portfolio and/or compute the net asset value per
share of the outstanding shares of each Portfolio or, if directed in writing
to do so by the Fund on behalf of the Portfolio, shall itself keep such books
of account and/or compute such net asset value per share. If so directed,
the Custodian shall also calculate daily the net income of the Portfolio as
described in the Fund's currently effective prospectus related to such
Portfolio and shall advise the Fund and the Transfer Agent daily of the total
amounts of such net income and, if instructed in writing by an officer of the
Fund to do so, shall advise the Transfer Agent periodically of the division
of such net income among its various components. The calculations of the net
asset value per share and the daily income of each
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Portfolio shall be made at the time or times described from time to time in
the Fund's currently effective prospectus related to such Portfolio.
8. RECORDS
The Custodian shall with respect to each Portfolio create and maintain
all records relating to its activities and obligations under this Contract in
such manner as will meet the obligations of the Fund under the Investment
Company Act of 1940, with particular attention to Section 31 thereof and
Rules 31a-1 and 31a-2 thereunder. All such records shall be the property of
the Fund and shall at all times during the regular business hours of the
Custodian be open for inspection by duly authorized officers, employees or
agents of the Fund and employees and agents of the Securities and Exchange
Commission. The Custodian shall, at the Fund's request, supply the Fund with
a tabulation of securities owned by each Portfolio and held by the Custodian
and shall, when requested to do so by the Fund and for such compensation as
shall be agreed upon between the Fund and the Custodian, include certificate
numbers in such tabulations.
9. OPINION OF FUND'S INDEPENDENT ACCOUNTANT
The Custodian shall take all reasonable action, as the Fund on behalf of
each applicable Portfolio may from time to time request, to obtain from year
to year favorable opinions from the Fund's independent accountants with
respect to its activities hereunder in connection with the preparation of the
Fund's Form N-1A, and Form N-SAR or other annual reports to the Securities
and Exchange Commission and with respect to any other requirements of such
Commission.
10. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS
The Custodian shall provide the Fund, on behalf of each of the
Portfolios at such times as the Fund may reasonably require, with reports by
independent public accountants on the accounting system, internal accounting
control and procedures for safeguarding securities, futures contracts and
options on futures contracts, including securities deposited and/or
maintained in a Securities System, relating to the services provided by the
Custodian under this Contract; such reports, shall be of sufficient scope and
in sufficient detail, as may reasonably be required by the Fund to provide
reasonable assurance that any material inadequacies would be disclosed by
such examination, and, if there are no such inadequacies, the reports shall
so state.
11. COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to receive from Integrity Management
reasonable compensation for its services and expenses as Custodian, as agreed
upon from time to time between Integrity Management and the Custodian.
12. RESPONSIBILITY OF CUSTODIAN
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto
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received by it or delivered by it pursuant to this Contract and shall be held
harmless in acting upon any notice, request, consent, certificate or other
instrument reasonably believed by it to be genuine and to be signed by the
proper party or parties, including any futures commission merchant acting
pursuant to the terms of a three-party futures or options agreement. The
Custodian shall be held to the exercise of reasonable care in carrying out
the provisions of this Contract, but shall be kept indemnified by and shall
be without liability to the Fund for any action taken or omitted by it in
good faith without negligence. It shall be entitled to rely on and may act
upon advice of counsel (who may be counsel for the Fund) on all matters, and
shall be without liability for any action reasonably taken or omitted
pursuant to such advice.
If the Fund on behalf of a Portfolio requires the Custodian to take any
action with respect to securities, which action involves the payment of money
or which action may, in the opinion of the Custodian, result in the Custodian
or its nominee assigned to the Fund or the Portfolio being liable for the
payment of money or incurring liability of some other form, the Fund on
behalf of the Portfolio, as a prerequisite to requiring the Custodian to take
such action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.
If the Fund requires the Custodian, its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but not
limited to securities settlements, foreign exchange contracts and assumed
settlement) for the benefit of a Portfolio or in the event that the Custodian
or its nominee shall incur or be assessed any taxes, charges, expenses,
assessments, claims or liabilities in connection with the performance of this
Contract, except such as may arise from its or its nominee's own negligent
action, negligent failure to act or willful misconduct, any property at any
time held for the account of the applicable Portfolio shall be security
therefor and should the Fund fail to repay the Custodian promptly, the
Custodian shall be entitled to utilize available cash and to dispose of such
Portfolio's assets to the extent necessary to obtain reimbursement.
13. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT
This Contract shall become effective as of its execution, shall continue
in full force and effect until terminated as hereinafter provided, may be
amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not
sooner than thirty (30) days after the date of such delivery or mailing;
PROVIDED, however that the Custodian shall not with respect to a Portfolio
act under Section 2.10 hereof in the absence of receipt of an initial
certificate of the Secretary or an Assistant Secretary that the Board of
Trustees of the Fund has approved the initial use of a particular Securities
System by such Portfolio, as required by Rule 17f-4 under the Investment
Company Act of 1940, as amended and that the Custodian shall not with respect
to a Portfolio act under Section 2.11 hereof in the absence of receipt of an
initial certificate of the Secretary or an Assistant Secretary that the Board
of Trustees has approved the initial use of the Direct Paper System by such
Portfolio; PROVIDED FURTHER, however, that the Fund shall not amend or
terminate this Contract in contravention of any applicable federal or state
regulations, or any provision of the Declaration of Trust, and further
provided, that the Fund on behalf of one or more of the Portfolios may at any
time by action of its Board of Trustees (i) substitute another bank or
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trust company for the Custodian by giving notice as described above to the
Custodian, or (ii) immediately terminate this Contract in the event of the
appointment of a conservator or receiver for the Custodian by the Comptroller
of the Currency or upon the happening of a like event at the direction of an
appropriate regulatory agency or court of competent jurisdiction.
Upon termination of the Contract, the Fund on behalf of each applicable
Portfolio shall pay to the Custodian such compensation as may be due as of
the date of such termination and shall likewise reimburse the Custodian for
its costs, expenses and disbursements.
14. SUCCESSOR CUSTODIAN
If a successor custodian for the Fund or one or more of the Portfolios
shall be appointed by the Board of Trustees of the Fund, the Custodian shall,
upon termination, deliver to such successor custodian at the office of the
Custodian, duly endorsed and in the form for transfer, all securities of each
applicable Portfolio then held by it hereunder and shall transfer to an
account of the successor custodian all of the securities of each such
Portfolio held in a Securities System.
If no such successor custodian shall be appointed, the Custodian shall,
in like manner, upon receipt of a certified copy of a vote of the Board of
Trustees of the Fund, deliver at the office of the Custodian and transfer
such securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Trustees shall have been delivered
to the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or
trust company, which is a "bank" as defined in the Investment Company Act of
1940, doing business in Boston, Massachusetts, of its own selection, having
an aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $25,000,000, all securities, funds and
other properties held by the Custodian on behalf of each applicable Portfolio
and all instruments held by the Custodian relative thereto and all other
property held by it under this Contract on behalf of each applicable
Portfolio and to transfer to an account of such successor custodian all of
the securities of each such Portfolio held in any Securities System.
Thereafter, such bank or trust company shall be the successor of the
Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or
of the Board of Trustees to appoint a successor custodian, the Custodian
shall be entitled to fair compensation for its services during such period as
the Custodian retains possession of such securities, funds and other
properties and the provisions of this Contract relating to the duties and
obligations of the Custodian shall remain in full force and effect.
15. INTERPRETIVE AND ADDITIONAL PROVISIONS
In connection with the operation of this Contract, the Custodian and the
Fund on behalf of each of the Portfolios, may from time to time agree on such
provisions interpretive of or in addition to the provisions of this Contract
as may in their joint opinion be consistent with the general tenor
14
<PAGE>
of this Contract. Any such interpretive or additional provisions shall be in
a writing signed by both parties and shall be annexed hereto, PROVIDED that
no such interpretive or additional provisions shall contravene any applicable
federal or state regulations or any provision of the Declaration of Trust of
the Fund. No interpretive or additional provisions made as provided in the
preceding sentence shall be deemed to be an amendment of this Contract.
16. ADDITIONAL FUNDS
In the event that the Fund establishes one or more series of Shares in
addition to U.S. Treasury Money Market Portfolio, U.S. Treasury Income
Portfolio, General Money Market Portfolio and Tax Exempt Money Market
Portfolio with respect to which it desires to have the Custodian render
services as custodian under the terms hereof, it shall so notify the
Custodian in writing, and if the Custodian agrees in writing to provide such
services, such series of Shares shall become a Portfolio hereunder.
17. MASSACHUSETTS LAW TO APPLY
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.
18. PRIOR CONTRACTS
This Contract supersedes and terminates, as of the date hereof, all
prior contracts between the Fund on behalf of each of the Portfolios and the
Custodian relating to the custody of the Fund's assets.
19 SHAREHOLDER COMMUNICATIONS ELECTION
Securities and Exchange Commission Rule 14b-2 requires banks which hold
securities for the account of customers to respond to requests by issuers of
securities for the names, addresses and holdings of beneficial owners of
securities of that issuer held by the bank unless the beneficial owner has
expressly objected to disclosure of this information. In order to comply
with the rule, the Custodian needs the Fund to indicate whether it authorizes
the Custodian to provide the Fund's name, address, and share position to
requesting companies whose securities the Fund owns. If the Fund tells the
Custodian "no", the Custodian will not provide this information to requesting
companies. If the Fund tells the Custodian "yes" or does not check either
"yes" or "no" below, the Custodian is required by the rule to treat the Fund
as consenting to disclosure of this information for all securities owned by
the Fund or any funds or accounts established by the Fund. For the Fund's
protection, the Rule prohibits the requesting company from using the Fund's
name and address for any purpose other than corporate communications. Please
indicate below whether the Fund consents or objects by checking one of the
alternatives below.
YES [ ] The Custodian is authorized to release the Fund's name,
address, and share positions.
15
<PAGE>
NO [X] The Custodian is not authorized to release the Fund's name,
address, and share positions.
20. LIMITATIONS OF LIABILITY OF TRUSTEES
A copy of the Declaration of Trust of the Trust is on file with the
Secretary of the Commonwealth of Massachusetts, and notice is hereby given
that this instrument is executed on behalf of the Trustees of the Trust as
trustees and not individually, and that the obligations of this instrument
are not binding upon any of the Trustees individually.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the 1st day of September, 1994.
ATTEST THE VALIANT FUND
/S/ Glenn Ciotti By /S/ Susan Beauregard
- ------------------------- -------------------------------
ATTEST STATE STREET BANK AND TRUST COMPANY
/S/ Kim Goodrich By /S/ Ronald E. Logue
- ------------------------- -------------------------------
Executive Vice President
ATTEST INTEGRITY MANAGEMENT & RESEARCH, INC.
/S/ Glenn Ciotti By /S/ Susan Beauregard
- ------------------------- -------------------------------
16
<PAGE>
EXHIBIT 9(a)
Administration Agreement between State Street Bank and Trust Company
Integrity Research & Management, Inc. and The Valiant Fund
<PAGE>
ADMINISTRATION AGREEMENT
Agreement dated as of September 1, 1994 between State Street Bank
and Trust Company, a Massachusetts trust company (the "Bank") and The Valiant
Fund, a Massachusetts business trust (the "Trust"), and Integrity Management
& Research, Inc., a Florida corporation ("Integrity Management").
WHEREAS, the Bank provides certain administrative and other
services to investment companies and others; and
WHEREAS, the Trust desires to retain the Bank to render certain
administrative and other services with respect to the Trust and the Bank is
willing to render such services on the terms and conditions hereinafter set
forth; and
WHEREAS, Integrity Management is responsible for management of the
business affairs and the investments of the Trust under a certain Management
Agreement dated July 19, 1993 between the Trust and Integrity Management
under which Integrity Management is obligated to perform or arrange for the
performance of any pay for administrative services for the Trust;
NOW, THEREFORE, the parties hereto agree as follows:
1. APPOINTMENT OF BANK
The Trust hereby appoints the Bank to act as administrator with
respect to the Trust for purposes of providing certain administrative
services for the period and on the terms set forth in this Agreement. The
Bank accepts such appointment and agrees to render the services stated herein
and to provide the office facilities and the personnel required by it to
perform such services. In connection with such appointment, the Trust will
deliver to the Bank copies of each of the following documents and will
deliver to it all future amendments and supplements, if any:
A. Certified copies of the Agreement and Declaration of Trust as
presently in effect and as amended from time to time;
B. The Trust's most recent registration statement on Form N-1A as
filed with, and declared effective by, the U.S. Securities and Exchange
Commission, and all amendments thereto;
C. Each resolution of the Board of Trustees of the Trust
authorizing the original issue of its shares;
D. Certified copies of the resolutions of the Trust's Board of
Trustees authorizing: (1) this Agreement, (2) certain officers and trustees
of the Trust to give instructions to the Bank pursuant to this Agreement and
(3) certain officers and employees of the Trust to sign checks and pay
expenses on behalf of the Trust, respectively;
<PAGE>
E. A copy of the Management Agreement;
F. A copy of the Investment Advisor Agreement between the Trust
and the Advisor;
G. A copy of the Custodian Agreement between the Trust and its
custodian;
H. A copy of the Transfer Agency and Registrar Agreement between
the Trust and its transfer agent; and
I. Such other certificates, documents or opinions which the Bank
may, in its reasonable discretion, deem necessary or appropriate in the
proper performance of its duties.
2. REPRESENTATION AND WARRANTIES OF THE BANK
The Bank represents and warrants to the Trust that:
A. It is a Massachusetts trust company, duly organized and
existing in good standing under the laws of the Commonwealth of Massachusetts;
B. It is duly qualified to carry on its business in the
Commonwealth of Massachusetts;
C. All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement; and
D. It has and will continue to have and maintain the necessary
facilities, equipment and personnel to perform its duties and obligations
under this Agreement.
3. AUTHORIZED SHARES
The Trust certifies to the Bank that, as of the close of business
on the date of this Agreement, the Trust is authorized to issue shares of
beneficial interest, and that it would initially offer shares in the
authorized amounts as set forth in Schedule A attached hereto.
4. ADMINISTRATION SERVICES
The Bank shall discharge the responsibilities set forth in Schedule
B hereof subject to the control of the Trust in accordance with procedures
established from time to time between the Trust and the Bank.
It is the responsibility of the Trust and/or its legal counsel and
accountants to notify the Bank in a timely manner of any change to any rule,
regulation, law or statute that will affect the services to be provided
hereunder. The Bank and the Trust agree that all services provided
2
<PAGE>
hereunder are subject to review and correction by the Trust's accountants
and/or legal counsel and the services provided by Bank shall not constitute
the practice of public accountancy or law.
5. SERVICES TO BE OBTAINED BY THE TRUST
The Trust shall provide for any of its own:
A. Organizational expenses;
B. Services of an independent accountant;
C. Services of outside legal and tax counsel (including such
counsel's review of the Trust's registration statement, proxy materials,
federal and state tax qualification as a regulated investment company, and
other reports and materials prepared by the Bank under this Agreement);
D. Any services contracted for by the Trust directly from parties
other than the Bank;
E. Trading operations and brokerage fees, commissions and
transfer taxes in connection with the purchase and sale of securities for the
Trust;
F. Investment advisory services;
G. Taxes, insurance premiums and other fees and expenses
applicable to its operation;
H. Costs incidental to any meetings of shareholders including,
but not limited to, legal and accounting fees, proxy filing fees and the
preparation, printing and mailing of any proxy materials;
I. Administration of and costs incidental to Trustees' meetings,
including fees and expenses of Trustees;
J. The salary and expenses of any officer, trustee or employee of
the Trust;
K. Costs incidental to the preparation, printing and distribution
of the Trust's registration statements and any amendments thereto, and
shareholder reports;
L. All applicable registration fees and filing fees required
under the securities laws of the United States and state regulatory
authorities;
M. Preparation and filing of the Trust's tax returns, Form N-1A,
Annual Report and Semi-Annual Report on Form N-SAR, and all notices,
registrations and amendments associated with applicable tax and securities
laws of the United States and state regulatory authorities; and
3
<PAGE>
N. Fidelity bond and directors' and officers' liability insurance.
6. FEES
The Bank shall receive from the Trust such compensation for the
Bank's services provided pursuant to this Agreement as may be agreed to from
time to time in a written fee schedule approved by the parties hereto and
initially set forth herein in Schedule C attached hereto. In addition, the
Bank shall be reimbursed by the Trust for the out-of-pocket costs incurred in
connection with this Agreement.
7. INSTRUCTIONS
At any time the Bank may apply to any officer or trustee of the
Trust for instructions and may consult with legal counsel for the Trust, or
its own legal counsel, the outside counsel for the Trust or the auditors for
the Trust at the expense of the Trust, with respect to any matter arising in
connection with the services to be performed by the Bank under this
Agreement. The Bank shall not be liable and shall be indemnified by the
Trust for any action taken or omitted by it in good faith in reliance upon
such instructions or upon any paper or document believed by it to be genuine
and to have been signed by the proper person or persons. The Bank shall not
be held to have notice of any change of authority of any person until receipt
of written notice thereof from the Trust.
8. LIMITATION OF LIABILITY AND INDEMNIFICATION
A. The Bank shall be responsible for the performance of only such
duties as are set forth herein and shall have no responsibility for the
actions or activities of any other party including other service providers.
The Bank shall have no liability for any loss or damage resulting from the
performance or nonperformance of its duties hereunder unless solely caused by
or resulting from the gross negligence or willful misconduct of the Bank, its
officers or employees. In any event, the Bank's liability shall be limited
to its total annual compensation earned and fees paid hereunder during the
preceding twelve months for any liability or loss suffered by the Trust
including, but not limited to, any liability relating to qualification of the
Trust as a regulated investment company or any liability relating to the
Trust's compliance with any federal or state tax or securities statute,
regulation or ruling.
B. The Trust shall indemnify and hold the Bank harmless from all
loss, cost, damage and expense, including reasonable expenses for counsel,
incurred by the Bank resulting from any claim, demand, action or suit in
connection with the Bank's acceptance of this Agreement, any action or
omission by it in the performance of its duties hereunder, or as a result of
acting upon any instructions reasonably believed by it to have been executed
by a duly authorized officer of the Manager or of the Trust, provided that
this indemnification shall not apply to actions or omissions of the Bank, its
officers or employees in cases of its or their own gross negligence or
willful misconduct.
4
<PAGE>
C. The Trust will be entitled to participate at its own expense
in the defense, or, if it so elects, to assume the defense of any suit
brought to enforce any liability subject to the indemnification provided
above. In the event the Trust elects to assume the defense of any such suit
and retain such counsel, the Bank or any of its affiliated persons, named as
defendant or defendants in the suit, may retain additional counsel but shall
bear the fees and expenses of such counsel unless the Trust shall have
specifically authorized the retaining of such counsel.
D. The indemnification contained herein shall survive the
termination of this Agreement.
E. This Section 8 shall not apply with respect to services
covered by the Custodian Agreement or the Transfer Agency and Registrar
Agreement.
9. CONFIDENTIALITY
The Bank agrees that, except as otherwise required by law, it will
keep confidential the terms of this Agreement, all records and information in
its possession relating to the Trust or its shareholders or shareholder
accounts and will not disclose the same to any person except at the request
or with the written consent of the Trust.
10. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS
The Trust assumes full responsibility for complying with all
applicable requirements of the Investment Company Act, the Securities Act of
1933, the Securities Exchange Act of 1934, and the Internal Revenue Code of
1986, all as amended, and any laws, rules and regulations issued thereunder.
The Bank shall maintain and preserve for the periods prescribed
such records relating to the services to be performed by the Bank under this
Agreement as are required pursuant to the Investment Company Act. All such
records shall at all times remain the property of the Trust, shall be readily
accessible during normal business hours, and shall be promptly surrendered
upon the termination of the Agreement or otherwise on written request.
Records shall be surrendered in usable machine-readable form.
11. STATUS OF THE BANK
The services of the Bank to the Trust are not to be deemed
exclusive, and the Bank shall be free to render similar services to others.
The Bank shall be deemed to be an independent contractor and shall, unless
otherwise expressly provided herein or authorized by the Trust from time to
time, have no authority to act or represent the Trust in any way or otherwise
be deemed an agent of the Trust.
5
<PAGE>
12. PRINTED MATTER
Neither party shall publish or circulate any printed matter which
contains any reference to the other party without such party's prior written
approval. The Trust may circulate such printed matter as refers in accurate
terms to the Bank's appointment hereunder provided that the Bank is given a
copy of such material prior to its first use.
13. TERM, AMENDMENT AND TERMINATION
This Agreement may be modified or amended from time to time by
mutual agreement between the parties hereto. The Agreement shall remain in
effect for a period of one year from the date the Trust first accepts money
for investment, and shall automatically continue in effect thereafter with
respect to the Trust unless terminated by a party at the end of such period
or thereafter on ninety (90) days' prior written notice. Upon termination of
this Agreement, the Trust shall pay to the Bank such compensation as may be
due under the terms hereof as of the date of such termination including
reasonable out-of-pocket expenses associated with such termination.
14. NOTICES
Any notice or other communication authorized or required by this
Agreement to be given to any party mentioned herein shall be sufficiently
given if addressed to such party and mailed postage prepaid or delivered to
its principal office.
15. NON-ASSIGNABILITY
This Agreement shall not be assigned by any of the parties hereto
without the prior consent in writing of the other parties.
16. SUCCESSORS
This Agreement shall be binding on and shall inure to the benefit
of the Trust and the Bank and their respective successors.
17. ENTIRE AGREEMENT
This Agreement (and any Compliance Manual and Trust Profile as may
be prepared by the Bank) contains the entire understanding between the
parties hereto and supersedes all previous representations, warranties or
commitments regarding the services to be performed hereunder whether oral or
in writing. This Agreement cannot be modified or terminated except in
accordance with its terms or by a writing signed by all parties.
18. LIMITATIONS OF LIABILITY OF TRUSTEES
A copy of the Declaration of Trust of the Trust is on file with the
Secretary of the Commonwealth of Massachusetts, and notice is hereby given
that this instrument is executed on
6
<PAGE>
behalf of the Trustees of the Trust as trustees and not individually, and
that the obligations of this instrument are not binding upon any of the
Trustees individually.
19. GOVERNING LAW
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
THE VALIANT FUND
By: /s/ Susan Beauregard
--------------------
Name: Susan Beauregard
--------------------
Title: Vice President
--------------------
STATE STREET BANK AND TRUST COMPANY
By: /s/ Ronald E. Logue
--------------------
Name: Ronald E. Logue
--------------------
Title: Executive Vice President
--------------------
INTEGRITY MANAGEMENT & RESEARCH, INC.
By: /s/ Susan Beauregard
--------------------
Name: Susan Beauregard
--------------------
Title: Vice President
--------------------
7
<PAGE>
SCHEDULE A
TO
ADMINISTRATION AGREEMENT
Services Provided by the Bank:
(a) Oversee the determination and publication of the Trust's net
asset value in accordance with the Trust's policy as adopted from
time to time by the Board of Trustees;
(b) Oversee the maintenance by State Street Bank and Trust Company of
certain books and records of the Trust as required under Rule
31a-1(b)(4) of the Investment Company Act of 1940;
(c) Prepare the Trust's federal, state and local income tax returns
for review by the Trust's independent accountants and filing by
the Trust treasurer;
(d) Review the appropriateness of and arrange for payment of the
Trust's expenses;
(e) Prepare for review and approval by officers of the Trust
financial information for the Trust's semi-annual and annual
reports, proxy statements and other communications with
shareholders required or otherwise to be sent to Trust
shareholders, and arrange for the printing and dissemination of
such reports and communications to shareholders;
(f) Prepare for review by an officer of and counsel for the Trust the
Trust's periodic financial report required to be filed with the
Securities and Exchange Commission ("SEC") on Form N-SAR and
Form N-1A and such other reports, forms or filings, as may be
mutually agreed upon;
(g) Prepare reports relating to the business and affairs of the Trust
as may be mutually agreed upon and not otherwise appropriately
prepared by the Trust's investment adviser, custodian, counsel or
auditors;
(h) Make such reports and recommendations to the Board concerning the
performance of the independent accountants as the Board may
reasonably request or deems appropriate;
(i) Make such reports and recommendations to the Board concerning the
performance and fees of the Trust's custodian and transfer and
dividend disbursing agent as the Board may reasonably request or
deems appropriate;
8
<PAGE>
(j) Oversee and review calculations of fees paid to the Manager, the
investment adviser, the custodian, and the transfer agent;
(k) Consult with the Trust's officers, independent accountants, legal
counsel, custodian and transfer and dividend disbursing agent in
establishing the accounting policies of the Trust;
(l) Review implementation of any dividend reinvestment programs
authorized by the Board of Trustees;
(m) Respond to or refer to the Trust's officers or transfer agent,
shareholder inquiries relating to the Trust.
(n) Provide periodic testing of portfolios to assist the Trust's
advisor in complying with Internal Revenue Code mandatory
qualification requirements, the requirements of the Investment
Company Act and Trust prospectus limitations as may be mutually
agreed upon.
Certain details of the scope of the Bank services hereunder may be
documented in the Compliance Manual and Trust Profile as amended from time to
time.
9
<PAGE>
SCHEDULE B
REGISTRATION OF TRUST SHARES
WITH STATE SECURITIES ADMINISTRATORS
The Bank will prepare required documentation and register Trust shares in
accordance with the securities laws of each state or jurisdiction in which
Trust shares are offered or sold as determined by the Trust. The
registration services shall consist of the following:
1. Filing of Trust initial registration statements and amendments
thereto (N-1A);
2. Amending state registration statements as required;
3. Filing on behalf of the Trust, Trust sales reports and
advertising literature where applicable;
4. Payment at the expense of the Trust of all Trust state
registration and filing fees;
5. Filing post effective amendments to the prospectuses and
statements of additional information (SAI);
6. Filing of annual reports, supplements and stickers, and proxy
statements; and
7. The performance of additional services which the Bank and the
Manager may agree upon in writing.
Unless otherwise noted in writing by the Bank, registration services by the
Bank shall not include determining the availability of institutional
exemptions under a state's blue sky law. Any such determination shall be
made by the Manager or its legal counsel. In connection with the services
described herein, the Manager shall cause the Trust to issue in favor of the
Bank a power of attorney to register Trust shares on behalf of the Trust,
which power of attorney shall be substantially in the form of Exhibit I
attached hereto.
10
<PAGE>
EXHIBIT I
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, as of September 1, 1994 that The Valiant Fund
(the "Trust") makes, constitutes, and appoints STATE STREET BANK AND TRUST
COMPANY (the "Bank") with principal offices at 225 Franklin Street, Boston,
Massachusetts its lawful attorney-in-fact for it to do as if it were itself
acting, the following:
1. REGISTRATION OF TRUST SHARES. The power to register shares of the Trust
in each jurisdiction in which Trust shares are offered or sold and in
connection therewith the power to prepare, execute, and deliver and file
any and all Trust applications, including without limitation, applications
to register shares, to register agents, consents, including consents to
service of process, reports, including without limitation, all periodic
reports, claims for exemption, or other documents and instruments now or
hereafter required or appropriate in the judgment of the Bank in
connection with the registration of Trust shares.
2. CHECKS. The power to draw, endorse, and deposit checks in the name of the
Trust in connection with the registration of Trust shares with state
securities administrators.
The execution of this limited power of attorney shall be deemed coupled with
an interest and shall be revocable only upon receipt by Bank of such
termination of authority. Nothing herein shall be construed to constitute
the appointment of the Bank as or otherwise authorize the Bank to act as an
officer, director or employee of the Trust.
IN WITNESS WHEREOF, the Trust has caused this Agreement to be executed in its
name and on its behalf by and through its duly authorized officer, as of the
date first written above.
[ ]
By:_______________________________
Name:_____________________________
Title:____________________________
11
<PAGE>
EXHIBIT 9(b)
Transfer Agency and Service Agreement between
State Street Bank and Trust Company,
Integrity Management & Research, Inc.
and The Valiant Fund
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
between
THE VALIANT FUND
and
STATE STREET BANK AND TRUST COMPANY
and
INTEGRITY MANAGEMENT & RESEARCH, INC.
DMA08199
1C193
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
----
Article 1 Terms of Appointment; Duties of the Bank . . . . . . .1
Article 2 Fees and Expenses. . . . . . . . . . . . . . . . . . .4
Article 3 Representations and Warranties of the Bank . . . . . .5
Article 4 Representations and Warranties of the Fund . . . . . .5
Article 5 Data Access and Proprietary Information. . . . . . . .5
Article 6 Indemnification. . . . . . . . . . . . . . . . . . . .7
Article 7 Standard of Care . . . . . . . . . . . . . . . . . . .9
Article 8 Covenants of the Fund and the Bank . . . . . . . . . .9
Article 9 Termination of Agreement . . . . . . . . . . . . . . 10
Article 10 Additional Funds . . . . . . . . . . . . . . . . . . 10
Article 11 Assignment . . . . . . . . . . . . . . . . . . . . . 11
Article 12 Amendment . . . . . . . . . . . . . . . . . . . . . .11
Article 13 Massachusetts Law to Apply . . . . . . . . . . . . . 11
Article 14 Force Majeure . . . . . . . . . . . . . . . . . . . .11
Article 15 Consequential Damages . . . . . . . . . . . . . . . .12
Article 16 Merger of Agreement . . . . . . . . . . . . . . . . .12
Article 17 Limitations of Liability of the Trustees and
Shareholders. . . . . . . . . . . . . . . . . . . . .12
Article 18 Counterparts . . . . . . . . . . . . . . . . . . . . 12
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the ____ day of _______, 199___, by and between THE
VALIANT FUND , a Massachusetts business trust, having its principal office and
place of business at 1776 Heritage Drive, North Quincy, MA 02171-91104 (the
"Fund"), and STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company
having its principal office and place of business at 225 Franklin Street,
Boston, Massachusetts 02110 (the "Bank") and Integrity Management & Research
Inc., a Florida corporation having its principal place of business at 1800
Second Street, Suite 757, Sarasota, Florida 34236 ("Integrity Management").
WHEREAS, the Fund is authorized to issue shares in separate series, with
each such series representing interests in a separate portfolio of securities
and other assets; and
WHEREAS, the Fund intends to initially offer shares in 4 series, U.S.
Treasury Money Market Portfolio, U.S. Treasury Income Portfolio, General Money
Market Portfolio, Tax Exempt Portfolio (each such series, together with all
other series subsequently established by the Fund and made subject to this
Agreement in accordance with Article 10, being herein referred to, as a
"Portfolio", and collectively as the "Portfolios");
WHEREAS, the Fund on behalf of the Portfolios desires to appoint the Bank
as its transfer agent, dividend disbursing agent, custodian of certain
retirement plans and agent in connection with certain other activities and the
Bank desires to accept such appointment;
WHEREAS, Integrity Management is responsible for bearing the transfer
agency expenses of the Trust pursuant to a Management Agreement dated July 29,
1993 between the Trust and Integrity Management;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
Article l TERMS OF APPOINTMENT; DUTIES OF THE BANK
1.01 Subject to the terms and conditions set forth in this
Agreement, the Fund, on behalf of the Portfolios, hereby employs and appoints
the Bank to act as, and the Bank agrees to act as its transfer agent for the
authorized and issued shares of beneficial interest of the Fund
<PAGE>
representing interests in each of the respective Portfolios ("Shares"),
dividend disbursing agent, custodian of certain retirement plans and agent in
connection with any accumulation, open-account or similar plans provided to
the shareholders of each of the respective Portfolios of the Fund
("Shareholders") and set out in the currently effective prospectus and
statement of additional information ("prospectus") of the Fund on behalf of
the applicable Portfolio, including without limitation any periodic
investment plan or periodic withdrawal program.
1.02 The Bank agrees that it will perform the following services:
(a) In accordance with procedures established from time to time by
agreement between the Fund on behalf of each of the Portfolios, as applicable
and the Bank, the Bank shall:
(i) Receive for acceptance, orders for the purchase of Shares, and
promptly deliver payment and appropriate documentation thereof
to the Custodian of the Fund authorized pursuant to the
Declaration of Trust of the Fund (the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate number of
Shares and hold such Shares in the appropriate Shareholder
account;
(iii) Receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation thereof to
the Custodian;
(iv) At the appropriate time as and when it receives monies paid to
it by the Custodian with respect to any redemption, pay over or
cause to be paid over in the appropriate manner such monies as
instructed by the redeeming Shareholders;
(v) Effect transfers of Shares by the registered owners thereof
upon receipt of appropriate instructions;
(vi) Prepare and transmit payments for dividends and distributions
declared by the Fund on behalf of the applicable Portfolio;
(vii) Issue replacement certificates for those certificates alleged
to have been lost, stolen or destroyed upon receipt by the Bank
of indemnification satisfactory to the Bank and protecting the
Bank and the Fund, and the Bank at its option, may issue
replacement certificates in place of mutilated stock
certificates upon presentation thereof and without such
indemnity;
2
<PAGE>
(viii)Maintain records of account for and advise the Fund and its
Shareholders as to the foregoing; and
(ix) Record the issuance of Shares of the Fund and maintain pursuant
to SEC Rule 17Ad-10(e) a record of the total number of Shares
of the Fund which are authorized, based upon data provided to
it by the Fund, and issued and outstanding. The Bank shall
also provide the Fund on a regular basis with the total number
of Shares which are authorized and issued and outstanding and
shall have no obligation, when recording the issuance of
Shares, to monitor the issuance of such Shares or to take
cognizance of any laws relating to the issue or sale of such
Shares, which functions shall be the sole responsibility of
the Fund.
(b) In addition to and neither in lieu nor in contravention of
the services set forth in the above paragraph (a), the Bank shall: (i)
perform the customary services of a transfer agent, dividend disbursing
agent, custodian of certain retirement plans and, as relevant, agent in
connection with accumulation, open-account or similar plans (including
without limitation any periodic investment plan or periodic withdrawal
program), including but not limited to: maintaining all Shareholder
accounts, preparing Shareholder meeting lists, mailing proxies, mailing
Shareholder reports and prospectuses to current Shareholders, withholding
taxes on U.S. resident and non-resident alien accounts, preparing and filing
U.S. Treasury Department Forms 1099 and other appropriate forms required with
respect to dividends and distributions by federal authorities for all
Shareholders, preparing and mailing confirmation forms and statements of
account to Shareholders for all purchases and redemptions of Shares and other
confirmable transactions in Shareholder accounts, preparing and mailing
activity statements for Shareholders, and providing Shareholder account
information and (ii) provide a system which will enable the Fund to monitor
the total number of Shares sold in each State.
(c) In addition, the Fund shall (i) identify to the Bank in
writing those transactions and assets to be treated as exempt from blue sky
reporting for each State and (ii) verify the establishment of transactions
for each State on the system prior to activation and thereafter monitor the
daily activity for each State. The responsibility of the Bank for the Fund's
blue sky State registration status is solely limited to the initial
establishment of transactions
3
<PAGE>
subject to blue sky compliance by the Fund and the reporting of such
transactions to the Fund as provided above.
(d) Procedures as to who shall provide certain of these services
in Article 1 may be established from time to time by agreement between the
Fund on behalf of each Portfolio and the Bank per the attached service
responsibility schedule. The Bank may at times perform only a portion of
these services and the Fund or its agent may perform these services on the
Fund's behalf.
(e) The Bank shall provide additional services on behalf of the
Fund (i.e., escheatment services) which may be agreed upon in writing between
the Fund and the Bank.
Article 2 FEES AND EXPENSES
2.01 For the performance by the Bank pursuant to this Agreement,
Integrity Management agrees to pay the Bank an annual maintenance fee for
each Shareholder account as set out in the initial fee schedule attached
hereto. Such fees and out-of-pocket expenses and advances identified under
Section 2.02 below may be changed from time to time subject to mutual written
agreement between Integrity Management and the Bank.
2.02 In addition to the fee paid under Section 2.01 above,
Integrity Management agrees to reimburse the Bank for out-of-pocket expenses,
including but not limited to confirmation production, postage, forms,
telephone, microfilm, microfiche, tabulating proxies, records storage or
advances incurred by the Bank for the items set out in the fee schedule
attached hereto. In addition, any other expenses incurred by the Bank at the
request or with the consent of the Fund, will be reimbursed by Integrity
Management.
2.03 Integrity Management agrees to pay all fees and reimbursable
expenses within five days following the receipt of the respective billing
notice. Postage for mailing of dividends, proxies, Fund reports and other
mailings to all Shareholder accounts shall be advanced to the Bank by the
Fund at least seven (7) days prior to the mailing date of such materials.
4
<PAGE>
Article 3 REPRESENTATIONS AND WARRANTIES OF THE BANK
The Bank represents and warrants to the Fund that:
3.01 It is a trust company duly organized and existing and in good
standing under the laws of the Commonwealth of Massachusetts.
3.02 It is duly qualified to carry on its business in the
Commonwealth of Massachusetts.
3.03 It is empowered under applicable laws and by its Charter and
By-Laws to enter into and perform this Agreement.
3.04 All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
3.05 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations under
this Agreement.
Article 4 REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to the Bank that:
4.01 It is a business trust duly organized and existing and in good
standing under the laws of Massachusetts.
4.02 It is empowered under applicable laws and by its Declaration of
Trust and By-Laws to enter into and perform this Agreement.
4.03 All corporate proceedings required by said Declaration of Trust
and By-Laws have been taken to authorize it to enter into and perform this
Agreement.
4.04 It is an open-end and diversified management investment company
registered under the Investment Company Act of 1940, as amended.
4.05 A registration statement under the Securities Act of 1933, as
amended on behalf of each of the Portfolios is currently effective and will
remain effective, and appropriate state securities law filings have been made
and will continue to be made, with respect to all Shares of the Fund being
offered for sale.
Article 5 DATA ACCESS AND PROPRIETARY INFORMATION
5.01 The Fund acknowledges that the data bases, computer programs,
screen formats, report formats, interactive design techniques, and
documentation manuals furnished to the Fund by the Bank as part of the Fund's
ability to access certain Fund-related data ("Customer
5
<PAGE>
Data") maintained by the Bank on data bases under the control and ownership
of the Bank or other third party ("Data Access Services") constitute
copyrighted, trade secret, or other proprietary information (collectively,
"Proprietary Information") of substantial value to the Bank or other third
party. In no event shall Proprietary Information be deemed Customer Data.
The Fund agrees to treat all Proprietary Information as proprietary to the
Bank and further agrees that it shall not divulge any Proprietary Information
to any person or organization except as may be provided hereunder. Without
limiting the foregoing, the Fund agrees for itself and its employees and
agents:
(a) to access Customer Data solely from locations as may be
designated in writing by the Bank and solely in accordance with
the Bank's applicable user documentation;
(b) to refrain from copying or duplicating in any way the
Proprietary Information;
(c) to refrain from obtaining unauthorized access to any portion of
the Proprietary Information, and if such access is inadvertently
obtained, to inform in a timely manner of such fact and dispose
of such information in accordance with the Bank's instructions;
(d) to refrain from causing or allowing third-party data acquired
hereunder from being retransmitted to any other computer
facility or other location, except with the prior written
consent of the Bank;
(e) that the Fund shall have access only to those authorized
transactions agreed upon by the parties;
(f) to honor all reasonable written requests made by the Bank to
protect at the Bank's expense the rights of the Bank in
Proprietary Information at common law, under federal copyright
law and under other federal or state law.
Each party shall take reasonable efforts to advise its employees of their
obligations pursuant to this Article 5. The obligations of this Article shall
survive any earlier termination of this Agreement.
6
<PAGE>
5.02 If the Fund notifies the Bank that any of the Data Access
Services do not operate in material compliance with the most recently issued
user documentation for such services, the Bank shall endeavor in a timely
manner to correct such failure. Organizations from which the Bank may obtain
certain data included in the Data Access Services are solely responsible for
the contents of such data and the Fund agrees to make no claim against the
Bank arising out of the contents of such third-party data, including, but not
limited to, the accuracy thereof. DATA ACCESS SERVICES AND ALL COMPUTER
PROGRAMS AND SOFTWARE SPECIFICATIONS USED IN CONNECTION THEREWITH ARE
PROVIDED ON AN AS IS, AS AVAILABLE BASIS. THE BANK EXPRESSLY DISCLAIMS ALL
WARRANTIES EXCEPT THOSE EXPRESSLY STATED HEREIN INCLUDING, BUT NOT LIMITED
TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE.
5.03 If the transactions available to the Fund include the ability
to originate electronic instructions to the Bank in order to (i) effect the
transfer or movement of cash or Shares or (ii) transmit Shareholder
information or other information (such transactions constituting a "COEFI"),
then in such event the Bank shall be entitled to rely on the validity and
authenticity of such instruction without undertaking any further inquiry as
long as such instruction is undertaken in conformity with security procedures
established by the Bank from time to time.
Article 6 INDEMNIFICATION
6.01 The Bank shall not be responsible for, and the Fund shall on
behalf of the applicable Portfolio indemnify and hold the Bank harmless from
and against, any and all losses, damages, costs, charges, counsel fees,
payments, expenses and liability arising out of or attributable to:
(a) All actions of the Bank or its agent or subcontractors
required to be taken pursuant to this Agreement, provided that such actions
are taken in good faith and without negligence or willful misconduct.
(b) The Fund's lack of good faith, negligence or willful
misconduct which arise out of the breach of any representation or warranty of
the Fund hereunder.
7
<PAGE>
(c) The reliance on or use by the Bank or its agents or
subcontractors of information, records, documents or services which (i) are
received by the Bank or its agents or subcontractors, and (ii) have been
prepared, maintained or performed by the Fund or any other person or firm on
behalf of the Fund including but not limited to any previous transfer agent
or registrar.
(d) The reliance on, or the carrying out by the Bank or its agents
or subcontractors of any instructions or requests of the Fund on behalf of
the applicable Portfolio.
(e) The offer or sale of Shares in violation of any requirement
under the federal securities laws or regulations or the securities laws or
regulations of any state that such Shares be registered in such state or in
violation of any stop order or other determination or ruling by any federal
agency or any state with respect to the offer or sale of such Shares in such
state.
6.02 At any time the Bank may apply to any officer of the Fund for
instructions, and may consult with legal counsel with respect to any matter
arising in connection with the services to be performed by the Bank under
this Agreement, and the Bank and its agents or subcontractors shall not be
liable and shall be indemnified by the Fund on behalf of the applicable
Portfolio for any action taken or omitted by it in reliance upon such
instructions or upon the opinion of such counsel. The Bank, its agents and
subcontractors shall be protected and indemnified in acting upon any paper or
document furnished by or on behalf of the Fund, reasonably believed to be
genuine and to have been signed by the proper person or persons, or upon any
instruction, information, data, records or documents provided the Bank or its
agents or subcontractors by machine readable input, telex, CRT data entry or
other similar means authorized by the Fund, and shall not be held to have
notice of any change of authority of any person, until receipt of written
notice thereof from the Fund. The Bank, its agents and subcontractors shall
also be protected and indemnified in recognizing stock certificates which are
reasonably believed to bear the proper manual or facsimile signatures of the
officers of the Fund, and the proper countersignature of any former transfer
agent or former registrar, or of a co-transfer agent or co-registrar.
6.03 In order that the indemnification provisions contained in
this Article 6 shall apply, upon the assertion of a claim for which the Fund
may be required to indemnify the Bank, the Bank shall promptly notify the
Fund of such assertion, and shall keep the Fund advised with
8
<PAGE>
respect to all developments concerning such claim. The Fund shall have the
option to participate with the Bank in the defense of such claim or to defend
against said claim in its own name or in the name of the Bank. The Bank
shall in no case confess any claim or make any compromise in any case in
which the Fund may be required to indemnify the Bank except with the Fund's
prior written consent.
Article 7 STANDARD OF CARE
7.01 The Bank shall at all times act in good faith and agrees to
use its best efforts within reasonable limits to insure the accuracy of all
services performed under this Agreement, but assumes no responsibility and
shall not be liable for loss or damage due to errors unless said errors are
caused by its negligence, bad faith, or willful misconduct of that of its
employees.
Article 8 COVENANTS OF THE FUND AND THE BANK
8.01 The Fund shall on behalf of each of the Portfolios promptly
furnish to the Bank the following:
(a) A certified copy of the resolution of the Trustees of the Fund
authorizing the appointment of the Bank and the execution and delivery of
this Agreement.
(b) A copy of the Declaration of Trust and By-Laws of the Fund and
all amendments thereto.
8.02 The Bank hereby agrees to establish and maintain facilities
and procedures reasonably acceptable to the Fund for safekeeping of stock
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such
certificates, forms and devices.
8.03 The Bank shall keep records relating to the services to be
performed hereunder, in the form and manner as it may deem advisable. To the
extent required by Section 31 of the Investment Company Act of 1940, as
amended, and the Rules thereunder, the Bank agrees that all such records
prepared or maintained by the Bank relating to the services to be performed
by the Bank hereunder are the property of the Fund and will be preserved,
maintained and made available in accordance with such Section and Rules, and
will be surrendered promptly to the Fund on and in accordance with its
request.
9
<PAGE>
8.04 The Bank and the Fund agree that all books, records,
information and data pertaining to the business of the other party which are
exchanged or received pursuant to the negotiation or the carrying out of this
Agreement shall remain confidential, and shall not be voluntarily disclosed
to any other person, except as may be required by law.
8.05 In case of any requests or demands for the inspection of the
Shareholder records of the Fund, the Bank will endeavor to notify the Fund
and to secure instructions from an authorized officer of the Fund as to such
inspection. The Bank reserves the right, however, to exhibit the Shareholder
records to any person whenever it is advised by its counsel that it may be
held liable for the failure to exhibit the Shareholder records to such person.
Article 9 TERMINATION OF AGREEMENT
9.01 This Agreement may be terminated by either party upon ninety
(90) days written notice to the other.
9.02 Should the Fund exercise its right to terminate, all out-of-
pocket expenses associated with the movement of records and material will be
borne by Integrity Management. Additionally, the Bank reserves the right to
charge Integrity Management for any other reasonable expenses associated with
such termination and/or a charge equivalent to the average of three (3) months'
fees.
Article 10 ADDITIONAL FUNDS
10.01 In the event that the Fund establishes one or more series of
Shares in addition to U.S. Treasury Money Market Portfolio, U.S. Treasury
Income Portfolio, General Money Market Portfolio, Tax Exempt Portfolio with
respect to which it desires to have the Bank render services as transfer
agent under the terms hereof, it shall so notify the Bank in writing, and if
the Bank agrees in writing to provide such services, such series of Shares
shall become a Portfolio hereunder.
10
<PAGE>
Article 11 ASSIGNMENT
11.01 Except as provided in Section 11.03 below, neither this
Agreement nor any rights or obligations hereunder may be assigned by either
party without the written consent of the other party.
11.02 This Agreement shall inure to the benefit of and be binding
upon the parties and their respective permitted successors and assigns.
11.03 The Bank may, without further consent on the part of the
Fund, subcontract for the performance hereof with (i) Boston Financial Data
Services, Inc., a Massachusetts corporation ("BFDS") which is duly registered
as a transfer agent pursuant to Section 17A(c)(1) of the Securities Exchange
Act of 1934, as amended ("Section 17A(c)(1)"), (ii) a BFDS subsidiary duly
registered as a transfer agent pursuant to Section 17A(c)(1) or (iii) a BFDS
affiliate; provided, however, that the Bank shall be as fully responsible to
the Fund for the acts and omissions of any subcontractor as it is for its own
acts and omissions.
Article 12 AMENDMENT
12.01 This Agreement may be amended or modified by a written
agreement executed by both parties and authorized or approved by a resolution
of the Trustees of the Fund.
Article 13 MASSACHUSETTS LAW TO APPLY
13.01 This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
Article 14 FORCE MAJEURE
14.01 In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts of God,
strikes, equipment or transmission failure or damage reasonably beyond its
control, or other causes reasonably beyond its control, such party shall not
be liable for damages to the other for any damages resulting from such
failure to perform or otherwise from such causes.
11
<PAGE>
Article 15 CONSEQUENTIAL DAMAGES
15.01 Neither party to this Agreement shall be liable to the
other party for consequential damages under any provision of this Agreement
or for any consequential damages arising out of any act or failure to act
hereunder.
Article 16 MERGER OF AGREEMENT
16.01 This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the subject
matter hereof whether oral or written.
Article 17 LIMITATIONS OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS
17.01 A copy of the Declaration of Trust of the Trust is on file
with Secretary of the Commonwealth of Massachusetts, and notice is hereby given
that this instrument is executed on behalf of the Trustees of the Trust as
trustees and not individually and that the obligations of this instrument are
not binding upon any of the Trustees individually.
Article 18 COUNTERPARTS
18.01 This Agreement may be executed by the parties hereto on any
number of counterparts, and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed in their names and on their behalf by and through their duly
authorized officers, as of the day and year first above written.
THE VALIANT FUND
BY: /s/ Susan Beauregard
--------------------
ATTEST:
/s/ Glenn Ciotti
- ----------------
STATE STREET BANK AND TRUST COMPANY
BY: /s/ Ronald E. Logue
-------------------
Executive Vice President
ATTEST:
/s/ Kim Goodrich
-------------
INTEGRITY MANAGEMENT & RESEARCH, INC.
BY: /s/ Susan Beauregard
--------------------
ATTEST:
/s/ Glenn Ciotti
------------
<PAGE>
STATE STREET BANK & TRUST COMPANY
FUND SERVICE RESPONSIBILITIES*
SERVICE PERFORMED RESPONSIBILITY
----------------- --------------
BANK FUND
---- ----
1. Receives orders for the purchase
of Shares. X
2. Issue Shares and hold Shares in
Shareholders accounts. X
3. Receive redemption requests. X
4. Effect transactions 1-3 above
directly with broker-dealers. X
5. Pay over monies to redeeming
Shareholders. X
6. Effect transfers of Shares. X
7. Prepare and transmit dividends
and distributions. X
8. Issue Replacement Certificates. X
9. Reporting of abandoned property. X
10. Maintain records of account. X
11. Maintain and keep a current and
accurate control book for each
issue of securities. X
12. Mail proxies. X
13. Mail Shareholder reports. X
14. Mail prospectuses to current
Shareholders. X
15. Withhold taxes on U.S. resident
and non-resident alien accounts. X
<PAGE>
16. Prepare and file U.S. Treasury
Department forms. X
17. Prepare and mail account and
confirmation statements for
Shareholders. X
18. Provide Shareholder account
information. X
19. Blue sky reporting. X
*Such services are more fully described in Article 1.02 (a), (b) and (c)
of the Agreement.
BY:________________________________
ATTEST:
________________________________
STATE STREET BANK AND TRUST COMPANY
BY:________________________________
Vice President
ATTEST:
________________________________
INTEGRITY MANAGEMENT & RESEARCH, INC.
BY:________________________________
ATTEST:
________________________________
<PAGE>
EXHIBIT 10
Opinion and Consent of Counsel
<PAGE>
[LETTERHEAD]
June 7, 1993
The Valiant Fund
440 Lincoln Street
Worcester, Massachusetts 01653
Ladies & Gentlemen:
We are furnishing this opinion in connection with the Registration
Statement on Form N-1A filed under the Securities and Exchange Act of 1933,
as amended, by The Valiant Fund (the "Trust") for the registration of an
indefinite number of shares of beneficial interest of the constituent series
(each, a "Fund") of the Trust (the "Shares"). The Shares are proposed to be
sold pursuant to a Distributor's Contract (the "Distributor's Contract")
between the Trust and Integrity Investments, Inc.
We have acted as counsel for the Trust since its organization. We are
familiar with the action taken by its Trustees to authorize this issuance of
the Shares. We have examined its records of Trustee action, its Bylaws, and
its Agreement and Declaration of Trust, as amended, on file at the office of
the Secretary of State of The Commonwealth of Massachusetts. We have
examined executed copies of such Registration Statement, in the form filed or
to be filed with the Securities and Exchange Commission, and such other
documents as we deem necessary for the purpose of this action.
We assume that upon sale of the Shares the Trust will receive the net
asset value thereof.
Based upon the foregoing, we are of the opinion that the Trust is
authorized to issue an unlimited number of Shares, and that when the Shares
are issued and sold pursuant to the Distributor's Contract, they will be
validly issued, fully paid and nonassessable by the Trust.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Agreement and Declaration of the Trust disclaims shareholder
liability for acts or obligations of the Trust and requires that notice of
such disclaimer be given in each agreement, obligation, or instrument entered
into or executed by the Trust or the Trustees. The Agreement and Declaration
of Trust provides for indemnification out of the relevant Fund's property for
all loss and expense of any shareholder held personally liable solely by
reason of his being or having been a shareholder of such Fund. Thus, the
risk of a
<PAGE>
The Valiant Fund -2- June 7, 1993
shareholder's incurring financial loss on account of shareholder liability is
limited to circumstances on which the Fund itself would be unable to meet its
obligations.
We consent to the filing of this opinion as an exhibit to such
Registration Statement and the references to us as counsel for the Trust in
the Registration Statement.
Very truly yours
/s/ Ropes & Gray
Ropes & Gray
<PAGE>
EXHIBIT 11
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Prospectuses and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 6 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated October 13, 1997, relating to the financial
statements and financial highlights appearing in the August 31, 1997 Annual
Report to Shareholders of The Valiant Fund, which is also incorporated by
reference into the Registration Statement. We also consent to the references
to us under the heading "Financial Highlights" in the Prospectuses and under
the headings "Independent Accountants" and "Financial Statements" in the
Statement of Additional Information.
PRICE WATERHOUSE LLP
- --------------------
Price Waterhouse LLP
Boston, Massachusetts
December 19, 1997
<PAGE>
EXHIBIT 12
Financial Statements
<PAGE>
THE VALIANT FUND
U.S. TREASURY MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
AUGUST 31, 1997
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 1)
--------- --------
<S> <C> <C>
U.S. TREASURY BILLS (A)--24.5%
$ 10,000,000 5.450%, 12/11/97. . . . . . . . . . . . . . . . . . . . . . . . $ 9,847,097
5,000,000 5.250%, 01/08/98. . . . . . . . . . . . . . . . . . . . . . . . 4,905,938
12,000,000 5.130%, 02/05/98. . . . . . . . . . . . . . . . . . . . . . . . 11,731,530
30,000,000 5.160%, 02/05/98. . . . . . . . . . . . . . . . . . . . . . . . 29,324,900
10,000,000 5.205%, 02/05/98. . . . . . . . . . . . . . . . . . . . . . . . 9,773,004
10,000,000 5.240%, 02/05/98. . . . . . . . . . . . . . . . . . . . . . . . 9,771,478
20,000,000 5.185%, 03/05/98. . . . . . . . . . . . . . . . . . . . . . . . 19,467,097
10,000,000 5.225%, 03/05/98. . . . . . . . . . . . . . . . . . . . . . . . 9,731,493
-------------
TOTAL U.S. TREASURY BILLS . . . . . . . . . . . . . . . . . . . 104,552,537
-------------
REPURCHASE AGREEMENTS--75.5%
100,000,000 First Boston Corp.
5.530%, 09/02/97, Dated 08/29/97, Repurchase Price $100,061,444
(Collateralized by U.S. Treasury Note, 6.50%, due 10/15/06;
par value $101,560,000; valued at $104,901,629) . . . . . . . . 100,000,000
10,078,000 Goldman, Sachs & Co., Inc.
5.450%, 09/02/97, Dated 08/29/97, Repurchase Price $10,084,103
(Collateralized by U.S. Treasury Bond, 6.50%, due 11/15/26;
par value $10,243,000; valued at $10,279,576) . . . . . . . . . 10,078,000
106,000,000 J.P. Morgan & Co., Inc.
5.550%, 09/02/97, Dated 08/29/97, Repurchase Price $106,065,367
(Collateralized by U.S. Treasury Notes, 6.75% & 5.75%,
due 04/30/00 & 12/31/98; total par value $34,763,000 & $71,430,000;
valued at $36,082,127 & $72,038,298, respectively). . . . . . . 106,000,000
106,000,000 Morgan Stanley Group, Inc.
5.580%, 09/02/97, Dated 08/29/97, Repurchase Price $106,065,720
(Collateralized by U.S. Treasury Bills, 5.22%, 5.17% & 5.14%,
due 05/28/98, 02/26/98 & 01/22/98; par value $76,460,000,
$24,073,000 & $11,600,000; valued at $73,455,963, $23,448,474 &
$11,357,722, respectively). . . . . . . . . . . . . . . . . . . 106,000,000
-------------
TOTAL REPURCHASE AGREEMENTS . . . . . . . . . . . . . . . . . . 322,078,000
-------------
TOTAL INVESTMENTS--100.0% . . . . . . . . . . . . . . . . . . . $ 426,630,537
(Cost $426,630,537)* --------------
-------------
</TABLE>
_____________________________________________
(A) Rate represents annualized yield to maturity at date of purchase
(unaudited).
* Aggregate cost for Federal tax purposes.
SEE NOTES TO FINANCIAL STATEMENTS.
1
<PAGE>
THE VALIANT FUND
GENERAL MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
AUGUST 31, 1997
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 1)
--------- --------
<S> <C> <C>
BANKERS' ACCEPTANCE NOTICES (A)--9.0%
Bank of New York
$ 14,000,000 5.590%, 12/10/97 . . . . . . . . . . . . . . . . . . . . . . . $ 13,782,611
6,000,000 5.550%, 12/19/97 . . . . . . . . . . . . . . . . . . . . . . . 5,899,175
5,000,000 5.550%, 12/23/97 . . . . . . . . . . . . . . . . . . . . . . . 4,912,896
2,000,000 5.570%, 12/30/97 . . . . . . . . . . . . . . . . . . . . . . . 1,962,867
-------------
26,557,549
-------------
Corestates (Phil Nat'l) Bank
5,000,000 5.550%, 12/17/97 . . . . . . . . . . . . . . . . . . . . . . . 4,917,521
5,000,000 5.550%, 12/19/97 . . . . . . . . . . . . . . . . . . . . . . . 4,915,979
-------------
9,833,500
-------------
Republic National Bank of New York
7,000,000 5.470%, 11/25/97 . . . . . . . . . . . . . . . . . . . . . . . 6,909,593
4,000,000 5.550%, 11/26/97 . . . . . . . . . . . . . . . . . . . . . . . 3,946,966
5,300,000 5.530%, 12/17/97 . . . . . . . . . . . . . . . . . . . . . . . 5,212,888
-------------
16,069,447
-------------
TOTAL BANKERS' ACCEPTANCE NOTICES. . . . . . . . . . . . . . . 52,460,496
-------------
COMMERCIAL PAPER (A) --82.9%
AEROSPACE--1.4%
8,000,000 Allied Signal, Inc.
5.500%, 09/29/97 . . . . . . . . . . . . . . . . . . . . . . . 7,965,778
-------------
CHEMICALS--6.3%
Dupont (E I) De Nemours & Co.
5,000,000 5.610%, 09/03/97 . . . . . . . . . . . . . . . . . . . . . . . 4,998,442
3,000,000 5.660%, 10/22/97 . . . . . . . . . . . . . . . . . . . . . . . 2,975,945
14,000,000 5.530%, 12/03/97 . . . . . . . . . . . . . . . . . . . . . . . 13,799,998
5,000,000 5.610%, 12/04/97 . . . . . . . . . . . . . . . . . . . . . . . 4,926,758
4,000,000 5.590%, 12/05/97 . . . . . . . . . . . . . . . . . . . . . . . 3,940,994
6,000,000 5.620%, 12/05/97 . . . . . . . . . . . . . . . . . . . . . . . 5,911,017
-------------
36,553,154
-------------
DRUGS & HEALTH CARE--1.7%
10,000,000 Abbott Laboratories
5.450%, 09/23/97 . . . . . . . . . . . . . . . . . . . . . . . 9,966,694
-------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
2
<PAGE>
THE VALIANT FUND
GENERAL MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS - (CONTINUED)
AUGUST 31, 1997
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 1)
--------- --------
<S> <C> <C>
COMMERCIAL PAPER (A)--(CONTINUED)
ELECTRIC UTILITIES--1.6%
$ 9,300,000 Tampa Electric Co.
5.470%, 09/22/97. . . . . . . . . . . . . . . . . . . . . . . . $ 9,270,325
------------
FINANCIAL SERVICES--10.9%
Ford Motor Credit Co.
10,000,000 5.630%, 12/02/97. . . . . . . . . . . . . . . . . . . . . . . . 9,856,122
7,000,000 5.490%, 12/08/97. . . . . . . . . . . . . . . . . . . . . . . . 6,895,385
10,000,000 5.550%, 12/10/97. . . . . . . . . . . . . . . . . . . . . . . . 9,845,833
8,000,000 5.550%, 12/15/97. . . . . . . . . . . . . . . . . . . . . . . . 7,870,500
-------------
34,467,840
-------------
J.P. Morgan & Co., Inc.
4,000,000 5.440%, 09/09/97. . . . . . . . . . . . . . . . . . . . . . . . 3,995,164
5,000,000 5.450%, 09/10/97. . . . . . . . . . . . . . . . . . . . . . . . 4,993,188
20,000,000 5.480%, 09/18/97. . . . . . . . . . . . . . . . . . . . . . . . 19,948,244
--------------
28,936,596
--------------
63,404,436
--------------
FOOD PRODUCTS--17.3%
Coca Cola Co.
20,000,000 5.520%, 09/02/97. . . . . . . . . . . . . . . . . . . . . . . . 19,996,933
10,000,000 5.450%, 11/10/97. . . . . . . . . . . . . . . . . . . . . . . . 9,894,028
--------------
29,890,961
--------------
H.J. Heinz Co.
16,435,000 5.480%, 09/23/97. . . . . . . . . . . . . . . . . . . . . . . . 16,379,961
12,000,000 5.480%, 09/26/97. . . . . . . . . . . . . . . . . . . . . . . . 11,954,333
--------------
28,334,294
--------------
22,300,000 Kellogg Co.
5.470%, 09/30/97. . . . . . . . . . . . . . . . . . . . . . . . 22,201,738
--------------
20,000,000 Sara Lee Corp.
5.500%, 09/25/97. . . . . . . . . . . . . . . . . . . . . . . . 19,926,667
--------------
100,353,660
--------------
GAS & PIPELINE UTILITIES--1.7%
10,000,000 Nicor, Inc.
5.510%, 11/03/97. . . . . . . . . . . . . . . . . . . . . . . . 9,903,575
--------------
INSURANCE--4.3%
25,000,000 AIG Funding, Inc.
5.470%, 09/03/97. . . . . . . . . . . . . . . . . . . . . . . . 24,992,403
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
3
<PAGE>
THE VALIANT FUND
GENERAL MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS - (CONTINUED)
AUGUST 31, 1997
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 1)
--------- --------
<S> <C> <C>
COMMERCIAL PAPER (A) -- (CONTINUED)
INTERNATIONAL OIL--16.3%
Amoco Co.
$ 20,000,000 5.500%, 09/02/97. . . . . . . . . . . . . . . . . . . . . . . . $ 19,996,944
8,100,000 5.520%, 10/27/97. . . . . . . . . . . . . . . . . . . . . . . . 8,030,448
6,000,000 5.450%, 11/17/97. . . . . . . . . . . . . . . . . . . . . . . . 5,930,058
--------------
33,957,450
--------------
20,000,000 Atlantic Richfield Co.
5.470%, 11/03/97. . . . . . . . . . . . . . . . . . . . . . . . 19,808,550
--------------
12,000,000 Shell Oil Co.
5.450%, 09/15/97. . . . . . . . . . . . . . . . . . . . . . . . 11,974,567
--------------
Sonoco Products Co.
9,000,000 5.590%, 09/02/97. . . . . . . . . . . . . . . . . . . . . . . . 8,998,603
20,000,000 5.500%, 09/18/97. . . . . . . . . . . . . . . . . . . . . . . . 19,948,056
--------------
28,946,659
--------------
94,687,226
--------------
LEISURE TIME--2.4%
14,000,000 Walt Disney Co.
5.450%, 12/15/97. . . . . . . . . . . . . . . . . . . . . . . . 13,777,458
--------------
NON-BANK FINANCE--8.4%
General Electric Capital Corp.
3,000,000 5.660%, 12/08/97. . . . . . . . . . . . . . . . . . . . . . . . 2,953,777
4,000,000 5.500%, 12/10/97. . . . . . . . . . . . . . . . . . . . . . . . 3,938,889
8,000,000 5.500%, 12/15/97. . . . . . . . . . . . . . . . . . . . . . . . 7,871,667
--------------
14,764,333
--------------
25,000,000 IBM Credit Corp.
5.470%, 09/10/97. . . . . . . . . . . . . . . . . . . . . . . . 24,965,812
--------------
8,928,000 Transamerica Finance Corp., Inc.
5.500%, 09/24/97. . . . . . . . . . . . . . . . . . . . . . . . 8,896,628
--------------
48,626,773
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
4
<PAGE>
THE VALIANT FUND
GENERAL MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS - (CONTINUED)
AUGUST 31, 1997
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 1)
--------- --------
<S> <C> <C>
COMMERCIAL PAPER (A) -- (CONTINUED)
SOAPS AND DETERGENTS--5.5%
Procter & Gamble Co.
$ 18,000,000 5.470%, 10/20/97. . . . . . . . . . . . . . . . . . . . . . . . $ 17,865,985
14,000,000 5.450%, 12/16/97. . . . . . . . . . . . . . . . . . . . . . . . 13,775,339
--------------
31,641,324
--------------
TECHNOLOGY--1.2%
7,000,000 International Business Machines
5.480%, 12/10/97. . . . . . . . . . . . . . . . . . . . . . . . 6,893,444
--------------
TELECOMMUNICATIONS--3.9%
10,000,000 American Telephone & Telegraph Co.
5.580%, 11/12/97. . . . . . . . . . . . . . . . . . . . . . . . 9,888,400
13,000,000 Ameritech Corp.
5.470%, 10/30/97. . . . . . . . . . . . . . . . . . . . . . . . 12,883,459
--------------
22,771,859
--------------
TOTAL COMMERCIAL PAPER. . . . . . . . . . . . . . . . . . . . . 480,808,109
--------------
U.S. TREASURY BILLS (A)--1.7%
10,000,000 U.S. Treasury Bill
5.090%, 01/22/98. . . . . . . . . . . . . . . . . . . . . . . . 9,797,814
--------------
REPURCHASE AGREEMENTS--6.4%
7,000,000 First Boston Corp.
5.530%, 09/02/97, Dated 08/29/97 , Repurchase Price $7,004,301
(Collateralized by U.S. Treasury Note, 7.50%, due 11/15/01;
par value $6,705,000; valued at $7,170,416) . . . . . . . . . . 7,000,000
15,000,000 J.P. Morgan & Co., Inc.
5.550%, 09/02/97, Dated 08/29/97, Repurchase Price $15,009,250
(Collateralized by U.S. Treasury Note & U.S. Treasury Bill,
8.875% & 4.96%, due 11/15/97 & 12/26/97; total par value
$768,000 & $14,750,000; valued at $792,883 & $14,507,672) . . . 15,000,000
15,320,000 Morgan Stanley Group, Inc.
5.580%, 09/02/97, Dated 08/29/97, Repurchase Price $15,329,498
(Collateralized by U.S. Treasury Bill, 5.28%, due 08/20/98;
par value $16,520,000; valued at $15,662,827) . . . . . . . . . 15,320,000
--------------
TOTAL REPURCHASE AGREEMENTS . . . . . . . . . . . . . . . . . . 37,320,000
--------------
TOTAL INVESTMENTS--100.0% . . . . . . . . . . . . . . . . . . . $ 580,386,419
(Cost $580,386,419)* --------------
--------------
</TABLE>
_____________________________________________
(A) Rate represents annualized yield to maturity at date of purchase
(unaudited).
* Aggregate cost for Federal tax purposes.
SEE NOTES TO FINANCIAL STATEMENTS.
5
<PAGE>
THE VALIANT FUND
TAX-EXEMPT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
AUGUST 31, 1997
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 1)
--------- --------
<S> <C> <C>
MUNICIPAL BONDS AND NOTES--100.0%
ALABAMA--0.3%
$ 1,000,000 Birmingham, Alabama GO
Series A
3.300%, 10/01/15**
LOC: Societe Generale . . . . . . . . . . . . . . . . . . . . . $ 1,000,000
--------------
ALASKA--3.2%
9,300,000 Alaska Housing Finance Corporation
Series C
3.300%, 06/01/26**
SBPA: Swiss Bank Corp . . . . . . . . . . . . . . . . . . . . . 9,300,000
--------------
CALIFORNIA--2.9%
5,000,000 Los Angeles County
TRANS
4.500%, 06/30/98. . . . . . . . . . . . . . . . . . . . . . . . 5,025,886
3,500,000 Oakland California
TRANS
4.500%, 06/30/98. . . . . . . . . . . . . . . . . . . . . . . . 3,520,595
--------------
8,546,481
--------------
COLORADO--2.8%
4,900,000 Colorado Health Facilities
Sisters of Charity Health Care
3.350%, 05/15/25**
LOC: Toronto Dominion Bank. . . . . . . . . . . . . . . . . . . 4,900,000
1,130,000 Colorado Springs Utility Revenue
6.000%, 11/15/97. . . . . . . . . . . . . . . . . . . . . . . . 1,135,514
2,200,000 Regional Transportation District
Passenger Fare Revenue, Series 89A
3.250%, 06/01/99**
LOC: Credit Local de France . . . . . . . . . . . . . . . . . . 2,200,000
--------------
8,235,514
--------------
CONNECTICUT--3.0%
6,500,000 Connecticut State GO
Series 1997 B
3.200%, 05/15/14**
SBPA: Bayerische Landesbank GZ . . . . . . . . . . . . . . . . . 6,500,000
2,200,000 Connecticut State Special Assessment
Unemployment Compensation, Series C
FGIC Insured
3.900%, 07/01/98
SBPA: FGIC Securities Purchase, Inc . . . . . . . . . . . . . . . 2,200,000
--------------
8,700,000
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE>
THE VALIANT FUND
TAX-EXEMPT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS - (CONTINUED)
AUGUST 31, 1997
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 1)
--------- --------
<S> <C> <C>
DELAWARE--1.0%
$ 3,000,000 Delaware State
Series A
5.000%, 01/01/98. . . . . . . . . . . . . . . . . . . . . . . . $ 3,012,951
--------------
FLORIDA--4.8%
8,000,000 Dade County Water & Sewer Revenue Systems
3.250%, 10/05/22**
SBPA: Commerzbank . . . . . . . . . . . . . . . . . . . . . . . 8,000,000
2,200,000 Florida State Board of Education Capital Outlay
Public Education, Series F
7.000%, 06/01/98. . . . . . . . . . . . . . . . . . . . . . . . 2,252,024
3,700,000 Jacksonville, Florida
Series A
3.600%, 10/10/97
LINE: Morgan Guaranty Trust, Credit Suisse, Bayerische
Landesbank GZ, Sunbank. . . . . . . . . . . . . . . . . . . . . 3,700,000
--------------
13,952,024
--------------
GEORGIA--7.0%
1,500,000 Burke County Development Authority, PCR
Georgia Power Project, Series 3
3.750%, 07/01/24**. . . . . . . . . . . . . . . . . . . . . . . 1,500,000
1,400,000 Burke County Development Authority, PCR
Georgia Power Project, Vogtle 2nd Series
3.700%, 04/01/25**. . . . . . . . . . . . . . . . . . . . . . . 1,400,000
1,200,000 Burke County Development Authority, PCR
Georgia Power Project, Vogtle 3rd Series
3.700%, 09/01/25**. . . . . . . . . . . . . . . . . . . . . . . 1,200,000
1,800,000 Burke County Development Authority, PCR
Oglethorpe Power Corp.
FGIC Insured
3.250%, 01/01/16**
SBPA: Canadian Imperial Bank of Canada. . . . . . . . . . . . . 1,800,000
1,700,000 Burke County Development Authority, PCR
Oglethorpe Power Corp., Vogtle A AMBAC
3.600%, 12/01/97. . . . . . . . . . . . . . . . . . . . . . . . 1,700,000
4,200,000 Georgia Municipal Gas Authority Revenue
Gas Portfolio I Series A
3.300%, 11/01/06**
LOC: Wachovia Bank of N.C., Credit Suisse,
Morgan Guaranty Trust . . . . . . . . . . . . . . . . . . . . . 4,200,000
5,000,000 Georgia Municipal Gas Authority Revenue
Gas Portfolio I Series B
3.500%, 09/01/07**
LOC: Wachovia Bank of N.C., Credit Suisse, Morgan Guaranty Trust,
Bayerisch Landesbank GZ . . . . . . . . . . . . . . . . . . . . 5,000,000
3,600,000 Georgia Municipal Gas Authority Revenue
Transco Project, Series B
3.850%, 10/08/97
LOC: Wachovia Bank of N.C. . . . . . . . . . . . . . . . . . . 3,600,000
--------------
20,400,000
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE>
THE VALIANT FUND
TAX-EXEMPT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS - (CONTINUED)
AUGUST 31, 1997
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 1)
--------- --------
<S> <C> <C>
HAWAII--0.7%
$ 1,000,000 Hawaii Department of Budget & Finance
Kaiser Permanente, Series 84B
3.500%, 09/01/97*** . . . . . . . . . . . . . . . . . . . . . . $ 1,000,000
1,000,000 Hawaii Department of Budget & Finance
Kaiser Permanente, Series 84B
3.750%, 03/01/98*** . . . . . . . . . . . . . . . . . . . . . . 1,000,000
--------------
2,000,000
--------------
ILLINOIS--1.9%
3,000,000 Chicago Illinois GO
Tender Notes
3.550%, 10/31/97***
LOC: Landesbank Hessen-Thueringer GZ . . . . . . . . . . . . . . 3,000,000
2,500,000 Chicago Illinois GO
Tender Notes
3.650%, 02/05/98***
LOC: Morgan Guaranty Trust . . . . . . . . . . . . . . . . . . . 2,500,000
--------------
5,500,000
--------------
KANSAS--4.4%
13,000,000 Kansas Department of Transportation Highway Revenue
Series B
3.200%, 09/01/14**. . . . . . . . . . . . . . . . . . . . . . . . 13,000,000
--------------
LOUISIANA--1.1%
3,300,000 Saint Charles Parish Louisiana
Shell
3.700%, 10/01/22**. . . . . . . . . . . . . . . . . . . . . . . . 3,300,000
--------------
MASSACHUSETTS--2.5%
2,250,000 Massachusetts Bay Transportation Authority
84A
3.450%, 09/02/97***
LOC: State Street Bank & Trust. . . . . . . . . . . . . . . . . . 2,250,000
4,200,000 Massachusetts Bay Transportation Authority
84A
3.750%, 03/01/98***
LOC: State Street Bank & Trust. . . . . . . . . . . . . . . . . . 4,200,000
1,000,000 Massachusetts Bay Transportation Authority
Series C
3.550%, 09/04/97
LOC: West Deutsche Landesbank . . . . . . . . . . . . . . . . . . 1,000,000
--------------
7,450,000
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
THE VALIANT FUND
TAX-EXEMPT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS - (CONTINUED)
AUGUST 31, 1997
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 1)
--------- --------
<S> <C> <C>
MICHIGAN--2.9%
$3,000,000 Michigan Municipal Bond Authority Revenue
Series B
4.500%, 07/02/98. . . . . . . . . . . . . . . . . . . . . . . . $ 3,016,841
5,500,000 Michigan State Housing Development Rental Revenue
Series B
3.300%, 04/01/19**
LOC: Landesbank Hessen-Thueringen GZ. . . . . . . . . . . . . . 5,500,000
--------------
8,516,841
--------------
MISSOURI--2.4%
3,200,000 Missouri State Health & Educational Facility
Washington University B
3.750%, 09/01/30**
SBPA: Morgan Guaranty Trust . . . . . . . . . . . . . . . . . . 3,200,000
3,700,000 Missouri State Health & Educational Facility
SSM Health Care Project, Series B
3.350%, 06/01/22**
SBPA: Rabobank. . . . . . . . . . . . . . . . . . . . . . . . . 3,700,000
--------------
6,900,000
--------------
NEVADA--3.9%
2,500,000 Clark County Airport Improvement Authority Revenue
MBIA Insured
3.250%, 07/01/12**
LINE: Union Bank Switzerland. . . . . . . . . . . . . . . . . . 2,500,000
8,955,000 Clark County Airport Improvement Authority Revenue
MBIA Insured
3.250%, 07/01/25**
LOC: Union Bank Switzerland . . . . . . . . . . . . . . . . . . 8,955,000
--------------
11,455,000
--------------
NEW MEXICO--4.6%
4,000,000 Albuquerque Airport Authority Revenue
AMBAC 95
3.250%, 07/01/14**
SBPA: Canadian Imperial Bank of Canada. . . . . . . . . . . . . 4,000,000
4,300,000 Hurley PCR
British Petroleum
3.750%, 12/01/15**. . . . . . . . . . . . . . . . . . . . . . . 4,300,000
5,000,000 New Mexico State
TRANS
4.500%, 06/30/98. . . . . . . . . . . . . . . . . . . . . . . . 5,025,892
--------------
13,325,892
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
THE VALIANT FUND
TAX-EXEMPT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS - (CONTINUED)
AUGUST 31, 1997
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 1)
--------- --------
<S> <C> <C>
NEW YORK--3.2%
$ 2,500,000 New York City Municipal Water Finance Authority
FGIC Insured
3.700%, 06/15/23**
LIQ: FGIC Securities Purchase, Inc. . . . . . . . . . . . . . . $ 2,500,000
2,000,000 New York City Municipal Water Finance Authority
FGIC Insured
3.800%, 06/15/24**
LIQ: FGIC Securities Purchase, Inc. . . . . . . . . . . . . . . 2,000,000
5,000,000 New York Municipal Assistance Corp.
Subser K1
3.150%, 07/01/08**
LOC: West Deutsche Landesbank . . . . . . . . . . . . . . . . . 5,000,000
--------------
9,500,000
--------------
NORTH CAROLINA--7.8%
8,850,000 Charlotte Airport Revenue
MBIA 93A
3.250%, 07/01/16**
SBPA: Commerzbank . . . . . . . . . . . . . . . . . . . . . . . 8,850,000
1,000,000 Raleigh Durham Airport Authority
American Airlines B1
3.750%, 11/01/15**
LOC: Royal Bank of Canada . . . . . . . . . . . . . . . . . . . 1,000,000
6,800,000 Raleigh Durham Airport Authority
American Airlines Series A
3.750%, 11/01/15**
LOC: Royal Bank of Canada . . . . . . . . . . . . . . . . . . . 6,800,000
6,200,000 Winston Salem Water & Sewer System
3.300%, 06/01/14**
SPBA: Wachovia Bank of N.C. . . . . . . . . . . . . . . . . . . 6,200,000
--------------
22,850,000
--------------
TENNESSEE--5.6%
6,600,000 Memphis Tennessee GO
Series A
3.350%, 08/01/03**
SBPA: Westdeutche Landesbank. . . . . . . . . . . . . . . . . . 6,600,000
1,400,000 Metro Nashville/Davidson County Airport Authority
American Airlines Series A
3.750%, 10/01/12***
LOC: Credit Suisse. . . . . . . . . . . . . . . . . . . . . . . 1,400,000
1,400,000 Metro Nashville/Davidson County Health
Vanderbilt University
3.950%, 05/01/98*** . . . . . . . . . . . . . . . . . . . . . . 1,400,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
THE VALIANT FUND
TAX-EXEMPT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS - (CONTINUED)
AUGUST 31, 1997
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 1)
--------- --------
<S> <C> <C>
TENNESSEE-- (CONTINUED)
$ 1,400,000 Metro Nashville/Davidson County Health
Vanderbilt University 85A
3.650%, 01/15/98. . . . . . . . . . . . . . . . . . . . . . . . $ 1,400,000
5,500,000 Tennessee State
BAN Series E
3.250%, 07/02/01**. . . . . . . . . . . . . . . . . . . . . . . 5,500,000
--------------
16,300,000
--------------
TEXAS--19.9%
2,050,000 Dallas Area Rapid Transit Authority
Series A
3.700%, 09/09/97
LOC: Credit Suisse, Swiss Bank Corp . . . . . . . . . . . . . . 2,050,000
4,000,000 Dallas Area Rapid Transit Authority
Series A
3.750%, 10/09/97
LOC: Credit Suisse, Swiss Bank Corp . . . . . . . . . . . . . . 4,000,000
4,000,000 Dallas Area Rapid Transit Authority
Series A
3.600%, 10/14/97
LOC: Credit Suisse, Swiss Bank Corp . . . . . . . . . . . . . . 4,000,000
1,200,000 Grapevine Texas IDC
American Airlines B-3
3.750%, 12/01/24**
LOC: Morgan Guaranty. . . . . . . . . . . . . . . . . . . . . . 1,200,000
8,000,000 Harris County Texas Health Facilities
Memorial Hospital Series B
3.250%, 06/01/24**
SBPA: Societe Generale. . . . . . . . . . . . . . . . . . . . . 8,000,000
3,700,000 Harris County Texas Health Facilities
Methodist Hospital
3.700%, 03/01/00**
LIQ: Morgan Guaranty. . . . . . . . . . . . . . . . . . . . . . 3,700,000
5,000,000 Harris County Texas Health Facilities
Sisters of Charity Series C
3.300%, 07/01/23**
SBPA: Credit Suisse . . . . . . . . . . . . . . . . . . . . . . 5,000,000
4,200,000 Harris County Texas Health Facilities
St. Lukes Episcopal Hospital
3.700%, 02/15/21**. . . . . . . . . . . . . . . . . . . . . . . 4,200,000
4,200,000 Harris County Toll Road
Series H
3.300%, 08/01/20**
LINE: Morgan Guaranty Trust Co. . . . . . . . . . . . . . . . . 4,200,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
THE VALIANT FUND
TAX-EXEMPT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS - (CONTINUED)
AUGUST 31, 1997
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 1)
--------- --------
<S> <C> <C>
TEXAS-- (CONTINUED)
$ 10,340,000 Lower Colorado River Authority Texas Revenue
Refunding Junior Lien 3rd Supply Series
3.250%, 01/01/13**
SBPA: Bayerische Landesbank GZ. . . . . . . . . . . . . . . . . $ 10,340,000
5,000,000 San Antonio Electric & Gas
Series A
3.600%, 09/05/97
LINE: Trust Company Bank, Morgan Guaranty Trust,
Union Bank of Switzerland, Toronto Dominion . . . . . . . . . . 5,000,000
5,700,000 Texas State
TRANS, Series A
4.750%, 08/31/98. . . . . . . . . . . . . . . . . . . . . . . . 5,750,217
900,000 Texas State Water Development Board
3.700%, 03/01/15**
SBPA: Canadian Imperial Bank. . . . . . . . . . . . . . . . . . 900,000
--------------
58,340,217
--------------
UTAH--1.3%
1,000,000 Intermountain Power Agency
Power Supply Revenue, Series 85E
3.500%, 09/15/97***
LOC: Swiss Banking Corp . . . . . . . . . . . . . . . . . . . . 1,000,000
1,100,000 Intermountain Power Agency
Power Supply Revenue, Series 85F
3.400%, 09/04/97
LOC: Swiss Bank Corp. . . . . . . . . . . . . . . . . . . . . . 1,100,000
1,700,000 Intermountain Power Agency
Power Supply Revenue, Series 85F
3.500%, 09/15/97***
LOC: Credit Suisse. . . . . . . . . . . . . . . . . . . . . . . . 1,700,000
--------------
3,800,000
--------------
VERMONT--0.4%
1,255,000 Vermont Education, Health & Buildings Finance Agency
Middlebury College
3.950%, 05/01/98*** . . . . . . . . . . . . . . . . . . . . . . 1,255,000
--------------
WASHINGTON--8.6%
6,200,000 Seattle Water System Revenue
3.300%, 09/01/25**
LOC: Bayerische Landesbank GZ . . . . . . . . . . . . . . . . . 6,200,000
5,000,000 Washington Health Care Facilities
Sisters of Providence, Series E
3.800%, 10/01/05**
LINE: Rabobank. . . . . . . . . . . . . . . . . . . . . . . . . 5,000,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
THE VALIANT FUND
TAX-EXEMPT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS - (CONTINUED)
AUGUST 31, 1997
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 1)
--------- --------
<S> <C> <C>
WASHINGTON -- (CONTINUED)
$ 4,900,000 Washington State GO
Series 96A
3.300%, 06/01/20**
SBPA: Landesbank Hessen-Thueringen GZ . . . . . . . . . . . . . $ 4,900,000
7,000,000 Washington State GO
Series 96B
3.250%, 06/01/20**
SBPA: Landesbank Hessen-Thueringen GZ . . . . . . . . . . . . . 7,000,000
2,220,000 Washington State Public Power Supply
3.300%, 07/01/17**
LOC: National Westminster . . . . . . . . . . . . . . . . . . . 2,220,000
--------------
25,320,000
--------------
WISCONSIN--2.9%
3,000,000 Sheboygan, PCR
Wisconsin Electric Power Company
3.400%, 09/01/15**. . . . . . . . . . . . . . . . . . . . . . . 3,000,000
4,500,000 Sheboygan, PCR
Wisconsin Power & Light
3.400%, 08/01/14**. . . . . . . . . . . . . . . . . . . . . . . 4,500,000
1,061,000 Wisconsin State
3.450%, 09/15/97
LINE: Bank of Nova Scotia, Commerzbank. . . . . . . . . . . . . 1,061,000
--------------
8,561,000
--------------
WYOMING--0.9%
2,500,000 Lincoln County PCR
Exxon
3.700%, 08/01/15**. . . . . . . . . . . . . . . . . . . . . . . 2,500,000
--------------
TOTAL INVESTMENTS--100.0% . . . . . . . . . . . . . . . . . . . $ 293,020,920
(Cost $293,020,920) * --------------
--------------
</TABLE>
________________________________
* Aggregate cost for Federal tax purposes.
** Variable rate demand notes are payable upon not more than one, seven or
thirty days' notice. The interest rate shown reflects the rate currently
in effect.
*** Put bonds and notes have demand features which mature within one year.
The interest rate shown reflects the rate currently in effect.
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
THE VALIANT FUND
TAX-EXEMPT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS - (CONTINUED)
AUGUST 31, 1997
GLOSSARY OF TERMS
AMBAC = American Municipal Bond Assurance Corp.
BAN = Bond Anticipation Notes
FGIC = Financial Guaranty Insurance Corp.
GO = General Obligations
IDC = Industrial Development Corp.
LINE = Line of Credit
LIQ = Liquidity Facility
LOC = Letter of Credit
MBIA = Municipal Bond Insurance Association
PCR = Pollution Control Revenue
SBPA = Standby Purchase Agreement
TRANS = Tax and Revenue Anticipation Note
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
THE VALIANT FUND
STATEMENTS OF ASSETS AND LIABILITIES
AUGUST 31, 1997
<TABLE>
<CAPTION>
U.S. TREASURY U.S. TREASURY GENERAL TAX-EXEMPT
MONEY MARKET INCOME MONEY MARKET MONEY MARKET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
ASSETS:
Investments (Note 1):
Investments at value. . . . . . . . . . . . $104,552,537 $ -- $543,066,419 $293,020,920
Repurchase agreements . . . . . . . . . . . 322,078,000 -- 37,320,000 --
------------ ---------- ------------ ------------
Total investments at value. . . . . . . 426,630,537 -- 580,386,419 293,020,920
Cash. . . . . . . . . . . . . . . . . . . . 811 25,351 125 --
Interest receivable . . . . . . . . . . . . 148,975 -- 17,287 1,299,611
Deferred organization expense (Note 1). . . 8,557 7,421 5,286 5,519
------------ ---------- ------------ ------------
Total Assets. . . . . . . . . . . . . . 426,788,880 32,772 580,409,117 294,326,050
------------ ---------- ------------ ------------
LIABILITIES:
Dividends payable . . . . . . . . . . . . . 1,712,347 -- 2,428,840 788,560
Payable for investments purchased . . . . . -- -- -- 10,950,321
Advisory fee payable (Note 2) . . . . . . . 67,643 -- 102,658 47,915
Distribution fee payable (Note 2) . . . . . 99,792 -- 1,988 --
Due to Custodian. . . . . . . . . . . . . . -- -- -- 165,655
Accrued expenses. . . . . . . . . . . . . . 8,557 7,421 5,286 5,519
------------ ---------- ------------ ------------
Total Liabilities . . . . . . . . . . . 1,888,339 7,421 2,538,772 11,957,970
------------ ---------- ------------ ------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . $424,900,541 $ 25,351 $577,870,345 $282,368,080
------------ ---------- ------------ ------------
------------ ---------- ------------ ------------
NET ASSETS CONSIST OF:
Paid-in capital (Note 3). . . . . . . . . . $424,897,316 $ 25,351 $578,129,532 $282,491,743
Accumulated net realized gain (loss) on
investments sold. . . . . . . . . . . . . 3,225 -- (259,187) (123,663)
------------ ---------- ------------ ------------
Total Net Assets. . . . . . . . . . . . $424,900,541 $ 25,351 $577,870,345 $282,368,080
------------ ---------- ------------ ------------
------------ ---------- ------------ ------------
SHARES OF BENEFICIAL INTEREST OUTSTANDING:
Class A . . . . . . . . . . . . . . . . . . 23,062,771 25,351 568,968,730 282,491,743
Class B . . . . . . . . . . . . . . . . . . 300,436,663 -- 9,160,802 --
Class D . . . . . . . . . . . . . . . . . . 101,397,882 -- -- --
NET ASSET VALUE,
All Shares - offering and redemption price
per share (Net Assets/Shares Outstanding). . $ 1.00 $ 1.00 $ 1.00 $1.00
------------ ---------- ------------ ------------
------------ ---------- ------------ ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
THE VALIANT FUND
STATEMENTS OF OPERATIONS
AUGUST 31, 1997
<TABLE>
<CAPTION>
U.S. TREASURY U.S. TREASURY GENERAL TAX-EXEMPT
MONEY MARKET INCOME MONEY MARKET MONEY MARKET
PORTFOLIO PORTFOLIO* PORTFOLIO PORTFOLIO
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest (Note 1) . . . . . . . . . . . . . $22,142,122 $738,116 $26,959,795 $9,448,176
EXPENSES:
Investment advisory fee (Note 2). . . . . . 823,706 33,215 975,895 528,012
Distribution fee, Class B (Note 2). . . . . 667,392 -- 23,621 --
Distribution fee, Class D (Note 2). . . . . 414,622 -- -- --
Trustee fees (Note 2) . . . . . . . . . . . 7,024 -- 10,113 5,006
Amortization of organization costs
(Note 1). . . . . . . . . . . . . . . . . 5,019 5,019 5,019 5,019
Expenses borne by the Investment Adviser
(Note 2). . . . . . . . . . . . . . . . . (12,043) (5,019) (15,132) (10,025)
----------- ---------- ------------ ------------
Total Net Expenses. . . . . . . . . . . 1,905,720 33,215 999,516 528,012
----------- ---------- ------------ ------------
NET INVESTMENT INCOME. . . . . . . . . . . . . . . . . 20,236,402 704,901 25,960,279 8,920,164
----------- ---------- ------------ ------------
REALIZED GAIN (LOSS) ON
INVESTMENTS SOLD (NOTE 1) . . . . . . . . . 15,357 (7) 15,375 (10,703)
----------- ---------- ------------ ------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS . . . . . . . . . $20,251,759 $704,894 $25,975,654 $8,909,461
----------- ---------- ------------ ------------
----------- ---------- ------------ ------------
</TABLE>
________________________________
* The Portfolio operated from December 13, 1996 - January 30, 1997.
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE>
THE VALIANT FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
U.S. TREASURY U.S. TREASURY
MONEY MARKET PORTFOLIO INCOME PORTFOLIO
YEAR ENDED YEAR ENDED PERIOD ENDED PERIOD ENDED
8/31/97 8/31/96* 8/31/97** 8/31/96 ***
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
NET ASSETS AT BEGINNING OF PERIOD . . . . . . . . . . $247,135,913 $106,296,537 $ 25,222 $ 25,133
------------ ----------- ------------ ----------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . 20,236,402 9,774,485 704,901 179,127
Net realized gain (loss) on investments sold . . 15,357 (10,545) (7) --
------------ ----------- ------------ ----------
Net increase in net assets resulting
from operations. . . . . . . . . . . . . . . 20,251,759 9,763,940 704,894 179,127
------------ ----------- ------------ ----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A . . . . . . . . . . . . . . . . . . (3,174,468) (3,702,775) (704,901) (179,127)
Class B . . . . . . . . . . . . . . . . . . (13,171,814) (5,756,290) -- --
Class D . . . . . . . . . . . . . . . . . . (3,890,120) (315,420) -- --
------------ ------------ ----------- ----------
Net decrease from distributions. . . . . . . . . (20,236,402) (9,774,485) (704,901) (179,127)
------------ ------------ ----------- ----------
SHARE TRANSACTIONS (AT $1.00 PER SHARE):
CLASS A:
Net proceeds from sales of shares . . . . . 174,614,603 293,279,024 245,972,311 93,740,874
Issued to shareholders in reinvestment
of dividends . . . . . . . . . . . . . 1,410 1,365 136 89
Cost of shares repurchased. . . . . . . . . (236,817,140) (238,199,277) (245,972,311) (93,740,874)
------------ ------------ ------------ -----------
Net Class A share transactions . . . . (62,201,127) 55,081,112 136 89
------------ ------------ ------------ -----------
CLASS B:
Net proceeds from sales of shares . . . . . 879,378,409 555,303,801 -- --
Cost of shares repurchased. . . . . . . . . (705,276,725) (505,084,160) -- --
------------ ------------ ------------ -----------
Net Class B share transactions . . . . 174,101,684 50,219,641 -- --
------------ ------------ ------------ -----------
CLASS D:
Net proceeds from sales of shares . . . . . 318,106,403 49,343,549 -- --
Cost of shares repurchased. . . . . . . . . (252,257,689) (13,794,381) -- --
------------ ------------ ------------ -----------
Net Class D share transactions . . . . 65,848,714 35,549,168
------------ ---------- ------------ -----------
Net increase from share transactions . 177,749,271 140,849,921 136 89
------------ ------------ ------------ -----------
Net increase in net assets. . . . . . . . . 177,764,628 140,839,376 129 89
------------ ------------ ------------ -----------
NET ASSETS AT END OF PERIOD . . . . . . . . . . . . . $424,900,541 $247,135,913 $ 25,351 $ 25,222
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
</TABLE>
________________________________
* The Portfolio commenced Class D shares operations on May 1, 1996.
** The Portfolio operated from December 13, 1996 - January 30, 1997.
*** The Portfolio operated from December 11, 1995 - January 10, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE>
THE VALIANT FUND
STATEMENTS OF CHANGES IN NET ASSETS - (CONTINUED)
<TABLE>
<CAPTION>
GENERAL MONEY TAX-EXEMPT
MARKET PORTFOLIO MONEY MARKET PORTFOLIO
YEAR ENDED YEAR ENDED PERIOD ENDED PERIOD ENDED
8/31/97 8/31/96 8/31/97 8/31/96
-------------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
NET ASSETS AT BEGINNING OF PERIOD . . . . . . . . . . $ 342,803,442 $ 385,426,702 $279,867,103 $283,653,602
-------------- -------------- ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . 25,960,279 25,653,674 8,920,164 9,548,672
Net realized gain (loss) on investments sold . . 15,375 (184,202) (10,703) (4,894)
-------------- -------------- ------------ ------------
Net increase (decrease) in net
assets resulting from operations . . . 25,975,654 25,469,472 8,909,461 9,543,778
-------------- -------------- ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A . . . . . . . . . . . . . . . . . . (25,485,808) (25,172,442) (8,920,164) (9,548,672)
Class B . . . . . . . . . . . . . . . . . . (474,471) (481,232) -- --
-------------- -------------- ------------ ------------
Net decrease from distributions. . . . . . . . . (25,960,279) (25,653,674) (8,920,164) (9,548,672)
-------------- -------------- ------------ ------------
SHARE TRANSACTIONS (AT $1.00 PER SHARE):
CLASS A:
Net proceeds from sales of shares . . . . . 2,791,812,765 1,937,503,266 573,325,388 452,820,528
Issued to shareholders in reinvestment
of dividends . . . . . . . . . . . . . 2,914,391 1,317,345 890 856
Cost of shares repurchased. . . . . . . . . (2,560,095,823) (1,980,536,000) (570,814,598) (456,602,989)
-------------- -------------- ------------ ------------
Net Class A share transactions . . . . 234,631,333 (41,715,389) 2,511,680 (3,781,605)
-------------- -------------- ------------ ------------
CLASS B:
Net proceeds from sales of shares . . . . . 12,777,268 11,688,082 -- --
Cost of shares repurchased. . . . . . . . . (12,357,073) (12,411,751) -- --
-------------- -------------- ------------ ------------
Net Class B share transactions . . . . 420,195 (723,669) -- --
-------------- -------------- ------------ ------------
Net increase (decrease) from share
transactions . . . . . . . . . . . . . 235,051,528 (42,439,058) 2,511,680 (3,781,605)
-------------- -------------- ------------ ------------
Net increase (decrease) in net
assets . . . . . . . . . . . . . . 235,066,903 (42,623,260) 2,500,977 (3,786,499)
-------------- -------------- ------------ ------------
NET ASSETS AT END OF PERIOD . . . . . . . . . . . . . $ 577,870,345 $ 342,803,442 $282,368,080 $279,867,103
-------------- -------------- ------------ ------------
-------------- -------------- ------------ ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
18
<PAGE>
THE VALIANT FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
U.S. TREASURY MONEY
MARKET PORTFOLIO - CLASS A
YEAR ENDED YEAR ENDED PERIOD ENDED PERIOD ENDED
8/31/97 8/31/96 8/31/95 8/31/94 (1)
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of period . . . . . . . . . $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- ---------
Income from Investment Operations:
Net investment income . . . . . . . . . . . 0.052 0.053 0.054 0.012
-------- -------- -------- ---------
Less Distributions:
Dividends from net investment income. . . . (0.052) (0.053) (0.054) (0.012)
-------- -------- -------- ---------
Net Asset Value, End of period . . . . . . . . . . . . $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- ---------
-------- -------- -------- ---------
Total Return (a) . . . . . . . . . . . . . . . . . . . 5.30% 5.45% 5.60% 1.19%
Ratios/Supplemental Data:
Net Assets, End of Period (000's). . . . . . . . . . . $ 23,063 $ 85,260 $ 30,183 $ 25
Ratios to average net assets:
Net investment income . . . . . . . . . . . 5.12% 5.21% 5.79% 4.06% (b)
Operating expenses. . . . . . . . . . . . . 0.20% 0.20% 0.20% 0.20% (b)
Operating expenses before
reimbursements/waivers. . . . . . . . . . 0.20% 0.20% 0.21% 0.26% (b)
<CAPTION>
U.S. TREASURY MONEY
MARKET PORTFOLIO - CLASS B
YEAR ENDED YEAR ENDED PERIOD ENDED PERIOD ENDED
8/31/97 8/31/96 8/31/95 8/31/94 (1)
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of period . . . . . . . . . $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- ---------
Income from Investment Operations:
Net investment income . . . . . . . . . . . 0.049 0.050 0.052 0.011
-------- -------- -------- ---------
Less Distributions:
Dividends from net investment income. . . . (0.049) (0.050) (0.052) (0.011)
-------- -------- -------- ---------
Net Asset Value, End of period . . . . . . . . . . . . $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- ---------
-------- -------- -------- ---------
Total Return (a) . . . . . . . . . . . . . . . . . . . 5.04% 5.18% 5.34% 1.12%
Ratios/Supplemental Data:
Net Assets, End of Period (000's). . . . . . . . . . .$ 300,437 $ 126,327 $ 76,114 $ 13,355
Ratios to average net assets:
Net investment income . . . . . . . . . . . 4.93% 5.01% 5.41% 3.87% (b)
Operating expenses. . . . . . . . . . . . . 0.45% 0.45% 0.45% 0.45% (b)
Operating expenses before
reimbursements/waivers. . . . . . . . . . 0.45% 0.45% 0.46% 0.50% (b)
</TABLE>
________________________________
(1) The Portfolio commenced Class A and Class B shares operations on May 17,
1994.
(a) Total returns for periods less than one year are not annualized and had
the Investment Adviser and Trustees not reimbursed and waived certain
expenses, respectively, total returns would have been lower.
(b) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
19
<PAGE>
THE VALIANT FUND
FINANCIAL HIGHLIGHTS - (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
U.S. TREASURY MONEY
MARKET PORTFOLIO - CLASS D
YEAR ENDED YEAR ENDED
8/31/97 8/31/96 (1)
------------- -------------
<S> <C> <C>
Net Asset Value, Beginning of period . . . . . . . . $ 1.000 $ 1.000
----------- ----------
Income from Investment Operations:
Net investment income . . . . . . . . . . . . . 0.047 0.015
----------- ----------
Less Distributions:
Dividends from net investment income. . . . . . (0.047) (0.015)
----------- ----------
Net Asset Value, End of period . . . . . . . . . . . $ 1.000 $ 1.000
----------- ----------
----------- ----------
Total Return (a) . . . . . . . . . . . . . . . . . . 4.78% 1.55%
Ratios/Supplemental Data:
Net Assets, End of Period (000's). . . . . . . . . . $ 101,401 $ 35,549
Ratios to average net assets:
Net investment income . . . . . . . . . . . . . 4.69% 4.68% (b)
Operating expenses. . . . . . . . . . . . . . . 0.70% 0.70% (b)
Operating expenses before
reimbursements/waivers . . . . . . . . . . 0.70% 0.70% (b)
<CAPTION>
U.S. TREASURY MONEY
INCOME PORTFOLIO - CLASS A
PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED
8/31/97 (2) 8/31/96 (3) 8/31/95 (4) 8/31/94 (5)
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of period . . . . . . . . $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------- ---------- ---------- ----------
Income from Investment Operations:
Net investment income . . . . . . . . . . . . . 0.005 0.004 0.004 0.001
----------- ---------- ---------- ----------
Less Distributions:
Dividends from net investment income. . . . . . (0.005) (0.004) (0.004) (0.001)
----------- ---------- ---------- ----------
Net Asset Value, End of period . . . . . . . . . . . $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------- ---------- ---------- ----------
----------- ---------- ---------- ----------
Total Return (a) . . . . . . . . . . . . . . . . . . 0.54% 0.35% 0.39% 0.12%
Ratios/Supplemental Data:
Net Assets, End of Period (000's). . . . . . . . . . $ 25 $ 25 $ 25 $ 25
Ratios to average net assets:
Net investment income . . . . . . . . . . . . . 4.24% 4.15% 4.47% 2.96% (b)
Operating expenses. . . . . . . . . . . . . . . 0.20% 0.20% 0.20% 0.20% (b)
Operating expenses before
reimbursements/waivers . . . . . . . . . . 0.23% 0.35% 0.29% 0.22% (b)
</TABLE>
________________________________
(1) The Portfolio commenced Class D shares operations on May 1, 1996.
(2) The Portfolio operated from December 13, 1996 to January 30, 1997.
(3) The Portfolio operated from December 11, 1995 to January 10, 1996.
(4) The Portfolio operated from December 12, 1994 to January 11, 1995.
(5) The Portfolio operated from December 28, 1993 to January 12, 1994.
(a) Total returns for periods less than one year are not annualized and had
the Investment Adviser and Trustees not reimbursed and waived certain
expenses, respectively, total returns would have been lower.
(b) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE>
THE VALIANT FUND
FINANCIAL HIGHLIGHTS - (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
GENERAL MONEY
MARKET PORTFOLIO - CLASS A
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
8/31/97 8/31/96 8/31/95 8/31/94 (1)
----------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of period . . . . . . . . $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------- ---------- ---------- ----------
Income from Investment Operations:
Net investment income . . . . . . . . . . . . . 0.053 0.053 0.056 0.033
----------- ---------- ---------- ----------
Less Distributions:
Dividends from net investment income. . . . . . (0.053) (0.053) (0.056) (0.033)
----------- ---------- ---------- ----------
Net Asset Value, End of period . . . . . . . . . . . $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------- ---------- ---------- ----------
----------- ---------- ---------- ----------
Total Return (a) . . . . . . . . . . . . . . . . . . 5.40% 5.52% 5.81% 3.33%
Ratios/Supplemental Data:
Net Assets, End of Period (000's). . . . . . . . . . $ 568,715 $ 334,069 $ 375,965 $ 167,016
Ratios to average net assets:
Net investment income . . . . . . . . . . . . . 5.33% 5.36% 5.70% 3.70% (b)
Operating expenses. . . . . . . . . . . . . . . 0.20% 0.20% 0.20% 0.20% (b)
Operating expenses before
reimbursements/waivers . . . . . . . . . . 0.20% 0.20% 0.20% 0.21% (b)
<CAPTION>
GENERAL MONEY
MARKET PORTFOLIO - CLASS B
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
8/31/97 8/31/96 8/31/95 8/31/94 (1)
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of period . . . . . . . . $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------- ---------- ---------- ----------
Income from Investment Operations:
Net investment income . . . . . . . . . . . . . 0.050 0.051 0.053 0.009
----------- ---------- ---------- ----------
Less Distributions:
Dividends from net investment income. . . . . . (0.050) (0.051) (0.053) (0.009)
----------- ---------- ---------- ----------
Net Asset Value, End of period . . . . . . . . . . . $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------- ---------- ---------- ----------
----------- ---------- ---------- ----------
Total Return (a) . . . . . . . . . . . . . . . . . . 5.14% 5.26% 5.54% 0.92%
Ratios/Supplemental Data:
Net Assets, End of Period (000's). . . . . . . . . . $ 9,155 $ 8,734 $ 9,461 $ 9,520
Ratios to average net assets:
Net investment income . . . . . . . . . . . . . 5.02% 5.11% 5.33% 3.99% (b)
Operating expenses. . . . . . . . . . . . . . . 0.45% 0.45% 0.45% 0.45% (b)
Operating expenses before
reimbursements/waivers . . . . . . . . . . 0.45% 0.45% 0.45% 0.46% (b)
</TABLE>
________________________________
(1) The Portfolio commenced Class A and Class B shares operations on
September 21, 1993 and May 17, 1994, respectively.
(a) Total returns for periods less than one year are not annualized and had
the Investment Adviser and Trustees not reimbursed and waived certain
expenses, respectively, total returns would have been lower.
(b) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
21
<PAGE>
THE VALIANT FUND
FINANCIAL HIGHLIGHTS - (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
TAX-EXEMPT MONEY
MARKET PORTFOLIO - CLASS A
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
8/31/97 8/31/96 8/31/95 8/31/94 (1)
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of period . . . . . . . . $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------- ---------- ---------- ----------
Income from Investment Operations:
Net investment income . . . . . . . . . . . . . 0.034 0.034 0.035 0.021
----------- ---------- ---------- ----------
Less Distributions:
Dividends from net investment income. . . . . . (0.034) (0.034) (0.035) (0.021)
----------- ---------- ---------- ----------
Net Asset Value, End of period . . . . . . . . . . . $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------- ---------- ---------- ----------
----------- ---------- ---------- ----------
Total Return (a) . . . . . . . . . . . . . . . . . . 3.42% 3.43% 3.67% 2.11%
Ratios/Supplemental Data:
Net Assets, End of Period (000's). . . . . . . . . . $ 282,368 $ 279,867 $ 283,654 $ 258,130
Ratios to average net assets:
Net investment income . . . . . . . . . . . . . 3.38% 3.34% 3.50% 2.38% (b)
Operating expenses. . . . . . . . . . . . . . . 0.20% 0.20% 0.20% 0.20% (b)
Operating expenses before
reimbursements/waivers . . . . . . . . . . 0.20% 0.20% 0.20% 0.22% (b)
</TABLE>
________________________________
(1) The Portfolio commenced operations on October 7, 1993.
(a) Total returns for periods less than one year are not annualized and had
the Investment Adviser and Trustees not reimbursed and waived certain
expenses, respectively, total returns would have been lower.
(b) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
22
<PAGE>
THE VALIANT FUND
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1997
The Valiant Fund (the "Trust") was organized as a Massachusetts business
trust on January 29, 1993 and is registered under the Investment Company Act
of 1940, as amended (the "1940 Act"), as an open end management investment
company. The Trust offers four managed investment portfolios. The
accompanying financial statements and financial highlights are those of the
U.S. Treasury Money Market, the U.S. Treasury Income, the General Money
Market and the Tax-Exempt Money Market Portfolios (individually, a
"Portfolio", collectively, the "Portfolios"). The Trust is authorized to
offer four classes of shares: Class A, Class B, Class C and Class D. U.S.
Treasury Money Market Class A, B and D, U.S. Treasury Income Class A, General
Money Market Class A and B and Tax-Exempt Money Market Class A are currently
active.
1. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally
accepted accounting principles require management to make certain estimates
and assumptions that affect the amounts of assets and liabilities reported at
the date of the financial statements and the amounts of income and expenses
reported during the reporting period. Actual results could differ from those
estimates.
The following is a summary of significant accounting policies which are
consistently followed by the Trust in the preparation of its financial
statements.
PORTFOLIO VALUATIONS: Securities in the Portfolios are valued utilizing
the amortized cost method permitted in accordance with Rule 2a-7 under the
1940 Act. This method involves valuing a portfolio security initially at its
cost and thereafter assuming a constant amortization to maturity of any
discount or premium.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions
are recorded on the trade date. Net realized gains and losses on investments
sold are recorded on the identified cost basis. Interest income is recorded
on the accrual basis. Interest income consists of market discount earned
(including both original issue and market discount), less amortization of any
market premium.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: It is the policy of the
Portfolios to declare dividends daily from net investment income and to pay
such dividends monthly. Net realized capital gains, if any, are distributed
at least annually.
FEDERAL TAXES: The Trust treats each Portfolio as a separate entity for
Federal income tax purposes. Each Portfolio intends to continue to qualify
each year as a "regulated investment company" under Subchapter M of the
Internal Revenue Code of 1986, as amended. By so qualifying, a Portfolio
will not be subject to Federal income taxes to the extent that it distributes
all of its taxable or tax-exempt income, if any, for its tax year ending
August 31. In addition, by distributing during each calendar year
substantially all of its net investment income and capital gains, if any, the
Portfolios will not be subject to Federal excise tax. Therefore, no Federal
income tax provision is required. As of August 31, 1997, the General Money
Market Portfolio and the Tax-Exempt Money Market Portfolio have capital loss
carryovers of $55,073, 30,898, 173,216 and 53,266, 54,799, 2,267,
respectively, which will expire on August 31, 2003, 2004, and 2,005,
respectively. As of August 31, 1997, the Tax-Exempt Money Market Portfolio
has elected for federal income tax purposes to defer $13,331 of losses
recognized during the period November 1, 1996 to August 31, 1997 to its
fiscal year ending August 31, 1998.
REPURCHASE AGREEMENTS: Each Portfolio, except the U.S. Treasury Income
Portfolio, may engage in repurchase agreement transactions. Under the terms
of a typical repurchase agreement, the Portfolio takes possession of an
underlying debt obligation subject to an obligation of the seller to
repurchase, and the Portfolio to resell, the obligation at an agreed upon
price and time, thereby determining the yield during the Portfolio's holding
period. This arrangement results in a
23
<PAGE>
THE VALIANT FUND
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
AUGUST 31, 1997
1. SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
fixed rate of return that is not subject to market fluctuations during the
Portfolio's holding period. It is the Portfolio's policy to maintain
collateral that is at least equal at all times to the total amount of the
repurchase obligations including interest. In the event of a counterparty
default, the Portfolio has the right to use the collateral to offset losses
incurred. There is potential loss to the Portfolio in the event the
Portfolio is delayed or prevented from exercising its rights to dispose of
the collateral securities, including the risk of a possible decline in the
market value of the underlying securities during the period while the
Portfolio seeks to assert its rights. The Portfolio's sub-adviser, David L.
Babson & Co. Inc., acting under the supervision of the Trust's Board of
Trustees, reviews the value of collateral and the creditworthiness of those
banks and dealers with which the Portfolio enters into repurchase agreements
to evaluate potential risks.
EXPENSES AND ALLOCATIONS: Expenses directly attributable to a Portfolio
are charged to the Portfolio, while expenses which are attributable to more
than one Portfolio of the Trust are allocated among the respective
Portfolios. Each share class bears its pro-rata portion of expenses
attributable to its series, except that each class separately bears its' own
distribution fees.
Income, Portfolio level expenses, and realized and unrealized gains and
losses are allocated to each class of shares on a daily basis based on each
class' portion of net assets.
ORGANIZATION COSTS: The Trust bears all costs in connection with its
organization, including the fees and expenses of registering and qualifying
its shares for distribution under Federal and state securities laws. All
such costs are being amortized using the straight line method over a period
of five years from commencement of each Portfolio's operations.
2. INVESTMENT ADVISORY, ADMINISTRATION, DISTRIBUTION AND OTHER FEES
Integrity Management & Research, Inc. (the "Investment Adviser" or the
"Manager"), a wholly-owned subsidiary of Integrity Investments, Inc., serves
as the Investment Adviser to the Trust. State Street Bank & Trust Company
serves as the Trust's administrator, custodian and transfer agent. Integrity
Investments, Inc. (the "Distributor") acts as exclusive distributor of the
Trust's shares.
The Trust pays the Investment Adviser a fee, computed daily and paid
monthly, at the annual rate of 0.20% of the average daily net assets of the
Trust. Under its Management Agreement with the Trust, the Manager performs
certain administrative and management services for the Trust and pays the
compensation, if any, of officers and Trustees who are affiliated with the
Manager or the Sub-Adviser and pays all the Portfolio expenses with the
following exceptions: the fees and expenses of those Trustees who are not
"interested persons" (as defined in the Investment Company Act of 1940) of
the Trust; interest on borrowings; taxes; expenses incurred by Class B, Class
C and Class D shares pursuant to the Distribution and Shareholder Servicing
Plans; and such extraordinary non-recurring expenses as may arise. From time
to time the Investment Adviser may voluntarily waive all or a portion of the
fees payable to it by a Portfolio. As such, the Investment Adviser has
agreed to reimburse the Portfolios for expenses exceeding 0.20% of average
daily net assets for Class A shares, 0.45% of the average daily net assets
for Class B shares, 0.60% of average daily net assets for Class C shares and
0.70% of average daily net assets for Class D shares. The expense
limitations are voluntary and were in effect through August 31, 1997. The
expense limitations may be removed at any time thereafter with 90 days' prior
notice to existing shareholders.
24
<PAGE>
THE VALIANT FUND
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
AUGUST 31, 1997
2. INVESTMENT ADVISORY, ADMINISTRATION, DISTRIBUTION AND OTHER FEES -
(CONTINUED)
For the year ended August 31, 1997 the Investment Adviser reimbursed the
Trust as follows:
PORTFOLIO REIMBURSEMENT
- ----------------------------------------------------
U.S. Treasury Money Market $12,043
U.S. Treasury Income 5,019
General Money Market 15,132
Tax-Exempt Money Market 10,025
The Investment Adviser has entered into an investment sub-advisory
agreement with David L. Babson & Co., Inc. ("Babson") pursuant to which the
Investment Adviser pays fees to Babson, computed daily and paid monthly, at
the annual rate of 0.10% of the first $500 million of the aggregate average
daily net assets of the Portfolios and 0.05% of average daily net assets in
excess thereof. Fees related to these services are borne directly by the
Investment Adviser.
The Trust has adopted a distribution plan for the Class A and Class B
shares, a distribution plan for the Class C shares and a distribution plan
for the Class D shares (together, the "Plans") pursuant to Rule 12b-1 of the
1940 Act. The Plans provide for payments to the Distributor of up to 0.35%
of the average net assets of the Class B shares, up to 0.50% of the average
net assets of the Class C shares and up to 0.50% of the average net assets of
the Class D shares. Payments under the Plans have been authorized at the
rate of 0.25% of each Portfolio's average daily net assets for the Class B
shares, 0.40% of each Portfolio's average daily net assets for the Class C
shares and 0.50% of each Portfolio's average daily net assets for the Class D
shares for the year ended August 31, 1997. No payments have been authorized
for the Class A shares.
Certain directors and officers of the Investment Adviser are also
Trustees and officers of the Trust.
Trustees who are not "interested persons" of the Trust receive an annual
$1,000 retainer and $1,000 per Trustee meeting attended and are entitled to
be reimbursed for out-of-pocket expenses incurred in attending such meetings.
3. SHARES OF BENEFICIAL INTEREST
The Trust's Declaration of Trust authorizes the Trustees to issue an
unlimited number of no par value shares of beneficial interest in the
Portfolios. Shareholders are entitled to one vote for each dollar (or
proportional fractional vote for each fraction of a dollar) of net asset
value per share owned. Each Portfolio votes separately with respect to
issues affecting only that Portfolio. Shareholders of a particular class
have the exclusive right to vote on matters pertaining only to that class.
Pursuant to the Declaration of Trust, the Trustees have the authority to
create additional Portfolios and to issue additional classes of shares for
each Portfolio of the Trust.
25
<PAGE>
THE VALIANT FUND
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
AUGUST 31, 1997
3. SHARES OF BENEFICIAL INTEREST - (CONTINUED)
At August 31, 1997 Integrity Investments, Inc. owned 100% of the
outstanding shares of the U. S. Treasury Income Portfolio and certain
institutional shareholders were record owners of more than 10% of the total
outstanding shares of the following Portfolios:
NAME OF PORTFOLIO NUMBER OF PERCENTAGE OF
SHAREHOLDERS SHARES OWNED
- ------------------------------------------------------------------------------
U.S. Treasury Money Market 2 88.9%
General Money Market 1 82.6%
Tax-Exempt Money Market 1 99.6%
4. DISTRIBUTIONS (UNAUDITED)
During the fiscal year ended August 31, 1997, 100% of the Tax-Exempt
Money Market Portfolio's distributions paid to the shareholders were
tax-exempt.
26
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders
of The Valiant Fund
In our opinion, the accompanying statements of assets and liabilities,
including the portfolios of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of U.S. Treasury
Money Market Portfolio, U.S. Treasury Income Portfolio, General Money Market
Portfolio and Tax-Exempt Money Market Portfolio (each a portfolio of The
Valiant Fund) at August 31, 1997, the results of each of their operations,
the changes in each of their net assets, and the financial highlights for the
periods indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of The Valiant
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at August 31, 1997 by
correspondence with the custodian and the application of alternative auditing
procedures where securities purchased had not been received, provide a
reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
October 13, 1997
27
<PAGE>
EXHIBIT 13
Subscription Agreement
<PAGE>
Form of
SUBSCRIPTION AGREEMENT
March__, 1993
The Valiant Fund
440 Lincoln Street
Worcester, Massachusetts 01653
Dear Sirs:
The Valiant Fund (the "Fund") proposes to issue and sell to the public
its shares of beneficial interest without par value (the "Shares") pursuant
to a registration statement on Form N-1A (the "Registration Statement") filed
with the Securities and Exchange Commission. In order to provide the Fund
with a net worth of at least $100,000 as required by Section 14 of the
Investment Company Act of 1940, as amended, and additional capitalization, we
hereby offer to purchase 100,000 Shares at a price of $1.00 per Share [two]
days prior to the effective date of the Registration Statement (or such
earlier date as may be agreed upon).
We will make payment to the Fund for the 100,000 Shares at least two
business days prior to the date specified by the Fund as the proposed
effective date of the Registration Statement.
We represent and warrant to the Fund that the Shares are being acquired
by us for investment and not with a view to the resale or further
distribution thereof and that we have no present intention to redeem the
Shares.
The undersigned agrees that if it or any direct or indirect transferee
of any of the Shares redeems any of the Shares of the Fund prior to the fifth
anniversary of the date the Fund begin investment activities, we will pay to
the Fund an amount equal to the number resulting from multiplying the Fund's
total unamortized organizational expenses by a fraction, the numerator of
which is equal to the number of Shares redeemed by the undersigned or such
transferee and the denominator of which is equal to the number of Shares
outstanding as of the date of such redemption, as long as the administrative
position of the staff of the Securities and Exchange Commission requires such
reimbursement.
<PAGE>
Please confirm that the foregoing correctly sets forth our agreement
with the Fund.
Very truly yours,
PURCHASER
By: /s/ Richard F. Curcio
---------------------
Richard F. Curcio
President
Confirmed, as of the date
first above mentioned.
THE VALIANT FUND
By: /s/ Richard C. Butt
-------------------
Richard C. Butt
Treasurer
<PAGE>
EXHIBIT 15(a)
Form of Distribution and Shareholder Servicing Plan
for Class D Shares
<PAGE>
THE VALIANT FUND
DISTRIBUTION AND SHAREHOLDER SERVICING PLAN FOR
CLASS D SHARES
DISTRIBUTION AND SHAREHOLDER SERVICING PLAN FOR CLASS D SHARES (the
"Plan") of The Valiant Fund (the "Trust") dated as of this day of
, 1995.
1. THE PLAN. This Plan is the Trust's written distribution plan,
contemplated by Rule 12b-1 (the "Rule") under the Investment Company Act of
1940 (the "1940 Act"), pursuant to which the Trust will bear certain costs
related to the distribution of the Class D shares (the "Shares") of its U.S.
Treasury Money Market Portfolio, Tax-Exempt Money Market Portfolio, General
Money Market Portfolio and U.S. Treasury Income Portfolio (each of the
aforementioned Funds shall be referred to herein individually as a "Fund" and
collectively as the "Funds") and the provision of services to holders of
Shares. To the extent that any payments (in addition to those specified in
Paragraph 3) made by the Trust to Integrity Management & Research, Inc. (the
"Manager"), any sub-adviser, Integrity Investments, Inc. (the "Distributor"),
any administrator of the Trust, or any of their affiliates, including payment
of investment advisory and services fees, may be deemed to be indirect
financing of any activity which is primarily intended to result in the
distribution of Shares, such payments shall be deemed to be authorized by
this Plan.
2. "SERVICE PROVIDER." As used in this Plan, the term "Service
Provider" shall mean any broker, dealer, bank or other institution which:
(i) renders assistance in the distribution of Shares or in providing
continuing personal service to holders of Shares; (ii) furnishes the
Distributor with such information as the Distributor and the Trust shall
reasonably request concerning the distribution of Shares and the provision of
such personal service; and (iii) has been selected by the Distributor to
receive payments under the Plan.
3. PAYMENTS FOR DISTRIBUTION ASSISTANCE AND SUPPORT SERVICES. The
Trust will make payments to the Distributor, within forty-five (45) days of
the end of each calendar month of an annualized fee of up to .50% of the
average daily net assets of each Fund's Shares, computed as of the close of
each business day, subject to such reductions, if any, as may be necessary to
comply with the rules of the Securities and Exchange Commission or the
National Association of Securities Dealers, Inc. Such fee shall compensate
the Distributor for distribution-related services as follows: (i) its
services as principal underwriter of Shares including bearing costs related
to distribution of Shares, including but not limited to costs and expenses of
printing and distributing prospectuses, Statements of Additional Information,
and annual reports (after such items have been prepared and set in type) and
sales literature which are intended to be provided to prospective investors
in connection with the offering of Shares, and paying compensation to dealers
and registered representatives for selling Shares, and (ii) compensating
Service Providers and the Distributor for providing continuing personal
services to shareholders after a sale of Shares, maintaining shareholder
accounts, and providing administrative service with respect to shareholder
accounts.
Distribution-related services include, but are not limited to, the
following: advertising the availability of services and products; designing
material to send to customers and
<PAGE>
developing methods of making such materials accessible to customers;
providing information about the product needs of customers; providing
facilities to solicit sales and to answer questions from prospective and
existing investors about the Funds; receiving and answering correspondence
from prospective investors, including requests for sale literature,
prospectuses and Statements of Additional Information; displaying and making
sales literature and prospectuses available on the service organization's
premises; acting as liaison between shareholders and the Funds, including
obtaining information from the Funds and providing performance and other
information about the Funds; and providing additional personal services
and/or shareholder account maintenance services or additional
distribution-related services.
4. SELECTION AND NOMINATION OF TRUSTEES. While this Plan is in
effect, the selection and nomination of the Trustees of the Trust (the
"Trustees") who are not "interested persons" of the Trust shall be committed
to the discretion of the Trustees who are not "interested persons" of the
Trust. Nothing herein shall prevent the Trustees who are not "interested
persons" of the Trust from soliciting the view or the involvement of others
in such selection or nomination if such selection and nomination is made by
Trustees who are not "interested persons" of the Trust.
5. REPORTS. While this Plan is in effect, the Distributor shall
provide at least quarterly a written report to the Trustees detailing the
amount of all payments made pursuant to this Plan, and the purposes for which
the payments were made, the amount of the Distributor's total expenses
incurred that year with respect to the distribution of Shares, and such other
information as from time-to-time may be reasonably requested by the Trustees.
6. RELATED AGREEMENTS. Any agreement related to this Plan shall be in
writing and shall provide that: (i) such agreement may be terminated with
respect to a Fund at any time, without payment of any penalty, by vote of a
majority of Trustees who are not "interested persons" of the Trust and have
no direct of indirect financial interest in the operation of this Plan or in
any agreements related to this Plan (the "Independent Trustees") or by a vote
of a majority of the outstanding voting securities of Class D of the Fund, on
not more than sixty days written notice to any other party to the agreement;
(ii) such agreement shall automatically terminate in the event of its
assignment; (iii) such agreement shall go into effect when approved by a
vote of the Trustees and the Independent Trustees cast in person at a meeting
called for the purpose of voting on such agreement; and (iv) such agreement
shall, unless terminated as herein provided, continue in effect with respect
to a Fund from year to year only so long as such continuance is specifically
approved at least annually by a vote of the Trustees and the Independent
Trustees cast in person at a meeting called for the purpose of voting on such
continuance.
7. EFFECTIVENESS, CONTINUATION, TERMINATION AND AMENDMENT. This plan
will take effect on the date first set forth above. Unless terminated as
hereinafter provided, this Plan shall continue in effect with respect to a
Fund from year to year from the date first set forth above only so long as
such continuance is specifically approved at least annually by a vote of the
Trustees and the Independent Trustees cast in person at a meeting called for
the purpose of voting on such continuance. This Plan may be terminated with
respect to a Fund at any time by vote of a majority of the Independent
Trustees or by the vote of the holders of the outstanding voting securities
of Class D of the Fund. This Plan may not be amended to increase materially
the amount of payments to be made by such a Fund without approval by a vote
of a majority of the outstanding voting securities of Class D of such Fund,
and all material
<PAGE>
amendments must be approved by a vote of the Trustees and of the Independent
Trustees cast in person at a meeting called for the purpose of voting on such
amendment.
8. COPIES. The Trust shall preserve copies of this Plan, and each
agreement related hereto and each report referred to in Section 5 hereof
(collectively the "Records") for a period of six years from the date of such
records and each such Record shall be kept in an easily accessible place for
the first two years of such period.
9. DEFINITIONS. For the purposes of the Plan, the terms "vote of a
majority of the outstanding voting securities", "interested persons", and
"assignment" shall have the meanings defined in the 1940 Act.
IN WITNESS WHEREOF, the Trust has executed this instrument in its name
and behalf, by one of its officers duly authorize, and the Distributor has
executed this instrument in its name and behalf, by one of its officers duly
authorized, as of the day and year first above written.
THE VALIANT FUND
By: /s/ Richard F. Curcio
--------------------------
INTEGRITY INVESTMENTS, INC.
By: /s/ Richard F. Curcio
--------------------------
<PAGE>
EXHIBIT 15(b)
Form of Distribution and Shareholder Servicing Plan
for Class C Shares
<PAGE>
THE VALIANT FUND
DISTRIBUTION AND SHAREHOLDER SERVICING PLAN FOR
CLASS C SHARES
DISTRIBUTION AND SHAREHOLDER SERVICING PLAN FOR CLASS C SHARES (the
"Plan") of The Valiant Fund (the "Trust") dated as of this day of
, 1995.
1. THE PLAN. This Plan is the Trust's written distribution plan,
contemplated by Rule 12b-1 (the "Rule") under the Investment Company Act of
1940 (the "1940 Act"), pursuant to which the Trust will bear certain costs
related to the distribution of the Class C shares (the "Shares") of its U.S.
Treasury Money Market Portfolio, Tax-Exempt Money Market Portfolio, General
Money Market Portfolio and U.S. Treasury Income Portfolio (each of the
aforementioned Funds shall be referred to herein individually as a "Fund" and
collectively as the "Funds") and the provision of services to holders of
Shares. To the extent that any payments (in addition to those specified in
Paragraph 3) made by the Trust to Integrity Management & Research, Inc. (the
"Manager"), any sub-adviser, Integrity Investments, Inc. (the "Distributor"),
any administrator of the Trust, or any of their affiliates, including payment
of investment advisory and services fees, may be deemed to be indirect
financing of any activity which is primarily intended to result in the
distribution of Shares, such payments shall be deemed to be authorized by
this Plan.
2. "SERVICE PROVIDER." As used in this Plan, the term "Service
Provider" shall mean any broker, dealer, bank or other institution which:
(i) renders assistance in the distribution of Shares or in providing
continuing personal service to holders of Shares; (ii) furnishes the
Distributor with such information as the Distributor and the Trust shall
reasonably request concerning the distribution of Shares and the provision of
such personal service; and (iii) has been selected by the Distributor to
receive payments under the Plan.
3. PAYMENTS FOR DISTRIBUTION ASSISTANCE AND SUPPORT SERVICES. The
Trust will make payments to the Distributor, within forty-five (45) days of
the end of each calendar month of an annualized fee of up to .50% of the
average daily net assets of each Fund's Shares, computed as of the close of
each business day, subject to such reductions, if any, as may be necessary to
comply with the rules of the Securities and Exchange Commission or the
National Association of Securities Dealers, Inc. Such fee shall compensate
the Distributor for distribution-related services as follows: (i) its
services as principal underwriter of Shares including bearing costs related
to distribution of Shares, including but not limited to costs and expenses of
printing and distributing prospectuses, Statements of Additional Information,
and annual reports (after such items have been prepared and set in type) and
sales literature which are intended to be provided to prospective investors
in connection with the offering of Shares, and paying compensation to dealers
and registered representatives for selling Shares, and (ii) compensating
Service Providers and the Distributor for providing continuing personal
services to shareholders after a sale of Shares, maintaining shareholder
accounts, and providing administrative service with respect to shareholder
accounts.
Distribution-related services include, but are not limited to, the
following: advertising the availability of services and products; designing
material to send to customers and
<PAGE>
developing methods of making such materials accessible to customers;
providing information about the product needs of customers; providing
facilities to solicit sales and to answer questions from prospective and
existing investors about the Funds; receiving and answering correspondence
from prospective investors, including requests for sale literature,
prospectuses and Statements of Additional Information; displaying and making
sales literature and prospectuses available on the service organization's
premises; acting as liaison between shareholders and the Funds, including
obtaining information from the Funds and providing performance and other
information about the Funds; and providing additional personal services
and/or shareholder account maintenance services or additional
distribution-related services.
4. SELECTION AND NOMINATION OF TRUSTEES. While this Plan is in
effect, the selection and nomination of the Trustees of the Trust (the
"Trustees") who are not "interested persons" of the Trust shall be committed
to the discretion of the Trustees who are not "interested persons" of the
Trust. Nothing herein shall prevent the Trustees who are not "interested
persons" of the Trust from soliciting the view or the involvement of others
in such selection or nomination if such selection and nomination is made by
Trustees who are not "interested persons" of the Trust.
5. REPORTS. While this Plan is in effect, the Distributor shall
provide at least quarterly a written report to the Trustees detailing the
amount of all payments made pursuant to this Plan, and the purposes for which
the payments were made, the amount of the Distributor's total expenses
incurred that year with respect to the distribution of Shares, and such other
information as from time-to-time may be reasonably requested by the Trustees.
6. RELATED AGREEMENTS. Any agreement related to this Plan shall be in
writing and shall provide that: (i) such agreement may be terminated with
respect to a Fund at any time, without payment of any penalty, by vote of a
majority of Trustees who are not "interested persons" of the Trust and have
no direct of indirect financial interest in the operation of this Plan or in
any agreements related to this Plan (the "Independent Trustees") or by a vote
of a majority of the outstanding voting securities of Class C of the Fund, on
not more than sixty days written notice to any other party to the agreement;
(ii) such agreement shall automatically terminate in the event of its
assignment; (iii) such agreement shall go into effect when approved by a
vote of the Trustees and the Independent Trustees cast in person at a meeting
called for the purpose of voting on such agreement; and (iv) such agreement
shall, unless terminated as herein provided, continue in effect with respect
to a Fund from year to year only so long as such continuance is specifically
approved at least annually by a vote of the Trustees and the Independent
Trustees cast in person at a meeting called for the purpose of voting on such
continuance.
7. EFFECTIVENESS, CONTINUATION, TERMINATION AND AMENDMENT. This plan
will take effect on the date first set forth above. Unless terminated as
hereinafter provided, this Plan shall continue in effect with respect to a
Fund from year to year from the date first set forth above only so long as
such continuance is specifically approved at least annually by a vote of the
Trustees and the Independent Trustees cast in person at a meeting called for
the purpose of voting on such continuance. This Plan may be terminated with
respect to a Fund at any time by vote of a majority of the Independent
Trustees or by the vote of the holders of the outstanding voting securities
of Class C of the Fund. This Plan may not be amended to increase materially
the amount of payments to be made by such a Fund without approval by a vote
of a majority of the outstanding voting securities of Class C of such Fund,
and all material
<PAGE>
amendments must be approved by a vote of the Trustees and of the Independent
Trustees cast in person at a meeting called for the purpose of voting on such
amendment.
8. COPIES. The Trust shall preserve copies of this Plan, and each
agreement related hereto and each report referred to in Section 5 hereof
(collectively the "Records") for a period of six years from the date of such
records and each such Record shall be kept in an easily accessible place for
the first two years of such period.
9. DEFINITIONS. For the purposes of the Plan, the terms "vote of a
majority of the outstanding voting securities", "interested persons", and
"assignment" shall have the meanings defined in the 1940 Act.
IN WITNESS WHEREOF, the Trust has executed this instrument in its name
and behalf, by one of its officers duly authorize, and the Distributor has
executed this instrument in its name and behalf, by one of its officers duly
authorized, as of the day and year first above written.
THE VALIANT FUND
By: /s/ Richard F. Curcio
------------------------
INTEGRITY INVESTMENTS, INC.
By: /s/ Richard F. Curcio
------------------------
<PAGE>
EXHIBIT 15(c)
Form of Amendment No. 2 to the
Distribution and Shareholder Servicing Plan
<PAGE>
Amendment No. 2
to
Distribution and Shareholder Servicing Plan (the "Plan")
of
The Valiant Fund (the "Trust")
dated July 29, 1993
Effective December 19, 1995 the Plan is hereby amended as follows:
Section 1 is amended to read in its entirety as follows: 1. THE PLAN. This
Plan is the Trust's written distribution plan, contemplated by Rule 12b-1
(the "Rule") under the Investment Company Act of 1940 (the "1940 Act"),
pursuant to which the Trust will bear certain costs related to the
distribution of the Class A and Class B shares (the "Class A Shares" and the
"Class B Shares") of its U.S. Treasury Income Portfolio, Tax-Exempt Money
Market Portfolio, General Money Market Portfolio and U. S. Treasury Money
Market Portfolio (each of the aforementioned Funds shall be referred to
herein individually as a "Fund" and collectively as the "Funds") and the
provision of services to holders of Shares. To the extent that any payments
(in addition to those specified in Paragraph 3) made by the Trust to
Integrity Management & Research, Inc. (the "Manager"), any sub-adviser, the
Distributor, any administrator of the Trust, or any of their affiliates,
including payment of investment advisory and services fees, may be deemed to
be indirect financing of any activity with is primarily intended to result in
the distribution of Shares, such payments shall be deemed to be authorized by
this Plan.
Sections 6 and 7 are amended to read in their entirety as follows:
6. RELATED AGREEMENTS. Any agreement related to this Plan shall be in
writing and shall provide that: (i) such agreement may be terminated with
respect to either Class A Shares or Class B Shares of a Fund at any time,
without payment of any penalty, by vote of a majority of Trustees who are not
"interested persons" of the Trust and have no direct or indirect financial
interest in the operation of this Plan or in any agreements related to this
Plan (the "Independent Trustees") or by a vote of a majority of the
outstanding voting securities of the affected Class of the affected Fund, on
not more than sixty days written notice to any other party to the agreement;
(ii) such agreement shall automatically terminate in the event of its
assignment; (iii) such agreement shall go into effect when approved by a vote
of the Trustees and the Independent Trustees cast in person at a meeting
called for the purpose of voting on such agreement; and (iv) such agreement
shall, unless terminated as herein provided,
<PAGE>
continue in effect with respect to a Class of a Fund from year to year only
so long as such continuance is specifically approved at least annually by a
vote of the Trustees and the Independent Trustees cast in person at a meeting
called for the purpose of voting on such continuance.
7. EFFECTIVENESS, CONTINUATION, TERMINATION AND AMENDMENT. This plan
will take effect on the date first set forth above. Unless terminated as
hereinafter provided, this Plan shall continue in effect with respect to a
Class of a Fund from year to year from the date first set above only so long
as such continuance is specifically approved at least annually by a vote of
the Trustees and the Independent Trustees cast in person at a meeting called
for the purpose of voting on such continuance. This Plan may be terminated
with respect to a Class of a Fund at any time by vote of a majority of the
Independent Trustees or by the vote of the holders of the outstanding voting
securities of the affected Class of the affected Fund. This Plan may not be
amended to increase materially the amount of payments to be made by a Class
of a Fund without approval by a vote of a majority of the outstanding voting
securities of the affected Class of the affected Fund and all material
amendments must be approved by a vote of the Trustees and of the Independent
Trustees cast in person at a meeting called for the purpose of voting on such
amendment.
Except as set forth above, the Amendment does not alter or amend the Plan,
which remains in full force and effect. The Amendment is not intended to,
and does not, amend to increase materially the amounts to be paid by a Fund
of the Trust under the Plan as originally adopted.
THE VALIANT FUND
By:_____________________________
INTEGRITY INVESTMENTS, INC.
By:_______________________________
<PAGE>
EXHIBIT 15(d)
Amendment No. 1 to the
Distribution and Shareholder Servicing Plan
<PAGE>
Amendment No. 1 (the "Amendment")
to
Distribution and Shareholder Servicing Plan (the "Plan")
of
The Valiant Fund (the "Trust")
dated July 29, 1993
The first sentence of Section 3 of the Plan is hereby amended, effective
December 14, 1993, to read as follows:
3. PAYMENTS FOR DISTRIBUTION ASSISTANCE AND SUPPORT SERVICES. The Trust
will make payments to the Distributor, within forty-five (45) days of the end
of each calendar month of an annualized fee of up to .35% of each Fund's
average daily net assets, computed as of the close of each business day,
subject to such reductions, if any, as may be necessary to comply with the
rules of the Securities and Exchange Commission or the National Association
of Securities Dealers, Inc.
Except as set forth above, the Amendment does not alter or amend the Plan,
which remains in full force and effect. The Amendment is not intended to,
and does not, amend to increase materially the amounts to be paid by a Fund
of the Trust under the Plan as originally adopted.
The U.S. Government Money Market Portfolio has been renamed the U.S. Treasury
Income Portfolio, effective December 30, 1993.
THE VALIANT FUND
/s/ Richard F. Curcio
------------------------
By: Richard F. Curcio
Its: President
INTEGRITY INVESTMENTS, INC.
/s/ Richard F. Curcio
------------------------
By: Richard F. Curcio
Its: President
<PAGE>
EXHIBIT 15(e)
Distribution and Shareholder Servicing Plan
<PAGE>
DISTRIBUTION AND SHAREHOLDER SERVICING PLAN
OF
THE VALIANT FUND
DISTRIBUTION AND SHAREHOLDER SERVICING PLAN (the "Plan") dated as of
this 29th day of July, 1993, of The Valiant Fund (the "Trust").
1. THE PLAN. This Plan is the Trust's written distribution plan,
contemplated by Rule 12b-1 (the "Rule") under the Investment Company Act of
1940 (the "1940 Act"), pursuant to which the Trust will bear certain costs
related to the distribution of shares (the "Shares") of its U.S. Government
Money Market Portfolio, Tax-Exempt Money Market Portfolio, General Money
Market Portfolio and U.S. Treasury Money Market Portfolio (each of the
aforementioned Funds shall be referred to herein individually as a "Fund" and
collectively as the "Funds") and the provision of services to holders of
Shares. To the extent that any payments (in addition to those specified in
Paragraph 3) made by the Trust to Integrity Management & Research ,Inc. (the
"Manager"), any sub-adviser, the Distributor or 440 Financial Distributors,
Inc. (the "Administrator") or any of their affiliates, including payment of
investment advisory and services fees, may be deemed to be indirect financing
of any activity which is primarily intended to result in the distribution of
Shares, such payments shall be deemed to be authorized by this Plan.
2. "SERVICE PROVIDER." As used in this Plan, the term "Service
Provider" shall mean any broker, dealer, bank or other institution which:
(i) renders assistance in the distribution of Shares or in providing
continuing personal service to holders of Shares; (ii) furnishes Integrity
Investments, Inc. (the "Distributor") with such information as the
Distributor and the Trust shall reasonably request concerning the
distribution of Shares and the provision of such personal service; and (iii)
has been selected by the Distributor to receive payments under the Plan.
3. PAYMENTS FOR DISTRIBUTION ASSISTANCE AND SUPPORT SERVICES. The
Trust will make payments to the Distributor, within forty-five (45) days of
the end of each calendar month of an annualized fee of up to .50% of the
average daily net assets of each Fund's Shares, computed as of the close of
each business day, subject to such reductions, if any, as may be necessary to
comply with the rules of the Securities and Exchange Commission or the
National Association of Securities Dealers, Inc. Such fee shall compensate
the Distributor for distribution-related services as follows: (i) its
services as principal underwriter of Shares including bearing costs related
to distribution of shares of the Fund, including but not limited to costs and
expenses of printing and distributing prospectuses, Statements of Additional
Information, annual reports and sales literature (after such items have been
prepared and set in type) which are intended to be provided to prospective
investors in connection with the offering of Shares, and paying compensation
to dealers and registered representatives for selling Shares, and (ii)
compensating Service Providers and the Distributor for providing continuing
personal services to shareholders after a sale of Shares, maintaining
shareholder accounts, and providing administrative service with respect to
shareholder accounts.
<PAGE>
Distribution-related services include, but are not limited to, the
following: advertising the availability of services and products; designing
material to send to customers and developing methods of making such materials
accessible to customers; providing information about the product needs of
customers; providing facilities to solicit sales and to answer questions from
prospective and existing investors about the Portfolios; receiving and
answering correspondence from prospective investors, including requests for
sale literature, prospectuses and Statements of Additional Information;
displaying and making sales literature and prospectuses available on the
service organization's premises; acting as liaison between shareholders and
the Portfolios, including obtaining information from the Portfolios and
providing performance and other information about the Portfolios; and
providing additional personal services and/or shareholder account maintenance
services or additional distribution-related services.
4. SELECTION AND NOMINATION OF TRUSTEES. While this Plan is in
effect, the selection and nomination of the Trustees of the Trust (the
"Trustees") who are not "interested persons" of the Trust shall be committed
to the discretion of the Trustees who are not "interested persons" of the
Trust. Nothing herein shall prevent the Trustees who are not "interested
persons" of the Trust from soliciting the view or the involvement of others
in such selection or nomination if such selection and nomination is made by
Trustees who are not "interested persons" of the Trust.
5. REPORTS. While this Plan is in effect, the Distributor shall
provide at least quarterly a written report to the Trustees detailing the
amount of all payments made pursuant to this Plan, and the purposes for which
the payments were made, the amount of the Distributor's total expenses
incurred that year with respect to the distribution of Shares, and such other
information as from time-to-time may be reasonably requested by the Trustees.
6. RELATED AGREEMENTS. Any agreement related to this Plan shall be in
writing and shall provide that: (i) such agreement may be terminated with
respect to a Fund at any time, without payment of any penalty, by vote of a
majority of Trustees who are not "interested persons" of the Trust and have
no direct of indirect financial interest in the operation of this Plan or in
any agreements related to this Plan (the "Independent Trustees") or by a vote
of a majority of the outstanding voting securities of the Trust, on not more
than sixty days written notice to any other party to the agreement; (ii)
such agreement shall automatically terminate in the event of its assignment;
(iii) such agreement shall go into effect when approved by a vote of the
Trustees and the Independent Trustees cast in person at a meeting called for
the purpose of voting on such agreement; and (iv) such agreement shall,
unless terminated as herein provided, continue in effect from year to year
only so long as such continuance is specifically approved at least annually
by a vote of the Trustees and the Independent Trustees cast in person at a
meeting called for the purpose of voting on such continuance.
7. EFFECTIVENESS, CONTINUATION, TERMINATION AND AMENDMENT. This plan
will take effect on the date first set forth above. Unless terminated as
hereinafter provided, this Plan shall continue in effect from year to year
from the date first set forth above only so long as such continuance is
specifically approved at least annually by a vote of the Trustees and the
Independent Trustees cast in person at a meeting called for the purpose of
voting on such continuance. This Plan may be terminated at any time by vote
of a majority of the Independent Trustees or by the vote of the holders of
the Fund's outstanding voting securities. This Plan may not be amended to
increase materially the amount of payments to be made by such a Fund
<PAGE>
without approval by a vote of a majority of the outstanding voting securities
of such Fund, and all material amendments must be approved by a vote of the
Trustees and of the Independent Trustees cast in person at a meeting called
for the purpose of voting on such amendment.
8. COPIES. The Trust shall preserve copies of this Plan, and each
agreement related hereto and each report referred to in Section 5 hereof
(collectively the "Records") for a period of six years from the date of such
records and each such Record shall be kept in an easily accessible place for
the first two years of such period.
9. DEFINITIONS. For the purposes of the Plan, the terms "vote of a
majority of the outstanding voting securities", "interested persons", and
"assignment" shall have the meanings defined in the 1940 Act.
IN WITNESS WHEREOF, the Trust has executed this instrument in its name
and behalf, by one of its officers duly authorize, and the Distributor has
executed this instrument in its name and behalf, by one of its officers duly
authorized, as of the day and year first above written.
THE VALIANT FUND
By: /s/ Richard F. Curcio
---------------------------
INTEGRITY INVESTMENTS, INC.
By: /s/ Richard F. Curcio
---------------------------
<PAGE>
EXHIBIT 16
Schedule for Computation of Performance Quotation
<PAGE>
SCHEDULE FOR COMPUTATION OF
PERFORMANCE QUOTATIONS
YIELD (as of August 31, 1994)
7 Day Yield = [((a-b)DIVIDED BYc)DIVIDED BY7] x 365
7 Day Effective Yield = ([((a-b)DIVIDED BYc)DIVIDED BY7] + 1) 365-1
Where: a = Interest earned during the period
b = Expense accrued for the period (net of reimbursement)
c = The average number of shares outstanding during the period
that were entitled to receive dividends
1. U.S. Treasury Money Market
CLASS A CLASS B
a = 22.51 a = 10,869.96
b = 0.96 b = 1,040.58
c = 25,206.27 c = 12,167,569.43
7 Day Yield = 4.46 7 Day Yield = 4.21
7 Day Effective Yield = 4.56 7 Day Effective Yield = 4.30
2. General Money Market
CLASS A CLASS B
a = 169,466.52 a = 8,764.58
b = 7,167.42 b = 834.89
c = 186,238,001.38 c = 9,629,451.95
7 Day Yield = 4.54 7 Day Yield = 4.29
7 Day Effective Yield = 4.65 7 Day Effective Yield = 4.39
3. Tax-Exempt Money Market
CLASS A
a = 150,079.53
b = 9,713.25
c = 253,052,323.53
7 Day Yield = 2.89
7 Day Effective Yield = 2.93
<PAGE>
EXHIBIT 18
Form of Plan for Multiple Classes of Shares
<PAGE>
THE VALIANT FUND
PLAN FOR MULTIPLE CLASSES OF SHARES
OCTOBER 26, 1995
WHEREAS, The Valiant Fund (the "Trust") is a Massachusetts business
trust, engaged in business as an open-end management investment company and
registered as such under the Investment Company Act of 1940, as amended (the
"1940 Act");
WHEREAS, pursuant to the terms of the Trust's Agreement and Declaration
of Trust, as well as the 1940 Act and the rules and regulations thereunder,
the Board of Trustees of the Trust (the "Board") has authority to approve and
authorize the issuance of, and has approved and authorized the issuance of,
shares of beneficial interest as Class A Shares, Class B Shares, Class C
Shares and Class D Shares of each investment portfolio (a "Portfolio") of the
Trust listed herein on Schedule A, as may be amended;
WHEREAS, the Trust wishes to adopt this Plan for Multiple Classes of
Shares (the "Multi-Class Plan"), which is a plan as contemplated by Rule
18f-3 of the 1940 Act; and
WHEREAS, at a meeting held on October 26, 1995, the Board, including a
majority of the Trustees who are not interested persons of the Trust (as
defined in section 2(a)(19) of the 1940 Act) (the "Independent Trustees"),
approved and adopted this Multi-Class Plan and determined that this
Multi-Class Plan is: (a) in the best interests of the holders of Class A
Shares; (b) in the best interests of the holders of Class B Shares; (c) in
the best interests of the holders of Class C Shares, (d) in the best
interests of the holders of Class D Shares and (e) in the best interests of
the Trust as a whole;
NOW, THEREFORE, this Multi-Class Plan, as amended from time to time,
shall remain in effect until such time as the Board terminates this
Multi-Class Plan.
SECTION I: CLASS DISTRIBUTION AND SHAREHOLDER SERVICES FEES
Class A Shares of each Portfolio are offered at net asset value and are
not subject to any asset-based distribution or shareholder service fee.
Class B Shares of each Portfolio are offered at net asset value and
shall be subject to annual asset-based distribution and shareholder service
fees (as provided for by the Distribution and Shareholder Servicing Plan
pursuant to Rule 12b-1 under the 1940 Act (the "12b-1 Plan")) of 0.25% of the
average daily net assets of the Class B Shares of such Portfolio. Such fees
are calculated daily and paid monthly to Integrity Investments, Inc. (the
"Distributor") and service providers that provide shareholder support
services.
<PAGE>
Class C Shares of each Portfolio will be offered at net asset value and
will be subject to annual asset-based distribution fees and shareholder
service fees (as provided for by the Distribution and Shareholder Servicing
Plan for Class C Shares (the "Class C 12b-1 Plan")) of 0.40% of the average
daily net assets of the Class C Shares in each Portfolio. Such fees are
calculated daily and paid monthly to the Distributor and service providers
that provide shareholder support services.
Class D Shares of each Portfolio will be offered at net asset value and
will be subject to annual asset-based distribution fees and shareholder
service fees (as provided for by the Distribution and Shareholder Servicing
Plan for Class D Shares (the "Class D 12b-1 Plan")) of 0.50% of the average
daily net assets of the Class D Shares in each Portfolio. Such fees are
calculated daily and paid monthly to the Distributor and service providers
that provide shareholder support services.
Notwithstanding the foregoing, the aggregate amounts of any asset-based
distribution and/or shareholder service fee paid by the Trust shall not
exceed such amount as is permitted under Section 26(d) of the Rules of Fair
Practice of the National Association of Securities Dealers, Inc. (the
"NASD"), as amended from time to time, and any other rules or regulations
promulgated by the NASD or Securities and Exchange Commission applicable to
mutual fund distribution and service fees.
SECTION II: ALLOCATION OF CLASS EXPENSES; OTHER PROVISIONS
Class A Shares, Class B Shares, Class C Shares and Class D Shares
represent interests in the same Portfolios of the Trust and have no exchange
privileges or conversion features. Each class of shares shall have the same
rights, preferences, voting powers, restrictions and limitations, except as
follows:
(1) expenses related to the distribution of a class of shares or to the
services provided to shareholders of a class of shares shall be borne
solely by such class;
(2) each class will bear different Class Expenses (as defined below);
(3) each class will have exclusive voting rights with respect to matters
that exclusively affect such class and separate voting rights on any
matter submitted to shareholders in which the interests of one class
differ from the interests of any other class;
(4) each class will bear a different name or designation.
The Board, acting in its sole discretion, has determined that the
following expenses attributable to the shares of a particular class ("Class
Expenses") will be borne solely by the class to which they are attributable:
2
<PAGE>
(1) asset-based distribution and shareholder service fees; and
(2) extraordinary non-recurring expenses including litigation and other
legal expenses relating to a particular class.
Class Expenses may be waived or reimbursed proportionately and on a pro
rata basis among classes of a Portfolio by Integrity Management and Research,
Inc. or any other provider of services to the Trust.
Investment advisory fees, custodial fees, and other expenses relating to
the management of a Portfolios' assets shall not be allocated on a
class-specific basis.
SECTION III: ALLOCATION OF FUND INCOME AND EXPENSES
Income, realized and unrealized capital gains and losses, and expenses
that are not allocated to a specific class pursuant to Section II above,
shall be allocated to each class of a Portfolio on the basis of the net asset
value of that class in relation to the net asset value of the Portfolio.
SECTION IV: AMENDMENTS
This Multi-Class Plan may not be amended to change any material
provision unless such amendment is approved by a vote of the majority of the
Board, including a majority of the Trustees who are not interested persons of
the Trust, based on its finding that the amendment is in the best interest of
each class individually and the Trust as a whole.
IN WITNESS WHEREOF, the Trust has executed this Multi-Class Plan on the
day and year set forth below.
Date:_______________________
THE VALIANT FUND
By:_______________________
Title:____________________
Attest:_______________________
3
<PAGE>
SCHEDULE A
The Valiant Fund
General Money Market Portfolio
U.S. Treasury Money Market Portfolio
U.S. Treasury Income Portfolio
Tax-Exempt Money Market Portfolio
4
<PAGE>
EXHIBIT 19(b)
Powers of Attorney
<PAGE>
POWER OF ATTORNEY
The undersigned Trustee of The Valiant Fund (the "Fund") hereby appoints
Susan M. Beauregard, Vice President, Treasurer and Secretary of the Fund, his
true and lawful attorney-in-fact with authority to execute in the name of
such Trustee on behalf of the Fund and to file with the U.S. Securities &
Exchange Commission, Commodity Futures Trading Commission or any other
federal or state regulatory body ("Regulatory Agency"), on behalf of the Fund
any and all regulatory materials necessary or advisable to enable the Fund to
comply with the Securities Act of 1933, as amended, and/or the Investment
Company Act of 1940, as amended, and any other rules, regulations and
requirements of such Regulatory Agency. The powers of the aforesaid
attorney-in-fact are hereby expressly limited to the execution and filing of
such documents with the appropriate Regulatory Agency.
(Signature) /s/ John S. Culbertson
------------------------
(Print name) John S. Culbertson
------------------------
Date: November 15, 1994
<PAGE>
POWER OF ATTORNEY
The undersigned Trustee of The Valiant Fund (the "Fund") hereby appoints
Susan M. Beauregard, Vice President, Treasurer and Secretary of the Fund, his
true and lawful attorney-in-fact with authority to execute in the name of
such Trustee on behalf of the Fund and to file with the U.S. Securities &
Exchange Commission, Commodity Futures Trading Commission or any other
federal or state regulatory body ("Regulatory Agency"), on behalf of the Fund
any and all regulatory materials necessary or advisable to enable the Fund to
comply with the Securities Act of 1933, as amended, and/or the Investment
Company Act of 1940, as amended, and any other rules, regulations and
requirements of such Regulatory Agency. The powers of the aforesaid
attorney-in-fact are hereby expressly limited to the execution and filing of
such documents with the appropriate Regulatory Agency.
(Signature) /s/ Richard F. Curcio
------------------------
(Print name) Richard F. Curcio
------------------------
Date: November 15, 1994
<PAGE>
POWER OF ATTORNEY
The undersigned Trustee of The Valiant Fund (the "Fund") hereby appoints
Susan M. Beauregard, Vice President, Treasurer and Secretary of the Fund, his
true and lawful attorney-in-fact with authority to execute in the name of
such Trustee on behalf of the Fund and to file with the U.S. Securities &
Exchange Commission, Commodity Futures Trading Commission or any other
federal or state regulatory body ("Regulatory Agency"), on behalf of the Fund
any and all regulatory materials necessary or advisable to enable the Fund to
comply with the Securities Act of 1933, as amended, and/or the Investment
Company Act of 1940, as amended, and any other rules, regulations and
requirements of such Regulatory Agency. The powers of the aforesaid
attorney-in-fact are hereby expressly limited to the execution and filing of
such documents with the appropriate Regulatory Agency.
(Signature) /s/ H. Willis Day, Jr.
------------------------
(Print name) H. Willis Day, Jr.
------------------------
Date: November 2, 1994
<PAGE>
POWER OF ATTORNEY
The undersigned Trustee of The Valiant Fund (the "Fund") hereby appoints
Susan M. Beauregard, Vice President, Treasurer and Secretary of the Fund, his
true and lawful attorney-in-fact with authority to execute in the name of
such Trustee on behalf of the Fund and to file with the U.S. Securities &
Exchange Commission, Commodity Futures Trading Commission or any other
federal or state regulatory body ("Regulatory Agency"), on behalf of the Fund
any and all regulatory materials necessary or advisable to enable the Fund to
comply with the Securities Act of 1933, as amended, and/or the Investment
Company Act of 1940, as amended, and any other rules, regulations and
requirements of such Regulatory Agency. The powers of the aforesaid
attorney-in-fact are hereby expressly limited to the execution and filing of
such documents with the appropriate Regulatory Agency.
(Signature) /s/ Roger F. Dumas
------------------------
(Print name) Roger F. Dumas
------------------------
Date: November 7, 1994
<PAGE>
POWER OF ATTORNEY
The undersigned Trustee of The Valiant Fund (the "Fund") hereby appoints
Susan M. Beauregard, Vice President, Treasurer and Secretary of the Fund, his
true and lawful attorney-in-fact with authority to execute in the name of
such Trustee on behalf of the Fund and to file with the U.S. Securities &
Exchange Commission, Commodity Futures Trading Commission or any other
federal or state regulatory body ("Regulatory Agency"), on behalf of the Fund
any and all regulatory materials necessary or advisable to enable the Fund to
comply with the Securities Act of 1933, as amended, and/or the Investment
Company Act of 1940, as amended, and any other rules, regulations and
requirements of such Regulatory Agency. The powers of the aforesaid
attorney-in-fact are hereby expressly limited to the execution and filing of
such documents with the appropriate Regulatory Agency.
(Signature) /s/ Kenneth J. Phelps
------------------------
(Print name) Kenneth J. Phelps
------------------------
Date: November 16, 1994
<PAGE>
POWER OF ATTORNEY
The undersigned Trustee of The Valiant Fund (the "Fund") hereby appoints
Susan M. Beauregard, Vice President, Treasurer and Secretary of the Fund, his
true and lawful attorney-in-fact with authority to execute in the name of
such Trustee on behalf of the Fund and to file with the U.S. Securities &
Exchange Commission, Commodity Futures Trading Commission or any other
federal or state regulatory body ("Regulatory Agency"), on behalf of the Fund
any and all regulatory materials necessary or advisable to enable the Fund to
comply with the Securities Act of 1933, as amended, and/or the Investment
Company Act of 1940, as amended, and any other rules, regulations and
requirements of such Regulatory Agency. The powers of the aforesaid
attorney-in-fact are hereby expressly limited to the execution and filing of
such documents with the appropriate Regulatory Agency.
(Signature) /s/ Rufus C. Cushman Jr.
------------------------
(Print name) Rufus C. Cushman Jr.
------------------------
Date: September 19, 1995
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