<PAGE> 1
As filed with the Securities and Exchange Commission on January 29, 1999
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. 8
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 10
-------------------------------------------
The Valiant Fund
(Exact Name of Registrant)
871 Venetia Bay Boulevard
Suite 370
Venice, FL 34292
(Address of Principal Executive Office)
Registrant's Telephone Number (813) 952-0441
Ellen F. Stoutamire, Esq. Timothy Diggins, Esq.
3435 Stelzer Road and Ropes & Gray
Columbus, OH 43219 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:
x on March 31, 1999 pursuant to paragraph (a) of
--- Rule 485
60 days after filing pursuant to paragraph (a)
--- of Rule 485
immediately upon filing pursuant to paragraph
--- (b) of Rule 485
on pursuant to paragraph (b) of Rule 485
---
================================================================================
- --------------------------------------------------------------------------------
<PAGE> 2
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> 3
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
Explanatory Note
This post-effective amendment no. 8 (the "Amendment") to the Registrant's
registration statement on Form N-1A (File no. 33-59840) (the "Registration
Statement") is being filed to amend the Registrant's disclosure with respect to
the offering of Class E shares for each of the four series of shares of the
Registrant (the "Funds"). Each Fund's prospectus relating to Class A shares,
Class B shares, Class C shares and Class D shares dated December 15, 1998 has
been previously filed under Rule 485(b) on November 24, 1998 and is herein
incorporated by reference.
<PAGE> 4
PART A
PROSPECTUSES
THE VALIANT FUND
POST-EFFECTIVE AMENDMENT NO. 8
Prospectuses included in this filing:
.....o........The Valiant Fund Prospectus for Class A shares of all Portfolios;*
.....o........The Valiant Fund Prospectus for Class B shares of all Portfolios;*
.....o........The Valiant Fund Prospectus for Class C shares of all Portfolios;*
.....o........The Valiant Fund Prospectus for Class D shares of all Portfolios;*
.....o........The Valiant Fund Prospectus for Class E shares of all Portfolios.
*Prospectus dated December 15, 1998 is incorporated by reference to this filing.
<PAGE> 5
The Valiant Fund
CLASS E SHARES
The Valiant Fund (the "Trust") is an open-end investment company comprised of
four separate investment portfolios (the "Portfolios"):
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 five classes of shares. The five classes of shares are
identical, except as to the services offered to and the expenses borne by each
class. Before purchasing, you should determine which class is appropriate for
you. THIS PROSPECTUS RELATES ONLY TO CLASS E 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 15, 1998, as
supplemented March 31, 1999 and 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 - March 31, 1999
<PAGE> 6
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....................................... 10
Year 2000 Issues......................................................... 11
Valuation of Shares ..................................................... 12
Distributions and Taxes.................................................. 12
Performance Information.................................................. 14
Investment Restrictions.................................................. 14
Certain Investment Strategies, Policies and Risk Considerations.......... 15
Appendix................................................................. 20
<PAGE> 7
EXPENSE INFORMATION
<TABLE>
<CAPTION>
U.S. Treasury Money U.S. Treasury Income General Money Market Tax-Exempt Money
Market Portfolio Portfolio Market
Portfolio Portfolio
Class E Class E Class E Class E
<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* 0.80% 0.80% 0.80% 0.80%
Other Expenses
(after expense
reimbursement) 0.00% 0.00% 0.00% 0.00%
----- ----- ----- -----
Total Fund
Operating Expenses
(after expense
reimbursement) 1.00% 1.00% 1.00% 1.00%
===== ===== ===== =====
</TABLE>
- -------------------------------------
* The Trust has adopted a Distribution and Shareholder Servicing Plan for the
Class E Shares (the "Plan"). Payments under the Plan are authorized at the rate
of up to 0.80% of the average daily net assets. See "Management Fees and Other
Expenses" for further information on the Plan.
In addition to the Class E shares offered by this prospectus, the Trust offers
four other classes of shares. Each class of shares respresents an interest in
the same assets of each Portfolio and is identical in all respects except that
each class is subject to lower annual distribution and service fees, which will
affect performance, and each class has separate or exclusive voting rights on
any matter submitted to shareholders in which the interests of one class differ
from the interests of the other class. An investor may obtain prospectuses
relating to the Class A and Class B shares, Class C 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 except the Management Fee are paid by the Manager and are not
charged directly to an investor's account. There are no sales charges 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 E shares of each Portfolio of 1.00% of average daily net assets of Class E
shares. The Manager will voluntarily reimburse any expenses above the expense
limitations. The expense limitations are voluntary but will remain in effect
through December 1999. 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.
<TABLE>
<CAPTION>
1 Year 3 Years
<S> <C> <C>
U.S. Treasury Money Market $10 $32
Portfolio
U.S. Treasury Income Portfolio $10 $32
General Money Market Portfolio $10 $32
Tax-Exempt Money Market Portfolio $10 $32
</TABLE>
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.
<PAGE> 8
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.
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
<PAGE> 9
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.
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, BISYS
Fund Services Ohio, Inc. (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, The Bank of New York (the "Custodian"), 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 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
<PAGE> 10
guarantee to the Transfer Agent, BISYS Fund Services Ohio, Inc., 3435 Stelzer
Road, Columbus, Ohio 43219.
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, 871 Venetia Bay Boulevard, Suite 370, Venice, Florida 34292. 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.
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 the outstanding shares of common stock of the Manager. Mr. Curcio has
19 years of experience in mutual fund industry marketing, sales and operations.
Located at 871 Venetia Bay Boulevard, Suite 370, Venice, Florida 34292, 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:
<PAGE> 11
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.
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. BISYS Fund Services Ohio, Inc. ("BISYS" or the "Administrator"),
3435 Stelzer Road, Columbus, Ohio 43219, 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. Pursuant to a Fund Accounting Agreement, the Administrator
assists the Trust in calculating net asset values and provides certain other
accounting services for each Fund and is paid a fee by the Manager.
Distribution and Shareholder Servicing Plan
Integrity Investments, Inc., 871 Venetia Bay Boulevard, Suite 370, Venice,
Florida 34292, is the Trust's Distributor. The Trust has adopted a Distribution
and Shareholder Servicing Plan for the Class E 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 at the rate of up to 0.80% of each Portfolio's average daily
net assets for the Class E 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 E 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.
Custodian, Transfer and Dividend Disbursing Agent
The Bank of New York serves as the Trust's custodian and holds all portfolio
securities and cash assets of the Trust. The Custodian is authorized to deposit
securities in securities depositories or to use the services of subcustodians.
BISYS serves as the Trust's Transfer Agent and dividend disbursing agent and
maintains the Trust's shareholder records. BISYS' fees are paid by the Manager.
YEAR 2000 ISSUES
Like other funds and business organizations around the world, the Trust could be
adversely affected if the computer systems used by the Manager and the Trust's
other service providers do not properly process and calculate date-related
information for the year 2000 and beyond. In addition, Year 2000 issues may
adversely affect companies in which the Trust invests where, for example, such
companies incur substantial costs to address Year 2000 issues or suffer losses
caused by the failure to adequately or timely do so.
The Trust has been assured that the Manager and the Trust's other service
providers (i.e., Sub-Adviser, Administrator, Transfer Agent, Fund Accounting
Agent, Custodian and Distributor) have developed and are implementing clearly
defined and documented plans intended to minimize risks to services critical to
the Trust's operations associated with Year 2000 issues. Internal efforts
include a commitment to dedicate adequate staff and funding to identify and
<PAGE> 12
remedy Year 2000 issues, and specific actions such as inventorying software
systems, determining inventory items that may not function properly after
December 31, 1999, reprogramming or replacing such systems, and retesting for
Year 2000 readiness. The Trust's Manager and service providers are likewise
seeking assurances from their respective vendors and suppliers that such
entities are addressing any Year 2000 issues, and each provider intends to
engage, where appropriate, in private and industry or "streetwide" interface
testing of systems for Year 2000 readiness.
In the event that any systems upon which the Trust is dependent are not Year
2000 ready by December 31, 1999, administrative errors and account maintenance
failures would likely occur. While the ultimate costs or consequences of
incomplete or untimely resolution of Year 2000 issues by the Manager or the
Trust's service providers cannot be accurately assessed at this time, the Trust
currently has no reason to believe that the Year 2000 plans of the Manager and
the Trust's service providers will not be completed by December 31, 1999, or
that the anticipated costs associated with full implementation of their plans
will have a material adverse impact on either their business operations or
financial condition of those of the Trust. The Trust and the Manager will
continue to closely monitor developments relating to this issue, including
development by the Manager and the Trust's service providers of contingency
plans for providing back-up computer services in the event of a systems failure
or the inability of any provider to achieve Year 2000 readiness. Separately, the
Manager will monitor potential investment risk related to Year 2000 issues.
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 unless the
investor has elected to reinvest such dividends 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 capital gains
that are distributed to shareholders or deemed to have been distributed to
shareholders.
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
<PAGE> 13
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.
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.
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
<PAGE> 14
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.
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.
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
<PAGE> 15
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.
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
<PAGE> 16
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 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
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.
<PAGE> 17
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.
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.
<PAGE> 18
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 15, 1998 as supplemented March 31, 1999
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 15,
1998). 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.
<PAGE> 19
TABLE OF CONTENTS
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
Integrity Management & Research, Inc. (the "Manager")
Sub-Adviser
David L. Babson & Co. Inc. (the "Sub-Adviser")
Distributor
Integrity Investments, Inc. (the "Distributor")
Administrator/ Transfer Agent
BISYS Fund Services Ohio, Inc. (the "Administrator" and the "Transfer Agent")
Custodian:
The Bank of New York (the "Custodian")
<PAGE> 20
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;
(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.
<PAGE> 21
(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.
<PAGE> 22
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.
(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
<PAGE> 23
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;
(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.
(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.
<PAGE> 24
(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, 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.
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 Tax-Exempt
Money Market Portfolio is subject to the 5% limitation contained in investment
limitation (1) above. However, in accordance with the Rule, the Tax-Exempt 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 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.
<PAGE> 25
(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 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
<PAGE> 26
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.
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.
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
<PAGE> 27
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.
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
<PAGE> 28
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 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 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, 1998 were:
<TABLE>
<CAPTION>
Portfolio Yield
<S> <C>
U.S. Treasury Money Market Portfolio - Class A 5.31%
U.S. Treasury Money Market Portfolio - Class B 5.06%
U.S. Treasury Money Market Portfolio- Class D 4.81%
General Money Market Portfolio - Class A 5.38%
General Money Market Portfolio - Class B 5.13%
Tax-Exempt Money Market Portfolio - Class A 3.18%
</TABLE>
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
<PAGE> 29
from the result. The effective yields for each Portfolio for the seven-day
period ended August 31, 1998 were:
<TABLE>
<CAPTION>
Portfolio Yield
<S> <C>
U.S. Treasury Money Market Portfolio - Class A 5.46%
U.S. Treasury Money Market Portfolio - Class B 5.19%
U.S. Treasury Money Market Portfolio- Class D 4.93%
General Money Market Portfolio - Class A 5.53%
General Money Market Portfolio - Class B 5.26%
Tax-Exempt Money Market Portfolio - Class A 3.23%
</TABLE>
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, 1998 was 5.21%. 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, 1998 was 5.30%. 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 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(R) 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
<PAGE> 30
closed, the Portfolios' net asset value per share may be affected when investors
may not purchase or redeem shares.
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 to shareholders of
record in those months and paid in January of the following year are taxable as
if paid on December 31st.
Capital Gains Distributions. The Portfolios may distribute 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.
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>
<S> <C> <C>
Name, Address and Age Position(s) Held With Principal Occupation During Past Five Years
Registrant
John S. Culbertson Trustee Retired. Trust Consultant with Fidelity
1995 Lake Marshall Drive Investments Institutional Services Co. from 1990
Gibsonia, PA 15044 to 1993.
68
Rufus C. Cushman, Jr. Trustee Retired. Money Manager with Fidelity Management &
10 Corn Point Road Research Corp. from 1968 through 1994.
Marblehead, MA 01945
65
Richard F. Curcio* President, Trustee, Founded Integrity Investments, Inc. (a
871 Venetia Bay Boulevard Chairman of the Board of broker/dealer) and Integrity Management &
Suite 370 Trustees Research, Inc. (an investment adviser) in 1992, and
Venice, FL 34292 is currently President and Director of each.
51 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
73
Roger F. Dumas Trustee Private investor since 1987.
151 Tremont Street
Boston, MA 02111
63
Kenneth J. Phelps* Trustee President, Principal and Director of Reliance
5545 Cross Gate Court, N.W. Trust Company, Atlanta, GA since 1992. Chairman,
Atlanta, GA 30327 Chief Executive Officer and Director, C&S/Sovran
57 Trust Company, Inc. from 1987 to 1992.
Susan M. Schwartz Vice President, Secretary Operations Manager of Integrity Investments, Inc.
871 Venetia Bay Boulevard and Treasurer since 1993. Account Officer of Fidelity
Suite 370 Investments from 1985 to 1993.
Venice, FL 34292
35
</TABLE>
<PAGE> 31
<TABLE>
<S> <C> <C>
Robert Melley Vice President, Assistant Senior Vice President of Integrity Investments,
871 Venetia Bay Boulevard Secretary and Assistant Inc. since April 1994. Senior Vice President of
Suite 370 Treasurer Fidelity Distributors, Inc. from 1981 to 1994.
Venice, FL 34292
60
</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, 1998, the Trust paid an aggregate of $ 20,000 to the
Independent Trustees. The following table shows compensation by Trustee for the
fiscal year ended August 31, 1998.
COMPENSATION TABLE
<TABLE>
<CAPTION>
Aggregate Pension or Retirement Estimated Annual
Name of Person, Compensation From the Benefits Accrued As Part Benefits Upon
Position Trust of Fund Expenses Retirement
<S> <C> <C> <C>
John S. Culbertson $5,000 None None
Trustee
Rufus C. Cushman $5,000 None None
Trustee
Richard F. Curcio None None None
President, Trustee,
Chairman of the
Board of Trustees
H. Willis Day, Jr. $5,000 None None
Trustee
Roger F. Dumas $5,000 None None
Trustee
Kenneth J. Phelps None None None
Trustee
</TABLE>
As of October 28, 1998, 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 fiscal year listed, the Portfolio paid the Manager:
<TABLE>
<CAPTION>
- ------------------- -------------------------- --------------------- ---------------------- ------------------------
Fiscal Year U.S. Treasury Money U.S. Treasury General Money Market Tax-Exempt Money
Ended Market Portfolio Income Portfolio Portfolio Market Portfolio
- ------------------- -------------------------- --------------------- ---------------------- ------------------------
<S> <C> <C> <C> <C>
8/31/98 $ 936,822 $ 36,010 $ 897,707 $ 514,182
- ------------------- -------------------------- --------------------- ---------------------- ------------------------
</TABLE>
<PAGE> 32
<TABLE>
<S> <C> <C> <C> <C>
- ------------------- -------------------------- --------------------- ---------------------- ------------------------
8/31/97 $ 823,706 $ 33,215 $ 975,895 $ 528,012
- ------------------- -------------------------- --------------------- ---------------------- ------------------------
8/31/96 $ 385,690 $ 8,578 $ 958,106 $ 572,477
- ------------------- -------------------------- --------------------- ---------------------- ------------------------
</TABLE>
For fiscal year listed, the Portfolio paid the Sub-Adviser:
<TABLE>
<CAPTION>
- ------------------- -------------------------- --------------------- ---------------------- ------------------------
Fiscal Year U.S. Treasury Money U.S. Treasury General Money Market Tax-Exempt Money
Ended Market Portfolio Income Portfolio Portfolio Market Portfolio
- ------------------- -------------------------- --------------------- ---------------------- ------------------------
<S> <C> <C> <C> <C>
8/31/98 $ 332,963 $ 12,605 $ 317,968 $ 182,645
- ------------------- -------------------------- --------------------- ---------------------- ------------------------
8/31/97 $ 293,764 $ 11,785 $ 345,965 $ 188,730
- ------------------- -------------------------- --------------------- ---------------------- ------------------------
8/31/96 $ 145,722 $ 6,319 $ 363,469 $ 217,873
- ------------------- -------------------------- --------------------- ---------------------- ------------------------
</TABLE>
ADMINISTRATION AGREEMENT AND OTHER CONTRACTS
Administrator. BISYS Fund Services Ohio, Inc. ("BISYS") serves as Administrator
to the Trust pursuant to an administration agreement dated September 1, 1998
(the "Administration Agreement") between the Trust, BISYS and the Manager. The
Administration Agreement continues in effect until August 31, 2000, ("Initial
Term"). Thereafter, unless otherwise terminated as provided herein, this
Agreement shall be renewed automatically for successive one-year periods
("Rollover Periods"). This Agreement may be terminated without penalty (i) by
provision of a notice of nonrenewal in the manner set forth in the
Administration Agreement, (ii) by mutual agreement of the parties or (iii) for
"cause," as defined in the Administration Agreement, upon the provision of 60
days advance written notice by the party alleging cause. In addition, subject to
the payment obligation set forth in the Administration Agreement, this Agreement
may be terminated during any Rollover Period upon the provision of 90 days
advance written notice of termination. Written notice of nonrenewal must be
provided within 60 days of the end of the Initial Term or any Rollover Period,
as the case may be. The Administration Agreement contains provisions limiting
the liability of BISYS and requiring its indemnification by the Trust. Pursuant
to the Administration Agreement, BISYS provides the Trust with general office
facilities and supervises the overall administration of the Fund, including
among other responsibilities, assisting in the preparation and filing of all
documents required for compliance by the Trust with applicable laws and
regulations and arranging for the maintenance of books and records of the Trust.
BISYS provides persons (including directors, officers or other employees of
BISYS or its affiliates) satisfactory to the Board of Trustees to serve as
officers of the Trust. BISYS is a wholly owned indirect subsidiary of BISYS
Group, Inc., which is headquartered in Little Falls, New Jersey, and through its
subsidiaries provides a comprehensive array of products and services to
financial institutions and corporate clients including: mutual fund distribution
and administration, retirement plan services, insurance distribution and support
services and image and data processing outsourcing.
Pursuant to the Administration Agreement, the Manager pays BISYS compensation at
the following annualized rates for each Portfolio:
.025% for portfolio assets of $1.2 billion and less
.0125% for portfolio assets greater than $1.2 billion
Custodian The Bank of New York, ("Custodian") 90 Washington Street, New York,
New York 10286, is the Custodian for each Portfolio under custodian agreements
with respect to each Portfolio.
Fund Accounting Services. BISYS provides certain Fund accounting services
pursuant to a Fund Accounting Agreement dated September 1, 1998 (the "Fund
Accounting Agreement") between the Trust, BISYS and the Manager and shall
continue in effect with respect to a Portfolio, unless earlier terminated by
either party hereto as provided hereunder, until August 31, 2000. The Fund
Accounting Agreement's provisions for termination, limitation of liability and
indemnification are similar to those of the Trust's Administration Agreement.
Under the Fund Accounting Agreement, BISYS maintains all Fund books and records
required under Rule 31a-1 under the Investment Company Act, performs daily
accounting services and provides additional Fund reporting and record keeping
requirements.
Pursuant to the Fund Accounting Agreement, BISYS is entitled to receive a fee
from the Manager for each Portfolio (except U.S. Treasury Income Portfolio) in
accordance with the following schedule, subject to a monthly minimum fee of
$3000 for up to four (4) classes for each Portfolio:
<PAGE> 33
.0225% of each Portfolio's average daily net assets up to $100 million;
.0125% of each Portfolio's average daily net assets in excess of $100
million up to $200 million; and
.005% of each Portfolio's average daily net assets in excess of $200
million.
Pursuant to the Fund Accounting Agreement, BISYS is entitled to receive a fee
from the U.S. Treasury Income Portfolio for those months during which the
Portfolio is operational, in accordance with the following schedule, subject to
a monthly minimum fee of $200:
.0225% of the Portfolio's average daily net assets up to $100 million;
.0125% of the Portfolio's average daily net assets in excess of $100
million up to $200 million; and
.005% of the Portfolio's average daily net assets in excess of $200
million.
Transfer Agent. BISYS, 3435 Stelzer Road, Columbus, Ohio 43219, also serves as
transfer agent and dividend disbursing agent for the Fund pursuant to a separate
agreement, the Transfer Agency Agreement.
Distributor. Integrity Investments, Inc. (the "Distributor"), located at 871
Venetia Bay Boulevard, Suite 370, Venice, Florida 34292, 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, Distribution and Shareholder Servicing Plan for the Class D and Class E
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, 1998, the Class B shares of the U.S. Treasury Money Market
Portfolio and the General Money Market Portfolio paid distribution costs of
$748,044 and $40,292, respectively and Class D shares of the U.S. Treasury Money
Market Portfolio paid distribution costs of $671,044 pursuant to their
respective Plans. 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.
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, Class D and
Class E 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.
<PAGE> 34
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. There are presently four
Portfolios of the Trust, each of which offers Class A, Class B, Class C, Class D
and Class E shares. 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 five 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.
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 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 January 4, 1999, to the knowledge of the
Trust's Management, the following persons owned of record or beneficially 5% or
<PAGE> 35
more of the outstanding shares of any class of a Portfolio.
General Money Market Portfolio Class A: David L. Babson & Co., One Memorial
Drive, Cambridge, MA 02142, 5.84%; Evergreen Select Income Plus Fund, State
Street Bank & Trust, 108 Myrtle Street, AH3, North-Quincy, MA 02171, 10.06%;
First Union National Bank, 1525 West Wt. Harris Blvd., Charlotte, NC 28288,
73.11%.*
General Money Market Portfolio Class B: Relico c/o Reliance Trust Company, PO
Box 48449, Atlanta, GA 30362, 100%.*
U.S. Treasury Money Market Portfolio Class A: Turtle & Co., ACM, PO Box 9427,
Boston, MA 02209, 5.98%; Relico c/o Reliance Trust Company, PO Box 48449,
Atlanta, GA 30362, 57.03%; State Street Bank & Trust, 108 Myrtle Street, AH3,
North-Quincy, MA 02171, 18.97%; Citizens Trust Co., 870 Westminster Street,
Providence, RI 02903, 17.95%.*
U.S. Treasury Money Market Portfolio Class B: Sun Bank National Association,
Suntrust Bank, Atlanta, PO Box 105504, Atlanta, GA 30348, 99.51%.*
U.S. Treasury Income Portfolio Class A: First Union National Bank, 1525 West Wt.
Harris Boulevard, Charlotte, NC 28288, 99.98%.*
U.S. Treasury Money Market Portfolio-Class D: First Union National Bank, 1525
West Wt. Harris Boulevard, Charlotte, NC 28288, 86.68%; Relico c/o Reliance
Trust Company, P.O. Box 48449, Atlanta, GA 30362, 12.71%.*
Tax-Exempt Money Market Portfolio-Class A: First Union National Bank, 1525 West
Wt. Harris Boulevard, Charlotte, NC 28288, 96.17%.*
Integrity Investments, Inc., 871 Venetia Bay Boulevard, Venice, FL 34292, 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.
*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. 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.
Independent Accountants. PricewaterhouseCoopers LLP, 100 East Broad Street,
Suite 2100, Columbus, Ohio 43215, 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, 1998, including the notes thereto and the report of
PricewaterhouseCoopers LLP thereon are incorporated herein by reference from the
Trust's 1998 Annual Report to Shareholders. A copy of the 1998 Annual Report to
Shareholders accompanies the delivery of this SAI.
<PAGE> 36
PART C
The Valiant Fund
OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
A. Financial Statements
INCLUDED IN PART A: FINANCIAL HIGHLIGHTS*
Incorporated by reference to Part B are audited
financial statements for the period ended August 31,
1998 as contained in and filed with the SEC in the
Trust's Annual Report as follows:
Report of PricewaterhouseCoopers LLP Independent
Auditors
Statements of Assets and Liabilities
Statements of Operations
Statements of Changes in Net Assets
Schedule of Investments
Notes to Financial Statements
* Previously filed in Post-Effective Amendment No. 7 on November
24, 1998 and are incorporated herein by reference.
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 refiled in P.E.A.
6 as filed December 19, 1997 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 refiled in P.E.A. 6 as filed
December 19, 1997 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 refiled in P.E.A. 6 as filed
December 19, 1997 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 refiled in
P.E.A. 6 as filed December 19, 1997 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 refiled in P.E.A.
6 as filed December 19, 1997 and is incorporated herein
by reference.
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 refiled in P.E.A. 6 as filed
December 19, 1997 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 refiled in P.E.A.
6 as filed December 19, 1997 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 refiled in P.E.A. 6 as
filed December 19, 1997 and is incorporated herein by
<PAGE> 37
reference.
7 None.
8 Custody Agreement between The Bank of New York, the
Manager and the Registrant was previously filed in
Post-Effective Amendment No. 7 on November 24, 1998 and
is incorporated herein by reference.
9(a) Administration Agreement between BISYS Fund Services
Ohio, Inc., the Manager and the Registrant dated
September 1, 1998 was previously filed in
Post-Effective Amendment No. 7 on November 24, 1998 and
is incorporated herein by reference.
9(b) Transfer Agency Agreement between BISYS Fund Services
Ohio, Inc., the Manager and the Registrant dated
September 1, 1998 was previously filed in
Post-Effective Amendment No. 7 on November 24, 1998 and
is incorporated herein by reference.
9(c) Fund Accounting Agreement between BISYS Fund Services
Ohio, Inc., the Manager and the Registrant dated
September 1, 1998 was previously filed in
Post-Effective Amendment No. 7 on November 24, 1998 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
refiled in P.E.A. 6 as filed December 19, 1997 and is
incorporated herein by reference.
11 Consent of Independent Accountants.
12 Financial Statements - were previously filed in
Post-Effective Amendment No. 7 on November 24, 1998 and
are incorporated herein by reference. See A above.
13 Subscription Agreement dated June 1, 1993 was
previously filed in Pre-Effective Amendment No. 1 on
June 14, 1993 and refiled in P.E.A. 6 as filed December
19, 1997 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 refiled in
P.E.A. 6 as filed December 19, 1997 and is incorporated
herein by reference.
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 refiled in
P.E.A. 6 as filed December 19, 1997 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
refiled in P.E.A. 6 as filed December 19, 1997 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
refiled in P.E.A. 6 as filed December 19, 1997 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 refiled in
P.E.A. 6 as filed December 19, 1997 and is incorporated
herein by reference.
15(f) Form of Distribution and Shareholder Servicing Plan
dated March _______, 1999.
17 Financial Data Schedule.
18 Form of Plan for Amended and Restated Multiple Classes
of Shares dated March _____, 1999.
19(b) Powers of Attorney, previously filed in Post-Effective
<PAGE> 38
Amendment No. 3 on November 17, 1994 and Post-Effective
Amendment No. 4 on October 31, 1995 and refiled in
P.E.A. 6 as filed December 19, 1997 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 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. Mr. Curcio is the sole
officer of the Manager since October, 1992 and holds no other
positions in any business profession or employment.
(b) David L. Babson and Co. Inc. ("Babson") Cambridge, MA is an
investment adviser registered under the Investment Advisers'
Act of 1940, as amended (the "Advisers Act") and serves as
Sub-Adviser to the Registrant. David L. Babson and Co. Inc. is
an indirect, wholly-owned subsidiary of Mass Mutual Life
Insurance Company. To the knowledge of Registrant, none of the
directors or officers of Integrity Investments or David L.
Babson and Co. Inc. is or has been at any time during the past
two fiscal years engaged in any other business profession,
vocation or employment of a substantial nature, except that
certain directors and officers of David L. Babson and Co. Inc.
may also hold positions with, David L. Babson and Co. Inc.'s
parent.
Set forth below are the names and principal businesses of the
directors and certain of the senior executive officers of David L.
Babson and Co. Inc. who are engaged in any other business,
profession, vocation or employment of a substantial nature.
DAVID L. BABSON AND COMPANY INCORPORATED
Position with David L. Babson Other Business
Name and Company, Incorporated Connections
Hanl Khalil Findakly Director Potomac Babson Inc.
James Walter MacAllen Director, President, Chief Potomac Babson Inc.
Executive Officer and Chief
Investment Officer
Edward Louis Martin Director, Executive Vice None
President
Peter Conkling Schlieman Managing Director, Executive Vice None
President
Roland Whiting Whitridge Director, Senior Vice President None
Jonathan Buck Treat Senior Vice President None
Frank Louis Tarantino Chief Operating Officer, Clerk and
<PAGE> 39
Senior Vice President
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.
Name and Principal Address Positions and Offices Positions and Offices
with Underwriter with Registrant
Richard Curcio President, Director President, Chairman of
Integrity Investments, Inc. Board of Trustees
871 Venetia Bay Boulevard, Suite 370
Venice, Florida 34292
(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 will be maintained at the
offices of:
(a) David L. Babson & Co. Inc., One Memorial Drive, Cambridge, MA
02142 (records relating to its functions as sub-investment
adviser).
(b) Integrity Investments, 871 Venetia Bay Boulevard, Suite 370,
Venice, FL 34292 (records relating to service as distributor).
(c) BISYS Fund Services Ohio, Inc., 3435 Stelzer Road, Columbus,
Ohio 43219 (records relating to service as administrator).
(d) Bank of New York, 90 Washington Street, New York, New York
10286 (records relating to services as Custodian).
Item 31. Management Services
Not applicable
Item 32. Undertakings
Not applicable
<PAGE> 40
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it has duly caused this
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 29th day of January, 1999.
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 29th day of January, 1999.
Signature Title
/S/ 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: /S/ SUSAN M. SCHWARTZ
---------------------
Susan M. Schwartz
Attorney-in-Fact
<PAGE> 1
EXHIBIT 11
Consent of Independent Accountants
January 29, 1999
We consent to the incorporation by reference in this Post-Effective Amendment
No. 8 to the Registration Statement on Form N-1A (File No. 33-59840) of The
Valiant Fund of our report dated October 5, 1998 on our audits of the financial
statements and financial highlights of The Valiant Fund (comprising 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),
which report is included in the Annual Report to Shareholders for the year ended
August 31, 1998. We also consent to the references to our Firm under the
captions "Independent Accountants" and "Financial Statements" in the Statement
of Additional Information relating to The Valiant Fund in this Post-Effective
Amendment No. 8 to the Registration Statement on Form N-1A (File No. 33-59840)
of The Valiant Fund.
PRICEWATERHOUSECOOPERS LLP
Columbus, Ohio
<PAGE> 1
EXHIBIT 15(f)
THE VALIANT FUND
DISTRIBUTION AND SHAREHOLDER SERVICING PLAN FOR
CLASS E SHARES
DISTRIBUTION AND SHAREHOLDER SERVICING PLAN FOR CLASS E SHARES (the
"Plan") of the Valiant Fund (the "Trust") dated as of this _____ day of 1999.
1. The Plan. This Plan is the Trust's written distribution plan,
contemplated by Rule 12-b1 (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 E 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 service
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 .80% 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
sell 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 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
<PAGE> 2
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 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 Class E 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 herein
after 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 E 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 E 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 person," 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:
------------------------------------
INTEGRITY INVESTMENTS, INC.
By:
------------------------------------
<PAGE> 1
EXHIBIT 18
THE VALIANT FUND
AMENDED AND RESTATED
PLAN FOR MULTIPLE CLASSES OF SHARES
________________, 1999
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,
Class D Shares and Class E 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 March 31, 1999, 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; (e) in the best interests of the holders of Class E Shares; and (f) in
the best interests of the holders 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.
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.
Class E 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 E Shares (the "Class E 12b-1 Plan")) of 0.80% of the average daily net
assets of the Class E 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 2030(d) of the Conduct Rules 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.
<PAGE> 2
SECTION II: ALLOCATION OF CLASS EXPENSES; OTHER PROVISIONS
Class A Shares, Class B Shares, Class C Shares, Class D Shares and Class
E 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:
(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: ______________________
<PAGE> 3
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
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000899090
<NAME> THE VALIANT FUND
<SERIES>
<NUMBER> 011
<NAME> U.S. TREASURY MONEY MARKET
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> AUG-31-1998
<INVESTMENTS-AT-COST> 522,174,412
<INVESTMENTS-AT-VALUE> 522,174,412
<RECEIVABLES> 62,565
<ASSETS-OTHER> 3,745
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 522,240,722
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,479,269
<TOTAL-LIABILITIES> 2,479,269
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 519,766,386
<SHARES-COMMON-STOCK> 31,186,483
<SHARES-COMMON-PRIOR> 23,062,771
<ACCUMULATED-NII-CURRENT> 3,224
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (8,157)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 519,761,453
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 23,757,156
<OTHER-INCOME> 0
<EXPENSES-NET> (1,003,253)
<NET-INVESTMENT-INCOME> 23,401,246
<REALIZED-GAINS-CURRENT> (8,157)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 23,393,089
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,852,870)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 135,312,262
<NUMBER-OF-SHARES-REDEEMED> (127,190,021)
<SHARES-REINVESTED> 1,471
<NET-CHANGE-IN-ASSETS> 94,860,912
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 3,225
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 937,000
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,368,000
<AVERAGE-NET-ASSETS> 35,140,725
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.05)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .20
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000899090
<NAME> THE VALIANT FUND
<SERIES>
<NUMBER> 012
<NAME> U.S. TREASURY MONEY MARKET
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> AUG-31-1998
<INVESTMENTS-AT-COST> 522,174,412
<INVESTMENTS-AT-VALUE> 522,174,412
<RECEIVABLES> 62,565
<ASSETS-OTHER> 3,745
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 522,240,722
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,479,269
<TOTAL-LIABILITIES> 2,479,269
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 519,766,386
<SHARES-COMMON-STOCK> 326,683,455
<SHARES-COMMON-PRIOR> 300,436,663
<ACCUMULATED-NII-CURRENT> 3,224
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (8,157)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 519,761,453
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 23,757,156
<OTHER-INCOME> 0
<EXPENSES-NET> (1,003,253)
<NET-INVESTMENT-INCOME> 23,401,246
<REALIZED-GAINS-CURRENT> (8,157)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 23,393,089
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (15,114,935)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 614,132,418
<NUMBER-OF-SHARES-REDEEMED> (587,885,626)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 94,860,912
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 3,225
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 937,000
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,368,000
<AVERAGE-NET-ASSETS> 299,415,428
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.05)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .45
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000899090
<NAME> THE VALIANT FUND
<SERIES>
<NUMBER> 013
<NAME> U.S. TREASURY MONEY MARKET
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> AUG-31-1998
<INVESTMENTS-AT-COST> 522,174,412
<INVESTMENTS-AT-VALUE> 522,174,412
<RECEIVABLES> 62,565
<ASSETS-OTHER> 3,745
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 522,240,722
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,479,269
<TOTAL-LIABILITIES> 2,479,269
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 519,766,386
<SHARES-COMMON-STOCK> 161,896,447
<SHARES-COMMON-PRIOR> 101,397,882
<ACCUMULATED-NII-CURRENT> 3,224
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (8,157)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 519,761,453
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 23,757,156
<OTHER-INCOME> 0
<EXPENSES-NET> (1,003,253)
<NET-INVESTMENT-INCOME> 23,401,246
<REALIZED-GAINS-CURRENT> (8,157)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 23,393,089
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (6,433,441)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 465,646,407
<NUMBER-OF-SHARES-REDEEMED> (405,147,842)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 94,860,912
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 3,225
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 937,000
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,368,000
<AVERAGE-NET-ASSETS> 134,330,699
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.05)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000899090
<NAME> THE VALIANT FUND
<SERIES>
<NUMBER> 021
<NAME> U.S. TREASURY INCOME
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> AUG-31-1998
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 27,863
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 27,863
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,402
<TOTAL-LIABILITIES> 2,402
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 25,539
<SHARES-COMMON-STOCK> 25,539
<SHARES-COMMON-PRIOR> 25,351
<ACCUMULATED-NII-CURRENT> 7
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (85)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 25,461
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 904,379
<OTHER-INCOME> 0
<EXPENSES-NET> (36,010)
<NET-INVESTMENT-INCOME> 868,369
<REALIZED-GAINS-CURRENT> (78)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 868,291
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (868,369)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 236,425,416
<NUMBER-OF-SHARES-REDEEMED> (236,425,416)
<SHARES-REINVESTED> 188
<NET-CHANGE-IN-ASSETS> 110
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 36,000
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 41,000
<AVERAGE-NET-ASSETS> 17,991,750
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .01
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.01)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .20
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000899090
<NAME> THE VALIANT FUND
<SERIES>
<NUMBER> 031
<NAME> GENERAL MONEY MARKET
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> AUG-31-1998
<INVESTMENTS-AT-COST> 291,701,780
<INVESTMENTS-AT-VALUE> 291,701,780
<RECEIVABLES> 3,704
<ASSETS-OTHER> 1,033
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 291,706,517
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,124,754
<TOTAL-LIABILITIES> 1,124,754
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 290,830,588
<SHARES-COMMON-STOCK> 273,221,404
<SHARES-COMMON-PRIOR> 568,968,730
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (248,825)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 290,581,763
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 25,041,401
<OTHER-INCOME> 0
<EXPENSES-NET> (937,999)
<NET-INVESTMENT-INCOME> 24,103,402
<REALIZED-GAINS-CURRENT> 10,362
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 24,113,754
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (23,272,185)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,065,147,438
<NUMBER-OF-SHARES-REDEEMED> (3,366,515,045)
<SHARES-REINVESTED> 5,620,281
<NET-CHANGE-IN-ASSETS> (287,288,582)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (259,187)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 898,000
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 952,000
<AVERAGE-NET-ASSETS> 431,369,649
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.05)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .20
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000899090
<NAME> THE VALIANT FUND
<SERIES>
<NUMBER> 032
<NAME> GENERAL MONEY MARKET
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> AUG-31-1998
<INVESTMENTS-AT-COST> 291,701,780
<INVESTMENTS-AT-VALUE> 291,701,780
<RECEIVABLES> 3,704
<ASSETS-OTHER> 1,033
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 291,706,517
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,124,754
<TOTAL-LIABILITIES> 1,124,754
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 290,830,588
<SHARES-COMMON-STOCK> 17,609,184
<SHARES-COMMON-PRIOR> 9,160,802
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (248,825)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 290,581,763
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 25,041,401
<OTHER-INCOME> 0
<EXPENSES-NET> (937,999)
<NET-INVESTMENT-INCOME> 24,103,402
<REALIZED-GAINS-CURRENT> 10,362
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 24,113,764
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (831,217)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 44,499,456
<NUMBER-OF-SHARES-REDEEMED> (36,051,074)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (287,288,582)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (259,187)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 898,000
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 952,000
<AVERAGE-NET-ASSETS> 16,122,036
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.05)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .45
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000899090
<NAME> THE VALIANT FUND
<SERIES>
<NUMBER> 041
<NAME> TAX-EXEMPT MONEY MARKET
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> AUG-31-1998
<INVESTMENTS-AT-COST> 269,477,139
<INVESTMENTS-AT-VALUE> 269,477,139
<RECEIVABLES> 1,344,488
<ASSETS-OTHER> 6,131
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 270,827,758
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,170,424
<TOTAL-LIABILITIES> 2,170,424
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 268,779,401
<SHARES-COMMON-STOCK> 268,779,401
<SHARES-COMMON-PRIOR> 282,491,743
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (122,067)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 268,657,334
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 9,125,219
<OTHER-INCOME> 0
<EXPENSES-NET> (514,182)
<NET-INVESTMENT-INCOME> 8,611,037
<REALIZED-GAINS-CURRENT> 1,596
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 8,612,633
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (8,611,037)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 643,017,161
<NUMBER-OF-SHARES-REDEEMED> (656,730,774)
<SHARES-REINVESTED> 1,271
<NET-CHANGE-IN-ASSETS> (13,710,746)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (123,663)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 514,000
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 523,000
<AVERAGE-NET-ASSETS> 257,092,946
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .03
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.03)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .20
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
