<PAGE> 1
As Filed with the Securities and Exchange Commission on October 21, 1999
Registration Nos. 33-59840
811-7582
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
Pre-Effective Amendment No. |_|
Post-Effective Amendment No. 9 |X|
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|
Amendment No. 10 |X|
(Check appropriate box or boxes)
THE VALIANT FUND
(Exact name of Registrant as specified in charter)
3435 Stelzer Road
Columbus, Ohio 43219
(Address of Principal Executive Offices with Zip Code)
Registrant's Telephone Number, including Area Code: (800) 847-5886
Curtis Barnes
The Valiant Fund
3435 Stelzer Road
Columbus, Ohio 43219
(Name and Address of Agent for Service)
with a copy to:
Timothy W. Diggins, Esq.
Ropes & Gray
One International Place
Boston, Massachusetts 02110
It is proposed that this filing will become effective:
--- immediately upon filing pursuant to paragraph (b)
--- on (date) pursuant to paragraph (b)
--- on (date) pursuant to paragraph (a)(i)
--- 75 days after filing pursuant to paragraph (a)(ii)
--- on (date) pursuant to paragraph (a)(ii) of rule 485
X 60 days after filing pursuant to paragraph (a)(i)
---
If appropriate, check the following box:
--- this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
<PAGE> 2
THE VALIANT FUND
- --------------------------------------------------------------------------------
----------
PROSPECTUS
----------
DECEMBER 29, 1999
CLASS A SHARES
U.S. TREASURY MONEY MARKET PORTFOLIO
U.S. TREASURY INCOME PORTFOLIO
GENERAL MONEY MARKET PORTFOLIO
TAX-EXEMPT MONEY MARKET PORTFOLIO
MANAGED BY INTEGRITY MANAGEMENT & RESEARCH, INC.
QUESTIONS?
CALL 1-800-828-2176
OR YOUR INVESTMENT REPRESENTATIVE.
THE SECURITIES AND EXCHANGE
COMMISSION HAS NOT APPROVED OR
DISAPPROVED THE SHARES DESCRIBED IN
THIS PROSPECTUS OR DETERMINED
WHETHER THIS PROSPECTUS IS ACCURATE
OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
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<PAGE> 3
TABLE OF CONTENTS
REVIEW THIS SECTION FOR OVERVIEW
AN OVERVIEW OF THE 3 OVERVIEW
PORTFOLIOS.
CAREFULLY REVIEW THIS
IMPORTANT SECTION, RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
WHICH SUMMARIZES EACH INCLUDES INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
PORTFOLIO'S INVESTMENTS,
STRATEGIES, RISKS, PAST 4-6 U.S. TREASURY MONEY MARKET PORTFOLIO
PERFORMANCE, AND FEES.
7-9 U.S. TREASURY INCOME PORTFOLIO
10-12 GENERAL MONEY MARKET PORTFOLIO
13-15 TAX-EXEMPT MONEY MARKET PORTFOLIO
16 FEES AND EXPENSES
ADDITIONAL INFORMATION
17-19
FUND MANAGEMENT
REVIEW THIS SECTION FOR
DETAILS ON THE PEOPLE AND 20 THE INVESTMENT ADVISER
ORGANIZATIONS WHO OVERSEE 21 THE DISTRIBUTOR
THE PORTFOLIOS. 21 THE ADMINISTRATOR
SHAREHOLDER INFORMATION
REVIEW THIS SECTION FOR
DETAILS ON HOW SHARES ARE 22 PRICING OF PORTFOLIOS SHARES
VALUED, HOW TO PURCHASE AND 23 PURCHASING AND ADDING TO YOUR SHARES
SELL SHARES, RELATED CHARGES 24 SELLING YOUR SHARES
AND PAYMENTS OF DIVIDENDS 25 GENERAL POLICIES ON SELLING SHARES
AND DISTRIBUTIONS. 25 DISTRIBUTION AND SERVICE (12B-1) FEES
25-26 DIVIDENDS, DISTRIBUTIONS AND TAXES
FINANCIAL HIGHLIGHTS
27-31
BACK COVER
31 WHERE TO LEARN MORE ABOUT THIS FUND GROUP
2
<PAGE> 4
OVERVIEW
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The Trust offers Class A shares, Class B shares, Class C shares, Class D shares
and Class E 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 by carefully reading its
prospectus. THIS PROSPECTUS RELATES ONLY TO THE CLASS A SHARES.
Each Portfolio is designed exclusively for investment of short-term monies held
in institutional accounts. Shares of the Portfolios may be purchased by banks
and other institutional investors that have entered into service agreements with
Integrity Investments, Inc. (the "Distributor"), 1-800-828-2176.
Each Portfolio is a money market fund. As a money market fund, each Portfolio is
subject to maturity, quality and diversification requirements designed to help
it maintain a stable price of $1.00 per share. Under these requirements, each
Portfolio's investments must have a remaining maturity of no more than 397 days
and its investments must maintain an average weighted maturity that does not
exceed 90 days.
Money Market Securities are high quality, short-term debt securities that
pay a fixed, variable or floating interest rate. Securities are often
specifically structured so that they are eligible investments for a money
market fund. For example, in order to satisfy the maturity restrictions for
a money market fund, some money market securities have demand or put
features that have the effect of shortening the security's maturity.
Taxable money market securities include bank certificates of deposit,
bank acceptances, bank time deposits, notes, commercial paper and U.S.
Government securities. Municipal money market securities include
variable rate demand notes, commercial paper and municipal notes.
RISK/RETURN SUMMARY
The following is a summary of certain key information about the Portfolios.
Other important things for you to note:
- An investment in the Portfolios is not a deposit in a bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency.
- Although the Portfolios seek to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in the
Portfolios.
3
<PAGE> 5
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
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U.S. TREASURY MONEY MARKET PORTFOLIO
INVESTMENT OBJECTIVES The Portfolio seeks to obtain as high a
level of current income as is consistent
with the preservation of capital and
liquidity.
PRINCIPAL INVESTMENT STRATEGIES
The Portfolio's principal investment
strategies include:
- Investing money market instruments issued
by the U.S. Treasury, certain U.S.
Government agencies and in U.S. Government
backed repurchase agreements.
- Generally maintaining a dollar-weighted
average maturity at 90 days or less.
- Investing in compliance with
industry-standard requirements for money
market funds for the quality, maturity and
diversification of investments.
The Portfolio invests based on
considerations of safety of principal and
liquidity, which means that the Portfolio
may not necessarily invest in securities
paying the highest available yield at a
particular time. The Portfolio will attempt
to increase its yield by trading to take
advantage of short-term market variations.
The Adviser generally evaluates investments
based on interest rate sensitivity.
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.
A full discussion of additional permissible
investments is included in the Statement of
Additional Information ("SAI").
PRINCIPAL INVESTMENT RISKS The Portfolio is a "money market fund" that
seeks to maintain a stable net asset value
of $1.00 per share. There is no guarantee
the Portfolio will be able to preserve the
value of your investment at $1.00 per share.
It is possible to lose money by investing in
the Portfolio.
There can be no assurance that the
investment objective of the Portfolio will
be achieved.
The principal risks of investing in the
Portfolio are:
- INTEREST RATE RISK This is the risk that
changes in interest rates will affect the
yield or value of the Portfolio's
investments in debt securities. Because
the Portfolio invests in short-term
securities, a decline in interest rates
will affect the Portfolio's yield as these
securities mature or are sold and the
Portfolio purchases new short-term
4
<PAGE> 6
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
U.S. TREASURY MONEY MARKET PORTFOLIO - CONTINUED
- --------------------------------------------------------------------------------
Securities with a lower yield. Generally, an
increase in interest rates causes the value
of a debt instrument to decrease. The change
in value for shorter-term securities is
usually smaller than for securities with
longer maturities.
- CREDIT RISK Although U.S. Government
securities, particularly U.S. Treasury
obligations, have historically involved
little risk, if an issuer fails to pay
interest or repay principal, the value of
your investment could decline.
- SELECTION RISK The Adviser evaluates the
rewards and risks presented by all
securities purchased by the Portfolio and
how they may advance the Portfolio's
investment objective. It is possible,
however, that these evaluations will prove
to be inaccurate.
WHO MAY WANT TO INVEST? Consider investing in the Portfolio if you
are:
[ ] SEEKING PRESERVATION OF CAPITAL
[ ] HAVE A LOW RISK TOLERANCE
[ ] WILLING TO ACCEPT LOWER POTENTIAL
RETURNS IN EXCHANGE FOR A HIGH DEGREE OF
SAFETY
[ ] INVESTING SHORT-TERM RESERVES
This Portfolio will not be appropriate for
someone:
[ ] SEEKING HIGH TOTAL RETURNS
[ ] PURSUING A LONG-TERM GOAL OR INVESTING
FOR RETIREMENT
5
<PAGE> 7
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
U.S. TREASURY MONEY MARKET PORTFOLIO - CONTINUED
- --------------------------------------------------------------------------------
The chart and table on this page PERFORMANCE BAR CHART AND TABLE
show how the U.S. Treasury -------------------------------
Money Market Portfolio has
performed and how its Year-by-Year Total Returns as of 12/31
performance has varied from [BAR CHART]
year to year. The bar chart shows
changes in the Portfolio's yearly 1995 - 5.83%
performance since inception to 1996 - 5.29%
demonstrate that the Portfolio 1997 - 5.37%
has gained and lost value at 1998 - 5.27%
differing times.
Of course, past performance does not
indicate how the Portfolio will
perform in the future.
--------------------------------------
Best quarter: Q2 1995 1.46%
Worst quarter: Q3 1994 1.08%
--------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (for the periods ending December 31, 1998)
Past Year Since Inception
(5/17/94)
- -----------------------------------------------------------------------
U.S. TREASURY MONEY 5.27% 5.33%
MARKET PORTFOLIO
- -----------------------------------------------------------------------
As of September 30, 1999 the 7-day yield was 4.92%. Without expense
limitations, the Portfolio's yield would have been 5.12% for this time
period. For current yield information on the Portfolio, call 1-800-828-2176.
The U.S. Treasury Money Market Portfolio's yield appears in the Wall Street
Journal each Thursday.
6
<PAGE> 8
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
U.S. TREASURY INCOME PORTFOLIO
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES
The Portfolio seeks to obtain as high a
level of current income as is consistent
with the preservation of capital and
liquidity.
PRINCIPAL INVESTMENT STRATEGIES
The Portfolio's principal investment
strategies include:
- Investing all of its assets in U.S.
Government Obligations which are backed by
the full faith and credit of the U.S.
Government and whose interest income is
generally not subject to state income tax.
Under normal market conditions, the
Portfolio invests at least 65% of its
total assets in U.S. Treasury obligations
such as U.S. Treasury bills, notes and
bonds.
- Generally maintaining a dollar-weighted
average of 90 days or less.
- Investing in compliance with industry
standard requirements for money market
funds for quality, maturity and
diversification of investments.
A full discussion of additional permissible
investments is included in the SAI.
PRINCIPAL INVESTMENT RISKS The Portfolio is a "money market fund" that
seeks to maintain a stable net asset value
of $1.00 per share. There is no guarantee
the Portfolio will be able to preserve the
value of your investment at $1.00 per share.
It is possible to lose money by investing in
the Portfolio.
There can be no assurance that the
investment objective of the Portfolio will
be achieved.
The principal risks of investing in the
Portfolio are:
- INTEREST RATE RISK This is the risk that
changes in interest rates will affect the
yield or value of the Portfolio's
investments in debt securities. Because
the Portfolio invests in short-term
securities, a decline in interest rates
will affect the Portfolio's yield as these
securities mature or are sold and the
Portfolio purchases new short-term
securities with a lower yield. Generally,
an increase in interest rates causes the
value of a debt instrument to decrease.
The change in value for shorter-term
securities is usually smaller than for
securities with longer maturities.
- CREDIT RISK Although U.S. Government
securities, particularly U.S. Treasury
obligations, have historically involved
little risk, if an issuer fails to pay
interest or repay principal, the value of
your investment could decline.
7
<PAGE> 9
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
U.S. TREASURY INCOME PORTFOLIO - CONTINUED
- --------------------------------------------------------------------------------
- SELECTION RISK The Adviser evaluates the
rewards and risks presented by all
securities purchased by the Portfolio and
how they may advance the Portfolio's
investment objective. It is possible,
however, that these evaluations will prove
to be inaccurate.
WHO MAY WANT TO INVEST? Consider investing in the Portfolio if you
are:
[ ] SEEKING PRESERVATION OF CAPITAL
[ ] HAVE A LOW RISK TOLERANCE
[ ] WILLING TO ACCEPT LOWER POTENTIAL
RETURNS IN EXCHANGE FOR A HIGH DEGREE OF
SAFETY
[ ] INVESTING SHORT-TERM RESERVES
This Portfolio will not be appropriate for
someone:
[ ] SEEKING HIGH TOTAL RETURNS
[ ] PURSUING A LONG-TERM GOAL OR INVESTING
FOR RETIREMENT
8
<PAGE> 10
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
U.S. TREASURY INCOME PORTFOLIO - CONTINUED
- --------------------------------------------------------------------------------
The chart and table on this page PERFORMANCE BAR CHART AND TABLE
show how the U.S. Treasury Income -------------------------------
Portfolio has performed and how its
performance has varied from year to Year-by-Year Total Returns as of 12/31
year. The bar chart shows changes [BAR CHART]
in the Portfolio's yearly
performance since inception to 1994 - 0.12%
demonstrate that the Portfolio has 1995 - 0.39%
gained and lost value at differing 1996 - 0.35%
times. 1997 - 0.54%
1998 - 0.74%
Of course, past performance does not
indicate how the Portfolio will
perform in the future.
--------------------------------------
Best quarter: Q1 1998 0.74%(1)
Worst quarter: Q1 1999 0.04%(2)
--------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (for the periods ending December 31, 1998)
Past Year Past 5 Years
- -----------------------------------------------------------------------
U.S. TREASURY INCOME _____% _____%
PORTFOLIO
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
As of September 30, 1999 the 7-day yield was ____%. Without expense
limitations, the Portfolio's yield would have been ____% for this time
period. For current yield information on the Portfolio, call
1-800-828-2176. The U.S. Treasury Income Portfolio's yield appears
in the Wall Street Journal each Thursday.
(1) The Portfolio operated from December 17, 1997 to February 11, 1998.
(2) The Portfolio operated from December 14, 1998 to January 22, 1999.
(3) The Portfolio operated from December 13, 1996 to January 30, 1997.
(4) The Portfolio operated from December 11, 1995 to January 10, 1996.
(5) The Portfolio operated from December 12, 1994 to January 11, 1995.
(6) The Portfolio operated from December 28, 1993 to January 12, 1994.
* Total returns for periods less than one year are not annualized.
9
<PAGE> 11
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
GENERAL MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES The Portfolio seeks to obtain as high a
level of current income as is consistent
with the preservation of capital and
liquidity.
PRINCIPAL INVESTMENT STRATEGIES The Portfolio's principal investment
strategies include:
- Investing in U.S. dollar-denominated
short-term obligations of domestic and
foreign issuers including banks rated in
the highest category by at least two
nationally recognized rating services,
U.S. Government securities, repurchase
agreements and entering into reverse
repurchase agreements.
- Generally maintaining a dollar-weighted
average maturity at 90 days or less.
- Investing in compliance with
market funds for the quality, maturity and
diversification of investments.
The Portfolio may invest 25% or more of its
total assets in the domestic banking
industry.
A full discussion of additional permissible
investments is included in the SAI.
PRINCIPAL INVESTMENT RISKS The Portfolio is a "money market fund" that
seeks to maintain a stable net asset value
of $1.00 per share. There is no guarantee
the Portfolio will be able to preserve the
value of your investment at $1.00 per share.
It is possible to lose money by investing in
the Portfolio.
There can be no assurance that the
investment objective of the Portfolio will
be achieved.
The principal risks of investing in the
Portfolio are:
- INTEREST RATE RISK This is the risk that
changes in interest rates will affect the
yield or value of the Portfolio's
investments in debt securities. Because
the Portfolio invests in short-term
securities, a decline in interest rates
will affect the Portfolio's yield as these
securities mature or are sold and the
Portfolio purchases new short-term
securities with a lower yield. Generally,
an increase in interest rates causes the
value of a debt instrument to decrease.
The change in value for
10
<PAGE> 12
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
GENERAL MONEY MARKET PORTFOLIO - CONTINUED
- --------------------------------------------------------------------------------
shorter-term securities is usually smaller
than for securities with longer maturities.
- CREDIT RISK This is the risk that the
issuer or guarantor of a debt security
will be unable or unwilling to make
timely interest or principal payments,
or to otherwise honor its obligations.
Credit risk includes the possibility
that any of the Portfolio's investments
will have its credit ratings downgraded.
The Portfolio will only purchase a money
market instrument if it presents minimal
credit risks.
- SELECTION RISK The Adviser evaluates the
rewards and risks presented by all
securities purchased by the Portfolio
and how they may advance the Portfolio's
investment objective. It is possible,
however, that these evaluations will
prove to be inaccurate.
- FOREIGN INVESTMENT RISK The Portfolio's
investments in U.S. dollar-denominated
obligations of foreign branches of U.S.
banks and U.S. branches of foreign banks
may be subject to foreign risk. Foreign
securities issuers are usually not
subject to the same degree of regulation
as U.S. issuers. Reporting, accounting,
and auditing standards of foreign
countries differ, in some cases,
significantly from U.S. standards.
Foreign risk includes nationalization,
expropriation or confiscatory taxation,
currency blockage, political changes or
diplomatic developments that could
adversely affect the portfolio's
investments.
WHO MAY WANT TO INVEST? Consider investing in the Portfolio if
you are:
- SEEKING PRESERVATION OF CAPITAL
- HAVE A LOW RISK TOLERANCE
- WILLING TO ACCEPT LOWER POTENTIAL
RETURNS IN EXCHANGE FOR A HIGH DEGREE
OF SAFETY
- INVESTING SHORT-TERM RESERVES
This Portfolio will not be appropriate
for someone:
- SEEKING HIGH TOTAL RETURNS
- PURSUING A LONG-TERM GOAL OR INVESTING
FOR RETIREMENT
11
<PAGE> 13
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
GENERAL MONEY MARKET PORTFOLIO - CONTINUED
- --------------------------------------------------------------------------------
The chart and table on this page show how the General Money Market Portfolio has
performed and how its performance has varied from year to year. The bar chart
shows changes in the Portfolio's yearly performance since inception to
demonstrate that the Portfolio has gained and lost value at differing times.
PERFORMANCE BAR CHART AND TABLE
-------------------------------
Year-by-Year Total Returns as of 12/31
[BAR CHART]
4.21% 5.95% 5.31% 5.50% 5.43%
1994 1995 1996 1997 1998
Of course, past performance does not indicate how the Portfolio will perform in
the future.
- -----------------------------------------
Best quarter: Q2 1995 1.49%
Worst quarter: Q4 1993 0.77%
- -----------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (for the periods ending December 31, 1998)
Past Year Past 5 Years Since Inception
(9/21/93)
- -----------------------------------------------------------------------
GENERAL MONEY MARKET 5.43% 5.30% 5.19%
PORTFOLIO
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
As of September 30, 1999 the 7-day yield was 5.13%. Without expense limitations,
the Portfolio's yield would have been 5.33% for this time period. For current
yield information on the Portfolio, call 1-800-828-2176. The General Money
Market Portfolio's yield appears in the Wall Street Journal each Thursday.
12
<PAGE> 14
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
TAX-EXEMPT MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES The Portfolio seeks primarily income exempt
from federal income tax.
PRINCIPAL INVESTMENT STRATEGIES The Portfolio principal investment
strategies include:
- Investing in municipal money market
- ------------------------------- securities
Municipal Securities are issued - Investing in compliance with industry
to raise money for a variety standard requirements for money market
of public and private purposes, funds for the quality, maturity and
including general financing diversification of investments.
for state and local governments, - Municipal securities subject to
or financing for a specific restrictions on resale.
project or public facility.
Municipal securities may be As a temporary defensive measure because of
fully or partially backed by the market, economic, political or other
local government, by the credit conditions, the Portfolio may invest in
of a private issuer, by the taxable money market securities. These
current or anticipated revenues temporary investments may produce taxable
from a specific project or income.
specific assets, or by domestic
or foreign entities providing The Portfolio does not intend to invest in
credit support such as letters Municipal Securities whose interest in
or credit, guarantees or subject to the federal alternative minimum
or insurance. tax ("AMT") for individuals.
- -------------------------------
The Portfolio buys and sells securities
based on its objective of maximizing current
income consistent with safety of principal
and liquidity. The Portfolio will attempt to
increase its yields by trading to take
advantage of short-term market variations.
The Fund's Adviser evaluates investments
based on credit Analysis and the interest
rate outlook.
A full discussion of additional permissible
investments is included in the SAI.
PRINCIPAL INVESTMENT RISKS The Fund is a "money market fund" that seeks
to maintain a stable net asset value of
$1.00 per share. There is no guarantee the
Portfolio will be able to preserve the value
of your investment at $1.00 per share. It is
possible to lose money by investing in the
Portfolio.
There can be no assurance that the
investment objective of the Portfolio will
be achieved.
13
<PAGE> 15
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
TAX-EXEMPT MONEY MARKET PORTFOLIO - CONTINUED
- --------------------------------------------------------------------------------
The principal risks of investing in the Fund
are:
- INTEREST RATE RISK This is the risk that
changes in interest rates will affect
the yield or value of the Portfolio's
investments in municipal debt
securities. Prices of municipal
obligations tend to move inversely with
changes in interest rates. The most
immediate effect of a rise in rates is
usually a drop in the prices of such
securities, and therefore in the
Portfolio's yield as well. Interest rate
risk is usually greater for fixed-income
securities with longer maturities or
durations.
- CREDIT RISK Although credit risk is very
low because the Portfolio only invests
in high quality obligations, if an
issuer fails to pay interest or repay
principal, the value of your investment
could decline. The ability of a state or
local government issuer to make payments
can be affected by many factors,
including economic conditions, the flow
of tax revenues and changes in the level
of federal, state or local aid. Some
municipal securities are payable only
from limited revenue sources or by
private entities.
- SELECTION RISK The Adviser evaluates the
rewards and risks presented by all
securities purchased by the Portfolio
and how they may advance the Portfolio's
investment objective. It is possible,
however, that these evaluations will
prove to be inaccurate.
WHO MAY WANT TO INVEST? Consider investing in the Portfolio if
you are:
- SEEKING PRESERVATION OF CAPITAL
- HAVE A LOW RISK TOLERANCE
- WILLING TO ACCEPT LOWER POTENTIAL RETURNS
IN EXCHANGE FOR A HIGH DEGREE OF SAFETY
- INVESTING SHORT-TERM RESERVES
This Portfolio will not be appropriate for
someone:
- SEEKING HIGH TOTAL RETURNS
- INVESTING AS PART OF A RETIREMENT PLAN
BECAUSE THE PLANS CAN NOT BENEFIT FROM
TAX EXEMPT INCOME
- PURSUING A LONG-TERM GOAL
14
<PAGE> 16
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
TAX-EXEMPT MONEY MARKET PORTFOLIO - CONTINUED
- --------------------------------------------------------------------------------
The chart and table on this page show how the Tax-Exempt Money Market Portfolio
has performed and how its performance has varied from year to year. The bar
chart shows changes in the Portfolio's yearly performance since inception to
demonstrate that the Portfolio has gained and lost value at differing times.
PERFORMANCE BAR CHART AND TABLE
-------------------------------
Year-by-Year Total Returns as of 12/31
[BAR CHART]
2.78% 3.70% 3.33% 3.48% 3.27%
1994 1995 1996 1997 1998
Of course, past performance does not indicate how the Portfolio will perform in
the future.
- --------------------------------------
Best quarter: Q2 1995 0.97%
Worst quarter: Q1 1994 0.52%
AVERAGE ANNUAL TOTAL RETURNS (for the periods ending December 31, 1998)
Past Year Past 5 Years Since Inception
(10/7/93)
- ---------------------------------------------------------------------
TAX-EXEMPT MONEY 3.27% 3.31% 3.27%
MARKET PORTFOLIO
- ---------------------------------------------------------------------
As of September 30, 1999 the 7-day yield was 3.43%. Without expense limitations,
the Portfolio's yield would have been 3.63% for this time period. For current
yield information on the Portfolio, call 1-800-828-2176. The Tax-Exempt Money
Market Portfolio's yield appears in the Wall Street Journal each Thursday.
15
<PAGE> 17
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FEES AND EXPENSES
- -----------------
If you buy and hold Class A
shares of the Portfolios, Shareholder Fees U.S. TREASURY U.S. TREASURY GENERAL TAX-EXEMPT
you will pay the following (fees paid directly MONEY MARKET INCOME MONEY MARKET MONEY MARKET
fees and expenses. Annual from your investment) PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
Fund operating expenses are ------------- ------------- ------------ ------------
paid out of Portfolio CLASS A CLASS A CLASS A CLASS A
assets, and are reflected in <S> <C> <C> <C> <C>
the Portfolio's yield. Maximum sales charge None None None None
(load) on purchases
- -----------------------------------------------------------------------------------------------------------------------------------
Annual Portfolio
Operating Expenses
(expenses that are
deducted from
Portfolio assets)
- -----------------------------------------------------------------------------------------------------------------------------------
Management fees .20% .20% .20% .20%
- -----------------------------------------------------------------------------------------------------------------------------------
Distribution and .00% .00% .00% .00%
Service (12b-1) fees(1)
- -----------------------------------------------------------------------------------------------------------------------------------
Other expenses(2) .00% .00% .00% .00%
- -----------------------------------------------------------------------------------------------------------------------------------
Total Annual .20% .20% .20% .20%
Portfolio operating
expenses
- -----------------------------------------------------------------------------------------------------------------------------------
(1) The Trust has adopted a Distribution and Shareholder Servicing Plan (the
"Plan") for the Class A shares. No payments under the Plan for Class A
shares have been authorized or will be made during the current fiscal year.
(2) Other Expenses and Total Fund Operating Expenses of the Fund are estimated
for the current fiscal year.
</TABLE>
EXPENSE EXAMPLE
- ---------------
Use the example below to compare fees and expenses with those of other
Portfolios. It illustrates the amount of fees and expenses you would pay,
assuming the following:
- $10,000 investment
- 5% annual return
- redemption at the end of each period
- no changes in the Portfolio's operating expenses
- reinvestment of dividends and distributions
Because this example is hypothetical and for comparison only, your actual costs
will be different.
<TABLE>
<CAPTION>
1 3 5 10
Year Years Years Years
<S> <C> <C> <C> <C>
U.S. TREASURY MONEY MARKET PORTFOLIO $20 $64 $113 $255
- ------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. TREASURY INCOME PORTFOLIO $20 $64 $113 $255
- ------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
GENERAL MONEY MARKET PORTFOLIO $20 $64 $113 $255
- ------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
TAX-EXEMPT MONEY MARKET PORTFOLIO $20 $64 $113 $255
- ---------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE> 18
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
The principal strategies and risks of investing in each Portfolio are described
on the previous pages. The following supplements that discussion.
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
Portfolio 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.
17
<PAGE> 19
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.
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 Portfolio's 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.
RESTRICTED SECURITIES (APPLICABLE TO GENERAL MONEY MARKET PORTFOLIO AND
TAX-EXEMPT MONEY MARKET PORTFOLIO ONLY)
The General Money Market Portfolio and 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.
STANDBY COMMITMENTS (APPLICABLE TO TAX-EXEMPT MONEY MARKET PORTFOLIO ONLY)
Standby Commitments are puts that entitle holders to same-day settlement at an
exercise price equal to the amortized cost of the underlying security plus
accrued interest, if any, at the time of exercise. The Tax-Exempt Money Market
Portfolio may acquire standby commitments to enhance the liquidity of portfolio
securities, but only when the issuers of the commitments present minimal risk of
default.
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.
18
<PAGE> 20
TEMPORARY DEFENSIVE POSITIONS
Each Portfolio may temporarily hold investments that are not part of its main
investment strategy during unfavorable market conditions. These investments may
include cash (which will not earn any income) and, in the case of the Tax-Exempt
Money Market Portfolio, short-term taxable money market instruments not to
exceed 20% of the Portfolio's assets. This strategy could prevent a Portfolio
from achieving its investment objective.
OTHER TYPES OF INVESTMENTS
This prospectus describes each Portfolio's principal investment strategies and
the particular types of securities in which each Portfolio principally invests.
Each Portfolio may, from time to time, make other types of investments and
pursue other investments strategies in support of its overall investment goal.
These supplemental investment strategies - and the risks involved - are
described in detail in the Statement of Additional Information ("SAI"), which is
referred to on the back cover of this prospectus.
YEAR 2000 RISKS
Like other funds and business organizations around the world, the Portfolios
could be adversely affected if the computer systems used by the Adviser and the
Portfolio'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 Portfolio 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 Portfolios have been assured that the Adviser and the Portfolio's other
service providers (i.e., 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
Portfolio's operations associated with Year 2000 issues. Internal efforts
include a commitment to dedicate adequate staff and funding to identify and
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 Fund's Adviser 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 Portfolios are 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 Adviser or the Portfolio's service providers cannot be
accurately assessed at this time, the Portfolios currently have no reason to
believe that the Year 2000 plans of the Adviser and the Portfolio'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 Portfolios. The Portfolios and the Adviser will continue to closely
monitor developments relating to this issue, including development by the
Adviser and the Portfolios' 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 Adviser will
monitor potential investment risk related to Year 2000 issues.
19
<PAGE> 21
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE INVESTMENT ADVISER
Integrity Management & Research, Inc. (the "Adviser"), 871 Venetia Bay
Boulevard, Suite 370, Venice, Florida 34292 is the adviser for 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
20 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 Adviser, founded in 1992, manages more than $1 billion in assets. Through
the portfolio management team, the Sub-Adviser makes the day-to-day investment
decisions and continuously reviews, supervises and administers the Funds'
investment programs.
For these advisory services, the Portfolios paid as follows during their fiscal
year ended:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PERCENTAGE OF AVERAGE
NET ASSETS AS OF
8/31/99
- --------------------------------------------------------------------------------
<S> <C>
U.S. Treasury Money Market Portfolio 0.20%
- --------------------------------------------------------------------------------
U.S. Treasury Income Portfolio 0.20%
- --------------------------------------------------------------------------------
General Money Market Portfolio 0.20%
- --------------------------------------------------------------------------------
Tax-Exempt Money Market Portfolio 0.20%
- --------------------------------------------------------------------------------
</TABLE>
The Sub-Adviser is paid by the Manager a fee at the annual rate based on each
Portfolio's average daily net assets, 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.
20
<PAGE> 22
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE DISTRIBUTOR
Integrity Investments, Inc. is the Portfolios' distributor. Its address is 871
Venetia Bay Boulevard, suite 370, Venice, Florida 34292.
THE ADMINISTRATOR
BISYS Fund Services Ohio, Inc. (BISYS) is the Fund's administrator. Its address
is 3435 Stelzer Road, Columbus, OH 43219. Management and Administrative services
of BISYS include providing office space, equipment and clerical personnel to the
Portfolios and supervising custodial, auditing, valuation, bookkeeping, legal
and dividend dispersing services.
The Statement of Additional Information has more detailed information about the
Investment Adviser and other service providers.
21
<PAGE> 23
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
PRICING OF PORTFOLIO SHARES
- ---------------------------
HOW NAV IS CALCULATED The Portfolios' net asset value
or NAV is expected to be constant
The NAV is calculated by at $1.00 per share, although this
adding the total value of the value is not guaranteed. The NAV
Portfolio's investments and is determined at 12:00 noon
other assets, subtracting its Eastern time for the U.S.
liabilities and then dividing Treasury Income Portfolio and the
that figure by the number of Tax-Exempt Money Market
outstanding shares of the Portfolio, and at 3:00 p.m.
Portfolio: Eastern time for the U.S.
Treasury Money Market Portfolio
and the General Money Market
Portfolio, and on days the New
NAV = York Stock Exchange and the
Boston and the New York Federal
TOTAL ASSETS - LIABILITIES Reserve Banks are open. The
-------------------------- Portfolios value their securities
NUMBER OF SHARES at their amortized cost. This
OUTSTANDING method involves valuing an
instrument at its cost and
thereafter applying a constant
amortization to maturity of any
discount or premium, regardless
of the impact of fluctuating
interest rates on the market
value of the investment.
Your order for purchase or sale
of shares is priced at the next
NAV calculated after your order
is accepted by the Fund. This is
what is known as the offering
price.
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 in order to determine the
NAV of each class.
22
<PAGE> 24
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES
- --------------------------------------------------------------------------------
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 charges by some
institutions with establish accounts on behalf of their customers.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
MINIMUM
Some institutions may charge ACCOUNT TYPE INITIAL MINIMUM
additional fees and may INVESTMENT* SUBSEQUENT
require different minimum
investments or impose other
limitations on buying and Regular $ 1,000,000 None
selling shares. The ------------------------------------------------------------------------------------
institution is responsible
for transmitting orders by * Institutions may satisfy the minimum investment by aggregating their fiduciary
close of business and may accounts.
have an earlier cut-off
time for purchase and sale Your purchase of shares will be on the same business day if the
requests. Consult your Portfolio's transfer agent receives your order by:
institution for specific
information. 12:00 noon, Eastern time, for the
-U.S. Treasury Income Portfolio
. -Tax-Exempt Money Market Portfolio
3:00 p.m., Eastern time, for the
-U.S. Treasury Money Market Portfolio
-General Money Market Portfolio
Otherwise, the purchase will be effective on the next business day.
To allow the Portfolios to be managed effectively, shareholders
are urged to initial all trades as early in the day as possible.
Also, please notify the Transfer Agent at least one day in advance
of trades in excess of $10,000,000. Include your name
and shareholder account number.
A Portfolio may reject any purchase order if it considers it
in the best interest of the Portfolio and its shareholders.
Purchases by exchange are not permitted.
</TABLE>
- --------------------------------------------------------------------------------
Avoid 31% Tax Withholding
The Portfolios are required to withhold 31% of taxable dividends, capital gains
distributions and redemptions paid to shareholders who have not provided the
Portfolios with their certified taxpayer identification number in compliance
with IRS rules. To avoid this, make sure you provide your correct Tax
Identification Number (Social Security Number for most investors) on your
account application.
- --------------------------------------------------------------------------------
23
<PAGE> 25
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES - CONTINUED
- --------------------------------------------------------------------------------
BY WIRE ORDERS
Prior to wiring monies and in order to ensure that wire orders are invested
promptly, you must call the Distributor to obtain instructions regarding the
bank account number where the monies should be wired and other pertinent
information.
- --------------------------------------------------------------------------------
Dividends and Distributions
- ---------------------------
All income dividends will be paid in cash and will automatically be made by wire
unless you request to reinvest such dividends in additional shares.
- --------------------------------------------------------------------------------
SELLING YOUR SHARES
- --------------------------------------------------------------------------------
You may sell your shares
at any time. Your sales WITHDRAWING MONEY FROM YOUR PORTFOLIO INVESTMENT
price will be the next
NAV calculated after the As a mutual fund shareholder, you are
Portfolio's transfer agent technically selling shares when you
receives your sell order. request a withdrawal. This is also
Normally you will known as redeeming shares or a
receive your proceeds redemption of shares.
within a week after
your request is received. If an account is closed, any accrued
see section on "General dividend will be paid with in 10
Policies on Selling days of the beginning of the
Shares below." following month.
- --------------------------------------------------------------------------------
INSTRUCTIONS FOR SELLING SHARES
You may request redemption of your shares through the Transfer Agent. The
Portfolio ordinarily will accept orders to purchase by wire or telephone.
Shareholders may change the bank account designated to receive an amount
redeemed at any time by sending a letter of instruction with a signature
guarantee to the Transfer Agent, BISYS Fund Services Ohio, Inc., 3435 Stelzer
Road, Columbus, Ohio 43219.
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.
24
<PAGE> 26
SHAREHOLDER INFORMATION
GENERAL POLICIES ON SELLING SHARES
- --------------------------------------------------------------------------------
REFUSAL OF REDEMPTION REQUEST
Payment for shares may be delayed under extraordinary circumstances or as
permitted by the SEC in order to protect remaining shareholders. When the NYSE
or either the Boston or New York Federal Reserve Bank is closed for
extraordinary circumstances (or when trading is restricted) for any reason,
payment for shares may be delayed.
WIRE OR TELEPHONE REDEMPTIONS
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.
DISTRIBUTION AND SERVICE (12b-1) FEES
- --------------------------------------------------------------------------------
The Portfolios have adopted a plan under SEC Rule 12b-1. The plan allows the
Portfolios to pay fees for services and expenses relating to the sale and
distribution of the Portfolios' shares and/or for providing shareholder
services. The amount of the fee the Plan allows is 0.35% of the average daily
net assets of the Portfolios. Because these fees are paid from the Portfolios'
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales fees. No
payments under the Plan have been authorized or will be made for the Class A
shares during the calendar year 2000.
SHAREHOLDERS STATEMENTS
Shareholders will receive a monthly statement and a confirmation after every
transaction that affects the share balance or the account registration.
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.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
Any income a Fund receives in the form of dividends is paid out, less expenses,
to its shareholders. Each Fund declares dividends from net investment income on
every business day. Dividends on are paid monthly, on or about the fifteenth day
of each month. Capital gains for all Funds are distributed at least annually.
In order to receive the dividend declared, the Custodian must receive the
purchase wire by the close of the Federal reserve wire system on that Business
Day.
Dividends and distributions are treated in the same manner for federal income
tax purposes whether you receive them in cash or in additional shares.
25
<PAGE> 27
SHAREHOLDER INFORMATION
DIVIDENDS, DISTRIBUTIONS AND TAXES - CONTINUED
- --------------------------------------------------------------------------------
The interest income from the U.S. Government securities is generally not subject
to state and local taxes, however any interest income from the repurchase
agreements is generally subject to state and local taxes.
The Funds expect that their dividends will primarily consist of net income or,
if any, short-term capital gains as opposed to long-term capital gains.
Dividends paid by the Portfolios (except Tax-Exempt Money Market Portfolio) are
taxable as ordinary income, as are dividends paid by the Tax-Exempt Money Market
Portfolio that are derived from taxable investments.
During normal market conditions, the Tax-Exempt Money Market Fund expects that
substantially all of its dividends will be excluded from gross income for
federal income tax purposes. The Portfolio may invest in certain securities with
interest that may be a preference item for the purposes of the alternative
minimum tax or a factor in determining whether Social Security benefits are
taxable. In such event, a portion of the Portfolio's dividends would not be
exempt from federal income taxes.
Dividends are taxable in the year in which they are paid, even if they appear on
your account statement the following year.
You will be notified in January each year about the federal tax status of
distributions made by the Portfolio. Depending on your residence for tax
purposes, distributions also may be subject to state and local taxes, including
withholding taxes.
Foreign shareholders may be subject to special withholding requirements. There
is a penalty on certain pre-retirement distributions from retirement accounts.
Consult your tax adviser about the federal, state and local tax consequences in
your particular circumstances.
26
<PAGE> 28
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following information has been audited by PricewaterhouseCoopers LLP,
independent accountants, whose report thereon was unqualified. This information
is part of the Trust's financial statements which are included in the Trust's
Annual Report to Shareholders and incorporated by reference in the SAI. The
following information should be read in conjunction with the financial
statements and notes thereto.
U.S. TREASURY MONEY MARKET PORTFOLIO- CLASS A
For a share outstanding throughout each period.
INSERT PAST 5 YEARS'
FINANCIAL HIGHLIGHTS
FROM ANNUAL REPORT.
27
<PAGE> 29
U.S. TREASURY INCOME PORTFOLIO- CLASS A
For a share outstanding throughout each period.
INSERT PAST 5 YEARS'
FINANCIAL HIGHLIGHTS
FROM ANNUAL REPORT.
28
<PAGE> 30
GENERAL MONEY MARKET PORTFOLIO- CLASS A
For a share outstanding throughout each period.
INSERT PAST 5 YEARS'
FINANCIAL HIGHLIGHTS
FROM ANNUAL REPORT.
29
<PAGE> 31
TAX-EXEMPT MONEY MARKET PORTFOLIO- CLASS A
For a share outstanding throughout each period.
INSERT PAST 5 YEARS'
FINANCIAL HIGHLIGHTS
FROM ANNUAL REPORT.
30
<PAGE> 32
For more information about the Funds, the following documents are available free
upon request:
ANNUAL/SEMIANNUAL REPORTS (REPORTS):
The Portfolios' annual and semi-annual reports to shareholders contain
additional information on each Portfolio's investments. In the annual report,
you will find a discussion of the market conditions and investment strategies
that significantly affected the Fund's performance during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed
information about the Funds, including their operations and investment policies.
It is incorporated by reference and is legally considered a part of this
prospectus.
- --------------------------------------------------------------------------------
YOU CAN RECEIVE FREE COPIES OF REPORTS AND THE SAI, OR REQUEST OTHER INFORMATION
AND DISCUSS YOUR QUESTIONS ABOUT THE FUNDS BY CONTACTING THE DISTRIBUTOR. OR
CONTACT THE PORTFOLIOS AT:
THE VALIANT FUND
3435 STELZER ROAD
COLUMBUS, OHIO 43219
TELEPHONE: 1-800-828-2176
E-MAIL: [email protected]
---------------------------
INTERNET: http://www.valiantfund.com
- --------------------------------------------------------------------------------
You can review and copy the Fund's reports and SAIs at the Public Reference Room
of the Securities and Exchange Commission. You can get text-only copies:
- - For a fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-6009 or calling 1-800-SEC-0330.
- - Free from the Commission's Website at http://www.sec.gov.
Investment Company Act file no. 811-7582.
31
<PAGE> 33
THE VALIANT FUND
PROSPECTUS
DECEMBER 29, 1999
CLASS B SHARES
U.S. TREASURY MONEY MARKET PORTFOLIO
U.S. TREASURY INCOME PORTFOLIO
GENERAL MONEY MARKET PORTFOLIO
TAX-EXEMPT MONEY MARKET PORTFOLIO
MANAGED BY INTEGRITY MANAGEMENT & RESEARCH, INC.
QUESTIONS?
CALL 1-800-828-2176
OR YOUR INVESTMENT REPRESENTATIVE.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED THE SHARES DESCRIBED IN THIS
PROSPECTUS OR DETERMINED WHETHER THIS PROSPECTUS IS
ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 34
TABLE OF CONTENTS
REVIEW THIS SECTION FOR AN OVERVIEW OF THE PORTFOLIOS.
OVERVIEW
3 OVERVIEW
CAREFULLY REVIEW THIS IMPORTANT SECTION, WHICH SUMMARIZES EACH PORTFOLIO'S
INVESTMENTS, STRATEGIES, RISKS, PAST PERFORMANCE, AND FEES.
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES INCLUDES INVESTMENT OBJECTIVES,
STRATEGIES AND RISKS
4-6 U.S. TREASURY MONEY MARKET PORTFOLIO
7-8 U.S. TREASURY INCOME PORTFOLIO
9-11 GENERAL MONEY MARKET PORTFOLIO
12-13 TAX-EXEMPT MONEY MARKET PORTFOLIO
14 FEES AND EXPENSES
ADDITIONAL INFORMATION
15-17
REVIEW THIS SECTION FOR DETAILS ON THE PEOPLE AND ORGANIZATIONS WHO OVERSEE THE
PORTFOLIOS.
FUND MANAGEMENT
18 THE INVESTMENT ADVISER
19 THE DISTRIBUTOR
19 THE ADMINISTRATOR
REVIEW THIS SECTION FOR DETAILS ON HOW SHARES ARE VALUED, HOW TO PURCHASE AND
SELL SHARES, RELATED CHARGES AND PAYMENTS OF DIVIDENDS AND DISTRIBUTIONS.
SHAREHOLDER INFORMATION
20 PRICING OF PORTFOLIOS SHARES
21-22 PURCHASING AND ADDING TO YOUR SHARES
22 SELLING YOUR SHARES
23 GENERAL POLICIES ON SELLING SHARES
23 DISTRIBUTION AND SERVICE (12B-1) FEES
23-24 DIVIDENDS, DISTRIBUTIONS AND TAXES
FINANCIAL HIGHLIGHTS
25-26
BACK COVER
27 WHERE TO LEARN MORE ABOUT THIS FUND GROUP
2
<PAGE> 35
OVERVIEW
- --------------------------------------------------------------------------------
The Trust offers Class A shares, Class B shares, Class C shares, Class D shares
and Class E 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 by carefully reading its
prospectus. THIS PROSPECTUS RELATES ONLY TO THE CLASS B SHARES.
Each Portfolio is designed exclusively for investment of short-term monies held
in institutional accounts. Shares of the Portfolios may be purchased by banks
and other institutional investors that have entered into service agreements with
Integrity Investments, Inc. (the "Distributor"), 1-800-828-2176.
Each Portfolio is a money market fund. As a money market fund, each Portfolio is
subject to maturity, quality and diversification requirements designed to help
it maintain a stable price of $1.00 per share. Under these requirements, each
Portfolio's investments must have a remaining maturity of no more than 397 days
and its investments must maintain an average weighted maturity that does not
exceed 90 days.
Money Market Securities are high quality, short-term debt securities that pay a
fixed, variable or floating interest rate. Securities are often specifically
structured so that they are eligible investments for a money market fund. For
example, in order to satisfy the maturity restrictions for a money market fund,
some money market securities have demand or put features that have the effect of
shortening the security's maturity. Taxable money market securities include bank
certificates of deposit, bank acceptances, bank time deposits, notes, commercial
paper and U.S. Government securities. Municipal money market securities include
variable rate demand notes, commercial paper and municipal notes.
RISK/RETURN SUMMARY
The following is a summary of certain key information about the Portfolios.
Other important things for you to note:
o An investment in the Portfolios is not a deposit in a bank and
is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
o Although the Portfolios seek to preserve the value of your
investment at $1.00 per share, it is possible to lose money by
investing in the Portfolios.
3
<PAGE> 36
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
- --------------------------------------------------------------------------------
U.S. TREASURY MONEY MARKET PORTFOLIO
INVESTMENT OBJECTIVES The Portfolio seeks to obtain as high a level
of current income as is consistent with the
preservation of capital and liquidity.
PRINCIPAL INVESTMENT STRATEGIES The Portfolio's principal investment strategies
include:
o Investing money market instruments
issued by the U.S. Treasury, certain
U.S. Government agencies and in U.S.
Government backed repurchase agreements.
o Generally maintaining a dollar-weighted
average maturity at 90 days or less.
o Investing in compliance with
industry-standard requirements for money
market funds for the quality, maturity
and diversification of investments.
The Portfolio invests based on considerations of
safety of principal and liquidity, which means
that the Portfolio may not necessarily invest in
securities paying the highest available yield at
a particular time. The Portfolio will attempt to
increase its yield by trading to take advantage
of short-term market variations. The Adviser
generally evaluates investments based on
interest rate sensitivity.
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.
A full discussion of additional permissible
investments is included in the Statement of
Additional Information ("SAI").
PRINCIPAL INVESTMENT RISKS The Portfolio is a "money market fund" that
seeks to maintain a stable net asset value of
$1.00 per share. There is no guarantee the
Portfolio will be able to preserve the value of
your investment at $1.00 per share. It is
possible to lose money by investing in the
Portfolio.
There can be no assurance that the investment
objective of the Portfolio will be achieved.
The principal risks of investing in the
Portfolio are:
o INTEREST RATE RISK This is the risk that
changes in interest rates will affect
the yield or value of the Portfolio's
investments in debt securities. Because
the Portfolio invests in short-term
securities, a decline in interest rates
will affect the Portfolio's yield as
these securities mature or are sold and
the Portfolio purchases new short-term
4
<PAGE> 37
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
U.S. TREASURY MONEY MARKET PORTFOLIO - CONTINUED
- --------------------------------------------------------------------------------
Securities with a lower yield.
Generally, an increase in interest rates
causes the value of a debt instrument to
decrease. The change in value for
shorter-term securities is usually
smaller than for securities with longer
maturities.
o CREDIT RISK Although U.S. Government
securities, particularly U.S. Treasury
obligations, have historically involved
little risk, if an issuer fails to pay
interest or repay principal, the value
of your investment could decline.
o SELECTION RISK The Adviser evaluates the
rewards and risks presented by all
securities purchased by the Portfolio
and how they may advance the Portfolio's
investment objective. It is possible,
however, that these evaluations will
prove to be inaccurate.
WHO MAY WANT TO INVEST? Consider investing in the Portfolio if you are:
[_] SEEKING PRESERVATION OF CAPITAL
[_] HAVE A LOW RISK TOLERANCE
[_] WILLING TO ACCEPT LOWER POTENTIAL RETURNS IN
EXCHANGE FOR A HIGH DEGREE OF SAFETY
[_] INVESTING SHORT-TERM RESERVES
This Portfolio will not be appropriate for
someone:
[_] SEEKING HIGH TOTAL RETURNS
[_] PURSUING A LONG-TERM GOAL OR INVESTING
FOR RETIREMENT
5
<PAGE> 38
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
U.S. TREASURY MONEY MARKET PORTFOLIO - CONTINUED
- --------------------------------------------------------------------------------
The chart and table on this page show how the U.S. Treasury Money Market
Portfolio has performed and how its performance has varied from year to year.
The bar chart shows changes in the Portfolio's yearly performance since
inception to demonstrate that the Portfolio has gained and lost value at
differing times.
PERFORMANCE BAR CHART AND TABLE
-------------------------------
Year-by-Year Total Returns as of 12/31
[BAR CHART]
5.56% 5.02% 5.11% 5.01%
1995 1996 1997 1998
Of course, past performance does not indicate how the Portfolio will
perform in the future.
- ----------------------------------------------------------------------------
Best quarter: Q2 1995 1.40%
Worst quarter: Q3 1994 1.01%
- ----------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (for the periods ending December 31, 1998)
Past Year Since Inception
(5/17/94)
............................. ............. ...................
U.S. TREASURY MONEY MARKET 5.01% 5.07%
PORTFOLIO
............................. ............. ...................
............................. ............. ...................
As of September 30, 1999 the 7-day yield was 4.67%. Without expense limitations,
the Portfolio's yield would have been 5.12% for this time period. For current
yield information on the Portfolio, call 1-800-828-2176. The U.S. Treasury Money
Market Portfolio's yield appears in the Wall Street Journal each Thursday.
6
<PAGE> 39
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
U.S. TREASURY INCOME PORTFOLIO
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES The Portfolio seeks to obtain as high a level of
current income as is consistent with the
preservation of capital and liquidity.
PRINCIPAL INVESTMENT STRATEGIES The Portfolio's principal investment strategies
include:
o Investing all of its assets in U.S.
Government Obligations which are backed
by the full faith and credit of the U.S.
Government and whose interest income is
generally not subject to state income
tax. Under normal market conditions, the
Portfolio invests at least 65% of its
total assets in U.S. Treasury
obligations such as U.S. Treasury bills,
notes and bonds.
o Generally maintaining a dollar-weighted
average of 90 days or less.
o Investing in compliance with industry
standard requirements for money market
funds for quality, maturity and
diversification of investments.
A full discussion of additional permissible
investments is included in the SAI.
PRINCIPAL INVESTMENT RISKS The Portfolio is a "money market fund" that
seeks to maintain a stable net asset value of
$1.00 per share. There is no guarantee the
Portfolio will be able to preserve the value of
your investment at $1.00 per share. It is
possible to lose money by investing in the
Portfolio.
There can be no assurance that the investment
objective of the Portfolio will be achieved.
The principal risks of investing in the
Portfolio are:
o INTEREST RATE RISK This is the risk that
changes in interest rates will affect
the yield or value of the Portfolio's
investments in debt securities. Because
the Portfolio invests in short-term
securities, a decline in interest rates
will affect the Portfolio's yield as
these securities mature or are sold and
the Portfolio purchases new short-term
securities with a lower yield.
Generally, an increase in interest rates
causes the value of a debt instrument to
decrease. The change in value for
shorter-term securities is usually
smaller than for securities with longer
maturities.
o CREDIT RISK Although U.S. Government
securities, particularly U.S. Treasury
obligations, have historically involved
little risk, if an issuer fails to pay
interest or repay principal, the value
of your investment could decline.
7
<PAGE> 40
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
U.S. TREASURY INCOME PORTFOLIO - CONTINUED
- --------------------------------------------------------------------------------
o SELECTION RISK The Adviser evaluates the
rewards and risks presented by all
securities purchased by the Portfolio
and how they may advance the Portfolio's
investment objective. It is possible,
however, that these evaluations will
prove to be inaccurate.
No performance information is shown for the
Class B shares of U.S. Treasury Income Portfolio
that, as of the date of this prospectus, has not
commenced operations. The performance of the
Portfolio's shares will fluctuate with market
conditions.
WHO MAY WANT TO INVEST? Consider investing in the Portfolio if you are:
[_] SEEKING PRESERVATION OF CAPITAL
[_] HAVE A LOW RISK TOLERANCE
[_] WILLING TO ACCEPT LOWER POTENTIAL RETURNS IN
EXCHANGE FOR A HIGH DEGREE OF SAFETY
[_] INVESTING SHORT-TERM RESERVES
This Portfolio will not be appropriate for
someone:
[_] SEEKING HIGH TOTAL RETURNS
[_] PURSUING A LONG-TERM GOAL OR INVESTING FOR
RETIREMENT
8
<PAGE> 41
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
GENERAL MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES The Portfolio seeks to obtain as high a level of
current income as is consistent with the
preservation of capital and liquidity.
PRINCIPAL INVESTMENT STRATEGIES The Portfolio's principal investment strategies
include:
o Investing in U.S. dollar-denominated
short-term obligations of domestic and
foreign issuers including banks rated in
the highest category by at least two
nationally recognized rating services,
U.S. Government securities, repurchase
agreements and entering into reverse
repurchase agreements.
o Generally maintaining a dollar-weighted
average maturity at 90 days or less.
o Investing in compliance with
industry-standard requirements for money
market funds for the quality, maturity
and diversification of investments.
The Portfolio may invest 25% or more of its
total assets in the domestic banking industry.
A full discussion of additional permissible
investments is included in the SAI.
PRINCIPAL INVESTMENT RISKS The Portfolio is a "money market fund" that
seeks to maintain a stable net asset value of
$1.00 per share. There is no guarantee the
Portfolio will be able to preserve the value of
your investment at $1.00 per share. It is
possible to lose money by investing in the
Portfolio.
There can be no assurance that the investment
objective of the Portfolio will be achieved.
The principal risks of investing in the
Portfolio are:
o INTEREST RATE RISK This is the risk that
changes in interest rates will affect
the yield or value of the Portfolio's
investments in debt securities. Because
the Portfolio invests in short-term
securities, a decline in interest rates
will affect the Portfolio's yield as
these securities mature or are sold and
the Portfolio purchases new short-term
securities with a lower yield.
Generally, an increase in interest rates
causes the value of a debt instrument to
decrease. The change in value for
9
<PAGE> 42
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
GENERAL MONEY MARKET PORTFOLIO - CONTINUED
- --------------------------------------------------------------------------------
shorter-term securities is usually smaller than
for securities with longer maturities.
o CREDIT RISK This is the risk that the
issuer or guarantor of a debt security
will be unable or unwilling to make
timely interest or principal payments,
or to otherwise honor its obligations.
Credit risk includes the possibility
that any of the Portfolio's investments
will have its credit ratings downgraded.
The Portfolio will only purchase a money
market instrument if it presents minimal
credit risks.
o SELECTION RISK The Adviser evaluates the
rewards and risks presented by all
securities purchased by the Portfolio
and how they may advance the Portfolio's
investment objective. It is possible,
however, that these evaluations will
prove to be inaccurate.
o FOREIGN INVESTMENT RISK The Portfolio's
investments in U.S. dollar-denominated
obligations of foreign branches of U.S.
banks and U.S. branches of foreign banks
may be subject to foreign risk. Foreign
securities issuers are usually not
subject to the same degree of regulation
as U.S. issuers. Reporting, accounting,
and auditing standards of foreign
countries differ, in some cases,
significantly from U.S. standards.
Foreign risk includes nationalization,
expropriation or confiscatory taxation,
currency blockage, political changes or
diplomatic developments that could
adversely affect the portfolio's
investments.
WHO MAY WANT TO INVEST? Consider investing in the Portfolio if you are:
[_] SEEKING PRESERVATION OF CAPITAL
[_] HAVE A LOW RISK TOLERANCE
[_] WILLING TO ACCEPT LOWER POTENTIAL RETURNS IN
EXCHANGE FOR A HIGH DEGREE OF SAFETY
[_] INVESTING SHORT-TERM RESERVES
This Portfolio will not be appropriate for
someone:
[_] SEEKING HIGH TOTAL RETURNS
[_] PURSUING A LONG-TERM GOAL OR INVESTING FOR
RETIREMENT
10
<PAGE> 43
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
GENERAL MONEY MARKET PORTFOLIO - CONTINUED
- --------------------------------------------------------------------------------
The chart and table on this page show how the General Money Market Portfolio has
performed and how its performance has varied from year to year. The bar chart
shows changes in the Portfolio's yearly performance since inception to
demonstrate that the Portfolio has gained and lost value at differing times.
PERFORMANCE BAR CHART AND TABLE
-------------------------------
Year-by-Year Total Returns as of 12/31
[BAR CHART]
5.69% 5.09% 5.24% 5.17%
1995 1996 1997 1998
Of course, past performance does not indicate how the Portfolio will
perform in the future.
- ----------------------------------------------------------------------------
Best quarter: Q2 1995 1.43%
Worst quarter: Q3 1994 1.08%
- ----------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (for the periods ending December 31, 1998)
Past Year Since Inception
(5/17/94)
............................. ............. ................... ...............
GENERAL MONEY MARKET 5.17% 5.15%
PORTFOLIO
............................. ............. ................... ................
............................. ............. ................... ................
As of September 30, 1999 the 7-day yield was 4.88%. Without expense limitations,
the Portfolio's yield would have been 5.33% for this time period. For current
yield information on the Portfolio, call 1-800-828-2176. The General Money
Market Portfolio's yield appears in the Wall Street Journal each Thursday.
11
<PAGE> 44
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
TAX-EXEMPT MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES The Portfolio seeks primarily income exempt from
federal income tax.
PRINCIPAL INVESTMENT STRATEGIES The Portfolio principal investment strategies
include:
o Investing in municipal money market
securities
o Investing in compliance with industry
standard requirements for money market
funds for the quality, maturity and
diversification of investments.
o Municipal securities subject to
restrictions on resale.
Municipal Securities are issued to raise money for a variety of public and
private purposes, including general financing for state and local governments,
or financing for a specific project or public facility. Municipal securities may
be fully or partially backed by the local government, by the credit of a private
issuer, by the current or anticipated revenues from a specific project or
specific assets, or by domestic or foreign entities providing credit support
such as letters of credit, guarantees or insurance.
As a temporary defensive measure because of
market, economic, political or other conditions,
the Portfolio may invest in taxable money market
securities. These temporary investments may
produce taxable income.
The Portfolio does not intend to invest in
Municipal Securities whose interest in subject
to the federal alternative minimum tax ("AMT")
for individuals.
The Portfolio buys and sells securities based on
its objective of maximizing current income
consistent with safety of principal and
liquidity. The Portfolio will attempt to
increase its yields by trading to take advantage
of short-term market variations. The Fund's
Adviser evaluates investments based on credit
Analysis and the interest rate outlook.
A full discussion of additional permissible
investments is included in the SAI.
PRINCIPAL INVESTMENT RISKS The Fund is a "money market fund" that seeks to
maintain a stable net asset value of $1.00 per
share. There is no guarantee the Portfolio will
be able to preserve the value of your investment
at $1.00 per share. It is possible to lose money
by investing in the Portfolio.
There can be no assurance that the investment
objective of the Portfolio will be achieved.
12
<PAGE> 45
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
TAX-EXEMPT MONEY MARKET PORTFOLIO - CONTINUED
- --------------------------------------------------------------------------------
The principal risks of investing in the Fund
are:
o INTEREST RATE RISK This is the risk that
changes in interest rates will affect
the yield or value of the Portfolio's
investments in municipal debt
securities. Prices of municipal
obligations tend to move inversely with
changes in interest rates. The most
immediate effect of a rise in rates is
usually a drop in the prices of such
securities, and therefore in the
Portfolio's yield as well. Interest rate
risk is usually greater for fixed-income
securities with longer maturities or
durations.
o CREDIT RISK Although credit risk is very
low because the Portfolio only invests
in high quality obligations, if an
issuer fails to pay interest or repay
principal, the value of your investment
could decline. The ability of a state or
local government issuer to make payments
can be affected by many factors,
including economic conditions, the flow
of tax revenues and changes in the level
of federal, state or local aid. Some
municipal securities are payable only
from limited revenue sources or by
private entities.
o SELECTION RISK The Adviser evaluates the
rewards and risks presented by all
securities purchased by the Portfolio
and how they may advance the Portfolio's
investment objective. It is possible,
however, that these evaluations will
prove to be inaccurate.
No performance information is shown for the
Class B shares of Tax-Exempt Money Market
Portfolio that, as of the date of this
prospectus, has not commenced operations. The
performance of the Portfolio's shares will
fluctuate with market conditions.
WHO MAY WANT TO INVEST? Consider investing in the Portfolio if you are:
[_] SEEKING PRESERVATION OF CAPITAL
[_] HAVE A LOW RISK TOLERANCE
[_] WILLING TO ACCEPT LOWER POTENTIAL RETURNS IN
EXCHANGE FOR A HIGH DEGREE OF SAFETY
[_] INVESTING SHORT-TERM RESERVES
This Portfolio will not be appropriate for
someone:
[_] SEEKING HIGH TOTAL RETURNS
[_] INVESTING AS PART OF A RETIREMENT PLAN
BECAUSE THE PLANS CAN NOT BENEFIT FROM TAX
EXEMPT INCOME
[_] PURSUING A LONG-TERM GOAL
13
<PAGE> 46
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
- --------------------------------------------------------------------------------
FEES AND EXPENSES
- -----------------
If you buy and hold Class B shares of the Portfolios, you will pay the following
fees and expenses. Annual Fund operating expenses are paid out of Portfolio
assets, and are reflected in the Portfolio's yield.
<TABLE>
<CAPTION>
Shareholder Fees U.S. TREASURY U.S. TREASURY GENERAL TAX-EXEMPT
(fees paid directly MONEY MARKET INCOME MONEY MARKET MONEY MARKET
from your investment) PORTFOLIO PORTFOLIO(1) PORTFOLIO PORTFOLIO(2)
--------- ------------ --------- ------------
CLASS B CLASS B CLASS B CLASS B
<S> <C> <C> <C> <C>
Maximum sales charge None None None None
(load) on purchases
- ----------------------- ------------------ ----------------- ----------------- ------------------
Annual Portfolio
Operating Expenses
(expenses that are
deducted from
Portfolio assets)
- ----------------------- ------------------ ----------------- ----------------- ------------------
Management fees .20% .20% .20% .20%
- ----------------------- ------------------ ----------------- ----------------- ------------------
Distribution and .25% .25% .25% .25%
Service (12b-1) fees(2)
- ----------------------- ------------------ ----------------- ----------------- ------------------
Other expenses(3) .00% .00% .00% .00%
- ----------------------- ------------------ ----------------- ----------------- ------------------
Total Annual .45% .45% .45% .45%
Portfolio operating
expenses
- ----------------------- ------------------ ----------------- ----------------- ------------------
</TABLE>
(1) As of the date of this Prospectus, the Class B shares of U.S. Treasury
Income Portfolio and Tax-Exempt Money Market Portfolio have not commenced
operations.
(2) The Trust has adopted a Distribution and Shareholder Servicing Plan (the
"Plan") for the Class B shares. Payments allowed under the Plan for Class B
shares are 0.35% yet are authorized and paid at the rate of 0.25% of the
average daily net assets of Class B shares.
(3) Other Expenses and Total Fund Operating Expenses of the Fund are estimated
for the current fiscal year.
EXPENSE EXAMPLE
- ---------------
Use the example below to compare fees and expenses with those of other
Portfolios. It illustrates the amount of fees and expenses you would pay,
assuming the following:
o $10,000 investment
o 5% annual return
o redemption at the end of each period
o no changes in the Portfolio's operating expenses
o reinvestment of dividends and distributions
Because this example is hypothetical and for comparison only, your actual costs
will be different.
<TABLE>
<CAPTION>
1 3 5 10
Year Years Years Years
<S> <C> <C> <C> <C>
U.S. TREASURY MONEY MARKET PORTFOLIO $46 $144 $252 $567
- ------------------------------------
- ------------------------------------------------------- -------------- ------------ ------------ ------------
U.S. TREASURY INCOME PORTFOLIO $46 $144 $252 $567
- ------------------------------
- ------------------------------------------------------- -------------- ------------ ------------ ------------
GENERAL MONEY MARKET PORTFOLIO $46 $144 $252 $567
- ------------------------------
- ------------------------------------------------------- -------------- ------------ ------------ ------------
TAX-EXEMPT MONEY MARKET PORTFOLIO $46 $144 $252 $567
- ---------------------------------
- ------------------------------------------------------- -------------- ------------ ------------ ------------
</TABLE>
14
<PAGE> 47
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
The principal strategies and risks of investing in each Portfolio are described
on the previous pages. The following supplements that discussion.
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
Portfolio 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.
15
<PAGE> 48
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.
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 Portfolio's 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.
RESTRICTED SECURITIES (APPLICABLE TO GENERAL MONEY MARKET PORTFOLIO AND
TAX-EXEMPT MONEY MARKET PORTFOLIO ONLY)
The General Money Market Portfolio and 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.
STANDBY COMMITMENTS (APPLICABLE TO TAX-EXEMPT MONEY MARKET PORTFOLIO ONLY)
Standby Commitments are puts that entitle holders to same-day settlement at an
exercise price equal to the amortized cost of the underlying security plus
accrued interest, if any, at the time of exercise. The Tax-Exempt Money Market
Portfolio may acquire standby commitments to enhance the liquidity of portfolio
securities, but only when the issuers of the commitments present minimal risk of
default.
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.
16
<PAGE> 49
TEMPORARY DEFENSIVE POSITIONS
Each Portfolio may temporarily hold investments that are not part of its main
investment strategy during unfavorable market conditions. These investments may
include cash (which will not earn any income) and, in the case of the Tax-Exempt
Money Market Portfolio, short-term taxable money market instruments not to
exceed 20% of the Portfolio's assets. This strategy could prevent a Portfolio
from achieving its investment objective.
OTHER TYPES OF INVESTMENTS
This prospectus describes each Portfolio's principal investment strategies and
the particular types of securities in which each Portfolio principally invests.
Each Portfolio may, from time to time, make other types of investments and
pursue other investments strategies in support of its overall investment goal.
These supplemental investment strategies - and the risks involved - are
described in detail in the Statement of Additional Information ("SAI"), which is
referred to on the back cover of this prospectus.
YEAR 2000 RISKS
Like other funds and business organizations around the world, the Portfolios
could be adversely affected if the computer systems used by the Adviser and the
Portfolio'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 Portfolio 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 Portfolios have been assured that the Adviser and the Portfolio's other
service providers (i.e., 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
Portfolio's operations associated with Year 2000 issues. Internal efforts
include a commitment to dedicate adequate staff and funding to identify and
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 Fund's Adviser 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 Portfolios are 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 Adviser or the Portfolio's service providers cannot be
accurately assessed at this time, the Portfolios currently have no reason to
believe that the Year 2000 plans of the Adviser and the Portfolio'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 Portfolios. The Portfolios and the Adviser will continue to closely
monitor developments relating to this issue, including development by the
Adviser and the Portfolios' 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 Adviser will
monitor potential investment risk related to Year 2000 issues.
17
<PAGE> 50
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE INVESTMENT ADVISER
Integrity Management & Research, Inc. (the "Adviser"), 871 Venetia Bay
Boulevard, Suite 370, Venice, Florida 34292 is the adviser for 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
20 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 Adviser, founded in 1992, manages more than $1 billion in assets. Through
the portfolio management team, the Sub-Adviser makes the day-to-day investment
decisions and continuously reviews, supervises and administers the Funds'
investment programs.
For these advisory services, the Portfolios paid as follows during their fiscal
year ended:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------- -----------------------
- ---------------------------------------------------------------------------------- -----------------------
PERCENTAGE OF AVERAGE
NET ASSETS AS OF
8/31/99
- ---------------------------------------------------------------------------------- -----------------------
<S> <C>
U.S. Treasury Money Market Portfolio 0.20%
- ---------------------------------------------------------------------------------- -----------------------
U.S. Treasury Income Portfolio 0.20%
- ---------------------------------------------------------------------------------- -----------------------
General Money Market Portfolio 0.20%
- ---------------------------------------------------------------------------------- -----------------------
Tax-Exempt Money Market Portfolio 0.20%
- ---------------------------------------------------------------------------------- -----------------------
</TABLE>
The Sub-Adviser is paid by the Manager a fee at the annual rate based on each
Portfolio's average daily net assets, 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.
18
<PAGE> 51
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE DISTRIBUTOR
Integrity Investments, Inc. is the Portfolios' distributor. Its address is 871
Venetia Bay Boulevard, suite 370, Venice, Florida 34292.
THE ADMINISTRATOR
BISYS Fund Services Ohio, Inc. (BISYS) is the Fund's administrator. Its address
is 3435 Stelzer Road, Columbus, OH 43219. Management and Administrative services
of BISYS include providing office space, equipment and clerical personnel to the
Portfolios and supervising custodial, auditing, valuation, bookkeeping, legal
and dividend dispersing services.
The Statement of Additional Information has more detailed information about the
Investment Adviser and other service providers.
19
<PAGE> 52
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
PRICING OF PORTFOLIO SHARES
- ---------------------------
HOW NAV IS CALCULATED
The NAV is calculated by adding the total value of the Portfolio's investments
and other assets, subtracting its liabilities and then dividing that figure by
the number of outstanding shares of the Portfolio:
NAV =
TOTAL ASSETS - LIABILITIES
- --------------------------
NUMBER OF SHARES
OUTSTANDING
The Portfolios' net asset value or NAV is expected to be constant at $1.00 per
share, although this value is not guaranteed. The NAV is determined at 12:00
noon Eastern time for the U.S. Treasury Income Portfolio and the Tax-Exempt
Money Market Portfolio, and at 3:00 p.m. Eastern time for the U.S. Treasury
Money Market Portfolio and the General Money Market Portfolio, and on days the
New York Stock Exchange and the Boston and the New York Federal Reserve Banks
are open. The Portfolios value their securities at their amortized cost. This
method involves valuing an instrument at its cost and thereafter applying a
constant amortization to maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of the investment.
Your order for purchase or sale of shares is priced at the next NAV calculated
after your order is accepted by the Fund. This is what is known as the offering
price.
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 in order
to determine the NAV of each class.
20
<PAGE> 53
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES
- --------------------------------------------------------------------------------
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 charges by some
institutions with establish accounts on behalf of their customers.
Some institutions may charge additional fees and may require different minimum
investments or impose other limitations on buying and selling shares. The
institution is responsible for transmitting orders by close of business and may
have an earlier cut-off time for purchase and sale requests. Consult your
institution for specific information.
MINIMUM
ACCOUNT TYPE INITIAL INVESTMENT* MINIMUM
SUBSEQUENT
Regular $ 1,000,000 None
........................... .................... .................
* Institutions may satisfy the minimum investment by aggregating their
fiduciary accounts.
Your purchase of shares will be
on the same business day if the
Portfolio's transfer agent
receives your order by:
12:00 noon, Eastern time, for the
-U.S. Treasury Income Portfolio
-Tax-Exempt Money Market Portfolio
3:00 p.m., Eastern time, for the
-U.S. Treasury Money Market Portfolio
-General Money Market Portfolio
Otherwise, the purchase will be effective on the next business day.
To allow the Portfolios to be managed effectively, shareholders are urged to
initial all trades as early in the day as possible. Also, please notify the
Transfer Agent at least one day in advance of trades in excess of $10,000,000.
Include your name and shareholder account number.
A Portfolio may reject any purchase order if it considers it in the best
interest of the Portfolio and its shareholders. Purchases by exchange are not
permitted.
- --------------------------------------------------------------------------------
Avoid 31% Tax Withholding
The Portfolios are required to withhold 31% of taxable dividends, capital gains
distributions and redemptions paid to shareholders who have not provided the
Portfolios with their certified taxpayer identification number in compliance
with IRS rules. To avoid this, make sure you provide your correct Tax
Identification Number (Social Security Number for most investors) on your
account application.
- --------------------------------------------------------------------------------
21
<PAGE> 54
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES - CONTINUED
- --------------------------------------------------------------------------------
BY WIRE ORDERS
Prior to wiring monies and in order to ensure that wire orders are invested
promptly, you must call the Distributor to obtain instructions regarding the
bank account number where the monies should be wired and other pertinent
information.
- --------------------------------------------------------------------------------
Dividends and Distributions
- ---------------------------
All income dividends will be paid in cash and will automatically be made by wire
unless you request to reinvest such dividends in additional shares.
- --------------------------------------------------------------------------------
SELLING YOUR SHARES
- --------------------------------------------------------------------------------
You may sell your shares at any time. Your sales price will be the next NAV
calculated after the Portfolio's transfer agent receives your sell order.
Normally you will receive your proceeds within a week after your request is
received. See section on "General Policies on Selling Shares below."
WITHDRAWING MONEY FROM YOUR PORTFOLIO INVESTMENT
As a mutual fund shareholder, you are technically selling shares when you
request a withdrawal. This is also known as redeeming shares or a redemption of
shares.
- --------------------------------------------------------------------------------
If an account is closed, any accrued dividend will be paid with in 10 days of
the beginning of the following month.
- --------------------------------------------------------------------------------
INSTRUCTIONS FOR SELLING SHARES
You may request redemption of your shares through the Transfer Agent. The
Portfolio ordinarily will accept orders to purchase by wire or telephone.
Shareholders may change the bank account designated to receive an amount
redeemed at any time by sending a letter of instruction with a signature
guarantee to the Transfer Agent, BISYS Fund Services Ohio, Inc., 3435 Stelzer
Road, Columbus, Ohio 43219.
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.
22
<PAGE> 55
SHAREHOLDER INFORMATION
GENERAL POLICIES ON SELLING SHARES
- --------------------------------------------------------------------------------
REFUSAL OF REDEMPTION REQUEST
Payment for shares may be delayed under extraordinary circumstances or as
permitted by the SEC in order to protect remaining shareholders. When the NYSE
or either the Boston or New York Federal Reserve Bank is closed for
extraordinary circumstances (or when trading is restricted) for any reason,
payment for shares may be delayed.
WIRE OR TELEPHONE REDEMPTIONS
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.
DISTRIBUTION AND SERVICE (12b-1) FEES
- --------------------------------------------------------------------------------
The Portfolios have adopted a plan under SEC Rule 12b-1. The plan allows the
Portfolios to pay fees for services and expenses relating to the sale and
distribution of the Portfolios' shares and/or for providing shareholder
services. The amount of the fee the Plan allows is 0.35% of the average daily
net assets of the Portfolios. Because these fees are paid from the Portfolios'
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales fees. Payments
under the Plan have been authorized at the rate of 0.25% of the average daily
net assets of Class B shares.
SHAREHOLDERS STATEMENTS
Shareholders will receive a monthly statement and a confirmation after every
transaction that affects the share balance or the account registration.
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.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
Any income a Fund receives in the form of dividends is paid out, less expenses,
to its shareholders. Each Fund declares dividends from net investment income on
every business day. Dividends on are paid monthly, on or about the fifteenth day
of each month. Capital gains for all Funds are distributed at least annually.
In order to receive the dividend declared, the Custodian must receive the
purchase wire by the close of the Federal reserve wire system on that Business
Day.
Dividends and distributions are treated in the same manner for federal income
tax purposes whether you receive them in cash or in additional shares.
23
<PAGE> 56
SHAREHOLDER INFORMATION
DIVIDENDS, DISTRIBUTIONS AND TAXES - CONTINUED
- --------------------------------------------------------------------------------
The interest income from the U.S. Government securities is generally not subject
to state and local taxes, however any interest income from the repurchase
agreements is generally subject to state and local taxes.
The Funds expect that their dividends will primarily consist of net income or,
if any, short-term capital gains as opposed to long-term capital gains.
Dividends paid by the Portfolios (except Tax-Exempt Money Market Portfolio) are
taxable as ordinary income, as are dividends paid by the Tax-Exempt Money Market
Portfolio that are derived from taxable investments.
During normal market conditions, the Tax-Exempt Money Market Fund expects that
substantially all of its dividends will be excluded from gross income for
federal income tax purposes. The Portfolio may invest in certain securities with
interest that may be a preference item for the purposes of the alternative
minimum tax or a factor in determining whether Social Security benefits are
taxable. In such event, a portion of the Portfolio's dividends would not be
exempt from federal income taxes.
Dividends are taxable in the year in which they are paid, even if they appear on
your account statement the following year.
You will be notified in January each year about the federal tax status of
distributions made by the Portfolio. Depending on your residence for tax
purposes, distributions also may be subject to state and local taxes, including
withholding taxes.
Foreign shareholders may be subject to special withholding requirements. There
is a penalty on certain pre-retirement distributions from retirement accounts.
Consult your tax adviser about the federal, state and local tax consequences in
your particular circumstances.
24
<PAGE> 57
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following information has been audited by PricewaterhouseCoopers LLP,
independent accountants, whose report thereon was unqualified. This information
is part of the Trust's financial statements which are included in the Trust's
Annual Report to Shareholders and incorporated by reference in the SAI. As of
the date of this Prospectus, U.S. Treasury Income Portfolio Class B shares and
Tax-Exempt Money Market Portfolio Class B shares had not commenced operations.
The following information should be read in conjunction with the financial
statements and notes thereto.
U.S. TREASURY MONEY MARKET PORTFOLIO- CLASS B
For a share outstanding throughout each period.
INSERT PAST 5 YEARS'
FINANCIAL HIGHLIGHTS
FROM ANNUAL REPORT.
25
<PAGE> 58
GENERAL MONEY MARKET PORTFOLIO- CLASS B
For a share outstanding throughout each period.
INSERT PAST 5 YEARS'
FINANCIAL HIGHLIGHTS
FROM ANNUAL REPORT.
26
<PAGE> 59
For more information about the Funds, the following documents are available free
upon request:
ANNUAL/SEMIANNUAL REPORTS (REPORTS):
The Portfolios' annual and semi-annual reports to shareholders contain
additional information on each Portfolio's investments. In the annual report,
you will find a discussion of the market conditions and investment strategies
that significantly affected the Fund's performance during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed
information about the Funds, including their operations and investment policies.
It is incorporated by reference and is legally considered a part of this
prospectus.
- --------------------------------------------------------------------------------
YOU CAN RECEIVE FREE COPIES OF REPORTS AND THE SAI, OR REQUEST OTHER INFORMATION
AND DISCUSS YOUR QUESTIONS ABOUT THE FUNDS BY CONTACTING THE DISTRIBUTOR. OR
CONTACT THE PORTFOLIOS AT:
THE VALIANT FUND
3435 STELZER ROAD
COLUMBUS, OHIO 43219
TELEPHONE: 1-800-828-2176
E-MAIL: [email protected]
INTERNET: http://www.valiantfund.com
- --------------------------------------------------------------------------------
You can review and copy the Fund's reports and SAIs at the Public Reference Room
of the Securities and Exchange Commission. You can get text-only copies:
o For a fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-6009 or calling 1-800-SEC-0330.
o Free from the Commission's Website at http://www.sec.gov.
Investment Company Act file no. 811-7582.
27
<PAGE> 60
THE VALIANT FUND
- --------------------------------------------------------------------------------
PROSPECTUS
----------
DECEMBER 29, 1999
CLASS C SHARES
U.S. TREASURY MONEY MARKET PORTFOLIO
U.S. TREASURY INCOME PORTFOLIO
GENERAL MONEY MARKET PORTFOLIO
TAX-EXEMPT MONEY MARKET PORTFOLIO
MANAGED BY INTEGRITY MANAGEMENT & RESEARCH, INC.
- ---------------------------------
QUESTIONS?
CALL 1-800-828-2176
OR YOUR INVESTMENT REPRESENTATIVE.
- ---------------------------------
THE SECURITIES AND EXCHANGE
COMMISSION HAS NOT APPROVED OR
DISAPPROVED THE SHARES DESCRIBED IN
THIS PROSPECTUS OR DETERMINED WHETHER
THIS PROSPECTUS IS ACCURATE OR
COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<PAGE> 61
TABLE OF CONTENTS
REVIEW THIS SECTION FOR AN OVERVIEW
OVERVIEW OF THE PORTFOLIOS. 3 OVERVIEW
- --------------------------------------------------------------------------------
CAREFULLY REVIEW THIS RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
IMPORTANT SECTION, WHICH INCLUDES INVESTMENT OBJECTIVES, STRATEGIES
SUMMARIZES EACH PORTFOLIO'S
INVESTMENTS, STRATEGIES, RISKS 4-5 U.S. TREASURY MONEY MARKET PORTFOLIO
PAST PERFORMANCE, AND FEES.
6-7 U.S. TREASURY INCOME PORTFOLIO
8-9 GENERAL MONEY MARKET PORTFOLIO
10-11 TAX-EXEMPT MONEY MARKET PORTFOLIO
12 FEES AND EXPENSES
ADDITIONAL INFORMATION
13-15
FUND MANAGEMENT
REVIEW THIS SECTION FOR 16 THE INVESTMENT ADVISER
DETAILS ON THE PEOPLE AND 17 THE DISTRIBUTOR
ORGANIZATIONS WHO OVERSEE 17 THE ADMINISTRATOR
THE PORTFOLIOS.
SHAREHOLDER INFORMATION
REVIEW THIS SECTION FOR 18 PRICING OF PORTFOLIOS SHARES
DETAILS ON HOW SHARES ARE 19-20 PURCHASING AND ADDING TO YOUR SHARES
VALUED, HOW TO PURCHASE AND 20 SELLING YOUR SHARES
SELL SHARES, RELATED CHARGES 21 GENERAL POLICIES ON SELLING SHARES
AND PAYMENTS OF DIVIDENDS 21 DISTRIBUTION AND SERVICE (12B-1) FEES
AND DISTRIBUTIONS. 21-22 DIVIDENDS, DISTRIBUTIONS AND TAXES
FINANCIAL HIGHLIGHTS
23
BACK COVER
24 WHERE TO LEARN MORE ABOUT THIS FUND
GROUP
2
<PAGE> 62
OVERVIEW
- --------------------------------------------------------------------------------
The Trust offers Class A shares, Class B shares, Class C shares, Class D shares
and Class E 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 by carefully reading its
prospectus. THIS PROSPECTUS RELATES ONLY TO THE CLASS C SHARES.
Each Portfolio is designed exclusively for investment of short-term monies held
in institutional accounts. Shares of the Portfolios may be purchased by banks
and other institutional investors that have entered into service agreements with
Integrity Investments, Inc. (the "Distributor"), 1-800-828-2176.
Each Portfolio is a money market fund. As a money market fund, each Portfolio is
subject to maturity, quality and diversification requirements designed to help
it maintain a stable price of $1.00 per share. Under these requirements, each
Portfolio's investments must have a remaining maturity of no more than 397 days
and its investments must maintain an average weighted maturity that does not
exceed 90 days.
Money Market Securities are high quality, short-term debt securities that
pay a fixed, variable or floating interest rate. Securities are often
specifically structured so that they are eligible investments for a money
market fund. For example, in order to satisfy the maturity restrictions
for a money market fund, some money market securities have demand or put
features that have the effect of shortening the security's maturity.
Taxable money market securities include bank certificates of deposit,
bank acceptances, bank time deposits, notes, commercial paper and U.S.
Government securities. Municipal money market securities include
variable rate demand notes, commercial paper and municipal notes.
RISK/RETURN SUMMARY
The following is a summary of certain key information about the Portfolios.
Other important things for you to note:
- An investment in the Portfolios is not a deposit in a bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency.
- Although the Portfolios seek to preserve the value of your investment
at $1.00 per share, it is possible to lose money by investing in the
Portfolios.
3
<PAGE> 63
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
- --------------------------------------------------------------------------------
U.S. TREASURY MONEY MARKET PORTFOLIO
INVESTMENT OBJECTIVES The Portfolio seeks to obtain as high a
level of current income as is consistent
with the preservation of capital and
liquidity.
PRINCIPAL INVESTMENT STRATEGIES
The Portfolio's principal investment
strategies include:
- Investing money market instruments issued
by the U.S. Treasury, certain U.S.
Government agencies and in U.S. Government
backed repurchase agreements.
- Generally maintaining a dollar-weighted
average maturity at 90 days or less.
- Investing in compliance with
industry-standard requirements for money
market funds for the quality, maturity and
diversification of investments.
The Portfolio invests based on
considerations of safety of principal and
liquidity, which means that the Portfolio
may not necessarily invest in securities
paying the highest available yield at a
particular time. The Portfolio will attempt
to increase its yield by trading to take
advantage of short-term market variations.
The Adviser generally evaluates investments
based on interest rate sensitivity.
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.
A full discussion of additional permissible
investments is included in the Statement of
Additional Information ("SAI").
PRINCIPAL INVESTMENT RISKS The Portfolio is a "money market fund" that
seeks to maintain a stable net asset value
of $1.00 per share. There is no guarantee
the Portfolio will be able to preserve the
value of your investment at $1.00 per share.
It is possible to lose money by investing in
the Portfolio.
There can be no assurance that the
investment objective of the Portfolio will
be achieved.
The principal risks of investing in the
Portfolio are:
- INTEREST RATE RISK This is the risk that
changes in interest rates will affect the
yield or value of the Portfolio's
investments in debt securities. Because
the Portfolio invests in short-term
securities, a decline in interest rates
will affect the Portfolio's yield as these
securities mature or are sold and the
Portfolio purchases new short-term
4
<PAGE> 64
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
- --------------------------------------------------------------------------------
U.S. TREASURY MONEY MARKET PORTFOLIO - CONTINUED
Securities with a lower yield. Generally, an
increase in interest rates causes the value
of a debt instrument to decrease. The change
in value for shorter-term securities is
usually smaller than for securities with
longer maturities.
- CREDIT RISK Although U.S. Government
securities, particularly U.S. Treasury
obligations, have historically involved
little risk, if an issuer fails to pay
interest or repay principal, the value of
your investment could decline.
- SELECTION RISK The Adviser evaluates the
rewards and risks presented by all
securities purchased by the Portfolio and
how they may advance the Portfolio's
investment objective. It is possible,
however, that these evaluations will prove
to be inaccurate.
No performance information is shown for the
Class C shares of U.S. Treasury Money Market
Portfolio that, as of the date of this
prospectus, has not commenced operations.
The performance of the Portfolio's shares
will fluctuate with market conditions.
WHO MAY WANT TO INVEST? Consider investing in the Portfolio if you
are:
[ ] SEEKING PRESERVATION OF CAPITAL
[ ] HAVE A LOW RISK TOLERANCE
[ ] WILLING TO ACCEPT LOWER POTENTIAL
RETURNS IN EXCHANGE FOR A HIGH DEGREE OF
SAFETY
[ ] INVESTING SHORT-TERM RESERVES
This Portfolio will not be appropriate for
someone:
SEEKING HIGH TOTAL RETURNS
[ ] PURSUING A LONG-TERM GOAL OR INVESTING
[ ] FOR RETIREMENT
5
<PAGE> 65
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
U.S. TREASURY INCOME PORTFOLIO
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES The Portfolio seeks to obtain as high a
level of current income as is consistent
with the preservation of capital and
liquidity.
PRINCIPAL INVESTMENT STRATEGIES The Portfolio's principal investment
strategies include:
- Investing all of its assets in U.S.
Government Obligations which are backed by
the full faith and credit of the U.S.
Government and whose interest income is
generally not subject to state income tax.
Under normal market conditions, the
Portfolio invests at least 65% of its
total assets in U.S. Treasury obligations
such as U.S. Treasury bills, notes and
bonds.
- Generally maintaining a dollar-weighted
average of 90 days or less.
- Investing in compliance with industry
standard requirements for money market
funds for quality, maturity and
diversification of investments.
A full discussion of additional permissible
investments is included in the SAI.
PRINCIPAL INVESTMENT RISKS The Portfolio is a "money market fund" that
seeks to maintain a stable net asset value
of $1.00 per share. There is no guarantee
the Portfolio will be able to preserve the
value of your investment at $1.00 per share.
It is possible to lose money by investing in
the Portfolio.
There can be no assurance that the
investment objective of the Portfolio will
be achieved.
The principal risks of investing in the
Portfolio are:
- INTEREST RATE RISK This is the risk that
changes in interest rates will affect the
yield or value of the Portfolio's
investments in debt securities. Because
the Portfolio invests in short-term
securities, a decline in interest rates
will affect the Portfolio's yield as these
securities mature or are sold and the
Portfolio purchases new short-term
securities with a lower yield. Generally,
an increase in interest rates causes the
value of a debt instrument to decrease.
The change in value for shorter-term
securities is usually smaller than for
securities with longer maturities.
- CREDIT RISK Although U.S. Government
obligations, have historically involved
little risk, if an issuer fails to pay
interest or repay principal, the value of
your investment could decline.
6
<PAGE> 66
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
U.S. TREASURY INCOME PORTFOLIO - CONTINUED
- --------------------------------------------------------------------------------
- SELECTION RISK The Adviser evaluates the
rewards and risks presented by all
securities purchased by the Portfolio and
how they may advance the Portfolio's
investment objective. It is possible,
however, that these evaluations will prove
to be inaccurate.
No performance information is shown for the
Class C shares of U.S. Treasury Income
Portfolio that, as of the date of this
prospectus, has not commenced operations.
The performance of the Portfolio's shares
will fluctuate with market conditions.
WHO MAY WANT TO INVEST? Consider investing in the Portfolio if you
are:
[ ] SEEKING PRESERVATION OF CAPITAL
[ ] HAVE A LOW RISK TOLERANCE
[ ] WILLING TO ACCEPT LOWER POTENTIAL
RETURNS IN EXCHANGE FOR A HIGH DEGREE
OF SAFETY
[ ] INVESTING SHORT-TERM RESERVES
This Portfolio will not be appropriate for
someone:
[ ] SEEKING HIGH TOTAL RETURNS
[ ] PURSUING A LONG-TERM GOAL OR INVESTING
FOR RETIREMENT
7
<PAGE> 67
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
GENERAL MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES The Portfolio seeks to obtain as high a
level of current income as is consistent
with the preservation of capital and
liquidity.
PRINCIPAL INVESTMENT STRATEGIES The Portfolio's principal investment
strategies include:
- Investing in U.S. dollar-denominated
short-term obligations of domestic and
foreign issuers including banks rated in
the highest category by at least two
nationally recognized rating services,
U.S. Government securities, repurchase
agreements and entering into reverse
repurchase agreements.
- Generally maintaining a dollar-weighted
average maturity at 90 days or less.
- Investing in compliance with
industry-standard requirements for money
market funds for the quality, maturity and
diversification of investments.
The Portfolio may invest 25% or more of its
total assets in the domestic banking
industry.
A full discussion of additional permissible
investments is included in the SAI.
PRINCIPAL INVESTMENT RISKS The Portfolio is a "money market fund" that
seeks to maintain a stable net asset value
of $1.00 per share. There is no guarantee
the Portfolio will be able to preserve the
value of your investment at $1.00 per share.
It is possible to lose money by investing in
the Portfolio.
There can be no assurance that the
investment objective of the Portfolio will
be achieved.
The principal risks of investing in the
Portfolio are:
- INTEREST RATE RISK This is the risk that
changes in interest rates will affect the
yield or value of the Portfolio's
investments in debt securities. Because
the Portfolio invests in short-term
securities, a decline in interest rates
will affect the Portfolio's yield as these
securities mature or are sold and the
Portfolio purchases new short-term
securities with a lower yield. Generally,
an increase in interest rates causes the
value of a debt instrument to decrease.
The change in value for
8
<PAGE> 68
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
GENERAL MONEY MARKET PORTFOLIO - CONTINUED
- --------------------------------------------------------------------------------
shorter-term securities is usually smaller
than for securities with longer maturities.
- CREDIT RISK This is the risk that the
issuer or guarantor of a debt security
will be unable or unwilling to make timely
interest or principal payments, or to
otherwise honor its obligations. Credit
risk includes the possibility that any of
the Portfolio's investments will have its
credit ratings downgraded. The Portfolio
will only purchase a money market
instrument if it presents minimal credit
risks.
- SELECTION RISK The Adviser evaluates the
rewards and risks presented by all
securities purchased by the Portfolio and
how they may advance the Portfolio's
investment objective. It is possible,
however, that these evaluations will prove
to be inaccurate.
- FOREIGN INVESTMENT RISK The Portfolio's
investments in U.S. dollar-denominated
obligations of foreign branches of U.S.
banks and U.S. branches of foreign banks
may be subject to foreign risk. Foreign
securities issuers are usually not subject
to the same degree of regulation as U.S.
issuers. Reporting, accounting, and
auditing standards of foreign countries
differ, in some cases, significantly from
U.S. standards. Foreign risk includes
nationalization, expropriation or
confiscatory taxation, currency blockage,
political changes or diplomatic
developments that could adversely affect
the portfolio's investments.
No performance information is shown for the
Class C shares of General Money Market
Portfolio that, as of the date of this
prospectus, has not commenced operations.
The performance of the Portfolio's shares
will fluctuate with market conditions.
WHO MAY WANT TO INVEST? Consider investing in the Portfolio if you
are:
[ ] SEEKING PRESERVATION OF CAPITAL
[ ] HAVE A LOW RISK TOLERANCE
[ ] WILLING TO ACCEPT LOWER POTENTIAL
RETURNS IN EXCHANGE FOR A HIGH DEGREE OF
SAFETY
[ ] INVESTING SHORT-TERM RESERVES
This Portfolio will not be appropriate for
someone:
[ ] SEEKING HIGH TOTAL RETURNS
[ ] PURSUING A LONG-TERM GOAL OR INVESTING
FOR RETIREMENT
9
<PAGE> 69
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
TAX-EXEMPT MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES The Portfolio seeks primarily income
exempt from federal income tax.
PRINCIPAL INVESTMENT STRATEGIES The Portfolio principal investment
strategies include:
- Investing in municipal money market
securities
- Investing in compliance with industry
Municipal Securities are issued standard requirements for money market
to raise money for a variety of funds for the quality, maturity and
public and private purposes, diversification of investments.
including general financing for - Municipal securities subject to
state and local governments, or restrictions on resale.
financing for a specific project
or public facility. Municipal As a temporary defensive measure because
securities may be fully or of market, economic, political or other
partially backed by the local conditions, the Portfolio may invest in
government, by the credit of a taxable money market securities. These
private issuer, by the current temporary investments may produce taxable
or anticipated revenues from a income.
specific project or specific
assets, or by domestic or foreign The Portfolio does not intend to invest in
entities providing credit support Municipal Securities whose interest in
such as letters of credit, subject to the federal alternative minimum
guarantees or insurance. tax ("AMT") for individuals.
The Portfolio buys and sells securities
based on its objective of maximizing
current income consistent with safety of
principal and liquidity. The Portfolio
will attempt to increase its yields by
trading to take advantage of short-term
market variations. The Fund's Adviser
evaluates investments based on credit
Analysis and the interest rate outlook.
A full discussion of additional
permissible investments is included in the
SAI.
PRINCIPAL INVESTMENT RISKS The Fund is a "money market fund" that
seeks to maintain a stable net asset value
of $1.00 per share. There is no guarantee
the Portfolio will be able to preserve the
value of your investment at $1.00 per
share. It is possible to lose money by
investing in the Portfolio.
There can be no assurance that the
investment objective of the Portfolio will
be achieved.
10
<PAGE> 70
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
TAX-EXEMPT MONEY MARKET PORTFOLIO - CONTINUED
- --------------------------------------------------------------------------------
The principal risks of investing in the Fund
are:
- INTEREST RATE RISK This is the risk that
changes in interest rates will affect the
yield or value of the Portfolio's
investments in municipal debt securities.
Prices of municipal obligations tend to
move inversely with changes in interest
rates. The most immediate effect of a rise
in rates is usually a drop in the prices
of such securities, and therefore in the
Portfolio's yield as well. Interest rate
risk is usually greater for fixed-income
securities with longer maturities or
durations.
- CREDIT RISK Although credit risk is very
low because the Portfolio only invests in
high quality obligations, if an issuer
fails to pay interest or repay principal,
the value of your investment could
decline. The ability of a state or local
government issuer to make payments can be
affected by many factors, including
economic conditions, the flow of tax
revenues and changes in the level of
federal, state or local aid. Some
municipal securities are payable only from
limited revenue sources or by private
entities.
- SELECTION RISK The Adviser evaluates the
rewards and risks presented by all
securities purchased by the Portfolio and
how they may advance the Portfolio's
investment objective. It is possible,
however, that these evaluations will prove
to be inaccurate.
No performance information is shown for the
Class C shares of Tax-Exempt Money Market
Portfolio that, as of the date of this
prospectus, has not commenced operations.
The performance of the Portfolio's shares
will fluctuate with market conditions.
WHO MAY WANT TO INVEST? Consider investing in the Portfolio if you
are:
[ ] SEEKING PRESERVATION OF CAPITAL
[ ] HAVE A LOW RISK TOLERANCE
[ ] WILLING TO ACCEPT LOWER POTENTIAL
RETURNS IN EXCHANGE FOR A HIGH DEGREE
OF SAFETY
[ ] INVESTING SHORT-TERM RESERVES
This Portfolio will not be appropriate for
someone:
[ ] SEEKING HIGH TOTAL RETURNS
[ ] INVESTING AS PART OF A RETIREMENT PLAN
BECAUSE THE PLANS CAN NOT BENEFIT FROM
TAX EXEMPT INCOME
[ ] PURSUING A LONG-TERM GOAL
11
<PAGE> 71
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FEES AND EXPENSES
If you buy and hold Class C
shares of the Portfolios, Shareholder Fees U.S. TREASURY U.S. TREASURY GENERAL TAX-EXEMPT
you will pay the following (fees paid directly MONEY MARKET INCOME MONEY MARKET MONEY MARKET
fees and expenses. Annual from your investment) PORTFOLIO(1) PORTFOLIO(1) PORTFOLIO(1) PORTFOLIO(1)
--------- --------- --------- ---------
Fund operating expenses are CLASS C CLASS C CLASS C CLASS C
paid out of Portfolio <S> <C> <C> <C> <C>
assets, and are reflected in Maximum sales charge None None None None
the Portfolio's yield. (load) on purchases
------------------------------------------------------------------------------------------------
Annual Portfolio
Operating Expenses
(expenses that are
deducted from
Portfolio assets)
------------------------------------------------------------------------------------------------
Management fees .20% .20% .20% .20%
------------------------------------------------------------------------------------------------
Distribution and .40% .40% .40% .40%
Service (12b-1) fees(2)
------------------------------------------------------------------------------------------------
Other expenses(3) .00% .00% .00% .00%
------------------------------------------------------------------------------------------------
Total Annual .60% .60% .60% .60%
Portfolio operating
expenses
------------------------------------------------------------------------------------------------
</TABLE>
(1) As of the date of this Prospectus, the Class C shares of each of the
Portfolios have not commenced operations.
(2) The Trust has adopted a Distribution and Shareholder Servicing Plan (the
"Plan") for the Class C shares. Payments under the Plan for Class C shares
are authorized at the rate of 0.40% of the average daily net assets of Class
C shares.
(3) Other Expenses and Total Fund Operating Expenses of the Fund are estimated
for the current fiscal year.
EXPENSE EXAMPLE
Use the example below to compare fees and expenses with those of other
Portfolios. It illustrates the amount of fees and expenses you would pay,
assuming the following:
- $10,000 investment
- 5% annual return
- redemption at the end of each period
- no changes in the Portfolio's operating expenses
- reinvestment of dividends and distributions
Because this example is hypothetical and for comparison only, your actual costs
will be different.
<TABLE>
<CAPTION>
1 3 5 10
Year Years Years Years
<S> <C> <C> <C> <C>
U.S. TREASURY MONEY MARKET PORTFOLIO $61 $192 $335 $750
- ------------------------------------------------------------------------------------------------------------
U.S. TREASURY INCOME PORTFOLIO $61 $192 $335 $750
- ------------------------------------------------------------------------------------------------------------
GENERAL MONEY MARKET PORTFOLIO $61 $192 $335 $750
- ------------------------------------------------------------------------------------------------------------
TAX-EXEMPT MONEY MARKET PORTFOLIO $61 $192 $335 $750
- ------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE> 72
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
The principal strategies and risks of investing in each Portfolio are described
on the previous pages. The following supplements that discussion.
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
Portfolio 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.
13
<PAGE> 73
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.
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 Portfolio's 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.
RESTRICTED SECURITIES (APPLICABLE TO GENERAL MONEY MARKET PORTFOLIO AND
TAX-EXEMPT MONEY MARKET PORTFOLIO ONLY)
The General Money Market Portfolio and 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.
STANDBY COMMITMENTS (APPLICABLE TO TAX-EXEMPT MONEY MARKET PORTFOLIO ONLY)
Standby Commitments are puts that entitle holders to same-day settlement at an
exercise price equal to the amortized cost of the underlying security plus
accrued interest, if any, at the time of exercise. The Tax-Exempt Money Market
Portfolio may acquire standby commitments to enhance the liquidity of portfolio
securities, but only when the issuers of the commitments present minimal risk of
default.
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.
14
<PAGE> 74
TEMPORARY DEFENSIVE POSITIONS
Each Portfolio may temporarily hold investments that are not part of its main
investment strategy during unfavorable market conditions. These investments may
include cash (which will not earn any income) and, in the case of the Tax-Exempt
Money Market Portfolio, short-term taxable money market instruments not to
exceed 20% of the Portfolio's assets. This strategy could prevent a Portfolio
from achieving its investment objective.
OTHER TYPES OF INVESTMENTS
This prospectus describes each Portfolio's principal investment strategies and
the particular types of securities in which each Portfolio principally invests.
Each Portfolio may, from time to time, make other types of investments and
pursue other investments strategies in support of its overall investment goal.
These supplemental investment strategies - and the risks involved - are
described in detail in the Statement of Additional Information ("SAI"), which is
referred to on the back cover of this prospectus.
YEAR 2000 RISKS
Like other funds and business organizations around the world, the Portfolios
could be adversely affected if the computer systems used by the Adviser and the
Portfolio'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 Portfolio 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 Portfolios have been assured that the Adviser and the Portfolio's other
service providers (i.e., 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
Portfolio's operations associated with Year 2000 issues. Internal efforts
include a commitment to dedicate adequate staff and funding to identify and
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 Fund's Adviser 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 Portfolios are 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 Adviser or the Portfolio's service providers cannot be
accurately assessed at this time, the Portfolios currently have no reason to
believe that the Year 2000 plans of the Adviser and the Portfolio'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 Portfolios. The Portfolios and the Adviser will continue to closely
monitor developments relating to this issue, including development by the
Adviser and the Portfolios' 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 Adviser will
monitor potential investment risk related to Year 2000 issues.
15
<PAGE> 75
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE INVESTMENT ADVISER
Integrity Management & Research, Inc. (the "Adviser"), 871 Venetia Bay
Boulevard, Suite 370, Venice, Florida 34292 is the adviser for 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
20 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 Adviser, founded in 1992, manages more than $1 billion in assets. Through
the portfolio management team, the Sub-Adviser makes the day-to-day investment
decisions and continuously reviews, supervises and administers the Funds'
investment programs.
For these advisory services, the Portfolios paid as follows during their fiscal
year ended:
- -----------------------------------------------------------------------------
PERCENTAGE OF AVERAGE
NET ASSETS AS OF
8/31/99
- -----------------------------------------------------------------------------
U.S. Treasury Money Market Portfolio 0.20%
- -----------------------------------------------------------------------------
U.S. Treasury Income Portfolio 0.20%
- -----------------------------------------------------------------------------
General Money Market Portfolio 0.20%
- -----------------------------------------------------------------------------
Tax-Exempt Money Market Portfolio 0.20%
- -----------------------------------------------------------------------------
The Sub-Adviser is paid by the Manager a fee at the annual rate based on each
Portfolio's average daily net assets, 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.
16
<PAGE> 76
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE DISTRIBUTOR
Integrity Investments, Inc. is the Portfolios' distributor. Its address is 871
Venetia Bay Boulevard, suite 370, Venice, Florida 34292.
THE ADMINISTRATOR
BISYS Fund Services Ohio, Inc. (BISYS) is the Fund's administrator. Its address
is 3435 Stelzer Road, Columbus, OH 43219. Management and Administrative services
of BISYS include providing office space, equipment and clerical personnel to the
Portfolios and supervising custodial, auditing, valuation, bookkeeping, legal
and dividend dispersing services.
The Statement of Additional Information has more detailed information about the
Investment Adviser and other service providers.
17
<PAGE> 77
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
PRICING OF PORTFOLIO SHARES
- ---------------------------
The Portfolios' net asset value or NAV is
HOW NAV IS CALCULATED expected to be constant at $1.00 per share,
although this value is not guaranteed. The
The NAV is calculated by NAV is determined at 12:00 noon Eastern time
adding the total value of the for the U.S. Treasury Income Portfolio and
Portfolio's investments and the Tax-Exempt Money Market Portfolio, and
other assets, subtracting its at 3:00 p.m. Eastern time for the U.S.
liabilities and then dividing Treasury Money Market Portfolio and the
that figure by the number of General Money Market Portfolio, and on days
outstanding shares of the the New York Stock Exchange and the Boston
Portfolio: and the New York Federal Reserve Banks are
open. The Portfolios value their securities
at their amortized cost. This method
NAV = involves valuing an instrument at its cost
and thereafter applying a constant
amortization to maturity of any discount or
TOTAL ASSETS - LIABILITIES premium, regardless of the impact of
- -------------------------- fluctuating interest rates on the market
NUMBER OF SHARES value of the investment.
OUTSTANDING
Your order for purchase or sale of shares is
priced at the next NAV calculated after your
order is accepted by the Fund. This is what
is known as the offering price.
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 in order to determine the
NAV of each class.
18
<PAGE> 78
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES
- --------------------------------------------------------------------------------
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 charges by some
institutions with establish accounts on behalf of their customers.
Some institutions may MINIMUM
charge additional fees ACCOUNT TYPE INITIAL MINIMUM
and may require different INVESTMENT* SUBSEQUENT
minimum investments or
impose other limitations Regular $ 1,000,000 None
on buying and selling --------------------------------------------------
shares. The institution
is responsible for * Institutions may satisfy the minimum investment
transmitting orders by by aggregating their fiduciary accounts.
close of business and
may have an earlier Your purchase of shares will be on the same
cut-off time for business day if the Portfolio's transfer agent
purchase and sale receives your order by:
requests. Consult your
institution for specific 12:00 noon, Eastern time, for the
information. -U.S. Treasury Income Portfolio
-Tax-Exempt Money Market Portfolio
3:00 p.m., Eastern time, for the
-U.S. Treasury Money Market Portfolio
-General Money Market Portfolio
Otherwise, the purchase will be effective on the
next business day.
To allow the Portfolios to be managed effectively,
shareholders are urged to initial all trades as
early in the day as possible. Also, please notify
the Transfer Agent at least one day in advance of
trades in excess of $10,000,000. Include your name
and shareholder account number.
A Portfolio may reject any purchase order if it
considers it in the best interest of the Portfolio
and its shareholders. Purchases by exchange are
not permitted.
- --------------------------------------------------------------------------------
Avoid 31% Tax Withholding
The Portfolios are required to withhold 31% of taxable dividends, capital gains
distributions and redemptions paid to shareholders who have not provided the
Portfolios with their certified taxpayer identification number in compliance
with IRS rules. To avoid this, make sure you provide your correct Tax
Identification Number (Social Security Number for most investors) on your
account application.
19
<PAGE> 79
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES - CONTINUED
- --------------------------------------------------------------------------------
BY WIRE ORDERS
Prior to wiring monies and in order to ensure that wire orders are invested
promptly, you must call the Distributor to obtain instructions regarding the
bank account number where the monies should be wired and other pertinent
information.
- --------------------------------------------------------------------------------
Dividends and Distributions
- --------------------------------------------------------------------------------
All income dividends will be paid in cash and will automatically be made by wire
unless you request to reinvest such dividends in additional shares.
- --------------------------------------------------------------------------------
SELLING YOUR SHARES
- --------------------------------------------------------------------------------
You may sell your shares
at any time. Your sales WITHDRAWING MONEY FROM YOUR PORTFOLIO
price will be the next INVESTMENT
NAV calculated after the
Portfolio's transfer agent As a mutual fund shareholder, you are
receives your sell order. technically selling shares when you request
Normally you will a withdrawal. This is also known as
receive your proceeds redeeming shares or a redemption of shares.
within a week after your --------------------------------------------
request is received. See
section on "General If an account is closed, any accrued
Policies on Selling Shares dividend will be paid with in 10 days of the
below." beginning of the following month.
--------------------------------------------
INSTRUCTIONS FOR SELLING SHARES
You may request redemption of your shares through the Transfer Agent. The
Portfolio ordinarily will accept orders to purchase by wire or telephone.
Shareholders may change the bank account designated to receive an amount
redeemed at any time by sending a letter of instruction with a signature
guarantee to the Transfer Agent, BISYS Fund Services Ohio, Inc., 3435 Stelzer
Road, Columbus, Ohio 43219.
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.
20
<PAGE> 80
SHAREHOLDER INFORMATION
GENERAL POLICIES ON SELLING SHARES
- --------------------------------------------------------------------------------
REFUSAL OF REDEMPTION REQUEST
Payment for shares may be delayed under extraordinary circumstances or as
permitted by the SEC in order to protect remaining shareholders. When the NYSE
or either the Boston or New York Federal Reserve Bank is closed for
extraordinary circumstances (or when trading is restricted) for any reason,
payment for shares may be delayed.
WIRE OR TELEPHONE REDEMPTIONS
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.
DISTRIBUTION AND SERVICE (12b-1) FEES
- --------------------------------------------------------------------------------
The Portfolios have adopted a plan under SEC Rule 12b-1. The plan allows the
Portfolios to pay fees for services and expenses relating to the sale and
distribution of the Portfolios' shares and/or for providing shareholder
services. The amount of the fee is 0.40% of the average daily net assets of the
Portfolios. Because these fees are paid from the Portfolios' assets on an
ongoing basis, over time these fees will increase the cost of your investment
and may cost you more than paying other types of sales fees.
SHAREHOLDERS STATEMENTS
Shareholders will receive a monthly statement and a confirmation after every
transaction that affects the share balance or the account registration.
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.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
Any income a Fund receives in the form of dividends is paid out, less expenses,
to its shareholders. Each Fund declares dividends from net investment income on
every business day. Dividends on are paid monthly, on or about the fifteenth day
of each month. Capital gains for all Funds are distributed at least annually.
In order to receive the dividend declared, the Custodian must receive the
purchase wire by the close of the Federal reserve wire system on that Business
Day.
Dividends and distributions are treated in the same manner for federal income
tax purposes whether you receive them in cash or in additional shares.
21
<PAGE> 81
SHAREHOLDER INFORMATION
DIVIDENDS, DISTRIBUTIONS AND TAXES - CONTINUED
- --------------------------------------------------------------------------------
The interest income from the U.S. Government securities is generally not subject
to state and local taxes, however any interest income from the repurchase
agreements is generally subject to state and local taxes.
The Funds expect that their dividends will primarily consist of net income or,
if any, short-term capital gains as opposed to long-term capital gains.
Dividends paid by the Portfolios (except Tax-Exempt Money Market Portfolio) are
taxable as ordinary income, as are dividends paid by the Tax-Exempt Money Market
Portfolio that are derived from taxable investments.
During normal market conditions, the Tax-Exempt Money Market Fund expects that
substantially all of its dividends will be excluded from gross income for
federal income tax purposes. The Portfolio may invest in certain securities with
interest that may be a preference item for the purposes of the alternative
minimum tax or a factor in determining whether Social Security benefits are
taxable. In such event, a portion of the Portfolio's dividends would not be
exempt from federal income taxes.
Dividends are taxable in the year in which they are paid, even if they appear on
your account statement the following year.
You will be notified in January each year about the federal tax status of
distributions made by the Portfolio. Depending on your residence for tax
purposes, distributions also may be subject to state and local taxes, including
withholding taxes.
Foreign shareholders may be subject to special withholding requirements. There
is a penalty on certain pre-retirement distributions from retirement accounts.
Consult your tax adviser about the federal, state and local tax consequences in
your particular circumstances.
22
<PAGE> 82
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
As of the date of this Prospectus, the Class C share of each of the Portfolios
have not commenced operations.
23
<PAGE> 83
For more information about the Funds, the following documents are available free
upon request:
ANNUAL/SEMIANNUAL REPORTS (REPORTS):
The Portfolios' annual and semi-annual reports to shareholders contain
additional information on each Portfolio's investments. In the annual report,
you will find a discussion of the market conditions and investment strategies
that significantly affected the Fund's performance during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed
information about the Funds, including their operations and investment policies.
It is incorporated by reference and is legally considered a part of this
prospectus.
- --------------------------------------------------------------------------------
YOU CAN RECEIVE FREE COPIES OF REPORTS AND THE SAI, OR REQUEST OTHER INFORMATION
AND DISCUSS YOUR QUESTIONS ABOUT THE FUNDS BY CONTACTING THE DISTRIBUTOR. OR
CONTACT THE PORTFOLIOS AT:
THE VALIANT FUND
3435 STELZER ROAD
COLUMBUS, OHIO 43219
TELEPHONE: 1-800-828-2176
E-MAIL: [email protected]
INTERNET: http://www.valiantfund.com
- --------------------------------------------------------------------------------
You can review and copy the Fund's reports and SAIs at the Public Reference Room
of the Securities and Exchange Commission. You can get text-only copies:
- - For a fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-6009 or calling 1-800-SEC-0330.
- - Free from the Commission's Website at http://www.sec.gov.
Investment Company Act file no. 811-7582.
<PAGE> 84
THE VALIANT FUND
- --------------------------------------------------------------------------------
------------
PROSPECTUS
------------
DECEMBER 29, 1999
CLASS D SHARES
U.S. TREASURY MONEY MARKET PORTFOLIO
U.S. TREASURY INCOME PORTFOLIO
GENERAL MONEY MARKET PORTFOLIO
TAX-EXEMPT MONEY MARKET PORTFOLIO
MANAGED BY INTEGRITY MANAGEMENT & RESEARCH, INC.
- -----------------------------------
QUESTIONS?
CALL 1-800-828-2176
OR YOUR INVESTMENT REPRESENTATIVE.
- -----------------------------------
THE SECURITIES AND EXCHANGE
COMMISSION HAS NOT APPROVED OR
DISAPPROVED THE SHARES DESCRIBED IN
THIS PROSPECTUS OR DETERMINED WHETHER
THIS PROSPECTUS IS ACCURATE OR
COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<PAGE> 85
TABLE OF CONTENTS
REVIEW THIS SECTION FOR AN OVERVIEW
OVERVIEW OF THE PORTFOLIOS. 3 OVERVIEW
- --------------------------------------------------------------------------------
CAREFULLY REVIEW THIS RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
IMPORTANT SECTION, WHICH INCLUDES INVESTMENT OBJECTIVES, STRATEGIES
SUMMARIZES EACH PORTFOLIO'S AND RISKS
INVESTMENTS, STRATEGIES, RISKS,
PAST PERFORMANCE, AND FEES. 4-6 U.S. TREASURY MONEY MARKET PORTFOLIO
7-8 U.S. TREASURY INCOME PORTFOLIO
9-10 GENERAL MONEY MARKET PORTFOLIO
11-12 TAX-EXEMPT MONEY MARKET PORTFOLIO
13 FEES AND EXPENSES
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
14-16
- --------------------------------------------------------------------------------
FUND MANAGEMENT
REVIEW THIS SECTION FOR 17 THE INVESTMENT ADVISER
DETAILS ON THE PEOPLE AND
ORGANIZATIONS WHO OVERSEE 18 THE DISTRIBUTOR
THE PORTFOLIOS.
18 THE ADMINISTRATOR
- --------------------------------------------------------------------------------
REVIEW THIS SECTION FOR SHAREHOLDER INFORMATION
DETAILS ON HOW SHARES ARE
VALUED, HOW TO PURCHASE AND 19 PRICING OF PORTFOLIOS SHARES
SELL SHARES, RELATED CHARGES
AND PAYMENTS OF DIVIDENDS AND 20-21 PURCHASING AND ADDING TO YOUR SHARES
DISTRIBUTIONS.
21 SELLING YOUR SHARES
22 GENERAL POLICIES ON SELLING SHARES
22 DISTRIBUTION AND SERVICE (12B-1)
FEES
22-23 DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
24
- --------------------------------------------------------------------------------
BACK COVER
25 WHERE TO LEARN MORE ABOUT THIS FUND
GROUP
2
<PAGE> 86
OVERVIEW
- --------------------------------------------------------------------------------
The Trust offers Class A shares, Class B shares, Class C shares, Class D shares
and Class E 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 by carefully reading its
prospectus. THIS PROSPECTUS RELATES ONLY TO THE CLASS D SHARES.
Each Portfolio is designed exclusively for investment of short-term monies held
in institutional accounts. Shares of the Portfolios may be purchased by banks
and other institutional investors that have entered into service agreements with
Integrity Investments, Inc. (the "Distributor"), 1-800-828-2176.
Each Portfolio is a money market fund. As a money market fund, each Portfolio is
subject to maturity, quality and diversification requirements designed to help
it maintain a stable price of $1.00 per share. Under these requirements, each
Portfolio's investments must have a remaining maturity of no more than 397 days
and its investments must maintain an average weighted maturity that does not
exceed 90 days.
-----------------------------------------------------
Money Market Securities are high quality,
short-term debt securities that pay a fixed,
variable or floating interest rate. Securities are
often specifically structured so that they are
eligible investments for a money market fund. For
example, in order to satisfy the maturity
restrictions for a money market fund, some money
market securities have demand or put features that
have the effect of shortening the security's
maturity. Taxable money market securities include
bank certificates of deposit, bank acceptances,
bank time deposits, notes, commercial paper and
U.S. Government securities. Municipal money market
securities include variable rate demand notes,
commercial paper and municipal notes.
-----------------------------------------------------
RISK/RETURN SUMMARY
The following is a summary of certain key information about the Portfolios.
Other important things for you to note:
- An investment in the Portfolios is not a deposit in a bank and is
not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
- Although the Portfolios seek to preserve the value of your
investment at $1.00 per share, it is possible to lose money by
investing in the Portfolios.
3
<PAGE> 87
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
- --------------------------------------------------------------------------------
U.S. TREASURY MONEY MARKET PORTFOLIO
INVESTMENT OBJECTIVES The Portfolio seeks to obtain as high a
level of current income as is consistent
with the preservation of capital and
liquidity.
PRINCIPAL INVESTMENT STRATEGIES The Portfolio's principal investment
strategies include:
- Investing money market instruments
issued by the U.S. Treasury, certain
U.S. Government agencies and in U.S.
Government backed repurchase agreements.
- Generally maintaining a dollar-weighted
average maturity at 90 days or less.
- Investing in compliance with
industry-standard requirements for money
market funds for the quality, maturity
and diversification of investments.
The Portfolio invests based on
considerations of safety of principal and
liquidity, which means that the Portfolio
may not necessarily invest in securities
paying the highest available yield at a
particular time. The Portfolio will attempt
to increase its yield by trading to take
advantage of short-term market variations.
The Adviser generally evaluates investments
based on interest rate sensitivity.
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.
A full discussion of additional
permissible investments is included in
the Statement of Additional Information
("SAI").
PRINCIPAL INVESTMENT RISKS The Portfolio is a "money market fund"
that seeks to maintain a stable net asset
value of $1.00 per share. There is no
guarantee the Portfolio will be able to
preserve the value of your investment at
$1.00 per share. It is possible to lose
money by investing in the Portfolio.
There can be no assurance that the
investment objective of the Portfolio
will be achieved.
The principal risks of investing in the
Portfolio are:
- INTEREST RATE RISK This is the risk that
changes in interest rates will affect
the yield or value of the Portfolio's
investments in debt securities. Because
the Portfolio invests in short-term
securities, a decline in interest rates
will affect the Portfolio's yield as
these securities mature or are sold and
the Portfolio purchases new short-term
4
<PAGE> 88
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
U.S. TREASURY MONEY MARKET PORTFOLIO - CONTINUED
- --------------------------------------------------------------------------------
Securities with a lower yield.
Generally, an increase in interest rates
causes the value of a debt instrument to
decrease. The change in value for
shorter-term securities is usually
smaller than for securities with longer
maturities.
- CREDIT RISK Although U.S. Government
securities, particularly U.S. Treasury
obligations, have historically involved
little risk, if an issuer fails to pay
interest or repay principal, the value
of your investment could decline.
- SELECTION RISK The Adviser evaluates the
rewards and risks presented by all
securities purchased by the Portfolio
and how they may advance the Portfolio's
investment objective. It is possible,
however, that these evaluations will
prove to be inaccurate.
WHO MAY WANT TO INVEST? Consider investing in the Portfolio if
you are:
- SEEKING PRESERVATION OF CAPITAL
- HAVE A LOW RISK TOLERANCE
- WILLING TO ACCEPT LOWER POTENTIAL RETURNS
IN EXCHANGE FOR A HIGH DEGREE OF SAFETY
- INVESTING SHORT-TERM RESERVES
This Portfolio will not be appropriate for
someone:
- SEEKING HIGH TOTAL RETURNS
- PURSUING A LONG-TERM GOAL OR INVESTING
FOR RETIREMENT
5
<PAGE> 89
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
U.S. TREASURY MONEY MARKET PORTFOLIO - CONTINUED
- --------------------------------------------------------------------------------
The chart and table on this page PERFORMANCE BAR CHART AND TABLE
show how the U.S. Treasury Money -------------------------------
Market Portfolio has performed and
how its performance has varied from Year-by-Year Total Returns as of 12/31
year to year. The bar chart shows
changes in the Portfolio's yearly
performance since inception to [BAR CHART]
demonstrate that the Portfolio has
gained and lost value at differing 1997 4.85%
times. 1998 4.75%
Of course, past performance does not
indicate how the Portfolio will perform
in the future.
---------------------------------------
Best quarter: Q3 1997 1.22%
Worst quarter: Q4 1998 1.07%
--------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (for the periods ending December 31, 1998)
Past Year Since Inception
(5/1/96)
- -----------------------------------------------------------
U.S. TREASURY MONEY 4.75% 4.78%
MARKET PORTFOLIO
- -----------------------------------------------------------
- -----------------------------------------------------------
As of September 30, 1999 the 7-day yield was 4.42%. Without expense limitations,
the Portfolio's yield would have been 5.12% for this time period. For current
yield information on the Portfolio, call 1-800-828-2176. The U.S. Treasury Money
Market Portfolio's yield appears in the Wall Street Journal each Thursday.
6
<PAGE> 90
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
U.S. TREASURY INCOME PORTFOLIO
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES The Portfolio seeks to obtain as high a
level of current income as is consistent
with the preservation of capital and
liquidity.
PRINCIPAL INVESTMENT STRATEGIES The Portfolio's principal investment
strategies include:
- Investing all of its assets in U.S.
Government Obligations which are backed
by the full faith and credit of the U.S.
Government and whose interest income is
generally not subject to state income
tax. Under normal market conditions, the
Portfolio invests at least 65% of its
total assets in U.S. Treasury
obligations such as U.S. Treasury bills,
notes and bonds.
- Generally maintaining a dollar-weighted
average of 90 days or less.
- Investing in compliance with industry
standard requirements for money market
funds for quality, maturity and
diversification of investments.
A full discussion of additional permissible
investments is included in the SAI.
PRINCIPAL INVESTMENT RISKS The Portfolio is a "money market fund"
that seeks to maintain a stable net asset
value of $1.00 per share. There is no
guarantee the Portfolio will be able to
preserve the value of your investment at
$1.00 per share. It is possible to lose
money by investing in the Portfolio.
There can be no assurance that the
investment objective of the Portfolio
will be achieved.
The principal risks of investing in the
Portfolio are:
- INTEREST RATE RISK This is the risk that
changes in interest rates will affect
the yield or value of the Portfolio's
investments in debt securities. Because
the Portfolio invests in short-term
securities, a decline in interest rates
will affect the Portfolio's yield as
these securities mature or are sold and
the Portfolio purchases new short-term
securities with a lower yield.
Generally, an increase in interest rates
causes the value of a debt instrument to
decrease. The change in value for
shorter-term securities is usually
smaller than for securities with longer
maturities.
- CREDIT RISK Although U.S. Government
securities, particularly U.S. Treasury
obligations, have historically involved
little risk, if an issuer fails to pay
interest or repay principal, the value
of your investment could decline.
7
<PAGE> 91
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
U.S. TREASURY INCOME PORTFOLIO - CONTINUED
- --------------------------------------------------------------------------------
- SELECTION RISK The Adviser evaluates the
rewards and risks presented by all
securities purchased by the Portfolio
and how they may advance the Portfolio's
investment objective. It is possible,
however, that these evaluations will
prove to be inaccurate.
No performance information is shown for the
Class D shares of U.S. Treasury Income
Portfolio that, as of the date of this
prospectus, has not commenced operations.
The performance of the Portfolio's shares
will fluctuate with market conditions.
WHO MAY WANT TO INVEST? Consider investing in the Portfolio if you
are:
- SEEKING PRESERVATION OF CAPITAL
- HAVE A LOW RISK TOLERANCE
- WILLING TO ACCEPT LOWER POTENTIAL RETURNS
IN EXCHANGE FOR A HIGH DEGREE OF SAFETY
- INVESTING SHORT-TERM RESERVES
This Portfolio will not be appropriate for
someone:
- SEEKING HIGH TOTAL RETURNS
- PURSUING A LONG-TERM GOAL OR INVESTING
FOR RETIREMENT
8
<PAGE> 92
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
GENERAL MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES The Portfolio seeks to obtain as high a
level of current income as is consistent
with the preservation of capital and
liquidity.
PRINCIPAL INVESTMENT STRATEGIES The Portfolio's principal investment
strategies include:
- Investing in U.S. dollar-denominated
short-term obligations of domestic and
foreign issuers including banks rated in
the highest category by at least two
nationally recognized rating services,
U.S. Government securities, repurchase
agreements and entering into reverse
repurchase agreements.
- Generally maintaining a dollar-weighted
average maturity at 90 days or less.
- Investing in compliance with
industry-standard requirements for money
market funds for the quality, maturity
and diversification of investments.
The Portfolio may invest 25% or more of its
total assets in the domestic banking
industry.
A full discussion of additional permissible
investments is included in the SAI.
PRINCIPAL INVESTMENT RISKS The Portfolio is a "money market fund"
that seeks to maintain a stable net asset
value of $1.00 per share. There is no
guarantee the Portfolio will be able to
preserve the value of your investment at
$1.00 per share. It is possible to lose
money by investing in the Portfolio.
There can be no assurance that the
investment objective of the Portfolio
will be achieved.
The principal risks of investing in the
Portfolio are:
- INTEREST RATE RISK This is the risk that
changes in interest rates will affect the
yield or value of the Portfolio's
investments in debt securities. Because
the Portfolio invests in short-term
securities, a decline in interest rates
will affect the Portfolio's yield as
these securities mature or are sold and
the Portfolio purchases new short-term
securities with a lower yield. Generally,
an increase in interest rates causes the
value of a debt instrument to decrease.
The change in value for
9
<PAGE> 93
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
GENERAL MONEY MARKET PORTFOLIO - CONTINUED
- --------------------------------------------------------------------------------
shorter-term securities is usually
smaller than for securities with longer
maturities.
- CREDIT RISK This is the risk that the
issuer or guarantor of a debt security
will be unable or unwilling to make
timely interest or principal payments, or
to otherwise honor its obligations.
Credit risk includes the possibility that
any of the Portfolio's investments will
have its credit ratings downgraded. The
Portfolio will only purchase a money
market instrument if it presents minimal
credit risks.
- SELECTION RISK The Adviser evaluates the
rewards and risks presented by all
securities purchased by the Portfolio and
how they may advance the Portfolio's
investment objective. It is possible,
however, that these evaluations will
prove to be inaccurate.
- FOREIGN INVESTMENT RISK The Portfolio's
investments in U.S. dollar-denominated
obligations of foreign branches of U.S.
banks and U.S. branches of foreign banks
may be subject to foreign risk. Foreign
securities issuers are usually not
subject to the same degree of regulation
as U.S. issuers. Reporting, accounting,
and auditing standards of foreign
countries differ, in some cases,
significantly from U.S. standards.
Foreign risk includes nationalization,
expropriation or confiscatory taxation,
currency blockage, political changes or
diplomatic developments that could
adversely affect the portfolio's
investments.
No performance information is shown for
the Class D shares of General Money
Market Portfolio that, as of the date of
this prospectus, has not completed a full
calendar year of operations. The
performance of the Portfolio's shares
will fluctuate with market conditions.
WHO MAY WANT TO INVEST? Consider investing in the Portfolio if you
are:
- SEEKING PRESERVATION OF CAPITAL
- HAVE A LOW RISK TOLERANCE
- WILLING TO ACCEPT LOWER POTENTIAL RETURNS
IN EXCHANGE FOR A HIGH DEGREE OF SAFETY
- INVESTING SHORT-TERM RESERVES
This Portfolio will not be appropriate for
someone:
- SEEKING HIGH TOTAL RETURNS
- PURSUING A LONG-TERM GOAL OR INVESTING
FOR RETIREMENT
10
<PAGE> 94
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
TAX-EXEMPT MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES The Portfolio seeks primarily income
exempt from federal income tax.
PRINCIPAL INVESTMENT STRATEGIES The Portfolio principal investment
strategies include:
- --------------------------------
Municipal Securities are issued - Investing in municipal money market
to raise money for a variety of securities
public and private purposes,
including general financing for - Investing in compliance with industry
state and local governments, or standard requirements for money market
financing for a specific funds for the quality, maturity and
project or public facility. diversification of investments.
Municipal securities may be
fully or partially backed by - Municipal securities subject to
the local government, by the restrictions on resale.
credit of a private issuer, by
the current or anticipated As a temporary defensive measure because
revenues from a specific of market, economic, political or other
project or specific assets, or conditions, the Portfolio may invest in
by domestic or foreign entities taxable money market securities. These
providing credit support such temporary investments may produce taxable
as letters of credit, income.
guarantees or insurance.
- -------------------------------- The Portfolio does not intend to invest
in Municipal Securities whose interest in
subject to the federal alternative
minimum tax ("AMT") for individuals.
The Portfolio buys and sells securities
based on its objective of maximizing
current income consistent with safety of
principal and liquidity. The Portfolio
will attempt to increase its yields by
trading to take advantage of short-term
market variations. The Fund's Adviser
evaluates investments based on credit
Analysis and the interest rate outlook.
A full discussion of additional
permissible investments is included in
the SAI.
PRINCIPAL INVESTMENT RISKS The Fund is a "money market fund" that
seeks to maintain a stable net asset
value of $1.00 per share. There is no
guarantee the Portfolio will be able to
preserve the value of your investment at
$1.00 per share. It is possible to lose
money by investing in the Portfolio.
There can be no assurance that the
investment objective of the Portfolio
will be achieved.
11
<PAGE> 95
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
TAX-EXEMPT MONEY MARKET PORTFOLIO - CONTINUED
- --------------------------------------------------------------------------------
The principal risks of investing in the
Fund are:
- INTEREST RATE RISK This is the risk that
changes in interest rates will affect the
yield or value of the Portfolio's
investments in municipal debt securities.
Prices of municipal obligations tend to
move inversely with changes in interest
rates. The most immediate effect of a
rise in rates is usually a drop in the
prices of such securities, and therefore
in the Portfolio's yield as well.
Interest rate risk is usually greater for
fixed-income securities with longer
maturities or durations.
- CREDIT RISK Although credit risk is very
low because the Portfolio only invests in
high quality obligations, if an issuer
fails to pay interest or repay principal,
the value of your investment could
decline. The ability of a state or local
government issuer to make payments can be
affected by many factors, including
economic conditions, the flow of tax
revenues and changes in the level of
federal, state or local aid. Some
municipal securities are payable only
from limited revenue sources or by
private entities.
- SELECTION RISK The Adviser evaluates the
rewards and risks presented by all
securities purchased by the Portfolio and
how they may advance the Portfolio's
investment objective. It is possible,
however, that these evaluations will
prove to be inaccurate.
No performance information is shown for the
Class D shares of Tax-Exempt Money Market
Portfolio that, as of the date of this
prospectus, has not commenced operations.
The performance of the Portfolio's shares
will fluctuate with market conditions.
WHO MAY WANT TO INVEST? Consider investing in the Portfolio if you
are:
- SEEKING PRESERVATION OF CAPITAL
- HAVE A LOW RISK TOLERANCE
- WILLING TO ACCEPT LOWER POTENTIAL RETURNS
IN EXCHANGE FOR A HIGH DEGREE OF SAFETY
- INVESTING SHORT-TERM RESERVES
12
<PAGE> 96
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
- --------------------------------------------------------------------------------
FEES AND EXPENSES
- -----------------
If you buy and hold Class D
shares of the Portfolios,
you will pay the following
fees and expenses. Annual
Fund operating expenses are
paid out of Portfolio
assets, and are reflected in
the Portfolio's yield.
<TABLE>
<CAPTION>
Shareholder Fees U.S. TREASURY U.S. TREASURY GENERAL TAX-EXEMPT
(fees paid directly MONEY MARKET INCOME MONEY MARKET MONEY MARKET
from your investment) PORTFOLIO PORTFOLIO(1) PORTFOLIO(1) PORTFOLIO(1)
--------- ------------ ------------ ------------
CLASS D CLASS D CLASS D CLASS D
<S> <C> <C> <C> <C>
Maximum sales None None None None
charge (load) on
purchases
- ------------------------------------------------------------------------------------------
Annual Portfolio
Operating Expenses
(expenses that are
deducted from
Portfolio assets)
- ------------------------------------------------------------------------------------------
Management fees .20% .20% .20% .20%
- ------------------------------------------------------------------------------------------
Distribution and .50% .50% .50% .50%
Service (12b-1) fees(2)
- ------------------------------------------------------------------------------------------
Other expenses(3) .00% .00% .00% .00%
- ------------------------------------------------------------------------------------------
Total Annual .70% .70% .70% .70%
Portfolio operating
expenses
- ------------------------------------------------------------------------------------------
</TABLE>
(1) As of the date of this Prospectus, the Class D shares of U.S. Treasury
Income Portfolio and Tax-Exempt Money Market Portfolio have not commenced
operations. Class D Shares of the General Money Market Portfolio commenced
operations on September 27, 1999.
(2) The Trust has adopted a Distribution and Shareholder Servicing Plan (the
"Plan") for the Class D shares. Payments under the Plan for Class D shares
are authorized at the rate of 0.50% of the average daily net assets of Class
D shares.
(3) Other Expenses and Total Fund Operating Expenses of the Fund are estimated
for the current fiscal year.
EXPENSE EXAMPLE
- ---------------
Use the example below to compare fees and expenses with those of other
Portfolios. It illustrates the amount of fees and expenses you would pay,
assuming the following:
- $10,000 investment
- 5% annual return
- redemption at the end of each period
- no changes in the Portfolio's operating expenses
- reinvestment of dividends and distributions
Because this example is hypothetical and for comparison only, your actual costs
will be different.
1 3 5 10
Year Years Years Years
U.S. TREASURY MONEY MARKET PORTFOLIO $72 $224 $390 $871
- ------------------------------------
- -------------------------------------------------------------------------------
U.S. TREASURY INCOME PORTFOLIO $72 $224 $390 $871
- ------------------------------
- -------------------------------------------------------------------------------
GENERAL MONEY MARKET PORTFOLIO $72 $224 $390 $871
- ------------------------------
- -------------------------------------------------------------------------------
TAX-EXEMPT MONEY MARKET PORTFOLIO $72 $224 $390 $871
- ---------------------------------
- -------------------------------------------------------------------------------
13
<PAGE> 97
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
The principal strategies and risks of investing in each Portfolio are described
on the previous pages. The following supplements that discussion.
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
Portfolio 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.
14
<PAGE> 98
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.
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 Portfolio's 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.
RESTRICTED SECURITIES (APPLICABLE TO GENERAL MONEY MARKET PORTFOLIO AND
TAX-EXEMPT MONEY MARKET PORTFOLIO ONLY)
The General Money Market Portfolio and 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.
STANDBY COMMITMENTS (APPLICABLE TO TAX-EXEMPT MONEY MARKET PORTFOLIO ONLY)
Standby Commitments are puts that entitle holders to same-day settlement at an
exercise price equal to the amortized cost of the underlying security plus
accrued interest, if any, at the time of exercise. The Tax-Exempt Money Market
Portfolio may acquire standby commitments to enhance the liquidity of portfolio
securities, but only when the issuers of the commitments present minimal risk of
default.
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.
15
<PAGE> 99
TEMPORARY DEFENSIVE POSITIONS
Each Portfolio may temporarily hold investments that are not part of its main
investment strategy during unfavorable market conditions. These investments may
include cash (which will not earn any income) and, in the case of the Tax-Exempt
Money Market Portfolio, short-term taxable money market instruments not to
exceed 20% of the Portfolio's assets. This strategy could prevent a Portfolio
from achieving its investment objective.
OTHER TYPES OF INVESTMENTS
This prospectus describes each Portfolio's principal investment strategies and
the particular types of securities in which each Portfolio principally invests.
Each Portfolio may, from time to time, make other types of investments and
pursue other investments strategies in support of its overall investment goal.
These supplemental investment strategies - and the risks involved - are
described in detail in the Statement of Additional Information ("SAI"), which is
referred to on the back cover of this prospectus.
YEAR 2000 RISKS
Like other funds and business organizations around the world, the Portfolios
could be adversely affected if the computer systems used by the Adviser and the
Portfolio'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 Portfolio 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 Portfolios have been assured that the Adviser and the Portfolio's other
service providers (i.e., 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
Portfolio's operations associated with Year 2000 issues. Internal efforts
include a commitment to dedicate adequate staff and funding to identify and
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 Fund's Adviser 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 Portfolios are 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 Adviser or the Portfolio's service providers cannot be
accurately assessed at this time, the Portfolios currently have no reason to
believe that the Year 2000 plans of the Adviser and the Portfolio'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 Portfolios. The Portfolios and the Adviser will continue to closely
monitor developments relating to this issue, including development by the
Adviser and the Portfolios' 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 Adviser will
monitor potential investment risk related to Year 2000 issues.
16
<PAGE> 100
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE INVESTMENT ADVISER
Integrity Management & Research, Inc. (the "Adviser"), 871 Venetia Bay
Boulevard, Suite 370, Venice, Florida 34292 is the adviser for 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
20 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 Adviser, founded in 1992, manages more than $1 billion in assets. Through
the portfolio management team, the Sub-Adviser makes the day-to-day investment
decisions and continuously reviews, supervises and administers the Funds'
investment programs.
For these advisory services, the Portfolios paid as follows during their fiscal
year ended:
- --------------------------------------------------------------------------------
PERCENTAGE OF
AVERAGE NET ASSETS
AS OF 8/31/99
- --------------------------------------------------------------------------------
U.S. Treasury Money Market Portfolio 0.20%
- --------------------------------------------------------------------------------
U.S. Treasury Income Portfolio 0.20%
- --------------------------------------------------------------------------------
General Money Market Portfolio 0.20%
- --------------------------------------------------------------------------------
Tax-Exempt Money Market Portfolio 0.20%
- --------------------------------------------------------------------------------
The Sub-Adviser is paid by the Manager a fee at the annual rate based on each
Portfolio's average daily net assets, 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.
17
<PAGE> 101
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE DISTRIBUTOR
Integrity Investments, Inc. is the Portfolios' distributor. Its address is 871
Venetia Bay Boulevard, suite 370, Venice, Florida 34292.
THE ADMINISTRATOR
BISYS Fund Services Ohio, Inc. (BISYS) is the Fund's administrator. Its address
is 3435 Stelzer Road, Columbus, OH 43219. Management and Administrative services
of BISYS include providing office space, equipment and clerical personnel to the
Portfolios and supervising custodial, auditing, valuation, bookkeeping, legal
and dividend dispersing services.
The Statement of Additional Information has more detailed information about the
Investment Adviser and other service providers.
18
<PAGE> 102
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
PRICING OF PORTFOLIO SHARES
- ---------------------------
The Portfolios' net asset value or NAV is
HOW NAV IS CALCULATED expected to be constant at $1.00 per
share, although this value is not
The NAV is calculated by guaranteed. The NAV is determined at
adding the total value of the 12:00 noon Eastern time for the U.S.
Portfolio's investments and Treasury Income Portfolio and the
other assets, subtracting its Tax-Exempt Money Market Portfolio, and at
liabilities and then dividing 3:00 p.m. Eastern time for the U.S.
that figure by the number of Treasury Money Market Portfolio and the
outstanding shares of the General Money Market Portfolio, and on
Portfolio: days the New York Stock Exchange and the
Boston and the New York Federal Reserve
Banks are open. The Portfolios value
NAV = their securities at their amortized cost.
This method involves valuing an
TOTAL ASSETS - LIABILITIES instrument at its cost and thereafter
- -------------------------- applying a constant amortization to
Number of Shares maturity of any discount or premium,
Outstanding regardless of the impact of fluctuating
interest rates on the market value of the
investment.
Your order for purchase or sale of shares
is priced at the next NAV calculated
after your order is accepted by the Fund.
This is what is known as the offering
price.
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 in order
to determine the NAV of each class.
19
<PAGE> 103
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES
- --------------------------------------------------------------------------------
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 charges by some
institutions with establish accounts on behalf of their customers.
Some institutions may charge MINIMUM
additional fees and may require ACCOUNT TYPE INITIAL MINIMUM
different minimum investments INVESTMENT* SUBSEQUENT
or impose other limitations on $ 1,000,000
buying and selling shares. The Regular None
institution is responsible for ...........................................
transmitting orders by close of
business and may have an * Institutions may satisfy the minimum
earlier cut-off time for investment by aggregating their fiduciary
purchase and sale requests. accounts.
Consult your institution for
specific information. Your purchase of shares will be on the
same business day if the Portfolio's
transfer agent receives your order by:
12:00 noon, Eastern time, for the
-U.S. Treasury Income Portfolio
-Tax-Exempt Money Market Portfolio
3:00 p.m., Eastern time, for the
-U.S. Treasury Money Market Portfolio
-General Money Market Portfolio
Otherwise, the purchase will be effective
on the next business day.
To allow the Portfolios to be managed
effectively, shareholders are urged to
initial all trades as early in the day as
possible. Also, please notify the
Transfer Agent at least one day in
advance of trades in excess of
$10,000,000. Include your name and
shareholder account number.
A Portfolio may reject any purchase order
if it considers it in the best interest
of the Portfolio and its shareholders.
Purchases by exchange are not permitted.
- --------------------------------------------------------------------------------
Avoid 31% Tax Withholding
The Portfolios are required to withhold 31% of taxable dividends, capital gains
distributions and redemptions paid to shareholders who have not provided the
Portfolios with their certified taxpayer identification number in compliance
with IRS rules. To avoid this, make sure you provide your correct Tax
Identification Number (Social Security Number for most investors) on your
account application.
- --------------------------------------------------------------------------------
20
<PAGE> 104
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES - CONTINUED
- --------------------------------------------------------------------------------
BY WIRE ORDERS
Prior to wiring monies and in order to ensure that wire orders are invested
promptly, you must call the Distributor to obtain instructions regarding the
bank account number where the monies should be wired and other pertinent
information.
- --------------------------------------------------------------------------------
Dividends and Distributions
- ---------------------------
All income dividends will be paid in cash and will automatically be made by wire
unless you request to reinvest such dividends in additional shares.
- --------------------------------------------------------------------------------
SELLING YOUR SHARES
- --------------------------------------------------------------------------------
You may sell your shares at any
time. Your sales price will be WITHDRAWING MONEY FROM YOUR PORTFOLIO
the next NAV calculated after INVESTMENT
the Portfolio's transfer agent
receives your sell order. As a mutual fund shareholder, you are
Normally you will receive your technically selling shares when you request
proceeds within a week after a withdrawal. This is also known as
your request is received. See redeeming shares or a redemption of shares.
section on "General Policies on
Selling Shares below." If an account is closed, any accrued
dividend will be paid with in 10 days of
the beginning of the following month.
INSTRUCTIONS FOR SELLING SHARES
You may request redemption of your shares through the Transfer Agent. The
Portfolio ordinarily will accept orders to purchase by wire or telephone.
Shareholders may change the bank account designated to receive an amount
redeemed at any time by sending a letter of instruction with a signature
guarantee to the Transfer Agent, BISYS Fund Services Ohio, Inc., 3435 Stelzer
Road, Columbus, Ohio 43219.
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.
21
<PAGE> 105
SHAREHOLDER INFORMATION
GENERAL POLICIES ON SELLING SHARES
- --------------------------------------------------------------------------------
REFUSAL OF REDEMPTION REQUEST
Payment for shares may be delayed under extraordinary circumstances or as
permitted by the SEC in order to protect remaining shareholders. When the NYSE
or either the Boston or New York Federal Reserve Bank is closed for
extraordinary circumstances (or when trading is restricted) for any reason,
payment for shares may be delayed.
WIRE OR TELEPHONE REDEMPTIONS
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.
DISTRIBUTION AND SERVICE (12b-1) FEES
- --------------------------------------------------------------------------------
The Portfolios have adopted a plan under SEC Rule 12b-1. The plan allows the
Portfolios to pay fees for services and expenses relating to the sale and
distribution of the Portfolios' shares and/or for providing shareholder
services. The amount of the fee is 0.50% of the average daily net assets of the
Portfolios. Because these fees are paid from the Portfolios' assets on an
ongoing basis, over time these fees will increase the cost of your investment
and may cost you more than paying other types of sales fees.
SHAREHOLDERS STATEMENTS
Shareholders will receive a monthly statement and a confirmation after every
transaction that affects the share balance or the account registration.
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.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
Any income a Fund receives in the form of dividends is paid out, less expenses,
to its shareholders. Each Fund declares dividends from net investment income on
every business day. Dividends on are paid monthly, on or about the fifteenth day
of each month. Capital gains for all Funds are distributed at least annually.
In order to receive the dividend declared, the Custodian must receive the
purchase wire by the close of the Federal reserve wire system on that Business
Day.
Dividends and distributions are treated in the same manner for federal income
tax purposes whether you receive them in cash or in additional shares.
22
<PAGE> 106
SHAREHOLDER INFORMATION
DIVIDENDS, DISTRIBUTIONS AND TAXES - CONTINUED
- --------------------------------------------------------------------------------
The interest income from the U.S. Government securities is generally not subject
to state and local taxes, however any interest income from the repurchase
agreements is generally subject to state and local taxes.
The Funds expect that their dividends will primarily consist of net income or,
if any, short-term capital gains as opposed to long-term capital gains.
Dividends paid by the Portfolios (except Tax-Exempt Money Market Portfolio) are
taxable as ordinary income, as are dividends paid by the Tax-Exempt Money Market
Portfolio that are derived from taxable investments.
During normal market conditions, the Tax-Exempt Money Market Fund expects that
substantially all of its dividends will be excluded from gross income for
federal income tax purposes. The Portfolio may invest in certain securities with
interest that may be a preference item for the purposes of the alternative
minimum tax or a factor in determining whether Social Security benefits are
taxable. In such event, a portion of the Portfolio's dividends would not be
exempt from federal income taxes.
Dividends are taxable in the year in which they are paid, even if they appear on
your account statement the following year.
You will be notified in January each year about the federal tax status of
distributions made by the Portfolio. Depending on your residence for tax
purposes, distributions also may be subject to state and local taxes, including
withholding taxes.
Foreign shareholders may be subject to special withholding requirements. There
is a penalty on certain pre-retirement distributions from retirement accounts.
Consult your tax adviser about the federal, state and local tax consequences in
your particular circumstances.
23
<PAGE> 107
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following information has been audited by PricewaterhouseCoopers LLP,
independent accountants, whose report thereon was unqualified. This information
is part of the Trust's financial statements which are included in the Trust's
Annual Report to Shareholders and incorporated by reference in the SAI. As of
the date of this Prospectus, the U.S. Treasury Income Portfolio Class D shares
and the Tax-Exempt Money Market Portfolio Class D shares had not commenced
operations. Additionally, the General Money Market Portfolio Class D shares
commenced operations September 27, 1999, and therefore, had no financial
information available to incorporate. The following information should be read
in conjunction with the financial statements and notes thereto.
U.S. TREASURY MONEY MARKET PORTFOLIO- CLASS D
For a share outstanding throughout each period.
INSERT PAST 5 YEARS'
FINANCIAL HIGHLIGHTS
FROM ANNUAL REPORT.
24
<PAGE> 108
For more information about the Funds, the following documents are available free
upon request:
ANNUAL/SEMIANNUAL REPORTS (REPORTS):
The Portfolios' annual and semi-annual reports to shareholders contain
additional information on each Portfolio's investments. In the annual report,
you will find a discussion of the market conditions and investment strategies
that significantly affected the Fund's performance during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed
information about the Funds, including their operations and investment policies.
It is incorporated by reference and is legally considered a part of this
prospectus.
- --------------------------------------------------------------------------------
YOU CAN RECEIVE FREE COPIES OF REPORTS AND THE SAI, OR REQUEST OTHER INFORMATION
AND DISCUSS YOUR QUESTIONS ABOUT THE FUNDS BY CONTACTING THE DISTRIBUTOR. OR
CONTACT THE PORTFOLIOS AT:
THE VALIANT FUND
3435 STELZER ROAD
COLUMBUS, OHIO 43219
TELEPHONE: 1-800-828-2176
E-MAIL: [email protected]
----------------------------
INTERNET: http://www.valiantfund.com
- --------------------------------------------------------------------------------
You can review and copy the Fund's reports and SAIs at the Public Reference Room
of the Securities and Exchange Commission. You can get text-only copies:
- - For a fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-6009 or calling 1-800-SEC-0330.
- - Free from the Commission's Website at http://www.sec.gov.
Investment Company Act file no. 811-7582.
25
<PAGE> 109
THE VALIANT FUND
PROSPECTUS
DECEMBER 29, 1999
CLASS E SHARES
U.S. TREASURY MONEY MARKET PORTFOLIO
U.S. TREASURY INCOME PORTFOLIO
GENERAL MONEY MARKET PORTFOLIO
TAX-EXEMPT MONEY MARKET PORTFOLIO
MANAGED BY INTEGRITY MANAGEMENT & RESEARCH, INC.
QUESTIONS?
CALL 1-800-828-2176
OR YOUR INVESTMENT REPRESENTATIVE.
THE SECURITIES AND EXCHANGE COMMISSION HAS
NOT APPROVED OR DISAPPROVED THE SHARES
DESCRIBED IN THIS PROSPECTUS OR DETERMINED
WHETHER THIS PROSPECTUS IS ACCURATE OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE> 110
TABLE OF CONTENTS
REVIEW THIS SECTION FOR AN OVERVIEW OF THE PORTFOLIOS.
OVERVIEW
3 OVERVIEW
CAREFULLY REVIEW THIS IMPORTANT SECTION, WHICH SUMMARIZES EACH PORTFOLIO'S
INVESTMENTS, STRATEGIES, RISKS, PAST PERFORMANCE, AND FEES.
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES INCLUDES INVESTMENT
OBJECTIVES, STRATEGIES AND RISKS
4-5 U.S. TREASURY MONEY MARKET PORTFOLIO
6-7 U.S. TREASURY INCOME PORTFOLIO
8-9 GENERAL MONEY MARKET PORTFOLIO
10-11 TAX-EXEMPT MONEY MARKET PORTFOLIO
12 FEES AND EXPENSES
ADDITIONAL INFORMATION
14-16
REVIEW THIS SECTION FOR DETAILS ON THE PEOPLE AND ORGANIZATIONS WHO OVERSEE THE
PORTFOLIOS.
FUND MANAGEMENT
17 THE INVESTMENT ADVISER
18 THE DISTRIBUTOR
18 THE ADMINISTRATOR
REVIEW THIS SECTION FOR DETAILS ON HOW SHARES ARE VALUED, HOW TO PURCHASE AND
SELL SHARES, RELATED CHARGES AND PAYMENTS OF DIVIDENDS AND DISTRIBUTIONS.
SHAREHOLDER INFORMATION
19 PRICING OF PORTFOLIOS SHARES
20 PURCHASING AND ADDING TO YOUR SHARES
21 SELLING YOUR SHARES
22 GENERAL POLICIES ON SELLING SHARES
22 DISTRIBUTION AND SERVICE (12B-1) FEES
22-23 DIVIDENDS, DISTRIBUTIONS AND TAXES
FINANCIAL HIGHLIGHTS
24
BACK COVER
25 WHERE TO LEARN MORE ABOUT THIS FUND GROUP
2
<PAGE> 111
OVERVIEW
- --------------------------------------------------------------------------------
The Trust offers Class A shares, Class B shares, Class C shares, Class D shares
and Class E 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 by carefully reading its
prospectus. THIS PROSPECTUS RELATES ONLY TO THE 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.
Each Portfolio is a money market fund. As a money market fund, each Portfolio is
subject to maturity, quality and diversification requirements designed to help
it maintain a stable price of $1.00 per share. Under these requirements, each
Portfolio's investments must have a remaining maturity of no more than 397 days
and its investments must maintain an average weighted maturity that does not
exceed 90 days.
Money Market Securities are high quality, short-term debt securities that pay a
fixed, variable or floating interest rate. Securities are often specifically
structured so that they are eligible investments for a money market fund. For
example, in order to satisfy the maturity restrictions for a money market fund,
some money market securities have demand or put features that have the effect of
shortening the security's maturity. Taxable money market securities include bank
certificates of deposit, bank acceptances, bank time deposits, notes, commercial
paper and U.S. Government securities. Municipal money market securities include
variable rate demand notes, commercial paper and municipal notes.
RISK/RETURN SUMMARY
The following is a summary of certain key information about the Portfolios.
Other important things for you to note:
o An investment in the Portfolios is not a deposit in a bank and
is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
o Although the Portfolios seek to preserve the value of your
investment at $1.00 per share, it is possible to lose money by
investing in the Portfolios.
3
<PAGE> 112
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
- --------------------------------------------------------------------------------
U.S. TREASURY MONEY MARKET PORTFOLIO
INVESTMENT OBJECTIVES The Portfolio seeks to obtain as high a level of
current income as is consistent with the
preservation of capital and liquidity.
PRINCIPAL INVESTMENT STRATEGIES The Portfolio's principal investment strategies
include:
o Investing money market instruments
issued by the U.S. Treasury, certain
U.S. Government agencies and in U.S.
Government backed repurchase agreements.
o Generally maintaining a dollar-weighted
average maturity at 90 days or less.
o Investing in compliance with
industry-standard requirements for money
market funds for the quality, maturity
and diversification of investments.
The Portfolio invests based on considerations of
safety of principal and liquidity, which means
that the Portfolio may not necessarily invest in
securities paying the highest available yield at
a particular time. The Portfolio will attempt to
increase its yield by trading to take advantage
of short-term market variations. The Adviser
generally evaluates investments based on
interest rate sensitivity.
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.
A full discussion of additional permissible
investments is included in the Statement of
Additional Information ("SAI").
PRINCIPAL INVESTMENT RISKS The Portfolio is a "money market fund" that
seeks to maintain a stable net asset value of
$1.00 per share. There is no guarantee the
Portfolio will be able to preserve the value of
your investment at $1.00 per share. It is
possible to lose money by investing in the
Portfolio.
There can be no assurance that the investment
objective of the Portfolio will be achieved.
The principal risks of investing in the
Portfolio are:
o INTEREST RATE RISK This is the risk that
changes in interest rates will affect
the yield or value of the Portfolio's
investments in debt securities. Because
the Portfolio invests in short-term
securities, a decline in interest rates
will affect the Portfolio's yield as
these securities mature or are sold and
the Portfolio purchases new short-term
4
<PAGE> 113
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
U.S. TREASURY MONEY MARKET PORTFOLIO - CONTINUED
- --------------------------------------------------------------------------------
Securities with a lower yield.
Generally, an increase in interest rates
causes the value of a debt instrument to
decrease. The change in value for
shorter-term securities is usually
smaller than for securities with longer
maturities.
o CREDIT RISK Although U.S. Government
securities, particularly U.S. Treasury
obligations, have historically involved
little risk, if an issuer fails to pay
interest or repay principal, the value
of your investment could decline.
o SELECTION RISK The Adviser evaluates the
rewards and risks presented by all
securities purchased by the Portfolio
and how they may advance the Portfolio's
investment objective. It is possible,
however, that these evaluations will
prove to be inaccurate.
No performance information is shown for the
Class E shares of U.S. Treasury Money Market
Portfolio that, as of the date of this
prospectus, has not completed a full calendar
year of operations. The performance of the
Portfolio's shares will fluctuate with market
conditions.
WHO MAY WANT TO INVEST? Consider investing in the Portfolio if you are:
[_] SEEKING PRESERVATION OF CAPITAL
[_] HAVE A LOW RISK TOLERANCE
[_] WILLING TO ACCEPT LOWER POTENTIAL RETURNS IN
EXCHANGE FOR A HIGH DEGREE OF SAFETY
[_] INVESTING SHORT-TERM RESERVES
This Portfolio will not be appropriate for
someone:
[_] SEEKING HIGH TOTAL RETURNS
[_] PURSUING A LONG-TERM GOAL OR INVESTING FOR
RETIREMENT
5
<PAGE> 114
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
U.S. TREASURY INCOME PORTFOLIO
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES The Portfolio seeks to obtain as high a level of
current income as is consistent with the
preservation of capital and liquidity.
PRINCIPAL INVESTMENT STRATEGIES The Portfolio's principal investment strategies
include:
o Investing all of its assets in U.S.
Government Obligations which are backed
by the full faith and credit of the U.S.
Government and whose interest income is
generally not subject to state income
tax. Under normal market conditions, the
Portfolio invests at least 65% of its
total assets in U.S. Treasury
obligations such as U.S. Treasury bills,
notes and bonds.
o Generally maintaining a dollar-weighted
average of 90 days or less.
o Investing in compliance with industry
standard requirements for money market
funds for quality, maturity and
diversification of investments.
A full discussion of additional permissible
investments is included in the SAI.
PRINCIPAL INVESTMENT RISKS The Portfolio is a "money market fund" that
seeks to maintain a stable net asset value of
$1.00 per share. There is no guarantee the
Portfolio will be able to preserve the value of
your investment at $1.00 per share. It is
possible to lose money by investing in the
Portfolio.
There can be no assurance that the investment
objective of the Portfolio will be achieved.
The principal risks of investing in the
Portfolio are:
o INTEREST RATE RISK This is the risk that
changes in interest rates will affect
the yield or value of the Portfolio's
investments in debt securities. Because
the Portfolio invests in short-term
securities, a decline in interest rates
will affect the Portfolio's yield as
these securities mature or are sold and
the Portfolio purchases new short-term
securities with a lower yield.
Generally, an increase in interest rates
causes the value of a debt instrument to
decrease. The change in value for
shorter-term securities is usually
smaller than for securities with longer
maturities.
o CREDIT RISK Although U.S. Government
securities, particularly U.S. Treasury
obligations, have historically involved
little risk, if an issuer fails to pay
interest or repay principal, the value
of your investment could decline.
6
<PAGE> 115
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
U.S. TREASURY INCOME PORTFOLIO - CONTINUED
- --------------------------------------------------------------------------------
o SELECTION RISK The Adviser evaluates the
rewards and risks presented by all
securities purchased by the Portfolio
and how they may advance the Portfolio's
investment objective. It is possible,
however, that these evaluations will
prove to be inaccurate.
No performance information is shown for the
Class E shares of U.S. Treasury Income Portfolio
that, as of the date of this prospectus, has not
commenced operations. The performance of the
Portfolio's shares will fluctuate with market
conditions.
WHO MAY WANT TO INVEST? Consider investing in the Portfolio if you are:
[_] SEEKING PRESERVATION OF CAPITAL
[_] HAVE A LOW RISK TOLERANCE
[_] WILLING TO ACCEPT LOWER POTENTIAL RETURNS IN
EXCHANGE FOR A HIGH DEGREE OF SAFETY
[_] INVESTING SHORT-TERM RESERVES
This Portfolio will not be appropriate for
someone:
[_] SEEKING HIGH TOTAL RETURNS
[_] PURSUING A LONG-TERM GOAL OR INVESTING
FOR RETIREMENT
7
<PAGE> 116
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
GENERAL MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES The Portfolio seeks to obtain as high a level of
current income as is consistent with the
preservation of capital and liquidity.
PRINCIPAL INVESTMENT STRATEGIES The Portfolio's principal investment strategies
include:
o Investing in U.S. dollar-denominated
short-term obligations of domestic and
foreign issuers including banks rated in
the highest category by at least two
nationally recognized rating services,
U.S. Government securities, repurchase
agreements and entering into reverse
repurchase agreements.
o Generally maintaining a dollar-weighted
average maturity at 90 days or less.
o Investing in compliance with
industry-standard requirements for money
market funds for the quality, maturity
and diversification of investments.
The Portfolio may invest 25% or more of its
total assets in the domestic banking industry.
A full discussion of additional permissible
investments is included in the SAI.
PRINCIPAL INVESTMENT RISKS The Portfolio is a "money market fund" that
seeks to maintain a stable net asset value of
$1.00 per share. There is no guarantee the
Portfolio will be able to preserve the value of
your investment at $1.00 per share. It is
possible to lose money by investing in the
Portfolio.
There can be no assurance that the investment
objective of the Portfolio will be achieved.
The principal risks of investing in the
Portfolio are:
o INTEREST RATE RISK This is the risk that
changes in interest rates will affect
the yield or value of the Portfolio's
investments in debt securities. Because
the Portfolio invests in short-term
securities, a decline in interest rates
will affect the Portfolio's yield as
these securities mature or are sold and
the Portfolio purchases new short-term
securities with a lower yield.
Generally, an increase in interest rates
causes the value of a debt instrument to
decrease. The change in value for
8
<PAGE> 117
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
GENERAL MONEY MARKET PORTFOLIO - CONTINUED
- --------------------------------------------------------------------------------
shorter-term securities is usually
smaller than for securities with longer
maturities.
o CREDIT RISK This is the risk that the
issuer or guarantor of a debt security
will be unable or unwilling to make
timely interest or principal payments,
or to otherwise honor its obligations.
Credit risk includes the possibility
that any of the Portfolio's investments
will have its credit ratings downgraded.
The Portfolio will only purchase a money
market instrument if it presents minimal
credit risks.
o SELECTION RISK The Adviser evaluates the
rewards and risks presented by all
securities purchased by the Portfolio
and how they may advance the Portfolio's
investment objective. It is possible,
however, that these evaluations will
prove to be inaccurate.
o FOREIGN INVESTMENT RISK The Portfolio's
investments in U.S. dollar-denominated
obligations of foreign branches of U.S.
banks and U.S. branches of foreign banks
may be subject to foreign risk. Foreign
securities issuers are usually not
subject to the same degree of regulation
as U.S. issuers. Reporting, accounting,
and auditing standards of foreign
countries differ, in some cases,
significantly from U.S. standards.
Foreign risk includes nationalization,
expropriation or confiscatory taxation,
currency blockage, political changes or
diplomatic developments that could
adversely affect the portfolio's
investments.
No performance information is shown for the
Class E shares of General Money Market Portfolio
that, as of the date of this prospectus, has not
completed a full calendar year of operations.
The performance of the Portfolio's shares will
fluctuate with market conditions.
WHO MAY WANT TO INVEST? Consider investing in the Portfolio if you are:
[_] SEEKING PRESERVATION OF CAPITAL
[_] HAVE A LOW RISK TOLERANCE
[_] WILLING TO ACCEPT LOWER POTENTIAL RETURNS IN
EXCHANGE FOR A HIGH DEGREE OF SAFETY
[_] INVESTING SHORT-TERM RESERVES
This Portfolio will not be appropriate for
someone:
[_] SEEKING HIGH TOTAL RETURNS
[_] PURSUING A LONG-TERM GOAL OR INVESTING FOR
RETIREMENT
9
<PAGE> 118
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
TAX-EXEMPT MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES The Portfolio seeks primarily income exempt from
federal income tax.
PRINCIPAL INVESTMENT STRATEGIES The Portfolio principal investment strategies
include:
o Investing in municipal money market
securities
o Investing in compliance with industry
standard requirements for money market
funds for the quality, maturity and
diversification of investments.
o Municipal securities subject to
restrictions on resale.
Municipal Securities are issued to raise money for a variety of public and
private purposes, including general financing for state and local governments,
or financing for a specific project or public facility. Municipal securities may
be fully or partially backed by the local government, by the credit of a private
issuer, by the current or anticipated revenues from a specific project or
specific assets, or by domestic or foreign entities providing credit support
such as letters of credit, guarantees or insurance.
As a temporary defensive measure because of
market, economic, political or other conditions,
the Portfolio may invest in taxable money market
securities. These temporary investments may
produce taxable income.
The Portfolio does not intend to invest in
Municipal Securities whose interest in subject
to the federal alternative minimum tax ("AMT")
for individuals.
The Portfolio buys and sells securities based on
its objective of maximizing current income
consistent with safety of principal and
liquidity. The Portfolio will attempt to
increase its yields by trading to take advantage
of short-term market variations. The Fund's
Adviser evaluates investments based on credit
Analysis and the interest rate outlook.
A full discussion of additional permissible
investments is included in the SAI.
PRINCIPAL INVESTMENT RISKS The Fund is a "money market fund" that seeks to
maintain a stable net asset value of $1.00 per
share. There is no guarantee the Portfolio will
be able to preserve the value of your investment
at $1.00 per share. It is possible to lose money
by investing in the Portfolio.
There can be no assurance that the investment
objective of the Portfolio will be achieved.
10
<PAGE> 119
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
TAX-EXEMPT MONEY MARKET PORTFOLIO - CONTINUED
- --------------------------------------------------------------------------------
The principal risks of investing in the Fund
are:
o INTEREST RATE RISK This is the risk that
changes in interest rates will affect
the yield or value of the Portfolio's
investments in municipal debt
securities. Prices of municipal
obligations tend to move inversely with
changes in interest rates. The most
immediate effect of a rise in rates is
usually a drop in the prices of such
securities, and therefore in the
Portfolio's yield as well. Interest rate
risk is usually greater for fixed-income
securities with longer maturities or
durations.
o CREDIT RISK Although credit risk is very
low because the Portfolio only invests
in high quality obligations, if an
issuer fails to pay interest or repay
principal, the value of your investment
could decline. The ability of a state or
local government issuer to make payments
can be affected by many factors,
including economic Conditions, the flow
of tax revenues and changes in the level
of federal, state or local aid. Some
municipal securities are payable only
from limited revenue sources or by
private entities.
o SELECTION RISK The Adviser evaluates the
rewards and risks presented by all
securities purchased by the Portfolio
and how they may advance the Portfolio's
investment objective. It is possible,
however, that these evaluations will
prove to be inaccurate.
No performance information is shown for the
Class E shares of Tax-Exempt Money Market
Portfolio that, as of the date of this
prospectus, has not commenced operations. The
performance of the Portfolio's shares will
fluctuate with market conditions.
WHO MAY WANT TO INVEST? Consider investing in the Portfolio if you are:
[_] SEEKING PRESERVATION OF CAPITAL
[_] HAVE A LOW RISK TOLERANCE
[_] WILLING TO ACCEPT LOWER POTENTIAL RETURNS IN
EXCHANGE FOR A HIGH DEGREE OF SAFETY
[_] INVESTING SHORT-TERM RESERVES
This Portfolio will not be appropriate for
someone:
[_] SEEKING HIGH TOTAL RETURNS
[_] INVESTING AS PART OF A RETIREMENT PLAN
BECAUSE THE PLANS CAN NOT BENEFIT FROM TAX
EXEMPT INCOME
[_] PURSUING A LONG-TERM GOAL
11
<PAGE> 120
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
- --------------------------------------------------------------------------------
FEES AND EXPENSES
- -----------------
If you buy and hold Class E shares of the Portfolios, you will pay the following
fees and expenses. Annual Fund operating expenses are paid out of Portfolio
assets, and are reflected in the Portfolio's yield.
<TABLE>
<CAPTION>
Shareholder Fees U.S. TREASURY U.S. TREASURY GENERAL TAX-EXEMPT
(fees paid directly MONEY MARKET INCOME MONEY MARKET MONEY MARKET
from your investment) PORTFOLIO(1) PORTFOLIO(1) PORTFOLIO(1) PORTFOLIO(1)
--------- --------- --------- ---------
CLASS E CLASS E CLASS E CLASS E
<S> <C> <C> <C> <C>
Maximum sales charge None None None None
(load) on purchases
- ----------------------- ------------------ ----------------- ----------------- ------------------
Annual Portfolio
Operating Expenses
(expenses that are
deducted from
Portfolio assets)
- ----------------------- ------------------ ----------------- ----------------- ------------------
Management fees .20% .20% .20% .20%
- ----------------------- ------------------ ----------------- ----------------- ------------------
Distribution and .80% .80% .80% .80%
Service (12b-1) fees(2)
- ----------------------- ------------------ ----------------- ----------------- ------------------
Other expenses(3) .00% .00% .00% .00%
- ----------------------- ------------------ ----------------- ----------------- ------------------
Total Annual 1.00% 1.00% 1.00% 1.00%
Portfolio operating
expenses(4)
- ----------------------- ------------------ ----------------- ----------------- ------------------
</TABLE>
(1) As of the date of this Prospectus, the Class E shares of U.S. Treasury
Income Portfolio and Tax-Exempt Money Market Portfolio have not commenced
operations. Class E Shares of U.S. Treasury Money Market Portfolio and
General Money Market Portfolio commenced operations on April 6, 1999, and
May 5, 1999, respectively.
(2) The Trust has adopted a Distribution and Shareholder Servicing Plan (the
"Plan") for the Class E shares. Payments under the Plan for Class E shares
are authorized at the rate of 0.80% of the average daily net assets of Class
E shares.
(3) Other Expenses and Total Fund Operating Expenses of the Fund are estimated
for the current fiscal year.
(4) The Adviser will voluntarily reimburse any expenses above the expense
limitations for Class E shares of each Portfolio of 1.00%. The expense
limitations are voluntary but will remain in effect through December 2000.
EXPENSE EXAMPLE
- ---------------
Use the example below to compare fees and expenses with those of other
Portfolios. It illustrates the amount of fees and expenses you would pay,
assuming the following:
o $10,000 investment
o 5% annual return
o redemption at the end of each period
o no changes in the Portfolio's operating expenses
o reinvestment of dividends and distributions
Because this example is hypothetical and for comparison only, your actual costs
will be different.
<TABLE>
<CAPTION>
1 3 5 10
Year Years Years Years
<S> <C> <C> <C> <C>
U.S. TREASURY MONEY MARKET PORTFOLIO $102 $318 $552 $1,225
- ------------------------------------
- ------------------------------------------------------- -------------- ------------ ------------ ------------
U.S. TREASURY INCOME PORTFOLIO $102 $318 $552 $1,225
- ------------------------------
</TABLE>
12
<PAGE> 121
<TABLE>
- ------------------------------------------------------- -------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
GENERAL MONEY MARKET PORTFOLIO $102 $318 $552 $1,225
- ------------------------------
- ------------------------------------------------------- -------------- ------------ ------------ ------------
TAX-EXEMPT MONEY MARKET PORTFOLIO $102 $318 $552 $1,225
- ---------------------------------
- ------------------------------------------------------- -------------- ------------ ------------ ------------
</TABLE>
13
<PAGE> 122
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
The principal strategies and risks of investing in each Portfolio are described
on the previous pages. The following supplements that discussion.
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
Portfolio 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.
14
<PAGE> 123
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.
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 Portfolio's 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.
RESTRICTED SECURITIES (APPLICABLE TO GENERAL MONEY MARKET PORTFOLIO AND
TAX-EXEMPT MONEY MARKET PORTFOLIO ONLY)
The General Money Market Portfolio and 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.
STANDBY COMMITMENTS (APPLICABLE TO TAX-EXEMPT MONEY MARKET PORTFOLIO ONLY)
Standby Commitments are puts that entitle holders to same-day settlement at an
exercise price equal to the amortized cost of the underlying security plus
accrued interest, if any, at the time of exercise. The Tax-Exempt Money Market
Portfolio may acquire standby commitments to enhance the liquidity of portfolio
securities, but only when the issuers of the commitments present minimal risk of
default.
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.
15
<PAGE> 124
TEMPORARY DEFENSIVE POSITIONS
Each Portfolio may temporarily hold investments that are not part of its main
investment strategy during unfavorable market conditions. These investments may
include cash (which will not earn any income) and, in the case of the Tax-Exempt
Money Market Portfolio, short-term taxable money market instruments not to
exceed 20% of the Portfolio's assets. This strategy could prevent a Portfolio
from achieving its investment objective.
OTHER TYPES OF INVESTMENTS
This prospectus describes each Portfolio's principal investment strategies and
the particular types of securities in which each Portfolio principally invests.
Each Portfolio may, from time to time, make other types of investments and
pursue other investments strategies in support of its overall investment goal.
These supplemental investment strategies - and the risks involved - are
described in detail in the Statement of Additional Information ("SAI"), which is
referred to on the back cover of this prospectus.
YEAR 2000 RISKS
Like other funds and business organizations around the world, the Portfolios
could be adversely affected if the computer systems used by the Adviser and the
Portfolio'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 Portfolio 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 Portfolios have been assured that the Adviser and the Portfolio's other
service providers (i.e., 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
Portfolio's operations associated with Year 2000 issues. Internal efforts
include a commitment to dedicate adequate staff and funding to identify and
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 Fund's Adviser 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 Portfolios are 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 Adviser or the Portfolio's service providers cannot be
accurately assessed at this time, the Portfolios currently have no reason to
believe that the Year 2000 plans of the Adviser and the Portfolio'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 Portfolios. The Portfolios and the Adviser will continue to closely
monitor developments relating to this issue, including development by the
Adviser and the Portfolios' 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 Adviser will
monitor potential investment risk related to Year 2000 issues.
16
<PAGE> 125
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE INVESTMENT ADVISER
Integrity Management & Research, Inc. (the "Adviser"), 871 Venetia Bay
Boulevard, Suite 370, Venice, Florida 34292 is the adviser for 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
20 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 Adviser, founded in 1992, manages more than $1 billion in assets. Through
the portfolio management team, the Sub-Adviser makes the day-to-day investment
decisions and continuously reviews, supervises and administers the Funds'
investment programs.
For these advisory services, the Portfolios paid as follows during their fiscal
year ended:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------- -----------------------
- ---------------------------------------------------------------------------------- -----------------------
PERCENTAGE OF AVERAGE
NET ASSETS AS OF
8/31/99
- ---------------------------------------------------------------------------------- -----------------------
<S> <C>
U.S. Treasury Money Market Portfolio 0.20%
- ---------------------------------------------------------------------------------- -----------------------
U.S. Treasury Income Portfolio 0.20%
- ---------------------------------------------------------------------------------- -----------------------
General Money Market Portfolio 0.20%
- ---------------------------------------------------------------------------------- -----------------------
Tax-Exempt Money Market Portfolio 0.20%
- ---------------------------------------------------------------------------------- -----------------------
</TABLE>
The Sub-Adviser is paid by the Manager a fee at the annual rate based on each
Portfolio's average daily net assets, 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.
17
<PAGE> 126
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE DISTRIBUTOR
Integrity Investments, Inc. is the Portfolios' distributor. Its address is 871
Venetia Bay Boulevard, suite 370, Venice, Florida 34292.
THE ADMINISTRATOR
BISYS Fund Services Ohio, Inc. (BISYS) is the Fund's administrator. Its address
is 3435 Stelzer Road, Columbus, OH 43219. Management and Administrative services
of BISYS include providing office space, equipment and clerical personnel to the
Portfolios and supervising custodial, auditing, valuation, bookkeeping, legal
and dividend dispersing services.
The Statement of Additional Information has more detailed information about the
Investment Adviser and other service providers.
18
<PAGE> 127
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
PRICING OF PORTFOLIO SHARES
- ---------------------------
HOW NAV IS CALCULATED
The NAV is calculated by adding the total value of the Portfolio's investments
and other assets, subtracting its liabilities and then dividing that figure by
the number of outstanding shares of the Portfolio:
NAV =
TOTAL ASSETS - LIABILITIES
--------------------------
NUMBER OF SHARES
OUTSTANDING
The Portfolios' net asset value or NAV is expected to be constant at $1.00 per
share, although this value is not guaranteed. The NAV is determined at 12:00
noon Eastern time for the U.S. Treasury Income Portfolio and the Tax-Exempt
Money Market Portfolio, and at 3:00 p.m. Eastern time for the U.S. Treasury
Money Market Portfolio and the General Money Market Portfolio, and on days the
New York Stock Exchange and the Boston and the New York Federal Reserve Banks
are open. The Portfolios value their securities at their amortized cost. This
method involves valuing an instrument at its cost and thereafter applying a
constant amortization to maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of the investment.
Your order for purchase or sale of shares is priced at the next NAV calculated
after your order is accepted by the Fund. This is what is known as the offering
price.
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 in order
to determine the NAV of each class.
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<PAGE> 128
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES
- --------------------------------------------------------------------------------
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 charges by some
institutions with establish accounts on behalf of their customers.
Some institutions may charge additional fees and may require different minimum
investments or impose other limitations on buying and selling shares. The
institution is responsible for transmitting orders by close of business and may
have an earlier cutoff time for purchase and sale requests. Consult your
institution for specific information.
MINIMUM
ACCOUNT TYPE INITIAL MINIMUM
INVESTMENT* SUBSEQUENT
Regular $ 1,000,000 None
........................... .................... .................
* Institutions may satisfy the minimum investment by aggregating
their fiduciary accounts.
Your purchase of shares will be
on the same business day if the
Portfolio's transfer agent
receives your order by:
12:00 noon, Eastern time, for the
-U.S. Treasury Income Portfolio
-Tax-Exempt Money Market Portfolio
3:00 p.m., Eastern time, for the
-U.S. Treasury Money Market Portfolio
-General Money Market Portfolio
Otherwise, the purchase will be effective on the next business day.
To allow the Portfolios to be managed effectively, shareholders are urged to
initial all trades as early in the day as possible. Also, please notify the
Transfer Agent at least one day in advance of trades in excess of $10,000,000.
Include your name and shareholder account number.
A Portfolio may reject any purchase order if it considers it in the best
interest of the Portfolio and its shareholders. Purchases by exchange are not
permitted.
Avoid 31% Tax Withholding
The Portfolios are required to withhold 31% of taxable dividends, capital gains
distributions and redemptions paid to shareholders who have not provided the
Portfolios with their certified taxpayer identification number in compliance
with IRS rules. To avoid this, make sure you provide your correct Tax
Identification Number (Social Security Number for most investors) on your
account application.
20
<PAGE> 129
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES - CONTINUED
- --------------------------------------------------------------------------------
BY WIRE ORDERS
Prior to wiring monies and in order to ensure that wire orders are invested
promptly, you must call the Distributor to obtain instructions regarding the
bank account number where the monies should be wired and other pertinent
information.
- --------------------------------------------------------------------------------
Dividends and Distributions
- ---------------------------
All income dividends will be paid in cash and will automatically be made by wire
unless you request to reinvest such dividends in additional shares.
- --------------------------------------------------------------------------------
SELLING YOUR SHARES
- --------------------------------------------------------------------------------
You may sell your shares at any time. Your sales price will be the next NAV
calculated after the Portfolio's transfer agent receives your sell order.
Normally you will receive your proceeds within a week after your request is
received. See section on "General Policies on Selling Shares below."
WITHDRAWING MONEY FROM YOUR PORTFOLIO INVESTMENT
As a mutual fund shareholder, you are technically selling shares when you
request a withdrawal. This is also known as redeeming shares or a redemption of
shares.
- --------------------------------------------------------------------------------
If an account is closed, any accrued dividend will be paid with in 10 days of
the beginning of the following month.
- --------------------------------------------------------------------------------
INSTRUCTIONS FOR SELLING SHARES
You may request redemption of your shares through the Transfer Agent. The
Portfolio ordinarily will accept orders to purchase by wire or telephone.
Shareholders may change the bank account designated to receive an amount
redeemed at any time by sending a letter of instruction with a signature
guarantee to the Transfer Agent, BISYS Fund Services Ohio, Inc., 3435 Stelzer
Road, Columbus, Ohio 43219.
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.
21
<PAGE> 130
SHAREHOLDER INFORMATION
GENERAL POLICIES ON SELLING SHARES
- --------------------------------------------------------------------------------
REFUSAL OF REDEMPTION REQUEST
Payment for shares may be delayed under extraordinary circumstances or as
permitted by the SEC in order to protect remaining shareholders. When the NYSE
or either the Boston or New York Federal Reserve Bank is closed for
extraordinary circumstances (or when trading is restricted) for any reason,
payment for shares may be delayed.
WIRE OR TELEPHONE REDEMPTIONS
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.
DISTRIBUTION AND SERVICE (12b-1) FEES
- --------------------------------------------------------------------------------
The Portfolios have adopted a plan under SEC Rule 12b-1. The plan allows the
Portfolios to pay fees for services and expenses relating to the sale and
distribution of the Portfolios' shares and/or for providing shareholder
services. The amount of the fee is 0.80% of the average daily net assets of the
Portfolios. Because these fees are paid from the Portfolios' assets on an
ongoing basis, over time these fees will increase the cost of your investment
and may cost you more than paying other types of sales fees.
SHAREHOLDERS STATEMENTS
Shareholders will receive a monthly statement and a confirmation after every
transaction that affects the share balance or the account registration.
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.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
Any income a Fund receives in the form of dividends is paid out, less expenses,
to its shareholders. Each Fund declares dividends from net investment income on
every business day. Dividends on are paid monthly, on or about the fifteenth day
of each month. Capital gains for all Funds are distributed at least annually.
In order to receive the dividend declared, the Custodian must receive the
purchase wire by the close of the Federal reserve wire system on that Business
Day.
Dividends and distributions are treated in the same manner for federal income
tax purposes whether you receive them in cash or in additional shares.
22
<PAGE> 131
SHAREHOLDER INFORMATION
DIVIDENDS, DISTRIBUTIONS AND TAXES - CONTINUED
- --------------------------------------------------------------------------------
The interest income from the U.S. Government securities is generally not subject
to state and local taxes, however any interest income from the repurchase
agreements is generally subject to state and local taxes.
The Funds expect that their dividends will primarily consist of net income or,
if any, short-term capital gains as opposed to long-term capital gains.
Dividends paid by the Portfolios (except Tax-Exempt Money Market Portfolio) are
taxable as ordinary income, as are dividends paid by the Tax-Exempt Money Market
Portfolio that are derived from taxable investments.
During normal market conditions, the Tax-Exempt Money Market Fund expects that
substantially all of its dividends will be excluded from gross income for
federal income tax purposes. The Portfolio may invest in certain securities with
interest that may be a preference item for the purposes of the alternative
minimum tax or a factor in determining whether Social Security benefits are
taxable. In such event, a portion of the Portfolio's dividends would not be
exempt from federal income taxes.
Dividends are taxable in the year in which they are paid, even if they appear on
your account statement the following year.
You will be notified in January each year about the federal tax status of
distributions made by the Portfolio. Depending on your residence for tax
purposes, distributions also may be subject to state and local taxes, including
withholding taxes.
Foreign shareholders may be subject to special withholding requirements. There
is a penalty on certain pre-retirement distributions from retirement accounts.
Consult your tax adviser about the federal, state and local tax consequences in
your particular circumstances.
23
<PAGE> 132
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
As of the date of this Prospectus, U.S. Treasury Income Portfolio Class E shares
and Tax-Exempt Money Market Portfolio Class E shares have not commenced
operations. Additionally, General Money Market Portfolio Class E shares and U.S.
Treasury Money Market Portfolio commenced operations May 5, 1999 and April 6,
1999, respectively, therefore, there is no financial information available to
incorporate.
24
<PAGE> 133
For more information about the Funds, the following documents are available free
upon request:
ANNUAL/SEMIANNUAL REPORTS (REPORTS):
The Portfolios' annual and semi-annual reports to shareholders contain
additional information on each Portfolio's investments. In the annual report,
you will find a discussion of the market conditions and investment strategies
that significantly affected the Fund's performance during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed
information about the Funds, including their operations and investment policies.
It is incorporated by reference and is legally considered a part of this
prospectus.
YOU CAN RECEIVE FREE COPIES OF REPORTS AND THE SAI, OR REQUEST OTHER INFORMATION
AND DISCUSS YOUR QUESTIONS ABOUT THE FUNDS BY CONTACTING THE DISTRIBUTOR. OR
CONTACT THE PORTFOLIOS AT:
THE VALIANT FUND
3435 STELZER ROAD
COLUMBUS, OHIO 43219
TELEPHONE: 1-800-828-2176
E-MAIL: [email protected]
INTERNET: http://www.valiantfund.com
You can review and copy the Fund's reports and SAIs at the Public Reference Room
of the Securities and Exchange Commission. You can get text-only copies:
o For a fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-6009 or calling 1-800-SEC-0330.
o Free from the Commission's Website at http://www.sec.gov.
Investment Company Act file no. 811-7582.
25
<PAGE> 134
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, Class D and Class E Shares
STATEMENT OF ADDITIONAL INFORMATION
DECEMBER 29, 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 29,
1999). 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.
1
<PAGE> 135
TABLE OF CONTENTS PAGE
Investment Policies and Limitations...................................3
Portfolio Transactions...............................................13
Valuation of Portfolio Securities....................................14
Performance..........................................................14
Additional Purchase and Redemption Information.......................16
Dividends, Capital Gains Distributions and Taxes.....................17
Trustees and Officers................................................18
Investment Advisory Agreements.......................................20
Administration Agreement and Other Contracts.........................20
Description of the Trust.............................................22
Investment Adviser
- ------------------
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")
2
<PAGE> 136
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
3
<PAGE> 137
(9) purchase the securities of other investment companies, except in connection
with a merger, consolidation, reorganization or acquisition of assets or in
accordance with the 1940 Act.
THE FOLLOWING LIMITATIONS OF THE U.S. TREASURY MONEY MARKET PORTFOLIO ARE NOT
FUNDAMENTAL AND MAY BE CHANGED WITHOUT SHAREHOLDER APPROVAL.
(i) The Portfolio does not currently intend during the coming year to purchase
the voting securities of any issuer.
(ii) The Portfolio does not currently intend during the coming year to sell
securities short, unless it owns or has the right, without payment of additional
consideration, to obtain securities equivalent in kind and amount to the
securities sold short.
(iii) The Portfolio does not currently intend during the coming year to purchase
securities on margin, except that the Portfolio may obtain such short-term
credits as are necessary for the clearance of transactions.
(iv) The Portfolio may borrow money only from a bank. The Portfolio will not
purchase any security while borrowings representing more than 5% of its total
assets are outstanding.
(v) The Portfolio does not currently intend during the coming year to purchase
any security or enter into a repurchase agreement if, as a result, more than 10%
of its net assets would be invested in repurchase agreements not entitling the
holder to payment of principal and interest within seven days and in securities
that are illiquid by virtue of legal or contractual restrictions on resale or
the absence of a readily available market.
(vi) The Portfolio does not currently intend during the coming year to make
loans, but this limit does not apply to purchases of debt securities or to
repurchase agreements.
(vii) The Portfolio does not currently intend during the coming year to invest
in oil, gas, or other mineral exploration or development programs or leases.
(viii) The Portfolio does not currently intend during the coming year to
purchase the securities of any issuer if those officers and Trustees of the
Trust and those officers and directors of the Manager or the Sub-Adviser who
individually own more than 1/2 of 1% of the securities of such issuer together
own more than 5% of such issuer's securities.
4
<PAGE> 138
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.
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(iv) The Portfolio may borrow money only (a) from a bank or (b) by engaging in
reverse repurchase agreements with any party (reverse repurchase agreements are
treated as borrowings for purposes of fundamental investment limitation (3)).
The Portfolio will not purchase any security while borrowings representing more
than 5% of its total assets are outstanding.
(v) The Portfolio does not currently intend during the coming year to purchase
any security or enter into a repurchase agreement if, as a result, more than 10%
of its net assets would be invested in repurchase agreements not entitling the
holder to payment of principal and interest within seven days and in securities
that are illiquid by virtue of legal or contractual restrictions on resale or
the absence of a readily available market.
(vi) The Portfolio does not currently intend during the coming year to make
loans, but this limit does not apply to purchases of debt securities or to
repurchase agreements.
(vii) The Portfolio does not currently intend during the coming year to invest
in oil, gas, or other mineral exploration or development programs or leases.
(viii) The Portfolio does not currently intend during the coming year to
purchase the securities of any issuer if those officers and Trustees of the
Trust and those officers and directors of the Manager or the Sub-Adviser who
individually own more than 1/2 of 1% of the securities of such issuer together
own more than 5% of such issuer's securities.
Notwithstanding paragraph (3) and paragraphs (iv) through (vi) above, as a
matter of nonfundamental policy, the Portfolio will not engage in repurchase
agreement or reverse repurchase agreement transactions.
GENERAL MONEY MARKET PORTFOLIO
THE FOLLOWING ARE THE GENERAL MONEY MARKET PORTFOLIO'S FUNDAMENTAL LIMITATIONS.
THE PORTFOLIO MAY NOT:
(1) with respect to 75% of the Portfolio's total assets, purchase the securities
of any issuer (other than securities issued or guaranteed by the U.S. Government
or any of its agencies or instrumentalities) if, as a result, (a) more than 5%
of the Portfolio's total assets would be invested in the securities of that
issuer; or (b) the Portfolio would hold more than 10% of the outstanding voting
securities of that issuer;
(2) issue senior securities, except as permitted under the 1940 Act;
(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;
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(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.
(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.
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(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
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 with 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. Under
normal market conditions, at least 80% of the Tax-Exempt Money Market
Portfolio's total assets will be invested in securities that produce income that
is exempt from federal income tax.
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
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(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.
(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.
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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. The demand feature may be backed by a bank letter of
credit or guarantee issued with respect to such instrument.
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.
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.
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Municipal Lease 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.
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 LEASE OBLIGATIONS (APPLICABLE TO TAX-EXEMPT MONEY MARKET PORTFOLIO
ONLY)
Municipal lease obligations are issued by a state and local government or
authority to acquire land and a wide variety of equipment and facilities. These
obligations typically are not fully backed by the municipality's credit, and the
interest payable on these obligations may become taxable if the lease is
assigned. If funds are not appropriated for the following year's lease payments,
a lease may terminate, with the possibility of default on the lease obligation
and significant loss to the Portfolio. Such risk of non-appropriation is unique
to municipal lease obligations. The SEC Staff has taken the position that
open-end investment companies may treat these obligations as liquid under
guidelines established by the Board of Trustees. Determination concerning the
liquidity and proper valuation of these obligations will include: the frequency
of trades and quotes for the obligation, the number of dealers willing to
purchase or sell the security and the number of potential buyers, the
willingness of dealers to make a market in the securities, the nature of the
marketplace trades and the likelihood that its marketability will be maintained
throughout the time the instrument is held by the Portfolio. The Board will be
responsible for determining the credit quality of any unrated lease obligations
held by the Portfolio, on an ongoing basis, including an assessment of the
likelihood that the lease will not be canceled. The high quality municipal lease
obligations in which the Tax-Exempt Money Market Portfolio intends to invest
generally are not expected by the Board to present liquidity risks. Lease
obligations will be valued based on a standard spread that relates to general
obligation securities whose value is determined using a pricing service.
Certificates of participation in municipal lease obligations or installment
sales contracts entitle the holder to a proportionate interest in the
lease-purchase payments made. Certificates of participation typically are issued
by municipalities and by banks and other financial institutions.
MUNICIPAL SECURITIES 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 specific tax, 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.
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These securities include municipal debt obligations that have been issued by
states and their political subdivisions, and duly constituted state and local
authorities and corporations as well as securities issued by certain territories
or possessions, such as Puerto Rico, the Virgin Islands, and Guam.
General obligation bonds that are secured by the issuer's pledge of its full
faith, credit, and taxing power for the payment of principal and interest;
Revenue bonds that are payable from the revenue derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise tax or other specific revenue source, but not from the general
taxing power;
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.
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.
LENDING OF SECURITIES
For the purpose of realizing additional income, the Portfolios may lend
portfolio securities to broker-dealers or financial institutions up to not more
than 10% of their respective total assets taken at current value. While any such
loan is outstanding, each such Portfolio will continue to receive amounts equal
to the interest or dividends paid by the issuer on the securities, as well as
interest (less any rebates to be paid to the borrower) on the investment of the
collateral or fees from the borrower. Each Portfolio will have a right to call
each loan and obtain the securities. Lending portfolio securities involves
certain risks, including possible delays in receiving additional collateral or
in the recovery of the securities or possible loss of rights in the collateral
should the borrower fail financially. Loans will be made in accordance with
guidelines established by the Board of Trustees.
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
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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.
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
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. 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 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. These transactions temporarily
transfer possession of a portfolio instrument to another party, such as a bank
or broker-dealer, in return for cash. At the same
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time, the Portfolio agrees to repurchase the instrument at an agreed upon time
and price, which includes interest. 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 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. 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 which cannot be sold to the
public without registration under the Securities Act of 1933 (restricted
securities), 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. Unless registered for sale, these securities
can only be sold in privately negotiated transactions or pursuant to an
exemption from registration. 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 of seven days or less, or a dealer or institutional trading
market exists, 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.
QUALITY AND MATURITY
Each Portfolio may purchase only high quality obligations that the Sub-Adviser
believes present minimal credit risks. To be considered high quality, a security
must be a U.S. Government Obligation; or rated in accordance with applicable
rules in one of the two highest rating categories for short-term obligations by
at least two NRSROs (or by one, if only one rating service has rated the
security); or, if unrated, judged to be of equivalent quality by the
Sub-Adviser. As a matter of non-fundamental policy, the Portfolios will only
purchase securities, in addition to U.S. Government Obligations, that are rated
in the highest rating category by at least two 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 60 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.
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<PAGE> 148
Unless otherwise indicated, each Portfolio may invest in the securities and
engage in the transactions described below.
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.
PORTFOLIO TRANSACTIONS
The Sub-Adviser makes decisions to buy and sell securities for each Portfolio,
selects broker-dealers and negotiates commission rates. The selection of
broker-dealers is generally made based upon the price, quality of execution
services and/or research provided. Portfolio securities are normally purchased
directly from the issuer or from a market maker for the securities. Since
purchases and sales of portfolio securities by the Portfolios are usually
principal transactions, the Portfolios incur little or no brokerage commissions.
The purchase price paid to dealers serving as market makers may include a spread
between the bid and asked prices. The Portfolios may also purchase securities
from underwriters at prices which include a commission paid by the issuer to the
underwriter.
Each Portfolio requires that investments mature (or are deemed to mature) within
397 days or less. The amortized cost method of valuing portfolio securities
requires that each Portfolio maintain an average weighted portfolio maturity of
90 days or less. Both policies may result in relatively high portfolio turnover,
but since brokerage commissions are not normally paid on money market
instruments, the high rate of portfolio turnover is not expected to have a
material effect on the Portfolios' net income or expenses. Each Portfolio may
seek to profit from short-term trading, and may not always hold portfolio
securities to maturity.
The Sub-Adviser's primary consideration in effecting a security transaction is
to obtain the best net price and the most favorable execution of the order. To
the extent that the executions and prices offered by more than one dealer are
comparable, the Sub-Adviser may, at its discretion, effect transactions with
dealers that furnish statistical, research or other information or services
which are deemed by the Sub-Adviser to be beneficial to the Portfolios'
investment program. Certain research services furnished by dealers may be useful
to the Sub-Adviser's clients other than the Portfolios. Similarly, any research
services received by the Sub-Adviser through placement of portfolio transactions
of other clients may be of value to the Sub-Adviser in fulfilling its
obligations to the Portfolios. The Sub-Adviser is of the opinion that the
material received is beneficial in supplementing its research and analysis, and
therefore, may benefit the Portfolios by improving the quality of its investment
advice. The advisory fee paid by the Portfolios is not reduced because of the
receipt of such services.
The Sub-Adviser and its affiliates may manage other investment accounts, some of
which may have objectives similar to that of the Portfolios. It is possible that
at times, identical securities will be acceptable
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<PAGE> 149
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
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<PAGE> 150
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, 1999
were:
Portfolio Yield
--------- -----
U.S. Treasury Money Market Portfolio - Class A 4.99%
U.S. Treasury Money Market Portfolio - Class B 4.74%
U.S. Treasury Money Market Portfolio- Class D 4.49%
U.S. Treasury Money Market Portfolio- Class E 4.19%
General Money Market Portfolio - Class A 5.12%
General Money Market Portfolio - Class B 4.87%
General Money Market Portfolio - Class E 4.32%
Tax-Exempt Money Market Portfolio - Class A 3.11%
The effective compound yield quotation for each Portfolio and class is computed
by adding 1 to the unannualized base period return (calculated as described
above), raising the sum to a power equal to 365 divided by 7, and subtracting 1
from the result. The effective yields for each Portfolio for the seven-day
period ended August 31, 1999 were:
Portfolio Yield
--------- -----
U.S. Treasury Money Market Portfolio - Class A 5.11%
U.S. Treasury Money Market Portfolio - Class B 4.85%
U.S. Treasury Money Market Portfolio- Class D 4.59%
U.S. Treasury Money Market Portfolio- Class E 4.28%
General Money Market Portfolio - Class A 5.25%
General Money Market Portfolio - Class B 4.99%
General Money Market Portfolio - Class E 4.41%
Tax-Exempt Money Market Portfolio - Class A 3.16%
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, 1999 was 5.08%. 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, 1999 was 5.23%. Tax equivalent and tax equivalent effective yields assume
the payment of federal income taxes at a rate of 39.6% 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
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<PAGE> 151
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
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
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<PAGE> 152
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.
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TRUSTEES AND OFFICERS
The Trustees and executive officers of the Trust are listed below. Each Trustee
that is an "interested person" (as defined by the 1940 Act) by virtue of his
affiliation with the Trust, or the Manager or the Distributor, is indicated by
an asterisk (*).
<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE POSITION(S) HELD WITH PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
REGISTRANT
<S> <C> <C>
John S. Culbertson Trustee Retired. Trust Consultant with Fidelity
1995 Lake Marshall Drive Investments Institutional Services Co. from 1990
Gibsonia, PA 15044 to 1993.
69
Rufus C. Cushman, Jr. Trustee Retired. Money Manager with Fidelity Management &
10 Corn Point Road Research Corp. from 1968 through 1994.
Marblehead, MA 01945
66
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.
52 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
74
Roger F. Dumas Trustee Private investor since 1987.
151 Tremont Street
Boston, MA 02111
64
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.
</TABLE>
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<PAGE> 154
<TABLE>
<CAPTION>
<S> <C> <C>
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
36
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
61
</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, 1999, the Trust paid an aggregate of $25,000 to the
Independent Trustees. The following table shows compensation by Trustee for the
fiscal year ended August 31, 1999.
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 $6,250 None None
Trustee
Rufus C. Cushman $6,250 None None
Trustee
Richard F. Curcio None None None
President, Trustee,
Chairman of the
Board of Trustees
H. Willis Day, Jr. $6,250 None None
Trustee
Roger F. Dumas $6,250 None None
Trustee
Kenneth J. Phelps None None None
Trustee
</TABLE>
As of September 30, 1999, 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.
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<PAGE> 155
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>
8/31/99 $ 953,866 $ 19,801 $ 651,335 $ 504,269
- -------------------- --------------------------- --------------------- ---------------------- -----------------------
8/31/98 $ 936,822 $ 36,010 $ 897,707 $ 514,182
- -------------------- --------------------------- --------------------- ---------------------- -----------------------
8/31/97 $ 823,706 $ 33,215 $ 975,895 $ 528,012
- -------------------- --------------------------- --------------------- ---------------------- -----------------------
- -------------------- --------------------------- --------------------- ---------------------- -----------------------
</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>
8/31/99 $ _______ $ ______ $ _______ $ _______
- -------------------- --------------------------- --------------------- ---------------------- -----------------------
8/31/98 $ 332,963 $ 12,605 $ 317,968 $ 182,645
- -------------------- --------------------------- --------------------- ---------------------- -----------------------
8/31/97 $ 293,764 $ 11,785 $ 345,965 $ 188,730
- -------------------- --------------------------- --------------------- ---------------------- -----------------------
- -------------------- --------------------------- --------------------- ---------------------- -----------------------
</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
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<PAGE> 156
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:
.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.
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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 Plans 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, 1999, the Class B shares of the U.S. Treasury Money Market
Portfolio and the General Money Market Portfolio paid distribution costs of
$651,725 and $33,632 respectively, the Class D shares of the U.S. Treasury Money
Market Portfolio paid distribution costs of $937,748 and the Class E shares of
the U.S. Treasury Mooney Market Portfolio and the General Money Market Fund paid
distributor costs of $24,184 and $69,530, respectively 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
24
<PAGE> 158
not suffer adverse financial consequences. In addition, state securities laws on
this issue may differ from the interpretations of federal law expressed herein,
and banks and other financial institutions may be required to register as
dealers pursuant to state law.
DESCRIPTION OF THE TRUST
TRUST ORGANIZATION. The U.S. Treasury Money Market Portfolio, U.S. Treasury
Income Portfolio, General Money Market Portfolio and Tax-Exempt Money Market
Portfolio are portfolios of The Valiant Fund. 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.
25
<PAGE> 159
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 September 30, 1999, to the knowledge of
the Trust's Management, the following persons owned of record or beneficially 5%
or more of the outstanding shares of any class of a Portfolio.
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, 1999, including the notes thereto and the report of
PricewaterhouseCoopers LLP thereon are incorporated herein by reference from the
Trust's 1999 Annual Report to Shareholders. A copy of the 1999 Annual Report to
Shareholders accompanies the delivery of this SAI.
26
<PAGE> 160
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.
27
<PAGE> 161
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS
Exhibit
Number Description of Exhibit
------ ----------------------
(a) Agreement and Declaration of Trust dated January 29,
1993 *
(b) By-laws dated January 29, 1993 *
(c) Not Applicable
(d)(1) Management Agreement with Integrity Management &
Research, Inc. dated July 29, 1993 *
(d)(2) Sub-Adviser Agreement between Adviser and David L.
Babson & Co. Inc. dated June 30, 1995 *
(e) Distribution Agreement dated July 29, 1993 *
(f) Not Applicable
(g)(1) Custody Agreement dated September 1, 1998 **
(h)(1) Transfer Agency Agreement dated September 1, 1998 **
(h)(2) Administration Agreement dated September 1, 1998 **
(h)(3) Fund Accounting Agreement dated September 1, 1998 **
(i) Opinion and Consent of Counsel to the Registrant ***
(j) Consent of PricewaterhouseCoopers LLP (Independent
Auditors)***
(k) None
(l) Subscription Agreement *
(m)(1) Distribution and Shareholder Servicing Plan for dated
July 29, 1993 *
(m)(1)(a) Amendment No. 1 to the Distribution and Shareholder
Servicing Plan dated December 30, 1993 *
(m)(1)(b) Amendment No. 2 to the Distribution and Shareholder
Servicing Plan dated December 19, 1995 ***
(m)(2) Distribution and Shareholder Servicing Plan for Class
C Shares dated December 1, 1995 ***
(m)(3) Distribution and Shareholder Servicing Plan for Class
D Shares dated December 19, 1995 ***
(m)(4) Distribution and Shareholder Servicing Plan for Class
E Shares dated March 16, 1999 ***
(n) Financial Data Schedules ***
(o) Amended and Restated Plan Pursuant for Multiple Class
Shares dated March 16, 1999 ***
(p) Powers of Attorney
* Incorporated herein by reference to Post Effective Amendment
No. 6 to the Registration Statement, filed December 19, 1997.
** Incorporated herein by reference to Post Effective Amendment
No. 7 to the Registration Statement, filed November 24, 1998.
*** To be filed in a forthcoming Post-Effective Amendment.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None.
ITEM 25. 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
Page C-1
<PAGE> 162
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 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
(a) The description of Integrity Management & Research, Inc. (the
"Manager") under the caption "Fund Management" 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
<TABLE>
<CAPTION>
Position with David L. Babson
Name and Company, Incorporated Other Business Connections
- ---- ------------------------- --------------------------
<S> <C> <C>
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 President None
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
Senior Vice President
</TABLE>
ITEM 27. PRINCIPAL UNDERWRITER
(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.
Page C-2
<PAGE> 163
<TABLE>
<CAPTION>
NAME AND PRINCIPAL ADDRESS POSITIONS AND OFFICES POSITIONS AND OFFICES
WITH UNDERWRITER WITH REGISTRANT
<S> <C> <C>
Richard Curcio President, Director President, Chairman of
Integrity Investments, Inc. Board of Trustees
871 Venetia Bay Boulevard, Suite 370
Venice, Florida 34292
</TABLE>
(c) Not applicable
ITEM 28. 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) The Bank of New York, 100 Church Street-10th Floor, New York,
New York 10286 (records relating to services as Custodian).
ITEM 29. MANAGEMENT SERVICES
None.
ITEM 30. UNDERTAKINGS
None.
NOTICE
A copy of the Agreement and Declaration of Trust of The Valiant Fund is
on file with the Secretary of The Commonwealth of Massachusetts and notice is
hereby given that this instrument is executed on behalf of the Registrant by an
officer of the Registrant as an officer and not individually and that the
obligations of or arising out of this instrument are not binding upon any of the
Trustees or shareholders individually but are binding only upon the assets and
property of the Registrant.
Page C-3
<PAGE> 164
THE VALIANT FUND
INDEX OF EXHIBITS
DESCRIPTION OF EXHIBIT EXHIBIT REFERENCE
- ---------------------- -----------------
None
<PAGE> 165
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, as amended, the Registrant has duly caused this
Post-Effective Amendment No. 9 to its 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 21st day of October, 1999.
The Valiant Fund
By: RICHARD F. CURCIO*
------------------
Richard F. Curcio, President
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Post-Effective Amendment No. 9 to the Registration Statement of The Valiant Fund
has been signed below by the following persons in the capacities indicated on
the 21st day of October, 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
