<PAGE> 1
As Filed with the Securities and Exchange Commission on December 28, 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. 10 |X|
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|
Amendment No. 11 |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) 828-2176
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:
_X_ 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
___ 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
CLASS A SHARES
---------------
PROSPECTUS DATED DECEMBER 29, 1999
---------------
U.S. TREASURY MONEY MARKET PORTFOLIO
U.S. TREASURY INCOME PORTFOLIO
GENERAL MONEY MARKET PORTFOLIO
TAX-EXEMPT MONEY MARKET PORTFOLIO
QUESTIONS?
Call 1-800-828-2176 or your
investment representative.
MANAGED BY INTEGRITY MANAGEMENT & RESEARCH, INC.
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> 3
THE VALIANT FUND CONTENTS
<TABLE>
<S> <C> <C> <C>
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
INCLUDES INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
Carefully review this 4 Overview
important section, which 5-7 U.S. Treasury Money Market Portfolio
summarizes each Portfolio's 8-10 U.S. Treasury Income Portfolio
investments, strategies, 11-13 General Money Market Portfolio
risks, past performance, and 14-16 Tax-Exempt Money Market Portfolio
fees. 17 Fees and Expenses
ADDITIONAL INFORMATION
20
FUND MANAGEMENT
Review this section for 21 The Investment Adviser
details on the people and 21 The Distributor
organizations who oversee 21 The Administrator
the Portfolios.
SHAREHOLDER INFORMATION
Review this section for 22 Pricing of Portfolios Shares
details on how shares are 23-24 Purchasing and Adding to Your Shares
valued, how to purchase and 24 Selling Your Shares
sell shares, related charges 25 General Policies on Selling Shares
and payments of dividends 25 Distribution and Service (12b-1) Fees
and distributions. 25-26 Dividends, Distributions and Taxes
FINANCIAL HIGHLIGHTS
27-30 Financial Highlights
</TABLE>
3
<PAGE> 4
[LOGO]
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
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 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 in its effort to 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.
The Portfolios:
- The U.S. Treasury Money Market Portfolio invests all of its assets in
securities issued or guaranteed by the United States Government or its
agencies, and repurchase agreements collateralized by such U.S. Government
Obligations.
- The U.S. Treasury Income Portfolio invests all of its assets in U.S.
Government Obligations which are backed by the full faith and credit of the
U.S. Government.
- The General Money Market Portfolio invests in U.S. dollar-denominated
short-term debt securities.
- The Tax-Exempt Money Market Portfolio invests in high-quality, short-term
municipal securities and in high-quality, long-term municipal securities
whose features give them interest rates, maturities and prices similar to
short-term instruments.
A few general risks:
- 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.
4
<PAGE> 5
[LOGO]
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
U.S. TREASURY MONEY MARKET PORTFOLIO
<TABLE>
<S> <C>
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 The Portfolio's principal investment strategies include:
STRATEGIES - Investing in 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
of 90 days or less.
- Investing in compliance with SEC rule 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.
Other 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.
</TABLE>
5
<PAGE> 6
[LOGO]
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
<TABLE>
<S> <C>
- 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
</TABLE>
6
<PAGE> 7
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
PERFORMANCE BAR CHART AND
TABLE
YEAR-BY-YEAR TOTAL RETURNS AS
OF 12/31
<TABLE>
<CAPTION>
<S> <C>
1995 5.83
1996 5.29
1997 5.37
1998 5.27
</TABLE>
Of course, past performance does not indicate
how the Portfolio will perform in the future.
Best quarter: 1.46% for the quarter ending
June 30, 1995
Worst quarter: 1.08% for the quarter ending
September 30, 1994
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ending December 31, 1998)
The chart and table on this
page are intended to give
you some indication of risk
of investing in the
Portfolio. They 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.
<TABLE>
<CAPTION>
SINCE INCEPTION
PAST YEAR (5/17/94)
<S> <C> <C>
U.S. TREASURY MONEY MARKET PORTFOLIO 5.27% 5.33%
</TABLE>
As of September 30, 1999 the 7-day yield was 4.92%. For current yield
information on the Portfolio, call 1-800-828-2176.
7
<PAGE> 8
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
U.S. TREASURY INCOME PORTFOLIO
<TABLE>
<S> <C>
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 The Portfolio's principal investment strategies include:
STRATEGIES - 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 SEC rule 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. Other 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.
</TABLE>
8
<PAGE> 9
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
<TABLE>
<S> <C>
- 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
</TABLE>
9
<PAGE> 10
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
PERFORMANCE BAR CHART AND
TABLE
PERIOD-BY-PERIOD RETURNS* AS
OF 12/31
<TABLE>
<CAPTION>
<S> <C>
1994 0.34
1995 0.49
1996 0.21
1997 0.53
1998 0.72
</TABLE>
Of course, past performance does not indicate
how the Portfolio will perform in the future.
Best quarter: 1st Q 1998 0.74%(1)
Worst quarter: 1st Q 1994 0.12%(2)
TOTAL RETURNS
(for the periods ending December 31, 1998)
The chart and table on this
page are intended to give
you some indication of risk
of investing in the
Portfolio. They show how
the U.S. Treasury Income
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.
<TABLE>
<CAPTION>
SINCE INCEPTION*
PAST YEAR* PAST 5 YEARS* (12/28/93)
<S> <C> <C> <C>
U.S. TREASURY INCOME PORTFOLIO 0.72% 0.46% 0.39%
</TABLE>
For the period January 1, 1999 through January 22, 1999 the total return was
0.40%*. Without expense limitations, the Portfolio's total return would have
been 0.38%. For current yield information on the Portfolio, call
1-800-828-2176.
- ---------------
(1) The Portfolio operated from January 1, 1998 to February 11, 1998.
(2) The Portfolio operated from January 1, 1994 to January 12, 1994.
* The Portfolio operates on an intermittent basis. The returns presented in
this Bar Chart and Table for the periods would be different if the
Portfolio operated on a continuous basis.
10
<PAGE> 11
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
GENERAL MONEY MARKET PORTFOLIO
<TABLE>
<S> <C>
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 The Portfolio's principal investment strategies include:
STRATEGIES - 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, affiliated bank
transactions, letters of credit, variable and floating
rate instruments, commercial paper and restricted
securities, as well as borrowing through reverse
repurchase agreements.
- Generally maintaining a dollar-weighted average maturity
of 90 days or less.
- Investing in compliance with SEC rule requirements for
money market funds for the quality, maturity and
diversification of investments.
Although the Portfolio does not actively invest in the
obligations of foreign issuers, an increase in the size of
the portfolio may provide an opportunity to implement this
investment strategy.
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.
Other 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.
</TABLE>
11
<PAGE> 12
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
<TABLE>
<S> <C>
- 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
</TABLE>
12
<PAGE> 13
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
PERFORMANCE BAR CHART AND
TABLE
YEAR-BY-YEAR TOTAL RETURNS AS
OF 12/31
<TABLE>
<CAPTION>
<S> <C>
1994 4.21
1995 5.95
1996 5.31
1997 5.50
1998 5.43
</TABLE>
Of course, past performance does not indicate
how the Portfolio will perform in the future.
Best quarter: 1.49% for the quarter ending
June 30, 1995
Worst quarter: 0.77% for the quarter ending
December 31, 1993
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ending December 31, 1998)
The chart and table on this
page are intended to give
you some indication of risk
of investing in the
Portfolio. They 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.
<TABLE>
<CAPTION>
SINCE INCEPTION
PAST YEAR PAST 5 YEARS (9/21/93)
<S> <C> <C> <C>
GENERAL MONEY MARKET PORTFOLIO 5.43% 5.30% 5.19%
</TABLE>
As of September 30, 1999 the 7-day yield was 5.13%. For current yield
information on the Portfolio, call 1-800-828-2176.
13
<PAGE> 14
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
TAX-EXEMPT MONEY MARKET PORTFOLIO
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES The Portfolio seeks primarily income exempt from federal
income tax.
PRINCIPAL The Portfolio's principal investment strategies include:
INVESTMENT STRATEGIES - Investing in municipal money market securities including
variable and floating rate instruments.
- Investing in compliance with SEC rule requirements for
money market funds for the quality, maturity and
diversification of investments.
- Municipal securities subject to restrictions on resale.
- Investing in repurchase agreements, forward commitments,
when-issued securities, letters of credit, and standby
commitments, and borrowing through reverse repurchase
agreements.
Under normal market conditions, the Portfolio will invest
100% of its investable assets in securities whose income is
exempt from federal income tax.
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 will not invest in Municipal Securities whose
interest is 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 The Fund is a "money market fund" that seeks to maintain a
INVESTMENT RISKS 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.
</TABLE>
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.
14
<PAGE> 15
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
<TABLE>
<S> <C>
Other 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
</TABLE>
15
<PAGE> 16
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
PERFORMANCE BAR CHART AND
TABLE
YEAR-BY-YEAR TOTAL RETURNS AS
OF 12/31
<TABLE>
<CAPTION>
<S> <C>
1994 2.78
1995 3.70
1996 3.33
1997 3.48
1998 3.27
</TABLE>
Of course, past performance does not indicate
how the Portfolio will perform in the future.
Best quarter: 0.97% for the quarter
ending June 30, 1995
Worst quarter: 0.52% for the quarter ending
March 31, 1994
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ending December 31, 1998)
The chart and table on this
page are intended to give
you some indication of risk
of investing in the
Portfolio. They 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.
<TABLE>
<CAPTION>
SINCE INCEPTION
PAST YEAR PAST 5 YEARS (10/7/93)
<S> <C> <C> <C>
TAX-EXEMPT MONEY MARKET PORTFOLIO 3.27% 3.31% 3.27%
</TABLE>
As of September 30, 1999 the 7-day yield was 3.43%. For current yield
information on the Portfolio, call 1-800-828-2176.
16
<PAGE> 17
logo
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
FEES AND EXPENSES
<TABLE>
U.S.
TREASURY U.S. TREASURY GENERAL TAX-EXEMPT
MONEY MARKET INCOME MONEY MARKET MONEY MARKET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
SHAREHOLDER FEES ------------ ------------- ------------ ------------
(FEES PAID DIRECTLY FROM YOUR CLASS CLASS CLASS CLASS
INVESTMENT) A A A A
<S> <C> <C> <C> <C>
<S> <C> <C> <C> <C>
Maximum sales charge (load) on
purchases None None None None
ANNUAL PORTFOLIO OPERATING
EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM PORTFOLIO ASSETS)
Management fees(1) .20% .20% .20% .20%
Distribution and Service
(12b-1) fees(2) .35% .35% .35% .35%
Other expenses(3) .01% .01% .01% .01%
Gross Annual Portfolio
operating expenses(3) .56% .56% .56% .56%
Fee Waivers(2,4) .36% .36% .36% .36%
Total Annual Portfolio
operating expenses .20% .20% .20% .20%
</TABLE>
(1) The Portfolios are contractually reimbursing
expenses which causes the actual Management
fee to be 0.19%.
(2) 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.
(3) Other expenses and Gross Annual Portfolio
operating expenses of the Portfolios are
estimated for the current fiscal year.
(4) The Portfolios' Adviser has contractually
agreed to reimburse Other expenses and waive
certain 12b-1 fees necessary to limit total
expenses to 0.20% for Class A shares until
August 31, 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:
- $10,000 investment
- 5% annual return
- redemption at the end of each period
- no changes in the Portfolio's operating expenses except in Year 1 when
the waiver is in effect
- reinvestment of dividends and distributions
Because this example is hypothetical and for comparison only, your actual
costs will be different.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
U.S. TREASURY MONEY MARKET PORTFOLIO $20 $143 $277 $667
U.S. TREASURY INCOME PORTFOLIO $20 $143 $277 $667
GENERAL MONEY MARKET PORTFOLIO $20 $143 $277 $667
TAX EXEMPT MONEY MARKET PORTFOLIO $20 $143 $277 $667
</TABLE>
If you buy and hold
Class A shares of the
Portfolios, you will
pay the following
fees and expenses.
Total Annual
Portfolio operating
expenses are paid out
of Portfolio assets,
and are reflected in
the Portfolio's
yield.
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RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
The principal strategies and risks of investing in each Portfolio are
described on the previous pages. The following elaborates on 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 rating agency (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 and illiquid securities 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.
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RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
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 Adviser, 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.
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ADDITIONAL INFORMATION
TEMPORARY DEFENSIVE POSITIONS
Each Portfolio may, from time to time, take temporary defensive positions
that are inconsistent with the Portfolio's principal investment strategy in
attempting to respond to adverse market, economic, political, or other
conditions. These positions may include cash (which will not earn any
income). 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 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 Portfolios invest 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 Portfolios' 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 Portfolios' 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 Portfolios' 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 Portfolios'
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.
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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 Adviser, 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 Adviser'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 Adviser. 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 Adviser was organized in Florida on September 24, 1992.
The Adviser has provided management oversight to the Portfolios since 1992.
It currently manages more than $1 billion in assets directly in the
Portfolios. Through the portfolio management team, the Sub-Adviser makes the
day-to-day investment decisions and continuously reviews, supervises and
administers the Portfolios' investment programs.
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.
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 0.19%(1)
U.S. TREASURY INCOME PORTFOLIO 0.19%(1)
GENERAL MONEY MARKET PORTFOLIO 0.19%(1)
TAX-EXEMPT MONEY MARKET PORTFOLIO 0.19%(1)
</TABLE>
(1) The Portfolio is contractually reimbursing expenses which causes the
actual Adviser fee to be 0.19%.
The Sub-Adviser is paid by the Adviser 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.
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 Portfolios' 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.
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SHAREHOLDER INFORMATION
<TABLE>
<S> <C>
PRICING OF PORTFOLIO SHARES
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 ("NYSE") and the Boston and the New York Federal
Reserve Banks are open. The NYSE is closed most national
holidays and Good Friday. 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.
</TABLE>
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
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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 charged by some institutions which establish accounts on behalf of their
customers.
<TABLE>
<S> <C> <C> <C>
MINIMUM MINIMUM
ACCOUNT TYPE INITIAL INVESTMENT* SUBSEQUENT
Regular $1,000,000 None
</TABLE>
<TABLE>
<S> <C>
*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 initiate 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 on your account application.
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.
----------------------
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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.
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.
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
within 10 days of the beginning
of the following month.
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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
Adviser 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 fiscal 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 Portfolio receives in the form of dividends is paid out, less
expenses, to its shareholders. Each Portfolio declares dividends from net
investment income on every business day. Dividends 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.
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SHAREHOLDER INFORMATION
DIVIDENDS, DISTRIBUTIONS AND TAXES -- CONTINUED
Dividends and distributions are treated in the same manner for federal income
tax purposes whether you receive them in cash or in additional shares.
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 Portfolios 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.
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.
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FINANCIAL HIGHLIGHTS
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
<TABLE>
<CAPTION>
For a share outstanding throughout each period.
YEAR ENDED
------------------------------------------------------
8/31/99 8/31/98 8/31/97 8/31/96 8/31/95
------- ------- ---------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.000 $1.000 $1.000 $1.000 $1.000
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.047 0.053 0.052 0.053 0.054
LESS DISTRIBUTIONS:
Dividends from net investment income (0.047) (0.053) (0.052) (0.053) (0.054)
NET ASSET VALUE, END OF PERIOD $1.000 $1.000 $1.000 $1.000 $1.000
Total Return (a) 4.77% 5.43% 5.30% 5.45% 5.60%
RATIOS/SUPPLEMENTAL DATA:
Net assets, End of Period (000's) $15,088 $31,185 $23,063 $85,260 $30,183
RATIOS TO AVERAGE NET ASSETS:
Net Investment Income 4.69% 5.27% 5.12% 5.21% 5.79%
Operating Expenses 0.20% 0.20% 0.20% 0.20% 0.20%
Operating Expenses Before
Reimbursements/Waivers 0.20% 0.20% 0.20% 0.20% 0.21%
</TABLE>
(a) Had the Investment Adviser and Trustees not reimbursed and waived certain
expenses, respectively, total returns would have been lower.
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FINANCIAL HIGHLIGHTS
U.S. TREASURY INCOME PORTFOLIO -- CLASS A
<TABLE>
<CAPTION>
For a share outstanding throughout each period.
PERIOD ENDED
--------------------------------------------------------------
8/31/99(1) 8/31/98(2) 8/31/97(3) 8/31/96(4) 8/31/95(5)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.000 $1.000 $1.000 $1.000 $1.000
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.004 0.007 0.005 0.004 0.004
LESS DISTRIBUTIONS:
Dividends from net investment income (0.004) (0.007) (0.005) (0.004) (0.004)
NET ASSET VALUE, END OF PERIOD $1.000 $1.000 $1.000 $1.000 $1.000
Total Return (a)(b) 0.40% 0.74% 0.54% 0.35% 0.39%
RATIOS/SUPPLEMENTAL DATA:
Net assets, End of Period (000's) $1 $25 $25 $25 $25
RATIOS TO AVERAGE NET ASSETS:
Net Investment Income 3.69% 4.83% 4.24% 4.15% 4.47%
Operating Expenses 0.20% 0.20% 0.20% 0.20% 0.20%
Operating Expenses Before
Reimbursements/Waivers 0.22% 0.23% 0.23% 0.35% 0.29%
</TABLE>
(1) The Portfolio operated from December 14, 1998 to January 22, 1999.
(2) The Portfolio operated from December 17, 1997 to February 11, 1998.
(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.
(a) Total returns for periods less than one year are not annualized.
(b) Had the Investment Adviser and Trustees not reimbursed and waived certain
expenses, respectively, total returns would have been lower.
28
<PAGE> 29
logo
FINANCIAL HIGHLIGHTS
GENERAL MONEY MARKET PORTFOLIO -- CLASS A
<TABLE>
<CAPTION>
For a share outstanding throughout each period.
PERIOD ENDED
----------------------------------------------------
8/31/99 8/31/98 8/31/97 8/31/96 8/31/95
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.000 $1.000 $1.000 $1.000 $1.000
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.049 0.054 0.053 0.053 0.056
LESS DISTRIBUTIONS:
Dividends from net investment income (0.049) (0.054) (0.053) (0.053) (0.056)
NET ASSET VALUE, END OF PERIOD $1.000 $1.000 $1.000 $1.000 $1.000
Total Return (a) 5.00% 5.54% 5.40% 5.52% 5.81%
RATIOS/SUPPLEMENTAL DATA:
Net assets, End of Period (000's) $254,808 $272,980 $568,715 $334,069 $375,965
RATIOS TO AVERAGE NET ASSETS:
Net Investment Income 4.91% 5.40% 5.33% 5.36% 5.70%
Operating Expenses 0.20% 0.20% 0.20% 0.20% 0.20%
Operating Expenses Before
Reimbursements/Waivers 0.20% 0.20% 0.20% 0.20% 0.20%
</TABLE>
(a) Had the Investment Adviser and Trustees not reimbursed and waived certain
expenses, respectively, total returns would have been lower.
29
<PAGE> 30
logo
FINANCIAL HIGHLIGHTS
TAX-EXEMPT MONEY MARKET PORTFOLIO -- CLASS A
<TABLE>
<CAPTION>
For a share outstanding throughout each period.
PERIOD ENDED
----------------------------------------------------
8/31/99 8/31/98 8/31/97 8/31/96 8/31/95
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.000 $1.000 $1.000 $1.000 $1.000
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.030 0.034 0.034 0.034 0.035
LESS DISTRIBUTIONS:
Dividends from net investment income (0.030) (0.034) (0.034) (0.034) (0.035)
NET ASSET VALUE, END OF PERIOD $1.000 $1.000 $1.000 $1.000 $1.000
Total Return (a) 3.01% 3.41% 3.42% 3.43% 3.67%
RATIOS/SUPPLEMENTAL DATA:
Net assets, End of Period (000's) $288,343 $268,657 $282,368 $279,867 $283,654
RATIOS TO AVERAGE NET ASSETS:
Net Investment Income 2.96%(b) 3.35% 3.38% 3.34% 3.50%
Operating Expenses 0.20%(b) 0.20% 0.20% 0.20% 0.20%
Operating Expenses Before
Reimbursements/Waivers 0.20%(b) 0.20% 0.20% 0.20% 0.20%
</TABLE>
(a) Had the Investment Adviser and Trustees not reimbursed and waived certain
expenses, respectively, total returns would have been lower.
(b) Annualized.
30
<PAGE> 31
FOR MORE INFORMATION
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 Portfolio's performance during its last fiscal
year.
STATEMENT OF ADDITIONAL INFORMATION (SAI):
The SAI provides more detailed information about the Portfolios, 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 Portfolios' reports and SAIs at the Public Reference
Room of the Securities and Exchange Commission. You can get text-only copies:
- - For a fee by:
- electronic mail request at [email protected]
- writing the Public Reference Section of the Commission, Washington, D.C.
20549-6009
- calling 1-202-942-8090.
- - Free from the Edgar database on the Commission's Website at
http://www.sec.gov.
Investment Company Act file no. 811-7582.
<PAGE> 32
THE VALIANT FUND
CLASS B SHARES
---------------
PROSPECTUS DATED DECEMBER 29, 1999
---------------
U.S. TREASURY MONEY MARKET PORTFOLIO
U.S. TREASURY INCOME PORTFOLIO
GENERAL MONEY MARKET PORTFOLIO
TAX-EXEMPT MONEY MARKET PORTFOLIO
QUESTIONS?
Call 1-800-828-2176 or your
investment representative.
MANAGED BY INTEGRITY MANAGEMENT & RESEARCH, INC.
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> 33
THE VALIANT FUND CONTENTS
<TABLE>
<S> <C> <C> <C>
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
INCLUDES INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
[LOGO]
Carefully review this 4 Overview
important section, which 5-7 U.S. Treasury Money Market Portfolio
summarizes each Portfolio's 8-9 U.S. Treasury Income Portfolio
investments, strategies, 10-12 General Money Market Portfolio
risks, past performance, and 13-14 Tax-Exempt Money Market Portfolio
fees. 15 Fees and Expenses
ADDITIONAL INFORMATION
[LOGO]
18
FUND MANAGEMENT
[LOGO]
Review this section for 19 The Investment Adviser
details on the people and 19 The Distributor
organizations who oversee 19 The Administrator
the Portfolios.
SHAREHOLDER INFORMATION
[LOGO]
Review this section for 20 Pricing of Portfolios Shares
details on how shares are 21-22 Purchasing and Adding to Your Shares
valued, how to purchase and 22 Selling Your Shares
sell shares, related charges 23 General Policies on Selling Shares
and payments of dividends 23 Distribution and Service (12b-1) Fees
and distributions. 23-24 Dividends, Distributions and Taxes
FINANCIAL HIGHLIGHTS
[LOGO]
25-26 Financial Highlights
</TABLE>
3
<PAGE> 34
[LOGO]
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
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 in its effort to 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.
The Portfolios:
- The U.S. Treasury Money Market Portfolio invests all of its assets in
securities issued or guaranteed by the United States Government or its
agencies, and repurchase agreements collateralized by such U.S. Government
Obligations.
- The U.S. Treasury Income Portfolio invests all of its assets in U.S.
Government Obligations which are backed by the full faith and credit of the
U.S. Government.
- The General Money Market Portfolio invests in U.S. dollar-denominated
short-term debt securities.
- The Tax-Exempt Money Market Portfolio invests in high-quality, short-term
municipal securities and in high-quality, long-term municipal securities
whose features give them interest rates, maturities and prices similar to
short-term instruments.
A few general risks:
- 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.
4
<PAGE> 35
[LOGO]
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
U.S. TREASURY MONEY MARKET PORTFOLIO
<TABLE>
<S> <C>
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 The Portfolio's principal investment strategies include:
STRATEGIES - Investing in 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
of 90 days or less.
- Investing in compliance with SEC rule 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.
Other 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.
</TABLE>
5
<PAGE> 36
[LOGO]
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
<TABLE>
<S> <C>
- 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
</TABLE>
6
<PAGE> 37
[LOGO]
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
PERFORMANCE BAR CHART AND TABLE YEAR-BY-YEAR
TOTAL RETURNS AS OF 12/31
<TABLE>
<CAPTION>
<S> <C>
1995 5.56
1996 5.02
1997 5.11
1998 5.01
</TABLE>
Of course, past performance does not indicate
how the Portfolio will perform in the future.
The chart and table on this
page are intended to give
you some indication of risk
of investing in the
Portfolio. They 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.
Best quarter: 1.40% for the quarter ending
June 30, 1995
Worst quarter: 1.01% for the quarter ending
September 30, 1994
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ending December 31, 1998)
<TABLE>
<CAPTION>
SINCE INCEPTION
PAST YEAR (5/17/94)
<S> <C> <C>
U.S. TREASURY MONEY MARKET PORTFOLIO 5.01% 5.07%
</TABLE>
As of September 30, 1999 the 7-day yield was 4.67%. For current yield
information on the Portfolio, call 1-800-828-2176.
7
<PAGE> 38
[LOGO]
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
U.S. TREASURY INCOME PORTFOLIO
<TABLE>
<S> <C>
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 The Portfolio's principal investment strategies include:
STRATEGIES - 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 SEC rule 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. Other 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.
</TABLE>
8
<PAGE> 39
[LOGO]
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
<TABLE>
<S> <C>
- 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
</TABLE>
9
<PAGE> 40
[LOGO]
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
GENERAL MONEY MARKET PORTFOLIO
<TABLE>
<S> <C>
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 The Portfolio's principal investment strategies include:
STRATEGIES - 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, affiliated bank transactions, letters
of credit, variable and floating rate instruments, commercial paper and
restricted securities, as well as borrowing through reverse repurchase
agreements.
- Generally maintaining a dollar-weighted average maturity of 90 days or
less.
- Investing in compliance with SEC rule requirements for money market funds
for the quality, maturity and diversification of investments.
Although the Portfolio does not actively invest in the obligations of
foreign issuers, an increase in the size of the portfolio may provide an
opportunity to implement this investment strategy.
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.
Other 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.
</TABLE>
10
<PAGE> 41
[LOGO]
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
<TABLE>
<S> <C>
- 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
</TABLE>
11
<PAGE> 42
[LOGO]
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
PERFORMANCE BAR CHART AND
TABLE
YEAR-BY-YEAR TOTAL RETURNS AS
OF 12/31
<TABLE>
<CAPTION>
<S> <C>
1995 5.69
1996 5.09
1997 5.24
1998 5.17
</TABLE>
Of course, past performance does not indicate
how the Portfolio will perform in the future.
Best quarter: 1.43% for the quarter ending
June 30, 1995
Worst quarter: 1.08% for the quarter ending
September 30, 1994
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ending December 31, 1998)
The chart and table on this
page are intended to give
you some indication of risk
of investing in the
Portfolio. They 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.
<TABLE>
<CAPTION>
SINCE INCEPTION
PAST YEAR (5/17/94)
<S> <C> <C>
GENERAL MONEY MARKET PORTFOLIO 5.17% 5.15%
</TABLE>
As of September 30, 1999 the 7-day yield was 4.88%. For current yield
information on the Portfolio, call 1-800-828-2176.
12
<PAGE> 43
[LOGO]
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
TAX-EXEMPT MONEY MARKET PORTFOLIO
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES The Portfolio seeks primarily income exempt from federal income tax.
PRINCIPAL The Portfolio's principal investment strategies include:
INVESTMENT STRATEGIES - Investing in municipal money market securities including variable and
floating rate instruments.
- Investing in compliance with SEC rule requirements for money market funds
for the quality, maturity and diversification of investments.
- Municipal securities subject to restrictions on resale.
- Investing in repurchase agreements, forward commitments, when-issued
securities, letters of credit, and standby commitments, and borrowing
through reverse repurchase agreements.
Under normal market conditions, the Portfolio will invest 100% of its
investable assets in securities whose income is exempt from federal income
tax.
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 will not invest in Municipal Securities whose interest is
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 The Fund is a "money market fund" that seeks to maintain a stable net asset
INVESTMENT RISKS 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.
</TABLE>
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.
13
<PAGE> 44
[LOGO]
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
<TABLE>
<S> <C>
Other 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 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
</TABLE>
14
<PAGE> 45
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
FEES AND EXPENSES
<TABLE>
U.S.
TREASURY U.S. TREASURY GENERAL TAX-EXEMPT
MONEY MARKET INCOME MONEY MARKET MONEY MARKET
PORTFOLIO PORTFOLIO(1) PORTFOLIO PORTFOLIO(1)
SHAREHOLDER FEES ------------ ------------- ------------ ------------
(FEES PAID DIRECTLY FROM YOUR CLASS CLASS CLASS CLASS
INVESTMENT) B B B B
<S> <C> <C> <C> <C>
<S> <C> <C> <C> <C>
Maximum sales charge (load) on
purchases None None None None
ANNUAL PORTFOLIO OPERATING
EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM PORTFOLIO ASSETS)
Management fees(2) .20% .20% .20% .20%
Distribution and Service
(12b-1) fees(3) .35% .35% .35% .35%
Other expenses(4) .01% .01% .01% .01%
Gross Annual Portfolio
operating expenses(4) .56% .56% .56% .56%
Fee Waivers(3,5) .11% .11% .11% .11%
Total Annual Portfolio
operating expenses 45% 45% 45% 45%
</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 Portfolios are contractually reimbursing
expenses which causes the actual Management
fee to be 0.19%.
(3) 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.
(4) Other expenses and Gross Annual Portfolio
operating expenses of the Portfolios are
estimated for the current fiscal year.
(5) The Portfolios' Adviser has contractually
agreed to reimburse Other expenses and waive
certain 12b-1 fees necessary to limit total
expenses to 0.45% for Class B shares until
August 31, 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:
- $10,000 investment
- 5% annual return
- redemption at the end of each period
- no changes in the Portfolio's operating expenses except in Year 1 when
the waiver is in effect
- reinvestment of dividends and distributions
Because this example is hypothetical and for comparison only, your actual
costs will be different.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
U.S. TREASURY MONEY MARKET PORTFOLIO $46 $168 $302 $691
U.S. TREASURY INCOME PORTFOLIO $46 $168 $302 $691
GENERAL MONEY MARKET PORTFOLIO $46 $168 $302 $691
TAX EXEMPT MONEY MARKET PORTFOLIO $46 $168 $302 $691
</TABLE>
If you buy and hold
Class B shares of the
Portfolios, you will
pay the following
fees and expenses.
Total Annual
Portfolio operating
expenses are paid out
of Portfolio assets,
and are reflected in
the Portfolio's
yield.
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RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
The principal strategies and risks of investing in each Portfolio are
described on the previous pages. The following elaborates on 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 rating agency (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 and illiquid securities 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.
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RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
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 Adviser, 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.
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ADDITIONAL INFORMATION
TEMPORARY DEFENSIVE POSITIONS
Each Portfolio may, from time to time, take temporary defensive positions
that are inconsistent with the Portfolio's principal investment strategy in
attempting to respond to adverse market, economic, political, or other
conditions. These positions may include cash (which will not earn any
income). 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 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 Portfolios invest 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 Portfolios' 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 Portfolios' 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 Portfolios' 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 Portfolios'
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.
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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 Adviser, 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 Adviser'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 Adviser. 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 Adviser was organized in Florida on September 24, 1992.
The Adviser has provided management oversight to the Portfolios since 1992.
It currently manages more than $1 billion in assets directly in the
Portfolios. Through the portfolio management team, the Sub-Adviser makes the
day-to-day investment decisions and continuously reviews, supervises and
administers the Portfolios' investment programs.
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.
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 0.19(1)
U.S. TREASURY INCOME PORTFOLIO 0.19(1)
GENERAL MONEY MARKET PORTFOLIO 0.19(1)
TAX-EXEMPT MONEY MARKET PORTFOLIO 0.19(1)
</TABLE>
(1) The Portfolios are contractually reimbursing expenses which causes the
actual Adviser fee to be 0.19%.
The Sub-Adviser is paid by the Adviser 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.
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 Portfolios' 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> 50
logo
SHAREHOLDER INFORMATION
<TABLE>
<S> <C>
PRICING OF PORTFOLIO SHARES
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 ("NYSE") and the Boston and the New York Federal
Reserve Banks are open. The NYSE is closed most national
holidays and Good Friday. 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.
</TABLE>
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
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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 charged by some institutions which establish accounts on behalf of their
customers.
<TABLE>
<S> <C> <C> <C>
MINIMUM MINIMUM
ACCOUNT TYPE INITIAL INVESTMENT* SUBSEQUENT
Regular $1,000,000 None
</TABLE>
<TABLE>
<S> <C>
*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 initiate 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 on your account application.
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.
----------------------
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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.
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.
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
within 10 days of the beginning
of the following month.
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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
Adviser 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 Portfolio receives in the form of dividends is paid out, less
expenses, to its shareholders. Each Portfolio declares dividends from net
investment income on every business day. Dividends 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.
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SHAREHOLDER INFORMATION
DIVIDENDS, DISTRIBUTIONS AND TAXES -- CONTINUED
Dividends and distributions are treated in the same manner for federal income
tax purposes whether you receive them in cash or in additional shares.
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 Portfolios 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.
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.
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FINANCIAL HIGHLIGHTS
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
<TABLE>
<CAPTION>
For a share outstanding throughout each period.
YEAR ENDED
----------------------------------------------------
8/31/99 8/31/98 8/31/97 8/31/96 8/31/95
------- -------- ---------- -------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.000 $1.000 $1.000 $1.000 $1.000
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.044 0.051 0.049 0.050 0.052
LESS DISTRIBUTIONS:
Dividends from net investment income (0.044) (0.051) (0.049) (0.050) (0.052)
NET ASSET VALUE, END OF PERIOD $1.000 $1.000 $1.000 $1.000 $1.000
Total Return (a) 4.51% 5.17% 5.04% 5.18% 5.34%
RATIOS/SUPPLEMENTAL DATA:
Net assets, End of Period (000's) $64,226 $326,675 $300,437 $126,327 $76,114
RATIOS TO AVERAGE NET ASSETS:
Net Investment Income 4.42% 5.05% 4.93% 5.01% 5.41%
Operating Expenses 0.45% 0.45% 0.45% 0.45% 0.45%
Operating Expenses Before
Reimbursements/Waivers 0.45% 0.45% 0.45% 0.45% 0.46%
</TABLE>
(a) Had the Investment Adviser and Trustees not reimbursed and waived certain
expenses, respectively, total returns would have been lower.
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FINANCIAL HIGHLIGHTS
GENERAL MONEY MARKET PORTFOLIO -- CLASS B
<TABLE>
<CAPTION>
For a share outstanding throughout each period.
PERIOD ENDED
---------------------------------------------------------
8/31/99 8/31/98 8/31/97 8/31/96 8/31/95
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.000 $1.000 $1.000 $1.000 $1.000
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.046 0.052 0.050 0.051 0.053
LESS DISTRIBUTIONS:
Dividends from net investment income (0.046) (0.052) (0.050) (0.051) (0.053)
NET ASSET VALUE, END OF PERIOD $1.000 $1.000 $1.000 $1.000 $1.000
Total Return (a) 4.74% 5.28% 5.14% 5.26% 5.54%
RATIOS/SUPPLEMENTAL DATA:
Net assets, End of Period (000's) $1,569 $17,602 $9,155 $8,734 $9,461
RATIOS TO AVERAGE NET ASSETS:
Net Investment Income 4.72% 5.16% 5.02% 5.11% 5.33%
Operating Expenses 0.45% 0.45% 0.45% 0.45% 0.45%
Operating Expenses Before
Reimbursements/Waivers 0.45% 0.45% 0.45% 0.45% 0.45%
</TABLE>
(a) Had the Investment Adviser and Trustees not reimbursed and waived certain
expenses, respectively, total returns would have been lower.
26
<PAGE> 57
FOR MORE INFORMATION
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 Portfolio's performance during its last fiscal
year.
STATEMENT OF ADDITIONAL INFORMATION (SAI):
The SAI provides more detailed information about the Portfolios, 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 Portfolios' reports and SAIs at the Public Reference
Room of the Securities and Exchange Commission. You can get text-only copies:
- - For a fee by:
- electronic mail request at [email protected]
- writing the Public Reference Section of the Commission, Washington, D.C.
20549-6009
- calling 1-202-942-8090.
- - Free from the Edgar database on the Commission's Website at
http://www.sec.gov.
Investment Company Act file no. 811-7582.
<PAGE> 58
THE VALIANT FUND
CLASS C SHARES
---------------
PROSPECTUS DATED DECEMBER 29, 1999
---------------
U.S. TREASURY MONEY MARKET PORTFOLIO
U.S. TREASURY INCOME PORTFOLIO
GENERAL MONEY MARKET PORTFOLIO
TAX-EXEMPT MONEY MARKET PORTFOLIO
QUESTIONS?
Call 1-800-828-2176 or your
investment representative.
MANAGED BY INTEGRITY MANAGEMENT & RESEARCH, INC.
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> 59
THE VALIANT FUND CONTENTS
<TABLE>
<S> <C> <C> <C>
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
INCLUDES INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
Carefully review this 4 Overview
important section, which 5-6 U.S. Treasury Money Market Portfolio
summarizes each Portfolio's 7-8 U.S. Treasury Income Portfolio
investments, strategies, 9-10 General Money Market Portfolio
risks, past performance, and 11-12 Tax-Exempt Money Market Portfolio
fees. 13 Fees and Expenses
ADDITIONAL INFORMATION
16
FUND MANAGEMENT
Review this section for 17 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 Financial Highlights
</TABLE>
3
<PAGE> 60
[LOGO]
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
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 in its effort to 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.
The Portfolios:
- The U.S. Treasury Money Market Portfolio invests all of its assets in
securities issued or guaranteed by the United States Government or its
agencies, and repurchase agreements collateralized by such U.S. Government
Obligations.
- The U.S. Treasury Income Portfolio invests all of its assets in U.S.
Government Obligations which are backed by the full faith and credit of the
U.S. Government.
- The General Money Market Portfolio invests in U.S. dollar-denominated
short-term debt securities.
- The Tax-Exempt Money Market Portfolio invests in high-quality, short-term
municipal securities and in high-quality, long-term municipal securities
whose features give them interest rates, maturities and prices similar to
short-term instruments.
A few general risks:
- 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.
4
<PAGE> 61
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RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
U.S. TREASURY MONEY MARKET PORTFOLIO
<TABLE>
<S> <C>
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 The Portfolio's principal investment strategies include:
STRATEGIES - Investing in 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
of 90 days or less.
- Investing in compliance with SEC rule 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.
Other 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.
</TABLE>
5
<PAGE> 62
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RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
<TABLE>
<S> <C>
- 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
</TABLE>
6
<PAGE> 63
[LOGO]
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
U.S. TREASURY INCOME PORTFOLIO
<TABLE>
<S> <C>
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 The Portfolio's principal investment strategies include:
STRATEGIES - 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 SEC rule 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. Other 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.
</TABLE>
7
<PAGE> 64
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RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
<TABLE>
<S> <C>
- 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
</TABLE>
8
<PAGE> 65
[LOGO]
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
GENERAL MONEY MARKET PORTFOLIO
<TABLE>
<S> <C>
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 The Portfolio's principal investment strategies include:
STRATEGIES - 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, affiliated bank
transactions, letters of credit, variable and floating
rate instruments, commercial paper and restricted
securities, as well as borrowing through reverse
repurchase agreements.
- Generally maintaining a dollar-weighted average maturity
of 90 days or less.
- Investing in compliance with SEC rule requirements for
money market funds for the quality, maturity and
diversification of investments.
Although the Portfolio does not actively invest in the
obligations of foreign issuers, an increase in the size of
the portfolio may provide an opportunity to implement this
investment strategy.
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.
Other 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.
</TABLE>
9
<PAGE> 66
[LOGO]
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
<TABLE>
<S> <C>
- 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
</TABLE>
10
<PAGE> 67
[LOGO]
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
TAX-EXEMPT MONEY MARKET PORTFOLIO
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES The Portfolio seeks primarily income exempt from federal
income tax.
PRINCIPAL The Portfolio's principal investment strategies include:
INVESTMENT STRATEGIES - Investing in municipal money market securities including
variable and floating rate instruments.
- Investing in compliance with SEC rule requirements for
money market funds for the quality, maturity and
diversification of investments.
- Municipal securities subject to restrictions on resale.
- Investing in repurchase agreements, forward commitments,
when-issued securities, letters of credit, and standby
commitments, and borrowing through reverse repurchase
agreements.
Under normal market conditions, the Portfolio will invest
100% of its investable assets in securities whose income is
exempt from federal income tax.
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 will not invest in Municipal Securities whose
interest is 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 The Fund is a "money market fund" that seeks to maintain a
INVESTMENT RISKS 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.
</TABLE>
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.
11
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RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
<TABLE>
<S> <C>
Other 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
</TABLE>
12
<PAGE> 69
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RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
FEES AND EXPENSES
<TABLE>
U.S.
TREASURY U.S. TREASURY GENERAL TAX-EXEMPT
MONEY MARKET INCOME MONEY MARKET MONEY MARKET
PORTFOLIO(1) PORTFOLIO(1) PORTFOLIO(1) PORTFOLIO(1)
SHAREHOLDER FEES ------------ ------------- ------------ ------------
(FEES PAID DIRECTLY FROM YOUR CLASS CLASS CLASS CLASS
INVESTMENT) C C C C
<S> <C> <C> <C> <C>
<S> <C> <C> <C> <C>
Maximum sales charge (load) on
purchases None None None None
ANNUAL PORTFOLIO OPERATING
EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM PORTFOLIO ASSETS)
Management fees(2) .20% .20% .20% .20%
Distribution and Service
(12b-1) fees(3) .40% .40% .40% .40%
Other expenses(4) .03% .03% .03% .03%
Gross Annual Portfolio
operating expenses(4) .63% .63% .63% .63%
Fee Waivers(3,5) .33% .33% .33% .33%
Total Annual Portfolio
operating expenses .30% .30% .30% .30%
</TABLE>
(1) As of the date of this Prospectus, the Class
C shares of each of the Portfolios have not
commenced operations.
(2) The Portfolios are contractually reimbursing
expenses which causes the actual Management
fee to be 0.17%.
(3) The Trust has adopted a Distribution and
Shareholder Servicing Plan (the "Plan") for
the Class C shares. Payments allowed under
the Plan for Class C shares are 0.40% yet are
authorized and paid at the rate of 0.10% of
the average daily net assets of Class C
shares.
(4) Other expenses and Gross Annual Portfolio
operating expenses of the Portfolios are
estimated for the current fiscal year.
(5) The Portfolios' Adviser has contractually
agreed to reimburse Other expenses and waive
certain 12b-1 fees necessary to limit total
expenses to 0.30% for Class C shares until
August 31, 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:
- $10,000 investment
- 5% annual return
- redemption at the end of each period
- no changes in the Portfolio's operating expenses except in Year 1 when
the waiver is in effect
- reinvestment of dividends and distributions
Because this example is hypothetical and for comparison only, your actual
costs will be different.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
U.S. TREASURY MONEY MARKET PORTFOLIO $31 $168 $319 $755
U.S. TREASURY INCOME PORTFOLIO $31 $168 $319 $755
GENERAL MONEY MARKET PORTFOLIO $31 $168 $319 $755
TAX EXEMPT MONEY MARKET PORTFOLIO $31 $168 $319 $755
</TABLE>
If you buy and hold
Class C shares of the
Portfolios, you will
pay the following
fees and expenses.
Total Annual
Portfolio operating
expenses are paid out
of Portfolio assets,
and are reflected in
the Portfolio's
yield.
13
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RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
The principal strategies and risks of investing in each Portfolio are
described on the previous pages. The following elaborates on 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 rating agency (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 and illiquid securities 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.
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RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
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 Adviser, 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.
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ADDITIONAL INFORMATION
TEMPORARY DEFENSIVE POSITIONS
Each Portfolio may, from time to time, take temporary defensive positions
that are inconsistent with the Portfolio's principal investment strategy in
attempting to respond to adverse market, economic, political, or other
conditions. These positions may include cash (which will not earn any
income). 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 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 Portfolios invest 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 Portfolios' 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 Portfolios' 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 Portfolios' 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 Portfolios'
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.
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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 Adviser, 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 Adviser'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 Adviser. 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 Adviser was organized in Florida on September 24, 1992.
The Adviser has provided management oversight to the Portfolios since 1992.
It currently manages more than $1 billion in assets directly in the
Portfolios. Through the portfolio management team, the Sub-Adviser makes the
day-to-day investment decisions and continuously reviews, supervises and
administers the Portfolios' investment programs.
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.
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 0.17%(1)
U.S. TREASURY INCOME PORTFOLIO 0.17%(1)
GENERAL MONEY MARKET PORTFOLIO 0.17%(1)
TAX-EXEMPT MONEY MARKET PORTFOLIO 0.17%(1)
</TABLE>
(1) The Portfolios are contractually reimbursing expenses which causes the
actual Adviser fee to be 0.17%.
The Sub-Adviser is paid by the Adviser 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.
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 Portfolios' 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.
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SHAREHOLDER INFORMATION
<TABLE>
<S> <C>
PRICING OF PORTFOLIO SHARES
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 ("NYSE") and the Boston and the New York Federal
Reserve Banks are open. The NYSE is closed most national
holidays and Good Friday. 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.
</TABLE>
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
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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 charged by some institutions which establish accounts on behalf of their
customers.
<TABLE>
<S> <C> <C> <C>
MINIMUM MINIMUM
ACCOUNT TYPE INITIAL INVESTMENT* SUBSEQUENT
Regular $1,000,000 None
</TABLE>
<TABLE>
<S> <C>
*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 initiate 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 on your account application.
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.
----------------------
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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.
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.
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
within 10 days of the beginning
of the following month.
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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
Adviser 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 0.40% 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. Payments under the Plan have been authorized at the rate of 0.10%
of the average daily net assets of Class C 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 Portfolio receives in the form of dividends is paid out, less
expenses, to its shareholders. Each Portfolio declares dividends from net
investment income on every business day. Dividends 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.
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<PAGE> 78
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SHAREHOLDER INFORMATION
DIVIDENDS, DISTRIBUTIONS AND TAXES -- CONTINUED
Dividends and distributions are treated in the same manner for federal income
tax purposes whether you receive them in cash or in additional shares.
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 Portfolios 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.
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
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FINANCIAL HIGHLIGHTS
FINANCIAL HIGHLIGHTS
As of the date of this Prospectus, the Class C shares of each of the
Portfolios have not commenced operations.
23
<PAGE> 80
FOR MORE INFORMATION
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 Portfolio's performance during its last fiscal
year.
STATEMENT OF ADDITIONAL INFORMATION (SAI):
The SAI provides more detailed information about the Portfolios, 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 Portfolios' reports and SAIs at the Public Reference
Room of the Securities and Exchange Commission. You can get text-only copies:
- - For a fee by:
- electronic mail request at [email protected]
- writing the Public Reference Section of the Commission, Washington, D.C.
20549-6009
- calling 1-202-942-8090.
- - Free from the Edgar database on the Commission's Website at
http://www.sec.gov.
Investment Company Act file no. 811-7582.
<PAGE> 81
THE VALIANT FUND
CLASS D SHARES
---------------
PROSPECTUS DATED DECEMBER 29, 1999
---------------
U.S. TREASURY MONEY MARKET PORTFOLIO
U.S. TREASURY INCOME PORTFOLIO
GENERAL MONEY MARKET PORTFOLIO
TAX-EXEMPT MONEY MARKET PORTFOLIO
QUESTIONS?
Call 1-800-828-2176 or your
investment representative.
MANAGED BY INTEGRITY MANAGEMENT & RESEARCH, INC.
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> 82
THE VALIANT FUND CONTENTS
<TABLE>
<S> <C> <C> <C>
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
INCLUDES INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
[LOGO]
Carefully review this 4 Overview
important section, which 5-7 U.S. Treasury Money Market Portfolio
summarizes each Portfolio's 8-9 U.S. Treasury Income Portfolio
investments, strategies, 10-11 General Money Market Portfolio
risks, past performance, and 12-13 Tax-Exempt Money Market Portfolio
fees. 14 Fees and Expenses
ADDITIONAL INFORMATION
[LOGO]
17
FUND MANAGEMENT
[LOGO]
Review this section for 18 The Investment Adviser
details on the people and 18 The Distributor
organizations who oversee 18 The Administrator
the Portfolios.
SHAREHOLDER INFORMATION
[LOGO]
Review this section for 19 Pricing of Portfolios Shares
details on how shares are 20-21 Purchasing and Adding to Your Shares
valued, how to purchase and 21 Selling Your Shares
sell shares, related charges 22 General Policies on Selling Shares
and payments of dividends 22 Distribution and Service (12b-1) Fees
and distributions. 22-23 Dividends, Distributions and Taxes
FINANCIAL HIGHLIGHTS
[LOGO]
24 Financial Highlights
</TABLE>
3
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RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
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 in its effort to 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.
The Portfolios:
- The U.S. Treasury Money Market Portfolio invests all of its assets in
securities issued or guaranteed by the United States Government or its
agencies, and repurchase agreements collateralized by such U.S. Government
Obligations.
- The U.S. Treasury Income Portfolio invests all of its assets in U.S.
Government Obligations which are backed by the full faith and credit of the
U.S. Government.
- The General Money Market Portfolio invests in U.S. dollar-denominated
short-term debt securities.
- The Tax-Exempt Money Market Portfolio invests in high-quality, short-term
municipal securities and in high-quality, long-term municipal securities
whose features give them interest rates, maturities and prices similar to
short-term instruments.
A few general risks:
- 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.
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RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
U.S. TREASURY MONEY MARKET PORTFOLIO
<TABLE>
<S> <C>
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 The Portfolio's principal investment strategies include:
STRATEGIES - Investing in 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 of 90 days or
less.
- Investing in compliance with SEC rule 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.
Other 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.
</TABLE>
5
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RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
<TABLE>
<S> <C>
- 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
</TABLE>
6
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RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
PERFORMANCE BAR CHART AND
TABLE
YEAR-BY-YEAR TOTAL RETURNS AS
OF 12/31
<TABLE>
<CAPTION>
<S> <C>
1997 4.85
1998 4.75
</TABLE>
Of course, past performance does not indicate
how the Portfolio will perform in the future.
Best quarter: 1.22% for the quarter ending
September 30, 1997
Worst quarter: 1.07% for the quarter ending
December 31, 1998
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ending December 31, 1998)
The chart and table on this
page are intended to give
you some indication of risk
of investing in the
Portfolio. They 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.
<TABLE>
<CAPTION>
SINCE INCEPTION
PAST YEAR (5/1/96)
<S> <C> <C>
U.S. TREASURY MONEY MARKET PORTFOLIO 4.75% 4.78%
</TABLE>
As of September 30, 1999 the 7-day yield was 4.92%. For current yield
information on the Portfolio, call 1-800-828-2176.
7
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RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
U.S. TREASURY INCOME PORTFOLIO
<TABLE>
<S> <C>
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 The Portfolio's principal investment strategies include:
STRATEGIES - 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 SEC rule 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. Other 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.
</TABLE>
8
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RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
<TABLE>
<S> <C>
- 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
</TABLE>
9
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RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
GENERAL MONEY MARKET PORTFOLIO
<TABLE>
<S> <C>
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 The Portfolio's principal investment strategies include:
STRATEGIES - 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, affiliated bank transactions, letters
of credit, variable and floating rate instruments, commercial paper and
restricted securities, as well as borrowing through reverse repurchase
agreements.
- Generally maintaining a dollar-weighted average maturity of 90 days or
less.
- Investing in compliance with SEC rule requirements for money market funds
for the quality, maturity and diversification of investments.
Although the Portfolio does not actively invest in the obligations of
foreign issuers, an increase in the size of the portfolio may provide an
opportunity to implement this investment strategy.
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.
Other 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.
</TABLE>
10
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RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
<TABLE>
<S> <C>
- 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
</TABLE>
11
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RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
TAX-EXEMPT MONEY MARKET PORTFOLIO
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES The Portfolio seeks primarily income exempt from federal income tax.
PRINCIPAL The Portfolio's principal investment strategies include:
INVESTMENT STRATEGIES - Investing in municipal money market securities including variable and
floating rate instruments.
- Investing in compliance with SEC rule requirements for money market funds
for the quality, maturity and diversification of investments.
- Municipal securities subject to restrictions on resale.
- Investing in repurchase agreements, forward commitments, when-issued
securities, letters of credit, and standby commitments, and borrowing
through reverse repurchase agreements.
Under normal market conditions, the Portfolio will invest 100% of its
investable assets in securities whose income is exempt from federal income
tax.
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 will not invest in Municipal Securities whose interest is
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 The Fund is a "money market fund" that seeks to maintain a stable net asset
INVESTMENT RISKS 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.
</TABLE>
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.
12
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RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
<TABLE>
<S> <C>
Other 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
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
</TABLE>
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RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
FEES AND EXPENSES
<TABLE>
U.S.
TREASURY U.S. TREASURY GENERAL TAX-EXEMPT
MONEY MARKET INCOME MONEY MARKET MONEY MARKET
PORTFOLIO(1) PORTFOLIO(1) PORTFOLIO(1) PORTFOLIO(1)
SHAREHOLDER FEES ------------ ------------- ------------ ------------
(FEES PAID DIRECTLY FROM YOUR CLASS CLASS CLASS CLASS
INVESTMENT) D D D D
<S> <C> <C> <C> <C>
<S> <C> <C> <C> <C>
Maximum sales charge (load) on
purchases None None None None
ANNUAL PORTFOLIO OPERATING
EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM PORTFOLIO ASSETS)
Management fees(2) .20% .20% .20% .20%
Distribution and Service
(12b-1) fees(3) .50% .50% .50% .50%
Other expenses(4) .01% .01% .01% .01%
Gross Annual Portfolio
operating expenses(4) .71% .71% .71% .71%
Fee Waivers(5) .01% .01% .01% .01%
Total Annual Portfolio
operating expenses .70% .70% .70% .70%
</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 Portfolios are contractually reimbursing
expenses which causes the actual Management
fee to be 0.19%.
(3) The Trust has adopted a Distribution and
Shareholder Servicing Plan (the "Plan") for
the Class D shares. Payments allowed under
the Plan for Class D shares are authorized
and paid at the rate of 0.50% of the average
daily net assets of Class D shares.
(4) Other expenses and Gross Annual Portfolio
operating expenses of the Portfolios are
estimated for the current fiscal year.
(5) The Portfolios' Adviser has contractually
agreed to reimburse Other expenses necessary
to limit total expenses to 0.70% for Class D
shares until August 31, 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:
- $10,000 investment
- 5% annual return
- redemption at the end of each period
- no changes in the Portfolio's operating expenses except in Year 1 when
the waiver is in effect
- reinvestment of dividends and distributions
Because this example is hypothetical and for comparison only, your actual
costs will be different.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
U.S. TREASURY MONEY MARKET PORTFOLIO $72 $226 $394 $882
U.S. TREASURY INCOME PORTFOLIO $72 $226 $394 $882
GENERAL MONEY MARKET PORTFOLIO $72 $226 $394 $882
TAX EXEMPT MONEY MARKET PORTFOLIO $72 $226 $394 $882
</TABLE>
If you buy and hold
Class D shares of the
Portfolios, you will
pay the following
fees and expenses.
Total Annual
Portfolio operating
expenses are paid out
of Portfolio assets,
and are reflected in
the Portfolio's
yield.
14
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RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
The principal strategies and risks of investing in each Portfolio are
described on the previous pages. The following elaborates on 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 rating agency (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 and illiquid securities 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
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RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
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 Adviser, 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> 96
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ADDITIONAL INFORMATION
TEMPORARY DEFENSIVE POSITIONS
Each Portfolio may, from time to time, take temporary defensive positions
that are inconsistent with the Portfolio's principal investment strategy in
attempting to respond to adverse market, economic, political, or other
conditions. These positions may include cash (which will not earn any
income). 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 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 Portfolios invest 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 Portfolios' 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 Portfolios' 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 Portfolios' 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 Portfolios'
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> 97
[LOGO]
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 Adviser, 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 Adviser'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 Adviser. 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 Adviser was organized in Florida on September 24, 1992.
The Adviser has provided management oversight to the Portfolios since 1992.
It currently manages more than $1 billion in assets directly in the
Portfolios. Through the portfolio management team, the Sub-Adviser makes the
day-to-day investment decisions and continuously reviews, supervises and
administers the Portfolios' investment programs.
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.
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 0.19%(1)
U.S. TREASURY INCOME PORTFOLIO 0.19%(1)
GENERAL MONEY MARKET PORTFOLIO 0.19%(1)
TAX-EXEMPT MONEY MARKET PORTFOLIO 0.19%(1)
</TABLE>
(1) The Portfolios are contractually reimbursing expenses which cause the
actual Adviser fee to be 0.19%.
The Sub-Adviser is paid by the Adviser 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.
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 Portfolios' 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> 98
[LOGO]
SHAREHOLDER INFORMATION
<TABLE>
<S> <C>
PRICING OF PORTFOLIO SHARES
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 ("NYSE") and the Boston
and the New York Federal Reserve Banks are open. The NYSE is closed most
national holidays and Good Friday. 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.
</TABLE>
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
19
<PAGE> 99
[LOGO]
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 charged by some institutions which establish accounts on behalf of their
customers.
<TABLE>
<S> <C> <C> <C>
MINIMUM MINIMUM
ACCOUNT TYPE INITIAL INVESTMENT* SUBSEQUENT
Regular $1,000,000 None
</TABLE>
<TABLE>
<S> <C>
*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 initiate 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 on your account application.
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.
----------------------
20
<PAGE> 100
[LOGO]
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.
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.
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
within 10 days of the beginning
of the following month.
21
<PAGE> 101
[LOGO]
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
Adviser 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 0.50% 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 Portfolio receives in the form of dividends is paid out, less
expenses, to its shareholders. Each Portfolio declares dividends from net
investment income on every business day. Dividends 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.
22
<PAGE> 102
[LOGO]
SHAREHOLDER INFORMATION
DIVIDENDS, DISTRIBUTIONS AND TAXES -- CONTINUED
Dividends and distributions are treated in the same manner for federal income
tax purposes whether you receive them in cash or in additional shares.
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 Portfolios 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.
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> 103
[LOGO]
FINANCIAL HIGHLIGHTS
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
<TABLE>
<CAPTION>
For a share outstanding throughout each period.
YEAR ENDED PERIOD
----------------------------------- ENDED
8/31/99 8/31/98 8/31/97 8/31/96(1)
--------- --------- --------- -----------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.000 $1.000 $1.000 $1.000
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.042 0.048 0.047 0.015
LESS DISTRIBUTIONS:
Dividends from net investment income (0.042) (0.048) (0.047) (0.015)
NET ASSET VALUE, END OF PERIOD $1.000 $1.000 $1.000 $1.000
Total Return (b) 4.25% 4.91% 4.78% 1.55%(a)
RATIOS/SUPPLEMENTAL DATA:
Net assets, End of Period (000's) $204,713 $161,901 $101,401 $35,549
RATIOS TO AVERAGE NET ASSETS:
Net Investment Income 4.16% 4.79% 4.69% 4.68%(c)
Operating Expenses 0.70% 0.70% 0.70% 0.70%(c)
Operating Expenses Before
Reimbursements/Waivers 0.70% 0.70% 0.70% 0.70%(c)
</TABLE>
(1) The Portfolio commenced Class D shares operations on May 1, 1996.
(a) Total returns for periods less than one year are not annualized.
(b) Had the Investment Adviser and Trustees not reimbursed and waived certain
expenses, respectively, total returns would have been lower.
(c) Annualized.
24
<PAGE> 104
FOR MORE INFORMATION
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 Portfolio's performance during its last fiscal
year.
STATEMENT OF ADDITIONAL INFORMATION (SAI):
The SAI provides more detailed information about the Portfolios, 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 Portfolios' reports and SAIs at the Public Reference
Room of the Securities and Exchange Commission. You can get text-only copies:
- - For a fee by:
- electronic mail request at [email protected]
- writing the Public Reference Section of the Commission, Washington, D.C.
20549-6009
- calling 1-202-942-8090.
- - Free from the Edgar database on the Commission's Website at
http://www.sec.gov.
Investment Company Act file no. 811-7582.
<PAGE> 105
THE VALIANT FUND
CLASS E SHARES
---------------
PROSPECTUS DATED DECEMBER 29, 1999
---------------
U.S. TREASURY MONEY MARKET PORTFOLIO
U.S. TREASURY INCOME PORTFOLIO
GENERAL MONEY MARKET PORTFOLIO
TAX-EXEMPT MONEY MARKET PORTFOLIO
QUESTIONS?
Call 1-800-828-2176 or your
investment representative.
MANAGED BY INTEGRITY MANAGEMENT & RESEARCH, INC.
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> 106
THE VALIANT FUND CONTENTS
<TABLE>
<S> <C> <C> <C>
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
INCLUDES INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
[LOGO]
Carefully review this 4 Overview
important section, which 5-6 U.S. Treasury Money Market Portfolio
summarizes each Portfolio's 7-8 U.S. Treasury Income Portfolio
investments, strategies, 9-10 General Money Market Portfolio
risks, past performance, and 11-12 Tax-Exempt Money Market Portfolio
fees. 13 Fees and Expenses
ADDITIONAL INFORMATION
[LOGO]
16
FUND MANAGEMENT
[LOGO]
Review this section for 17 The Investment Adviser
details on the people and 17 The Distributor
organizations who oversee 17 The Administrator
the Portfolios.
SHAREHOLDER INFORMATION
[LOGO]
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
[LOGO]
23 Financial Highlights
</TABLE>
3
<PAGE> 107
[LOGO]
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
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 in its effort to 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.
The Portfolios:
- The U.S. Treasury Money Market Portfolio invests all of its assets in
securities issued or guaranteed by the United States Government or its
agencies, and repurchase agreements collateralized by such U.S. Government
Obligations.
- The U.S. Treasury Income Portfolio invests all of its assets in U.S.
Government Obligations which are backed by the full faith and credit of the
U.S. Government.
- The General Money Market Portfolio invests in U.S. dollar-denominated
short-term debt securities.
- The Tax-Exempt Money Market Portfolio invests in high-quality, short-term
municipal securities and in high-quality, long-term municipal securities
whose features give them interest rates, maturities and prices similar to
short-term instruments.
A few general risks:
- 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.
4
<PAGE> 108
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RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
U.S. TREASURY MONEY MARKET PORTFOLIO
<TABLE>
<S> <C>
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 The Portfolio's principal investment strategies include:
STRATEGIES - Investing in 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 of 90 days or
less.
- Investing in compliance with SEC rule 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.
Other 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.
</TABLE>
5
<PAGE> 109
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RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
<TABLE>
<S> <C>
- 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 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
</TABLE>
6
<PAGE> 110
[LOGO]
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
U.S. TREASURY INCOME PORTFOLIO
<TABLE>
<S> <C>
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 The Portfolio's principal investment strategies include:
STRATEGIES - 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 SEC rule 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. Other 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.
</TABLE>
7
<PAGE> 111
[LOGO]
RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
<TABLE>
<S> <C>
- 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
</TABLE>
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RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
GENERAL MONEY MARKET PORTFOLIO
<TABLE>
<S> <C>
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 The Portfolio's principal investment strategies include:
STRATEGIES - 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, affiliated bank transactions, letters
of credit, variable and floating rate instruments, commercial paper and
restricted securities, as well as borrowing through reverse repurchase
agreements.
- Generally maintaining a dollar-weighted average maturity of 90 days or
less.
- Investing in compliance with SEC rule requirements for money market funds
for the quality, maturity and diversification of investments.
Although the Portfolio does not actively invest in the obligations of
foreign issuers, an increase in the size of the portfolio may provide an
opportunity to implement this investment strategy.
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.
Other 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.
</TABLE>
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RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
<TABLE>
<S> <C>
- 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 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
</TABLE>
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RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
TAX-EXEMPT MONEY MARKET PORTFOLIO
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES The Portfolio seeks primarily income exempt from federal income tax.
PRINCIPAL The Portfolio's principal investment strategies include:
INVESTMENT STRATEGIES - Investing in municipal money market securities including variable and
floating rate instruments.
- Investing in compliance with SEC rule requirements for money market funds
for the quality, maturity and diversification of investments.
- Municipal securities subject to restrictions on resale.
- Investing in repurchase agreements, forward commitments, when-issued
securities, letters of credit, and standby commitments, and borrowing
through reverse repurchase agreements.
Under normal market conditions, the Portfolio will invest 100% of its
investable assets in securities whose income is exempt from federal income
tax.
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 will not invest in Municipal Securities whose interest is
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 The Fund is a "money market fund" that seeks to maintain a stable net asset
INVESTMENT RISKS 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.
</TABLE>
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.
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RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
<TABLE>
<S> <C>
Other 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 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
</TABLE>
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RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
FEES AND EXPENSES
<TABLE>
U.S.
TREASURY U.S. TREASURY GENERAL TAX-EXEMPT
MONEY MARKET INCOME MONEY MARKET MONEY MARKET
PORTFOLIO(1) PORTFOLIO(1) PORTFOLIO(1) PORTFOLIO(1)
SHAREHOLDER FEES ------------ ------------- ------------ ------------
(FEES PAID DIRECTLY FROM YOUR CLASS CLASS CLASS CLASS
INVESTMENT) E E E E
<S> <C> <C> <C> <C>
Maximum sales charge (load) on
purchases None None None None
ANNUAL PORTFOLIO OPERATING
EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM PORTFOLIO ASSETS)
Management fees(2) .20% .20% .20% .20%
Distribution and Service
(12b-1) fees(3) .80% .80% .80% .80%
Other expenses(4) .06% .06% .06% .06%
Gross Annual Portfolio
operating expenses(4) 1.06% 1.06% 1.06% 1.06%
Fee Waivers(5) .06% .06% .06% .06%
Total Annual Portfolio
operating expenses 1.00% 1.00% 1.00% 1.00%
</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 Portfolios are contractually reimbursing
expenses which causes the actual Management
fee to be 0.14%.
(3) The Trust has adopted a Distribution and
Shareholder Servicing Plan (the "Plan") for
the Class E shares. Payments allowed under
the Plan for Class E shares are authorized
and paid at the rate of 0.80% of the average
daily net assets of Class E shares.
(4) Other expenses and Gross Annual Portfolio
operating expenses of the Portfolios are
estimated for the current fiscal year.
(5) The Portfolios' Adviser has contractually
agreed to reimburse Other expenses necessary
to limit total expenses to 1.00% for Class E
shares until August 31, 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:
- $10,000 investment
- 5% annual return
- redemption at the end of each period
- no changes in the Portfolio's operating expenses except in Year 1 when
the waiver is in effect
- reinvestment of dividends and distributions
Because this example is hypothetical and for comparison only, your actual
costs will be different.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
U.S. TREASURY MONEY MARKET PORTFOLIO $102 $331 $579 $1,289
U.S. TREASURY INCOME PORTFOLIO $102 $331 $579 $1,289
GENERAL MONEY MARKET PORTFOLIO $102 $331 $579 $1,289
TAX EXEMPT MONEY MARKET PORTFOLIO $102 $331 $579 $1,289
</TABLE>
If you buy and hold
Class E shares of the
Portfolios, you will
pay the following
fees and expenses.
Total Annual
Portfolio operating
expenses are paid out
of Portfolio assets,
and are reflected in
the Portfolio's
yield.
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RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
The principal strategies and risks of investing in each Portfolio are
described on the previous pages. The following elaborates on 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 rating agency (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 and illiquid securities 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.
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RISK/RETURN SUMMARY AND PORTFOLIO EXPENSES
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 Adviser, 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.
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ADDITIONAL INFORMATION
TEMPORARY DEFENSIVE POSITIONS
Each Portfolio may, from time to time, take temporary defensive positions
that are inconsistent with the Portfolio's principal investment strategy in
attempting to respond to adverse market, economic, political, or other
conditions. These positions may include cash (which will not earn any
income). 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 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 Portfolios invest 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 Portfolios' 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 Portfolios' 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 Portfolios' 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 Portfolios'
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.
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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 Adviser, 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 Adviser'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 Adviser. 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 Adviser was organized in Florida on September 24, 1992.
The Adviser has provided management oversight to the Portfolios since 1992.
It currently manages more than $1 billion in assets directly in the
Portfolios. Through the portfolio management team, the Sub-Adviser makes the
day-to-day investment decisions and continuously reviews, supervises and
administers the Portfolios' investment programs.
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.
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 0.14%(1)
U.S. TREASURY INCOME PORTFOLIO 0.14%(1)
GENERAL MONEY MARKET PORTFOLIO 0.14%(1)
TAX-EXEMPT MONEY MARKET PORTFOLIO 0.14%(1)
</TABLE>
(1) The Portfolios are contractually reimbursing expenses which causes the
actual Adviser fee to be 0.14%.
The Sub-Adviser is paid by the Adviser 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.
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 Portfolios' 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.
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SHAREHOLDER INFORMATION
<TABLE>
<S> <C>
PRICING OF PORTFOLIO SHARES
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 ("NYSE") and the Boston and the New York Federal
Reserve Banks are open. The NYSE is closed most national
holidays and Good Friday. 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.
</TABLE>
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
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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 charged by some institutions which establish accounts on behalf of their
customers.
<TABLE>
<S> <C> <C> <C>
MINIMUM MINIMUM
ACCOUNT TYPE INITIAL INVESTMENT* SUBSEQUENT
Regular $1,000,000 None
</TABLE>
<TABLE>
<S> <C>
*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 initiate 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 on your account application.
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.
----------------------
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[LOGO]
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.
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.
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
within 10 days of the beginning
of the following month.
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<PAGE> 124
[LOGO]
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
Adviser 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 0.80% 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 Portfolio receives in the form of dividends is paid out, less
expenses, to its shareholders. Each Portfolio declares dividends from net
investment income on every business day. Dividends 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.
21
<PAGE> 125
[LOGO]
SHAREHOLDER INFORMATION
DIVIDENDS, DISTRIBUTIONS AND TAXES -- CONTINUED
Dividends and distributions are treated in the same manner for federal income
tax purposes whether you receive them in cash or in additional shares.
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 Portfolios 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.
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> 126
[LOGO]
FINANCIAL HIGHLIGHTS
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, U.S. Treasury Money Market Portfolio and
General Money Market Portfolio Class E shares commenced operations April 6,
1999 and May 5, 1999, respectively, therefore, there is no financial
information available to incorporate.
23
<PAGE> 127
FOR MORE INFORMATION
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 Portfolio's performance during its last fiscal
year.
STATEMENT OF ADDITIONAL INFORMATION (SAI):
The SAI provides more detailed information about the Portfolios, 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 Portfolios' reports and SAIs at the Public Reference
Room of the Securities and Exchange Commission. You can get text-only copies:
- - For a fee by:
- electronic mail request at [email protected]
- writing the Public Reference Section of the Commission, Washington, D.C.
20549-6009
- calling 1-202-942-8090.
- - Free from the Edgar database on the Commission's Website at
http://www.sec.gov.
Investment Company Act file no. 811-7582.
<PAGE> 128
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.
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<PAGE> 129
<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
<S> <C>
Investment Policies and Limitations...................................3
Portfolio Transactions...............................................16
Valuation of Portfolio Securities....................................17
Performance..........................................................18
Additional Purchase and Redemption Information.......................20
Dividends, Capital Gains Distributions and Taxes.....................20
Trustees and Officers................................................21
Investment Advisory Agreements.......................................23
Administration Agreement and Other Contracts.........................23
Description of the Trust.............................................26
Appendix.............................................................29
</TABLE>
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> 130
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 except as noted for Restriction No. 8 on the following page. 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> 131
(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.
CLARIFYING COMMENT TO FUNDAMENTAL POLICY NO. 8.
The Portfolio reserves the right to lend securities up to 10% of its total
assets. However, this limit does not apply to repurchase agreements. Given
certain market, economic, or other conditions, the Adviser may invest up to 100%
of the Portfolio in repurchase agreements.
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> 132
U.S. TREASURY INCOME PORTFOLIO
THE FOLLOWING ARE THE U.S. TREASURY INCOME PORTFOLIO'S FUNDAMENTAL LIMITATIONS
EXCEPT AS NOTED FOR RESTRICTION NO. 8 BELOW. 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.
CLARIFYING COMMENT TO FUNDAMENTAL POLICY NO. 8.
The Portfolio reserves the right to lend securities up to 10% of its total
assets. However, this limit does not apply to repurchase agreements. Given
certain market, economic, or other conditions, the Adviser may invest up to 100%
of the Portfolio in repurchase agreements.
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.
5
<PAGE> 133
(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
EXCEPT AS NOTED FOR RESTRICTION NO. 1 AND NO. 8 ON THE FOLLOWING PAGE. THE
PORTFOLIO MAY NOT:
(1) with respect to 75% of the Portfolio's total assets, purchase the securities
of any issuer (other than securities issued or guaranteed by the U.S. Government
or any of its agencies or instrumentalities) if, as a result, (a) more than 5%
of the Portfolio's total assets would be invested in the securities of that
issuer; or (b) the Portfolio would hold more than 10% of the outstanding voting
securities of that issuer;
(2) issue senior securities, except as permitted under the 1940 Act;
(3) borrow money, except that the Portfolio may (i) borrow money for temporary
or emergency purposes (not for leveraging or investment) and (ii) engage in
reverse repurchase agreements for any purpose; provided that (i) and (ii) in
combination do not exceed 33% of the Portfolio's total assets (including the
amount borrowed) less liabilities (other than borrowings). Any borrowings that
come to exceed this amount will be reduced within three days (not including
Sundays and holidays) to the extent necessary to comply with this 33%
limitation;
(4) underwrite securities issued by others, except to the extent that the
Portfolio may be considered an underwriter within the meaning of the 1933 Act in
the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. Government or any of its agencies or instrumentalities,
or by domestic issuers which are banks, bank holding companies or similar
banking institutions) if, as a result, more than 25% of the Portfolio's total
assets would be invested in the securities of companies whose principal business
activities are in the same industry;
6
<PAGE> 134
(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.
CLARIFYING COMMENT TO FUNDAMENTAL POLICY NO. 1.
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.
CLARIFYING COMMENT TO FUNDAMENTAL POLICY NO. 8.
The Portfolio reserves the right to lend securities up to 10% of its total
assets. However, this limit does not apply to repurchase agreements. Given
certain market, economic, or other conditions, the Adviser may invest up to 100%
of the Portfolio in repurchase agreements.
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.
7
<PAGE> 135
(vii) The Portfolio does not currently intend during the coming year to invest
in oil, gas, or other mineral exploration or development programs or leases.
(viii) The Portfolio does not currently intend during the coming year to
purchase the securities of any issuer if those officers and Trustees of the
Trust and those officers and directors of the Manager or the Sub-Adviser who
individually own more than 1/2 of 1% of the securities of such issuer together
own more than 5% of such issuer's securities.
TAX-EXEMPT MONEY MARKET PORTFOLIO
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 EXCEPT AS NOTED FOR RESTRICTIONS NO.1, NO. 5 AND NO. 8 BELOW. THE
PORTFOLIO MAY NOT:
(1) with respect to 75% of the Portfolio's total assets, purchase the securities
of any issuer (other than securities issued or guaranteed by the U.S. Government
or any of its agencies or instrumentalities) if, as a result, (a) more than 5%
of the Portfolio's total assets would be invested in the securities of that
issuer, or (b) the Portfolio would hold more than 10% of the outstanding voting
securities of that issuer;
(2) issue senior securities, except as permitted under the 1940 Act;
(3) borrow money, except that the Portfolio may (i) borrow money for temporary
or emergency purposes (not for leveraging or investment) and (ii) engage in
reverse repurchase agreements; provided that (i) and (ii) in combination do not
exceed 33 % of the Portfolio's total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed this
amount will be reduced within three days (not including Sundays and holidays) to
the extent necessary to comply with this 33 % limitation;
(4) underwrite securities issued by others, except to the extent that the
Portfolio may be considered an underwriter within the meaning of the 1933 Act in
the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. Government or any of its agencies or instrumentalities,
or tax-exempt obligations issued or guaranteed by a U.S. territory or possession
or a state or local government, or a political subdivision of any of the
foregoing) if, as a result, more than 25% of the Portfolio's total assets would
be invested in securities of companies whose principal business activities are
in the same industry;
(6) buy or sell real estate, unless acquired as a result of ownership of
securities or other instruments (but this shall not prevent the Portfolio from
investing in securities or other instruments backed by real estate or securities
of companies engaged in the real estate business);
(7) purchase or sell physical commodities (unless acquired as a result of
ownership of securities or other instruments) or commodity contracts, including
futures contracts;
(8) lend any security or make any other loan if, as a result, more than 10% of
its total assets would be lent to other parties, but this limit does not apply
to purchases of debt securities or to repurchase agreements; or
(9) purchase the securities of other investment companies except in connection
with a merger, consolidation, reorganization or acquisition of assets or in
accordance with the 1940 Act.
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CLARIFYING COMMENT TO FUNDAMENTAL POLICY NO. 1.
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.
CLARIFYING COMMENT TO FUNDAMENTAL POLICY NO. 5.
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.
CLARIFYING COMMENT TO FUNDAMENTAL POLICY NO. 8.
The Portfolio reserves the right to lend securities up to 10% of its total
assets. However, this limit does not apply to repurchase agreements. Given
certain market, economic, or other conditions, the Adviser may invest up to 100%
of the Portfolio in repurchase agreements.
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.
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(vii) The Portfolio does not currently intend during the coming year to invest
in oil, gas, or other mineral exploration or development programs or leases.
(viii) The Portfolio does not currently intend during the coming year to
purchase the securities of any issuer if those officers and Trustees of the
Trust and those officers and directors of the Manager who individually own more
than 1/2 of 1% of the securities of such issuer together own more than 5% of
such issuer's securities.
INVESTMENT POLICIES OF THE PORTFOLIOS
BANK OBLIGATIONS. Bank obligations that may be purchased by an Underlying Fund
include certificates of deposit, banker's acceptances and fixed time deposits. A
certificate of deposit is a short-term negotiable certificate issued by a
commercial bank against funds deposited in the bank and is either
interest-bearing or purchased on a discount basis. A bankers' acceptance is a
short-term draft drawn on a commercial bank by a borrower, usually in connection
with an international commercial transaction. The borrower is liable for payment
as is the bank, which unconditionally guarantees to pay the draft at its face
amount on the maturity date. Fixed time deposits are obligations of branches of
U.S. banks or foreign banks which are payable at a stated maturity date and bear
a fixed rate of interest. Although fixed time deposits do not have a market,
there are no contractual restrictions on the right to transfer a beneficial
interest in the deposit to a third party.
Bank obligations may be general obligations of the parent bank or may be limited
to the issuing branch by the terms of the specific obligations or by government
regulation.
COMMERCIAL PAPER. Commercial paper (including asset-backed commercial paper)
which are short-term and unsecured promissory notes issued by corporations in
order to finance their current operations. Generally the commercial paper will
be rated within the top two rating categories by an NRSRO, or if not rated, is
issued and guaranteed as to payment of principal and interest by companies which
at the date of investment have a high quality outstanding debt issue.
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
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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.
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
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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.
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.
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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 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
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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 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
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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.
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.
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The purchase price paid to dealers serving as market makers may include a spread
between the bid and asked prices. The Portfolios may also purchase securities
from underwriters at prices which include a commission paid by the issuer to the
underwriter.
Each Portfolio requires that investments mature (or are deemed to mature) within
397 days or less. The amortized cost method of valuing portfolio securities
requires that each Portfolio maintain an average weighted portfolio maturity of
90 days or less. Both policies may result in relatively high portfolio turnover,
but since brokerage commissions are not normally paid on money market
instruments, the high rate of portfolio turnover is not expected to have a
material effect on the Portfolios' net income or expenses. Each Portfolio may
seek to profit from short-term trading, and may not always hold portfolio
securities to maturity.
The Sub-Adviser's primary consideration in effecting a security transaction is
to obtain the best net price and the most favorable execution of the order. To
the extent that the executions and prices offered by more than one dealer are
comparable, the Sub-Adviser may, at its discretion, effect transactions with
dealers that furnish statistical, research or other information or services
which are deemed by the Sub-Adviser to be beneficial to the Portfolios'
investment program. Certain research services furnished by dealers may be useful
to the Sub-Adviser's clients other than the Portfolios. Similarly, any research
services received by the Sub-Adviser through placement of portfolio transactions
of other clients may be of value to the Sub-Adviser in fulfilling its
obligations to the Portfolios. The Sub-Adviser is of the opinion that the
material received is beneficial in supplementing its research and analysis, and
therefore, may benefit the Portfolios by improving the quality of its investment
advice. The advisory fee paid by the Portfolios is not reduced because of the
receipt of such services.
The Sub-Adviser and its affiliates may manage other investment accounts, some of
which may have objectives similar to that of the Portfolios. It is possible that
at times, identical securities will be acceptable for one or more of such
investment accounts. However, the position of each account in the securities of
the same issue may vary and the length of time that each account may choose to
hold its investment in the securities of the same issue may likewise vary. Also,
the timing and amount of purchase by each account 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
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1940 Act. Each Portfolio must adhere to certain conditions under Rule 2a-7 which
are summarized in the Prospectuses.
The Trustees have established procedures designed to stabilize each Portfolio's
net asset value per share calculated on the basis of amortized cost. The
Trustees review each Portfolio's holdings, at such intervals as they may deem
appropriate, to determine whether net asset value per share calculated by using
available market quotations would deviate from $1.00. The Trustees have agreed
to take such corrective action as they may deem necessary and appropriate, if
any such deviation would result in material dilution or otherwise would be
unfair to shareholders. This may include selling portfolio instruments prior to
maturity to realize capital gains or losses or to shorten average portfolio
maturity, withholding dividends, redeeming shares in kind, or establishing net
asset value per share by using available market quotations.
PERFORMANCE
From time to time, each Portfolio of the Trust advertises its yield and
effective yield for each class of shares in advertisements or in reports or
other communications with shareholders and others. Both yield figures are based
on historical earnings and are not intended to indicate future performance.
The standardized annualized seven-day yield for each Portfolio for a class of
shares is computed by: (1) determining the net change exclusive of capital
changes, in the value of a hypothetical pre-existing account in a Portfolio
having a balance of one share of the relevant class at the beginning of a
seven-day period, for which the yield is to be quoted, (2) dividing the net
change in account value by the value of the account at the beginning of the base
period to obtain the base period return, and (3) annualizing the results (i.e.,
multiplying the base period return by 365/7). The net change in the value of the
account in each Portfolio includes the value of additional shares purchased with
dividends from the original share and dividends declared on both the original
share and any such additional shares, and all fees that are charged by a
Portfolio to all shareholder accounts in proportion to the length of the base
period, other than nonrecurring account and sales charges. For any account fees
that vary with the size of the account, the amount of fees charged would be
computed with respect to the Portfolio's mean (or median) account size. The
capital changes to be excluded from the calculation of the net change in account
value are realized gains and losses from the sale of securities and unrealized
appreciation and depreciation. The yields for each Portfolio for the seven-day
period ended August 31, 1999 were:
<TABLE>
<CAPTION>
Portfolio Yield
--------- -----
<S> <C>
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%
</TABLE>
The effective compound yield quotation for each Portfolio and class is computed
by adding 1 to the unannualized base period return (calculated as described
above), raising the sum to a power equal to 365 divided by 7, and subtracting 1
from the result. The effective yields for each Portfolio for the seven-day
period ended August 31, 1999 were:
<TABLE>
<CAPTION>
Portfolio Yield
--------- -----
<S> <C>
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%
</TABLE>
17
<PAGE> 145
<TABLE>
<S> <C>
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%
</TABLE>
In addition to the current yield, the Portfolios may quote yields in advertising
based on any historical seven day period.
Yield information may be useful in reviewing each Portfolio's performance and
for providing a basis for comparison with other investment alternatives. Each
Portfolio's yield will fluctuate, unlike investments which pay a fixed yield for
a stated period of time. Investors should give consideration to the quality and
maturity of portfolio securities of the respective investment companies when
comparing investments.
In addition, the Tax-Exempt Money Market Portfolio may calculate a "tax
equivalent yield" and "tax equivalent effective yield" for each class of shares.
The tax equivalent yield shows the taxable yield an investor would have to earn,
before taxes, to equal the class's tax-free yield. The tax equivalent yield for
the class is computed by dividing that portion of the class's yield which is
tax-exempt by one minus a stated income tax rate and adding the product to that
portion, if any, of the class's computed yield that is not tax-exempt. The tax
equivalent yield for the Tax-Exempt Money Market Portfolio Class A shares for
the seven days ended August 31, 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 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
18
<PAGE> 146
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 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.
19
<PAGE> 147
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
58 Trust Company, Inc. from 1987 to 1992.
</TABLE>
20
<PAGE> 148
<TABLE>
<S> <C> <C>
Susan M. Schwartz Vice President, Secretary Operations Manager of Integrity Investments, Inc.
One Broadway - Ste 100 and Treasurer since 1993. Account Officer of Fidelity
Cambridge, MA 02139 Investments from 1985 to 1993.
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.
<TABLE>
COMPENSATION 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 November 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> 149
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 $476,812 $10,002 $325,423 $252,013
- ------------------- -------------------------- --------------------- ---------------------- ------------------------
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
22
<PAGE> 150
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") 100 Church 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.
23
<PAGE> 151
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 Money 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> 152
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> 153
The Declaration of Trust further provides that the Trustees, if they have
exercised reasonable care, will not be liable for any neglect or wrongdoing, but
nothing in the Declaration of Trust protects a Trustee against any liability to
which he would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office.
VOTING RIGHTS. Each Portfolio's capital consists of shares of beneficial
interest. The shares have no preemptive or conversion or exchange rights; the
voting and dividend rights, and the right of redemption are described in the
Prospectuses. Shares are fully paid and nonassessable, except as set forth under
the heading "Shareholder and Trustee Liability" above. Holders of shares
representing 10% or more of the votes represented by all outstanding shares of
the Trust or a Portfolio may, as set forth in the By-Laws, call meetings of the
Trust or a Portfolio or Class for any purpose related to the Trust or a
Portfolio, as the case may be, including, in the case of a meeting of the entire
Trust, the purpose of voting on removal of one or more Trustees. The Trust or
any Portfolio may be terminated upon the sale of its assets to another open-end
management investment company, if approved by vote of the holders of shares
representing a majority of the votes represented by all outstanding shares of
the Trust or the Portfolio. If not so terminated, the Trust and the Portfolios
will continue indefinitely.
PRINCIPAL HOLDERS OF SECURITIES. As of November 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.
<TABLE>
<CAPTION>
- ----------------------------------------------------------- ------------------ ----------------------------
SHARES PERCENT
------ -------
U.S. TREASURY MONEY MARKET PORTFOLIO
- ------------------- --------------------------------------- ------------------ ----------------------------
<S> <C> <C>
Class A Shares Citizens Trust Co. 816,840.45 5.53%
870 Westminister Street
Providence, RI 02903
- ------------------- --------------------------------------- ------------------ ----------------------------
State Street Bank 1,380,791.97 9.35%
108 Myrtle Street
North Quincy, MA 02171
- ------------------- --------------------------------------- ------------------ ----------------------------
Reliance Trust Company 12,143,292.68 82.26%
P.O.Box 48449
Atlanta, GA 48449
- ------------------- --------------------------------------- ------------------ ----------------------------
Class B Shares Hare & Co. 58,044,303.10 100.00%
One Wall Street
New York, NY 10286
- ------------------- --------------------------------------- ------------------ ----------------------------
Class D Shares Hare & Co. 49,560,542.03 18.24%
One Wall Street
New York, NY 10286
- ------------------- --------------------------------------- ------------------ ----------------------------
First Union National Bank 183,922,629.65 67.67%
1525 West Wt Harris Blvd
Charlotte, NC 28288
- ------------------- --------------------------------------- ------------------ ----------------------------
Reliance Trust Company 36,261,290.29 13.34%
P.O.Box 48449
Atlanta, GA 48449
- ------------------- --------------------------------------- ------------------ ----------------------------
Class E Shares First Union National Bank 37,355,598.90 100.00%
1525 West Wt Harris Blvd
Charlotte, NC 28288
- ------------------- --------------------------------------- ------------------ ----------------------------
</TABLE>
26
<PAGE> 154
<TABLE>
<CAPTION>
U.S. TREASURY INCOME PORTFOLIO
- ----------------------------------------------------------- ------------------ ----------------------------
<S> <C> <C>
Class A Shares Integrity Investments, Inc. 614.17 100.00%
871 Venetia Bay Blvd
Venice, FL 34292
- ----------------------------------------------------------- ------------------ ----------------------------
<CAPTION>
GENERAL MONEY MARKET PORTFOLIO
- ------------------- --------------------------------------- ------------------ ----------------------------
Class A Shares David L. Babson 12,932,240.22 5.15%
One Memorial Dr.
Cambridge, MA 02142
- ------------------- --------------------------------------- ------------------ ----------------------------
First Union National Bank 218,336,110.42 86.90%
1525 West Wt Harris Blvd
Charlotte, NC 28288
- ------------------- --------------------------------------- ------------------ ----------------------------
Class B Shares Reliance Trust Company 529,600.50 75.16%
P.O.Box 48449
Atlanta, GA 48449
- ------------------- --------------------------------------- ------------------ ----------------------------
Coamerica Bank 175,017.52 24.84%
411 W. Layfayette
Detroit, MI 48226
- ------------------- --------------------------------------- ------------------ ----------------------------
Class D Shares Century Financial 66,700.00 5.42%
100 S. Federal Place
Santa Fe, NM 87501
- ------------------- --------------------------------------- ------------------ ----------------------------
Pyramid Construction 1,163,136.14 94.58%
4425 Valley Road
Enola, PA 17025
- ------------------- --------------------------------------- ------------------ ----------------------------
Class E Shares Reliance Trust Company 27,643,290.42 100.00%
P.O.Box 48449
Atlanta, GA 48449
- ----------------------------------------------------------- ------------------ ----------------------------
<CAPTION>
TAX-EXEMPT MONEY MARKET PORTFOLIO
- ----------------------------------------------------------- ------------------ ----------------------------
Class A Shares First Union National Bank 224,111,727.12 96.90%
1525 West Wt Harris Blvd
Charlotte, NC 28288
- ------------------- --------------------------------------- ------------------ ----------------------------
</TABLE>
*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.
27
<PAGE> 155
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.
28
<PAGE> 156
PART C
OTHER INFORMATION
<TABLE>
ITEM 23. EXHIBITS
<CAPTION>
Exhibit
Number Description of Exhibit
------ ----------------------
<S> <C>
(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.
*** Incorporated herein by reference to this Post Effective Amendment No. 10 to the Registration Statement,
filed December 28, 1999.
</TABLE>
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
Page C-1
<PAGE> 157
payment by Registrant of expenses incurred or paid by a Trustee, Officer or
Controlling Person of Registrant in the successful defense of any action, suit
or proceeding) is asserted by such Trustee, Officer or controlling Person in
connection with the securities being registered, Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the 1933 Act and
will be governed by the final adjudication of such issue.
ITEM 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.
<TABLE>
DAVID L. BABSON AND COMPANY INCORPORATED
<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 Executive Potomac Babson Inc.
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.
Page C-2
<PAGE> 158
(b) The following table presents certain information with respect
to each director and officer of the Distributor.
<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> 159
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, as amended, the Registrant certifies that it meets all of
the requirements for the effectiveness of this amendment to the Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Post-Effective Amendment No. 10 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 28 day of December, 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. 10 to the Registration Statement of The Valiant
Fund has been signed below by the following persons in the capacities indicated
on the 28 day of December, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------- -----
<S> <C>
/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
</TABLE>
<PAGE> 160
<TABLE>
THE VALIANT FUND
INDEX OF EXHIBITS
<CAPTION>
DESCRIPTION OF EXHIBIT EXHIBIT REFERENCE
- ---------------------- -----------------
<S> <C>
Opinion and Consent of Counsel to the Registrant...........................................................(i)
Consent of PricewaterhouseCoopers LLP (Independent Auditors) ..............................................(j)
Amendment No. 2 to the Distribution and Shareholder Servicing Plan dated December 19, 1995 ..........(m)(1)(b)
Distribution and Shareholder Servicing Plan for Class C Shares dated December 1, 1995...................(m)(2)
Distribution and Shareholder Servicing Plan for Class D Shares dated December 19, 1995..................(m)(3)
Distribution and Shareholder Servicing Plan for Class E Shares dated March 16, 1999.....................(m)(4)
Financial Data Schedules...................................................................................(n)
Amended and Restated Plan Pursuant for Multiple Class Shares dated March 16, 1999..........................(o)
</TABLE>
<PAGE> 1
Exhibit (i)
ROPES & GRAY
One International Place
Boston, Massachusetts 02110
December 27, 1999
The Valiant Fund
3435 Stelzer Road
Columbus, Ohio 43219
Ladies and Gentlemen:
We have acted as counsel to The Valiant Fund (the "Trust"). In
connection with this opinion, we have examined:
(a) A copy of the Agreement and Declaration of Trust of the
Trust, As Amended, dated January 29, 1993 (the
"Declaration of Trust"), certified by the Assistant
Secretary of the Trust;
(b) A copy of a Written Instrument Amending Agreement and
Declaration of Trust dated July 16, 1993, certified by
the Assistant Secretary of the Trust;
(c) A copy of a Certificate of Amendment to the Agreement
and Declaration of Trust dated December 30, 1994,
certified by the Assistant Secretary of the Trust;
(d) A certificate of the Secretary of State of The
Commonwealth of Massachusetts dated December 23, 1999
certifying as to the authority of the Trust to exercise
in The Commonwealth all of the powers recited in the
Declaration of Trust, as amended, and to transact
business in The Commonwealth;
(e) A copy of the Bylaws of the Trust certified by the
Assistant Secretary of the Trust.
(f) A certificate of the Assistant Secretary of the Trust
dated December 27, 1999 as to, among other things,
certain actions of the Trustees and shareholders of the
Trust;
<PAGE> 2
The Valiant Fund -2- December 27, 1999
(g) Such other certificates, documents, and records as we
have deemed necessary for purposes of this opinion.
In our examination, we have assumed the genuineness of all
signatures, the legal capacity of all natural persons, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified or photostatic copies, and the
authenticity of the originals of such latter documents.
We have made such examination of Massachusetts law as we have
deemed relevant for purposes of this opinion. We express no opinion as to the
effect of laws, rules, and regulations of any state or jurisdiction other than
The Commonwealth of Massachusetts.
You have advised us that the Trust has filed with the Securities
and Exchange Commission a registration statement and amendments thereto (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"1933 Act"), relating to the issuance of shares of beneficial interest of four
series, including the U.S. Treasury Money Market Portfolio, the U.S. Treasury
Income Portfolio, the General Money Market Portfolio, and the Tax-Exempt Money
Market Portfolio, including shares of Classes A, B, C, D, and E of each such
Portfolio (collectively, the "Shares").
For purposes of this opinion, we have assumed that all Shares will
be offered and sold on the terms, and that the Trust will receive for the sale
of such Shares the consideration, set forth in the Registration Statement as in
effect at the time of such sale, and that such consideration will be in each
case at least equal to the applicable net asset value per Share.
We assume that appropriate action has been taken to register or
qualify the sale of the Shares under any applicable state and federal laws
regulating offerings and sales of securities.
Based upon and subject to the foregoing, we are of the opinion
that:
1. The Trust is a legally organized and validly existing voluntary
association with transferable shares of beneficial interest under the laws of
The Commonwealth of Massachusetts and is authorized to issue an unlimited number
of Shares.
2. Shares issued and sold after the date hereof will be validly
issued, fully paid, and nonassessable by the Trust.
The Trust is an entity of the type commonly known as a
"Massachusetts business trust". Under Massachusetts law, shareholders could,
under certain circumstances, be held personally liable for the obligations of
the Trust. However, the Declaration of Trust, as amended, disclaims shareholder
liability for acts or obligations of the Trust and requires that notice of such
disclaimer be given in every note, bond, contract, instrument, certificate, or
<PAGE> 3
The Valiant Fund -3- December 27, 1999
undertaking made or issued by the Trust or its Trustees or officers. The
Declaration of Trust, as amended, provides for indemnification out of the
property of the Portfolio in question for all loss and expense of any
shareholder of that Portfolio held personally liable for the obligations of the
Portfolio solely by reason of his being or having been a shareholder of the
Portfolio. Thus, the risk of a shareholder's incurring financial loss on account
of shareholder liability is limited to circumstances in which the Portfolio
itself would be unable to meet its obligations.
We consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
Ropes & Gray
<PAGE> 1
EXHIBIT (j)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in Post-Effective Amendment No. 10
to the Registration Statement of The Valiant Funds on Form N-1A (File No.
33-59840) of our report dated October 20, 1999 on our audits of the financial
statements and financial highlights of U.S. Treasury Money Market Portfolio,
U.S. Treasury Income Portfolio, General Money Market Portfolio and Tax-Exempt
Money Market Portfolio (separate portfolios consistuting The Valiant Fund),
which report is included in the Annual Report to Shareholders for the period
ended August 31, 1999. We also consent to the references to our Firm under the
caption "Financial Highlights" in the prospectuses and the captions "Independent
Accountants" and "Financial Statements" in the Statement of Additional
Information in this Post-Effective Amendment No. 10 to Registration Statement of
The Valiant Fund on Form N-1A (File No. 33-59840).
PricewaterhouseCoopers LLP
Columbus, Ohio
December 28, 1999
<PAGE> 1
EXHIBIT (m)(1)(b)
Amendment No. 2
To
Distribution and Shareholder Servicing Plan (the "Plan")
of
The Valiant Fund (the "Trust")
dated July 29, 1993
Effective December 19, 1995 the Plan is hereby amended as follows:
Section 1 is amended to read in its entirety as follows: 1. THE PLAN. This Plan
is the Trust's written distribution plan, contemplated by Rule 12b-1 (the
"Rule") under the Investment Company Act of 1940 (the "1940 Act"), pursuant to
which the Trust will bear certain costs related to the distribution of the Class
A and Class B shares (the "Class A Shares" and the "Class B Shares") of its U.S.
Treasury Income Portfolio, Tax-Exempt Money Market Portfolio, General Money
Market Portfolio and U.S. Treasury Money Market Portfolio (each of the
aforementioned Funds shall be referred to herein individually as a "Fund" and
collectively as the "Funds") and the provision of services to holders of Shares.
To the extent that any payments (in addition to those specified in Paragraph 3)
made by the Trust to Integrity Management & Research, Inc. (the "Manager"), any
sub-adviser, the Distributor, any administrator of the Trust, or any of their
affiliates, including payment of investment advisory and services fees, may be
deemed to be indirect financing of any activity which is primarily intended to
result in the distribution of Shares, such payments shall be deemed to be
authorized by this Plan.
Sections 6 and 7 are amended to read in their entirety as follows:
6. RELATED AGREEMENTS. Any agreement related to this Plan shall be in
writing and shall provide that: (i) such agreement may be terminated with
respect to either Class A Shares of Class B Shares of a Fund at any time,
without payment of any penalty, by vote of a majority of Trustees who are not
"interested persons" of the Trust and have no direct or indirect financial
interest in the operation of this Plan or in any agreements related to this Plan
(the "Independent Trustees") or by a vote of a majority of the outstanding
voting securities of the affected Class of the affected Fund, on not more than
sixty days written notice to any other party to the agreement; (ii) such
agreement shall automatically terminate in the event of its assignment; (iii)
such agreement shall go into effect when approved by a vote of the Trustees and
the Independent Trustees cast in person at a meeting called for the purpose of
voting on such agreement; and (iv) such agreement shall, unless terminated as
herein provided, continue in effect with respect to a Class of a Fund from year
to year only so long as
<PAGE> 2
such continuance is specifically approved at least annually by a vote of the
Trustees and the Independent Trustees cast in person at a meeting called for the
purpose of voting on such continuance.
7. EFFECTIVENESS, CONTINUATION, TERMINATION AND AMENDMENT. This plan
will take effect on the date first set forth above. Unless terminated as
hereinafter provided, this Plan shall continue in effect with respect to a Class
of a Fund from year to year from the date first set above only so long as such
continuance is specifically approved at least annually by a vote of the Trustees
and the Independent Trustees cast in person at a meeting called for the purpose
of voting on such continuance. This Plan may be terminated with respect to a
Class of a Fund at any time by vote of a majority of the Independent Trustees or
by the vote of the holders of the outstanding voting securities of the affected
Class of the affected Fund. This Plan may not be amended to increase materially
the amount of payments to be made by a Class of a Fund without approval by a
vote of a majority of the outstanding voting securities of the affected Class of
the affected Fund and all material amendments must be approved by a vote of the
Trustees and the Independent Trustees cast in person at a meeting called for the
purpose of voting on such amendment.
Except as set forth above, the Amendment does not alter or amend the Plan, which
remains in full force and effect. The Amendment is not intended to, and does
not, amend to increase materially the amounts to be paid by a Fund of the Trust
under the Plan as originally adopted.
THE VALIANT FUND
By: /s/ Richard F. Curcio
INTEGRITY INVESTMENTS, INC.
By: /s/ Richard F. Curcio
2
<PAGE> 1
EXHIBIT (m)(2)
THE VALIANT FUND
DISTRIBUTION AND SHAREHOLDER SERVICING PLAN FOR
CLASS C SHARES
DISTRIBUTION AND SHAREHOLDER SERVICING PLAN FOR CLASS C SHARES (the
"Plan") of the Valiant Fund (the "Trust") dated as of this 1st day of December,
1995.
1. THE PLAN. This Plan is the Trust's written distribution plan,
contemplated by Rule 12-b1 (the "Rule") under the Investment Company Act of 1940
(the "1940 Act"), pursuant to which the Trust will bear certain costs related to
the distribution of the Class C shares (the "Shares") of its U.S. Treasury Money
Market Portfolio, Tax-Exempt Money Market Portfolio, General Money Market
Portfolio and U.S. Treasury Income Portfolio (each of the aforementioned Funds
shall be referred to herein individually as a "Fund" and collectively as the
"Funds") and the provision of services to holders of Shares. To the extent that
any payments (in addition to those specified in Paragraph 3) made by the Trust
to Integrity Management & Research, Inc. (the "Manager"), any sub-adviser,
Integrity Investments, Inc. (the "Distributor"), any administrator of the Trust,
or any of their affiliates, including payment of investment advisory and service
fees, may be deemed to be indirect financing of any activity which is primarily
intended to result in the distribution of Shares, such payments shall be deemed
to be authorized by this Plan.
2. "SERVICE PROVIDER." As used in this Plan, the term "Service
Provider" shall mean any broker, dealer, bank or other institution which: (i)
renders assistance in the distribution of Shares or in providing continuing
personal service to holders of Shares; (ii) furnishes the Distributor with such
information as the Distributor and the Trust shall reasonably request concerning
the distribution of Shares and the provision of such personal service; and (iii)
has been selected by the Distributor to receive payments under the Plan.
3. PAYMENTS FOR DISTRIBUTION ASSISTANCE AND SUPPORT SERVICES. The Trust
will make payments to the Distributor, within forty-five (45) days of the end of
each calendar month of an annualized fee of up to .40% of the average daily net
assets of each Fund's Shares, computed as of the close of each business day,
subject to such reductions, if any, as may be necessary to comply with the rules
of the Securities and Exchange Commission or the National Association of
Securities Dealers, Inc. Such fee shall compensate the Distributor for
distribution-related services as follows: (i) its services as principal
underwriter of Shares including bearing costs related to distribution of Shares,
including but not limited to costs and expenses of printing and distributing
prospectuses, Statements of Additional Information, and annual reports (after
such items have been prepared and set in type) and sales literature which are
intended to be provided to prospective investors in connection with the offering
of Shares, and paying compensation to dealers and registered representatives for
sell Shares, and (ii) compensating Service Providers and the Distributor for
providing continuing personal services to shareholders after a sale of Shares,
maintaining shareholder accounts, and providing administrative service with
respect to shareholder accounts.
Distribution-related services include, but are not limited to, the
following: advertising the availability of services and products; designing
material to send to customers and
<PAGE> 2
developing methods of making such materials accessible to customers; providing
information about the product needs of customers; providing facilities to
solicit sales and to answer questions from prospective and existing investors
about the Funds; receiving and answering correspondence from prospective
investors, including requests for sale literature, prospectuses and Statements
of Additional Information; displaying and making sales literature and
prospectuses available on the service organization's premises; acting as liaison
between shareholders and the Funds, including obtaining information from the
Funds and providing performance and other information about the Funds' and
providing additional personal services and/or shareholder account maintenance
services or additional distribution-related services.
4. SELECTION AND NOMINATION OF TRUSTEES. While this Plan is in effect,
the selection and nomination of the Trustees of the Trust (the "Trustees") who
are not "interested persons" of the Trust shall be committed to the discretion
of the Trustees who are not "interested persons" of the Trust. Nothing herein
shall prevent the Trustees who are not "interested persons" of the Trust from
soliciting the view or the involvement of others in such selection or nomination
if such selection and nomination is made by Trustees who are not "interested
persons" of the Trust.
5. REPORTS. While this Plan is in effect, the Distributor shall provide
at least quarterly a written report to the Trustees detailing the amount of all
payments made pursuant to this Plan, and the purposes for which the payments
were made, the amount of the Distributor's total expenses incurred that year
with respect to the distribution of Shares, and such other information as from
time-to-time may be reasonably requested by the Trustees.
6. RELATED AGREEMENTS. Any agreement related to this Plan shall be in
writing and shall provide that: (i) such agreement may be terminated with
respect to a Fund at any time, without payment of any penalty, by vote of a
majority of Trustees who are not "interested persons" of the Trust and have no
direct or indirect financial interest in the operation of this Plan or in any
agreements related to this Plan (the "Independent Trustees") or by a vote of a
majority of the outstanding voting securities of Class C of the Fund, on not
more than sixty days written notice to any other party to the agreement; (ii)
such agreement shall automatically terminate in the event of its assignment;
(iii) such agreement shall go into effect when approved by a vote of the
Trustees and the Independent Trustees cast in person at a meeting called for the
purpose of voting on such agreement; and (iv) such agreement shall, unless
terminated as herein provided, continue in effect with respect to a Fund from
year to year only so long as such continuance is specifically approved at least
annually by a vote of the Trustees and the Independent Trustees cast in person
at a meeting called for the purpose of voting on such continuance.
7. EFFECTIVENESS, CONTINUATION, TERMINATION AND AMENDMENT. This Plan
will take effect on the date first set forth above. Unless terminated as herein
after provided, this Plan shall continue in effect with respect to a Fund from
year to year from the date first set forth above only so long as such
continuance is specifically approved at least annually by a vote of the Trustees
and the Independent Trustees cast in person at a meeting called for the purpose
of voting on such continuance. This Plan may be terminated with respect to a
Fund at any time by vote of a majority of the Independent Trustees or by the
vote of the holders of the outstanding voting securities of Class C of the Fund.
This Plan may not be amended to increase materially the amount of payments to be
made by such a Fund without approval by a vote of a majority of the outstanding
voting securities of Class C of such Fund, and all material amendments must be
approved by a vote of the Trustees and of the Independent Trustees cast in
person at a meeting called for the purpose of voting on such amendment.
2
<PAGE> 3
8. COPIES. The Trust shall preserve copies of this Plan, and each
agreement related hereto and each report referred to in Section 5 hereof
(collectively the "Records") for a period of six years from the date of such
records and each such Record shall be kept in an easily accessible place for the
first two years of such period.
9. DEFINITIONS. For the purposes of the Plan, the terms "vote of a
majority of the outstanding voting securities," "interested person," and
"assignment" shall have the meanings defined in the 1940 Act.
IN WITNESS WHEREOF, the Trust has executed this instrument in its name
and behalf, by one of its officers duly authorize, and the Distributor has
executed this instrument in its name and behalf, by one of its officers duly
authorized, as of the day and year first above written.
THE VALIANT FUND
By: /s/ Richard F. Curcio
-------------------------
Richard F. Curcio
INTEGRITY INVESTMENTS, INC.
By: /s/ Richard F. Curcio
-------------------------
Richard F. Curcio
3
<PAGE> 1
EXHIBIT (m)(3)
THE VALIANT FUND
DISTRIBUTION AND SHAREHOLDER SERVICING PLAN FOR
CLASS D SHARES
DISTRIBUTION AND SHAREHOLDER SERVICING PLAN FOR CLASS D SHARES (the
"Plan") of the Valiant Fund (the "Trust") dated as of this 19th day of December,
1995.
1. THE PLAN. This Plan is the Trust's written distribution plan,
contemplated by Rule 12-b1 (the "Rule") under the Investment Company Act of 1940
(the "1940 Act"), pursuant to which the Trust will bear certain costs related to
the distribution of the Class D shares (the "Shares") of its U.S. Treasury Money
Market Portfolio, Tax-Exempt Money Market Portfolio, General Money Market
Portfolio and U.S. Treasury Income Portfolio (each of the aforementioned Funds
shall be referred to herein individually as a "Fund" and collectively as the
"Funds") and the provision of services to holders of Shares. To the extent that
any payments (in addition to those specified in Paragraph 3) made by the Trust
to Integrity Management & Research, Inc. (the "Manager"), any sub-adviser,
Integrity Investments, Inc. (the "Distributor"), any administrator of the Trust,
or any of their affiliates, including payment of investment advisory and service
fees, may be deemed to be indirect financing of any activity which is primarily
intended to result in the distribution of Shares, such payments shall be deemed
to be authorized by this Plan.
2. "SERVICE PROVIDER." As used in this Plan, the term "Service
Provider" shall mean any broker, dealer, bank or other institution which: (i)
renders assistance in the distribution of Shares or in providing continuing
personal service to holders of Shares; (ii) furnishes the Distributor with such
information as the Distributor and the Trust shall reasonably request concerning
the distribution of Shares and the provision of such personal service; and (iii)
has been selected by the Distributor to receive payments under the Plan.
3. PAYMENTS FOR DISTRIBUTION ASSISTANCE AND SUPPORT SERVICES. The Trust
will make payments to the Distributor, within forty-five (45) days of the end of
each calendar month of an annualized fee of up to .50% of the average daily net
assets of each Fund's Shares, computed as of the close of each business day,
subject to such reductions, if any, as may be necessary to comply with the rules
of the Securities and Exchange Commission or the National Association of
Securities Dealers, Inc. Such fee shall compensate the Distributor for
distribution-related services as follows: (i) its services as principal
underwriter of Shares including bearing costs related to distribution of Shares,
including but not limited to costs and expenses of printing and distributing
prospectuses, Statements of Additional Information, and annual reports (after
such items have been prepared and set in type) and sales literature which are
intended to be provided to prospective investors in connection with the offering
of Shares, and paying compensation to dealers and registered representatives for
sell Shares, and (ii) compensating Service Providers and the Distributor for
providing continuing personal services to shareholders after a sale of Shares,
maintaining shareholder accounts, and providing administrative service with
respect to shareholder accounts.
Distribution-related services include, but are not limited to, the
following: advertising the availability of services and products; designing
material to send to customers and
<PAGE> 2
developing methods of making such materials accessible to customers; providing
information about the product needs of customers; providing facilities to
solicit sales and to answer questions from prospective and existing investors
about the Funds; receiving and answering correspondence from prospective
investors, including requests for sale literature, prospectuses and Statements
of Additional Information; displaying and making sales literature and
prospectuses available on the service organization's premises; acting as liaison
between shareholders and the Funds, including obtaining information from the
Funds and providing performance and other information about the Funds' and
providing additional personal services and/or shareholder account maintenance
services or additional distribution-related services.
4. SELECTION AND NOMINATION OF TRUSTEES. While this Plan is in effect,
the selection and nomination of the Trustees of the Trust (the "Trustees") who
are not "interested persons" of the Trust shall be committed to the discretion
of the Trustees who are not "interested persons" of the Trust. Nothing herein
shall prevent the Trustees who are not "interested persons" of the Trust from
soliciting the view or the involvement of others in such selection or nomination
if such selection and nomination is made by Trustees who are not "interested
persons" of the Trust.
5. REPORTS. While this Plan is in effect, the Distributor shall provide
at least quarterly a written report to the Trustees detailing the amount of all
payments made pursuant to this Plan, and the purposes for which the payments
were made, the amount of the Distributor's total expenses incurred that year
with respect to the distribution of Shares, and such other information as from
time-to-time may be reasonably requested by the Trustees.
6. RELATED AGREEMENTS. Any agreement related to this Plan shall be in
writing and shall provide that: (i) such agreement may be terminated with
respect to a Fund at any time, without payment of any penalty, by vote of a
majority of Trustees who are not "interested persons" of the Trust and have no
direct or indirect financial interest in the operation of this Plan or in any
agreements related to this Plan (the "Independent Trustees") or by a vote of a
majority of the outstanding voting securities of Class D of the Fund, on not
more than sixty days written notice to any other party to the agreement; (ii)
such agreement shall automatically terminate in the event of its assignment;
(iii) such agreement shall go into effect when approved by a vote of the
Trustees and the Independent Trustees cast in person at a meeting called for the
purpose of voting on such agreement; and (iv) such agreement shall, unless
terminated as herein provided, continue in effect with respect to a Fund from
year to year only so long as such continuance is specifically approved at least
annually by a vote of the Trustees and the Independent Trustees cast in person
at a meeting called for the purpose of voting on such continuance.
7. EFFECTIVENESS, CONTINUATION, TERMINATION AND AMENDMENT. This Plan
will take effect on the date first set forth above. Unless terminated as herein
after provided, this Plan shall continue in effect with respect to a Fund from
year to year from the date first set forth above only so long as such
continuance is specifically approved at least annually by a vote of the Trustees
and the Independent Trustees cast in person at a meeting called for the purpose
of voting on such continuance. This Plan may be terminated with respect to a
Fund at any time by vote of a majority of the Independent Trustees or by the
vote of the holders of the outstanding voting securities of Class D of the Fund.
This Plan may not be amended to increase materially the amount of payments to be
made by such a Fund without approval by a vote of a majority of the outstanding
voting securities of Class D of such Fund, and all material amendments must be
approved by a vote of the Trustees and of the Independent Trustees cast in
person at a meeting called for the purpose of voting on such amendment.
2
<PAGE> 3
8. COPIES. The Trust shall preserve copies of this Plan, and each
agreement related hereto and each report referred to in Section 5 hereof
(collectively the "Records") for a period of six years from the date of such
records and each such Record shall be kept in an easily accessible place for the
first two years of such period.
9. DEFINITIONS. For the purposes of the Plan, the terms "vote of a
majority of the outstanding voting securities," "interested person," and
"assignment" shall have the meanings defined in the 1940 Act.
IN WITNESS WHEREOF, the Trust has executed this instrument in its name
and behalf, by one of its officers duly authorize, and the Distributor has
executed this instrument in its name and behalf, by one of its officers duly
authorized, as of the day and year first above written.
THE VALIANT FUND
By: /s/ Richard F. Curcio
-------------------------
Richard F. Curcio
INTEGRITY INVESTMENTS, INC.
By: /s/ Richard F. Curcio
-------------------------
Richard F. Curcio
3
<PAGE> 1
EXHIBIT (m)(4)
THE VALIANT FUND
DISTRIBUTION AND SHAREHOLDER SERVICING PLAN FOR
CLASS E SHARES
DISTRIBUTION AND SHAREHOLDER SERVICING PLAN FOR CLASS E SHARES (the
"Plan") of the Valiant Fund (the "Trust") dated as of this 16th day of March,
1999.
1. THE PLAN. This Plan is the Trust's written distribution plan,
contemplated by Rule 12-b1 (the "Rule") under the Investment Company Act of 1940
(the "1940 Act"), pursuant to which the Trust will bear certain costs related to
the distribution of the Class E shares (the "Shares") of its U.S. Treasury Money
Market Portfolio, Tax-Exempt Money Market Portfolio, General Money Market
Portfolio and U.S. Treasury Income Portfolio (each of the aforementioned Funds
shall be referred to herein individually as a "Fund" and collectively as the
"Funds") and the provision of services to holders of Shares. To the extent that
any payments (in addition to those specified in Paragraph 3) made by the Trust
to Integrity Management & Research, Inc. (the "Manager"), any sub-adviser,
Integrity Investments, Inc. (the "Distributor"), any administrator of the Trust,
or any of their affiliates, including payment of investment advisory and service
fees, may be deemed to be indirect financing of any activity which is primarily
intended to result in the distribution of Shares, such payments shall be deemed
to be authorized by this Plan.
2. "SERVICE PROVIDER." As used in this Plan, the term "Service
Provider" shall mean any broker, dealer, bank or other institution which: (i)
renders assistance in the distribution of Shares or in providing continuing
personal service to holders of Shares; (ii) furnishes the Distributor with such
information as the Distributor and the Trust shall reasonably request concerning
the distribution of Shares and the provision of such personal service; and (iii)
has been selected by the Distributor to receive payments under the Plan.
3. PAYMENTS FOR DISTRIBUTION ASSISTANCE AND SUPPORT SERVICES. The Trust
will make payments to the Distributor, within forty-five (45) days of the end of
each calendar month of an annualized fee of up to .80% of the average daily net
assets of each Fund's Shares, computed as of the close of each business day,
subject to such reductions, if any, as may be necessary to comply with the rules
of the Securities and Exchange Commission or the National Association of
Securities Dealers, Inc. Such fee shall compensate the Distributor for
distribution-related services as follows: (i) its services as principal
underwriter of Shares including bearing costs related to distribution of Shares,
including but not limited to costs and expenses of printing and distributing
prospectuses, Statements of Additional Information, and annual reports (after
such items have been prepared and set in type) and sales literature which are
intended to be provided to prospective investors in connection with the offering
of Shares, and paying compensation to dealers and registered representatives for
sell Shares, and (ii) compensating Service Providers and the Distributor for
providing continuing personal services to shareholders after a sale of Shares,
maintaining shareholder accounts, and providing administrative service with
respect to shareholder accounts.
Distribution-related services include, but are not limited to, the
following: advertising the availability of services and products; designing
material to send to customers and
<PAGE> 2
developing methods of making such materials accessible to customers; providing
information about the product needs of customers; providing facilities to
solicit sales and to answer questions from prospective and existing investors
about the Funds; receiving and answering correspondence from prospective
investors, including requests for sale literature, prospectuses and Statements
of Additional Information; displaying and making sales literature and
prospectuses available on the service organization's premises; acting as liaison
between shareholders and the Funds, including obtaining information from the
Funds and providing performance and other information about the Funds' and
providing additional personal services and/or shareholder account maintenance
services or additional distribution-related services.
4. SELECTION AND NOMINATION OF TRUSTEES. While this Plan is in effect,
the selection and nomination of the Trustees of the Trust (the "Trustees") who
are not "interested persons" of the Trust shall be committed to the discretion
of the Trustees who are not "interested persons" of the Trust. Nothing herein
shall prevent the Trustees who are not "interested persons" of the Trust from
soliciting the view or the involvement of others in such selection or nomination
if such selection and nomination is made by Trustees who are not "interested
persons" of the Trust.
5. REPORTS. While this Plan is in effect, the Distributor shall provide
at least quarterly a written report to the Trustees detailing the amount of all
payments made pursuant to this Plan, and the purposes for which the payments
were made, the amount of the Distributor's total expenses incurred that year
with respect to the distribution of Shares, and such other information as from
time-to-time may be reasonably requested by the Trustees.
6. RELATED AGREEMENTS. Any agreement related to this Plan shall be in
writing and shall provide that: (i) such agreement may be terminated with
respect to a Fund at any time, without payment of any penalty, by vote of a
majority of Trustees who are not "interested persons" of the Trust and have no
direct or indirect financial interest in the operation of this Plan or in any
agreements related to this Plan (the "Independent Trustees") or by a vote of a
majority of the outstanding voting securities of Class E of the Fund, on not
more than sixty days written notice to any other party to the agreement; (ii)
such agreement shall automatically terminate in the event of its assignment;
(iii) such agreement shall go into effect when approved by a vote of the
Trustees and the Independent Trustees cast in person at a meeting called for the
purpose of voting on such agreement; and (iv) such agreement shall, unless
terminated as herein provided, continue in effect with respect to a Fund from
year to year only so long as such continuance is specifically approved at least
annually by a vote of the Trustees and the Independent Trustees cast in person
at a meeting called for the purpose of voting on such continuance.
7. EFFECTIVENESS, CONTINUATION, TERMINATION AND AMENDMENT. This Plan
will take effect on the date first set forth above. Unless terminated as herein
after provided, this Plan shall continue in effect with respect to a Fund from
year to year from the date first set forth above only so long as such
continuance is specifically approved at least annually by a vote of the Trustees
and the Independent Trustees cast in person at a meeting called for the purpose
of voting on such continuance. This Plan may be terminated with respect to a
Fund at any time by vote of a majority of the Independent Trustees or by the
vote of the holders of the outstanding voting securities of Class E of the Fund.
This Plan may not be amended to increase materially the amount of payments to be
made by such a Fund without approval by a vote of a majority of the outstanding
voting securities of Class E of such Fund, and all material amendments must be
approved by a vote of the Trustees and of the Independent Trustees cast in
person at a meeting called for the purpose of voting on such amendment.
<PAGE> 3
8. COPIES. The Trust shall preserve copies of this Plan, and each
agreement related hereto and each report referred to in Section 5 hereof
(collectively the "Records") for a period of six years from the date of such
records and each such Record shall be kept in an easily accessible place for the
first two years of such period.
9. DEFINITIONS. For the purposes of the Plan, the terms "vote of a
majority of the outstanding voting securities," "interested person," and
"assignment" shall have the meanings defined in the 1940 Act.
IN WITNESS WHEREOF, the Trust has executed this instrument in its name
and behalf, by one of its officers duly authorize, and the Distributor has
executed this instrument in its name and behalf, by one of its officers duly
authorized, as of the day and year first above written.
THE VALIANT FUND
By: /s/ Richard F. Curcio
-------------------------
Richard F. Curcio
INTEGRITY INVESTMENTS, INC.
By: /s/ Richard F. Curcio
-------------------------
Richard F. Curcio
3
<PAGE> 1
EXHIBIT (o)
THE VALIANT FUND
AMENDED AND RESTATED
PLAN FOR MULTIPLE CLASSES OF SHARES
MARCH 16, 1999
WHEREAS, The Valiant Fund (the "Trust") is a Massachusetts business
trust, engaged in business as an open-end management investment company and
registered as such under the Investment Company Act of 1940, as amended (the
"1940 Act");
WHEREAS, pursuant to the terms of the Trust's Agreement and Declaration
of Trust, as well as the 1940 Act and the rules and regulations thereunder, the
Board of Trustees of the Trust (the "Board") has authority to approve and
authorize the issuance of, and has approved and authorized the issuance of,
shares of beneficial interest as Class A Shares, Class B Shares, Class C Shares,
Class D Shares and Class E Shares of each investment portfolio (a "Portfolio")
of the Trust listed herein on Schedule A, as may be amended;
WHEREAS, the Trust wishes to adopt this Plan for Multiple Classes of
Shares (the "Multi-Class Plan"), which is a plan as contemplated by Rule 18f-3
of the 1940 Act; and
WHEREAS, at a meeting held on March 16, 1999, the Board, including a
majority of the Trustees who are not interested persons of the Trust (as defined
in section 2(a) (19) of the 1940 Act) (the "Independent Trustees"), approved and
adopted this Multi-Class Plan and determined that this Multi-Class Plan is: (a)
in the best interests of the holders of Class A Shares; (b) in the best
interests of the holders of Class B Shares; (c) in the best interests of the
holders of Class C Shares; (d) in the best interests of the holders of Class D
Shares; (e) in the best interests of the holders of Class E Shares; and (f) in
the best interests of the holders the Trust as a whole;
NOW, THEREFORE, this Multi-Class Plan, as amended from time to time,
shall remain in effect until such time as the Board terminates this Multi-Class
Plan.
SECTION I: CLASS DISTRIBUTION AND SHAREHOLDER SERVICES FEES
Class A Shares of each Portfolio are offered at net asset value and are
not subject to any asset-based distribution or shareholder service fee.
Class B Shares of each Portfolio are offered at net asset value and shall
be subject to annual asset-based distribution and shareholder service fees (as
provided for by the Distribution and Shareholder Servicing Plan pursuant to Rule
12b-1 under the 1940 Act (the "12b-1 Plan")) of 0.25% of the average daily net
assets of the Class B Shares of such Portfolio. Such fees are calculated daily
and paid monthly to Integrity Investments, Inc. (the "Distributor") and service
providers that provide shareholder support services.
Class C Shares of each Portfolio will be offered at net asset value and
will be subject to annual asset-based distribution fees and shareholder service
fees (as provided for by the Distribution and Shareholder Servicing Plan for
Class C Shares (the "Class C 12b-1 Plan")) of 0.40% of the average daily
<PAGE> 2
net assets of the Class C Shares in each Portfolio. Such fees are calculated
daily and paid monthly to the Distributor and service providers that provide
shareholder support services.
Class D Shares of each Portfolio will be offered at net asset value and
will be subject to annual asset-based distribution fees and shareholder service
fees (as provided for by the Distribution and Shareholder Servicing Plan for
Class D Shares (the "Class D 12b-1 Plan")) of 0.50% of the average daily net
assets of the Class D Shares in each Portfolio. Such fees are calculated daily
and paid monthly to the Distributor and service providers that provide
shareholder support services.
Class E Shares of each Portfolio will be offered at net asset value and
will be subject to annual asset-based distribution fees and shareholder service
fees (as provided for by the Distribution and Shareholder Servicing Plan for
Class E Shares (the "Class E 12b-1 Plan")) of 0.80% of the average daily net
assets of the Class E Shares in each Portfolio. Such fees are calculated daily
and paid monthly to the Distributor and service providers that provide
shareholder support services.
Notwithstanding the foregoing, the aggregate amounts of any asset-based
distribution and/or shareholder service fee paid by the Trust shall not exceed
such amount as is permitted under Section 2030(d) of the Conduct Rules of the
National Association of Securities Dealers, Inc. (the "NASD"), as amended from
time to time, and any other rules or regulations promulgated by the NASD or
Securities and Exchange Commission applicable to mutual fund distribution and
service fees.
SECTION II: ALLOCATION OF CLASS EXPENSES; OTHER PROVISIONS
Class A Shares, Class B Shares, Class C Shares, Class D Shares and Class
E Shares represent interests in the same Portfolios of the Trust and have no
exchange privileges or conversion features. Each class of shares shall have the
same rights, preferences, voting powers, restrictions and limitations, except as
follows:
(1) expenses related to the distribution of a class of shares or
to the services provided to shareholders of a class of shares
shall be borne solely by such class;
(2) each class will bear different Class Expenses (as defined
below);
(3) each class will have exclusive voting rights with respect to
matters that exclusively affect such class and separate voting
rights on any matter submitted to shareholders in which the
interests of one class differ from the interests of any other
class;
(4) each class will bear a different name or designation.
The Board, acting in its sole discretion, has determined that the
following expenses attributable to the shares of a particular class ("Class
Expenses") will be borne solely by the class to which they are attributable:
(1) asset-based distribution and shareholder service fees; and
(2) extraordinary non-recurring expenses including litigation and
other legal expenses relating to a particular class.
Class Expenses may be waived or reimbursed proportionately and on a pro
rata basis among classes of a Portfolio by Integrity Management and Research,
Inc. or any other provider of services to the Trust.
2
<PAGE> 3
Investment advisory fees, custodial fees, and other expenses relating to
the management of a Portfolios' assets shall not be allocated on a
class-specific basis.
SECTION III: ALLOCATION OF FUND INCOME AND EXPENSES
Income, realized and unrealized capital gains and losses, and expenses
that are not allocated to a specific class pursuant to Section II above, shall
be allocated to each class of a Portfolio on the basis of the net asset value of
that class in relation to the net asset value of the Portfolio.
SECTION IV: AMENDMENTS
This Multi-Class Plan may not be amended to change any material provision
unless such amendment is approved by a vote of the majority of the Board,
including a majority of the trustees who are not interested persons of the
Trust, based on its finding that the amendment is in the best interest of each
class individually and the Trust as a whole.
IN WITNESS WHEREOF, the Trust has executed this Multi-Class Plan on the
day and year set forth below.
DATE:
---------------------------
THE VALIANT FUND
By:
-----------------------------
Richard F. Curcio
Title: Chairman and President
Attest:
--------------------------
3
<PAGE> 4
SCHEDULE A
The Valiant Fund
General Money Market Portfolio
Tax-Exempt Money Market Portfolio
U.S. Treasury Income Portfolio
U.S. Treasury Money Market Portfolio
4
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000899090
<NAME> THE VALIANT FUND
<SERIES>
<NUMBER> 011
<NAME> U.S. TREASURY MONEY MARKET
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1999
<PERIOD-START> SEP-01-1998
<PERIOD-END> AUG-31-1999
<INVESTMENTS-AT-COST> 303262003
<INVESTMENTS-AT-VALUE> 303262003
<RECEIVABLES> 30651
<ASSETS-OTHER> 817
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 303293471
<PAYABLE-FOR-SECURITIES> 4899142
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1282116
<TOTAL-LIABILITIES> 6181258
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 297373986
<SHARES-COMMON-STOCK> 15103045<F1>
<SHARES-COMMON-PRIOR> 31186483<F1>
<ACCUMULATED-NII-CURRENT> 51967
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (313740)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 297112213
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 23208317
<OTHER-INCOME> 0
<EXPENSES-NET> 2567523
<NET-INVESTMENT-INCOME> 20640794
<REALIZED-GAINS-CURRENT> (256840)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 20383954
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1204030)<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 53480150<F1>
<NUMBER-OF-SHARES-REDEEMED> (69564003)<F1>
<SHARES-REINVESTED> 415<F1>
<NET-CHANGE-IN-ASSETS> (222649240)
<ACCUMULATED-NII-PRIOR> 3224
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 8157
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<GROSS-EXPENSE> 2579872
<AVERAGE-NET-ASSETS> 25658005<F1>
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<FN>
<F1>Class A
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000899090
<NAME> THE VALIANT FUND
<SERIES>
<NUMBER> 012
<NAME> U.S. TREASURY MONEY MARKET
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1999
<PERIOD-START> SEP-01-1998
<PERIOD-END> AUG-31-1999
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<F1>Class B
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000899090
<NAME> THE VALIANT FUND
<SERIES>
<NUMBER> 013
<NAME> U.S. TREASURY MONEY MARKET
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1999
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<FN>
<F1>Class D
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000899090
<NAME> THE VALIANT FUND
<SERIES>
<NUMBER> 014
<NAME> U.S. TREASURY MONEY MARKET
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1999
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<SHARES-REINVESTED> 12<F1>
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<EXPENSE-RATIO> .99<F1>
<FN>
<F1>Class E
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000899090
<NAME> THE VALIANT FUND
<SERIES>
<NUMBER> 021
<NAME> U.S. TREASURY INCOME
<S> <C>
<PERIOD-TYPE> 12-MOS
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000899090
<NAME> THE VALIANT FUND
<SERIES>
<NUMBER> 031
<NAME> GENERAL MONEY MARKET
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1999
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<FN>
<F1>Class A
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000899090
<NAME> THE VALIANT FUND
<SERIES>
<NUMBER> 032
<NAME> GENERAL MONEY MARKET
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1999
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<F1>Class B
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000899090
<NAME> THE VALIANT FUND
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<NUMBER> 033
<NAME> GENERAL MONEY MARKET
<S> <C>
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<F1>Class E
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</TABLE>
<TABLE> <S> <C>
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<CIK> 0000899090
<NAME> THE VALIANT FUND
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<NUMBER> 041
<NAME> TAX-EXEMPT MONEY MARKET
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