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[LOGO OF THE GRIFFIN FUNDS]
PROSPECTUS
GRIFFIN MONEY MARKET FUND
GRIFFIN TAX-FREE MONEY MARKET FUND
JANUARY 31, 1996
AS SUPPLEMENTED JULY 29, 1996
[LOGO OF THE GRIFFIN FUNDS]
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THE GRIFFIN FUNDS
PROSPECTUS JANUARY 31, 1996 AS SUPPLEMENTED ON JULY 29, 1996
................................................................................
MONEY MARKET FUND
The Money Market Fund seeks to provide investors with as high a level of
current income as is consistent with the preservation of principal and
liquidity.
TAX-FREE MONEY MARKET FUND
The Tax-Free Money Market Fund seeks to provide investors with as high a level
of current income, exempt from federal income taxes, as is consistent with a
portfolio of high quality short-term municipal obligations selected on the
basis of liquidity and stability of capital.
INVESTMENTS IN THE MONEY MARKET FUND AND TAX-FREE MONEY MARKET FUND (EACH A
"FUND," TOGETHER THE "FUNDS") ARE NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE CAN BE NO ASSURANCE THAT EITHER THE MONEY MARKET FUND OR THE
TAX-FREE MONEY MARKET FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF
$1.00 PER SHARE.
This prospectus sets forth concisely the information about the Money Market
Fund and the Tax-Free Money Market Fund of The Griffin Funds, Inc. ("The
Griffin Funds") that a prospective investor ought to know before investing in
the Funds. Please read this prospectus carefully before investing and keep it
for future reference.
A Statement of Additional Information ("SAI") dated January 31, 1996 has been
filed with the Securities and Exchange Commission ("SEC") and is incorporated
herein by reference. The SAI is available free upon request by calling The
Griffin Funds at 1-800-676-4450.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR ISSUED,
ENDORSED OR GUARANTEED BY, HOME SAVINGS OF AMERICA, FSB ("HOME SAVINGS"),
SAVINGS OF AMERICA OR ANY OF THEIR AFFILIATES. SUCH SHARES ARE NOT INSURED BY
THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN EITHER OF THE
FUNDS INVOLVES CERTAIN RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
GRIFFIN FINANCIAL INVESTMENT ADVISERS ("GRIFFIN ADVISERS") IS THE INVESTMENT
ADVISER AND, TOGETHER WITH ITS AFFILIATES, PROVIDES CERTAIN OTHER SERVICES TO
THE FUNDS, FOR WHICH THEY ARE COMPENSATED. GRIFFIN FINANCIAL SERVICES ("GRIFFIN
FINANCIAL") IS THE SPONSOR AND DISTRIBUTOR FOR THE FUNDS. GRIFFIN ADVISERS AND
GRIFFIN FINANCIAL ARE BOTH AFFILIATED WITH HOME SAVINGS AND SAVINGS OF AMERICA.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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KEY FUND FACTS
THE FUNDS IN BRIEF 3
.............................................................................
WHO MAY WANT TO INVEST 4
FUND EXPENSES
FUND EXPENSES 4
FINANCIAL HIGHLIGHTS
FINANCIAL HIGHLIGHTS 6
INVESTMENT POLICIES AND
PROCEDURES
INVESTMENT POLICIES AND PROCEDURES 6
YOUR FUND ACCOUNT
TYPES OF ACCOUNTS 7
Different ways to set up an account.
.............................................................................
HOW TO PURCHASE SHARES 8
Opening an account and making additional Fund purchases.
.............................................................................
HOW TO REDEEM SHARES 10
Redeeming shares and closing your account.
.............................................................................
SHAREHOLDER SERVICES 12
.............................................................................
DIVIDENDS, CAPITAL GAINS AND TAXES 13
FUND ACCOUNT POLICIES
TRANSACTION POLICIES 14
Share price calculations and purchase and redemption policies.
THE FUNDS IN DETAIL
STRUCTURE 16
How the Funds are structured.
.............................................................................
SERVICE PROVIDERS 16
.............................................................................
SUMMARY OF FUND EXPENSES 17
Fund operating costs and how they are calculated.
.............................................................................
PERFORMANCE 17
.............................................................................
DESCRIPTION OF INVESTMENTS 18
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INVESTMENT LIMITATIONS 22
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KEY FUND FACTS
THE FUNDS IN BRIEF
INVESTMENT OBJECTIVES AND POLICIES: THE MONEY MARKET FUND, an open-end,
diversified management investment company, seeks to provide investors with as
high a level of current income as is consistent with the preservation of
principal and liquidity.
THE TAX-FREE MONEY MARKET FUND, an open-end, diversified management
investment company, seeks to provide investors with as high a level of current
income, exempt from federal income taxes, as is consistent with a portfolio of
high quality short-term municipal obligations selected on the basis of
liquidity and stability of capital. As a matter of fundamental policy, under
normal market conditions, the Tax-Free Money Market Fund will invest its assets
so that at least 80% of its income distributions are exempt from federal income
tax and the federal alternative minimum tax.
The Funds may purchase only high-quality securities that Griffin Advisers
believes present minimal risks. To be considered high quality, a security
generally must be rated in accordance with applicable rules in one of the two
highest categories for short-term securities by at least two nationally
recognized rating services (or by one, if only one rating service has rated the
security) or, if unrated, be judged to be of equivalent quality by Griffin
Advisers.
The Money Market Fund and Tax-Free Money Market Fund must limit their
investments to securities with remaining maturities of 397 days or less and
must maintain a dollar-weighted average maturity of 90 days or less.
For more detailed information about portfolio practices see "Investment
Policies and Procedures" and "The Funds In Detail -- Description of
Investments" and "-- Investment Limitations."
As with any mutual fund, there is no assurance that the Funds will achieve
their respective goals. The ability of the Funds to achieve a high level of
income is circumscribed by their investment exclusively in high quality, short-
term instruments.
MANAGEMENT: Subject to the general supervision of the Board of Directors of The
Griffin Funds and in accordance with each Fund's investment policies, Griffin
Advisers, as adviser, and Payden & Rygel Investment Counsel ("Payden & Rygel")
as sub-adviser, manage investments for the Funds. Griffin Advisers, a
subsidiary of H.F. Ahmanson & Company, a savings and loan holding company, and
an affiliate of Home Savings and Savings of America, is located at 5000
Rivergrade Road, Irwindale, CA 91706. Griffin Advisers, a California
corporation, was organized on July 22, 1993.
Payden & Rygel, which is located at 333 South Grand Avenue, 32nd Floor, Los
Angeles, California 90071, was established in 1983, and as of December 31, 1995
managed assets of approximately $20 billion.
SPONSOR AND DISTRIBUTOR: Griffin Financial, a registered broker-dealer, is the
sponsor and distributor of the Funds. In this capacity, Griffin Financial has
the exclusive right to distribute shares of the Funds. Griffin Financial is a
subsidiary of H.F. Ahmanson & Company and an affiliate of Griffin Advisers,
Home Savings and Savings of America.
ADMINISTRATOR: Griffin Financial Administrators ("Griffin Administrators")
serves as the administrator of the Funds and provides various administrative
and accounting services to the Funds. Investors Fiduciary Trust Company
("IFTC") provides certain sub-administration services to the Funds.
HOW TO PURCHASE AND REDEEM SHARES: For a description of how to purchase and
redeem shares, see "Your Fund Account -- How to Purchase Shares," and "-- How
to Redeem Shares" in this prospectus.
Customers of Griffin Financial may invest in the Funds through a Griffin
Financial Services Portfolio Builder Account ("Portfolio Builder Account").
Investments through a Portfolio Builder Account are governed by the terms and
conditions of the Portfolio Builder Account, which are set forth in a separate
Portfolio Builder Account Client Agreement provided by Griffin Financial to
each Portfolio Builder Account holder. In light of the discretionary asset
allocation structure of investments through the Portfolio Builder Account,
certain of the features described in this Prospectus are not available to all
investors purchasing shares of the Funds through a Portfolio Builder Account.
Specifically, shares of a Fund purchased through a Portfolio Builder Account
may be redeemed only through the Portfolio Builder Account, and the dividend
and distribution options
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and exchange privileges described in this Prospectus are not available with
respect to shares purchased through a Portfolio Builder Account. Potential
Portfolio Builder Account holders should refer to the Client Agreement for more
information regarding the Portfolio Builder Account, including information
about fees and expenses.
WHO MAY WANT TO INVEST
The Money Market Fund is designed as a convenient vehicle for those investors
seeking to obtain the yields available from money market instruments while
maintaining liquidity. The Money Market Fund makes it possible for investors to
participate in a more diversified portfolio of money market instruments than
the amount of their investments might otherwise permit.
The Tax-Free Money Market Fund offers investors a convenient way to invest in a
professionally managed portfolio of short-term municipal obligations.
Investments in the Tax-Free Money Market Fund earn federally tax-exempt income
while remaining liquid and diversified.
Each Fund's ability to achieve its respective investment objectives depends
on the successful implementation of its investment strategies. The Funds'
policies are intended to help maintain a stable $1.00 share price; however, the
value of the instruments which the Funds may purchase can change under certain
circumstances, such as when interest rates or issuers' creditworthiness change,
or if an issuer or guarantor of a security fails to pay interest or principal
when due. If these changes in value are material, a Fund's share price could
deviate (positively or negatively) from $1.00. Securities with longer
maturities generally are more susceptible to price changes, although they may
provide higher yields. Debt securities that are not backed by the United States
Government are subject to credit risk, which is the risk that the issuer may
not be able to pay principal and/or interest when due. Neither of the Funds on
an individual basis constitutes a complete investment plan. An additional risk
of investing in the Funds is the fact that Griffin Advisers has no previous
experience in advising a mutual fund, although the Funds' sub-adviser does have
prior advisory experience. See "The Funds In Detail -- Service Providers."
FUND EXPENSES
MONEY MARKET FUND
TAX-FREE MONEY MARKET FUND
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SHAREHOLDER TRANSACTION EXPENSES
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<TABLE>
<CAPTION>
TAX-FREE
MONEY MONEY
MARKET MARKET
FUND FUND
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<S> <C> <C>
Maximum sales load
imposed on purchases None None
Maximum sales load
imposed on reinvested
dividends None None
Deferred sales load None None
Redemption fees None None
Exchange fees None None
- --------------------------------------------------------
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ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
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<CAPTION>
TAX-FREE
MONEY MONEY
MARKET MARKET
FUND FUND
- --------------------------------------------------------
<S> <C> <C>
Management fees
(after waivers)* 0.00% 0.00%
12b-1 fees 0.20% 0.20%
Other expenses
(after waivers
and reimbursements)* 0.40% 0.40%
Total Fund operating
expenses (after
waivers and re-
imbursements)* 0.60% 0.60%
</TABLE>
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*Griffin Advisers and Griffin Administrators each has agreed to waive or
reimburse all or a portion of its respective fees in circumstances in which any
Fund's expenses that are subject to limitations imposed under state securities
laws and regulations exceed such limitations. See "Management Contracts" in the
SAI with respect to state law limitations on expenses. In addition, Griffin
Advisers and Griffin Administrators currently intend to voluntarily waive a
portion of their respective fees and reimburse the Funds for certain expenses.
The percentages shown above under "Management fees (after waivers)," "Other
expenses (after waivers and reimbursements)" and "Total Fund operating expenses
(after waivers and reimbursements)" are based on amounts incurred during the
most recent fiscal year, restated to reflect voluntary fee waivers and expense
reimbursements that are expected to continue during the current fiscal year.
Absent
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such voluntary waivers and reimbursements, these percentages are expected to be
0.50%, 0.37% and 1.07%, respectively, for the Money Market Fund and 0.50%,
1.02% and 1.72%, respectively, for the Tax-Free Money Market Fund. There can be
no assurance that the foregoing voluntary fee waivers and expense
reimbursements will continue.
EXAMPLE: Assume hypothetically that each Fund's annual return is 5% and that
its operating expenses are as described in the above table for the periods
shown below. For every $1,000 you invested, the following shows the amounts you
would have paid in total expenses if you redeemed your shares after the number
of years indicated:
After 1 year
Money Market Fund $ 6
Tax-Free Money Market Fund $ 6
After 3 years
Money Market Fund $19
Tax-Free Money Market Fund $19
After 5 years
Money Market Fund $34
Tax-Free Money Market Fund $34
After 10 years
Money Market Fund $75
Tax-Free Money Market Fund $75
THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES; ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.
The foregoing states the basis on which payments are made. Operation of the
Funds involves a variety of expenses for shareholder statements, tax reporting,
legal, accounting and other services. These costs are paid out of each Fund's
assets.
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FINANCIAL HIGHLIGHTS
The following financial information relating to the Funds has been derived from
the financial statements of The Griffin Funds. The financial statements of The
Griffin Funds for the periods presented have been audited by KPMG Peat Marwick
LLP, the independent auditor to The Griffin Funds.
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<TABLE>
<CAPTION>
TAX-FREE
MONEY MARKET MONEY MARKET
YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED
9/30/95 9/30/94(a) 9/30/95 9/30/94(a)
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<S> <C> <C> <C> <C>
Net asset value--beginning of period.... $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME (LOSS) FROM INVESTMENT
OPERATIONS:
Net investment income................. 0.05 0.03 0.03 0.02
Total from investment operations.... 0.05 0.03 0.03 0.02
LESS DISTRIBUTIONS:
Dividends from net investment income.. (0.05) (0.03) (0.03) (0.02)
Total distributions................. (0.05) (0.03) (0.03) (0.02)
Net increase (decrease) in net asset
value.................................. 0.00 0.00 0.00 0.00
Net asset value--end of period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return (not annualized)(c)........ 5.52% 3.36% 3.44% 2.22%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)....... $79,964 $49,988 $8,621 $10,633
Ratios to average net assets
(annualized):
Ratio of expenses to average net
assets(i)............................ 0.42% 0.15% 0.44% 0.17%
Ratio of net investment income to
average net assets(ii)............... 5.40% 4.25% 3.39% 2.56%
(i) Ratio of expenses to average net
assets prior to:
waivers and reimbursements(b)... 1.29% 1.64% 1.90% 2.28%
(ii) Ratio of net investment income
to average net assets prior to:
waivers and reimbursements(b)... 4.53% 2.76% 1.92% 0.45%
Portfolio Turnover Rate............... N/A N/A N/A N/A
</TABLE>
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(a) The fund commenced operations on October 19, 1993.
(b) Ratio reflects fees reduced in connection with Custodial Earnings Credits
only for periods ended September 30, 1995.
(c) Total return represents aggregate total return for the periods indicated.
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INVESTMENT POLICIES AND PROCEDURES
The MONEY MARKET FUND invests in high quality U.S. dollar-denominated money
market instruments, including (i) bank obligations, consisting of certificates
of deposit and bankers' acceptances of U.S. and foreign banks; (ii) commercial
paper; (iii) U.S. Government obligations; and (iv) other debt obligations,
consisting of municipal obligations, corporate bonds, asset-backed securities
and securities issued by special purpose entities. The Money Market Fund also
may engage in repurchase and reverse repurchase transactions. In addition, the
Fund may buy or sell securities on a when-issued or delayed-delivery basis and
may purchase restricted and illiquid instruments.
The Fund will concentrate (I.E. invest more than 25% of its total assets) in
the financial services industry. Because the Fund concentrates its investments
in the financial services industry, its performance may be affected by
conditions affecting banks and other financial services companies. See "The
Funds in Detail -- Investment Limitations."
The TAX-FREE MONEY MARKET FUND invests in high quality, short-term municipal
obligations selected on the basis of liquidity and stability of principal.
These include municipal obligations issued by states or their counties,
municipalities, authorities or
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other political subdivisions, and municipal obligations issued by territories
or possessions of the U.S. such as Puerto Rico.
As a matter of fundamental policy, under normal market conditions, the Fund
will invest its assets so that at least 80% of its income distributions are
exempt from federal income tax and the federal alternative minimum tax.
The Tax-Free Money Market Fund invests in high quality, short-term municipal
securities but it may also invest in high quality, long-term fixed, variable or
floating rate municipal instruments (including tender option bonds) and
municipal instruments with demand features and standby commitments whose
features give them interest rates, maturities and prices similar to short-term
instruments. See "Additional Securities and Investment Practices Shared By
Certain Funds -- Variable or Floating Rate Demand Obligations," and "Additional
Securities and Investment Practices of the Tax-Free Money Market Fund Only--
Standby Commitments" in the SAI. Generally, the Fund's investments in municipal
securities will consist of tax, revenue or bond anticipation notes; tax-exempt
commercial paper, general obligation or revenue bonds (including municipal lease
obligations and resource recovery bonds); and zero coupon bonds. The Fund may
buy or sell securities on a when-issued or delayed-delivery basis, and may
purchase restricted securities and illiquid instruments.
The Tax-Free Money Market Fund may temporarily change its investment focus
for defensive purposes. During periods when, in Griffin Advisers' opinion, a
temporary defensive posture in the market is appropriate, the Fund may hold
cash that is not earning interest or invest in obligations whose interest may
be federally taxable. Under such circumstances, the Fund may temporarily invest
so that less than 80% of its income distributions are federally tax-free.
Federally taxable obligations consist of obligations issued by the U.S.
Government or any of its agencies or instrumentalities, high-quality commercial
paper, certificates of deposit and repurchase agreements.
Pursuant to procedures adopted by the Board of Directors, the Funds may
purchase only high-quality securities that Griffin Advisers believes present
minimal credit risks. To be considered high quality, a security must be rated
in accordance with applicable rules in one of the two highest categories for
short-term securities by at least two nationally recognized rating services (or
by one, if only one rating service has rated the security) or, if unrated, must
be judged to be of equivalent quality by Griffin Advisers. For more information
concerning the instruments in which the Funds may invest, see "The Funds in
Detail --Description of Investments."
YOUR FUND ACCOUNT
TYPES OF ACCOUNTS
You may set up an account directly in either Fund. The various types of
accounts that can be established with The Griffin Funds are described below.
Remember: The account guidelines may NOT apply to certain retirement
accounts. If your employer offers either of the Funds through a retirement
program, contact your employer for more information. Otherwise, call The
Griffin Funds directly or contact your Griffin Financial Representative.
INDIVIDUAL OR JOINT TENANTS
Individual accounts are owned by one person. Joint accounts can have two or
more owners (tenants).
RETIREMENT
Retirement plans can help individuals to "shelter" investment income and
capital gains from current taxes. In addition, contributions to these accounts
may be tax deductible. Retirement accounts require special applications and
typically have lower minimums. The following summarizes the general attributes
of tax laws common to retirement programs. You should consult your tax adviser
for more specific information.
. Individual Retirement Accounts (IRAs) allow individuals who are not active
participants (and who do not have a spouse who is an active participant) in
certain types of retirement plans and who are under age 70-1/2 with earned
income to make deductible contributions to an IRA subject to certain dollar
limitations.
. Rollover IRAs offer special tax advantages for certain distributions from
employer-sponsored retirement plans.
. Keogh or Corporate Profit Sharing and Money Purchase Pension Plans allow
self-employed individuals or small business owners (and their employees) to
make tax deductible contributions for themselves and any eligible employees
up to $30,000 per year.
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. Simplified Employee Pension Plans (SEP-IRAs) provide small business owners
or those with self-employed income (and their eligible employees) with many
of the same advantages as a Keogh plan, together with fewer administrative
requirements.
. 403(b) Custodial Accounts are available to employees of most tax-exempt
institutions, including schools, hospitals, and other charitable
organizations.
. 401(k) Programs allow employees of a company which has established such a
program to contribute a percentage of their wages on a tax-deferred basis.
These accounts need to be established by the trustee of the plan.
The Tax-Free Money Market Fund is probably not an appropriate investment for
tax-exempt institutions or tax-sheltered retirement accounts, since such
investors would receive no benefit from the tax-exempt status of the Fund's
dividends.
GIFTS OR TRANSFER TO MINORS (UGMA, UTMA)
These custodial accounts enable a donor to give or otherwise transfer money to
a child and to obtain certain tax benefits. A donor can give up to $10,000 a
year per child without having such contributuions be subject to federal gift
tax. Depending on applicable state laws, a custodial account can be established
under either the Uniform Gifts to Minors Act (UGMA) or the Uniform Transfers to
Minors Act (UTMA).
Trust
The trust must be established before an account can be opened. You may have to
provide additional materials or sign additional documents.
BUSINESS OR ORGANIZATION
For investment needs of corporations, associations, partnerships, institutions
or other organizations
Ask your Griffin Financial Representative.
HOW TO PURCHASE SHARES
If you are a new investor in the Funds, you may open your account in person or
by wire as described on page 9. You also may complete and sign an account
application and mail it together with your check. If you need an application,
call 1-800-676-4450 or contact your Griffin Financial Representative.
If you are already an investor in any portfolio of The Griffin Funds (each, a
"Griffin Fund"), you can make further investments in one of the Griffin Funds:
. In person,
. By mailing in an application with a check, or
. By exchanging from another Griffin Fund, subject to the limitations
described in the other Griffin Fund's prospectus.
You can arrange withdrawals from your checking or savings deposit account to
open a new Fund account or to add to an existing Fund account, subject to the
terms of the deposit account.
If you are a first-time investor through a tax-sheltered retirement plan,
such as an IRA, you will need a special application. Ask your Griffin Financial
Representative or call1-800-676-4450 for more information about retirement plan
investment procedures and a retirement application.
If you purchase shares by check, and then redeem those shares by any method
other than by exchange to another Griffin Fund, the redemption proceeds will be
mailed upon clearance of your purchase check, which may take up to fifteen
days.
All purchases made by check should be in U.S. dollars and be made payable to
the appropriate Griffin Fund. Third party checks, except those payable to an
existing shareowner who is a natural person (as opposed to a corporation or
partnership), credit cards and cash will not be accepted.
From time to time, shares of the Funds also may be available for purchase
through various sweep and cash management programs offered by various entities,
including Griffin Financial and its affiliates, on terms specified in those
programs.
SHARE PRICE
The Funds' share price, referred to as the net asset value ("NAV"), is
calculated every day that the New York Stock Exchange ("NYSE") is open for
business.
Shares are purchased at the next share price determined after an order and
good funds are received and accepted by a Fund. Share price is determined at
noon New York time. Orders received with good funds before noon New York time
are effective that day and orders received at or after noon New York time are
effective the following business day. You will begin to accrue daily dividends
the day after becoming a shareholder.
8
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MINIMUM INVESTMENT AMOUNTS
FOR NEW ACCOUNTS
<TABLE>
<S> <C>
Minimum total initial investment $1,000
Minimum investment per Fund $ 250
For retirement accounts $ 250
</TABLE>
<TABLE>
<S> <C>
FOR ADDITIONAL INVESTMENTS $100
For retirement accounts $100
Through automatic investment $ 50
</TABLE>
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PURCHASING SHARES
- --------------------------------------------------------------------------------
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
IN PERSON *Bring your application *Bring your check to a Griffin
and check to a Griffin Financial Representative. Call 1-
Financial Representative. 800-676-4450 for the Representative
Call 1-800-676-4450 for nearest you.
the Representative nearest
you.
MAIL *Complete and sign the *Make your check payable to "Money
application. Make your Market Fund" or "Tax-Free Money
check payable to "Money Market Fund." Indicate your Fund
Market Fund" or "Tax-Free account number on your check.
Money Market Fund." Mail to (checks only):
Mail to: P.O. Box 419647
P.O. Box 419245 Kansas City, Missouri 64141
Kansas City, Missouri 64141
*Exchange by mail:
call 1-800-676-4450 for
instructions.
PHONE 1-800- *Exchange from another *Exchange from another Griffin Fund
676-4450 Griffin Fund account with account with the same registration
the same registration (identical name(s), address, and
(identical name(s), taxpayer ID number).
address, and taxpayer ID
number).
WIRE *Call 1-800-676-4450 to
set up your account and to
arrange a wire
transaction. Not available
for retirement accounts.
*Wire within 24 hours to: *Wire to:
Investors Fiduciary Trust Investors Fiduciary Trust Co.
Co. Routing #101 0036 21
Routing #101 0036 21 Account #752-7144
Account #752-7144 Specify Fund name andinclude your
Specify fund and include account number andyour name.
your new account number
and your name.
AUTOMATIC *Automatic investments on a regular
INVESTMENT basis: call 1-800-676-4450.
PLANS
9
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HOW TO REDEEM SHARES
You can take money out of your Fund account at any time by redeeming some or
all of your shares. Your shares will be redeemed at the next share price
calculated after your order is received and accepted by the Fund.
To redeem shares in a non-retirement account, you may use any of the methods
described in this section.
To redeem shares in a retirement account, your request must be made in
writing, except for exchanges to other Griffin Funds, which can be requested by
phone or in writing. Call 1-800-676-4450 for a retirement distribution form.
If you are redeeming some but not all of your shares, you must leave an
aggregate of at least $1,000 worth of shares in your Griffin Funds accounts to
keep it open ($250 for retirement accounts).
To redeem shares by wire, you will need to provide advance authorization.
You may redeem shares through the Funds' checkwriting service. There is no
charge for this service and you may write an unlimited number of checks. The
minimum check amount is $500. You may not use the checkwriting service if you
have set up a systematic withdrawal plan. In addition, you should not write a
check for the entire value of your account or close your account by writing a
check.
Certain redemption requests must include a signature guarantee. A signature
guarantee is designed for your protection. Your request must be made in writing
and must include a signature guarantee in any of the following situations:
. You wish to redeem more than $100,000 worth of shares,
. Your account registration has changed within the last 60 days,
. The check is not being mailed to the address on your account (record
address),
. The check is not being made payable to the account holder, or
. The redemption proceeds are being transferred to a Griffin Fund account
registered in a different name.
You can obtain a signature guarantee from a bank, broker (including Griffin
Financial offices), dealer, credit union (if authorized under state law),
securities exchange or association, clearing agency or savings association. A
notary public cannot provide a signature guarantee.
The Griffin Funds, Griffin Financial and the transfer agent are not liable
for damages resulting from following instructions communicated by telephone
that they reasonably believe to be genuine. The Griffin Funds will employ
reasonable procedures to confirm that instructions communicated by telephone
are genuine. If The Griffin Funds fails to do so, it may be liable for any
losses due to unauthorized or fraudulent instructions. The following procedures
are used to process telephone redemptions: (i) your Social Security number is
requested; (ii) the dollar amount of the transaction is confirmed by reading it
back to you; (iii) the address of record or predesignated account number for
the distribution is confirmed; and (iv) you are given a control number so that
the transaction can be traced should you have any questions.
Certain purchase, redemption and exchange features (e.g., checkwriting,
automatic investment, systematic withdrawal, etc.) generally available to
shareholders of a Fund may not be available to an investor that purchases
shares of a Fund through a sweep or other cash management program offered by
various entities, including Griffin Financial and its affiliates.
REDEEMING SHARES IN WRITING
Write a "letter of instruction" with:
. Your name,
. The Fund's name,
. Your Fund account number,
. The dollar amount or number of shares to be redeemed, and
. Any other applicable requirements listed in the following table.
Unless otherwise instructed, The Griffin Funds will send a check to the record
address. Mail your instructions to:
The Griffin Funds, Inc.
P.O. Box 419245
Kansas City, Missouri 64141
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REDEEMING SHARES
- --------------------------------------------------------------------------------
METHOD ACCOUNT TYPE SPECIAL REQUIREMENTS
PHONE 1-800- All account types except *Maximum check request: $100,000
676-4450 retirement
All account types *You may exchange to other Griffin
Funds if both accounts are
registered with the same name(s),
address, and taxpayer ID number.
MAIL OR IN Individual, Joint *The letter of instruction must be
PERSON Tenants, Sole signed by all persons required to
Proprietorships, UGMA, authorize transactions, exactly as
UTMA their names appear on the account.
Retirement accounts *The account owner should complete
a retirement distribution form.
Call 1-800-676-4450 to request one.
Trust *The trustee must sign the letter
in this capacity. If the trustee is
not named in the account
registration, provide a copy of the
trust document certified within the
last 60 days.
Business or Organization *At least one person authorized (by
corporate resolution or other
action) to act on behalf of the
account must sign the letter.
*Include a corporate resolution
with corporate seal or a signature
guarantee.
Executor, Administrator, *Call 1-800-676-4450 for
Conservator, Guardian instructions.
WIRE All account types except *You must authorize in writing the
retirement wire feature before using it. To
verify that the authorization is in
place, call 1-800-676-4450. Minimum
wire: $5,000.
*Your wire redemption request must
be received by The Griffin Funds
before 4 p.m. Eastern time for
money to be wired on the next
business day.
CHECKWRITING All account types except *Call 1-800-676-4450 to apply for
retirement checkwriting.
*Minimum check amount: $500.
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SHAREHOLDER SERVICES
The Griffin Funds provide a variety of services to help you with your account.
INFORMATION SERVICES
You may visit a Griffin Financial Representative for information or assistance
or you can call a 24-hour toll-free telephone number for automated account
balance information.
Statements and reports that you will receive include the following:
. Confirmation statements (generally, after every transaction, except a
reinvestment, that affects your account balance or your account
registration)
. Account statements (monthly)
. Fund reports (every six months)
To reduce expenses, only one copy of most Fund reports will be mailed to you,
even if you have more than one Fund account. Call 1-800-676-4450 if you need
additional copies of any Fund reports or historical account information.
TRANSACTION SERVICES
EXCHANGE PRIVILEGES allow you to redeem your shares in either of the Funds and
buy shares of the other Fund or shares of any other Griffin Fund by telephone
or written exchange. Investors should obtain and read the Prospectus for the
Fund into which they desire to exchange before submitting an exchange order.
Please remember that exchanges from a Fund are limited to four per calendar
year, and that exchanges may have tax consequences for you. Shares of the
Griffin Fund to be acquired must be registered for sale in the shareholder's
state of residence. For complete policies and restrictions governing exchanges,
including circumstances under which a shareholder's exchange privilege may be
suspended or revoked, see "Fund Account Policies-- Transaction Policies."
AUTOMATIC INVESTMENT PLANS can help you in pursuing your financial goals by
providing a convenient way to invest money regularly. The Griffin Funds lets
you transfer money into your Fund account automatically on a monthly or
quarterly basis. Transfers will occur on or about the 5th or 20th day of the
applicable month. The minimum monthly automatic investment amount is $50.
Certain restrictions apply for retirement accounts. Call 1-800-676-4450 for
more information.
SYSTEMATIC WITHDRAWAL PLANS let you set up monthly, quarterly, semiannual or
annual redemptions from your account. The minimum eligible account size for
this service is $10,000 and the minimum withdrawal amount is $50. Fund shares
will be redeemed as necessary to meet withdrawal payments. Remember that
withdrawals may result in a gain or loss for tax purposes, may involve the use
of principal and may deplete all of the shares in your account.
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<PAGE>
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REGULAR INVESTMENT PLANS
- --------------------------------------------------------------------------------
AUTOMATIC INVESTMENTS
To transfer money from your bank or depository institution account to a Griffin
Fund
MINIMUM FREQUENCY OPENING OR CHANGING AN ACCOUNT
$50 Monthly or *For a new account, complete the appropriate section on
quarterly the Fund application.
*For existing accounts, call 1-800-676-4450 for an
application.
*To change the amount or frequency of your investment,
visit a Griffin Financial office or call 1-800-676-4450
at least ten business days prior to your next scheduled
investment date.
- --------------------------------------------------------------------------------
DIRECT DEPOSIT
To send all or a portion of your paycheck or Social Security check to a Griffin
Fund
MINIMUM FREQUENCY OPENING OR CHANGING AN ACCOUNT
$50 Every pay *Check the appropriate box on the fund application,
period visit a Griffin Financial office or call 1-800-676-4450
for an authorization form.
*Changes require a new authorization form.
- --------------------------------------------------------------------------------
GRIFFIN AUTOMATIC EXCHANGES
To transfer money from one Griffin Fund to another
MINIMUM FREQUENCY SETTING UP OR CHANGING
$50 Monthly, *Check the appropriate box on the Fund application,
quarterly visit a Griffin Financial office or call 1-800-676-4450
or for an authorization form.
annually
*To change the amount or frequency of your investment,
visit a Griffin Financial office or call 1-800-676-4450
- --------------------------------------------------------------------------------
SYSTEMATIC WITHDRAWAL PLANS
- --------------------------------------------------------------------------------
AUTOMATIC REDEMPTIONS
To redeem shares on a regular basis
MINIMUM FREQUENCY SETTING UP OR CHANGING
$50 Monthly, *For a new account, complete the appropriate section
quarterly, on the Fund application.
semiannually
or
annually
*For existing accounts, contact your Griffin Fund
Representative or call 1-800-676-4450 to request the
appropriate form.
- --------------------------------------------------------------------------------
DIVIDENDS, CAPITAL GAINS AND TAXES
Income dividends are accrued daily and paid monthly on both Funds. Capital
gains, if any, are declared and paid annually.
DISTRIBUTION OPTIONS
When you open an account, specify on your application how you want to receive
your distributions. Each Fund offers four options:
1. REINVESTMENT OPTION. Dividend and capital gain distributions will be
automatically reinvested in additional Fund shares. If you do not indicate a
choice on your application, it will be assumed you have chosen this option.
2. EARNED-INCOME OPTION. Capital gain distributions will be automatically
reinvested, but you will be sent a check for each dividend distribution.
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<PAGE>
3. CASH OPTION. A check for each dividend and capital gain distribution will be
sent to you.
4. DESIGNATED DISTRIBUTION OPTION. Dividend and capital gain distributions will
be automatically invested in shares of the same class of another Griffin
Fund owned through an identically registered account. Visit a Griffin
Financial office or call 1-800-676-4450 for more information.
TAXES
The following is a brief discussion of certain federal income tax
considerations. Further information is contained in the SAI. All investors
should consult their individual tax advisers with respect to their particular
tax situations as well as the state and local tax status of investments in
shares of the Funds.
Each Fund intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). By
complying with the applicable provisions of the Code, the Funds will not be
subject to federal income taxes with respect to net investment income and net
realized capital gains distributed to its shareholders. No part of the
distributions to shareholders for either Fund is expected to qualify for the
dividends-received deduction allowed to corporate shareholders.
Unless a shareholder is exempt from taxation or entitled to tax deferral, all
dividends derived from net investment income, except exempt interest dividends,
and distributions from capital gains are taxable when they are paid, whether
they are received in cash or reinvested in additional shares of a Fund,
regardless of how long the shareholder has held the shares.
With respect to the Tax-Free Money Market Fund, if certain conditions are
met, federally tax-free interest earned by this Fund is free from federal
income taxes when distributed as dividends ("exempt-interest dividends"). If
the Fund earns federally taxable income from any of its investments, this
income would be distributed as taxable dividends. Distributions from the Fund's
short-term capital gains, if any, will generally be federally taxable as
dividends, and long-term capital gain distributions, if any, are federally
taxable as long-term capital gains. In addition, interest on indebtedness
incurred or continued to purchase or carry shares of the Tax-Free Money Market
Fund will not be deductible to the extent that the Fund's distributions are
exempt from income tax.
If the Tax-Free Money Market Fund should hold certain private activity bonds
issued after August 7, 1986, shareholders of the Fund must include, as an item
of tax preference, the portion of dividends paid by the Fund that is
attributable to interest on such bonds in their federal alternative minimum
taxable income for purposes of determining liability (if any) for the 28%
alternative minimum tax applicable to individuals and the 20% alternative
minimum tax and the environmental tax applicable to corporations. Corporate
shareholders must also take all exempt-interest dividends into account in
determining certain adjustments for federal alternative minimum and
environmental tax purposes. The environmental tax applicable to corporations is
imposed at the rate of 0.12% on the excess of the corporation's modified
federal alternative minimum taxable income over $2,000,000.
Taxes are not withheld from distributions to U.S. investors if certain
Internal Revenue Service ("IRS") requirements regarding Taxpayer Identification
Numbers ("TINs") are met. Non-resident aliens and other foreign shareholders
may be subject to U.S. withholding tax at rates up to 31% on distributions.
Each year, the Funds will notify shareholders as to the amount and federal
tax status of all dividends and capital gains paid during the prior year.
FUND ACCOUNT POLICIES
TRANSACTION POLICIES
Each Fund's NAV per share is determined on each day the NYSE is open for
trading. Each Fund's NAV is the value of a single share. The NAV is computed by
adding up the value of a Fund's investments, cash and other assets, subtracting
its liabilities, and then dividing the result by the number of shares
outstanding. Each Fund's portfolio investments are valued on the basis of
amortized cost. The value of assets of each Fund is determined as of 12:00 noon
New York time on each day the NYSE is open, immediately after the daily
declaration of dividends.
Each Fund's offering price (per share) and redemption price of a share are
the Fund's NAV.
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<PAGE>
On your account application, you will be asked to certify that your Social
Security or TIN is correct and that you are not subject to backup withholding
by the IRS. If these certifications are not made, the IRS can require The
Griffin Funds to withhold 31% of your taxable distributions and redemptions.
Each Fund reserves the right to suspend the offering of its shares for a
period of time. The Funds also reserve the right to reject any specific
purchase order, including certain purchases by exchange. See "Exchange
Privileges" on page 12. For example, purchase orders may be rejected if, in The
Griffin Funds' opinion, an order or orders are of a size that would disrupt
management of a Fund.
Orders to buy shares will be processed at the next NAV calculated after your
order and good funds are received and accepted by the Fund. Note that:
. All of your purchases must be made in U.S. dollars and checks must be drawn
on U.S. banks.
. The Funds do not accept cash.
. When making a purchase with more than one check, each check must have a
value of at least $50.
. Each Fund reserves the right to limit the number of checks processed at one
time.
. If your check does not clear, or if payment is not received for any tele-
phone purchase, your purchase will be cancelled and you could be liable for
any losses or fees that a Fund or its transfer agent has incurred.
The Funds will in most cases issue share certificates upon request.
You can avoid the collection period associated with check purchases by buying
shares by bank wire, U.S. Postal money order, U.S. Treasury check, Federal
Reserve check or Direct Deposit.
When you place an order to redeem shares, your shares will be redeemed at the
next NAV calculated after your request is received and accepted. Please note
the following:
. Normally, redemption proceeds will be mailed to you on the next business
day, although the Funds may take up to seven days to pay you.
. If you purchase shares by check, and then seek to redeem those shares by any
method other than through an exchange to another Griffin Fund, the
redemption proceeds will be mailed upon clearance of your purchase check,
which may take up to fifteen days.
. Redemptions may be suspended or payment dates postponed on days when the
NYSE is closed, when trading on the NYSE is restricted, or as authorized by
the SEC.
If your Griffin Fund total account balance falls below $1,000 ($250 for
retirement accounts) as a result of redeeming shares, and The Griffin Funds
elects to close your account, you will be given 30 days' notice to reestablish
the minimum balance. If you do not increase your balance to the minimum account
size, The Griffin Funds reserves the right to close your account and send the
proceeds to you. Your shares will be redeemed at the NAV on the day your
account is closed.
As a shareholder, you have the option of exchanging shares of the Funds for
shares of other Griffin Funds subject to the following:
. The Fund you are exchanging into must be registered for sale in your state
of residence.
. You may only exchange between Funds with accounts that are identically
registered (i.e., with the same name(s), address and Taxpayer Identification
Number.)
. If you exchange into a Fund with a sales charge, you pay the percentage
point difference between that Fund's sales charge and any sales charge you
have previously paid in connection with the shares you are exchanging. For
example, if you paid no sales charge on your shares and you exchange them
into Class A Shares of a Fund with a 4-1/2% sales charge, you would pay a 4-
1/2% sales charge.
. If you exchange shares of one of the Funds into Class B Shares of a Fund
that imposes a contingent deferred sales charge ("CDSC"), you will be
subject to the CDSC applicable to such shares upon redemption of the Class B
Shares acquired through the exchange. In addition, if you acquire Class B
Shares of a Fund through such an exchange, the remaining period of time that
the CDSC applicable to the acquired Class B Shares remains in effect will be
computed from the time of the exchange.
15
<PAGE>
. Exchanges may have tax consequences.
. Because excessive trading can adversely affect a Fund's performance and
shareholders, each of the Funds reserves the right to temporarily or
permanently terminate the exchange privilege of any investor who makes more
than four exchanges between Griffin Funds per calendar year. Accounts under
common ownership or control, including accounts with the same Taxpayer
Identification Number, will be counted together for purposes of the four
exchange limit.
. Each Fund also reserves the right to refuse exchange purchases by any person
or group if, in Griffin Advisers' judgment, the receiving Fund would be
unable to invest the money effectively in accordance with its investment
objective and policies, or would otherwise be adversely affected.
Although The Griffin Funds will attempt to give you prior notice whenever it
is reasonably able to do so, these restrictions may be imposed at any time. The
Funds reserve the right to terminate or modify the exchange privilege in the
future upon 60 days' prior written notice to shareholders. Remember: Before
exchanging into a Fund, you should read its prospectus.
THE FUNDS IN DETAIL
STRUCTURE
The Griffin Funds was organized as a Maryland corporation on August 5, 1993.
Each Fund is comprised of only one class of shares. The Griffin Funds is
governed by a Board of Directors, which has overall responsibility for the
management of the Funds and is responsible for protecting the interests of
shareholders. The directors meet periodically throughout the year to oversee
each Fund's activities and review arrangements with the companies that provide
major services to the Funds and the performance of the Funds.
The Griffin Funds typically will not hold annual shareholders meetings,
although special meetings may be called from time to time. These meetings may
be called to elect or remove directors, change fundamental policies, approve
management contracts or for other purposes. Shareholders not attending these
meetings are encouraged to vote by proxy. Proxy materials, including a voting
card and information about the proposals to be voted on, will be mailed in
advance of a meeting. Shareholders are entitled to one vote for each share
owned. The Griffin Funds will hold special meetings of shareholders for the
purpose of voting on the question of removal of a director or directors if
requested in writing by the holders of at least 10% of outstanding voting
securities of the Funds and will assist shareholders in communicating with
other shareholders.
SERVICE PROVIDERS
The Funds are advised by Griffin Advisers, which manages the Funds' investments
pursuant to an advisory contract. Griffin Advisers has no previous experience
in advising mutual funds. Payden & Rygel acts as sub-adviser to the Funds and
as such has primary responsibility for choosing investments for the Funds.
Payden & Rygel, with approximately $20 billion in assets under management as of
December 31, 1995, is the sub-adviser to other separately managed series of The
Griffin Funds and to a fixed income global mutual fund unaffiliated with The
Griffin Funds, as well as to a series of group trusts and several pooled
accounts for a wide variety of clients. Pursuant to a sub-advisory contract
with Griffin Advisers, Payden & Rygel provides periodic reports on the
investment strategy and performance of the Funds.
Griffin Administrators is the Funds' administrator and provides
administrative and accounting services to the Funds.
IFTC is the Funds' transfer, shareholder service and dividend-paying agent.
IFTC is located at 127 West 10th Street, Kansas City, Missouri 64105. IFTC also
provides certain sub-administrative services to the Funds.
Griffin Financial, located at 5000 Rivergrade Road, Irwindale, California
91706, distributes and markets the Funds.
Griffin Advisers, Griffin Financial and Griffin Administrators are wholly-
owned subsidiaries of Griffin Financial Services of America, which in a wholly-
owned subsidiary of H.F. Ahmanson & Company, a savings and loan holding
company, and are affiliates of Home Savings and Savings of America.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR ISSUED,
ENDORSED OR GUARANTEED BY, HOME SAVINGS, SAVINGS OF AMERICA, OR ANY OF THEIR
AFFILIATES. SUCH SHARES ARE NOT INSURED BY THE U.S. GOVERNMENT, THE FEDERAL
DEPOSIT
16
<PAGE>
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENTAL
AGENCY.
SUMMARY OF FUND EXPENSES
Like all mutual funds, the Funds pay expenses related to their operations.
Expenses charged to a Fund and paid out of a Fund's assets are reflected in its
share price or dividends.
Each Fund pays a management fee to Griffin Advisers for managing its assets.
The Funds also pay other expenses, which are described below.
Griffin Advisers or Griffin Administrators may, from time to time,
voluntarily agree to waive or reimburse the Funds for management fees and other
expenses. Waiver or reimbursement arrangements, which may be terminated at any
time without notice, can enhance a Fund's performance by decreasing its
expenses.
MANAGEMENT FEE
The management fee is calculated and paid to Griffin Advisers every month. The
fee is calculated by multiplying each Fund's average daily net assets by 0.50%
on an annualized basis. Griffin Advisers, in turn, pays Payden & Rygel for the
sub-advisory services provided to the Funds at the annual rate of 0.25% of the
first $25 million of each Fund's average daily net assets and 0.20% of each
Fund's average daily net assets in excess of $25 million. For the fiscal year
ended September 30, 1995, after waivers, the Money Market Fund and the Tax-Free
Money Market Fund paid management fees to Griffin Advisers at the rate of 0.03%
and 0.04%, respectively, of their daily net assets.
DISTRIBUTION AND SERVICE FEES
Griffin Financial is the distributor ("Distributor") of shares of the Funds.
The Griffin Funds has adopted a Distribution and Services Plan on behalf of
each of the Funds under the SEC's Rule 12b-1 (the "Plans"). Under the Plans,
the Distributor may receive compensatory payments and/or reimbursements to
defray all or part of the cost of preparing, printing and delivering
prospectuses to prospective shareholders of a Fund or for other distribution-
related or sales support services. The fees paid under the Plans also can be
used to pay servicing agents for shareholder liaison services, including
responding to customer inquiries and providing information on their
investments. Payments under the Plans may not exceed, on an annual basis, 0.20%
of each Fund's average daily net assets.
OTHER EXPENSES
The Funds have the following expenses in addition to the management fee and
distribution and services fees.
The Funds contract with Griffin Administrators to provide various
administrative and accounting services. These services include processing
shareholder transactions and calculating the Funds' share prices. The
administrative fee is determined and paid to Griffin Administrators every
month. The fee is determined by multiplying each Fund's average daily net
assets by 0.20% on an annualized basis. Griffin Administrators, in turn, pays
IFTC for subadministration services it provides to the Funds. For the fiscal
year ended September 30, 1995, after waivers, the Funds paid administration
fees to Griffin Administrators at the rate of 0.16% and 0.17%, respectively, of
their daily net assets.
In addition to the management fee and the other fees paid to Griffin
Advisers, Griffin Financial and Griffin Administrators, the Funds pay other
expenses, such as legal, audit and custodian fees, proxy solicitation costs,
and the compensation of directors who are not affiliated with Griffin Advisers,
Griffin Financial or Griffin Administrators.
PERFORMANCE
The Funds' performance may be advertised in terms of current yield or effective
yield. In addition, the Tax-Free Money Market Fund's performance may be
advertised in terms of tax-equivalent yield or effective tax-equivalent yield.
These performance figures are based on historical results calculated under
uniform SEC formulas and are not intended to indicate future performance.
Yield refers to the income generated by an investment in a Fund over a seven-
day period, expressed as an annual percentage rate. Effective yields are
calculated similarly, but assume that the income earned from a Fund is
reinvested in the Fund. Because of the effects of compounding, effective yields
are slightly higher than current yields. The tax-equivalent yield and the
effective tax-equivalent yield of the Tax-Free Money Market Fund show the level
of taxable yield needed to produce an after-tax equivalent of the Fund's tax-
free yield. This is done by increasing the Fund's yield (calculated as above)
by the amount necessary to reflect the payment of federal income tax at a
stated tax
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rate. The application of the stated income tax rate results in a higher yield
figure.
DESCRIPTION OF INVESTMENTS
The following pages contain more detailed information about the types of
instruments in which the Funds may invest, and strategies Griffin Advisers may
employ in pursuit of the Funds' investment objectives. A summary of risks and
restrictions associated with these instrument types and investment practices is
included as well. Additional information about these instruments and investment
practices is contained in the SAI. Except as specifically noted, policies and
limitations are considered at the time of purchase; the sale of instruments is
not required in the event of a subsequent change in circumstances.
BOTH FUNDS
ASSET BACKED SECURITIES The Funds may invest in Asset Backed Securities, which
arise through the grouping by governmental, government-related, and private
organizations of loans, receivables and other assets originated by various
lenders. Asset Backed Securities acquired by a Fund consist of both mortgage
and non-mortgage backed securities. Unlike other forms of debt securities,
which normally provide for periodic payment of interest in fixed amounts with
principal paid at maturity or specified call dates, Asset Backed Securities
provide periodic payments which generally consist of both interest and
principal payments.
The life of an Asset Backed Security varies with the prepayment experience
with respect to the underlying debt instruments. The rate of such prepayments,
and hence the life of an Asset Backed Security, will be primarily a function of
current market interest rates, although other economic and demographic factors
may be involved. For example, falling interest rates generally result in an
increase in the rate of prepayments of mortgage loans while rising interest
rates generally decrease the rate of prepayments. An acceleration in
prepayments in response to sharply falling interest rates will shorten the
security's average maturity and limit the potential appreciation in the
security's value relative to a conventional debt security. Consequently, Asset
Backed Securities are not as effective in locking in high, long-term yields.
Conversely, in periods of sharply rising rates, prepayments are generally slow,
increasing the security's average life and its potential for price
appreciation.
Mortgage backed securities represent an ownership interest in a pool of
residential mortgage loans, the interest on which is in most cases issued and
guaranteed by an agency or instrumentality of the U.S. Government, though not
necessarily by the U.S. Government itself. One such type of mortgage backed
security is a Government National Mortgage Association ("GNMA") Certificate.
GNMA Certificates are backed as to the timely payment of principal and interest
by the full faith and credit of the U.S. Government. Another type is a Federal
National Mortgage Association ("FNMA") Certificate, the principal and interest
of which are guaranteed only by FNMA itself, not by the full faith and credit
of the U.S. Government. Another type is a Federal Home Loan Mortgage
Corporation ("FHLMC") Participation Certificate. This type of obligation is
guaranteed by FHLMC as to timely payment of principal and interest. However,
like a FNMA security, it is not guaranteed by the full faith and credit of the
U.S. Government. Mortgage backed securities issued by private issuers, whether
or not such obligations are subject to guarantees by the private issuer, may
entail greater risk than obligations directly or indirectly guaranteed by the
U.S. Government. Such securities will be purchased for the Funds only when
Griffin Advisers determines that they are readily marketable at the time of
purchase.
Non-mortgage backed securities include interests in pools of receivables,
such as motor vehicle installment purchase obligations and credit card
receivables. Such securities are generally issued as pass-through certificates,
which represent undivided fractional ownership interests in the underlying pool
of assets. Such securities also may be debt instruments, which also are known
as collateralized obligations and are generally issued as the debt of a special
purpose entity organized solely for the purpose of owning such assets and
issuing such debt.
Non-mortgage backed securities are not issued or guaranteed by the U.S.
Government or its agencies or instrumentalities; however, the payment of
principal and interest on such obligations may be guaranteed up to certain
amounts and for a certain time period by a letter of credit issued by a
financial institution (such as a bank or insurance company) unaffiliated with
the issuers of such securities.
BANKERS' ACCEPTANCES are negotiable obligations of a bank to pay a draft which
has been drawn on it by a customer. These
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<PAGE>
obligations are drawn on large banks and usually backed by goods in
international trade.
CERTIFICATES OF DEPOSIT (CDS) are negotiable certificates representing a
depository institution's obligation to repay funds deposited with it, earning
special rates of interest over a given period of time. The Funds intend to
invest in negotiable CDs with a stated maturity of 397 days or less. Many CDs
by their terms are not withdrawable; others impose penalties upon early
withdrawal. Because such instruments trade in a developed secondary market,
however, early withdrawal penalties should not affect the ability to dispose of
the investment.
COMMERCIAL PAPER refers to short-term debt obligations issued by banks, broker-
dealers, corporations and other entities for purposes such as financing their
current operations. The Funds intend to invest in commercial paper having
maximum maturities of 270 days.
CORPORATE BONDS AND NOTES include debt securities issued by domestic
corporations, U.S. dollar-denominated debt securities issued by foreign
corporations, Yankee bonds and supranational obligations. Yankee bonds are U.S.
dollar-denominated obligations issued by foreign governments or companies.
Supranational obligations are U.S. dollar-denominated obligations issued by
international entities such as The World Bank and the Inter-American
Development Bank. A bond generally is an interest-bearing security--an IOU--
issued by companies or governmental units. The issuer has a contractual
obligation to pay interest at a stated rate on specific dates and to repay
principal (the bond's face value) on a specified date. An issuer may have the
right to redeem or "call" a bond before maturity, and the investor may have to
reinvest the proceeds at lower market rates.
A bond's annual interest income, set by its coupon rate, is usually fixed for
the life of the bond. Its yield (income as a percent of current price) will
fluctuate to reflect the changes in interest rate levels. A bond's price
usually rises when interest rates fall, and vice versa, so its yield stays
current. Bonds may be unsecured (backed by the issuer's general
creditworthiness only) or secured (also backed by specified collateral).
Certain bonds have interest rates that are adjusted periodically which tend
to minimize fluctuations in their principal value. In calculating the Fund's
weighted average maturity, the maturity of these securities may be shortened
under certain specified conditions. Bonds may be senior or subordinated
obligations. Senior obligations generally have the first claim on a
corporation's earnings and assets and, in the event of liquidation, are paid
before subordinated debt.
DELAYED DELIVERY TRANSACTIONS are securities purchased on a when-issued or
delayed delivery basis, with payment and delivery taking place at a future
date. The Funds may purchase securities on a delayed delivery basis to generate
income and to hedge against changes in interest rates and securities' prices.
The market value of securities purchased in this way may change before the
delivery date, which could affect the market value of a Fund's assets.
Ordinarily, the Funds will not earn interest on securities until they are
delivered. The Funds may also purchase and sell securities on a forward
commitment basis. When delayed delivery purchases are outstanding, a Fund will
set aside cash or liquid high quality debt instruments in a segregated
custodial account to cover its purchase obligations. See "Additional Securities
and Investment Practices Shared By Certain Funds -- Delayed Delivery
Transactions" in the SAI.
DEMAND FEATURES. The Funds may invest in securities with demand features, which
are puts that entitle a security holder to repayment of the principal amount of
the underlying security on no more than 30 days' notice at any time or at
specified intervals not exceeding 397 days.
ILLIQUID INVESTMENTS. Each Fund may invest up to 10% of its net assets in
illiquid investments. Illiquid investments are those that may not be sold or
disposed of in the ordinary course of business within seven days at
approximately the price at which they are valued. Under the supervision of the
Board of Directors, Griffin Advisers determines the liquidity of each Fund's
investments. The absence of a trading market can make it difficult to ascertain
a market value for illiquid investments. Disposing of illiquid investments
before maturity may be time-consuming and expensive and it may be difficult or
impossible for a Fund to sell illiquid investments promptly at an acceptable
price. See "Additional Securities and Investment Practices Shared By Certain
Funds--Illiquid Investments" in the SAI.
MUNICIPAL SECURITIES. The Funds may invest in Municipal Securities, which
include general obligation securities, which are backed by the full taxing
power of a municipality, and revenue securities, which are backed by revenues
of a
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specific tax, project or facility. Industrial revenue bonds are a type of
revenue bond backed by the credit and security of a private issuer and may
involve greater risk. Private activity municipal securities, which may be
subject to the federal alternative minimum tax, include securities issued to
finance housing and other construction projects, student loans and privately
owned solid waste disposal and water and sewage treatment facilities.
OTHER INVESTMENT COMPANIES. The Funds may invest in shares of other open-end
management investment companies with consistent investment objectives, subject
to the limitations of Section 12(d)(1) of the Investment Company Act of 1940,
provided that any such purchases will be limited to temporary investments in
shares of unaffiliated investment companies and Griffin Advisers will waive its
advisory fees for that portion of a Fund's assets so invested, except when such
purchase is part of a plan of merger, consolidation, reorganization or
acquisition. Such investment companies can be expected to charge fees for
certain operating expenses that would be in addition to those charged by the
Funds. The Tax-Free Money Market Fund may invest in shares of another tax-free
money market fund provided, however, that the Tax-Free Money Market Fund may
only invest in a tax-free money market fund with a fundamental policy of
investing, under normal conditions, at least 80 percent of its total assets in
obligations that are exempt from federal income taxes and that are not subject
to the federal alternative minimum tax. The Funds will only invest in the
shares of other money market funds after conducting a credit analysis of such
funds.
REPURCHASE TRANSACTIONS. The Funds may participate in repurchase transactions,
which are transactions involving a purchase of a security by a Fund that
simultaneously commits to resell that security to the seller at an agreed upon
price on an agreed upon date within a number of days from the date of purchase.
The resale price reflects the purchase price plus an agreed upon incremental
amount. In the event of the bankruptcy of the other party to a repurchase
agreement, a Fund could experience delays in recovering its cash or disposing
of the securities obtained from the other party. To the extent that in the
meantime, the value of the securities purchased may have decreased, a Fund
could experience a loss. In all cases, the creditworthiness of the other party
to a transaction is reviewed and found satisfactory by Griffin Advisers.
Repurchase agreements are, in effect, loans of Fund assets.
RESTRICTED SECURITIES. The Funds may purchase securities which cannot be sold
to the public without registration under the Securities Act of 1933. Unless
registered for sale these securities can only be sold in privately negotiated
transactions or pursuant to an exemption from registration.
REVERSE REPURCHASE TRANSACTIONS. In a reverse repurchase transaction, a Fund
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 Fund
agrees to repurchase the instrument at an agreed upon price and time. Reverse
repurchase agreements are, in effect, borrowings by the Funds. Each Fund
expects that it will engage in reverse repurchase agreements for the limited
purpose of meeting redemptions. Reverse repurchase agreements may increase the
risk of fluctuation in the market value of each Fund's assets or in its yield.
As a matter of fundamental policy, each Fund may not engage in reverse
repurchase agreements in an amount exceeding 10% of its total assets. When a
Fund enters into a reverse repurchase transaction, it will place cash or liquid
high quality debt instruments in a segregated account with its custodian in an
amount at least equal to its obligations under the reverse repurchase
transaction.
U.S. GOVERNMENT OBLIGATIONS. The Funds may invest in U.S. Government
Obligations, which are securities issued or guaranteed by the U.S. Government,
its agencies and instrumentalities. Not all U.S. Government Obligations are
direct obligations of the U.S. Treasury. Payment of their principal and
interest may be backed by the full faith and credit of the United States (e.g.,
U.S. Treasury bills and GNMA certificates) or solely by the issuing or
guaranteeing agency or instrumentality itself (e.g., FNMA notes). In the latter
case, investors must look to the agency or instrumentality issuing or
guaranteeing the obligation for ultimate repayment. GNMA certificates and FNMA
notes represent ownership interests in a pool of mortgages and the resulting
cash flow from those mortgages. The stated maturities of these obligations may
be shortened by unscheduled prepayments of principal and interest on the
underlying mortgages, thereby affecting a Fund's yield.
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VARIABLE OR FLOATING RATE INSTRUMENTS. The Funds may invest in variable or
floating rate instruments (including notes purchased directly from issuers),
which bear variable or floating interest rates and may carry a demand feature
that permits holders to demand full payment from the issuers or certain
financial intermediaries. Floating rate securities have interest rates that
change whenever there is a change in a designated market-based interest rate,
while variable rate instruments provide for a specified periodic adjustment in
the interest rate. These formulas generally are designed to result in a market
value for the instrument that approximates its par value. These formulas also
limit the increase or decrease in the amount of interest received on the debt
instruments.
THE TAX-FREE MONEY MARKET FUND ONLY
BOND ANTICIPATION NOTES normally provide interim financing in advance of an
issue of bonds or notes, the proceeds of which are used to repay the
anticipation notes. Tax revenue and bond anticipation notes are unsecured. The
Fund intends to invest only in notes having a maximum maturity of 397 days.
MUNICIPAL LEASE OBLIGATIONS AND CERTIFICATES OF PARTICIPATION are issued by a
state or local government or authority to acquire land and a wide variety of
equipment and facilities. These obligations typically are not fully backed by
the municipality's credit, and their interest 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 Fund. A participation interest in a
municipal lease obligation represents a specified, undivided interest in the
obligation in proporation to the purchased interest in the total amount of the
obligation and may have limited marketability.
RESOURCE RECOVERY BONDS are a type of revenue bond issued to build facilities
such as solid waste incinerators or waste-to-energy plans. Typically, a private
corporation will be involved, at least during the construction phase, and the
revenue stream will be secured by fees or rents paid by municipalities for the
use of facilities. The viability of a resource recovery project, environmental
protection regulations, and project operator tax incentives may affect the
value and credit quality of resource recovery bonds.
STANDBY COMMITMENTS are puts that entitle the security holder to same-day
settlement at amortized cost plus accrued interest. Issuers or financial
intermediaries who provide demand features or standby commitments often support
their ability to buy securities 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 other types of municipal instruments. Griffin
Advisers may rely upon its evaluation of a bank's credit in determining whether
to purchase an instrument supported by LOC. In evaluating a foreign bank's
credit, Griffin Advisers 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.
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 provide short-
term capital or finance operating needs.
TENDER OPTION BONDS are created by coupling an intermediate or long-term, fixed
rate tax-exempt bond with a tender agreement that gives the holder the option
to tender the bond at its face value. In return for providing the tender
option, the sponsor (usually a bank, broker-dealer or other financial
institution) receives periodic fees equal to the difference between the bond's
fixed coupon rate and the rate that would cause the bond, coupled with the
tender option, to trade at par value. Subject to applicable regulatory
requirements, the Fund may buy tender option bonds if the tender option
agreement gives the Fund the right to tender the bond to its sponsor no less
frequently than once every 397 days. A sponsor may terminate a tender option
if, for example, the issuer of the underlying bond defaults on interest
payments.
ZERO COUPON BONDS are bonds that do not make regular interest payments; instead
they are sold at a deep discount from their face value and are redeemed at face
value when they mature. Because zero coupon bonds do not pay current income,
their prices can be very volatile when interest rates change. In calculating
dividends, the Fund will take into account as income a portion of the
difference
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between a zero coupon bond's purchase price and its face value.
INVESTMENT LIMITATIONS
The Funds' investment objectives as set forth in the "The Funds in Brief"
section are fundamental; that is, they may not be changed without approval by
vote of the holders of a majority of the relevant Fund's outstanding voting
securities. In addition, any fundamental investment policy may not be changed
without such shareholder approval. If The Griffin Fund's Board of Directors
determines, however, that a Fund's investment objective can best be achieved by
a substantive change in a non-fundamental investment policy or strategy, the
Board may make such change without shareholder approval and will disclose any
such material changes in the then current prospectus. Any policy that is not
specified in a Fund's Prospectus, or in the SAI, as being fundamental is non-
fundamental.
The following summarizes each Fund's principal investment limitations. A
complete listing is contained in the SAI.
(1) Each Fund normally may not invest more than 5% of its total assets in the
securities (other than U.S. Government securities) of any one issuer. Under
certain conditions, however, each Fund may invest up to 10% of its total
assets in the first tier securities of a single issuer for up to three
days.
(2) Each Fund will not purchase a security (other than U.S. Government
securities) if, as a result, more than 25% of its total assets would be
invested in a particular industry, except that the Money Market Fund will
concentrate more than 25% of its total assets in the financial services
industry.
(3) Each Fund may not purchase more than 10% of the outstanding voting
securities of any one issuer (other than U.S. Government securities).
(4) Each Fund may not invest more than 5% of the value of its total assets in
the securities (other than U.S. Government securities) of issuers having a
record, together with predecessors, of less than three years of continuous
operation.
(5) Each Fund (a) may borrow money for temporary or emergency purposes or
engage in reverse repurchase agreements in an amount not to exceed 10% of
its total assets; and (b) may not purchase any security while borrowings
representing more than 5% of its total assets are outstanding; and
(6) Each Fund (a) may make securities or other loans to other parties, but not
in excess of 33 1/3% of its total assets, and (b) may engage in repurchase
agreements.
Limitations 1, 2, 5 and 6(a) are fundamental limitations. Each Fund's
investment policies and limitations, unless otherwise indicated, are not
fundamental, and may be changed without shareholder approval. Except for the
percentage limitation in 6(a), these limitations and policies are considered at
the time of purchase; the sale of securities is not required in the event of a
subsequent change in circumstances.
Because the Money Market Fund concentrates more than 25% of its total assets
in the financial services industry, its performance may be affected by
conditions affecting banks and other financial services companies. Companies in
the financial services industry are subject to various risks related to that
industry, such as governmental regulation, changes in interest rates and
exposure on loans, including loans to foreign borrowers.
Investments in the financial services industry will consist of obligations of
domestic banks, savings and loan associations, consumer and industrial finance
companies, securities brokerage companies, leasing companies and a variety of
firms in the insurance field. These obligations will consist of time deposits,
certificates of deposit, bankers' acceptances and commercial paper.
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INVESTMENT ADVISER
Griffin Financial Investment Advisers
5000 Rivergrade Road
Irwindale, California 91706
SUB-ADVISER
Payden & Rygel Investment Counsel
333 South Grand Avenue, 32nd Floor
Los Angeles, California 90071
SPONSOR AND DISTRIBUTOR
Griffin Financial Services
5000 Rivergrade Road
Irwindale, California 91706
TRANSFER AGENT AND CUSTODIAN
Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, Missouri 64105
INDEPENDENT AUDITOR
KPMG Peat Marwick LLP
725 South Figueroa Street
Los Angeles, California 90017
LEGAL COUNSEL
Morrison & Foerster LLP
2000 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
For more information about the Funds, simply call
(800) 676-4450, or write:
Griffin Financial Services
5000 Rivergrade Road
Irwindale, California 91706
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
