<PAGE>
Registration No. 33-72424
811-8194
497(e)
June 27, 1996
FGIC PUBLIC TRUST
SHORT-TERM U.S. GOVERNMENT INCOME FUND
SUPPLEMENT TO PROSPECTUS DATED AUGUST 4, 1995
The following supplements and should be read in conjunction with the
prospectus of the Short-Term U.S. Government Fund (the "Fund") dated August
4, 1995. Capitalized terms, unless otherwise defined herein, have the same
meaning as in the Fund's current prospectus:
At a special meeting of the Fund's shareholders held on June 27, 1996,
acting on the recommendation of the Fund's Board of Trustees, the Fund's
shareholders have approved changing the investment objective of the Fund to
one that seeks to provide investors with as high a level of current income as
is consistent with preservation of capital and liquidity by investing
exclusively in obligations issued or guaranteed as to principal and interest
by the U.S. Government or by any of its agencies or instrumentalities. The
shareholders also approved changing the Fund to a money market fund.
Consistent with these changes, the name of the fund has been changed to the
U.S. Government Money Market Fund.
As a money market fund, the Fund will seek to maintain a stable net
asset value of $1.00 per share, although there is no assurance that it will
be able to do so. The Board of Trustees of the Trust has adopted procedures
under Rule 2a-7 under the Investment Company Act of 1940 ("Rule 2a-7"). Rule
2a-7 was enacted by the Securities and Exchange Commission with the intent of
stabilizing money market funds at $1.00 per share. Under the Rule, the Fund
uses the amortized cost method to value its securities and does a "mark-to
market-analysis" to determine the degree to which any variations may exist
between the amortized pricing method and the actual market price of the
securities in the Fund.
Rule 2a-7 also requires the Fund to maintain a dollar weighted average
portfolio maturity of 90 days or less, purchase securities having remaining
maturities of 13 months or less and invest only in securities determined by
the Board of Trustees to be "eligible securities" that present minimal credit
risks.
The Fund's revised investment policies and restrictions permit it to
invest in securities issued by the U.S. Government or by any of its agencies
or instrumentalities ("Government Obligations"), and to engage in repurchase
agreement transactions with respect to such obligations. Government
<PAGE>
Obligations are high quality debt securities issued or guaranteed by the U.S.
Treasury or by an agency or instrumentality of the U.S. Government. Not all
Government Obligations are backed by the full faith and credit of the United
States. Some Government Obligations, such as those issued by the Federal
National Mortgage Association, are supported by an instrumentality's or
agency's right to borrow money from the U.S. Treasury under certain
circumstances. Other Government Obligations may be supported only by the
credit of the entity that issues them.
The Fund's investment adviser (the "Adviser") is entitled to receive a
fee, calculated daily and payable monthly, at the annual rate of 0.15% of the
Fund's average daily net assets. The Adviser has stated that it will
voluntarily waive a portion of the management fee otherwise payable by the
Fund, as well as voluntarily assuming a portion of the Fund's expenses, to
the extent necessary for the Fund to maintain a total expense ratio of not
more than 0.20% of the average net assets of the Fund.
The minimum initial investment in the Fund is $2,000,000. Subsequent
investments may be made in any amount.
If the Fund receives an order and payment in the form of Federal Funds
after 5:00 p.m. Eastern Time ("ET") on a Business Day or after noon ET on a
Half Day, the order will be processed the next Business Day.
<PAGE>
June 27, 1996
FGIC PUBLIC TRUST
SHORT-TERM U.S. GOVERNMENT INCOME FUND
SUPPLEMENT TO THE STATEMENT OF ADDITIONAL INFORMATION
DATED AUGUST 4, 1995
The following information supplements and should be read in conjunction
with the Statement of Additional Information of the FGIC Public Trust: Short-
Term U.S. Government Income Fund (the "Government Fund") dated August 4, 1995:
At a special meeting of the Government Fund's shareholders held on June
27, 1996, acting on the recommendation of the Government Fund's Board of
Trustees, the Government Fund's shareholders have approved changing the
investment objective of the Government Fund to one that seeks to provide
investors with as high a level of current income as is consistent with
preservation of capital and liquidity by investing exclusively in obligations
issued or guaranteed as to principal and interest by the U.S. Government or
by any of its agencies or instrumentalities. The shareholders also approved
changing the Government Fund to a money market fund. Consistent with these
changes, the name of the Government Fund has been changed to the U.S.
Government Money Market Fund. The Government Fund is required to maintain a
dollar-weighted average portfolio maturity of 90 days or less and seeks to
maintain its net asset value per share at $1.00 for purposes of purchases and
redemptions.
The Government Fund's revised investment policies and restrictions
permit it to invest in securities issued by the U.S. Government or by any of
its agencies or instrumentalities ("Government Obligations"), and to engage
in repurchase agreement transactions with respect to such obligations.
U.S. Government Agencies. The Government Fund may invest Government
Obligations which have remaining maturities not exceeding thirteen months.
Agencies and instrumentalities which issue or guarantee debt securities and
which have been established or sponsored by the United States Government
include the Banks for Cooperatives, the Export-Import Bank, the Federal Farm
Credit System, the Federal Home Loan Banks, the Federal Home Loan Mortgage
Corporation, the Federal Intermediate Credit Banks, the Federal Land Banks,
the Federal National Mortgage Association and the Student Loan Marketing
Association. United States Government agency and instrumentality obligations
include master notes issued by these entities but do not include obligations
of the World Bank, The Inter-American Development Bank or the Asian
Development Bank.
Mortgage-Related Securities. The Government Fund, may, consistent with
its respective investment objective and policies, invest in mortgage-related
securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities.
Mortgage-related securities, for purposes of the Government Fund's
Prospectus and this SAI, represent pools of mortgage loans assembled for sale
to investors by various governmental agencies such as the Government National
Mortgage Association and government-related organizations such as the Federal
National Mortgage Association and the Federal Home Loan Mortgage Corporation,
as well as by non-governmental issuers such as commercial banks, savings and
loan institutions, mortgage bankers, and private mortgage insurance
companies. Although certain mortgage-related securities are guaranteed by a
third party or otherwise similarly secured, the market value of the security,
which may fluctuate, is not so secured. If the Government Fund purchases a
mortgage-related security at a premium, that portion may be lost if there is
a decline in the market value of the security whether resulting from changes
in interest rates or prepayments in the underlying mortgage collateral. As
with other interest-bearing securities, the prices of such securities are
inversely affected by changes in interest rates. However, though the value
of a mortgage-related security may decline when interest rates rise, the
converse is not necessarily true since in periods of declining interest rates
the mortgages underlying the securities are prone to prepayment. For this
and other reasons, a mortgage-related security's stated maturity may be
shortened by unscheduled prepayments on the underlying mortgages and,
therefore, it is not possible to predict accurately the security's return to
the Government Fund. In addition, regular payments received in respect of
mortgage-related securities include both interest and principal. No
assurance can be given as to the return the Government Fund will receive when
these amounts are reinvested.
<PAGE>
There are a number of important differences among the agencies and
instrumentalities of the U.S. Government that issue mortgage-related
securities and among the securities that they issue. Mortgage-related
securities created by the Government National Mortgage Association ("GNMA")
include GNMA Mortgage Pass-Through Certificates (also known as "Ginnie Maes")
which are guaranteed as to the timely payment of principal and interest and
such guarantee is backed by the full faith and credit of the United States.
GNMA is a wholly-owned U.S. Government corporation within the Department of
Housing and Urban Development. GNMA certificates also are supported by the
authority of GNMA to borrow funds from the U.S. Government to make payments
under its guarantee. Mortgage-related securities issued by the Federal
National Mortgage Association ("FNMA") include FNMA Guaranteed Mortgage
Pass-Through Certificates (also known as "Fannie Maes") which are solely the
obligations of the FNMA and are not backed by or entitled to the full faith
and credit of the United States. The FNMA is a government-sponsored
organization owned entirely by private stock-holders. Fannie Maes are
guaranteed as to timely payment of the principal and interest by FNMA.
Mortgage-related securities issued by the Federal Home Loan Mortgage
Corporation ("FHLMC") include FHLMC Mortgage Participation Certificates (also
known as "Freddie Macs" or "PCs"). The FHLMC is a corporate instrumentality
of the United States, created pursuant to an Act of Congress, which is owned
entirely by Federal Home Loan Banks. Freddie Macs are not guaranteed by the
United States or by any Federal Home Loan Banks and do not constitute a debt
or obligation of the United States or of any Federal Home Loan Bank. Freddie
Macs entitle the holder to timely payment of interest, which is guaranteed by
the FHLMC. The FHLMC currently guarantees timely payment of interest and
either timely payment of principal or eventual payment of principal,
depending upon the date of issue. When the FHLMC does not guarantee timely
payment of principal, FHLMC may remit the amount due on account of its
guarantee of ultimate payment of principal at any time after default on an
underlying mortgage, but in no event later than one year after it becomes
payable.
The Government Fund may, from time to time, include its yield and
effective yield in advertisements or reports to shareholders or prospective
investors. Current yield (or "SEC Seven Day Yield") for the Government Fund
will be based on the change in the value of a hypothetical investment
(exclusive of capital changes) over a particular 7-day period, less a
pro-rata share of the Government Fund's expenses accrued over that period
(the "base period"), and stated as a percentage of the investment at the
start of the base period (the "base period return"). The base period return
is then annualized by multiplying by 365/7, with the resulting yield figure
carried to at least the nearest hundredth of one percent. "Effective yield"
for the Government Fund assumes that all dividends received during an annual
period have been reinvested. Calculation of "effective yield" begins with
the same "base period return" used in the calculation of yield, which is then
annualized to reflect weekly compounding pursuant to the following formula:
Effective Yield - [(Base Period Return) + 1) 365/7] - 1.
The fourth paragraph under the section entitled "DETERMINATION OF NET
ASSET VALUE" on page 14 of the SAI is no longer applicable to the Government
Fund. Paragraphs two and three under the same section are now applicable to
both Funds in the Trust.
<PAGE>
FGIC PUBLIC TRUST August 4, 1995
THIS FUND IS NOT INSURED BY FGIC, THE FDIC OR ANY OTHER INSURER
370 Seventeenth Street, Suite 2700, Denver, Colorado 80202
For additional information, call (800) 298-FGIC (3442)
SHORT-TERM U.S. GOVERNMENT INCOME FUND
This Prospectus describes the Short-Term U.S. Government Income Fund
(the "Fund"), a diversified no-load mutual fund offered to municipal and
other institutional investors by FGIC Public Trust (the "Trust"), a Delaware
business trust. Neither the Fund nor any of the securities in which the Fund
invests are insured by Financial Guaranty Insurance Company ("FGIC"), the
Federal Deposit Insurance Corporation ("FDIC"), the Federal Reserve Board or
any other agency or insurer. Shares of the Fund are sold without the
imposition of Rule 12b-1 fees or other sales-related charges.
The Fund seeks to provide investors with as high a level of current
income as is consistent with the preservation of capital by investing
exclusively in U.S. Treasury bills, notes and other direct obligations of the
U.S Treasury and repurchase agreements collateralized to 102% by direct U.S.
Treasury obligations. The securities held by the Fund have remaining
maturities of three years or less and, under normal circumstances, the
average weighted maturity of the securities held by the Fund will range
between one-and-one half and two years. The net asset value of the Fund will
fluctuate depending on the market value of its assets.
Shares of the Fund are sold directly and exclusively to municipal
investors which include municipalities, counties and state agencies as well
as other institutional investors, including broker/dealers, investment
advisers, investment banks, insurance companies and other financial
institutions.
The Fund is sponsored and distributed by ALPS Mutual Funds Services,
Inc. ("ALPS" or the "Administrator" or "Distributor") and is advised by FGIC
Advisors, Inc. (the "Adviser").
SHARES IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY ANY BANK, AND ARE NOT INSURED BY FGIC, THE FDIC, THE FEDERAL
RESERVE BOARD, OR ANY OTHER AGENCY OR INSURER AND THEY MAY INVOLVE INVESTMENT
RISKS INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
This Prospectus sets forth concisely the information you should consider
before investing in the Fund. Please read this Prospectus and keep it for
future reference. Additional information about the Fund is contained in a
Statement of Additional Information (the "Statement of Additional
Information") which has been filed with the Securities and Exchange
Commission and is available upon request without charge by writing to or
calling the Trust at the address and telephone number listed above. The
Statement of Additional Information bears the same date as this Prospectus
and is incorporated herein by reference.
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. AN INVESTMENT IN THE FUND IS NEITHER INSURED
NOR GUARANTEED BY THE U.S. GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT THE
FUND WILL BE ABLE TO ACHIEVE ITS INVESTMENT OBJECTIVE.
TABLE OF CONTENTS
Page
----
EXPENSE SUMMARY 3
FINANCIAL HIGHLIGHTS 4
FUND OPERATIONS 6
SUITABILITY 8
<PAGE>
MANAGEMENT OF THE FUND 10
HOW TO INVEST IN THE FUND 12
HOW TO REDEEM SHARES 14
SHAREHOLDER SERVICES 16
TAXES 17
OTHER INFORMATION 17
EXPENSE SUMMARY
The summary below shows shareholder transaction expenses imposed by the
Fund and annual Fund operating expenses based on the actual operating
expenses for the fiscal period ended April 30, 1995, restated to reflect
current fees of the Fund. A hypothetical example based on the summary is
also shown. "Shareholder Transaction Expenses" are charges you pay when
buying or selling shares of the Fund whereas "Expected Annual Fund Operating
Expenses" are paid out of the Fund's assets and include fees for portfolio
management, Fund administration and other services.
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load on Purchases
of Fund Shares None
Deferred Sales Load None
Redemption Fees None
Exchange Fee None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
<PAGE>
Management Fees
(Net of Fee Waivers)(1) 0.35%
12b-1 Fees None
All Other Expenses(2) 0.25%
----
Total Fund Operating Expenses
(Net of Fee Waivers) 0.60%
(1) The Adviser has stated that it will voluntarily waive a portion of
the Management fee otherwise payable by the Fund, as well as voluntarily
assuming a portion of the fund expenses, to the extent necessary for the Fund
to maintain a total expense ratio of not more than 0.60% of the average net
assets of the Fund. Without this voluntary fee waiver and assumption of
expenses, Management Fees, Other Expenses and Total Fund Operating Expenses
would be 0.45%, 0.25% and 0.70%, respectively, of the average net assets of
the Fund. The Adviser reserves the right to modify or terminate the fee
waiver at any time.
(2) The amount for "All Other Expenses" includes administration fees
payable to the Administrator calculated daily and payable monthly, at an
annual rate of the greater of $90,000 or 0.18% of average daily net assets of
the Trust up to $500 million, 0.15% of average daily net assets of the Trust
in excess of $500 million up to $1 billion and 0.12% of average daily net
assets of the Trust in excess of $1 billion.
THE FOLLOWING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
FUTURE EXPENSES. THE EXPENSES SET FORTH ABOVE AND THE EXAMPLE SET FORTH
BELOW REFLECT THE NON-IMPOSITION OF CERTAIN FEES AND EXPENSES. THE ACTUAL
EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.
EXAMPLE:
Based upon the above summary of expenses and assuming a 5% annual rate
of return and the reinvestment of all dividends and distributions, you would
pay the following expenses on a $1,000 investment in the Fund.
1 YEAR $6
3 YEARS $19
5 YEARS $34
10 YEARS $75
OTHER INFORMATION:
The Expense Summary and Example are intended to help you understand the
expenses you would bear either directly (as with the Transaction Expenses) or
indirectly (as with the Expected Annual Fund Operating Expenses) as a Fund
shareholder. As stated above, the Fund does not impose any sales-related
charges in connection with purchases of its shares, although certain service
institutions may charge their clients fees in connection with purchases and
sales for the accounts of their clients. These fees are in addition to the
expenses shown in the Expense Summary and Example. For a more complete
description of the Fund's operating expenses, see "Management of the Fund" in
this Prospectus and the Statement of Additional Information.
FINANCIAL HIGHLIGHTS
The financial highlights have been derived from the Fund's financial
statements for the fiscal period ended April 30, 1995, which have been
audited by Deloitte & Touche LLP, independent auditors, whose report on the
financial statement of the Fund is included in the Statement of Additional
Information. You should read the financial highlights with the financial
statements and related notes included in the Statement of Additional
Information. Further information about the performance of the Fund is
available in the annual report to shareholders. You may obtain both the
Statement of Additional Information and the annual report to
<PAGE>
shareholders free of charge by calling FGIC Public Trust or writing to the
Trust at the telephone or address listed on the first page.
THE FINANCIAL HIGHLIGHTS CONTINUE ON PAGE 5.
FINANCIAL HIGHLIGHTS
SHORT-TERM U.S. GOVERNMENT INCOME FUND
Selected data for a share of beneficial interest
outstanding throughout the periods indicated:
For the Period
Ended
April 30,
1995(1)
Net asset value - beginning of period $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.44
Net realized and unrealized loss on investments (0.03)
Total income from investment operations 0.41
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income (0.44)
Net asset value - end of period $9.97
Total Return 4.73%(2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $41,893
<PAGE>
Ratio of expenses to average net assets 0.45%(2)
Ratio of net investment income to average net assets 5.23%(2)
Ratio of expenses to average net assets without fee waivers .65%(2)
Ratio of net investment income to average net assets
without fee waivers 5.03%(2)
Portfolio turnover rate (3) 827.35%(2)
(1) Operations commenced on June 7, 1994.
(2) Annualized.
(3) A portfolio turnover rate is, in general, the percentage computed by taking
the lesser of purchases or sales of portfolio securities (excluding securities
with a maturity date of one year or less at the time of acquisition) for a
period and dividing it by the monthly average of the market value of such
securities during the period. Purchases and sales of investment securities
(excluding short-term securities) for the period ended April 30, 1995 were
$26,984,886 and $24,886,719, respectively.
FUND OPERATIONS
INVESTMENT OBJECTIVE
The Adviser will use its best efforts to achieve the investment
objective of the Fund as described below, although the achievement of the
investment objective, of course, cannot be assured. You should not consider
the Fund, by itself, to be a complete investment program. The Fund is a
diversified, open-end management investment company.
The Fund's investment objective is to seek as high a level of current
income as is consistent with the preservation of capital. The securities
held by the Fund have remaining maturities of three years or less. Under
normal circumstances, the average weighted maturity of the securities held by
the Fund will range between one-and-one half and two years. The Fund's
investment objective may not be changed without approval of a majority of the
Fund's outstanding shares.
In seeking to achieve its investment objective, the Fund will invest
exclusively in U.S. Treasury notes and other direct obligations of the U.S.
Treasury, and may engage in repurchase agreement transactions with respect to
such obligations. U.S. Treasury bills, U.S. Treasury notes and U.S. Treasury
bonds differ only in their interest rates, maturities and times of issuance.
The Fund will attempt to enhance its income by extending the maturity of the
Fund's portfolio securities compared to a money market fund portfolio.
Securities issued by the U.S. Treasury have historically involved little
risk of default. However, due to fluctuations in interest rates, the market
value of such securities may vary
<PAGE>
during the period a shareholder owns shares of the Fund. Neither the United
States, nor any agency or instrumentality thereof, has guaranteed, sponsored
or approved the Fund or its shares. There is no assurance that the Fund's
investment objectives will be achieved.
INVESTMENT POLICIES
Securities held by the Fund may be subject to repurchase agreements. A
repurchase agreement is a transaction in which the Fund agrees to purchase
portfolio securities from financial institutions, such as banks and
broker-dealers, subject to the seller's agreement to repurchase them at an
agreed upon time and price. Although the securities subject to a repurchase
agreement might bear maturities exceeding two years, the Fund does not intend
to enter into repurchase agreements with maturities in excess of seven days.
The seller under a repurchase agreement will be required to maintain the
value of the securities subject to the repurchase agreement at not less than
102% of the principal value of the repurchase agreement, including any
accrued interest earned on the repurchase agreement, and that the Fund's
custodian or subcustodian will take possession of such collateral. The
seller will collateralize the repurchase agreement with U.S. Treasury
obligations and other direct obligations of the U.S. Government. Default by
or bankruptcy of the seller may, however, expose the Fund to possible loss
because of adverse market action or delay or transaction costs in connection
with the disposition of the underlying obligations. The Fund may enter into
agreements with a single counterparty that constitutes more than 5% of Fund
assets.
Subject to the investment restrictions described below, the Fund may,
from time to time, lend securities from its portfolio to brokers, dealers and
financial institutions and receive collateral in cash or U.S. Treasury
obligations which will be maintained at all times in an amount equal to at
least 100% of the current market value of the loaned securities. The Fund
will be entitled to the interest paid upon investment of the cash collateral
in its permitted investments or to the payment of a premium or fee for the
loan. The Fund may at any time call such loans and obtain the securities
loaned. However, if the borrower of the securities should default on its
obligation to return the securities borrowed, the value of the collateral may
be insufficient to permit the Fund to reestablish its position by making a
comparable investment due to changes in market conditions. The Fund may pay
reasonable fees to persons unaffiliated with the Fund in connection with
arranging such loans. The Fund will only engage in securities lending
transactions with broker-dealers registered with the Securities and Exchange
Commission, or with federally supervised banks or savings and loan
associations.
The Fund intends to purchase U.S. Treasury securities at auction from
the Federal Reserve.
The Fund's policy of investing in securities with remaining maturities of
three years or less may result in high portfolio turnover. Since brokerage
commissions are not normally paid on investments of the type made by the
Fund, a high turnover rate should not adversely affect the net income of the
Fund.
INVESTMENT RESTRICTIONS
The Fund is subject to a number of Investment Restrictions which reflect
self-imposed standards as well as federal and state regulatory limitations.
These limitations are designed to minimize certain risks associated with
investing in specified types of securities or engaging in certain
transactions. The Investment Restrictions may be changed only by a vote of a
majority of the Fund's outstanding shares.
The Fund may not:
1) Purchase securities other than direct obligations of the U.S.
Treasury, some of which may be subject to repurchase agreements, and
repurchase agreements collateralized to 102% by direct U.S. Treasury
obligations.
2) Make loans, except that the Fund may purchase or hold debt
instruments, lend portfolio securities, and enter into repurchase agreements
in accordance with its investment objective and policies.
3) Borrow money or issue senior securities, except that the Fund may
borrow
<PAGE>
from banks for temporary purposes in amounts up to 10% of the value of its
total assets at the time of such borrowing; or mortgage, pledge or
hypothecate any assets, except in connection with any such borrowings and in
amounts not in excess of the dollar amounts borrowed or 10% of the value of
the Fund's assets at the time of borrowing. The Fund may not purchase
securities while its borrowings are outstanding.
4) Enter into repurchase agreements providing for settlement more
than seven days after notice if such investment exceeds 10% of the Fund's
total net assets.
5) Purchase municipal bonds issued by an issuer any of whose
outstanding bonds are insured by FGIC.
6) Purchase collateralized mortgage obligations, inverse floaters or
any other securities commonly known as "derivatives".
7) Purchase illiquid securities, except fully collateralized
repurchase agreements that, because of term limitations, are deemed to be
illiquid.
8) Purchase reverse repurchase agreements.
DETERMINATION OF NET ASSET VALUE
The value of the Fund's shares is referred to as "net asset value". Net
asset value per share for purposes of pricing purchases and redemptions is
calculated by adding the value of all securities and other assets belonging
to the Fund, subtracting its liabilities, and dividing the result by the
number of the Fund's outstanding shares. Net asset value is determined as of
4:00 p.m. Eastern Time on each day the New York Stock Exchange is open for
business and as of 12:00 noon Eastern Time on any other day the bond market
closes at 1 p.m. Eastern Time (each such day referred to as a "Half Day").
Currently, the New York Stock Exchange is closed on New Years Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
The Fund's investments are valued at market or, where market quotations
are not readily available, at fair market value as determined in good faith
by or under the direction of the Board of Trustees. Debt securities with
maturities of sixty days or less are valued at amortized cost, unless the
Board of Trustees determines that this does not constitute fair value. For
further information about valuing Fund investments, see the Statement of
Additional Information.
DIVIDENDS AND DISTRIBUTIONS
The Fund's net income is declared daily as a dividend at the close of
business on the day of declaration. Your shares begin earning dividends on
the day you purchase them, and continue to earn dividends through and
including the day before you redeem them. See "How to Invest in the Fund".
The Fund pays dividends not later than five business days after the end of
each month in the form of additional shares of the Fund, unless you elect
prior to the date of distribution to receive payment in cash. Reinvested
dividends and distributions receive the same tax treatment as those paid in
cash. If you redeem all of your shares in the Fund, the Fund will pay your
dividends in cash not later than five business days after the redemption.
SUITABILITY
The Fund is designed as an economical and convenient professionally
managed investment vehicle for Municipal Investors and other institutional
investors with cash balances or cash reserves who seek as high a level of
current income as is consistent with the preservation of capital. While the
Fund offers daily liquidity, it is designed for cash balances that will not
be needed on a short-term basis (for example, within ninety days).
"Municipal Investors" include any State, county, municipality, school
district or special district in the United States. While the Fund is
designed to meet the specific cash management needs of Municipal Investors,
it may also be suitable for other institutional investors, such as banks,
service organizations, credit unions or investment advisers.
Legislation in each state sets forth guidelines and limitations with
respect to investments by Municipal Investors located within the state. In
addition, Municipal Investors may be subject to local laws or have their own
guidelines and policies prescribing acceptable investments for
<PAGE>
cash management purposes. Each Municipal Investor planning to invest in the
Fund must independently verify that the Fund meets all of the criteria of
investment policies and guidelines applicable to such Municipal Investor.
Future statutory or regulatory changes, as well as future judicial or
administrative decisions and interpretations of present and future statutes
and regulations could prevent a Municipal Investor from continuing its
investment in the Fund. Each Municipal Investor should therefore remain
aware of any changes in the applicable regulation of permitted investments.
The Fund offers the advantages of purchasing power efficiencies and
diversification of risk. Generally, in purchasing debt instruments from
dealers, the percentage difference between the bid and asked price tends to
decrease as the size of the transaction increases. The Fund also offers the
Municipal Investor the opportunity to participate in a portfolio of U.S.
Treasury obligations which is more diversified in terms of issuers and
maturities than a portfolio a single Municipal Investor may otherwise be able
to invest in.
Investment in the Fund relieves the Municipal Investor of money
management and administrative burdens usually associated with the direct
purchase and sale of U.S. Treasury debt instruments. This includes the
selection of the portfolio investments; surveying the market for the best
terms at which to buy and sell; scheduling and monitoring maturities and
reinvestments; receipt, delivery and safekeeping of securities; and portfolio
recordkeeping.
The Fund qualifies as an eligible investment for federally chartered
credit unions pursuant to Section 107 of the Federal Credit Union Act and
Part 703 of the National Credit Union Administration Rules and Regulations.
The Fund intends to review changes in the applicable laws, rules and
regulations governing eligible investments for federally chartered credit
unions, and to take such action as may be necessary so that the investments
of the Fund qualify as eligible investments under the Federal Credit Union
Act and the regulations thereunder. Shares of the Fund, however, may or may
not qualify as eligible investments for particular state chartered credit
unions. The Fund encourages each state chartered credit unions to consult
qualified legal counsel concerning whether the Fund is a permissible
investment under the laws applicable to it.
MANAGEMENT OF THE FUND
The property, affairs and business of the Fund are managed by the Board
of Trustees. The Trustees elect officers who are charged with responsibility
for the day-to-day operations of the Fund and the execution of policies
formulated by the Trustees. The Trustees and their affiliations are as
follows:
ANN C. STERN - Trustee and Chairman. Ms. Stern is Chairman and Chief
Executive Officer of FGIC. Ms. Stern was named CEO of FGIC in January 1992
and was elected to Chairman in October 1993. Prior to her appointment, Ms.
Stern was Managing Director and General Counsel of FGIC. Ms. Stern is also a
member of the firm's Executive Committee and Structured Finance Underwriting
Committee. Prior to joining FGIC, Ms. Stern was an Associate and a Partner at
two New York City law firms specializing in municipal bonds. She is a member
of several organizations including the Board of Advisors of the Association
of Financial Guaranty Insurors, the American Bar Association, the Arts &
Culture Committee of the GE Foundation and a member of the Board of Advisors
of THE PUBLIC'S CAPITAL, a quarterly journal on infrastructure. Because of
her affiliation with FGIC, Ms. Stern is considered an "interested" Trustee of
FGIC Public Trust.
W. ROBERT ALEXANDER - Trustee and President. Mr. Alexander is the Chief
Executive Officer of ALPS Mutual Funds Services, Inc. which provides
administration and distribution services for proprietary mutual fund
complexes. Prior to co-founding ALPS, Mr. Alexander was Vice Chairman of
First Interstate Bank of Denver, responsible for Trust, Private Banking,
Retail Banking, Cash Management Services and Marketing. Mr. Alexander is
currently Chairman of the Board of Health ONE, Denver's largest healthcare
system. He is also a member of the Board of Trustees of the Colorado Trust,
Colorado's largest foundation, as well as a
<PAGE>
Trustee of the Hunter and Hughes Trusts. Because of his affiliation with
ALPS, Mr. Alexander is considered an "interested" Trustee of FGIC Public
Trust.
BEVERLY S. BUNCH - Trustee. Ms. Bunch is Assistant Professor at the LBJ
School of Public Affairs University of Texas at Austin. Ms. Bunch teaches
graduate courses in public financial management, economics, and quantitative
methods. Ms. Bunch also conducts research in environmental finance and
municipal debt. Prior to her current position, Ms. Bunch was Assistant to
the Executive Director of the Texas Bond Review Board. In that capacity, Ms.
Bunch analyzed proposed state debt issues, briefed board representatives and
made recommendations to state budget officials on capital planning and
budgeting. Ms. Bunch has held several academic positions and has taught
courses in public finance and related subjects. Ms. Bunch also acted as
Budget Analyst for the City of San Antonio where she analyzed and monitored a
$64 million budget for four city departments.
WILLIAM J. COCHRAN - Trustee. Mr. Cochran served as Director of Finance
and Chief Financial Officer of the City of Hartford, Connecticut from July,
1987 to December, 1993. As Director of Finance, Mr. Cochran had full Charter
responsibility for the fiscal affairs of a major urban government comprised
of 6,000 employees, assets of over $1 billion and an overall operating budget
of $500 million. During Mr. Cochran's tenure with Hartford, the city was
awarded the Certificate of Achievement for Excellence in Financial Reporting
and the Distinguished Budget Presentation Award by the Government Finance
Officers Association ("GFOA"). Prior to his tenure as Director of Finance and
Chief Financial Officer, Mr. Cochran was the Executive Director of the
Hartford Development Commission from October, 1981 and served the City in
other responsible financial capacities beginning in 1971. In 1993, Mr.
Cochran was elected to the Executive Board of the National GFOA and has also
served on its Debt and Fiscal Policy Committee. Mr. Cochran is a member of
the Connecticut Government Finance Officers Association, the Board of
Trustees of the Connecticut Resources Recovery Authority, and is a Founder
and Trustee of the Hartford Partnership for Scholarships.
MAYNARD H. JACKSON, JR. - Trustee. Mr. Jackson served three terms as
the mayor of Atlanta, completing his last term in January of 1994. During
his tenure as mayor, Rand McNally named Atlanta as the best major city in
which to live and work in the United States. Mr. Jackson recently returned
to the private sector as Chairman of the Board of Jackson Securities. Mr.
Jackson has also held positions on several civic related boards, including
Chairman of the U.S. Local Government Energy Policy Advisory Committee, of
the Rebuild America Coalition, and founding chairman of the Atlanta Economic
Development Authority of Atlanta. Mr. Jackson was also a key component of
Atlanta's successful bid for the 1996 Summer Olympics. A member of Phi Beta
Kappa and a trustee of Morehouse College, Mr. Jackson is the recipient of
numerous honorary degrees, citations and awards for civic, humanitarian,
academic and business achievements.
Detailed information about the Trustees and their affiliations may be
found in the Statement of Additional Information under "Management of the
Fund".
INVESTMENT ADVISER
FGIC Advisors, Inc. serves as the Investment Adviser to the Fund. The
Adviser is a subsidiary of FGIC Holdings, Inc., which in turn is a wholly
owned subsidiary of General Electric Capital Corporation. The principal
address of the Adviser is 115 Broadway, New York, New York 10006.
The Investment Adviser is an affiliate of Financial Guaranty Insurance
Company ("FGIC"), a leading insurer of debt securities. FGIC guarantees
timely payment of principal and interest on municipal securities, including
newly issued bonds, those held in mutual funds and those traded in the
secondary markets. FGIC also guarantees a variety of non-municipal
structured securities. Securities insured by FGIC have been, without
exception, rated Aaa/AAA/AAA, the highest ratings assigned by Moody's
Investors Service, Inc., Standard & Poor's Corp. and Fitch Investors Service,
respectively. As a result of FGIC's insurance, the value and marketability
of a bond are enhanced, and an issuer can sell its bonds at a lower
<PAGE>
interest rate than that of uninsured, lower rated investment grade securities.
Pursuant to the Advisory Contract, the Adviser has agreed to provide a
continuous investment program for the Fund, including investment research and
management with respect to the assets of the Fund. The Adviser is entitled
to receive a fee, calculated daily and payable monthly, at the annual rate of
0.45% of the Fund's average daily net assets. The Adviser may from time to
time voluntarily waive with respect to the Fund all or a portion of its
advisory fee; however, the Adviser may modify or terminate this waiver at any
time without the Fund's consent. The Adviser has agreed under the Advisory
Contract to waive its advisory fee to the extent necessary to insure that the
total expense ratio of the Fund does not exceed 0.60% of the Fund's average
daily net assets.
James McCullough has managed the Fund since its inception. He is
directly responsible for the day-to-day management of the Fund and has
considerable experience in managing accounts with comparable investment
objectives and policies. Prior to joining the Adviser, James McCullough was
responsible for the active management of the Resolution Trust Corporation's
$10 billion investment portfolio.
ADMINISTRATOR AND BOOKKEEPING AND PRICING AGENT
ALPS serves as the Fund's Administrator. As Administrator, ALPS has
agreed to: assist in maintaining the Fund's office; furnish the Fund with
clerical and certain other services; compile data for and prepare notices and
semi-annual reports to the Securities and Exchange Commission; prepare
filings with state securities commissions; coordinate Federal and state tax
returns; monitor the Fund's expense accruals; monitor compliance with the
Fund's investment policies and limitations; and generally assist in the
Fund's operations. ALPS is entitled to receive a fee from the Fund for its
administrative services computed daily and payable monthly, at the annual
rate of the greater of $90,000 or 0.18% of average daily net assets of the
Trust up to $500 million, 0.15% of average daily net assets of the Trust in
excess of $500 million up to $1 billion and 0.12% of average daily net assets
of the Trust in excess of $1 billion. ALPS may voluntarily waive all or any
portion of its administration fee from time to time.
ALPS also serves as the Fund's Bookkeeping and Pricing Agent. In this
capacity, ALPS has agreed to maintain the financial accounts and records of
the Fund and to compute the net asset value and certain other financial
information relating to the Fund.
CUSTODIAN
State Street Bank and Trust Company of Connecticut, N.A., located at 750
Main Street, Suite 1114, Hartford, Connecticut 06103, serves as Custodian
for the Fund.
SUB-CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company, located at P.O. Box 1978, Boston,
Massachusetts 02015, serves as Sub-Custodian and Transfer Agent for the Fund.
HOW TO INVEST IN THE FUND
Shares in the Fund are distributed on a continuous basis by ALPS, the
Fund's Sponsor and Distributor. ALPS has its principal office at 370
Seventeenth Street, Suite 2700, Denver, Colorado 80202 and may be reached at
(800) 298-FGIC (3442).
GENERAL PROCEDURES
You may purchase Fund shares through ALPS or the Fund's Transfer Agent.
You may pay for your purchase of Fund shares by check, money order or by
using the Federal Reserve Wire System. The check or money order must be
payable in U.S. dollars and be drawn on a bank located within the United
States. Shares of the Fund may be purchased at the net asset value next
determined after an order is received and accepted. The Fund does not impose
any sales-related charges in connection with purchases of shares. The Fund
may discontinue offering its shares in
<PAGE>
any state without notice to shareholders.
An initial investment in the Fund must be preceded or accompanied by a
completed, signed application. The application should be forwarded to:
FGIC Public Trust
P.O. Box 1978
Boston, Massachusetts 02015
Purchases by telephone can be made after an account has been established
by the Transfer Agent. The Trust reserves the right to reject any purchase
order.
PURCHASE PRICE
Your purchase of Fund shares will be effected at the net asset value next
determined after the Fund receives your purchase order in proper form and
payment in the form of Federal Funds. If you pay by check, your purchase of
Fund shares will be effected at the net asset value next determined after the
receipt of your check. Your account will begin accruing dividends when your
check is credited to your account in the form of Federal Funds (generally two
Business Days after receipt of your check). If your order is accompanied by
Federal Funds, or is converted into Federal Funds by 4:00 p.m. Eastern Time
on a Business Day or 12:00 noon on a Half Day, it will be executed on that
day. If the Fund receives your order and payment in the form of Federal
Funds after 4:00 p.m. Eastern Time on a Business Day or after 12:00 noon
Eastern Time on a Half Day, your order will be processed the next Business
Day. A "Business Day" is any day on which the New York Stock Exchange is
open for business.
TELEPHONE AND FACSIMILE PURCHASES
You can purchase Fund shares by telephone or facsimile once you have
established your account with the Fund and your telephone and facsimile
privileges have been approved by the Fund. In order to qualify for dividends
on the day of purchase, telephone or facsimile orders must be placed and
Federal Funds must be in the Fund's custody account by 4:00 p.m. Eastern Time
on Business Days. In order to qualify for dividends on the day of purchase
on Half Days, telephone or facsimile orders must be placed and Federal Funds
must be in the Fund's custody account by 12:00 noon that day. If Federal
Funds arrive in the Fund's custody account after the stated deadlines for
both Business Days and Half Days, the account will be credited the next
Business Day. Monies received for the purchase of Fund shares will be
credited to the shareholder's account the next Business Day if customers do
not notify the Fund of purchases by telephone or facsimile by 3:00 p.m. on
Business Days and 11:00 a.m. on Half Days.
MINIMUM INVESTMENT AND ACCOUNT BALANCES
The minimum initial investment in the Fund is $100,000 and additional
investments may be made in any amount. An initial investment can be split
between any series or portfolios of the Trust, providing a minimum amount of
$25,000 is invested in any individual Fund. The minimum purchase
requirements do not apply to reinvested dividends. If an account balance
falls below $25,000 due to redemptions or exchanges, the account may be
closed and the proceeds wired to the bank account of record, or a check will
be issued and sent to the party of record. An investor will be given 30 days
notice that the account will be closed unless an additional investment is
made to increase the account balance to the $25,000 minimum.
STATEMENTS AND REPORTS
The Trust will send you a statement of your account after every
transaction that affects your share balance or your account registration. A
statement with tax information and an annual statement will be mailed to you
by January 31 of each year, and also will be filed with the IRS. At least
twice a year, you will receive financial statements in the form of Annual and
Semi-Annual Reports of
<PAGE>
the Fund.
HOW TO REDEEM SHARES
GENERAL PROCEDURES
Shareholders may redeem all or any part of the value of their
account(s) on any Business Day. You may redeem by mail, telephone or
facsimile if you have established that capability with the Fund. Redemption
orders are processed at the net asset value per share next determined after
the Fund receives your order. If the Fund receives your redemption order
before 1:00 p.m. Eastern Time, on a Business Day other than a Half Day, or by
11:00 a.m. Eastern Time on a Half Day, the Fund will pay for your redeemed
shares on the next Business Day. Otherwise, the Fund will pay for your
redeemed shares on the day following the next Business Day. The Fund
reserves the right to pay for redeemed shares within seven days after
receiving your redemption order if, in the judgment of the Adviser, an
earlier payment could adversely affect the Fund.
REGULAR REDEMPTION
You may redeem shares by sending a written request to FGIC Public Trust,
P.O. Box 1978, Boston, Massachusetts 02015. You must sign a redemption
request. (All individuals with authority on the account must co-sign.)
Your written redemption request must:
(i) state the number of shares to be redeemed;
(ii) identify your shareholder account number; and
(iii) provide your tax identification number.
Each signature must be guaranteed by either a bank that is a member of
the FDIC, a trust company or a member firm of a national securities exchange
or other eligible guarantor institution. The Fund will not accept guarantees
from notaries public. Guarantees must be signed by an authorized person at
the guarantor institution, and the words "Signature Guaranteed" must appear
with the signature. You must obtain a signature guarantee for signatures on
endorsed certificates submitted for redemption. A redemption request will
not be deemed to be properly received until the Fund receives all required
documents in proper form.
If the Fund wires your redemption proceeds, the wire must be paid to the
same bank and account as designated on the Trust's Account Application or in
your written instructions to the Fund. If your bank is not a member of the
Federal Reserve System, your redemption proceeds will be wired to a
correspondent bank. Immediate notification by the correspondent bank to your
bank will be necessary to avoid a delay in crediting the funds to your bank
account.
TELEPHONE REDEMPTION
You may redeem shares by telephone. Shareholders must check the
appropriate box on the Account Application to activate the telephone
redemption privilege. Shares may be redeemed by telephoning the Fund at
(800) 298-FGIC (3442) and giving the account name, account number, Personal
Identification Number (PIN#), name of Fund and amount of redemption.
Proceeds from redemptions may be wired or mailed directly to your account at
a commercial bank within the United States or mailed to you at your address
on the Fund's books. Only redemptions of $1,000 or more will be executed by
telephone.
In order to arrange for telephone redemptions after you have opened your
account, or to change the bank, account or address designated to receive
redemption proceeds, send a written request to the Fund at the address listed
under "Regular Redemption". The request must be signed by you and each other
shareholder of the account involved, with the signatures guaranteed as
described above. The Trust may modify or terminate procedures for redeeming
shares by telephone.
During periods of substantial economic or market change, telephone
redemptions may be
<PAGE>
difficult to complete. If you are unable to contact the Fund by telephone,
you may redeem your shares by mail as described above under "Regular
Redemption".
By electing the telephone redemption option, you may be giving up a
measure of security which you might have had if you were to redeem in
writing. The Trust will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine, such as recording
telephone calls, providing written confirmation of transactions, or requiring
a form of personal identification prior to acting on instructions received by
telephone. To the extent the Trust does not employ reasonable procedures, it
and/or its service contractors may be liable for any losses due to
unauthorized or fraudulent instructions. Neither the Trust, the Transfer
Agent nor ALPS will be liable for following instructions communicated by
telephone that are reasonably believed to be genuine. Accordingly, you, as a
result of this policy, may bear the risk of fraudulent telephone redemption
transactions.
GENERAL REDEMPTION INFORMATION
Except for the presence of certain exceptional circumstances described in
the Investment Company Act of 1940, the Fund will pay for redeemed shares by
mail within seven days after the Fund receives your order and supporting
documents in proper form (except as provided by the rules of the Securities
and Exchange Commission). The Fund will wire redemption proceeds the next
Business Day on which your redemption order is received, provided it is
received before 1:00 p.m. Eastern Time on Business Days and 11:00 a.m.
Eastern Time on Half Days. However, if any of the shares are to be redeemed
by check, the Fund may delay the payment of redemption proceeds until the
Transfer Agent is reasonably satisfied that the check has been collected,
which could take up to 15 days from the purchase date.
There is no charge for share redemptions. The Fund may redeem an account
that has a balance of less than $25,000 if the shareholder does not increase
the amount of the account to at least $25,000 upon 30 days' notice.
Please direct questions concerning the proper form for redemption
requests to the Fund at (800) 298-FGIC (3442).
SHAREHOLDER SERVICES
EXCHANGE PRIVILEGE
You may sell your Fund shares and buy shares of the U.S. Treasury Money
Market Fund, another portfolio of the Trust, in exchange by written request.
There are no fees or commissions for exchanging Trust shares. If you have
checked the appropriate box on your Account Application, you may also
initiate exchanges by telephone. Exchange requests should be directed to the
Fund at (800) 298-FGIC (3442).
Exchange transactions must be for amounts of $1,000 or more. Exchanges
may have tax consequences, so you should consult your tax adviser for further
information. The U.S. Treasury Money Market Fund must be registered for sale
in your state and must meet the investment criteria for your institution.
See "Suitability". Prior to requesting an exchange of Fund shares you should
call the Fund at 1-800-298-FGIC(3442). You should read the current
prospectus for the U.S. Treasury Money Market Fund.
During periods of significant economic or market change, telephone
exchanges may be difficult to complete. If you are unable to contact the
Fund by telephone, you may also mail the exchange request to the Fund at the
address listed under "Regular Redemption". Neither the Trust, the Transfer
Agent nor ALPS will be responsible for the authenticity of exchange
instructions received by telephone except as set forth under "How to Redeem
Shares - Telephone Redemption".
The Trust can provide you with information concerning certain limitations
on the exchange privilege, including those related to frequency. The Trust
may modify or terminate the exchange privilege but will not materially change
or terminate it without giving shareholders 60 days' written notice.
<PAGE>
TAXES
While municipal investors are generally exempt from Federal income taxes,
each investor should independently ascertain its tax status. With respect to
investors who are not exempt from Federal income taxes, dividends derived
from net investment income and short term capital gains are taxable as
ordinary income distributions and are taxable when paid, whether investors
receive distributions in cash or reinvest them in additional shares, except
that distributions declared in December and paid in January are taxable as if
paid on December 31. The Fund will send to non-exempt investors an IRS Form
1099-DIV showing their taxable distributions for the past calendar year.
The Fund intends to continue to qualify as a "regulated investment
company" under the Internal Revenue Code of 1986, as amended (the "Code").
This qualification will relieve the Fund of liability for Federal income
taxes, to the extent its earnings are distributed in accordance with the Code.
The information above is only a summary of some of the federal tax
consequences generally affecting the Fund and its shareholders, and no
attempt has been made to discuss individual tax consequences. In addition to
Federal taxes, investors may be subject to state or local taxes on their
investment. Investors should consult their tax advisor to determine whether
the Fund is suitable to their particular tax situation.
When investors sign their account application, they will be asked to
certify that their social security or taxpayer identification number is
correct and that they are not subject to 31% backup withholding for failing
to report income to the IRS. If investors violate IRS regulations, the IRS
can require the Fund to withhold 31% of taxable distributions and redemptions.
The Fund declares dividends from net investment income daily and pays
such dividends monthly. The Fund intends to distribute substantially all of
its net investment income and capital gains, if any, to shareholders within
each calendar year as well as on a fiscal year basis.
Since all of the Fund's net investment income is expected to be derived
from earned interest, it is anticipated that all dividends paid by the Fund
will be taxable as ordinary income to those shareholders who are not exempt
from Federal income taxes, and that no part of any distribution will be
eligible for the dividends received deduction for corporations.
OTHER INFORMATION
CAPITALIZATION
FGIC Public Trust was organized as a Delaware Business Trust on November
30, 1993 and consists of two separate portfolios or series, one of which is
offered in this Prospectus. The Board of Trustees may establish additional
series in the future. The capitalization of the Trust consists solely of an
unlimited number of shares of beneficial interest with a par value of $0.001
each. When issued, shares of the Trust are fully paid and non-assessable.
Under Delaware law, shareholders could, under certain circumstances, be
held personally liable for the obligations of a series of the Trust but only
to the extent of the shareholder's investment in such series. However, the
Trust Instrument disclaims liability of the shareholders, Trustees or
Officers of the Trust for acts or obligations of the Trust, which are binding
only on the assets and property of each series of the Trust and requires that
notice of the disclaimer be given in each contract or obligations entered
into or executed by the Trust or the Trustees. The risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which the Trust itself would be unable to meet its
obligations and should be considered remote and is limited to the amount of
the shareholder's investment in the Fund.
VOTING
Shareholders have the right to vote in the election of Trustees and on
any and all matters on which, by law or under the provisions of the Trust
Instrument, they may be entitled to vote.
<PAGE>
The Trust is not required to hold regular annual meetings of the Fund's
shareholders and does not intend to do so. The Fund may vote separately on
items which affect only the Fund.
The Trust Instrument provides that the holders of not less than
two-thirds of the outstanding shares of the Trust may remove a person serving
as Trustee either by declaration in writing or at a meeting called for such
purpose. The Trustees are required to call a meeting of shareholders for the
purpose of considering the removal of a person serving as Trustee if
requested in writing to do so by the holders of not less than 10% of the
outstanding shares of the Trust or the Fund.
Shares entitle their holders to one vote per share (with proportionate
voting for fractional shares). As used in this Prospectus, the phrase "vote
of a majority of the outstanding shares" of the Fund (or the Trust) means the
vote of the lesser of: (1) 67% of the shares of the Fund (or the Trust)
present at a meeting if the holders of more than 50% of the outstanding
shares are present in person or by proxy: or (2) more than 50% of the
outstanding shares of the Fund.
PERFORMANCE INFORMATION
From time to time, the Fund may quote its "yield" or "total return" in
advertisements or in communications to shareholders. BOTH TYPES OF
PERFORMANCE ARE BASED ON HISTORICAL EARNINGS AND ARE NOT INTENDED TO INDICATE
FUTURE PERFORMANCE. The Fund's total return is calculated on an average
annual total return basis, and may also be calculated on an aggregate total
return basis, for various periods.
Average annual total return reflects the average annual percentage change
of an investment in the Fund over the measuring period.
Aggregate total return reflects the total percentage change in value over
the measuring period. Both methods of calculating total return assume that
you have reinvested dividends and capital gain distributions made by the Fund
during the time period in Fund shares.
The yield is computed based on the net income of the Fund during a
specified thirty day (or one month) period. More specifically, the Fund's
yield is computed by dividing the Fund's net income per share during a thirty
day (or one month) period by the net asset value per share on the last day of
the period and annualizing the result on a semi-annual basis.
Additionally, the yield of the Fund may be compared in advertisements or
in reports to shareholders to those of other mutual funds with similar
investment objectives and to other relevant indices or to rankings prepared
by independent services or other financial or industry publications that
monitor the performance of mutual funds. For example, the total return and
yield of the Fund may be compared to data prepared by Lipper Analytical
Services, Inc. and Morningstar.
Yield data as reported in national financial publications, including
MONEY MAGAZINE, FORBES, BARRON'S, THE WALL STREET JOURNAL and THE NEW YORK
TIMES, or in publications of a local or regional nature, may also be used in
comparing the yields of the Fund. The total return may also be compared to
indexes such as the Lipper indexes, Shearson Lehman Bond indexes or the
Consumer Price Index.
Performance quotations of the Fund represent the Fund's past performance
and you should not consider such quotations representative of future results.
The investment return and principal value of an investment in the Fund will
fluctuate so that the value of your shares, when redeemed, may be worth more
or less than their original cost. Since yields fluctuate, you cannot
necessarily use yield data to compare an investment in the Funds' shares with
bank deposits, savings accounts and similar investment alternatives which
often provide an agreed or guaranteed fixed yield for a stated period of
time. Yield is generally a function of the kind and quality of the
instruments held in a portfolio, portfolio maturity, operating expenses and
market conditions. Any fees charged by service institutions directly to
their customer accounts in connection with investments in shares of the Fund
will not be included in the Fund's calculations of yield.
INQUIRIES
Please write or call the Trust at the address or telephone number listed
on the cover of
<PAGE>
this Prospectus with any inquiries you may have regarding the Fund or any
other investment portfolios of the Trust that are not offered by this
Prospectus.
INVESTMENT ADVISER INDEPENDENT AUDITORS
FGIC Advisors, Inc. Deloitte & Touche LLP
115 Broadway 1560 Broadway
New York, New York 10006 Suite 1800
Denver, Colorado 80202-5151
DISTRIBUTOR & CUSTODIAN
ADMINISTRATOR State Street Bank and Trust
ALPS Mutual Funds Services, Inc. Company of Connecticut N.A.
370 Seventeenth Street 750 Main Street
Suite 2700 Suite 1114
Denver, Colorado 80202 Hartford, Connecticut 06103
LEGAL COUNSEL SUB-CUSTODIAN &
Baker & McKenzie TRANSFER AGENT
805 Third Avenue State Street Bank & Trust
New York, New York 10022 Company
P.O. Box 1978
Boston, Massachusetts
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUND'S STATEMENT
OF ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION
WITH THE OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
<PAGE>
AUTHORIZED BY THE TRUST OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING BY THE TRUST OR BY THE DISTRIBUTOR IN ANY JURISDICTION
IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
<PAGE>
FGIC PUBLIC TRUST
U.S. TREASURY MONEY MARKET FUND
SHORT-TERM U.S. GOVERNMENT INCOME FUND
370 Seventeenth Street, Suite 2700
Denver, Colorado 80202
[August 4, 1995]
General
Information: (800) 298-FGIC (3442)
STATEMENT OF ADDITIONAL INFORMATION
FGIC Public Trust (the "Trust") is an open-end, diversified management
investment company with multiple investment portfolios, including the U.S.
Treasury Money Market Fund (the "Money Market Fund") and the Short-Term U.S.
Government Income Fund (the "Short-Term Fund") (collectively, the "Funds").
THE MONEY MARKET FUND seeks to provide investors with as high a level of
current income as is consistent with preservation of capital and liquidity by
investing exclusively in U.S. Treasury bills, notes and other direct
obligations of the U.S. Treasury and repurchase agreements fully
collateralized by direct U.S. Treasury obligations. The Fund is required to
maintain a dollar-weighted average portfolio maturity of 90 days or less and
seeks to maintain its net asset value per share at $1.00 for purposes of
purchases and redemptions.
THE SHORT-TERM FUND seeks to provide investors with as high a level of
current income as is consistent with the preservation of capital by investing
exclusively in U.S. Treasury bills, notes and other direct obligations of the
U.S. Treasury and repurchase agreements fully collateralized by direct U.S.
Treasury obligations. The securities held by the Fund have remaining
maturities of three years or less and, under normal circumstances, the
average weighted maturity of the securities held by the Fund will range
between one-and-one half and two years. The net asset value of the Fund
varies depending on the market value of its assets.
Shares of the Funds are offered for sale by ALPS Mutual Funds Services,
Inc., the Sponsor and Distributor, as an investment vehicle for municipal and
other institutions.
This Statement of Additional Information is not a prospectus and is only
authorized for distribution when preceded or accompanied by the Funds'
Prospectuses dated June 30, 1995. This Statement of Additional Information
contains additional and more detailed information than that set forth in each
Prospectus and should be read in conjunction with the Prospectuses,
additional copies of which may be obtained without charge from the Trust.
<PAGE>
- -------------------------------------------------------------------------------
Table of Contents
Page No.
Investment Policies...................................... 2
Investment Restrictions.................................. 4
Management............................................... 6
Calculation of Yields and Performance Information........ 11
Determination of Net Asset Value......................... 14
Portfolio Transactions................................... 16
Portfolio Turnover....................................... 17
Exchange Privilege....................................... 17
Redemptions.............................................. 18
Federal Income Taxes..................................... 19
Shares of Beneficial Interest............................ 21
Other Information........................................ 23
Custodian and Sub-Custodian.............................. 24
Experts.................................................. 24
Financial Statements..................................... 24
- -------------------------------------------------------------------------------
INVESTMENT POLICIES
The following information supplements the discussion of the investment
objective and policies of the Funds found under "Investment Objective" and
"Investment Policies" in each Prospectus.
U.S. TREASURY OBLIGATIONS. Each Fund invests exclusively in direct
obligations of the United States Treasury which have remaining maturities of
13 months or less with respect to the Money Market Fund and three years or
less with respect to the Short-Term Fund and related repurchase agreements.
The United States Treasury issues various types of marketable securities
consisting of bills, notes, bonds and other debt securities. They are direct
obligations of the United States Government and differ primarily in the
length of their maturity. Treasury bills, the most frequently issued
marketable United States Government security, have a maturity of up to one
year and are issued on a discount basis.
REPURCHASE AGREEMENTS. Each Fund may invest in securities pursuant to
repurchase agreements, whereby the seller agrees to repurchase such
securities at the Fund's cost plus interest within a specified time
(generally one day). The securities underlying the repurchase agreements will
consist exclusively of U.S. Treasury obligations in which the Funds are
otherwise permitted to invest. While repurchase agreements involve certain
risks not associated with direct investments in the underlying
-2-
<PAGE>
securities, the Funds will follow procedures designed to minimize such risks.
These procedures include effecting repurchase transactions only with large,
well-capitalized banks and registered broker-dealers having creditworthiness
determined by the Adviser to be substantially equivalent to that of issuers
of debt securities rated investment grade. In addition, the Funds'
repurchase agreements will provide that the value of the collateral
underlying the repurchase agreement will always be at least equal to the
repurchase price, including any accrued interest earned on the repurchase
agreement, and that the Funds' custodian will take possession of such
collateral. In the event of a default or bankruptcy by the seller, the Funds
will seek to liquidate such collateral. However, the exercise of the Funds'
right to liquidate such collateral could involve certain costs or delays and,
to the extent that proceeds from any sale upon a default of the obligation to
repurchase were less than the repurchase price, a Fund could suffer a loss.
Repurchase agreements are considered to be loans by an investment company
under the Investment Company Act of 1940 (the "1940 Act"). There is no limit
on the amount of the Funds' net assets that may be subject to repurchase
agreements having a maturity of seven days or less. The Funds will not enter
into repurchase agreements which will cause more than 10% of a Fund's net
assets to be subject to repurchase agreements having a maturity beyond seven
days.
LOANS OF PORTFOLIO SECURITIES. The Short-Term Fund may, subject to the
restrictions set forth under "Investment Restrictions" in the Prospectus,
lend its portfolio securities to brokers, dealers and financial institutions
if cash or cash equivalent collateral, including letters of credit, equal to
at least 100% of the current market value of the securities loaned (including
accrued dividends and interest thereon) plus the interest payable with
respect to the loan is maintained by the borrower with the lending Fund in a
segregated account. Cash collateral will be invested only in securities in
which the Short-Term Fund is otherwise permitted to invest. In determining
whether to lend a security to a particular broker, dealer or financial
institution, the Adviser will consider all relevant facts and circumstances,
including the creditworthiness of the broker, dealer or financial
institution. The Short-Term Fund will not enter into any portfolio security
lending arrangement having a duration of longer than one year. Any
securities which the Short-Term Fund may receive as collateral will not
become part of the Fund's portfolio at the time of the loan and, in the event
of a default by the borrower, the Fund will, if permitted by law, dispose of
such collateral except for such part thereof which is a security in which the
Fund is permitted to invest. During the time securities are on loan, the
borrower will pay the Fund an amount equal to any accrued income on those
securities, and the Fund may invest the cash collateral and earn additional
-3-
<PAGE>
income or receive an agreed upon fee from a borrower which has delivered cash
equivalent collateral.
The Short-Term Fund will not lend securities having a value which exceeds
10% of the current value of the Fund's total assets. Loans of securities
will be subject to termination at the lender's or the borrower's option. The
Fund may pay reasonable administrative and custodial fees in connection with
a securities loan and may pay a negotiated portion of the interest or fee
earned with respect to the collateral to the borrower or the placing broker.
Borrowers and placing brokers may not be affiliated, directly or indirectly,
with the Fund or its Adviser.
INVESTMENT RESTRICTIONS
The Funds observe the following fundamental investment restrictions which
can be changed only when permitted by law and approved by a majority of a
Fund's outstanding voting securities. A "majority of a Fund's outstanding
voting securities" means the lesser of (i) 67% of the shares represented at a
meeting at which more than 50% of the outstanding shares are represented in
person or by proxies or (ii) more than 50% of the outstanding shares.
The Funds may not:
(1) purchase securities on margin or purchase real estate or
interests therein, commodities or commodity contracts, or make loans,
except loans of portfolio securities with respect to the Short-Term Fund
and except that the Funds may purchase or hold short-term debt securities
and enter into repurchase agreements with respect to its portfolio
securities as described in the Prospectus. For this purpose, repurchase
agreements are considered loans;
(2) invest more than 5% of the current value of the total assets of a
Fund in the securities of any one issuer, other than obligations of the
United States Government or its agencies or instrumentalities, and
repurchase agreements fully collateralized by direct obligations of the
U.S. Government;
(3) purchase the securities of issuers conducting their principal
business activity in the same industry if, immediately after the purchase
and as a result thereof, the value of the investments of a Fund in that
industry would exceed 25% of the current value of the total assets of the
Fund, except that there is no limitation with respect to investments in
obligations of the United States Government, its agencies or
instrumentalities;
-4-
<PAGE>
(4) engage in the underwriting of securities of other issuers, except
to the extent that a Fund may be deemed to be an underwriter in selling, as
part of an offering registered under the Securities Act of 1933, as
amended, securities which it has acquired; or participate on a joint or
joint-and-several basis in any securities trading account. The "bunching"
of orders with other accounts under the management of the Adviser to save
commissions or to average prices among them is not deemed to result in a
securities trading account;
(5) effect a short sale of any security, or issue senior securities
except as permitted in paragraph (6). For purpose of this restriction, the
purchase and sale of financial futures contracts and related options does
not constitute the issuance of a senior security;
(6) issue senior securities or otherwise borrow money, except that
each Fund may borrow from banks as a temporary measure for emergency
purposes where such borrowings would not exceed 10% of a Fund's total
assets (including the amount borrowed) taken at market value; or pledge,
mortgage or hypothecate its assets, except to secure indebtedness permitted
by this paragraph and then only if such pledging, mortgaging or
hypothecating does not exceed 10% of the Fund's total assets taken at
market value.
(7) invest more than 10% of the total assets of a Fund in the
securities of other investment companies, subject to the limitations of
Section 12(d)(1) of the 1940 Act;
(8) invest in any security, including repurchase agreements maturing
in over seven days or other illiquid investments which are subject to legal
or contractual delays on resale or which are not readily marketable, if as
a result more than 10% of the market value of a Fund's assets would be so
invested;
(9) purchase interests in oil, gas, or other mineral exploration
programs of real estate and real estate mortgage loans except as provided
in the Prospectus;
(10) have dealings on behalf of a Fund with Officers and Trustees of
the Fund, except for the purchase or sale of securities on an agency or
commission basis, or make loans to any officers, directors or employees of
the Fund; and
(11) purchase equity securities or other securities convertible into
equity securities.
There will be no violation of any investment restriction if that
restriction is complied with at the time the relevant action
-5-
<PAGE>
is taken notwithstanding a later change in the market value of an investment,
in the net or total assets of a Fund, in the securities rating of the
investment, or any other later change.
MANAGEMENT
TRUSTEES AND OFFICERS
The principal occupations of the Trustees and executive officers of the
Trust for the past five years are listed below. The address of each, unless
otherwise indicated, is 370 Seventeenth Street, Suite 2700, Denver, Colorado
80202. Trustees deemed to be "interested persons" of the Trust for purposes
of the Investment Company Act of 1940, as amended, are indicated by an
asterisk.
* ANN C. STERN, 43, - Trustee and Chairman. Ms. Stern is Chairman and
Chief Executive Officer of FGIC. Ms. Stern was named CEO of FGIC in
January 1992 and was elected to Chairman in October 1993. Prior to
her appointment, Ms. Stern was Managing Director and General Counsel
of FGIC. Ms. Stern is also a member of the firm's Executive Committee
and Structured Finance Underwriting Committee. Prior to joining FGIC,
Ms. Stern was an Associate and a Partner at two New York City law
firms specializing in municipal bonds. She is a member of several
organizations including the Board of Advisors of the Association of
Financial Guaranty Insurors, the American Bar Association, the Arts &
Culture Committee of the GE Foundation and a member of the Board of
Advisors of The Public's Capital, a quarterly journal on
infrastructure. Because of her affiliation with FGIC, Ms. Stern is
considered an "interested" Trustee of FGIC Public Trust.
*W. ROBERT ALEXANDER, 67, - TRUSTEE AND PRESIDENT. Mr. Alexander is
the Chief Executive Officer of ALPS Mutual Funds Services, Inc. which
provides administration and distribution services for proprietary
mutual fund complexes. Prior to co-founding ALPS, Mr. Alexander was
Vice Chairman of First Interstate Bank of Denver, responsible for
Trust, Private Banking, Retail Banking, Cash Management Services and
Marketing. Mr. Alexander is currently Chairman of the Board of Health
ONE, Denver's largest healthcare system. He is also a member of the
Board of Trustees of the Colorado Trust, Colorado's largest foundation
as well as a Trustee of the Hunter and Hughes Trusts. Because of his
affiliation with ALPS, Mr. Alexander is considered an "interested"
Trustee of FGIC Public Trust.
-6-
<PAGE>
BEVERLY S. BUNCH, 38, - TRUSTEE. Ms. Bunch is Assistant Professor at
LBJ School of Public Affairs University of Texas at Austin. Ms. Bunch
teaches graduate courses in public financial management, economics,
and quantitative methods. Ms. Bunch also conducts research in
environmental finance and municipal debt. Prior to her current
position, Ms. Bunch was Assistant to the Executive Director of the
Texas Bond Review Board. In that capacity, Ms. Bunch analyzed
proposed state debt issues, briefed board representatives and made
recommendations to state budget officials on capital planning and
budgeting. Ms. Bunch has held several academic positions and has
taught courses in public finance and related subjects. Ms. Bunch also
acted as Budget Analyst for the City of San Antonio where she analyzed
and monitored a $64 million budget for four city departments.
WILLIAM J. COCHRAN, 47, - TRUSTEE - Mr. Cochran served as Director of
Finance and Chief Financial Officer of the City of Hartford,
Connecticut from July, 1987 to December 1993. As Director of Finance,
Mr. Cochran had full Charter responsibility for the fiscal affairs of
a major urban government comprised of 6,000 employees, assets of over
$1 billion and an overall operating budget of $500 million. During
Mr. Cochran's tenure with Hartford, the city was awarded the
Certificate of Achievement for Excellence in Financial Reporting and
the Distinguished Budget Presentation Award by the Government Finance
Officers Association ("GFOA"). Prior to his tenure as Director of
Finance and Chief Financial Officer, Mr. Cochran was the Executive
Director of the Hartford Development Commission from October, 1981 and
served the City in other responsible financial capacities beginning in
1971. In 1993, Mr. Cochran was elected to the Executive Board of the
national GFOA and has also served on its Debt and Fiscal Policy
Committee. Mr. Cochran is a member of the Connecticut Government
Finance Officers Association, the Board of Trustees of the Connecticut
Resources Recovery Authority, and is a Founder and Trustee of the
Hartford Partnership for Scholarships.
MAYNARD H. JACKSON, JR., 57, - TRUSTEE. Mr. Jackson served three
terms as the mayor of Atlanta; completing his last term in January of
1994. During his tenure as mayor, Rand McNally named Atlanta as the
best major city in which to live and work in the United States. Mr.
Jackson recently returned to the private sector as Chairman of the
Board of Jackson Securities. Mr. Jackson has also held positions on
several civic related boards, including Chairman of the U.S. Local
-7-
<PAGE>
Government Energy Policy Advisory Committee, founding Chairman of the
Rebuild America Coalition, and founding Chairman of the Atlanta
Economic Development Authority of Atlanta. Mr. Jackson was also a key
component of Atlanta's successful bid for the 1996 Summer Olympics. A
member of Phi Beta Kappa and a trustee of Morehouse College, Mr.
Jackson is the recipient of numerous honorary degrees, citations and
awards for civic, humanitarian, academic and business achievements.
STEPHEN A. ATTANASIO, 36, - VICE PRESIDENT. 115 Broadway, New York,
New York 10006. Mr. Attanasio is currently Vice President and Senior
Product Manager for FGIC Capital Market Services. Prior to joining
FGIC in June 1991, Mr. Attanasio served a ten-year tenure at Dean
Witter Reynolds, most recently as Vice President/Manager of Unit Trust
Originations.
WILLIAM PASTON, 39, - VICE PRESIDENT AND TREASURER. 370 Seventeenth
Street, Suite 2700, Denver, Colorado 80202. Product Development
Manager of ALPS Mutual Funds Services. Prior to joining ALPS, Mr.
Paston was an associate with Lipper Analytical Services, coordinating
that firm's marketing effort in the banking industry.
STEVEN R. HOWARD, 42, - SECRETARY. 805 Third Avenue, New York, New
York 10022. Partner, Baker & McKenzie since April 1991; Partner,
Gaston & Snow from 1988 to 1991. Attorney, Debevoise & Plimpton from
1982 to 1988; Secretary, Mariner Funds Trust since 1987.
Trustees of the Trust receive from the Trust an annual fee of $5,000.00
and a fee in the amount of $500.00 for attending each meeting of the Trustees
and each committee meeting and are reimbursed for all out-of-pocket expenses
relating to attendance at meetings.
As of the date of this Statement of Additional Information the Trustees
and officers of the Trust as a group owned less than 1% of the outstanding
shares of the Trust.
INVESTMENT ADVISER. The Trust retains FGIC Advisors, Inc. (the
"Adviser") as investment adviser for each Fund.
The Advisory Contract provides that the Adviser will manage the portfolio
of each Fund and will furnish to each Fund investment guidance and policy
direction in connection therewith. The Adviser has agreed to provide to the
Trust, among other things, information relating to money market portfolio
composition, credit conditions and average maturity of the
-8-
<PAGE>
portfolio of each Fund. Pursuant to the Advisory Contract, the Adviser also
furnishes to the Trust's Board of Trustees periodic reports on the investment
performance of the Funds.
The Adviser has also agreed in the Advisory Contract to provide
administrative assistance in connection with the operation of each Fund.
Administrative services provided by the Adviser include, among other things,
(i) data processing, clerical and bookkeeping services required in connection
with maintaining the financial accounts and records for the Funds, (ii)
compiling statistical and research data required for the preparation of
reports and statements which are periodically distributed to the Funds'
officers and Trustees, (iii) handling general shareholder relations with Fund
investors, such as advice as to the status of their accounts, the current
yield and dividends declared to date and assistance with other questions
related to their accounts, and (iv) compiling information required in
connection with the Funds' filings with the Securities and Exchange
Commission.
SPONSOR AND DISTRIBUTOR. Shares of the Funds are offered on a continuous
basis through ALPS Mutual Funds Services, Inc., the Distributor, pursuant to
the Distribution Contract. The Distributor is not obligated to sell any
specific amount of shares.
ADMINISTRATOR. Pursuant to the Administrative Services Contract, ALPS
Mutual Funds Services: (i) provides administrative services reasonably
necessary for the operation of the Funds, (other than those services which
are provided by the Adviser pursuant to the Advisory Contract) (ii) provides
the Funds with office space and office facilities reasonably necessary for
the operation of the Funds; and (iii) employs or associates with itself such
persons as it believes appropriate to assist it in performing its obligations
under the Administrative Services Contract.
As compensation for its administrative services under the Administrative
Services Agreement, ALPS Mutual Funds Services, Inc., is entitled to receive
a fee computed daily and payable monthly, at the annual rate of .18 percent
of average daily net assets up to $500 million, .15 percent on the next 500
million and .12 percent on assets in excess of $1 billion subject to a
minimum monthly fee of $62,500 for the U.S. Treasury Money Market Fund and
$7,500 for the Short-Term U.S. Government Income Fund.
For the period of May 25, 1994 (commencement of operations) to April 30,
1995, the U.S. Treasury Money Market Fund paid $687,761 in administration
fees under the Administration Services Agreement. For the period of June 7,
1994 (commencement of operations) to April 30, 1995, the Short-Term U.S.
Government
-9-
<PAGE>
Income Fund paid $68,092 to ALPS Mutual Funds Services, in administration
fees under the Administrative Services Agreement.
FEES AND EXPENSES
As compensation for advisory, management and administrative services, the
Adviser and the Administrator are paid a monthly fee at the following annual
rates:
MONEY MARKET FUND:
PORTION OF AVERAGE DAILY VALUE
OF NET ASSETS OF THE FUND ADVISORY ADMINISTRATIVE TOTAL
- ------------------------------ -------- -------------- -----
Not exceeding $500 million......... 0.35% 0.18% 0.53%
In excess of $500 million but
not exceeding $1 billion......... 0.35% 0.15% 0.50%
In excess of $1 billion............ 0.35% 0.12% 0.47%
SHORT-TERM FUND:
PORTION OF AVERAGE DAILY VALUE
OF NET ASSETS OF THE FUND ADVISORY ADMINISTRATIVE TOTAL
- ------------------------------ -------- -------------- -----
Not exceeding $500 million......... 0.45% 0.18% 0.63%
In excess of $500 million but
not exceeding $1 billion......... 0.45% 0.15% 0.60%
In excess of $1 billion............ 0.45% 0.12% 0.57%
The Adviser has stated that it will voluntarily waive a portion of the
advisory fee otherwise payable and/or reimburse Trust expenses to the extent
necessary to maintain a total expense ratio of not more than 0.50% of average
net assets with respect to the Money Market Fund and 0.60% of average net
assets with respect to the Short-Term Fund. The Adviser reserves the right to
terminate the fee waiver at any time. The U.S. Treasury Money Market Fund
paid to the Adviser $264,224 (all of which, was voluntarily waived) for the
period May 25, 1994 (commencement of operations) to April 30, 1995 in
advisory fees. The Short-Term U.S. Government Income Fund paid to the
Adviser $215,432, (of which $109,039 was voluntarily waived) in advisory fees
for the period June 7, 1994 (commencement of operations) to April 30, 1995.
Except for the expenses paid by the Adviser under the Advisory Contract
and the Administrator under the Administrative Services Contract, each Fund
bears all costs of its operations. Expenses attributable to the Funds are
charged against the assets of each Fund, respectively.
The Advisory Contract, Distribution Contract and Administrative Services
Contract will continue in effect with respect to each Fund from year to year
provided such continuance
-10-
<PAGE>
is approved annually (i) by the holders of a majority of the outstanding
voting securities of a Fund or by the Trust's Trustees; and (ii) by a
majority of the Trustees who are not parties to such contracts or "interested
persons" (as defined in the Investment Company Act of 1940) of any such
party. Each contract may be terminated with respect to a Fund at any time,
without payment of any penalty, by a vote of a majority of the outstanding
voting securities of the Fund (as defined in the Investment Company Act of
1940) or by a vote of a majority of the Trustees. The Advisory Contract,
Administrative Services Contract and the Distribution Contract shall
terminate automatically in the event of their assignment (as defined in the
Investment Company Act of 1940).
The Board of Trustees of the Trust approved the continuance of each of
the Fund's Advisory Contract, the Distribution Contract and the
Administrative Services Agreement at a meeting of the Board of Trustees on
April 24, 1995.
The Trust incurs administration expenses based on the terms of the
Administrative Services Agreement. In the absence of certain fee waivers and
reimbursements, administration fees borne by the Funds might not be in
proportion to relative Fund assets.
CALCULATION OF YIELDS AND
PERFORMANCE INFORMATION
Each Fund may, from time to time, include its yield and effective yield
in advertisements or reports to shareholders or prospective investors.
Current yield for each Fund will be based on the change in the value of a
hypothetical investment (exclusive of capital changes) over a particular
7-day period, less a pro-rata share of a Fund's expenses accrued over that
period (the "base period"), and stated as a percentage of the investment at
the start of the base period (the "base period return"). The base period
return is then annualized by multiplying by 365/7, with the resulting yield
figure carried to at least the nearest hundredth of one percent. "Effective
yield" for the Funds assumes that all dividends received during an annual
period have been reinvested. Calculation of "effective yield" begins with the
same "base period return" used in the calculation of yield, which is then
annualized to reflect weekly compounding pursuant to the following formula:
Effective Yield - [(Base Period Return) + 1) 365/7] - 1.
Thirty-day yields for the Funds may also be advertised from time to
time and are calculated by using a method known as "semi-annual compounding".
Yield is calculated by dividing the net investment income per share earned
during the period by the maximum offering price per share on the last day of
the period, according to the following formula:
-11-
<PAGE>
Where: yield = 2[(a-b+1)6 - 1]
___
cd
a = dividends and interest earned during the period, including the
amortization of market premium or accretion of market discount.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the period
that were entitled to receive dividends.
d = the maximum offering price per share on the last day of the
period.
As of April 30, 1995, the Seven Day Effective Yield and the SEC Seven Day
Yield for the U.S. Treasury Money Market Fund was 5.64% and 5.49%,
respectively. The 30 Day SEC Yield for the Short-Term U.S. Government Income
Fund was 5.69%.
The Short Term Fund from time to time may also advertise total return and
cumulative total return figures. Total return is the average annual compound
rate of return for one, five and ten year periods and for the life of the
Fund, where applicable, each ended on the last day of a recent calendar
quarter. Total return quotations reflect the change in the price of a Fund's
share and assume that all dividends and capital gains distributions during
the respective periods were reinvested in shares of such Fund. Total return
is calculated by finding the average annual compounded rates of return of a
hypothetical investment over such periods, that would compare the initial
amount to the ending redeemable value of such investment according to the
following formula (total return is then expressed as a percentage):
n
Where: P(1+T) = ERV
P = a hypothetical initial investment of $1,000
T = average annual total return
n = number of years.
ERV= ending redeemable value: ERV is the value, at the end of the
applicable period, of a hypothetical $1,000 investment made at
the beginning of the applicable period.
-12-
<PAGE>
Cumulative total return is the compound rate of return on a hypothetical
initial investment of $1,000 for a specified period. Cumulative total return
quotations reflect the change in the price of the Fund's shares and assume
that all dividends and capital gains distributions during the period were
calculated by finding the compound rates of return of a hypothetical
investment over such period, according to the following formula (cumulative
total return is then expressed as a percentage):
C = (ERV/P) - 1
C = Cumulative Total Return
P = a hypothetical initial investment of $1,000
ERV= ending redeemable value: ERV is the value, at the end of the
applicable period, of a hypothetical $1,000 investment made at
the beginning of the applicable period.
The average annual total return for the Short-Term Fund for the period
June 7, 1994 (commencement of operations) to April 30, 1995 was 4.73%. Past
Performance is not predictive of future performance.
From time to time, in marketing pieces and other Fund literature, the
Funds' total performance may be compared to the performance of broad groups
of comparable funds or unmanaged indices of comparable securities.
Evaluations of Fund performance made by independent sources may also be used
in advertisements concerning the Funds. Sources for Fund performance
information may include, but are not limited to, the following:
BARRON'S, a Dow Jones and Company, Inc. business and financial weekly that
periodically reviews mutual fund performance data.
BUSINESS WEEK, a national business weekly that periodically reports the
performance rankings and ratings of a variety of mutual funds investing
abroad.
CHANGING TIMES, THE KIPLINGER MAGAZINE, a monthly investment advisory
publication that periodically features the performance of a variety of
securities.
DONOGHUE'S MONEY FUND REPORT, a weekly publication of the Donoghue
Organization, Inc., of Holliston, Massachusetts, reporting on the
performance of the nation's money market funds, summarizing money market
fund activity, and including certain averages as performance benchmarks,
specifically
-13-
<PAGE>
"Donoghue's Money Fund Average," and "Donoghue's Government
Money Fund Average."
FINANCIAL TIMES, Europe's business newspaper, which features from time to
time articles on international or country-specific funds.
FORBES, a national business publication that from time to time reports the
performance of specific investment companies in the mutual fund industry.
FORTUNE, a national business publication that periodically rates the
performance of a variety of mutual funds.
GLOBAL INVESTOR, a European publication that periodically reviews the
performance of U.S. mutual funds investing internationally.
LIPPER ANALYTICAL SERVICES, INC.'S MUTUAL FUND PERFORMANCE ANALYSIS, a
weekly publication of industry-wide mutual fund averages by type of fund.
MONEY, a monthly magazine that from time to time features both specific
funds and the mutual fund industry as a whole.
NEW YORK TIMES, a nationally distributed newspaper which regularly covers
financial news.
PERSONAL INVESTOR, a monthly investment advisory publication that includes
a "Mutual Funds Outlook" section reporting on mutual fund performance
measures, yields, indices and portfolio holdings.
SYLVIA PORTER'S PERSONAL FINANCE, a monthly magazine focusing on personal
money management that periodically rates and ranks mutual funds by
performance.
WALL STREET JOURNAL, a Dow Jones and Company, Inc. newspaper which
regularly covers financial news.
WIESENBERGER INVESTMENT COMPANIES SERVICES, an annual compendium of
information about mutual funds and other investment companies, including
comparative data on funds' backgrounds, management policies, salient
features, management results, income and dividend records, and price
ranges.
DETERMINATION OF NET ASSET VALUE
The Funds' net asset value per share is determined by dividing the total
current market value of the assets of a Fund,
-14-
<PAGE>
less liabilities, by the total number of shares outstanding at the time of
determination. All expenses, including the advisory and administrative fees,
are accrued daily and taken into account for the purpose of determining the
net asset value.
As indicated under "Determination of Net Asset Value" in the Money Market
Fund Prospectus, the Money Market Fund uses the amortized cost method to
determine the value of its portfolio securities pursuant to Rule 2a-7 under
the Investment Company Act of 1940. The amortized cost method involves
valuing a security at its cost and amortizing any discount or premium over
the period until maturity, regardless of the impact of fluctuating interest
rates on the market value of the security. While this method provides
certainty in valuation, it may result in periods during which the value, as
determined by amortized cost, is higher or lower than the price which the
Fund would receive if the security were sold. During these periods the yield
to a shareholder may differ somewhat from that which could be obtained from a
similar fund which utilizes a method of valuation based upon market prices.
Thus, during periods of declining interest rates, if the use of the amortized
cost method resulted in a lower value of the Fund's portfolio on a particular
day, a prospective investor in the Fund would be able to obtain a somewhat
higher yield than would result from an investment in a fund utilizing solely
market values, and existing Fund shareholders would receive correspondingly
less income. The converse would apply during periods of rising interest
rates.
Rule 2a-7 provides that in order to value its portfolio using the
amortized cost method, the Money Market Fund must maintain a dollar-weighted
average portfolio maturity of 90 days or less, purchase securities having
remaining maturities of thirteen months or less and invest only in securities
determined by the Trust's Board of Trustees to be "eligible securities" as
defined by Rule 2a-7 and to present minimal credit risks. Pursuant to Rule
2a-7, the Board is required to establish procedures designed to stabilize, to
the extent reasonably possible, the price per share of the Fund, as computed
for the purpose of sales and redemptions, at $1.00. Such procedures include
review of the Fund's portfolio holdings by the Board of Trustees, at such
intervals as it may deem appropriate, to determine whether the net asset
value of the Fund calculated by using available market quotations deviates
from $1.00 per share based on amortized cost. The extent of any deviation
will be examined by the Board of Trustees. If such deviation exceeds 1/2 of
1%, the Board will promptly consider what action, if any, will be initiated.
In the event the Board determines that a deviation exists which may result in
material dilution or other unfair results to investors or existing
shareholders, the Board will take such corrective action as it regards as
necessary and appropriate, including the sale of portfolio instruments prior
to maturity to realize capital gains or losses or to shorten average
-15-
<PAGE>
portfolio maturity, withholding dividends or establishing a net asset value
per share by using available market quotations.
Portfolio securities of the Short Term Fund are valued at current market
value, if available. Securities for which market quotations are not readily
available are valued at fair value as determined in good faith by or under
the supervision of the Trust's officers in accordance with guidelines which
have been adopted by the Board of Trustees. Such procedures include the use
of independent pricing services which use prices based on yields or prices of
securities of comparable quality, coupon, maturity and type; indications as
to value from dealers; and general market conditions. Short-term obligations
of sixty days or less are valued at amortized cost, which approximates market
value.
Each Fund will compute its net asset value once daily as of 4:00 p.m.
(New York City time), on each day the New York Stock Exchange is open for
business which excludes New Year's Day, Washington's Birthday, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas.
PORTFOLIO TRANSACTIONS
The Trust has no obligation to deal with any dealer or group of dealers
in the execution of transactions in portfolio securities. Subject to policy
established by the Trustees, the Adviser is primarily responsible for
portfolio decisions and the placing of portfolio transactions. In placing
orders, it is the policy of the Fund to obtain the best results taking into
account the dealer's general execution and operational facilities, the type
of transaction involved and other factors such as the dealer's risk in
positioning the securities involved. While the Adviser generally seeks
reasonably competitive spreads or commissions, the Funds will not necessarily
be paying the lowest spread or commission available.
Purchases and sales of securities will often be principal transactions in
the case of debt securities traded otherwise than on an exchange. Debt
securities normally will be purchased or sold from or to issuers directly or
to dealers serving as market makers for the securities at a net price.
Generally, money market securities are traded on a net basis and do not
involve brokerage commissions. Under the Investment Company Act of 1940,
persons affiliated with the Adviser, the Funds or the Distributor are
prohibited from dealing with the Funds as a principal in the purchase and
sale of securities except in accordance with regulations adopted by the
Securities and Exchange Commission. Under the Investment Company Act of
1940, persons affiliated with the Adviser, the Funds or the Distributor may
act as a broker for the Funds. In order for such persons to effect any
portfolio
-16-
<PAGE>
transactions for the Funds, the commissions, fees or other remuneration
received by such persons must be reasonable and fair compared to the
commissions, fees or other remunerations paid to other brokers in connection
with comparable transactions involving similar securities being purchased or
sold on an exchange during a comparable period of time. This standard would
allow the affiliate to receive no more than the remuneration which would be
expected to be received by an unaffiliated broker in a commensurate
arms-length transaction. The Trustees of the Trust will regularly review the
commissions paid by the Funds to affiliated brokers.
The Adviser may, in circumstances in which two or more dealers are in a
position to offer comparable results, give preference to a dealer which has
provided statistical or other research services to the Adviser. By
allocating transactions in this manner, the Adviser is able to supplement its
research and analysis with the views and information of securities firms.
PORTFOLIO TURNOVER
The portfolio turnover rate measures the frequency with which a Fund's
portfolio of securities is traded. The Short-Term U.S. Government Income
Fund will attempt to purchase securities with intent of holding them for
investment but may purchase and sell portfolio securities whenever the
adviser believes it to be warranted (e.g., the Fund may sell portfolio
securities in anticipation of an adverse market movement). The purchase and
sale of portfolio securities may involve dealer mark-ups, underwriting
commissions or other transaction costs. Generally, the higher the portfolio
turnover rate, the higher the transaction costs to the Fund, which will
generally increase the Fund's total operating expenses. In order to qualify
as a regulated investment company, less than 30% of the Fund's gross income
must be derived from gains on the sale or other disposition of stock,
securities or certain other investments held for less than 3 months.
Although increased portfolio turnover may increase the likelihood of
additional capital gains for the Funds, the Short-Term U.S. Government Income
Fund expects to satisfy the 30% income test. The Short-Term U.S. Government
Income Fund's portfolio turnover rate for the period ending April 30, 1995
was 743.48%.
EXCHANGE PRIVILEGE
Shareholders who have held all or part of their shares in one of the Funds
for at least seven days may exchange those shares for shares of the other Fund
if such Fund is available for sale in their state and meets the investment
criteria of the investor.
-17
<PAGE>
Before effecting an exchange, shareholders should review the Prospectus
of the other Fund. Exercise of the exchange privilege is treated as a
redemption for income tax purposes and, depending on the circumstances, a
gain or loss may be recognized.
The exchange privilege may be modified or terminated upon sixty (60)
days' written notice to shareholders. Although initially there will be no
limit on the number of times a shareholder may exercise the exchange
privilege, the Funds reserve the right to impose such a limitation. Call or
write the Funds for further details.
REDEMPTIONS
With respect to the Short Term Fund (and with respect to the Money Market
Fund in the event that Fund does not maintain a constant net asset value per
share), the proceeds of a redemption may be more or less than the amount
invested and, therefore, a redemption may result in a gain or loss for
Federal and state and local income tax purposes. Any loss realized on the
redemption of Fund shares held, or treated as held, for six months or less
will be treated as a long-term capital loss to the extent of any long-term
capital gain dividends received on the redeemed shares.
A shareholder's account with the Funds remains open for at least one year
following complete redemption and all costs during the period will be borne
by the Funds. This permits an investor to resume investments in the Fund
during the period in an amount of $25,000 or more.
To be in a position to eliminate excessive shareholder expense burdens,
the Funds reserve the right to adopt a policy pursuant to which a Fund may
redeem, upon not less than 30 days' notice, shares of the Fund in an account
which has a value below a designated amount. However, any shareholder
affected by the exercise of this right will be allowed to make additional
investments prior to the date fixed for redemption to avoid liquidation of
the account. Shareholder accounts which have a value below the designated
amount due to changes in the market value in portfolio securities will not be
redeemed.
The Funds may suspend the right of redemption during any period when (i)
trading on the New York Stock Exchange is restricted or that Exchange is
closed, other than customary weekend and holiday closings, (ii) the
Securities and Exchange Commission has by order permitted such suspension or
(iii) an emergency exists making disposal of portfolio securities or
determination of the value of the net assets of the Fund not reasonably
practicable.
-18-
<PAGE>
Although it would not normally do so, the Trust has the right to pay the
redemption price in whole or in part in securities of a Fund's portfolio as
prescribed by the Trustees. When a shareholder sells portfolio securities
received in this fashion he would incur a brokerage charge. The Trust has,
however, elected to be governed by Rule 18f-1 under the Investment Company
Act of 1940, as amended. Under that rule, the Trust must redeem its shares
for cash except to the extent that the redemption payments to any shareholder
during any 90-day period would exceed the lesser of $250,000 or 1% of a
Fund's net asset value at the beginning of such period.
FEDERAL INCOME TAXES
Each Fund has elected to be treated as a regulated investment company and
qualified as such in 1995. The Funds intend to continue to so qualify by
complying with the provisions of the Internal Revenue Code (the "Code")
applicable to regulated investment companies so that they will not be liable
for Federal income tax with respect to amounts distributed to shareholders in
accordance with the timing requirements of the Code.
In order to qualify as a regulated investment company for a taxable year,
each Fund must, among other things, (a) derive at least 90% of its gross
income from dividends, interest, payments with respect to loans of stock or
securities and gains from the sale or other disposition of stock or
securities or foreign currency gains related to investments in stock or
securities or other income (including gains from options, futures or forward
contracts) derived with respect to the business of investing in stock,
securities or currency; (b)derive less than 30% of its gross income from the
sale or other disposition of stock or securities or certain other investments
held less than three months (excluding some amounts included in income as a
result of certain hedging transactions); and (c) diversify its holdings so
that, at the end of each quarter of its taxable year, (i) at least 50% of the
market value of the Fund's assets is represented by cash, cash items, U.S.
Government securities, securities of other regulated investment companies and
other securities limited, in the case of other securities for purposes of
this calculation, in respect of any one issuer, to an amount not greater than
5% of its assets or 10% of the voting securities of the issuer, and (ii) not
more than 25% of the value of its assets is invested in the securities of any
one issuer (other than U.S. Government securities or securities of other
regulated investment companies). As such, and by complying with the
applicable provisions of the Code, the Funds will not be subject to Federal
income tax on taxable income (including realized capital gains) which is
distributed to shareholders in accordance with the timing requirements of the
Code.
-19-
<PAGE>
The amount of capital gains, if any, realized in any given year will
result from sales of securities made with a view to the maintenance of a
portfolio believed by Fund management to be most likely to attain a Fund's
investment objective. Such sales and any resulting gains or losses, may
therefore vary considerably from year to year. Since at the time of an
investor's purchase of shares, a portion of the per share net asset value by
which the purchase price is determined may be represented by realized or
unrealized appreciation in a Fund's portfolio or undistributed income of the
Fund, subsequent distributions (or portions thereof) on such shares may be
taxable to such investor even if the net asset value of his shares is, as a
result of the distributions, reduced below his cost for such shares and the
distributions (or portions thereof) represent a return of a portion of his
investment.
The Funds are required to report to the IRS all distributions of taxable
dividends and of capital gains, as well as the gross proceeds of share
redemptions. The Funds may be required to withhold Federal income tax at a
rate of 31% ("backup withholding") from taxable dividends (including capital
gain dividends) and the proceeds of redemptions of shares paid to
non-corporate shareholders who have not furnished the Fund with a correct
taxpayer identification number and made certain required certifications or
who have been notified by the Internal Revenue Service that they are subject
to backup withholding. The Funds may also be required to withhold Federal
income tax at a rate of 31% if they are notified by the IRS or a broker that
the taxpayer identification number is incorrect or that backup withholding
applies because of underreporting of interest or dividend income.
Distributions of taxable net investment income and net realized capital
gains will be taxable as described in the Prospectus whether made in shares
or in cash. In determining amounts of net realized capital gains to be
distributed, any capital loss carryovers from prior years will be applied
against capital gains. Shareholders receiving distributions in the form of
additional shares will have a cost basis for Federal income tax purposes in
each share so received equal to the net asset value of a share of the Fund on
the reinvestment date. Fund distributions will also be included in
individual and corporate shareholders' income on which the alternative
minimum tax may be imposed.
Any loss realized upon the redemption of shares held (or treated as held)
for six months or less will be treated as a long-term capital loss to the
extent of any long-term capital gain dividend received on the redeemed
shares. Any loss realized upon the redemption of shares within six months
after receipt of an exempt-interest dividend will be disallowed. All or a
portion of a loss realized upon the redemption of shares may be disallowed to
the extent shares are purchased (including shares
-20-
<PAGE>
acquired by means of reinvested dividends) within 30 days before or after
such redemption. Exchanges are treated as redemptions for Federal tax
purposes.
Different tax treatment is accorded to accounts maintained as IRAs,
including a penalty on early distributions. Shareholders should consult
their tax advisers for more information.
Each Fund will be separate for investment and accounting purposes and
will be treated as a separate taxable entity for Federal income tax purposes.
Each Fund is subject to a 4% nondeductible excise tax to the extent that
it fails to distribute to its shareholders during each calendar year an
amount equal to (a) at least 98% of its taxable ordinary investment income
(excluding long-term and short-term capital gain income) for the calendar
year; plus (b) at least 98% of its capital gain net income for the one year
period ending on October 31 of such calendar year; plus (c) any ordinary
investment income or capital gain net income from the preceding calendar year
which was neither distributed to shareholders nor taxed to the Fund during
such year. The Funds intend to distribute to shareholders each year an
amount sufficient to avoid the imposition of such excise tax.
SHARES OF BENEFICIAL INTEREST
The Trust consists of multiple separate portfolios or Funds. When
certain matters affect one Fund but not another, the shareholders would vote
as a Fund regarding such matters. Subject to the foregoing, on any matter
submitted to a vote of shareholders, all shares then entitled to vote will be
voted separately by the Fund unless otherwise required by the 1940 Act, in
which case all shares will be voted in the aggregate. For example, a change
in a Fund's fundamental investment policies would be voted upon only by
shareholders of the Fund. Additionally, approval of the Advisory Contract is
a matter to be determined separately by each Fund. Approval by the
shareholders of one Fund is effective as to that Fund whether or not
sufficient votes are received from the shareholders of the other Fund to
approve the proposal as to that Fund. As used in the Prospectuses and in
this Statement of Additional Information, the term "majority," when referring
to approvals to be obtained from shareholders of a Fund means the vote of the
lesser of (i) 67% of the shares of the Fund or class represented at a meeting
if the holder of more than 50% of the outstanding shares of the Fund or class
are present in person or by proxy, or (ii) more than 50% of the outstanding
shares of the Fund. The term "majority", when referring to the approvals to
be obtained from shareholders of the Trust as a whole means the vote of the
lesser of (i) 67% of the Trust's shares represented at a
-21-
<PAGE>
meeting if the holders of more than 50% of the Trust's outstanding shares are
present in person or proxy, or (ii) more than 50% of the Trust's outstanding
shares. Shareholders are entitled to one vote for each full share held and
fractional votes for fractional shares held.
The Trust may dispense with annual meetings of shareholders in any year
in which it is not required to elect trustees under the 1940 Act. However,
the Trust undertakes to hold a special meeting of its shareholders if the
purpose of voting on the question of removal of a director or trustees is
requested in writing by the holders of at least 10% of the Trust's
outstanding voting securities, and to assist in communicating with other
shareholders as required by Section 16(c) of the 1940 Act.
Each share of a Fund represents an equal proportional interest in the
Fund with each other share and is entitled to such dividends and
distributions out of the income earned on the assets belonging to the Fund as
are declared in the discretion of the Trustees. In the event of the
liquidation or dissolution of the Trust, shareholders of each Fund are
entitled to receive the assets attributable to such Fund that are available
for distribution, and a distribution of any general assets of the Trust not
attributable to a particular Fund that are available for distribution in such
manner and on such basis as the Trustees in their sole discretion may
determine.
Shareholders are not entitled to any preemptive rights. All shares, when
issued, will be fully paid and non-assessable by the Trust.
As of July 19, 1995, the following shareholders owned 5% or more of the
outstanding shares of the Funds as listed below:
FUND PERCENTAGE INTEREST
U.S. TREASURY MONEY MARKET FUND
City of Cranston 8.61%
Attn: Douglas Stewart
869 Park Avenue
Cranston, IL 02905
City of Hartford 9.70%
City Treasurers Office, Denise Nappier
550 Main Street
Hartford, CT 06103
-22-
<PAGE>
City of Odessa 6.84%
Attn: Jim Cox
P.O. Box 4398
Odessa, TX 79760-4398
City of Bridgeport 9.01%
Attn: Sharon D. Lemdon
45 Lyon Terrace
Bridgeport, CT 06604
Treasurer-County of Riverside 6.33%
Attn: Kenneth Kirin
P.O. Box 12005
Riverside, CA 92502-2205
County of Winnebago 9.66%
Douglas R. Aurand, Treasurer
P.O. Box 1216
Rockford, IL 61105-1216
SHORT-TERM U.S. GOVERNMENT INCOME FUND
City of Hartford 71.74%
City Treasurer's Office
Denise Nappier
550 Main Street
Hartford, CT 06103
Health Care FAC-SAYR 16.19%
c/o Mellon Bank, N.A.
Attn: Joe Robinson
Corporate Trust Group
Two Mellon Bank Center
Third Floor, Room 0325
Pittsburg, PA 15259
OTHER INFORMATION
The Trust's Registration Statement, including the Prospectuses, the
Statement of Additional Information and the exhibits filed therewith, may be
examined at the office of the SEC in Washington, D.C. Statements contained
in the Prospectuses or the Statement of Additional Information as to the
contents of any contract or other document referred to herein or in the
Prospectuses are not necessarily complete, and, in each instance, reference
is made to the copy of such contract or other document filed as an exhibit to
the Registration Statement, each such statement being qualified in all
respects by such reference.
-23-
<PAGE>
CUSTODIAN AND SUB-CUSTODIAN
State Street Bank & Trust Company of Connecticut, N.A. acts as Custodian
for the Trust. The Custodian, among other things, maintains a custody
account or accounts in the name of the Funds; receives and delivers all
assets for the Funds upon purchase and upon sale or maturity; collects and
receives all income and other payments and distributions on account of the
assets of the Funds and pays all expenses of the Funds. For its services as
Custodian, State Street receives an asset-based fee and transaction charges.
State Street Bank and Trust Company serves as Sub-Custodian for the Trust.
The Administrative Services Agreement between ALPS Mutual Fund Services and
the Trust currently provides that the asset-based fee and transaction costs
of the Trust's Custodian and Sub-Custodian be paid by ALPS Mutual Fund
Services. The Sub-Custodian was paid $76,684, for the year ended April 30,
1995 for custody services.
EXPERTS
Deloitte & Touche LLP has been selected as the independent accountants
for the Trust. Deloitte & Touche provide audit services, tax return
preparation and assistance and consultation in connection with review of
certain SEC filings. Deloitte & Touche's address is 1560 Broadway, Suite
1800, Denver, Colorado 80202-5151.
FINANCIAL STATEMENTS
The financial highlights included in this prospectus and the related
financial statements included elsewhere in the registration statement have
been audited by Deloitte & Touche LLP, independent auditors, as stated in
their reports appearing in the Statement of Additional Information, and are
included in reliance upon the reports of such firm given upon their authority
as experts in accounting and auditing.
-24-
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders,
FGIC Public Trust:
We have audited the accompanying statements of assets
and liabilities, including the statements of investments, of
the U.S. Treasury Money Market Fund and the Short-Term U.S.
Government Income Fund of the FGIC Public Trust as of April
30, 1995, the related statements of operations for the U.S.
Treasury Money Market Fund (May 25, 1994 (commencement of
operations) to April 30, 1995) and the Short-Term U.S.
Government Income Fund (June 7, 1994 (commencement of
operations) to April 30, 1995) and the statements of changes
in net assets and financial highlights for the periods ended
April 30, 1995. These financial statements and financial
highlights are the responsibility of the Trust's Management.
Our responsibility is to express an opinion on these
financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable assurance
about whether the financial statements and financial
highlights are free of material misstatement. An audit also
includes examining on a test basis, evidence supporting the
amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned at
April 30, 1995, by correspondence with the custodian. An
audit also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial
highlights present fairly, in all material respects, the
financial position of the U.S. Treasury Money Market Fund
and the Short-Term U.S. Government Income Fund of the FGIC
Public Trust as of April 30, 1995, and the results of their
operations, the changes in their net assets and financial
highlights for each of the periods indicated in conformity
with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Denver, Colorado
May 24, 1995
<PAGE>
U.S. TREASURY MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1995
ASSETS
Investments, at amortized cost (which approximates
market value) -see accompanying statement $ 109,066,301
Organization costs, net of accumulated amortization 287,014
Receivable from investment advisor 160,467
Other 33,227
Total Assets 109,547,009
LIABILITIES
Payables:
Dividends 396,797
Accrued expenses 94,911
Total Liabilities 491,708
NET ASSETS $ 109,055,301
COMPOSITION OF NET ASSETS
Paid-in capital $ 109,097,794
Accumulated net realized loss (42,493)
NET ASSETS $ 109,055,301
Shares of beneficial interest outstanding 109,097,794
Net asset value and redemption value per share $1.00
See notes to financial statements.
<PAGE>
U.S. TREASURY MONEY MARKET FUND
STATEMENT OF INVESTMENTS
APRIL 30, 1995
<TABLE>
<CAPTION>
Market Collateral
Face Amount Value* Value
<S> <C> <C>
U.S. GOVERNMENT TREASURIES 4.51%
$ 5,000,000 U.S. Treasury Bills
08/10/95 (Cost $4,915,132) $4,915,132
REPURCHASE AGREEMENTS
COLLATERALIZED BY U.S.
GOVERNMENT OBLIGATIONS 95.50%
4,300,000 Repurchase agreement with BA Securities Inc.,
5.93%, dated 04/28/95 and maturing 05/01/95,
collateralized by U.S. Treasury Notes, 7.50%
due 10/31/95 4,302,125 $ 4,381,027
4,300,000 Repurchase agreement with Barclay's BZW Inc.,
5.90%, dated 04/28/95 and maturing 05/01/95,
collateralized by U.S. Treasury Notes,
3.875% due 09/30/95, 7.375% due 11/15/97 4,302,114 4,387,022
10,000,000 Repurchase agreement with Barclay's
BZW Inc., 5.70%, dated 04/28/95 and maturing
05/01/95, collateralized by U.S. Treasury
Note, 4.375% due 08/15/96 10,004,750 10,200,768
21,500,000 Repurchase agreement with Chase
Securities Inc., 5.93%, dated 04/28/95 and
maturing 05/01/95, collateralized by U.S.
Treasury Bills due 06/08/95, 06/15/95 21,510,625 21,933,839
4,300,000 Repurchase agreement with Deutsche
Bank, 5.875%, dated 04/28/95 and maturing
05/01/95, collateralized by U.S. Treasury
Notes, 5.50% due 02/28/99, 9.125% due
05/15/99, 8.875% due 05/15/00 4,302,105 4,386,690
4,300,000 Repurchase agreement with First Chicago
Capital Markets, 5.92%, dated 04/28/95
and maturing 05/01/95, collateralized by
U.S. Treasury Bond, 10.375% due 11/15/09 4,302,121 4,390,691
</TABLE>
(continued)
<PAGE>
U.S. TREASURY MONEY MARKET FUND
STATEMENT OF INVESTMENTS
APRIL 30, 1995 (Continued)
<TABLE>
<CAPTION>
Market Collateral
Face Amount Value* Value
<S> <C> <C>
REPURCHASE AGREEMENTS
COLLATERALIZED BY U.S.
GOVERNMENT OBLIGATIONS (continued)
4,300,000 Repurchase agreement with Fuji Securities
Inc., 5.93%, dated 04/28/95 and maturity
05/01/95, collateralized by U.S. Treasury
Notes, 5.50% due 09/30/97, 5.375% due
05/31/98, 4.75% due 10/31/98 $ 4,302,125 $ 4,386,975
4,300,000 Repurchase agreement with Lehman
Brothers Inc., 5.90%, dated 04/28/95 and
maturing 05/01/95, collateralized by U.S.
Treasury Note, 7.375% due 11/15/97 4,302,114 4,383,631
10,000,000 Repurchase agreement with Lehman
Brothers Inc., 5.75%, dated 04/28/95 and
maturing 05/01/95, collateralized by U.S.
Treasury Note, 7.375% due 11/15/97 10,004,792 10,195,224
19,600,168 Repurchase agreement with Morgan Stanley
Inc., 5.93%, dated 04/28/95 and maturing
05/01/95, collateralized by U.S. Treasury
Note, 7.25% due 11/30/96 19,609,854 19,999,926
4,300,000 Repurchase agreement with Nomura
Securities Inc., 5.875%, dated 04/28/95
and maturing 05/01/95, collateralized by U.S.
Treasury Note, 7.25% due 02/15/98, U.S.
Treasury Bond, 12.00% due 06/15/10 4,302,105 4,386,995
4,300,000 Repurchase agreement with Smith Barney
Shearson, Inc., 5.86%, dated 04/28/95 and
maturing 05/01/95, collateralized by U.S.
Treasury Bills, due 05/25/95 and 04/04/96,
U.S. Treasury Note, 6.00% due 11/30/97,
U.S. Treasury Bond, 14.25% due 02/15/02 4,302,100 4,386,594
</TABLE>
(continued)
<PAGE>
U.S. TREASURY MONEY MARKET FUND
STATEMENT OF INVESTMENTS
APRIL 30, 1995 (Continued)
<TABLE>
<CAPTION>
Market Collateral
Face Amount Value* Value
<S> <C> <C>
REPURCHASE AGREEMENTS
COLLATERALIZED BY U.S.
GOVERNMENT OBLIGATIONS (continued)
$4,300,000 Repurchase agreement with State Street
Bank Corp., 5.90%, dated 04/28/95 and
maturing 05/01/95, collateralized by U.S.
Treasury Note, 5.125% due 03/31/96 $4,302,114 $4,388,560
4,300,000 Repurchase agreement with UBS Securities,
Inc., 5.93%, dated 04/28/95 and maturing
05/01/95, collateralized by U.S. Treasury Bonds,
10.625% due 08/15/15, 9.875% due 11/15/15,
9.25% due 02/15/16 4,302,125 4,387,361
TOTAL REPURCHASE AGREEMENTS
(Cost $104,151,169) 104,151,169 106,195,303
TOTAL INVESTMENTS
(Cost $109,066,301) 100.01% $109,066,301
Liabilities in Excess of Other Assets (0.01%) (11,000)
NET ASSETS 100.00% $109,055,301
</TABLE>
*See note I to financial statements.
<PAGE>
U.S. TREASURY MONEY MARKET FUND
STATEMENT OF OPERATIONS
For the period from May 25, 1994 (commencement of operations) to April 30, 1995
INVESTMENT INCOME $4,728,306
EXPENSES:
Investment advisory fee (Note 3) 264,224
Administration services*(Note 3) 687,761
Legal 41,852
Audit 15,000
Amortization of organization costs 52,751
Insurance 29,180
Registration 68,888
Total Expenses 1,159,656
Expenses waived by investment advisor (264,224)
Expenses reimbursed by investment advisor (455,040)
NET EXPENSES 440,392
NET INVESTMENT INCOME 4,287,914
REALIZED LOSS ON INVESTMENTS
Net realized loss from investment transactions (42,493)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $4,245,421
* Administration services include: fund accounting, daily pricing, custody,
licensing and registration, shareholder servicing, transfer agency,
fund ratings, training, SEC registration fees and printing.
See notes to financial statements.
<PAGE>
U.S. TREASURY MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
For the Period
Ended
April 30, 1995 (1)
OPERATIONS
Net investment income $ 4,287,914
Net realized loss on investments (42,493)
Net increase in net assets resulting from operations 4,245,421
Dividends to shareholders from net investment income (4,287,914)
Change in net assets from operations (42,493)
BENEFICIAL INTEREST TRANSACTIONS
Shares sold 733,139,524
Dividends reinvested 3,414,118
736,553,642
Shares redeemed (627,505,848)
Change in net assets derived from beneficial
interest transactions 109,047,794
NET INCREASE IN NET ASSETS 109,005,301
NET ASSETS:
Beginning of period 50,000*
End of period $109,055,301
*Initial capitalization
(1) Operations commenced on May 25, 1994.
See notes to financial statements.
<PAGE>
U.S. TREASURY MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest
outstanding throughout the period indicated:
For the Period Ended
April 30, 1995 (1)
Net asset value - beginning of period $1.00
Income from investment operations
Net investment income 0.04
Dividends and distributions to shareholders
Dividends from net investment income (0.04)
Net asset value - end of period $1.00
Total return 4.71%(2)
Ratios/Supplemental Data:
Net assets, end of period (000) $ 109,055
Ratio of expenses to average net assets 0.50%(2)
Ratio of net investment income to average net assets 4.87%(2)
Ratio of expenses to average net assets without fee waivers 1.32%(2)
Ratio of net investment income to average net assets
without fee waivers 4.05%(2)
(1) Operations commenced on May 25, 1994.
(2) Annualized.
See notes to financial statements.
<PAGE>
SHORT-TERM U.S. GOVERNMENT INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1995
ASSETS
Investments, at value (cost $42,029,889)
-see accompanying statement $ 42,065,834
Organization costs, net of accumulated amortization 14,678
Interest receivable 37,292
Other 11,828
Total Assets 42,129,632
LIABILITIES
Payables:
Dividends 198,003
Advisory fees 11,127
Accrued expenses 27,416
Total Liabilities 236,546
NET ASSETS $ 41,893,086
COMPOSITION OF NET ASSETS
Paid-in capital $ 42,045,954
Accumulated net realized loss (188,813)
Net unrealized appreciation 35,945
NET ASSETS $ 41,893,086
Shares of beneficial interest outstanding 4,201,105
Net asset value and redemption value per share $9.97
See notes to financial statements.
<PAGE>
SHORT-TERM U S. GOVERNMENT INCOME FUND
STATEMENT OF INVESTMENTS
APRIL 30, 1995
Market Collateral
Face Amount Value* Value
U.S. GOVERNMENT TREASURIES 13.95%
U.S. Treasury Bills,
$4,000,000 02/08/96 $ 3,815,416
U.S. Treasury Notes,
2,000,000 7.50%, 01/31/97 2,030,000
TOTAL U.S. GOVERNMENT TREASURIES
(Cost $5,809,471) 5,845,416
REPURCHASE AGREEMENTS
COLLATERALIZED BY U.S.
GOVERNMENT OBLIGATIONS 86.46%
1,800,000 Repurchase agreement with BA Securities
Inc., 5.93%, dated 04/28/95 and maturing
05/01/95, collateralized by U.S. Treasury
Note, 7.50% due 10/31/99 1,800,889 $1,835,152
1,800,000 Repurchase agreement with Barclay's
BZW Securities Inc., 5.90%, dated 04/28/95
and maturing 05/01/95, collateralized by U.S.
Treasury Note, 7.375% due 11/15/97 1,800,885 1,836,551
9,000,000 Repurchase agreement with Chase
Securities Inc., 5.93%, dated 04/28/95 and
maturing 05/01/95, collateralized by U.S.
Treasury Bills, due 06/01/95 and 06/08/95 9,004,448 9,184,197
1,800,000 Repurchase agreement with Deutsche
Bank Corp., 5.875%, dated 04/28/95 and
maturing 05/01/95, collateralized by U.S.
Treasury Bill, due 04/04/96 1,800,881 1,836,220
1,800,000 Repurchase agreement with First Chicago
Capital Markets, 5.92%, dated 04/28/95
and maturing 05/01/95, collateralized by U.S.
Treasury Bonds, 12.375% due 05/15/04,
10.75% due 08/15/05, 10.375% due 11/15/09 1,800,888 1,841,305
(continued)
<PAGE>
SHORT-TERM US. GOVERNMENT INCOME FUND
STATEMENT OF INVESTMENTS
APRIL 30, 1995 (Continued)
Market Collateral
Face Amount Value* Value
REPURCHASE AGREEMENTS
COLLATERALIZED BY U.S.
GOVERNMENT OBLIGATIONS (continued)
$1,800,000 Repurchase agreement with Fuji Securities
Inc., 5.93%, dated 04/28/95 and maturing
05/01/95, collateralized by U.S. Treasury
Notes, 7.875% due 07/31/96, 6.75% due
06/30/99 $1,800,889 $1,836,230
1,800,000 Repurchase agreement with Lehman
Brothers Inc., 5.90%, dated 04/28/95 and
maturing 05/01/95, collateralized by U.S.
Treasury Note, 7.375% due 11/15/97 1,800,885 1,837,450
9,202,570 Repurchase agreement with Morgan
Stanley Inc., 5.93%, dated 04/28/95 and
maturing 05/01/95, collateralized by U.S.
Treasury Note, 8.50% due 05/15/97 9,207,118 9,391,335
1,800,000 Repurchase agreement with Nomura
Securities Inc., 5.875%, dated 04/28/95
and maturing 05/01/95, collateralized by U.S.
Treasury Note, 7.25% due 02/15/98 1,800,881 1,836,600
1,800,000 Repurchase agreement with Smith Barney
Shearson, Inc., 5.86%, dated 04/28/95 and
maturing 05/01/95, collateralized by U.S.
Treasury Bills, due 10/19/95, U.S. Treasury
Notes, 4.125% due 05/31/95, 6.375% due
06/30/97 1,800,879 1,836,306
1,800,000 Repurchase agreement with State Street
Bank Corp., 5.90%, dated 04/28/95 and
maturing on 05/01/95, collateralized by U.S.
Treasury Notes, 5.125% due 03/31/96 1,800,885 1,841,006
(continued)
<PAGE>
SHORT-TERM US. GOVERNMENT INCOME FUND
STATEMENT OF INVESTMENTS
APRIL 30, 1995 (Continued)
Market Collateral
Face Amount Value* Value
REPURCHASE AGREEMENTS
COLLATERALIZED BY U.S.
GOVERNMENT OBLIGATIONS (continued)
$1,800,000 Repurchase agreement with UBS
Securities Inc., 5.93%, dated 04/28/95
and maturing on 05/01/95, collateralized
by U.S. Treasury Bonds, 10.625% due
08/15/15 $ 1,800,890 $ 1,840,519
TOTAL REPURCHASE AGREEMENTS
(Cost $36,220,418) 36,220,418 36,952,871
TOTAL INVESTMENTS
(Cost $42,029,889) 100.41% $42,065,834
Liabilities in Excess of Other Assets (0.41%) (172,748)
NET ASSETS 100.00% $41,893,086
*See note I to financial statements.
<PAGE>
SHORT-TERM U.S. GOVERNMENT INCOME FUND
STATEMENT OF OPERATIONS
For the period from June 7, 1994 (commencement of operations) to April 30, 1995
INVESTMENT INCOME $3,064,302
EXPENSES:
Investment advisory fee (Note 3) 215,432
Administration services* (Note 3) 68,092
Legal 26,496
Audit 12,000
Amortization of organization costs 3,205
Insurance 4,193
Registration 20,039
Total Expenses 349,457
Expenses waived by investment advisor (109,039)
NET EXPENSES 240,418
NET INVESTMENT INCOME 2,823,884
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss from investment transactions (188,813)
Unrealized appreciation on investments:
Beginning of period 0
End of Period 35,945
Net change in unrealized appreciation 35,945
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS (152,868)
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $2,671,016
* Administration services include: fund accounting, daily pricing, custody,
licensing and registration, shareholder servicing, transfer agency,
fund ratings, training, SEC registration fees and printing.
See notes to financial statements.
<PAGE>
SHORT- TERM U.S. GOVERNMENT INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
For the Period
Ended
April 30,1995 (1)
OPERATIONS
Net investment income 2,823,884
Net realized loss on investments (188,813)
Net unrealized depreciation 35,945
Net increase in net assets resulting from operations 2,671,016
Dividends to shareholders from net investment income (2,823,884)
Change in net assets from operations (152,868)
BENEFICIAL INTEREST TRANSACTIONS
Shares sold 108,454,418
Dividends reinvested 2,503,280
110,957,698
Shares redeemed (68,961,744)
Change in net assets derived from beneficial
interest transactions 41,995,954
NET INCREASE IN NET ASSETS 41,843,086
NET ASSETS:
Beginning of period 50,000*
End of period $41,893,086
*Initial capitalization
(1) Operations commenced on June 7, 1994.
See notes to financial statements.
<PAGE>
SHORT-TERM U.S. GOVERNMENT INCOME FUND
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest
outstanding throughout the period indicated:
For the Period
Ended
April 30, 1995 (1)
Net asset value - beginning of Period $10.00
Income from investment operations
Net investment income 0.44
Net realized and unrealized loss on investments (0.03)
Total income from investment operations 0.41
Dividends and distributions to shareholders
Dividends from net investment income (0.44)
Net asset value - end of period $9.97
Total return 4.73%(2)
Ratios/Supplemental Data:
Net assets, end of period (000) $41,893
Ratio of expenses to average net assets 0.45%
Ratio of net investment income to average net assets 5.23%(2)
Ratio of expenses to average net assets without fee waivers .65%(2)
Ratio of net investment income to average net assets without
fee waivers 5.03%(2)
Portfolio turnover rate (3) 827.35%(2)
(1) Operations commenced on June 7, 1994.
(2) Annualized.
(3) A portfolio turnover rate is, in general, the percentage computed by
taking the lesser of purchases or sales of portfolio securities (excluding
securities with maturity date of one year or less at the time of
acquisition) for the period and dividing it by the monthly average
of the market value of such securities during the period. Purchases
and sales of investment securities (excluding short-term securities) for
the period ended April 30, 1995 were $26,984,886 and $24,886,719,
respectively.
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
FGIC Public Trust (the "Trust") is registered under the
Investment Company Act of 1940, as amended, as an open-end
management investment company. The U.S. Treasury Money
Market Fund and the Short-Term U.S. Government Income Fund
("Funds"), are represented by separate classes of shares of
beneficial interest of the Trust, which is organized as a
Delaware business trust.
The following is a summary of significant accounting
policies consistently followed by the Funds in the
preparation of their financial statements. The policies are
in conformity with generally accepted accounting principles.
Investment Valuation: The U.S. Treasury Money Market
Funds securities are valued on the basis of amortized cost
which approximates market value.
Securities of the Short-Term U.S. Government Income
Fund are valued at 4:00 p.m. (EST) on each trading day. The
Fund's investments are valued at the last sales price of the
day or where market quotations are not readily available, a
fair market value is determined in good faith by or under
the direction of the Board of Trustees. Short-term
securities are valued at amortized cost which approximates
market value.
Repurchase Agreements: A third party custodian takes
possession of the collateral pledged for investments in
repurchase agreements. The underlying collateral is valued
daily on a mark-to-market basis to ensure that value,
including accrued interest, is at least 102% of the
repurchase price. In the event of default on the obligation
to repurchase, the Funds have the right to liquidate the
collateral and apply the proceeds in satisfaction of the
obligation. Under certain circumstances, in the event of
default by or bankruptcy of the other party to the agreement
realization and/or retention of the collateral may be
subject to legal proceedings.
Federal Income Taxes: It is the Fund's policy to
continue to comply with provisions of the Internal Revenue
Code applicable to regulated investment companies and to
distribute all of its taxable income to shareholders.
Therefore, no Federal Income Tax provisions are required.
Organization Costs: The Funds have deferred certain
organization costs. Such costs are being amortized over a
60 month period from the commencement of operations. In the
event that all, or part of FGIC's initial investment in
shares of the Fund is withdrawn during the amortization
period, the redemption proceeds will be reduced by the
proportionate amount of the unamortized organization costs
represented by the ratio that the number of shares redeemed
bears to the number of initial shares outstanding at the
time of each redemption.
Other: Investment transactions are accounted for on
the date the investments are purchased or sold (trade date).
Dividends from net investment income are declared daily and
paid monthly. Distributions of net realized gains, if any,
are declared at least once a year. Realized gains and
losses from investment transactions are reported on an
identified cost basis which is the same basis the Funds use
for Federal Income Tax purposes.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
2. SHARES OF BENEFICIAL INTEREST
On April 30, 1995, there was an unlimited number of no
par value shares of beneficial interest authorized.
Transactions in shares of beneficial interest were as
follows:
U.S. Treasury Money Short-Term U.S. Government
Market Fund Income Fund
For the Period For the Period
Ended April 30, 1995 Ended April 30, 1995
Shares Sold 733,139,524 10,861,462
Shares Reinvested 3,414,118 251,089
Total 736,553,642 11,112,551
Shares Redeemed 627,505,848 6,916,446
Net Increase 109,047,794 4,196,105
3. INVESTMENT ADVISORY FEES, ADMINISTRATION FEES AND OTHER
RELATED PARTY TRANSACTIONS
The Trust has entered into Investment Advisory
Agreements with FGIC Advisors, Inc. (FGIC). Pursuant to
these advisory agreements with the Trust, the Investment
Advisor is entitled to an advisory fee, computed daily and
payable monthly. FGIC receives an annual fee of .35 percent
and .45 percent of the average net assets of the U.S.
Treasury Money Market Fund and Short-Term U.S. Government
Income Fund, respectively. In addition, FGIC waived all of
its advisory fee and voluntarily assumed some of the
expenses of the U.S. Treasury Money Market Fund and waived a
portion of its advisory fee on the Short-Term U.S.
Government Income Fund.
ALPS Mutual Funds Services, Inc. (ALPS) serves as the Fund's
administrator. ALPS is entitled to receive a fee from the
Funds for its administrative services computed daily and
payable monthly, at the annual rate of .18 percent of
average daily net assets up to $500 million, .15 percent on
the next 500 million and .12 percent on assets in excess of
$1 billion subject to a minimum monthly fee of $62,500 for
the U.S. Treasury Money Market Fund and $7,500 for the Short-
Term U.S. Government Income Fund.
Two shareholders of the U.S. Treasury Money Market Fund
owned 18.3 percent and 12.9 percent of the outstanding
shares at April 30, 1995. Three shareholders of the Short-
Term U.S. Government Income Fund owned 58.0 percent, 17.5
percent and 12.3 percent of the outstanding shares at April
30, 1995.
