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FUNDS IV TRUST 237 PARK AVENUE, NEW YORK, NEW YORK 10017
-----------------------------------------
GENERAL AND ACCOUNT INFORMATION:
(800) 557-3768
SERVICE CLASS PROSPECTUS
BANK IV, N.A. -- INVESTMENT ADVISOR
("BANK IV" OR THE "ADVISER")
AMR INVESTMENT SERVICES, INC. -- INVESTMENT ADVISOR
FOR THE CASH RESERVE MONEY MARKET FUND
("AMR")
FURMAN SELZ LLC -- ADMINISTRATOR AND SPONSOR
("FURMAN SELZ")
FUNDS IV DISTRIBUTOR INC. -- DISTRIBUTOR
("FFD" OR THE "DISTRIBUTOR")
This Prospectus describes eight funds, two money market funds (the "Money
Market Funds") and six non-money market funds (the "Non Money Market Funds")
(collectively, the "Funds"), all of which are managed by BANK IV, except the
Cash Reserve Money Market Fund, which is managed by AMR. The Funds and their
investment objectives are:
- The U.S. TREASURY RESERVE MONEY MARKET FUND seeks to provide investors with
as high a level of current income as is consistent with liquidity,
stability, maximum safety of principal and the maintenance of a stable $1.00
net asset value.
- The CASH RESERVE MONEY MARKET FUND seeks to provide investors with current
income, liquidity and the maintenance of a stable $1.00 net asset value by
investing in high quality, short-term obligations.
- The SHORT-TERM TREASURY INCOME FUND seeks to provide investors with as high
a level of current income as is consistent with liquidity and safety of
principal.
- The INTERMEDIATE BOND INCOME FUND seeks to provide investors with as high a
level of current income as is consistent with managing for total return by
investing in fixed income securities.
- The BOND INCOME FUND seeks to provide investors with as high a level of
current income as is consistent with managing for total return by investing
in fixed income securities.
- The STOCK APPRECIATION FUND seeks to provide investors with long-term
capital appreciation.
- The AGGRESSIVE STOCK APPRECIATION FUND seeks to provide investors with
aggressive long-term capital appreciation.
- The VALUE STOCK APPRECIATION FUND seeks to provide investors with long-term
capital appreciation and dividend income.
This Prospectus describes only the "Service Class" of each Fund. Each Fund
also offers a Premium Class of shares. See "Other Information"
- -- "Capitalization". The Funds are separate investment funds of FUNDS IV
Trust (the "Trust"), a Delaware business trust and registered management
investment company.
AN INVESTMENT IN SHARES OF THE TRUST IS NEITHER INSURED NOR GUARANTEED BY THE
U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE MONEY MARKET FUNDS WILL BE
ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE. SHARES OF THE
TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, BANK IV,
AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY, AND MAY INVOLVE
INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THIS PROSPECTUS SETS FORTH CONCISELY THE INFORMATION A PROSPECTIVE INVESTOR
SHOULD KNOW BEFORE INVESTING IN ANY OF THE FUNDS AND SHOULD BE READ AND RETAINED
FOR INFORMATION ABOUT EACH FUND.
A Statement of Additional Information (the "SAI"), dated January 30, 1996,
containing additional and more detailed information about the Funds has been
filed with the Securities and Exchange Commission ("SEC") and is hereby
incorporated by reference into this Prospectus. It is available without charge
and can be obtained by writing or calling the Funds at the address and
information numbers printed above.
------------------------
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.
The Date of this Prospectus is January 30, 1996.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Fund Expenses............................................................. 3
Fee Table................................................................. 3
Financial Highlights...................................................... 5
Highlights................................................................ 6
The Investment Policies and Practices of the Funds........................ 11
Investment Restrictions................................................... 24
Risks of Investing in the Funds........................................... 24
Management of the Funds................................................... 26
Fund Share Valuation...................................................... 30
Pricing and Purchase of Fund Shares....................................... 31
Minimum Purchase Requirements............................................. 32
Individual Retirement Accounts............................................ 32
Exchange of Fund Shares................................................... 33
Redemption of Fund Shares................................................. 33
Dividends, Distributions and Federal Income Tax........................... 36
Other Information......................................................... 38
Appendix.................................................................. A-1
</TABLE>
2
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FUND EXPENSES
The following expense table lists the costs and expenses that an investor
in the Service Class of shares will incur either directly or indirectly as a
shareholder of a Fund. The information is based upon expenses during the first
year of operations ended June 30, 1995 adjusted to reflect current fees and
expenses. Shareholders in the Premium Class of shares may be subject to an
additional shareholder servicing charge of up to 0.50% of average daily net
assets.
FEE TABLE
<TABLE>
<CAPTION>
U.S.
TREASURY CASH SHORT-
RESERVE RESERVE TERM INTERMEDIATE AGGRESSIVE VALUE
MONEY MONEY TREASURY BOND BOND STOCK STOCK STOCK
MARKET MARKET INCOME INCOME INCOME APPRECIATION APPRECIATION APPRECIATION
FUND FUND FUND FUND FUND FUND FUND FUND
-------- ------- -------- ------------ ------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Maximum Sales Load Imposed on
Purchases (as a percentage of
offering price).............. None None None None None None None None
Maximum Sales Load Imposed on
Reinvested Dividends
(as a percentage of offering
price)...................... None None None None None None None None
Deferred Sales Load
(as a percentage of
redemption proceeds)........ None None None None None None None None
Redemption Fees(1)............ None None None None None None None None
Exchange Fees................. None None None None None None None None
Annual Fund Operating Expenses
(as a percentage of average
net assets)
Management Fees............... 0.15% 0.20% 0.30% 0.40% 0.40% 0.65% 0.745% 0.65%
12b-1 Fees
(after waivers)(2).......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Other Expenses................ 0.32% 0.30% 0.45% 0.35% 0.56% 0.35% 0.49% 0.53%
---- ---- ---- ---- ---- ---- ---- ----
TOTAL PORTFOLIO OPERATING
EXPENSES(1,2)............... 0.47% 0.50% 0.75% 0.75% 0.96% 1.00% 1.23% 1.18%
==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
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(1) Shareholders may be charged a wire redemption fee by their bank for
receiving a wire payment on their behalf.
(2) The fee under each Fund's Distribution Plan and Agreement is calculated
on the basis of the average net assets of each Fund at an annual rate not
to exceed 0.25%.
(3) Absent 12b-1 fee waivers, which may be discontinued at any time, Total
Portfolio Operating Expenses would be 0.72% for the U.S. Treasury Reserve
Money Market Fund, 0.75% for the Cash Reserve Money Market Fund, 1.00% for
the Short-Term Treasury Income Fund, 1.00% for the Intermediate Bond Income
Fund, 1.21% for the Bond Income Fund, 1.25% for the Stock Appreciation
Fund, 1.48% for the Aggressive Stock Appreciation Fund, and 1.43% for the
Value Stock Appreciation Fund.
3
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The purpose of this table is to assist a shareholder in the Service Class
of shares in understanding the various costs and expenses that an investor in
the Funds will bear.
EXAMPLE:*
You would pay the following expenses on a $1,000 investment, assuming (1)
5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
U.S.
TREASURY CASH SHORT-
RESERVE RESERVE TERM INTERMEDIATE AGGRESSIVE VALUE
MONEY MONEY TREASURY BOND BOND STOCK STOCK STOCK
MARKET MARKET INCOME INCOME INCOME APPRECIATION APPRECIATION APPRECIATION
FUND FUND FUND FUND FUND FUND FUND FUND
-------- ------- -------- ------------ ------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 year........................ $ 5 $ 5 $ 8 $ 8 $ 10 $ 10 $ 13 $ 12
3 years....................... $15 $16 $24 $24 $ 31 $ 32 $ 39 $ 37
5 years....................... $26 $28 $42 $42 $ 53 $ 55 $ 68 $ 65
10 years...................... $59 $63 $93 $93 $118 $122 $149 $143
</TABLE>
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* This example should not be considered a representation of future expenses
which may be more or less than those shown. The assumed 5% annual return is
hypothetical and should not be considered a representation of past or future
annual return; actual return may be greater or less than the assumed amount.
4
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FINANCIAL HIGHLIGHTS
The condensed financial information included below is supplementary
information to the financial statements contained in the Statement of Additional
Information, and sets forth certain information concerning the investment
results for Service Shares of the Fund for the period presented. The financial
statements and financial highlights for Service Shares of the Fund for the
period ended June 30, 1995 have been audited by Price Waterhouse LLP, whose
unqualified report thereon is contained in the Statement of Additional
Information.
The following table sets forth information for a Service Class Share of
beneficial interest outstanding throughout the period:
<TABLE>
<CAPTION>
VALUE STOCK
THE THE APPRECIATION
THE CASH SHORT TERM THE AGGRESSIVE FUND PERIOD
RESERVE TREASURY INTERMEDIATE THE BOND THE STOCK STOCK ENDING
MONEY MARKET INCOME BOND INCOME APPRECIATION APPRECIATION JUNE 30,
FUND* FUND** INCOME FUND** FUND** FUND** FUND** 1995***
------------ ---------- ------------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.......... $ 1.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
-------- ------- -------- ------- -------- ------- -------
Income from Investment
Operations:
Net investment income........ 0.05 0.47 0.51 0.52 0.16 0.10 0.10
Net realized and unrealized
gain on securities.......... -- 0.20 0.19 0.35 1.05 0.87 0.93
-------- ------- -------- ------- -------- ------- -------
Total from Investment
Operations................. 0.05 0.67 0.70 0.87 1.21 0.97 1.03
-------- ------- -------- ------- -------- ------- -------
Less Distributions:
Dividend from net
investment income.......... (0.05) (0.47) (0.51) (0.52) (0.16) (0.10) (0.10)
-------- ------- -------- ------- -------- ------- -------
Net Asset Value, End
of Period................... $ 1.00 $ 10.20 $ 10.19 $ 10.35 $ 11.05 $ 10.87 $ 10.93
-------- ------- -------- ------- -------- ------- -------
Total Return****.............. 4.74% 6.95% 7.26% 9.05% 12.19% 9.81% 10.32%
Ratios/Supplemental Data:
Net Assets, End of Period
(in thousands)............. $274,663 $15,272 $ 129,317 $12,977 $131,239 $ 44,205 $20,690
Ratios of Expenses to Average
Net Assets Annualized...... 0.50% 0.75% 0.75% 0.96% 1.00% 1.23% 1.18%
Effect of waivers/
reimbursements on
expense ratio............... 0.04% 0.29% 0.02% 0.15% 0.02% -- 0.15%
Ratio of Net Investment
Income to Average Net
Assets Annualized.......... 5.40% 5.65% 6.10% 6.21% 1.89% 1.27% 2.52%
Portfolio Turnover Rate...... N/A 83.28% 107.54% 149.36% 46.37% 72.11% 16.74%
</TABLE>
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* Fund commenced operations on August 19, 1994.
** Fund commenced operations on August 26, 1994.
*** Fund commenced operations on February 10, 1995.
**** Total return computed since inception not annualized.
5
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HIGHLIGHTS
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS
This Prospectus describes eight funds, two money market funds and six
non-money market funds (collectively, the "Funds"), all of which are managed by
BANK IV, except the Cash Reserve Money Market Fund which is managed by AMR
Investment Services, Inc. Each Fund has distinct investment objectives and
policies.
MONEY MARKET FUNDS:
U.S. Treasury Reserve Money Market Fund. The investment objective of the
U.S. Treasury Reserve Money Market Fund is to seek as high a level of current
income as is consistent with liquidity, stability and maximum safety of
principal and the maintenance of a stable $1.00 net asset value per share. The
Fund invests exclusively in short-term obligations of the United States
Treasury, which are backed by the full faith and credit of the United States
Government, and repurchase agreements in respect of such obligations. This fund
is not currently in operation.
Cash Reserve Money Market Fund. The investment objectives of the Cash
Reserve Money Market Fund are current income, liquidity and the maintenance of a
stable $1.00 net asset value per share by investing in high quality, U.S.
dollar-denominated short-term obligations which are determined by the investment
advisor to present minimal credit risks.
The Cash Reserve Money Market Fund may invest in obligations permitted to
be purchased under Rule 2a-7 of the Investment Company Act of 1940 (the "1940
Act") including, but not limited to, (1) obligations of the U.S. Government or
its agencies or instrumentalities; (2) commercial paper, loan participation
interests, medium-term notes, asset-backed securities and other promissory
notes, including floating or variable rate obligations; and (3) domestic, Yankee
dollar and Eurodollar certificates of deposit, time deposits, bankers'
acceptances, commercial paper, bearer deposit notes and other promissory notes,
including floating or variable rate obligations issued by U.S. or foreign bank
holding companies and their bank subsidiaries, branches and agencies. The Cash
Reserve Money Market Fund will invest only in issuers or instruments that at the
time of purchase (1) have received the highest short-term rating by at least two
Nationally Recognized Statistical Rating Organizations ("NRSROs") such as "A-1"
by Standard & Poor's and "P-1" by Moody's; (2) are single rated and have
received the highest short-term rating by a NRSRO (and provided the purchase is
approved or ratified by the Board of Trustees); or (3) are unrated, but are
determined to be of comparable quality by AMR pursuant to guidelines approved by
the Board and subject to ratification by the Board. The Cash Reserve Money
Market Fund may also purchase securities on a "when-issued" basis and purchase
or sell them on a "forward commitment" basis.
The Cash Reserve Money Market Fund will concentrate its investments in
obligations issued by the banking industry. Concentration in this context means
the investment of more than 25% of the Cash Reserve Money Market Fund's assets
in such investments. However, for temporary defensive purposes during periods
when AMR believes that maintaining this concentration may be inconsistent with
the best interest of shareholders, the Cash Reserve Money Market Fund will not
maintain this concentration. The Cash Reserve Money Market Fund's policy of
concentration in the banking industry increases the Fund's exposure to market
conditions prevailing in that industry.
6
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The Cash Reserve Money Market Fund may also invest in variable amount
master demand obligations which are unsecured demand notes that permit the
indebtedness thereunder to vary, and provide for periodic adjustments in the
interest rate. Because master demand obligations are direct lending arrangements
between the Cash Reserve Money Market Fund and the issuer, they are not normally
traded. There is no secondary market for the notes; however, the period of time
remaining until payment of principal and accrued interest can be recovered under
a variable amount master demand obligation generally shall not exceed seven
days. To the extent this period is exceeded, the obligation in question would be
considered illiquid. Issuers of variable amount master demand obligations must
satisfy the same criteria as set forth for other promissory notes (e.g.,
commercial paper). The Cash Reserve Money Market Fund will invest in variable
amount master demand obligations only when such obligations are determined by
AMR, pursuant to guidelines established by the Board of Trustees, to be of
comparable quality to rated issuers or instruments eligible for investment by
the Cash Reserve Money Market Fund. In determining weighted average dollar
portfolio maturity, a variable amount master demand obligation will be deemed to
have a maturity equal to the longer of the period of time remaining until the
next readjustment of the interest rate or the period of time remaining until the
principal amount can be recovered from the issuer on demand.
Amortized Cost Method of Valuation for the Money Market Funds
Portfolio investments of each Money Market Fund are valued based on the
amortized cost valuation technique pursuant to Rule 2a-7 under the 1940 Act.
Obligations in which the Money Market Funds invest generally have remaining
maturities of 397 days or less, although instruments subject to repurchase
agreements and certain variable and floating rate obligations may bear longer
final maturities. The weighted average dollar portfolio maturity of each Money
Market Fund will not exceed 90 days. See the SAI for an explanation of the
amortized cost valuation method.
NON-MONEY MARKET FUNDS:
Short-Term Treasury Income Fund. The investment objective of this Fund is
to seek as high a level of current income as is consistent with liquidity and
safety of principal. The Fund invests at least 65% of its total assets in U.S.
Treasury obligations and it is the current intent of BANK IV to maintain an
average maturity range between 1 to 3 years.
Intermediate Bond Income Fund. The investment objective of the
Intermediate Bond Income Fund is to provide as high a level of current income as
is consistent with managing for total return by investing at least 65% of its
total assets in fixed income securities. The Fund invests primarily in high
quality fixed income securities such as U.S. Government securities, corporate
bonds and asset-backed securities (including mortgage-backed securities). A
minimum of 65% of the Fund's total assets will be invested in securities rated
"A" or better by a primary credit rating agency and the Fund will seek to
maintain a minimum average portfolio quality rating of "AA". All securities will
be rated "BBB" or better by a primary credit rating agency at the time of
purchase. Fixed income securities downgraded to below BBB subsequent to purchase
may be retained in the portfolio when deemed by the advisor to be in the best
interest of Fund shareholders. The Fund may also invest in convertible
securities, preferred stocks and debt of foreign governments or corporations.
Futures and/or options may be used to hedge the portfolio against reinvestment
and interest rate risk when deemed necessary. For purposes of this Fund, a
"bond" is defined as a debt instrument with a fixed interest rate. The average
maturity of the Intermediate Income Fund will generally range between three and
ten years.
7
<PAGE> 8
Bond Income Fund. The investment objective of the Bond Income Fund is to
provide as high a level of current income as is consistent with managing for
total return by investing at least 65% of its total assets in fixed income
securities. The Fund primarily invests in high quality fixed income securities
such as U.S. Government securities, corporate bonds and asset-backed securities
(including mortgage-backed securities). A minimum of 65% of the portfolio will
be invested in securities rated "A" or better by a primary credit rating agency
and the Fund will seek to maintain a minimum average portfolio quality of "AA".
All securities will be rated "BBB" or better by a primary credit rating agency
at the time of purchase. Fixed income securities downgraded to below BBB
subsequent to purchase may be retained in the portfolio when deemed by the
advisor to be in the best interests of Fund shareholders. The Fund may also
invest in convertible securities, preferred stocks and debt of foreign
governments or corporations. Futures and/or options may be used to hedge the
portfolio against reinvestment and interest rate risk when deemed necessary. For
purposes of this Fund, a "bond" is defined as a debt instrument with a fixed
interest rate. The average maturity of the Bond Income Fund will generally range
between seven and fifteen years.
Stock Appreciation Fund. The objective of the Stock Appreciation Fund is
to seek long-term capital appreciation through investment in a diversified
portfolio of common stock (and securities convertible into common stock) of
domestic companies. The Fund may also invest, to a far lesser extent, in
securities of foreign companies, primarily through securities represented by
American Depositary Receipts (ADRs). Under normal market conditions, at least
65% of the Fund's total assets will consist of common stocks. Each stock that is
purchased will be selected on the weight of available evidence, including but
not limited to: (1) the company's fundamental business outlook and competitive
position, (2) the valuation of the security relative to its own historical
norms, to the industry in which the company competes, and to the market as a
whole, and (3) the momentum of earnings growth expected to be generated by the
company. BANK IV will seek to control performance risk in two ways: (1) relative
to the market, by diversifying investments across economic sectors and amongst
small-, medium-, and large-capitalization companies, and (2) by increasing the
level of money market reserves and/or employing hedging vehicles (futures and/or
options) when risks of a substantial stock market correction have risen to
levels where such action appears warranted. In addition, assets may be held in
securities convertible into common stock, debt securities (it is the Fund's
current intention to restrict these debt securities to those rated in the top
three quality categories by Moody's Investors Service, Inc. or Standard & Poor's
Corporation or determined to be of equivalent quality by BANK IV), cash or cash
equivalents, U.S. Government securities, or nonconvertible preferred stock.
Aggressive Stock Appreciation Fund. The objective of the Aggressive Stock
Appreciation Fund is to aggressively seek long-term capital appreciation through
investment in a diversified portfolio of common stock (and securities
convertible into common stock) of domestic companies. The Fund may also invest,
to a far lesser extent, in securities of foreign companies, primarily through
securities represented by ADRs. The Fund will invest primarily in the stocks of
companies expected to increase their earnings at a rate that exceeds the growth
rate expected of the market. (Periodically, however, the emphasis on growth as a
selection factor may be tempered by market conditions). While the Fund will
always hold a broad array of larger-capitalization stocks (approximately $4
billion and greater), there will often be an emphasis on investing in
mid-capitalization issues (between approximately $1 billion and $4 billion), and
to a much lesser extent, smaller-capitalization stocks (approximately $1 billion
market capitalization and under). The decision to emphasize stocks of mid- to
smaller-capitalization companies will be based on a positive outlook for the
market in general, favorable stock valuation comparisons relative to
larger-company stocks, and attractive relative growth characteristics.
8
<PAGE> 9
Under normal market conditions, at least 65% of the Fund's total assets will
consist of common stocks. Each stock that is purchased will be selected on the
weight of available evidence, including but not limited to: (1) the company's
fundamental business outlook and competitive position, (2) the momentum of
earnings growth expected to be generated by the company, and (3) the valuation
of the security relative to its own historic norms, to the industry in which the
company competes, and to the market as a whole. Although the Fund will have
representation in all major economic sectors and amongst small-, medium-, and
large-capitalization companies, BANK IV generally will attempt to add
considerable value relative to the market by emphasizing those stocks,
investment themes, and/or industry groups with the greatest overall appeal and
most attractive reward/risk characteristics. At times, the Fund may hold
considerable positions (relative to the market) in broadly-defined economic
sectors with growth potential unreflected in then current stock prices. BANK IV
may increase the level of money market reserves and/or employ hedging vehicles
(futures and/or options) when risks of a substantial market correction have
risen to levels where such action appears warranted. In addition, assets may be
held in securities convertible into common stocks, debt securities (it is the
Fund's current intention to restrict these debt securities to those rated in the
top three quality categories by Moody's Investors Service, Inc. or Standard &
Poor's Corporation or determined to be of equivalent quality by BANK IV), cash
or cash equivalents, U.S. Government securities, or nonconvertible preferred
stocks. Aggressive stock funds generally involve a higher degree of risk in
search of higher returns.
The Value Stock Appreciation Fund. The objective of the Value Stock
Appreciation Fund is to seek long-term capital appreciation and dividend income
through investment in a diversified portfolio of common stocks (and securities
convertible into common stock) of domestic companies. The Fund may also invest,
to a far lesser extent, in securities of foreign companies, primarily through
securities represented by American Depositary Receipts (ADRs). The Fund will
employ a "value style" of equity management. Stocks selected for use in the Fund
may generally be expected to exhibit the following characteristics: 1) sell at a
discount to their underlying "intrinsic value" determined by discounting the
stock's expected future dividends to their present day value and/or 2) possess
relative low price/ earnings ratios and/or 3) possess relative low price/cash
flow ratios. A "dividend discount model" methodology is a contributing component
in the determination of a stocks "intrinsic value". Frequently, these stocks may
have a higher-than-average dividend yield. Often, stocks exhibiting the above
noted characteristics are described as being "underowned" or "out of favor".
Stock investments are selected from a universe of high quality large, medium,
and small capitalization companies. Quality is determined based on a company's
fundamental financial strength, size and earnings visibility. Stocks are
purchased with a long-term investment time horizon in mind and are generally
sold when their market price rises above intrinsic value and/or their underlying
fundamentals begin to deteriorate. BANK IV may increase the level of money
market reserves and/or employ hedging vehicles (futures and/or options) when
risks of a substantial market correction have risen to levels where such action
appears warranted. In addition, assets may be held in securities convertible
into common stocks, straight debt securities (it is the Fund's current intention
to restrict these debt securities to those rated in the top three quality
categories by Moody's Investors Service, Inc. or Standard & Poor's Corporation
or determined to be of equivalent quality by BANK IV), cash or cash equivalents,
U.S. Government securities, or nonconvertible preferred stocks.
9
<PAGE> 10
Short-Term Trading for the Stock Funds
Under certain market conditions, the Stock Appreciation Fund, Aggressive
Stock Appreciation Fund, and Value Stock Appreciation Fund may seek profits by
short-term trading. The length of time a Fund has held a particular security is
not generally a consideration in investment decisions. A change in the number of
securities owned by a Fund is known as "portfolio turnover". To the extent
short-term trading strategies are used, a Fund's portfolio turnover rate may be
higher than that of other mutual funds. Portfolio turnover generally involves
some expense to a Fund, including brokerage commissions or dealer mark-ups and
other transaction costs on the sale of securities and reinvestment in other
securities. Such transactions may result in realization of taxable capital
gains.
RISKS OF INVESTING IN THE FUNDS
The Money Market Funds attempt to maintain the value of their shares at a
constant $1.00 share price, although there can be no assurance that the Money
Market Funds will always be able to do so. The Money Market Funds may not
achieve as high a level of current income as other funds that do not limit their
investments to the high quality securities in which the Money Market Funds
invest.
The price per share of the Non-Money Market Funds will fluctuate with
changes in value of the investments held by each Fund. Additionally, there can
be no assurance that a Fund will achieve its investment objective or be
successful in preventing or minimizing the risk of loss that is inherent in
investing in particular types of securities. Such risks include the sensitivity
of the cash flows and yields of separately traded interest and principal
components of obligations to the rate of principal payments (including
prepayments). With respect to mortgage-backed securities, risks include a
similar sensitivity to the rate of prepayments in that, although the value of
fixed-income securities generally increases during periods of falling interest
rates, as a result of prepayments and other factors, this is not always the case
with respect to mortgage-backed securities. Asset-backed securities involve the
risk that such securities do not usually have the benefit of a complete security
interest in the related collateral. Positions in options, futures and options on
futures involve the risks that such options and futures may fail as hedging
techniques, that the loss from investing in futures transactions is potentially
unlimited and that closing transactions may not be effected where a secondary
liquid market does not exist. Further, investment in the securities of issuers
in any foreign country involves special risks and considerations not typically
associated with investing in U.S. issuers.
MANAGEMENT OF THE FUNDS
BANK IV acts as investment advisor to all of the Funds, except the Cash
Reserve Money Market Fund for which AMR acts as investment advisor. For its
services, BANK IV receives a fee from each Fund (other than the Cash Reserve
Money Market Fund) based upon each Fund's average daily net assets. AMR receives
a fee from the Cash Reserve Money Market Fund based upon that Fund's average
daily net assets. See "Fee Table" in this Prospectus.
Furman Selz acts as administrator and sponsor to the Funds. For its
services, Furman Selz receives a fee from the Funds based on each Fund's average
daily net assets. See "Management of the Fund" in this Prospectus. Funds IV
Distributor Inc. ("FFD") distributes the Funds' shares and may be reimbursed for
certain of its distribution-related expenses.
10
<PAGE> 11
GUIDE TO INVESTING IN THE FUNDS IV FAMILY OF FUNDS
Purchase orders for the Money Market Funds received by 12:00 noon Eastern
time will become effective that day. Purchase orders for all other Funds
received by your broker or Service Organization in proper form prior to 4:15
p.m., Eastern time, and transmitted to FFD prior to 5:00 p.m. Eastern time, will
become effective that day.
<TABLE>
<S> <C>
- Minimum Initial Investment........................................ $1,000
- Minimum Initial Investment for IRAs............................... $ 250
- Minimum Subsequent Investment..................................... $ 50
</TABLE>
The Funds are purchased at net asset value.
Shareholders may exchange shares between Funds in the Trust by telephone or
mail. Exchanges may not be effected by facsimile.
<TABLE>
<S> <C>
- Minimum initial exchange........................................... $500
(minimum for subsequent exchanges)
</TABLE>
Shareholders may redeem shares by telephone, mail, wire, or by writing a
check (the Money Market Funds only). Shares may not be redeemed by facsimile.
- If a redemption request is received by 12:00 noon Eastern time,
proceeds for the Money Market Funds will be transferred to a
designated account that day.
- Minimum check amount is $500.
- The Funds reserve the right to redeem upon not less than 30 days'
notice all shares in a Fund's account which have an aggregate value of
$500 or less.
(Redemption by telephone, wire and check writing is not available for IRAs
and trust relationships of BANK IV.)
All dividends and distributions will be automatically paid in additional
shares at net asset value of the applicable Fund unless cash payment is
requested.
- Distributions for the Stock Appreciation Fund, Aggressive Stock
Appreciation Fund, and Value Stock Appreciation Fund are paid at least
once annually and distributions for the other Funds are paid monthly.
THE INVESTMENT POLICIES AND PRACTICES OF THE FUNDS
Each Fund is a separate investment fund or portfolio, commonly known as a
mutual fund. The Funds are portfolios of a Delaware business trust, FUNDS IV
Trust, organized under the laws of Delaware as an open-end, management
investment company. The Trust's Board of Trustees oversees the overall
management of the Funds and elects the officers of the Trust.
- The investment objective of the U.S. Treasury Reserve Money Market Fund
is to provide investors with as high a level of current income as is
consistent with liquidity, stability, maximum safety of principal and the
maintenance of a stable $1.00 net asset value per share.
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<PAGE> 12
- The investment objective of the Cash Reserve Money Market Fund is to
provide investors with current income, liquidity and the maintenance of a
stable $1.00 net asset value by investing in high quality, short-term
obligations.
- The investment objective of the Short-Term Treasury Income Fund is to
provide investors with as high a level of current income as is consistent
with liquidity and safety of principal.
- The investment objective of the Intermediate Bond Income Fund is to
provide investors with as high a level of current income as is consistent
with managing for total return by investing in fixed income securities.
- The investment objective of the Bond Income Fund is to provide investors
with as high a level of current income as is consistent with managing for
total return by investing in fixed income securities.
- The investment objective of the Stock Appreciation Fund is to provide
investors with long-term capital appreciation.
- The investment objective of the Aggressive Stock Appreciation Fund is to
provide investors with aggressive long-term capital appreciation.
- The investment objective of the Value Stock Appreciation Fund is to
provide investors with long-term capital appreciation and dividend
income.
Each Fund follows its own investment objectives and policies, including
certain investment restrictions. The SAI contains specific investment
restrictions which govern the Funds' investments. Those restrictions and the
Funds' investment objectives are fundamental policies, which means that they may
not be changed without a majority vote of shareholders of the affected Fund.
Except for the objectives and those restrictions specifically identified as
fundamental, all other investment policies and practices described in this
Prospectus and in the SAI are not fundamental and may change solely with Board
of Trustees approval.
BANK IV and AMR select investments and make investment decisions based on
the investment objective and policies of each Fund. The following is a
description of securities and investment practices.
U.S. Treasury Obligations (All Funds). The Funds may invest in U.S.
Treasury obligations, which are backed by the full faith and credit of the
United States Government as to the timely payment of principal and interest.
U.S. Treasury obligations consist of bills, notes, and bonds and separately
traded interest and principal component parts of such obligations known as
STRIPS which generally differ in their interest rates and maturities. U.S.
Treasury bills, which have original maturities of up to one year, notes, which
have maturities ranging from one year to 10 years, and bonds, which have
original maturities of 10 to 30 years, are direct obligations of the United
States Government.
U.S. Government Securities (All Funds, except U.S. Treasury Reserve Money
Market Fund and Short-Term Treasury Income Fund). U.S. Government securities
are obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. U.S. Government securities include debt securities issued or
guaranteed by U.S. Government-sponsored enterprises and federal agencies and
instrumentalities. Some types of U.S. Government securities are supported by the
full faith and credit of the United States Government or U.S. Treasury
guarantees, such as mortgage-backed certificates guaranteed by the Government
National Mortgage Association ("GNMA"). Other types of U.S. Government
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<PAGE> 13
securities, such as obligations of the Student Loan Marketing Association,
provide recourse only to the credit of the agency or instrumentality issuing the
obligation. In the case of obligations not backed by the full faith and credit
of the United States Government, the investor must look to the agency issuing or
guaranteeing the obligation for ultimate repayment.
Commercial Paper (All Funds, except U.S. Treasury Reserve Money Market Fund
and Short-Term Treasury Income Fund). Commercial paper includes short-term
unsecured promissory notes, variable rate demand notes and variable rate master
demand notes issued by both domestic and foreign bank holding companies,
corporations and financial institutions and United States Government agencies
and instrumentalities. All commercial paper purchased by the Funds is, at the
time of investment, rated in one of the top two rating categories of at least
one NRSRO, or, if not rated is, in the opinion of BANK IV or AMR, of an
investment quality comparable to rated commercial paper in which the Funds may
invest, or, with respect to the Cash Reserve Money Market Fund, (i) rated "P-1"
by Moody's Investors Service, Inc. ("Moody's") and "A-1" or better by Standard &
Poor's Corporation ("S&P") or in a comparable rating category by any two NRSROs
that have rated the commercial paper or (ii) rated in a comparable category by
only one such organization if it is the only organization that has rated the
commercial paper (and provided the purchase is approved or ratified by the Board
of Trustees).
Corporate Debt Securities (All Funds, except U.S. Treasury Reserve Money
Market Fund and Short-Term Treasury Income Fund). These Funds may purchase
corporate debt securities, subject to the rating and quality requirements
specified with respect to each Fund. The Funds may invest in both rated
commercial paper and rated corporate debt obligations of foreign issuers that
meet the same quality criteria applicable to investments by the Funds in
commercial paper and corporate debt obligations of domestic issuers. These
investments, therefore, are not expected to involve significant additional risks
as compared to the risks of investing in comparable domestic securities.
Generally, all foreign investments carry with them both opportunities and risks
not applicable to investments in securities of domestic issuers, such as risks
of foreign political and economic instability, adverse movements in foreign
exchange rates, the imposition or tightening of exchange controls or other
limitations on repatriation of foreign capital, changes in foreign governmental
attitudes toward private investment (possibly leading to nationalization,
increased taxation or confiscation of foreign assets) and added difficulties
inherent in obtaining and enforcing a judgment against a foreign issuer of
securities should it default.
Mortgage-Related Securities (All Funds, except U.S. Treasury Reserve Money
Market Fund and Short-Term Treasury Income Fund). These Funds are permitted to
invest in mortgage-related securities subject to the rating and quality
requirements specified with respect to each such Fund. Mortgage pass-through
securities are securities representing interests in "pools" of mortgages in
which payments of both interest and principal on the securities are made
monthly, in effect, "passing through" monthly payments made by the individual
borrowers on the mortgage loans which underlie the securities (net of fees paid
to the issuer or guarantor of the securities). Early repayment of principal on
mortgage pass-through securities (arising from prepayments of principal due to
sale of the underlying property, refinancing, or foreclosure, net of fees and
costs which may be incurred) may expose a Fund to a lower rate of return upon
reinvestment of principal. Also, if a security subject to prepayment has been
purchased at a premium, in the event of prepayment the value of the premium
would be lost. Like other fixed-income securities, when interest rates rise, the
value of mortgage-related securities generally will decline; however, when
interest rates decline, the value of mortgage-related securities with prepayment
features may not increase as much as other fixed-income securities. In
recognition of
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<PAGE> 14
this prepayment risk to investors, the Public Securities Association (the "PSA")
has standardized the method of measuring the rate of mortgage loan principal
prepayments. The PSA formula, the Constant Prepayment Rate or other similar
models that are standard in the industry will be used by the Funds in
calculating maturity for purposes of investment in mortgage-related securities.
The inverse relation between interest rates and value of fixed income securities
will be more pronounced with respect to investments by the Fund in
mortgage-related securities, the value of which may be more sensitive to
interest rate changes.
Payment of principal and interest on some mortgage pass-through securities
(but not the market value of the securities themselves) may be guaranteed by the
full faith and credit of the U.S. Government (in the case of securities
guaranteed by GNMA or guaranteed by agencies or instrumentalities of the U.S.
Government (in the case of securities guaranteed by the Federal National
Mortgage Association ("FNMA") or the Federal Home Loan Mortgage Corporation
("FHLMC"), which are supported only by the discretionary authority of the U.S.
Government to purchase the agency's obligations). Mortgage pass-through
securities created by non-governmental issuers (such as commercial banks,
savings and loan institutions, private mortgage insurance companies, mortgage
bankers and other secondary market issuers) may be supported in various forms of
insurance or guarantees issued by governmental entities.
Collateralized Mortgage Obligations ("CMOs") are hybrid instruments with
characteristics of both mortgage-backed bonds and mortgage pass-through
securities. Similar to a bond, interest and prepaid principal on a CMO are paid,
in most cases, semi-annually. CMOs may be collateralized by whole mortgage loans
but are more typically collateralized by portfolios of mortgage pass-through
securities guaranteed by GNMA, FHLMC or FNMA. CMOs are structured in multiple
classes, with each class bearing a different stated maturity or interest rate.
The inverse relation between interest rates and value of fixed income securities
will be more pronounced with respect to investments by the Fund in
mortgage-related securities, the value of which may be more sensitive to
interest rate changes.
Asset-Backed Securities (Cash Reserve Money Market Fund, Intermediate Bond
Income Fund and Bond Income Fund). These Funds are permitted to invest in
asset-backed securities, subject to the rating and quality requirements
specified with respect to each such Fund. Through the use of trusts and special
purpose subsidiaries, various types of assets, primarily home equity loans and
automobile and credit card receivables, are being securitized in pass-through
structures similar to the mortgage pass-through structures described above.
Consistent with the Funds' investment objectives, policies and quality
standards, a Fund may invest in these and other types of asset-backed securities
which may be developed in the future.
Asset-backed securities involve certain risks that are not posed by
mortgage-related securities, resulting mainly from the fact that asset-backed
securities do not usually contain the benefit of a complete security interest in
the related collateral. For example, credit card receivables generally are
unsecured and the debtors are entitled to the protection of a number of state
and Federal consumer credit laws, some of which may reduce the ability to obtain
full payment. In the case of automobile receivables, due to various legal and
economic factors, proceeds from repossessed collateral may not always be
sufficient to support payments on these securities. The risks associated with
asset-backed securities are often reduced by the addition of credit enhancements
such as a letter of credit from a bank, excess collateral or a third-party
guarantee.
14
<PAGE> 15
Municipal Commercial Paper (Intermediate Bond Income Fund and Bond Income
Fund). Municipal commercial paper is a debt obligation with a stated maturity
of one year or less which is issued to finance seasonal working capital needs or
as short-term financing in anticipation of longer-term debt. Investments in
municipal commercial paper are limited to commercial paper which is rated at the
date of purchase: (i) "P-1" by Moody's and "A-1" or "A-1+" by S&P "P-2"
(Prime-2) or better by Moody's and "A-2" or better by S&P or (ii) in a
comparable rating category by any two of the NRSROs that have rated commercial
paper or (iii) in a comparable rating category by only one such organization if
it is the only organization that has rated the commercial paper or (iv) if not
rated, is, in the opinion of BANK IV, of comparable investment quality and
within the credit quality policies and guidelines established by the Board of
Trustees.
Issuers of municipal commercial paper rated "P-1" have a "superior capacity
for repayment of short-term promissory obligations". The "A-1" rating for
commercial paper under the S&P classification indicates that the "degree of
safety regarding timely payment is either overwhelming or very strong."
Commercial paper with "overwhelming safety characteristics" will be rated
"A-1+". Commercial paper receiving a "P-2" rating has a strong capacity for
repayment of short-term promissory obligations. Commercial paper rated "A-2" has
the capacity for timely payment although the relative degree of safety is not as
overwhelming as for issues designated "A-1". See the Appendix for a more
complete description of securities ratings.
Municipal Notes (Intermediate Bond Income Fund and Bond Income
Fund). Municipal notes are generally sold as interim financing in anticipation
of the collection of taxes, a bond sale or receipt of other revenue. Municipal
notes generally have maturities at the time of issuance of one year or less.
Investments in municipal notes are limited to notes which are rated at the date
of purchase: (i) MIG 1 or MIG 2 by Moody's and in a comparable rating category
by at least one other nationally recognized statistical rating organization that
has rated the notes, or (ii) in a comparable rating category by only one such
organization, including Moody's, if it is the only organization that has rated
the notes, or (iii) if not rated, are, in the opinion of BANK IV, of comparable
investment quality and within the credit quality policies and guidelines
established by the Board of Trustees.
Notes rated "MIG 1" are judged to be of the "best quality" and carry the
smallest amount of investment risk. Notes rated "MIG 2" are judged to be of
"high quality, with margins of protection ample although not as large as in the
preceding group."
Municipal Bonds (Intermediate Bond Income Fund and Bond Income
Fund). Municipal bonds generally have a maturity at the time of issuance of
more than one year. Municipal bonds may be issued to raise money for various
public purposes -- such as constructing public facilities and making loans to
public institutions. There are generally two types of municipal bonds: general
obligation bonds and revenue bonds. General obligation bonds are backed by the
taxing power of the issuing municipality and are considered the safest type of
municipal bond. Revenue bonds are backed by the revenues of a project or
facility -- tolls from a toll road, for example. Certain types of municipal
bonds are issued to obtain funding for privately operated facilities. Industrial
development revenue bonds (which are private activity bonds) are a specific type
of revenue bond backed by the credit and security of a private user, and
therefore investments in these bonds have more potential risk. Investments in
municipal bonds are limited to bonds which are rated at the time of purchase "A"
or better by a NRSRO. Municipal bonds generally have a maturity at the time of
issuance of more than one year.
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<PAGE> 16
Common Stocks (Stock Appreciation Fund, Aggressive Stock Appreciation Fund,
and Value Stock Appreciation Fund). Common stock represents the residual
ownership interest in the issuer after all of its obligations and preferred
stocks are satisfied. Common stock fluctuates in price in response to many
factors, including historical and prospective earnings of the issuer, the value
of its assets, general economic conditions, interest rates, investor perceptions
and market volatility.
Preferred Stocks (Intermediate Bond Income Fund, Bond Income Fund, Stock
Appreciation Fund, Aggressive Stock Appreciation Fund, and Value Stock
Appreciation Fund). Preferred stock has a preference over common stock in
liquidation and generally in dividends as well, but is subordinated to the
liabilities of the issuer in all respects. Preferred stock may or may not be
convertible into common stock. As a general rule, the market value of preferred
stock with a fixed dividend rate and no conversion element varies inversely with
interest rates and perceived credit risk. Because preferred stock is junior to
debt securities and other obligations of the issuer, deterioration in the credit
quality of the issuer will cause greater changes in the value of a preferred
stock than in a more senior debt security with similar stated yield
characteristics.
American Depository Receipts (Intermediate Bond Income Fund, Bond Income
Fund, Stock Appreciation Fund, Aggressive Stock Appreciation Fund, and Value
Stock Appreciation Fund). American Depository Receipts are U.S.
dollar-denominated receipts generally issued by domestic banks, which evidence
the deposit with the bank of the common stock of a foreign issuer and which are
publicly traded on exchanges or over-the-counter in the United States.
These Funds may each invest in both sponsored and unsponsored ADR programs.
There are certain risks associated with investments in unsponsored ADR programs.
Because the non-U.S. company does not actively participate in the creation of
the ADR program, the underlying agreement for service and payment will be
between the depository and the shareholder. The Company issuing the stock
underlying the ADR pays nothing to establish the unsponsored facility, as fees
for ADR issuance and cancellation are paid by brokers. Investors directly bear
the expenses associated with certificate transfer, custody and dividend payment.
In an unsponsored ADR program, there also may be several depositories with
no defined legal obligations to the non-U.S. company. The duplicate depositories
may lead to marketplace confusion because there would be no central source of
information to buyers, sellers and intermediaries. The efficiency of
centralization gained in a sponsored program can greatly reduce the delays in
delivery of dividends and annual reports. In addition, with respect to all ADRs
there is always the risk of loss due to currency fluctuations.
Investments in ADRs involve certain risks not typically involved in purely
domestic investments, including future foreign political and economic
developments, and the possible imposition of foreign governmental laws or
restrictions applicable to such investments. Securities of foreign issuers
through ADRs are subject to different economic, financial, political and social
factors. Individual foreign economies may differ favorably or unfavorably from
the U.S. economy in such respects as growth of gross national product, rate of
inflation, capital reinvestment, resources, self-sufficiency and balance of
payments position. With respect to certain countries, there is the possibility
of expropriation of assets, confiscatory taxation, political or social
instability or diplomatic developments which could adversely affect the value of
the particular ADR. There may be less publicly available information about a
foreign company than about a U.S. company, and foreign companies may not be
subject to accounting, auditing and financial reporting standards and
requirements comparable to those of U.S. companies.
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<PAGE> 17
Investment in Foreign Securities (Intermediate Bond Income Fund, Bond
Income Fund, Stock Appreciation Fund, Aggressive Stock Appreciation Fund, and
Value Stock Appreciation Fund). These Funds may each invest in securities of
foreign governmental and private issuers that are generally denominated in and
pay interest in U.S. dollars. Investments in foreign securities involve certain
considerations that are not typically associated with investing in domestic
securities. There may be less publicly available information about a foreign
issuer than about a domestic issuer. Foreign issuers also are not generally
subject to uniform accounting, auditing and financial reporting standards
comparable to those applicable to domestic issuers. In addition, with respect to
certain foreign countries, interest may be withheld at the source under foreign
income tax laws, and there is a possibility of expropriation or confiscatory
taxation, political or social instability or diplomatic developments that could
adversely affect investments in securities of issuers located in those
countries.
Convertible and Exchangeable Securities (Intermediate Bond Income Fund,
Bond Income Fund, Stock Appreciation Fund, Aggressive Stock Appreciation Fund
and Value Stock Appreciation Fund). These Funds are permitted to invest in
convertible and exchangeable securities, subject to the rating and quality
requirements specified with respect to each such Fund. Convertible securities
generally offer fixed interest or dividend yields and may be converted either at
a stated price or stated rate for common or preferred stock. Exchangeable
securities may be exchanged on specified terms for common or preferred stock.
Although to a lesser extent than with fixed income securities generally, the
market value of convertible securities tends to decline as interest rates
increase and, conversely, tends to increase as interest rates decline. In
addition, because of the conversion or exchange feature, the market value of
convertible or exchangeable securities tends to vary with fluctuations in the
market value of the underlying common or preferred stock. Debt securities that
are convertible into or exchangeable for preferred or common stock are
liabilities of the issuer but are generally subordinated to senior debt of the
issuer.
Domestic and Foreign Bank Obligations (All Funds, except U.S. Treasury
Reserve Money Market Fund and Short-Term Treasury Income Fund). These
obligations include but are not restricted to certificates of deposit,
commercial paper, Yankee certificates of deposit, bankers' acceptances,
Eurodollar certificates of deposit and time deposits, promissory notes and
medium term deposit notes. The Funds will not invest in any obligations of their
affiliates, as defined under the 1940 Act.
Each Fund limits its investment in United States bank obligations to
obligations of United States banks (including foreign branches). Each Fund
limits its investment in foreign bank obligations to United States
dollar-denominated obligations of foreign banks (including United States
branches of foreign banks) which in the opinion of BANK IV or AMR, are of an
investment quality comparable to obligations of United States banks which may be
purchased by the Funds. There is no limitation on the amount of the Funds'
assets which may be invested in obligations of foreign banks which meet the
conditions set forth herein.
Fixed time deposits may be withdrawn on demand by the investor, but may be
subject to early withdrawal penalties which vary depending upon market
conditions and the remaining maturity of the obligation. There are no
contractual restrictions on the right to transfer a beneficial interest in a
fixed time deposit to a third party, although there is no market for such
deposits. Investments in fixed time deposits subject to withdrawal penalties
maturing from two days through seven days may not exceed 15% of the value of the
total assets of the Non-Money Market Funds and 10% of the value of the total
assets of the Money Market Funds.
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<PAGE> 18
Obligations of foreign banks involve somewhat different investment risks
than those affecting obligations of United States banks, including the
possibilities that their liquidity could be impaired because of future political
and economic developments, that the obligations may be less marketable than
comparable obligations of United States banks, that a foreign jurisdiction might
impose withholding taxes on interest income payable on those obligations, that
foreign deposits may be seized or nationalized, that foreign governmental
restrictions such as exchange controls may be adopted which might adversely
affect the payment of principal and interest on those obligations and that the
selection of those obligations may be more difficult because there may be less
publicly available information concerning foreign banks or the accounting,
auditing and financial reporting standards, practices and requirements
applicable to foreign banks may differ from those applicable to United States
banks. In that connection, foreign banks are not subject to examination by any
United States Government agency or instrumentality.
Investments in Eurodollar and Yankeedollar obligations involve additional
risks. Most notably, there generally is less publicly available information
about foreign companies; there may be less governmental regulation and
supervision; they may use different accounting and financial standards; and the
adoption of foreign governmental restrictions may adversely affect the payment
of principal and interest on foreign investments. In addition, not all foreign
branches of United States banks are supervised or examined by regulatory
authorities as are United States banks, and such branches may not be subject to
reserve requirements.
Zero Coupon Securities (All Funds). The Funds may invest in zero coupon
securities. A zero coupon security pays no interest to its holder during its
life and is sold at a discount to its face value at maturity. The market prices
of zero coupon securities generally are more volatile than the market prices of
securities that pay interest periodically and are more sensitive to changes in
interest rates than non-zero coupon securities having similar maturities and
credit qualities.
Variable rate demand obligations (All Funds, except U.S. Treasury Reserve
Money Market Fund and Short-Term Treasury Income Fund). Variable rate demand
obligations have a maturity of 397 days or less with respect to the Money Market
Funds or five to twenty years with respect to the Non-Money Market Funds, but
carry with them the right of the holder to put the securities to a remarketing
agent or other entity on short notice, typically seven days or less. Generally,
the remarketing agent will adjust the interest rate every seven days (or at
other intervals corresponding to the notice period for the put), in order to
maintain the interest rate at the prevailing rate for securities with a
seven-day maturity. The remarketing agent is typically a financial intermediary
that has agreed to perform these services. Variable rate master demand
obligations permit a Fund to invest fluctuating amounts at varying rates of
interest pursuant to direct arrangements between the Funds, as lender, and the
borrower. Because the obligations are direct lending arrangements between the
Funds and the borrower, they will not generally be traded, and there is no
secondary market for them, although they are redeemable (and thus immediately
repayable by the borrower) at principal amount, plus accrued interest, at any
time. The borrower also may prepay up to the full amount of the obligation
without penalty. While master demand obligations, as such, are not typically
rated by credit rating agencies, if not so rated, a Fund may, under its minimum
rating standards, invest in them only if, in the opinion of BANK IV or AMR, they
are of an investment quality comparable to other debt obligations in which the
Funds may invest and are within the credit quality policies, guidelines and
procedures established by the Board of Trustees. See the SAI for further details
on variable rate demand obligations and variable rate master demand obligations.
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<PAGE> 19
Other Mutual Funds (All Funds). Each Fund may invest in shares of other
open-end, management investment companies, subject to the limitations of the
1940 Act and subject to such investments being consistent with the overall
objective and policies of the Fund making such investment, provided that any
such purchases will be limited to short-term investments in shares of
unaffiliated investment companies. The purchase of securities of other mutual
funds results in duplication of expenses such that investors indirectly bear a
proportionate share of the expenses of such mutual funds including operating
costs, and investment advisory and administrative fees.
Options on Securities (All Funds, except U.S. Treasury Reserve Money Market
Fund and Cash Reserve Money Market Fund). The Funds may purchase put and call
options and write covered put and call options on securities in which each Fund
may invest directly and that are traded on registered domestic securities
exchanges or that result from separate, privately negotiated transactions (i.e.,
over-the-counter (OTC) options). The writer of a call option, who receives a
premium, has the obligation, upon exercise, to deliver the underlying security
against payment of the exercise price during the option period. The writer of a
put, who receives a premium, has the obligation to buy the underlying security,
upon exercise, at the exercise price during the option period.
The Funds may write put and call options on securities only if they are
covered, and such options must remain covered as long as the Fund is obligated
as a writer. A call option is covered if a Fund owns the underlying security
covered by the call or has an absolute and immediate right to acquire that
security without additional cash consideration (or for additional cash
consideration if the underlying security is held in a segregated account by its
custodian) upon conversion or exchange of other securities held in its
portfolio. A put option is covered if a Fund maintains cash, U.S. Treasury bills
or other high grade short-term obligations with a value equal to the exercise
price in a segregated account with its custodian.
The principal reason for writing put and call options is to attempt to
realize, through the receipt of premiums, a greater current return than would be
realized on the underlying securities alone. In return for the premium received
for a call option, the Funds forego the opportunity for profit from a price
increase in the underlying security above the exercise price so long as the
option remains open, but retain the risk of loss should the price of the
security decline. In return for the premium received for a put option, the Funds
assume the risk that the price of the underlying security will decline below the
exercise price, in which case the put would be exercised and the Fund would
suffer a loss. The Funds may purchase put options in an effort to protect the
value of a security it owns against a possible decline in market value.
Writing of options involves the risk that there will be no market in which
to effect a closing transaction. An exchange-traded option may be closed out
only on an exchange that provides a secondary market for an option of the same
series. OTC options are not generally terminable at the option of the writer and
may be closed out only by negotiation with the holder. There is also no
assurance that a liquid secondary market on an exchange will exist. In addition,
because OTC options are issued in privately negotiated transactions exempt from
registration under the Securities Act of 1933, there is no assurance that the
Funds will succeed in negotiating a closing out of a particular OTC option at
any particular time. If a Fund, as covered call option writer, is unable to
effect a closing purchase transaction in the secondary market or otherwise, it
will not be able to sell the underlying security until the option expires or it
delivers the underlying security upon exercise.
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<PAGE> 20
The staff of the SEC has taken the position that purchased options not
traded on registered domestic securities exchanges and the assets used as cover
for written options not traded on such exchanges are generally illiquid
securities. However, the staff has also opined that, to the extent a mutual fund
sells an OTC option to a primary dealer that it considers creditworthy and
contracts with such primary dealer to establish a formula price at which the
fund would have the absolute right to repurchase the option, the fund would only
be required to treat as illiquid the portion of the assets used to cover such
option equal to the formula price minus the amount by which the option is
in-the-money. Pending resolution of the issue, the Funds will treat such options
and, except to the extent permitted through the procedure described in the
preceding sentence, assets as subject to each such Fund's limitation on
investments in securities that are not readily marketable.
Futures, Related Options and Options on Stock Indices (Stock Appreciation
Fund, Aggressive Stock Appreciation Fund, and Value Stock Appreciation
Fund). Each Fund may attempt to reduce the risk of investment in equity
securities by hedging a portion of its portfolio through the use of certain
futures transactions, options on futures traded on a board of trade and options
on stock indices traded on national securities exchanges. In addition, each Fund
may hedge a portion of its portfolio by purchasing such instruments during a
market advance or when BANK IV anticipates an advance. In attempting to hedge a
portfolio, a Fund may enter into contracts for the future delivery of securities
and futures contracts based on a specific security, class of securities or an
index, purchase or sell options on any such futures contracts, and engage in
related closing transactions. Each Fund will use these instruments primarily as
a hedge against changes resulting from market conditions in the values of
securities held in its portfolio or which it intends to purchase.
A stock index assigns relative weighing to the common stocks in the index,
and the index generally fluctuates with changes in the market values of these
stocks. A stock index futures contract is an agreement in which one party agrees
to deliver to the other an amount of cash equal to a specific dollar amount
times the difference between the value of a specific stock index at the close of
the last trading day of the contract and the price at which the agreement is
made. Each Fund will sell stock index futures only if the amount resulting from
the multiplication of the then current level of the indices upon which such
futures contracts are based, and the number of futures contracts which would be
outstanding, do not exceed one-third of the value of the Fund's net assets.
When a futures contract is executed, each party deposits with a broker or
in a segregated custodial account up to 5% of the contract amount, called the
"initial margin," and during the term of the contract, the amount of the deposit
is adjusted based on the current value of the futures contract by payments of
variation margin to or from the broker or segregated account.
In the case of options on stock index futures, the holder of the option
pays a premium and receives the right, upon exercise of the option at a
specified price during the option period, to assume the option writer's position
in a stock index futures contract. If the option is exercised by the holder
before the last trading day during the option period, the option writer delivers
the futures position, as well as any balance in the writer's futures margin
account. If it is exercised on the last trading day, the option writer delivers
to the option holder cash in an amount equal to the difference between the
option exercise price and the closing level of the relevant index on the date
the option expires. In the case of options on stock indexes, the holder of the
option pays a premium and receives the right, upon exercise of the option at a
specified price during the option period, to receive cash equal to the dollar
amount of the difference between the closing price of the relevant index and the
option exercise price times a specified multiple, called the "multiplier."
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During a market decline or when BANK IV anticipates a decline, each Fund
may hedge a portion of its portfolio by selling futures contracts or purchasing
puts on such contracts or on a stock index in order to limit exposure to the
decline. This provides an alternative to liquidation of securities positions and
the corresponding costs of such liquidation. Conversely, during a market advance
or when BANK IV anticipates an advance, each Fund may hedge a portion of its
portfolio by purchasing futures, options on these futures or options on stock
indices. This affords a hedge against a Fund not participating in a market
advance at a time when it is not fully invested and serves as a temporary
substitute for the purchase of individual securities which may later be
purchased in a more advantageous manner. Each Fund will sell options on futures
and on stock indices only to close out existing positions.
Interest Rate Futures Contracts (All Funds, except U.S. Treasury Reserve
Money Market Fund). These Funds may, to a limited extent, enter into interest
rate futures contracts -- i.e., contracts for the future delivery of securities
or index-based futures contracts -- that are, in the opinion of BANK IV,
sufficiently correlated with the Fund's portfolio. These investments will be
made primarily in an attempt to protect a Fund against the effects of adverse
changes in interest rates (i.e., "hedging"). When interest rates are increasing
and portfolio values are falling, the sale of futures contracts can offset a
decline in the value of a Fund's current portfolio securities. The Funds will
engage in such transactions primarily for bona fide hedging purposes.
Options on Interest Rate Futures Contracts (All Funds, except U.S. Treasury
Reserve Money Market Fund). These Funds may purchase put and call options on
interest rate futures contracts, which give a Fund the right to sell or purchase
the underlying futures contract for a specified price upon exercise of the
option at any time during the option period. Each Fund may also write (sell) put
and call options on such futures contracts. For options on interest rate futures
that a Fund writes, such Fund will receive a premium in return for granting to
the buyer the right to sell to the Fund or to buy from the Fund the underlying
futures contract for a specified price at any time during the option period. As
with futures contracts, each Fund will purchase or sell options on interest rate
futures contracts primarily for bona fide hedging purposes.
Risks of Options and Futures Contracts. One risk involved in the purchase
and sale of futures and options is that a Fund may not be able to effect closing
transactions at a time when it wishes to do so. Positions in futures contracts
and options on futures contracts may be closed out only on an exchange or board
of trade that provides an active market for them, and there can be no assurance
that a liquid market will exist for the contract or the option at any particular
time. To mitigate this risk, each Fund will ordinarily purchase and write
options only if a secondary market for the options exists on a national
securities exchange or in the over-the-counter market. Another risk is that
during the option period, if a Fund has written a covered call option, it will
have given up the opportunity to profit from a price increase in the underlying
securities above the exercise price in return for the premium on the option
(although the premium can be used to offset any losses or add to a Fund's
income) but, as long as its obligation as a writer continues, such Fund will
have retained the risk of loss should the price of the underlying security
decline. Investors should note that because of the volatility of the market
value of the underlying security, the loss from investing in futures
transactions is potentially unlimited. In addition, a Fund has no control over
the time when it may be required to fulfill its obligation as a writer of the
option. Once a Fund has received an exercise notice, it cannot effect a closing
transaction in order to terminate its obligation under the option and must
deliver the underlying securities at the exercise price.
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The Funds' successful use of stock index futures contracts, options on such
contracts and options on indices depends upon the ability of BANK IV to predict
the direction of the market and is subject to various additional risks. The
correlation between movements in the price of the futures contract and the price
of the securities being hedged is imperfect and the risk from imperfect
correlation increases in the case of stock index futures as the composition of
the Funds' portfolios diverge from the composition of the relevant index. Such
imperfect correlation may prevent the Funds from achieving the intended hedge or
may expose the Funds to risk of loss. In addition, if the Funds purchase futures
to hedge against market advances before they can invest in common stock in an
advantageous manner and the market declines, the Funds might create a loss on
the futures contract. Particularly in the case of options on stock index futures
and on stock indices, the Funds' ability to establish and maintain positions
will depend on market liquidity. The successful utilization of options and
futures transactions requires skills different from those needed in the
selection of the Funds' portfolio securities. The Funds believe that BANK IV
possesses the skills necessary for the successful utilization of such
transactions.
The Funds are permitted to engage in bona fide hedging transactions (as
defined in the rules and regulations of the Commodity Futures Trading
Commission) without any quantitative limitations. Futures and related option
transactions which are not for bona fide hedging purposes may be used provided
the total amount of the initial margin and any option premiums attributable to
such positions does not exceed 5% of each Fund's liquidating value after taking
into account unrealized profits and unrealized losses, and excluding any
in-the-money option premiums paid. The Funds will not market, and are not
marketing, themselves as commodity pools or otherwise as vehicles for trading in
futures and related options. The Funds will segregate liquid assets such as
cash, U.S. Government securities or other liquid high grade debt obligations to
cover the futures and options.
"When Issued" and "Forward Commitment" Transactions (All Funds). The Funds
may purchase securities on a when issued and delayed delivery basis and may
purchase or sell securities on a forward commitment basis. When issued or
delayed delivery transactions arise when securities are purchased by a Fund with
payment and delivery taking place in the future in order to secure what is
considered to be an advantageous price and yield to the Fund at the time of
entering into the transaction. A forward commitment transaction is an agreement
by a Fund to purchase or sell securities at a specified future date. When a Fund
engages in these transactions, the Fund relies on the buyer or seller, as the
case may be, to consummate the sale. Failure to do so may result in the Fund
missing the opportunity to obtain a price or yield considered to be
advantageous. When issued and delayed delivery transactions and forward
commitment transactions may be expected to occur a month or more before delivery
is due. However, no payment or delivery is made by a Fund until it receives
payment or delivery from the other party to the transaction. A separate account
containing only liquid assets such as cash, U.S. Government securities, or other
liquid high grade debt obligations equal to the value of purchase commitments
will be maintained until payment is made. Such securities have the effect of
leverage on the Funds and may contribute to volatility of a Fund's net asset
value. For further information, see the SAI.
Loans of Portfolio Securities (All Funds). To increase current income,
each Fund may lend its portfolio securities in an amount up to 33 1/3% of each
such Fund's total assets to brokers, dealers and financial institutions,
provided certain conditions are met, including the condition that each loan is
secured continuously by collateral maintained on a daily mark-to-market basis in
an amount at least equal to the current market value of the securities loaned.
These transactions involve a loan by the
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applicable Fund and are subject to the same risks as repurchase agreements. For
further information, see the SAI.
Repurchase Agreements (All Funds, except the Short-Term Treasury Income
Fund). The Funds may enter into repurchase agreements with any bank and
broker-dealer which, in the opinion of the Trustees, presents a minimum risk of
bankruptcy. Under a repurchase agreement a Fund acquires securities and obtains
a simultaneous commitment from the seller to repurchase the securities at a
specified time and at an agreed upon yield. The agreements will be fully
collateralized and the value of the collateral, including accrued interest,
marked-to-market daily. The agreements may be considered to be loans made by the
purchaser, collateralized by the underlying securities. If the seller should
default on its obligation to repurchase the securities, a Fund may experience a
loss of income from the loaned securities and a decrease in the value of any
collateral, problems in exercising its rights to the underlying securities and
costs and time delays in connection with the disposition of securities. No Money
Market Fund may invest more than 10% and no Non-Money Market Fund may invest
more than 15% of its net assets in repurchase agreements maturing in more than
seven business days and in securities for which market quotations are not
readily available. For more information about repurchase agreements, see
"Investment Policies" in the SAI.
Reverse Repurchase Agreements (All Funds). The Funds may also enter into
reverse repurchase agreements to avoid selling securities during unfavorable
market conditions to meet redemptions. Pursuant to a reverse repurchase
agreement, a Fund will sell portfolio securities and agree to repurchase them
from the buyer at a particular date and price. Whenever a Fund enters into a
reverse repurchase agreement, it will establish a segregated account in which it
will maintain liquid assets in an amount at least equal to the repurchase price
marked to market daily (including accrued interest), and will subsequently
monitor the account to ensure that such equivalent value is maintained. The Fund
pays interest on amounts obtained pursuant to reverse repurchase agreements.
Reverse repurchase agreements are considered to be borrowings by a Fund under
the 1940 Act.
Portfolio Turnover. The Funds generally will not engage in the trading of
securities for the purpose of realizing short-term profits, but each Fund will
adjust its portfolio as it deems advisable in view of prevailing or anticipated
market conditions or fluctuations in interest rates to accomplish its respective
investment objective. For example, each Fund may sell portfolio securities in
anticipation of an adverse market movement. Other than for tax purposes,
frequency of portfolio turnover will not be a limiting factor if a Fund
considers it advantageous to purchase or sell securities. The Funds do not
anticipate that the respective annual portfolio turnover rates will exceed the
following: Short-Term Treasury Income Fund, 400%; Intermediate Income Fund,
500%; Bond Income Fund, 500%; Stock Appreciation Fund, 85%; Aggressive Stock
Appreciation Fund, 85%; and Value Stock Appreciation Fund, 85%. A high rate of
portfolio turnover involves correspondingly greater transaction expenses than a
lower rate, which expenses must be borne by each Fund and its shareholders. High
portfolio turnover rates may also make it more difficult for the Funds to
satisfy the requirement for qualification as a regulated investment company
under the Internal Revenue Code of 1986, as amended (the "Code"), that less than
30% of each Funds' gross income in any tax year be derived from gains on the
sale of securities held for less than less than three months.
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INVESTMENT RESTRICTIONS
(ALL FUNDS, EXCEPT AS INDICATED)
(1) No Fund may invest more than 15% (10% with respect to the Money Market
Funds) of the aggregate value of its net assets in investments which are
illiquid, or not readily marketable (including repurchase agreements having
maturities of more than seven calendar days, time deposits having maturities of
more than seven calendar days, and securities of foreign issuers that are not
listed on a recognized domestic or foreign securities exchange).
(2) No Fund may borrow money or pledge or mortgage its assets, except that
a Fund may borrow from banks up to 10% of the current value of its total net
assets for temporary or emergency purposes and those borrowings may be secured
by the pledge of not more than 15% of the current value of that Fund's total net
assets (but investments may not be purchased by a Fund while any such borrowings
exist).
(3) No Fund may make loans, except loans of portfolio securities and except
that a Fund may enter into repurchase agreements with respect to its portfolio
securities and may purchase the types of debt instruments described in this
Prospectus.
The foregoing investment restrictions and those described in the SAI as
fundamental are policies of each Fund which may be changed only when permitted
by law and approved by the holders of a majority of the applicable Fund's
outstanding voting securities as described under "Other Information -- Voting."
In addition, each Fund is a diversified fund. As such, each will not, with
respect to 75% of its total assets, invest more than 5% of its total assets in
the securities of any one issuer (except for U.S. Government securities), or
purchase more than 10% of the outstanding voting securities of any such issuer.
The Money Market Funds are subject to further diversification requirements with
respect to 100% of their assets. Also, each Fund will invest less than 25% of
its total assets in the securities of any one industry, excluding the Cash
Reserve Money Market Fund which may invest more than 25% of its total assets in
instruments issued by the banking industry. For this purpose, U.S. Government
securities (and repurchase agreements related thereto) are not considered
securities of a single industry.
If a percentage restriction on investment policies or the investment or use
of assets set forth in this Prospectus are adhered to at the time a transaction
is effected, later changes in percentage resulting from changing asset values
will not be considered a violation.
RISKS OF INVESTING IN THE FUNDS
CERTAIN RISK CONSIDERATIONS
The Money Market Funds attempt to maintain a constant net asset value of
$1.00 per share, although there can be no assurance that the Money Market Funds
will always be able to do so. The Money Market Funds may not achieve as high a
level of current income as other funds that do not limit their investment to the
high quality securities in which the Money Market Funds invest.
The price per share of each of the other Funds will fluctuate with changes
in value of the investments held by the Fund. For example, the value of a bond
Fund's shares will generally fluctuate
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inversely with the movements in interest rates and a stock Fund's shares will
generally fluctuate as a result of numerous factors, including but not limited
to investors' expectations about the economy and corporate earnings and interest
rates. Shareholders of a Fund should expect the value of their shares to
fluctuate with changes in the value of the securities owned by that Fund.
Additionally, a Fund's investment in smaller companies may involve greater risks
than investments in large companies due to such factors as limited product
lines, markets and financial or managerial resources, and less frequently traded
securities that may be subject to more abrupt price movements than securities of
larger companies.
There is, of course, no assurance that a Fund will achieve its investment
objective or be successful in preventing or minimizing the risk of loss that is
inherent in investing in particular types of investment products. In order to
attempt to minimize that risk, BANK IV and AMR monitor developments in the
economy, the securities markets, and with each particular issuer. Also, as noted
earlier, each diversified Fund is managed within certain limitations that
restrict the amount of a Fund's investment in any single issuer.
Foreign Securities (All Funds, except the U.S. Treasury Reserve Money
Market Fund and Short-Term Treasury Income Fund). Investing in the securities
of issuers in any foreign country, including ADRs, involves special risks and
considerations not typically associated with investing in U.S. companies. These
include differences in accounting, auditing and financial reporting standards;
generally higher commission rates on foreign portfolio transactions; the
possibility of nationalization, expropriation or confiscatory taxation; adverse
changes in investment or exchange control regulations (which may include
suspension of the ability to transfer currency from a country); and political
instability which could affect U.S. investments in foreign countries.
Additionally, foreign securities and dividends and interest payable on those
securities may be subject to foreign taxes, including taxes withheld from
payments on those securities. Foreign securities often trade with less frequency
and volume than domestic securities and, therefore, may exhibit greater price
volatility. Additional costs associated with an investment in foreign securities
may include higher custodial fees than apply to domestic custodial arrangements
and transaction costs of foreign currency conversions. Changes in foreign
exchange rates also will affect the value of securities denominated or quoted in
currencies other than the U.S. dollar and, with respect to the Money Market
Fund, may affect the ability to maintain net asset value. A Fund's objectives
may be affected either unfavorably or favorably by fluctuations in the relative
rates of exchange between the currencies of different nations, by exchange
control regulations and by indigenous economic and political developments.
Through a Fund's flexible policies, management endeavors to avoid unfavorable
consequences and to take advantage of favorable developments in particular
nations where, from time to time, it places a Fund's investments. See the SAI
for further information about foreign securities.
Small Capitalization Stocks (Stock Appreciation Fund, Aggressive Stock
Appreciation Fund, and Value Stock Appreciation Fund). Small capitalization
stocks are more volatile than larger capitalization stocks. The Fund may invest
in relatively new or unseasoned companies, which are in their early stages of
development, or small companies positioned in new and emerging industries.
Securities of small and unseasoned companies present greater risks than
securities of larger, more established companies. The companies in which the
Fund may invest may have relatively small revenues and limited product lines,
and may have a small share of the market for their products or services. Small
companies may lack depth of management. They may be unable to internally
generate funds necessary for growth or
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potential development or to generate such funds through external financing on
favorable terms. They may be developing or marketing new products or services
for which markets are not yet established and may never become established. Due
to these and other factors, small companies may incur significant losses, and
investments in such companies are therefore speculative.
MANAGEMENT OF THE FUNDS
The business and affairs of each Fund are managed under the direction of
the Board of Trustees. Information about the Trustees, as well as the Trust's
executive officers, may be found in the SAI under the heading "Management
Trustees and Officers."
THE ADVISORS: BANK IV, N.A.
BANK IV, N.A. ("BANK IV") has provided investment advisory
services to the Funds since inception (except the Cash Reserve
Money Market Fund) pursuant to an Advisory Agreement with the
Trust (the "Advisory Agreement"). Subject to such policies as the
Trust's Board of Trustees may determine, BANK IV makes investment
decisions for the Funds. For the advisory services it provides to
the Funds, BANK IV receives fees based on average daily net
assets up to the following annualized rates: U.S. Treasury
Reserve Money Market Fund, 0.15%; Short-Term Treasury Income
Fund, 0.30%; Intermediate Bond Income Fund, 0.40%; Bond Income
Fund, 0.40%; Stock Appreciation Fund, 0.65%; Aggressive Stock
Appreciation Fund, 0.745%; and Value Stock Appreciation Fund,
0.65%. BANK IV does not receive advisory fees with respect to the
International Equity Fund, as long as the Fund remains completely
invested in the Portfolio or any other investment company.
Each of the portfolio managers listed below has significant
experience in managing investment portfolios similar to the
Funds. Ms. Janet Mullen, an Assistant Vice President of BANK IV,
is responsible for the day-to-day management of the Short-Term
Treasury Income Fund's portfolio. Ms. Mullen has been with BANK
IV since 1991 and was previously with The Columbian Securities
Corporation from 1987 to 1991. Mr. Brad Eppard, an Assistant Vice
President of BANK IV, is responsible for the day-to-day
management of the portfolios of the Intermediate Income Fund and
the Bond Income Fund. Mr. Eppard has been with BANK IV since 1992
and was previously with First Florida Bank from 1991 to 1992 and
Shenandoah Life Insurance Company from 1985 to 1991. Mr. Paul
Worth, Vice President of BANK IV, is responsible for the
day-to-day management of the portfolios of the Stock Appreciation
Fund and the Aggressive Stock Appreciation Fund. Mr. Worth has
been with BANK IV since 1986. Mr. Stuart Hopkins, Vice President
of BANK IV, is responsible for the day-to-day management of the
Value Stock Appreciation Fund's portfolio. Mr. Hopkins has been
with BANK IV and its Tulsa, Oklahoma predecessor since 1989.
BANK IV, whose predecessor was formed in 1887, is the largest
commercial bank in Kansas and provides banking, trust and
investment services to individuals and institutions. It is a
wholly-owned subsidiary of Fourth Financial Corporation. BANK IV
acts as the investment advisor to a wide variety of trusts,
individuals, institutions
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and corporations. Its investment management responsibilities, as
of February 1995, included accounts with aggregate assets of
approximately $3.1 billion. The principal business address of
BANK IV is 100 N. Broadway, Wichita, KS 67202.
On August 25, 1995, the Board of Directors of Fourth Financial
Corporation, the bank holding company which wholly owns BANK IV,
announced that they had approved an Agreement and Plan of Merger
for the acquisition of Fourth Financial Corporation and its
subsidiaries by Boatmen's Bancshares, Inc. of St., Louis,
Missouri. Boatmen's is the largest bank holding company in
Missouri and among the 30 largest bank holding companies in the
United States. Boatmen's also ranks among the 20 largest
providers of trust services in the nation, with approximately $45
billion in assets under management as of June 30, 1995. This
acquisition is subject to approval by the shareholders of both
Fourth Financial and Boatmen's (obtained December 12, 1995) and
by various regulatory authorities, but is expected to occur on
January 31, 1996. On January 15, 1996, the Trustees of the Trust
approved the assignment of the Trust's advisory contract with
Bank IV that is deemed to occur upon the consummation of this
acquisition.
AMR INVESTMENT SERVICES, INC.
AMR Investment Services, Inc. ("AMR"), located at 4333 Amon
Carter Boulevard, MD 5645, Fort Worth, Texas 76155, is a
wholly-owned subsidiary of AMR Corporation, the parent company of
American Airlines, Inc., and was organized in 1986 to provide
business management, advisory, administrative and asset
management consulting services. American Airlines, Inc. is not
responsible for investments made by AMR. As of February 1995, AMR
provides investment advice with respect to approximately $11.2
billion in assets, including approximately $8.0 billion of assets
on behalf of AMR Corporation and its primary subsidiary, American
Airlines, Inc. For the advisory services it provides to the Cash
Reserve Money Market Fund, AMR receives monthly fees based upon
average daily net assets at the annual rate of 0.20%.
Based upon the advice of counsel, BANK IV believes that the performance of
investment advisory services for the Funds will not violate the Glass-Steagall
Act or other applicable banking laws or regulations. However, future statutory
or regulatory changes, as well as future judicial or administrative decisions
and interpretations of present and future statutes and regulations, could
prevent BANK IV from continuing to perform such services for the Funds. If BANK
IV were prohibited from acting as investment advisor to the Funds, it is
expected that the Board of Trustees would recommend to shareholders approval of
a new investment advisory agreement with another qualified investment advisor
selected by the Board or that the Board would recommend other appropriate
action.
THE SPONSOR AND DISTRIBUTOR
Furman Selz LLC, 230 Park Avenue, New York, New York 10169, acts as Sponsor
of the Funds. Furman Selz is primarily an institutional brokerage firm with
membership on the New York, American, Boston, Midwest, Pacific and Philadelphia
Stock Exchanges. Furman Selz also serves as administrator
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and distributor of other mutual funds. FUNDS IV Distributor Inc. ("FFD") is an
affiliate of Furman Selz and was organized specifically to distribute the FUNDS
IV Funds.
In addition to sales charges paid to dealers, FFD may from time to time pay
a bonus or other incentive to dealers which employ registered representatives
who sell a minimum dollar amount of shares of the Funds. Such bonus or other
incentive may take the form of payment for travel expenses, including lodging,
incurred in connection with trips taken by qualifying registered representatives
and members of their families to places within or without the United States, or
other bonuses, such as gift certificates or the cash equivalent of such bonuses.
The Funds have adopted a Rule 12b-1 Distribution Plan and Agreement (the
"Plan") pursuant to which each Fund may reimburse the Distributor on a monthly
basis for costs and expenses of the Distribution in connection with the
distribution and marketing of shares. These costs and expenses, which are
subject to a maximum limit of 0.25% per annum of the average daily net assets of
the Fund, include (i) advertising by radio, television, newspapers, magazines,
brochures, sales literature, direct mail or any other form of advertising, (ii)
expenses of employees or agents of the Distributor, including salary,
commissions, travel and related expenses, (iii) payments to broker-dealers and
financial institutions for services in connection with the distribution of
shares, including promotional incentives and fees calculated with reference to
the average daily net asset value of shares held by shareholders who have a
brokerage or other service relationship with the broker-dealer or other
institution receiving such fees, (iv) costs of printing prospectuses, statements
of additional information and other materials to be given or sent to prospective
investors, (v) such other similar services as the Trustees determine to be
reasonably calculated to result in the sale of shares of the Funds, (vi) costs
of shareholder servicing which may be incurred by broker-dealers, banks or other
financial institutions, and (vii) other direct and indirect distribution related
expenses, including the provision of services with respect to maintaining the
assets of the Funds. Each Fund will pay all costs and expenses in connection
with the preparation, printing and distribution of its Prospectus to current
shareholders and the operation of its Plan, including related legal and
accounting fees. No Fund will be liable for distribution expenditures made by
the Distributor in any given year in excess of the maximum amount payable under
the Plan for that Fund year.
ADMINISTRATIVE SERVICES
The Funds have also entered into an Administrative Services Contract with
Furman Selz pursuant to which Furman Selz provides certain management and
administrative services necessary for the Funds' operations including: (i)
general supervision of the operation of the Funds including coordination of the
services performed by the Funds' Advisors, transfer agent, custodian,
independent accountants and legal counsel, regulatory compliance, including the
compilation of information for documents such as reports to, and filings with,
the SEC and state securities commissions, and preparation of proxy statements
and shareholder reports for the Funds; (ii) general supervision relative to the
compilation of data required for the preparation of periodic reports distributed
to the Funds' Officers and Board of Trustees; and (iii) furnishing office space
and certain facilities required for conducting the business of the Funds. For
these services, Furman Selz receives from each Fund a fee, payable monthly, at
the annual rate of 0.15% of each Fund's average daily net assets. Pursuant to a
Services Agreement between the Trust and the Administrator, Furman Selz assists
the Trust with certain transfer and dividend disbursing agent functions and
receives a fee of $15 per account per year plus out-of-pocket expenses. Pursuant
to a Fund Accounting Agreement between the Trust and the
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Administrator, the Administrator assists the Trust in calculating net asset
values and provides certain other accounting services for each Fund described
therein, for an annual fee of $30,000 per Fund plus out-of-pocket expenses.
SERVICE ORGANIZATIONS
Various banks, trust companies, broker-dealers (other than the Sponsor) or
other financial organizations (collectively, "Service Organizations") also may
provide administrative services for the Funds, such as maintaining shareholder
accounts and records. The Funds may pay fees to Service Organizations (which
vary depending upon the services provided) in amounts up to an annual rate of
0.05% of the daily net asset value of the Funds' shares owned by shareholders
with whom the Service Organization has a servicing relationship.
Some Service Organizations may impose additional or different conditions on
their clients, such as requiring their clients to invest more than a Fund's
minimum initial or subsequent investments or charging a direct fee for
servicing. If imposed, these fees would be in addition to any amounts which
might be paid to the Service Organization by the Funds. Each Service
Organization has agreed to transmit to its clients a schedule of any such fees.
Shareholders using Service Organizations are urged to consult with them
regarding any such fees or conditions.
The Glass-Steagall Act and other applicable laws provide that, among other
things, banks may not engage in the business of underwriting, selling or
distributing securities. There is currently no precedent prohibiting banks from
performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or interpretations
of such laws, as well as changes in either Federal or state regulations relating
to the permissible activities of banks and their subsidiaries or affiliates,
could prevent a bank Service Organization from continuing to perform all or a
part of its servicing activities. If a bank were prohibited from so acting, its
shareholder clients would be permitted to remain shareholders of the Funds and
alternative means for continuing the servicing of such shareholders would be
sought. It is not expected that shareholders would suffer any adverse financial
consequences as a result of any of these occurrences.
OTHER EXPENSES
Each Fund bears all costs of its operations other than expenses
specifically assumed by Furman Selz, FFD, BANK IV or AMR. The costs borne by the
Funds include legal and accounting expenses; Trustees' fees and expenses;
insurance premiums; custodian and transfer agent fees and expenses; expenses
incurred in acquiring or disposing of the Funds' portfolio securities; expenses
of registering and qualifying the Funds' shares for sale with the SEC and with
various state securities commissions; expenses of obtaining quotations on the
Funds' portfolio securities and pricing of the Funds' shares; expenses of
maintaining the Funds' legal existence and of shareholders' meetings; and
expenses of preparation and distribution to existing shareholders of reports,
proxies and prospectuses. Each Fund bears its own expenses associated with its
establishment as a series of the Trust; these expenses are amortized over a
five-year period from the commencement of a Fund's operations. See "Management"
in the SAI. Trust expenses directly attributable to a Fund are charged to that
Fund; other expenses are allocated proportionately among all of the Funds in the
Trust in relation to the net assets of each Fund.
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PORTFOLIO TRANSACTIONS
Pursuant to the applicable Advisory Agreement, BANK IV and AMR place orders
for the purchase and sale of portfolio investments for the Funds' accounts with
brokers or dealers selected by it in its discretion. In effecting purchases and
sales of portfolio securities for the account of the Funds, BANK IV and AMR will
seek the best available price and most favorable execution of the Funds' orders.
Trading does, however, involve transaction costs. Transactions with dealers
serving as primary market makers reflect the spread between the bid and asked
prices. Purchases of underwritten issues may be made, which will include an
underwriting fee paid to the underwriter. Purchases and sales of securities are
generally placed by BANK IV with broker-dealers which, in BANK IV's judgment,
provide prompt and reliable execution at favorable security prices and
reasonable commission rates. BANK IV may cause a Fund to pay commissions higher
than another broker-dealer would have charged if BANK IV believes the commission
paid is reasonable in relation to the value of the brokerage and research
services received by BANK IV. Broker-dealers are selected on the basis of a
variety of factors such as reputation, capital strength, size and difficulty of
order, sale of Fund shares and research provided to BANK IV and AMR. Consistent
with its policy of seeking best execution of portfolio transactions, the Fund
may place orders to purchase or sell securities with affiliates. Affiliates will
not, however, execute as principal, any transactions for or with the Fund. The
Fund has adopted procedures under Rule 17e-1 of the Investment Company Act of
1940 governing brokerage transactions with affiliates.
FUND SHARE VALUATION
The net asset value per share of the Funds is calculated at 12:00 noon
(Eastern time) for the Money Market Funds and at 4:15 p.m. (Eastern time) for
each of the Non-Money Market Funds, Monday through Friday, on each day the New
York Stock Exchange is open for trading, which excludes the following business
holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day; and the
following additional business holidays for the Money Market Funds: Martin Luther
King's Birthday, Columbus Day and Veterans Day. The net asset value per share of
each share class is computed by dividing the value of the net assets
attributable to each class (i.e., the value of the assets less the liabilities)
by the total number of such class's outstanding shares. All expenses, including
fees paid to the Advisor, Furman Selz and FFD, are accrued daily and taken into
account for the purpose of determining the net asset value. Expenses directly
attributable to a Fund are charged to the Fund; other expenses are allocated
proportionately among each Fund within the Trust in relation to the net assets
of each Fund, or on another reasonable basis. Each share class within the Fund
is charged with the direct expenses of that class and with a proportion of the
general expenses of the Fund. These general expenses (e.g., investment advisory
fees) are allocated among the classes of shares based on the relative value of
their outstanding shares.
Securities listed on an exchange are valued on the basis of the last sale
prior to the time the valuation is made. If there has been no sale since the
immediately previous valuation, then the current bid price is used. Quotations
are taken from the exchange where the security is primarily traded. Portfolio
securities which are primarily traded on foreign exchanges may be valued with
the assistance of a pricing service and are generally valued at the preceding
closing values of such securities on their respective exchanges, except that
when an occurrence subsequent to the time a foreign security is valued is likely
to have changed such value, then the fair value of those securities will be
determined
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by consideration of other factors by or under the direction of the Board of
Trustees. Over-the-counter securities are valued on the basis of the bid price
at the close of business on each business day. Securities for which market
quotations are not readily available are valued at fair value as determined in
good faith by or at the direction of the Board of Trustees. Notwithstanding the
above, bonds and other fixed-income securities are valued by using market
quotations and may be valued on the basis of prices provided by a pricing
service approved by the Board of Trustees. All assets and liabilities initially
expressed in foreign currencies will be converted into U.S. dollars at the mean
between the bid and asked prices of such currencies against U.S. dollars as last
quoted by any major bank.
The Money Market Funds use the amortized cost method to value their
portfolio securities and seek to maintain a constant net asset value of $1.00
per share, although there may be circumstances under which this goal cannot be
achieved. 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.
See the SAI for a more complete description of the amortized cost method.
PRICING AND PURCHASE OF FUND SHARES
Orders for the purchase of shares will be executed at the net asset value
per share next determined after an order has been received.
The following purchase procedures do not apply to certain fund or trust
accounts that are managed by BANK IV. The customer should consult his or her
trust administrator for proper instructions.
All funds received are invested in full and fractional shares of the
appropriate Fund. Certificates for shares are not issued. Furman Selz maintains
records of each shareholder's holdings of Fund shares, and each shareholder
receives a statement of transactions, holdings and dividends. The Funds reserve
the right to reject any purchase.
An investment may be made using any of the following methods:
Through an Authorized Broker, Investment Advisor or Service
Organization. Shares are available to new and existing shareholders through
authorized brokers, investment advisors and Service Organizations. To make an
investment using this method, simply complete a Purchase Application and contact
your broker, investment advisor or Service Organization with instructions as to
the amount you wish to invest. Your broker will then contact FFD to place the
order on your behalf on that day.
Orders received by your broker or Service Organization for the Non-Money
Market Funds in proper order prior to the determination of net asset value and
transmitted to FFD prior to the close of its business day (which is currently
5:00 p.m., Eastern time), will become effective that day. Orders for the Money
Market Funds received prior to 12:00 noon will become effective that day.
Brokers who receive orders are obligated to transmit them promptly. You should
receive written confirmation of your order within a few days of receipt of
instructions from your broker.
By Wire. Investments may be made directly through the use of wire
transfers of Federal funds. Contact your bank and request it to wire Federal
funds to the applicable Fund. In most cases, your bank will either be a member
of the Federal Reserve Banking System or have a relationship with a bank that
is. Your bank may charge a fee for handling the transaction. To purchase shares
by a Federal funds wire, please first contact Furman Selz Mutual Funds Client
Services at (800) 557-3768. They will
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establish a record of information for the wire to insure the correct processing
of funds. You can reach the Wire Desk at (800) 557-3768.
Then, have your bank wire funds using the following instructions:
Investors Fiduciary Trust Company
Kansas City, MO 64105
ABA #1010-0362-1
ACCOUNT #751-3003
Further Credit to: Fund Name
As long as you have read the Prospectus, you may establish a new regular
account through the Wire Desk; IRAs may not be opened in this way. When new
accounts are established by wire, the distribution options will be set to
reinvest and the social security or tax identification number ("TIN") will not
be certified until a signed application is received. Completed applications
should be forwarded immediately to FFD. With the Purchase Application, the
shareholder can specify other distribution options and add any special features
offered by a Fund. Should any dividend distributions or redemptions be paid
before the TIN is certified, they will be subject to 31% Federal tax
withholding.
Institutional Accounts. Bank trust departments and other institutional
accounts may place orders directly with FFD by telephone at (800) 557-3768.
MINIMUM PURCHASE REQUIREMENTS
The minimum initial investment in the Funds is $1,000 unless the investor
is a purchaser who at the time of purchase, has a balance of $1,000 or more in
any of the FUNDS IV Funds, is a purchaser through a trust investment manager or
account manager or is administered by the Advisor, is an employee or an
ex-employee of Fourth Financial Corporation or is an employee of any of its
affiliates, AMR, Furman Selz, or any other service provider, or is an employee
of any trust customer of Fourth Financial Corporation or any of its affiliates.
Note that the minimum is $250 for an IRA, other than an IRA for which Fourth
Financial Corporation or any of its affiliates acts as trustee or custodian. Any
subsequent investments must be at least $50, including an IRA investment. All
initial investments should be accompanied by a completed Purchase Application. A
Purchase Application accompanies this Prospectus. Different minimums apply, and
a separate application is required for IRA investments. The Funds reserve the
right to reject purchase orders.
INDIVIDUAL RETIREMENT ACCOUNTS
All Funds may be used as a funding medium for IRAs. Shares may also be
purchased for IRAs established with Fourth Financial Corporation or any of its
affiliates or other authorized custodians. Completion of a special application
is required in order to create such an account, and the minimum initial
investment for an IRA is $250. Contributions to IRAs are subject to prevailing
amount limits set by the Internal Revenue Service. A $7.50 establishment fee and
an annual $15 maintenance and custody fee is payable with respect to each IRA,
and there will be a $12 termination fee when the account is closed. For more
information and IRA information, call the Funds at (800) 557-3768.
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EXCHANGE OF FUND SHARES
The Funds offer two convenient ways to exchange shares in one Fund for
shares in another Fund in the Trust. Before engaging in an exchange transaction,
a shareholder should read carefully the Prospectus describing the Fund into
which the exchange will occur, which is available without charge and can be
obtained by writing to the Fund at 237 Park Avenue, New York, New York 10017, or
by calling (800) 557-3768. A shareholder may not exchange shares of one Fund for
shares of another Fund if the new Fund is not qualified for sale in the state of
the shareholder's residence. The minimum amount for an initial exchange is $500.
No minimum is required in subsequent exchanges. The Trust may terminate or amend
the terms of the exchange privilege at any time.
A new account opened by exchange must be established with the same name(s),
address and social security number as the existing account. All exchanges will
be made based on the net asset value next determined following receipt of the
request by a Fund in good order, plus any applicable sales charge. An exchange
is taxable as a sale of a security on which a gain or loss may be recognized.
Shareholders should receive written confirmation of the exchange within a few
days of the completion of the transaction. Shareholders will receive at least 60
days' prior written notice of any modification or termination of the exchange
privilege.
Exchange by Mail. To exchange Fund shares by mail, simply send a letter of
instruction to Furman Selz. The letter of instruction must include: (i) your
account number; (ii) the Fund from and the Fund into which you wish to exchange
your investment; (iii) the dollar or share amount you wish to exchange; and (iv)
the signatures of all registered owners or authorized parties. All signatures
must be guaranteed by an eligible guarantor institution including a member of a
national securities exchange or by a commercial bank or trust company,
broker-dealers, credit unions and savings associations.
Exchange by Telephone. To exchange Fund shares by telephone or if you have
any questions simply call the Funds at (800) 557-3768. You should be prepared to
give the telephone representative the following information: (i) your account
number, social security or tax identification number and account registration;
(ii) the name of the Fund from and the Fund into which you wish to transfer your
investment; and (iii) the dollar or share amount you wish to exchange. The
conversation may be recorded to protect you and the Funds. Telephone exchanges
are available only if the shareholder so indicates by checking the "yes" box on
the Purchase Application. See "Redemption of Fund Shares -- By Telephone" for a
discussion of telephone transactions generally.
Automatic Investment Program. An eligible shareholder may also participate
in the Automatic Investment Program, an investment plan that automatically
debits money from the shareholder's bank account and invests it in one or more
of the Funds in the Trust through the use of electronic funds transfers or
automatic bank drafts. Shareholders may elect to make subsequent investments by
transfers of a minimum of $50 on either the fifth or twentieth day of each month
into their established Fund account. Contact the Funds for more information
about the Automatic Investment Program.
REDEMPTION OF FUND SHARES
Shareholders may redeem their shares, in whole or in part, on any business
day. Shares will be redeemed at the net asset value next determined after a
redemption request in good order has been received by the applicable Fund. See
"Determination of Net Asset Value." A redemption may be a taxable transaction on
which gain or loss may be recognized. Generally, however, gain or loss is not
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expected to be realized on a redemption of shares of the Money Market Funds,
both of which seek to maintain a net asset value per share of $1.00.
Where the shares to be redeemed have been purchased by check, the
redemption request will be returned if the purchasing check has not cleared,
which may take up to 15 days. Shareholders may avoid this delay by investing
through wire transfers of Federal funds. During the period prior to the time the
shares are redeemed, dividends on the shares will continue to accrue and be
payable and the shareholder will be entitled to exercise all other beneficial
rights of ownership.
Once the shares are redeemed, a Fund will ordinarily send the proceeds by
check to the shareholder at the address of record on the next business day. The
Funds may, however, take up to seven days to make payment. This will not be the
customary practice. Also, if the New York Stock Exchange is closed (or when
trading is restricted) for any reason other than the customary weekend or
holiday closing or if an emergency condition as determined by the SEC merits
such action, the Funds may suspend redemptions or postpone payment dates.
Redemption Methods. To ensure acceptance of your redemption request, it is
important to follow the procedures described below. Although the Funds have no
present intention to do so, the Funds reserve the right to refuse or to limit
the frequency of any telephone or wire redemptions. Of course, it may be
difficult to place orders by telephone during periods of severe market or
economic change, and a shareholder should consider alternative methods of
communications, such as couriers. The Funds' services and their provisions may
be modified or terminated at any time by the Funds. If the Funds terminate any
particular service, they will do so only after giving written notice to
shareholders. Redemption by mail will always be available to shareholders.
You may redeem your shares using any of the following methods:
Through an Authorized Broker, Investment Advisor or Service
Organization. You may redeem your shares by contacting your broker or
investment advisor and instructing him or her to redeem your shares. He or she
will then contact FFD and place a redemption trade on your behalf. He or she may
charge you a fee for this service.
By Mail. You may redeem your shares by sending a letter directly to FFD.
To be accepted, a letter requesting redemption must include: (i) the Fund name
and account registration from which you are redeeming shares; (ii) your account
number; (iii) the amount to be redeemed, (iv) the signatures of all registered
owners; and (v) a signature guarantee by any eligible guarantor institution
including a member of a national securities exchange or a commercial bank or
trust company, broker-dealers, credit unions and savings associations.
Corporations, partnerships, trusts or other legal entities will be required to
submit additional documentation.
By Telephone. You may redeem your shares by calling the Funds toll free at
(800) 557-3768. You should be prepared to give the telephone representative the
following information: (i) your account number, social security number and
account registration; (ii) the Fund name from which you are redeeming shares;
and (iii) the amount to be redeemed. The conversation may be recorded to protect
you and the Funds. Telephone redemptions are available only if the shareholder
so indicates by checking the "yes" box on the Purchase Application or on the
Optional Services Form. The Funds employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. If the Funds fail to employ
such reasonable procedures, they may be liable for any loss, damage or expense
arising out of any telephone transactions purporting to be on a shareholder's
behalf. In order
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to assure the accuracy of instructions received by telephone, the Funds require
some form of personal identification prior to acting upon instructions received
by telephone, record telephone instructions and provide written confirmation to
investors of such transactions. Redemption requests transmitted via facsimile
will not be accepted.
By Wire. You may redeem your shares by contacting the Funds by mail or
telephone and instructing them to send a wire transmission to your personal
bank. Proceeds of wire redemption for the Money Market Funds generally will be
transferred to the designated account on the day the request is received,
provided that it is received by 12:00 Noon (Eastern time).
Your instructions should include: (i) your account number, social security
or tax identification number and account registration; (ii) the Fund name from
which you are redeeming shares; and (iii) the amount to be redeemed. Wire
redemptions can be made only if the "yes" box has been checked on your Purchase
Application, and attach a copy of a void check of account where proceeds are to
be wired. Your bank may charge you a fee for receiving a wire payment on your
behalf.
Check Writing. A check redemption ($500 minimum, no maximum) feature is
available with respect to the Money Market Funds. Checks are free and may be
obtained from the Funds. It is not possible to use a check to close out your
account since additional shares accrue daily.
The above-mentioned services "By Telephone," "By Wire" and "Check Writing"
are not available for IRAs and trust relationships of BANK IV.
Systematic Withdrawal Plan. An owner of $10,000 or more of shares of a
Fund may elect to have periodic redemptions from his or her account to be paid
on a monthly, quarterly, semi-annual or annual basis. The minimum periodic
payment is $100. A sufficient number of shares to make the scheduled redemption
will normally be redeemed on the date selected by the shareholder. Depending on
the size of the payment requested and fluctuation in the net asset value, if
any, of the shares redeemed, redemptions for the purpose of making such payments
may reduce or even exhaust the account. A shareholder may request that these
payments be sent to a predesignated bank or other designated party. Capital
gains and dividend distributions paid to the account will automatically be
reinvested at net asset value on the distribution payment date.
Redemption of Small Accounts. Due to the disproportionately higher cost of
servicing small accounts, each Fund reserves the right to redeem, on not less
than 30 days' notice, an account in a Fund that has been reduced by a
shareholder to $500 or less. However, if during the 30-day notice period the
shareholder purchases sufficient shares to bring the value of the account above
$500, this restriction will not apply.
Redemption in Kind. All redemptions of shares of the Funds shall be made
in cash, except that the commitment to redeem shares in cash extends only to
redemption requests made by each shareholder of a Fund during any 90-day period
of up to the lesser of $250,000 or 1% of the net asset value of that Fund at the
beginning of such period. This commitment is irrevocable without the prior
approval of the SEC and is a fundamental policy of the Funds that may not be
changed without shareholder approval. In the case of redemption requests by
shareholders in excess of such amounts, the Board of Trustees reserves the right
to have the Funds make payment, in whole or in part, in securities or other
assets, in case of an emergency or any time a cash distribution would impair the
liquidity of a Fund to the detriment of the existing shareholders. In this
event, the securities would be valued in the same manner as the securities of
that Fund are valued. If the recipient were to sell such
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securities, he or she could receive less than the redemption value of the
securities and could incur certain transaction costs.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAX
Each Fund has qualified and intends to continue to qualify annually and to
elect to be treated as a regulated investment company pursuant to the provisions
of Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").
By so qualifying and electing, each Fund generally will not be subject to
Federal income tax to the extent that it distributes investment company taxable
income and net capital gains in the manner required under the Code.
Each Fund intends to distribute to its shareholders substantially all of
its investment company taxable income (which includes, among other items,
dividends and interest and the excess, if any, of net short-term capital gains
(generally including any net option premium income) over net long-term capital
losses). The Money Market Funds, the Intermediate Bond Income Fund, the Bond
Income Fund and the Short-Term Treasury Income Fund will declare distributions
of such income daily and pay those dividends monthly; the Stock Appreciation
Fund, the Aggressive Stock Appreciation Fund, and Value Stock Appreciation Fund
will pay dividends at least once annually. Each Fund intends to distribute, at
least annually, substantially all net capital gains (the excess of net long-term
capital gains over net short-term capital losses). In determining amounts of
capital gains to be distributed, any capital loss carryovers from prior years
will be applied against capital gains.
Distributions will be paid in additional Fund shares based on the net asset
value at the close of business on the payment date of the distribution, unless
the shareholder elects in writing, not less than five full business days prior
to the record date, to receive such distributions in cash. Dividends declared
in, and attributable to, the preceding month will be paid within five business
days after the end of each month.
In the case of the Money Market Funds, shares purchased will begin earning
dividends on the day the purchase order is executed and shares redeemed will
earn dividends through the previous day. Net investment income for a Saturday,
Sunday or a holiday will be declared as a dividend on the previous business day.
In the case of the other Funds that declare daily dividends, shares purchased
will begin earning dividends on the day after the purchase order is executed,
and shares redeemed will earn dividends through the day the redemption is
executed.
Investors who redeem all or a portion of Fund shares prior to a dividend
payment date will be entitled on the next dividend payment date to all dividends
declared but unpaid on those shares at the time of their redemption.
Distributions of investment company taxable income (regardless of whether
derived from dividends, interest or short-term capital gains) will be taxable to
shareholders as ordinary income. Distributions of net long-term capital gains
properly designated by a Fund as capital gain dividends will be taxable as
long-term capital gains, regardless of how long a shareholder has held his Fund
shares. Distributions are taxable in the same manner whether received in
additional shares or in cash.
Earnings of the Funds not distributed on a timely basis in accordance with
a calendar year distribution requirement are subject to a nondeductible 4%
excise tax. To prevent imposition of this tax, each Fund intends to comply with
this distribution requirement.
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A distribution, including an "exempt-interest dividend," will be treated as
paid on December 31 of the calendar year if it is declared by a Fund during
October, November, or December of that year to shareholders of record in such a
month and paid by a Fund during January of the following calendar year. Such
distributions will be treated as received by shareholders in the calendar year
in which the distributions are declared, rather than the calendar year in which
the distributions are received.
A Fund's distributions with respect to a given taxable year may exceed the
current and accumulated earnings and profits of that Fund available for
distribution. In that event, distributions in excess of such earnings and
profits would be characterized as a return of capital to shareholders for
Federal income tax purposes, thus reducing each shareholder's cost basis in his
Fund shares. Such distributions in excess of a shareholder's cost basis in his
shares would be treated as a gain realized from a sale of such shares.
Any gain or loss realized by a shareholder upon the sale or other
disposition of shares of a Fund, or upon receipt of a distribution in complete
liquidation of a Fund, generally will be a capital gain or loss which will be
long-term or short-term, generally depending upon the shareholder's holding
period for the shares. A loss realized by a shareholder on a redemption, sale,
or exchange of shares of a Fund held six months or less with respect to which
capital gain dividends have been paid will be characterized as a long-term
capital loss to the extent of such capital gain dividends.
It is anticipated that a portion of the dividends paid by the Funds (except
the Money Market Funds, Intermediate Bond Income and Bond Income Funds) will
qualify and be designated by such Funds as dividends eligible for the
dividends-received deduction available to corporations. The Code imposes various
limitations restricting the availability of the dividends received deduction.
Investors should consult their own tax advisers in this regard.
The Funds may be required to withhold for Federal income tax ("backup
withholding") 31% of the distributions and the proceeds of redemptions payable
to shareholders who fail to provide a correct taxpayer identification number or
to make required certifications, or where a Fund or shareholder has been
notified by the Internal Revenue Service that the shareholder is subject to
backup withholding. Most corporate shareholders and certain other shareholders
specified in the Code and regulations are exempt from backup withholding. Backup
withholding is not an additional tax. Any amounts withheld may be credited
against the shareholder's U.S. Federal income tax liability.
Those Funds that may invest in securities of foreign issuers may be subject
to withholding and other similar income taxes imposed by a foreign country. Each
of these Funds intends to elect, if it is eligible to do so under the Code, to
"pass-through" to its shareholders the amount of such foreign taxes paid. If
such an election is made by a Fund, each shareholder of that Fund would be
required to include in gross income the taxable dividends received and the
amount of pro rata share of those foreign taxes paid by the Fund. Each
shareholder would be entitled either to deduct (as an itemized deduction) his
pro rata share of the foreign taxes in computing his taxable income or to use it
(subject to limitations) as a foreign tax credit against his U.S. Federal income
tax liability. No deduction for foreign taxes may be claimed by a shareholder
who does not itemize deductions. Each shareholder will be notified within 60
days after the close of a Fund's taxable year whether the foreign taxes paid by
the Fund will "pass-through" for that year.
Shareholders will be notified annually by the Trust as to the Federal tax
status of distributions made by the Fund(s) in which they invest. Depending on
the residence of the shareholder for tax
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purposes, distributions also may be subject to state and local taxes, including
withholding taxes. Foreign shareholders may, for example, be subject to special
withholding requirements. Special tax treatment, including a penalty on certain
pre-retirement distributions, is accorded to accounts maintained as IRAs.
Shareholders should consult their own tax advisors as to the Federal, state and
local tax consequences of ownership of shares of the Funds in their particular
circumstances.
OTHER INFORMATION
CAPITALIZATION STRUCTURE
FUNDS IV Trust was organized as a Delaware business trust on May 2, 1994,
and currently consists of eleven separately managed portfolios. The Board of
Trustees may establish additional portfolios 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 Funds are
fully paid, non-assessable and freely transferable.
Each Fund also offers a Premium Class of shares. The Service Class shares
are offered at net asset value without a sales load only to certain
institutional investors, or other investors who at the time of purchase have a
balance of $1,000 or more invested in any of the FUNDS IV Funds, are purchased
through a trust investment manager or account manager or administered by the
Advisor, are employees or ex-employees of Fourth Financial Corporation or any of
its affiliates, employees of AMR, Furman Selz, or any other service provider, or
employees of any trust customer of Fourth Financial Corporation or any of its
affiliates. Shareholders in the Premium Class of shares may be subject to an
additional shareholder servicing charge of up to 0.50% of average net assets.
Call 800-557-3768 or contact your sales representative, broker-dealer or bank to
obtain more information about the Funds' classes of shares.
Under Delaware law, shareholders could, under certain circumstances, be
held personally liable for the obligations of the Trust. However, the
Declaration of Trust 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 the Trust and requires that notice of the
disclaimer be given in each contract or obligation entered into or executed by
the Trust or the Trustees. The Declaration of Trust provides for indemnification
out of Trust property for all loss and expense of any shareholder held
personally liable for the obligations of the Trust. 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.
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 Declaration of
Trust, they may be entitled to vote. The Trust is not required to hold regular
annual meetings of the Funds' shareholders and does not intend to do so. The
Trustees are required to call a meeting 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 and in
connection with such meeting to comply with the shareholders' communications
provisions of Section 16(c) of the Act. See "Other Information -- Voting Rights"
in the SAI.
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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 a Fund (or the Trust) means the vote of
the lesser of: (1) 67% of the shares of a 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 a Fund (or
the Trust).
PERFORMANCE INFORMATION
A Fund may, from time to time, include its yield and total return in
advertisements or reports to shareholders or prospective investors. Shareholders
of the Premium Class of shares will experience a lower net return on their
investment than shareholders of the Service Class of Shares because of the
additional shareholder servicing charge to which Premium Class shareholders are
subject. The methods used to calculate the yield and total return of the Funds
are mandated by the SEC. Quotations of "yield" for a Fund (other than the Money
Market Funds) will be based on the investment income per share during a
particular 30-day (or one month) period (including dividends and interest), less
expenses accrued during the period ("net investment income"), and will be
computed by dividing net investment income by the maximum public offering price
per share on the last day of the period.
Quotations of "yield" for the Money Market Funds will be based on the
income received by a hypothetical investment (less a pro-rata share of Fund
expenses) over a particular seven-day period, which is then "annualized" (i.e.,
assuming that the seven-day yield would be received for 52 weeks, stated in
terms of an annual percentage return on the investment).
"Effective yield" for the Money Market Funds is calculated in a manner
similar to that used to calculate yield, but includes the compounding effect of
earnings on reinvested dividends.
Quotations of yield and effective yield reflect only a Fund's performance
during the particular period on which the calculations are based. Yield and
effective yield for a Fund will vary based on changes in market conditions, the
level of interest rates and the level of that Fund's expenses, and no reported
performance figure should be considered an indication of performance which may
be expected in the future.
Quotations of average annual total return for a Fund (other than the Money
Market Funds) will be expressed in terms of the average annual compounded rate
of return of a hypothetical investment in that Fund over periods of 1, 5 and 10
years (up to the life of that Fund), reflect the deduction of a proportional
share of Fund expenses (on an annual basis), and assume that all dividends and
distributions are reinvested when paid.
Performance information for a Fund may be compared to various unmanaged
indices, such as those indices prepared by Lipper Analytical Services, Standard
& Poor's 500 Stock Index, the Dow Jones Industrial Average and other entities or
organizations which track the performance of investment companies. Any
performance information should be considered in light of the Fund's investment
objectives and policies, characteristics and quality of the Funds and the market
conditions during the time period indicated, and should not be considered to be
representative of what may be achieved in the future. For a description of the
methods used to determine yield and total return for the Funds, see the SAI.
39
<PAGE> 40
Each of the Short-Term Treasury Income Fund, Intermediate Bond Income Fund,
Stock Appreciation Fund, Aggressive Stock Appreciation Fund and Value Stock
Appreciation Fund is the successor to one or more collective investment funds
previously managed by BANK IV. Investors in the collective investment funds were
invited to invest in the corresponding FUNDS IV Fund at the inception of each
such Fund. The Cash Reserve Money Market Fund is substantially identical to the
American Advantage Money Market Fund, another mutual fund managed by AMR, the
investment advisor of the Cash Reserve Money Market Fund. Set forth below are
certain performance data for the collective investment funds and the American
Advantage Money Market Fund for the past five years. The data shown below
reflects total return for the periods shown, reduced by the expense ratio for
each corresponding FUNDS IV Fund as indicated in the Fee Table in this
Prospectus. This performance information is deemed relevant since the collective
investment funds and the American Advantage Money Market Fund have been managed
using the same investment objectives, policies and restrictions and portfolio
managers as those to be used by each corresponding FUNDS IV Fund. However, this
performance data is not necessarily indicative of the future performance of any
of the Funds.
BANK IV COLLECTIVE TRUST FUNDS
TOTAL RETURN FOR THE PERIOD ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
CASH SHORT-TERM INTERMEDIATE AGGRESSIVE
RESERVE TREASURY BOND STOCK STOCK VALUE STOCK
MONEY INCOME INCOME APPRECIATION APPRECIATION APPRECIATION
MARKET FUND FUND FUND FUND FUND FUND
----------- ---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
1989........................ 9.2% 9.8% 11.5% 32.0% 26.7% 24.1%
1990........................ 8.2% 8.8% 6.6% -3.4% -3.2% 2.5%
1991........................ 6.5% 11.3% 14.9% 35.6% 40.2% 33.6%
1992........................ 3.8% 5.4% 6.9% 11.9% 19.2% 5.7%
1993........................ 3.0% 5.6% 8.3% 16.7% 19.9% 0.8%
5 Years
(Annualized).............. 6.1% 8.1% 9.6% 17.7% 19.8% 12.6%
</TABLE>
ACCOUNT SERVICES
All transactions in shares of the Funds will be reflected in a statement
for each shareholder. In those cases where a Service Organization or its nominee
is shareholder of record of shares purchased for its customer, the Funds have
been advised that the statement may be transmitted to the customer at the
discretion of the Service Organization.
Furman Selz acts as the Funds' transfer agent. The Trust compensates Furman
Selz, the Trust's administrator, pursuant to a Services Agreement described in
"Management of the Fund -- Administrative Services" of this Prospectus, for
providing personnel and facilities to perform dividend disbursing and transfer
agency-related services for the Trust.
SHAREHOLDER INQUIRIES
All shareholder inquiries should be directed to the Funds at 237 Park
Avenue, New York, New York 10017.
General and Account Information: (800) 557-3768.
40
<PAGE> 41
APPENDIX
DESCRIPTION OF MOODY'S BOND RATINGS:
Excerpts from Moody's description of its four highest bond ratings are
listed as follows: Aaa -- judged to be the best quality and they carry the
smallest degree of investment risk; Aa -- judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as high grade bonds; A -- possess many favorable investment attributes and are
to be considered as "upper medium grade obligations"; Baa -- considered to be
medium grade obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Other Moody's bond
descriptions include: Ba -- judged to have speculative elements, their future
cannot be considered as well assured; B -- generally lack characteristics of the
desirable investment; Caa -- are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest; Ca -- speculative in a high degree, often in default; C -- lowest
rated class of bonds, regarded as having extremely poor prospects.
Moody's also supplies numerical indicators 1, 2 and 3 to rating categories.
The modifier 1 indicates that the security is in the higher end of its rating
category; the modifier 2 indicates a mid-range ranking; and modifier 3 indicates
a ranking toward the lower end of the category.
DESCRIPTION OF S&P'S BOND RATINGS:
Excerpts from S&P's description of its four highest bond ratings are listed
as follows: AAA -- highest grade obligations, in which capacity to pay interest
and repay principal is extremely strong; AA -- also qualify as high grade
obligations, having a very strong capacity to pay interest and repay principal,
and differs from AAA issues only in a small degree; A -- regarded as upper
medium grade, having a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories;
BBB -- regarded as having an adequate capacity to pay interest and repay
principal. Whereas it normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for debt in this category
than in higher rated categories.
BB, B, CCC, CC: Debt rated in these categories is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
CI: The "CI" rating is reserved for income bonds on which no interest is
being paid.
S&P applies indicators "+, -," no character, and relative standing within
the major rating categories.
DESCRIPTION OF MOODY'S RATINGS OF NOTES AND VARIABLE RATE DEMAND INSTRUMENTS:
Moody's ratings for state and municipal short-term obligations will be
designated Moody's Investment Grade or MIG. Such ratings recognize the
differences between short-term credit and long-term risk. Short-term ratings on
issues with demand features (variable rate demand obligations) are
A-1
<PAGE> 42
differentiated by the use of the VMIG symbol to reflect such characteristics as
payment upon periodic demand rather than fixed maturity dates and payments
relying on external liquidity.
MIG 1/VMIG 1: This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.
MIG 2/VMIG 2: This denotes high quality. Margins of protection are ample
although not as large as in the preceding group.
A-2
<PAGE> 43
FUNDS IV
ADDRESS FOR
TRUST CLIENTS OF BANK IV
P.O. Box 1122
Wichita, Kansas 67201-1112
INVESTMENT ADVISORS
BANK IV, N.A.
100 North Broadway
Wichita, Kansas 67202
AMR Investment Services, Inc.
4333 Amon Carter Blvd., MD 5645
Fort Worth, Texas 76155
(Cash Reserve Money Market Fund only)
ADMINISTRATOR AND SPONSOR
Furman Selz LLC
230 Park Avenue
New York, New York 10169
DISTRIBUTOR
FUNDS IV Distributor Inc.
230 Park Avenue
New York, New York 10169
CUSTODIAN
BANK IV, N.A.
100 North Broadway
Wichita, Kansas 67202
COUNSEL
Baker & McKenzie
805 Third Avenue
New York, New York 10022
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
FUNDS IV TRUST
A FAMILY OF
MUTUAL FUNDS
The U.S. Treasury Reserve Money Market Fund seeks to provide investors with as
high a level of current income as is consistent with liquidity, stability,
maximum safety of principal and the maintenance of a stable $1.00 net asset
value per share
The Cash Reserve Money Market Fund seeks to provide investors with current
income, liquidity and the maintenance of a stable $1.00 net asset value by
investing in high quality, short-term obligations
The Short-Term Treasury Income Fund seeks to provide investors with as high a
level of current income as is consistent with liquidity and safety of principal
The Intermediate Bond Income Fund seeks to provide investors with as high a
level of current income as is consistent with managing for total return by
investing in fixed income securities managed for total return
The Bond Income Fund seeks to provide investors with as high a level of current
income as is consistent with managing for total return by investing in fixed
income securities
The Stock Appreciation Fund seeks to provide investors with long-term capital
appreciation
The Aggressive Stock Appreciation Fund seeks to provide investors with
aggressive long-term capital appreciation
The Value Stock Appreciation Fund seeks to provide investors with long-term
capital appreciation and dividend income
PROSPECTUS
January 30, 1996
Investment Advisor
BANK IV, N.A.
AMR INVESTMENT SERVICES, INC.
(Cash Reserve Money Market Fund Only)
