Registration No. 33-87498
811-8910
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [x]
Pre-Effective Amendment No. _____ [ ]
Post-Effective Amendment No. 7 [x]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [x]
Amendment No. 10 [x]
(Check appropriate box or boxes.)
IMG MUTUAL FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
2203 Grand Avenue
Des Moines, Iowa 50312-5338
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (515) 244-5426
MARK A. MCCLURG, President
IMG Mutual Funds, Inc.
2203 Grand Avenue
Des Moines, Iowa 50312-5338
(Name and Address of Agent for Service)
Copies of all Communications to:
JOHN C. MILES, ESQ.
Cline, Williams, Wright, Johnson & Oldfather
1900 FirsTier Bank Building
Lincoln, Nebraska 68508
Approximate Date of Proposed Public Offering: As soon as practicable after the
Registration Statement becomes effective.
It is proposed that this filing will become effective 75 days after filing or at
such earlier time as the Commissions may determine pursuant to paragraph (a)of
Rule 485 under the Securities Act of 1933.
The Registrant has registered an indefinite number of shares under the
Securities Act of 1933 pursuant to Rule 24f-2 under the Securites Company Act of
1940, and the Rule 24f-2 Notice for the year ended April 30, 1997 was filed on
or about June 25, 1997.
<PAGE>
IMG MUTUAL FUNDS, INC.
Cross-Reference Sheet
Required by Rule 404(a)
PART A
Liquid Assets Fund/Municipal Assets Fund Combined Prospectus
N-1A Item No. Location in Prospectus
- ------------- ----------------------
1. Cover Page.....................................COVER PAGE
2. Synopsis.......................................SUMMARY
3. Financial Highlights...........................NOT APPLICABLE
4. General Description of Registrant..............INVESTMENT OBJECTIVES,
POLICIES AND RESTRICTIONS
5. Management of the Fund.........................MANAGEMENT AND FEES
6. Capital Stock and Other Securities.............COVER PAGE; DISTRIBUTIONS
AND TAXES; ORGANIZATION AND
SHARES OF THE FUNDS
7. Purchase of Securities Being Offered...........OPENING AN ACCOUNT;
PURCHASING SHARES
8. Redemption or Repurchase.......................REDEEMING SHARES
9. Legal Proceedings..............................NOT APPLICABLE
PART B
Liquid Assets Fund Statement of Additional Information
Location in Statement of
Additional Information
----------------------
10. Cover Page.....................................COVER PAGE
11. Table of Contents..............................TABLE OF CONTENTS
12. General Information and History................GENERAL INFORMATION AND
HISTORY
13. Investment Objective and Policies..............INVESTMENT OBJECTIVES,
POLICIES AND RESTRICTIONS
14. Management of the Fund.........................MANAGEMENT; COMPENSATION
TABLE
15. Control Persons and Principal Holders of
Securities.....................................PRINCIPAL SHAREHOLDERS;
MANAGEMENT
16. Investment Advisory and Other Services.........MANAGEMENT; THE INVESTMENT
ADVISORY AGREEMENT
17. Brokerage Allocation...........................MANAGEMENT
18. Capital Stock and Other Securities.............NOT APPLICABLE; SEE
ORGANIZATION AND SHARES OF
THE FUNDS IN PROSPECTUS
19. Purchase, Redemption and Pricing
of Securities Being Offered....................VALUING OF FUND'S SHARES
20. Tax Status.....................................TAXES
21. Underwriters...................................THE DISTRIBUTOR AND
DISTRIBUTION PLAN
22. Calculation of Performance data................CALCULATION OF YIELD
23. Financial Statements...........................FINANCIAL STATEMENTS
PART B
Municipal Assets Fund Statement of Additional Information
Location in Statement of
Additional Information
----------------------
10. Cover Page.....................................COVER PAGE
11. Table of Contents..............................TABLE OF CONTENTS
12. General Information and History................GENERAL INFORMATION AND
HISTORY
13. Investment Objective and Policies..............INVESTMENT OBJECTIVES,
POLICIES AND RESTRICTIONS
14. Management of the Fund.........................MANAGEMENT; COMPENSATION
TABLE
15. Control Persons and Principal Holders of
Securities.....................................PRINCIPAL SHAREHOLDERS;
MANAGEMENT
16. Investment Advisory and Other Services.........MANAGEMENT; THE INVESTMENT
ADVISORY AGREEMENT
17. Brokerage Allocation...........................MANAGEMENT
18. Capital Stock and Other Securities.............NOT APPLICABLE; SEE
ORGANIZATION AND SHARES OF
THE FUNDS IN PROSPECTUS
19. Purchase, Redemption and Pricing
of Securities Being Offered....................VALUING OF FUND'S SHARES
20. Tax Status.....................................TAXES
21. Underwriters...................................THE DISTRIBUTOR AND
DISTRIBUTION PLAN
22. Calculation of Performance data................CALCULATION OF YIELD
23. Financial Statements...........................FINANCIAL STATEMENTS
PART C
Information required to be included in Part C is set forth under the appropriate
item, so numbered in Part C to this Registration Statement.
<PAGE>
LIQUID ASSETS FUND AND SWEEP SHARES
MUNICIPAL ASSETS FUND
2203 Grand Avenue, Des Moines, Iowa 50312-5338
- --------------------------------------------------------------------------------
FOR CURRENT YIELD, PURCHASE AND REDEMPTION INFORMATION CALL ........800-798-1819
....................................................................515-244-5426
- --------------------------------------------------------------------------------
PROSPECTUS ___, 1997
- --------------------------------------------------------------------------------
Liquid Assets Fund and Municipal Assets Fund, each of these a "Fund",
(collectively, the "Funds") are money market mutual funds designed to enable
investors to meet short-term goals. Investors choose whichever Fund best suits
their needs and may, without charge, exchange Funds as their investment outlook
or goals change.
Liquid Assets Fund offers four classes of shares and Municipal Assets Fund
offers three classes of shares. This Prospectus describes the "Sweep Shares" of
each Fund. Sweep Shares are offered to customers of banks. Sweep Shares are
normally offered through financial institutions providing automatic "sweep"
investment programs to their own customers. The Funds also offer "Trust Shares"
and "Institutional Shares" which accrue daily dividends in the same manner as
Sweep Shares except that each class bears separate distribution and/or
shareholder servicing fees. "S2 Shares" are also offered by Liquid Assets Fund.
(see "Organization and Shares of the Funds").
LIQUID ASSETS FUND, ("Liquid Assets") seeks maximum current income consistent
with safety of principal and maintenance of liquidity. MUNICIPAL ASSETS FUND,
("Municipal Assets") seeks maximum current income exempt from federal income
tax, consistent with safety of principal and maintenance of liquidity. Sweep
Shares are offered and redeemed at $1.00 per share under rules which allow the
Funds to use the amortized cost method of valuing the Funds' assets.
AN INVESTMENT IN SHARES OF THE FUNDS IS NOT INSURED OR GUARANTEED BY THE UNITED
STATES GOVERNMENT, BY ANY STATE, OR BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION. SHARES OF THE FUNDS ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF A
BANK, OR GUARANTEED BY A BANK. INVESTMENTS IN THE FUNDS INVOLVE INVESTMENT
RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
THE FUNDS SEEK TO MAINTAIN A CONSTANT NET ASSET VALUE OF $1.00, BUT UNDER
EXTRAORDINARY CIRCUMSTANCES THE VALUE OF SHARES MAY VARY FROM $1.00 AND
CONSEQUENTLY, THERE CAN BE NO ASSURANCE THAT THE FUNDS WILL BE ABLE TO MAINTAIN
A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
This Prospectus sets forth basic information about each Fund that investors
should know before investing and should be retained for future reference.
Statements of Additional Information (as of the date of this Prospectus) which
contain more detailed information about each Fund have been filed with the
Securities and Exchange Commission and are hereby incorporated by reference. The
Statements of Additional Information are available free upon request from the
Funds at the address and telephone number indicated 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 ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
PROSPECTUS SUMMARY
TYPE OF COMPANY
Each Fund is a diversified series of an open-end, management investment company.
INVESTMENT OBJECTIVE
For Liquid Assets, maximum current income consistent with safety of principal
and maintenance of liquidity.
For Municipal Assets, maximum current income exempt from federal income tax,
consistent with safety of principal and maintenance of liquidity.
INVESTMENT POLICY
Under normal market conditions, Liquid Assets will invest in a diversified
portfolio of high quality, U.S. dollar denominated short-term debt obligations
including, primarily, redeemable Certificates backed by federally insured
student loans and Farmers Home Administration guaranteed loans, commercial
paper, bank obligations, short-term corporate obligations and obligations issued
or guaranteed by the U.S. government, its agencies or instrumentalities and
repurchase agreements collateralized by such obligations having a
dollar-weighted average maturity of 90 days or less. The Fund seeks to maintain
a net asset value of $1.00 per share.
Under normal market conditions, Municipal Assets will invest in a diversified
portfolio of high quality, U.S. dollar denominated short-term municipal
securities which mature or have a demand feature exercisable in one year or less
from the date of acquisition having a dollar-weighted average maturity of 90
days or less. The Fund seeks to maintain a net asset value of $1.00 per share.
RISK FACTORS AND SPECIAL CONSIDERATIONS
An investment in the Funds is subject to certain risks, as set forth in detail
under "INVESTMENT OBJECTIVES, POLICIES AND Restrictions." As with all mutual
funds, there can be no assurance that the Funds will achieve their investment
objectives.
OFFERING PRICE
The public offering price of each Fund is equal to its net asset value of $1.00
per Share.
SHARES OFFERED
Sweep Shares of common stock ("Shares") of Liquid Assets and Municipal Assets,
each a separate investment portfolio of the IMG Mutual Funds, Inc., a Maryland
Corporation.
MINIMUM PURCHASE
The minimum initial investment is $250 with $25 minimum subsequent investments
(subject to certain exceptions).
DIVIDENDS
Dividends are declared daily and paid monthly and will be automatically
reinvested unless the shareholder elects otherwise.
INVESTMENT ADVISOR
Investors Management Group (the "Advisor").
ADMINISTRATOR
Investors Management Group (the "Administrator").
DISTRIBUTOR
BISYS Fund Services Inc., Columbus, Ohio (the "Distributor")
<PAGE>
EXPENSE SUMMARY
SHAREHOLDER TRANSACTION EXPENSES
LIQUID MUNICIPAL
ASSETS ASSETS
Maximum Sales Charge Imposed on Purchases None None
Maximum Sales Charge on Reinvested Dividends None None
Deferred Sales Load None None
Redemption Fee* None None
Exchange Fee None None
* A $15.00 fee may be charged to an individual shareholder account for
redemption by wire.
LIQUID MUNICIPAL
ASSETS ASSETS
ESTIMATED ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
Management Fees...................................... 0.35% 0.35%
12b-1 Distribution Fees............................. 0.50% 0.25%
Shareholder Servicing Fees........................... 0.25% 0.25%
Other Expenses....................................... 0.07% 0.11%
Total Fund Operating Expenses After Waivers 1........ 1.17% 0.96%
The purpose of the above table is to assist a potential purchaser of a Fund's
Shares in understanding the various costs and expenses that an investor in Sweep
Shares of a Fund will bear directly or indirectly. The table reflects the
current fees and an estimate of other expenses. The Management Fees, Rule 12b-1
Distribution Fees and Shareholder Servicing Fees are based on the maximum
allowable under the Investment Advisory Agreements, Distribution Plans and
Shareholder Servicing Plans. Rule 12b-1 Distribution Fees and Shareholder
Servicing Fees are fees related to distribution and marketing expenses incurred
under plans adopted pursuant to Rule 12b-1 under the Investment Company Act of
1940. From time to time, the Fund's Advisor and/or Distributor may voluntarily
waive the Management Fees, the 12b-1 Distribution Fees and/or Shareholder
Servicing Fees and/or absorb certain expenses for a Fund or class of Shares of a
Fund. Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charge permitted by the National Association of
Securities Dealers. Wire transfers may be used to transfer federal funds
directly to/from the Funds' custodian bank.
1 The Company has entered into a Management and Administration Agreement
pursuant to which the Funds are authorized to pay a periodic amount calculated
at an annual rate of 0.20% of the average daily net assets of such Funds.
Currently, however, it is intended that 70% of the fees due to be paid under the
Agreement by Liquid Assets or Municipal Assets will be waived. Absent the waiver
of these fees, "Total Operating Expenses" as a percentage of average daily net
assets would have been 1.37% for Liquid Assets and 1.16% for Municipal Assets.
EXAMPLE
You would pay the following expenses on a $1,000 investment in each Fund
assuming, (1) a (hypothetical) five percent annual return and (2) redemption at
the end of each time period.
1 Year 3 Years 5 Years 10 Years
Liquid Assets $12 $37 $64 $142
Municipal Assets $10 $31 $53 $118
THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RATES OF RETURN. ACTUAL EXPENSES OR RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN. The above Example is based on the expense information
included in the previous Expense Summary. The Expense Summary and Examples do
not reflect any charges that may be imposed by financial institutions on their
customers. Please refer to "MANAGEMENT AND FEES" for a more complete discussion
of the Shareholder transaction expenses and annual operating expenses for the
Fund.
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
LIQUID ASSETS
The investment objective of Liquid Assets is maximum current income consistent
with safety of principal and maintenance of liquidity. The Fund invests in the
following money market instruments maturing in 397 days or less from time of
investment, (with certain exceptions):
(1) Obligations issued or guaranteed by the U.S. government or any agency or
instrumentality thereof. Such securities will include those supported by
the full faith and credit of the United States Treasury or the right of
the agency or instrumentality to borrow from the Treasury, as well as
those supported only by the credit of the issuing agency or
instrumentality.
(2) Repurchase agreements involving securities in the immediately foregoing
categories. A repurchase agreement involves the sale of such securities
to the Fund with the concurrent agreement of the seller to repurchase
them at a specified time and price to yield an agreed upon rate of
interest. Repurchase agreements may involve certain risks which are
described in greater detail in the Statement of Additional Information.
(3) Redeemable interest-bearing trust certificates ("Student Loan
Certificates") issued by the Iowa Student Loan Trust and/or other Student
Loan Trusts established by the Fund, ("Student Loan Trusts"), created for
the sole purpose of purchasing from banks (which qualify as "eligible
lenders") federally insured student loans originated by banks. The
Student Loan Certificates will have original maturities of no more than
397 days but will be redeemable by the Fund at their face amount upon not
more than five days' written notice to the issuing Student Loan Trust.
Further details concerning the Student Loan Trusts and the Fund's
investments in Student Loan Certificates are found in the Statement of
Additional Information.
(4) Redeemable interest-bearing ownership certificates ("FmHA Certificates")
issued by one or more guaranteed loan trusts ("FmHA Trusts"), each
created for the purpose of acquiring participation interests in the
guaranteed portion of Farmer's Home Administration ("FmHA") guaranteed
loans. The FmHA Certificates will have original maturities of no more
than 397 days but will be redeemable by the Fund at their face amount
upon not more than five days' written notice to the issuing FmHA Trust.
Further details concerning the FmHA Trusts and the Fund's investment in
FmHA Certificates and FmHA guaranteed loans are found in the Statement of
Additional Information.
(5) Commercial paper which at the time of investment (a) is rated (or the
issuer of which has been rated) highest quality by two nationally
recognized statistical rating organizations ("NRSRO") if rated by two or
more NRSROs; (b) is rated (or the issuer of which has been rated) highest
quality if rated by only one NRSRO; or (c) is determined to be of
equivalent quality by the Fund's Board of Directors if unrated.
(6) U.S. dollar-denominated bank obligations (certificates of deposit and
bankers' acceptances) issued by domestic offices of U.S. banks which, at
the date of investment, have capital, surplus, and undivided profits (as
of the date of their most recently published financial statements) in
excess of $10,000,000; and obligations of other banks or savings and
loans if such obligations are insured by the Federal Deposit Insurance
Corporation, provided that not more than 10 percent of the total assets
of the Fund will be invested in such insured obligations.
(7) Short-term (maturing in one year or less) corporate obligations which at
the time of investment (a) are rated in the highest rating category by
two NRSROs, if rated by two or more NRSROs; (b) are rated in the highest
rating category if rated by only one NRSRO; or (c) are determined to be
of equivalent quality by the Fund's Board of Directors if unrated.
In accordance with procedures adopted pursuant to Rule 2a-7 under the 1940 Act,
the Fund limits its investments to those U.S. dollar-denominated instruments
determined by the Board of Directors to present minimal credit risk and which
are "Eligible Securities" as that term is defined by Rule 2a-7. Pursuant to Rule
2a-7, the Fund shall not have invested more than five percent of its total
assets in securities issued by a single issuer. For additional requirements of
Rule 2a-7, see "Opening an Account -- Share Price". Assets of the Fund will
consist of securities with maturities of 397 days or less at date of purchase
or, if maturing beyond 397 days, will be backed by Liquidity and Servicing
Agreements or Guaranteed Funding Agreements and will have variable interest
rates adjustable at least semiannually. In determining whether particular
variable rate investments backed by Liquidity and Servicing Agreements or
Guaranteed Funding Agreements may be made, the period remaining until maturity
will be deemed to be the longer of the demand notice period required before the
Fund is entitled to receive payment of the principal amount or the period
remaining until the next interest adjustment. The dollar-weighted average
maturity of Fund investments will be 90 days or less, determined in the same
manner. While the underlying security in a repurchase agreement may have a
maturity of more than 397 days, the repurchase agreement itself will terminate
in less than 397 days, and typically within a few days. The Fund intends to
invest at least 25 percent of its total assets in Student Loan Certificates,
and/or FmHA Certificates, except when such investments are either not available
in sufficient quantity or do not carry yields competitive with alternative
investments.
It is the policy of the Fund that any illiquid securities (including repurchase
agreements of more than seven days duration) may not constitute, at the time of
purchase or at any time, more than ten percent of the value of the total net
assets of the Fund.
As a fundamental policy, the Fund does not intend to concentrate its investments
in any one industry and pursuant to Section 18(f) of the 1940 Act, the Fund may
not issue senior securities. As a general policy, it is the Fund's intention to
hold investments until they mature. However, in an effort to increase portfolio
yields the Fund may periodically trade securities to take advantage of perceived
disparities between markets for various short-term money market instruments. It
is also possible that redemptions of Fund shares could necessitate the sale of
portfolio investments prior to maturity and at times when such sale would be
undesirable because of unfavorable market conditions.
While investments by the Fund will be confined to high quality financial
instruments, the complete elimination of risk is not possible. Under certain
circumstances described in more detail in the Statement of Additional
Information, the net asset value of Fund shares could decrease. It is also
possible Participating Banks or borrowers will default on the provisions of
their agreements with the Fund or that banks will default on repurchase
agreements with the Student Loan Trusts or the FmHA Trusts, which could cause
the net asset value per share to decrease.
In light of these various contingencies, there can be no assurances the Fund
will achieve its investment objectives.
The Fund has adopted a number of investment policies and restrictions, some of
which can be changed by the Board of Directors. Others may be changed only by
holders of a majority of the outstanding shares and include the following:
Without shareholder approval the Fund may not: (1) purchase any securities other
than those described above; (2) invest more than 80 percent of its total assets
in Student Loan Certificates and/or FmHA Certificates; (3) purchase or sell real
estate (other than short-term loans secured by real estate or interests therein
or loans to companies which invest in or engage in other activities related to
real estate), commodities or commodity contracts, interests in oil, gas or other
mineral exploration or development programs; (4) make short sales of securities
or maintain a short position or write, purchase, or sell puts (excluding
repayment and guarantee arrangements on loan participations purchased from
Participating Banks), calls, straddles, spreads or combinations thereof; (5)
make loans to other persons, provided the Fund may invest up to 80 percent of
its total assets in Student Loan Certificates or FmHA Certificates, as described
in (2) above, and may make the investments and enter into repurchase agreements
as described above; (6) invest in securities with legal or contractual
restrictions on resale (except for repurchase agreements, Student Loan
Certificates, and FmHA Certificates) or for which no ready market exists; (7)
enter into repurchase agreements if, as a result thereof, more than five percent
of the Fund's total assets (taken at market value at the time of such
investment) would be subject to repurchase agreements maturing in more than
seven days.
The foregoing investment restrictions are considered fundamental policies which
cannot be changed without the approval of a "majority" of the Fund's outstanding
voting securities, that is, by (a) 67 percent or more of the securities voting
at a special or annual meeting if more than 50 percent of the outstanding shares
of Common Stock are represented at such meeting in person or by proxy; or (b)
more than 50 percent of the outstanding Common Stock, whichever is less. The
Statement of Additional Information includes discussion of certain other
investment policies and restrictions, some of which are also considered
fundamental and may not be changed without shareholder approval.
MUNICIPAL ASSETS
The investment objective of Municipal Assets is maximum current income exempt
from federal income tax, consistent with safety of
principal and maintenance of liquidity. The Fund invests in the following types
of money market instruments maturing in 397 days or less from time of investment
(with certain exceptions), as defined herein:
(1) Tax-exempt debt obligations issued by state and municipal governmental
units and public authorities within the United States and participation
interests therein. With few exceptions such obligations will be nonrated
and of limited marketability. However, they will be backed by demand
repurchase commitments of the issuers thereof and irrevocable bank
letters of credit or guarantees (collectively referred to herein as
"Liquidity Agreements"). The Liquidity Agreements will permit the holder
of the securities to demand payment of the unpaid principal balance plus
accrued interest upon a specified number of days' notice either from the
issuer or by drawing on an irrevocable bank letter of credit or
guarantee. In addition, all obligations with maturities longer than 397
days from date of purchase will, by their terms, bear rates of interest
that are adjusted upward or downward no less frequently than semiannually
by means of a formula intended to reflect market changes in interest
rates. Certain types of industrial development bonds issued by public
bodies to finance the construction of industrial and commercial
facilities and equipment are also purchased. The Statement of Additional
Information contains further details concerning the Fund's policies and
procedures with respect to investments in such tax-exempt obligations and
participation interests.
(2) High quality tax-exempt debt obligations issued by state and municipal
governments and by public authorities, including issues sold as interim
financing in anticipation of tax collections, revenue receipts or bond
sales, and tax-exempt Project Notes secured by the full faith and credit
of the United States. Such obligations will be purchased only if backed
by the full faith and credit of the United States or rated Aaa, Aa,
MIG-1, MIG-2 or Prime-1 by Moody's Investors Service, Inc., or AAA, AA,
or A-1 by Standard & Poor's Corporation. Nonrated securities may also be
purchased if determined by the Fund's board of directors to be of
comparable quality to the rated securities in which the Fund may invest.
(3) Taxable obligations issued or guaranteed by agencies or instrumentalities
of the U.S. government may be acquired from time to time on a temporary
basis for defensive purposes.
(4) Repurchase agreements involving securities in the immediate foregoing
category. A repurchase agreement involves the sale of such securities to
the Fund with the concurrent agreement of the seller to repurchase them
at a specified time and price, to yield an agreed upon rate of interest.
Repurchase agreements may involve certain risks which are described in
greater detail in the Statement of Additional Information.
In accordance with procedures adopted pursuant to Rule 2a-7 under the 1940 Act,
the Fund limits its investments to those U.S. dollar-denominated instruments
determined by the Board of Directors to present minimal credit risk and which
are "Eligible Securities" as that term is defined by Rule 2a-7. Pursuant to Rule
2a-7, the Fund shall not invest more than five percent of its total assets in
securities issued by a single issuer. For additional requirements of Rule 2a-7,
see "Opening an Account -- Share Price". Assets of the Fund will consist of
securities with maturities of 397 days or less at date of purchase or, if
maturing beyond 397 days, securities which are backed by Liquidity Agreements
and which have variable interest rates adjustable at least semi-annually and
upon the adjustment of the interest rate the value of the securities will be
approximately equal to par. In determining whether particular variable rate
investments backed by Liquidity Agreements may be made, the period remaining
until maturity will be deemed to be the longer of the demand notice period
required before the Fund is entitled to receive payment of the principal amount
or the period remaining until the next interest adjustment. The dollar-weighted
average maturity of Fund investments will be 90 days or less, determined in the
same manner.
Under normal market conditions, the Fund as a matter of fundamental policy, will
invest at least 80 percent of its total net assets in tax-exempt securities, the
interest on which is exempt from federal income tax, except to the extent that
some or all of which may be subject to the alternative minimum tax. This
fundamental policy may not be changed without the approval of a majority of the
Fund's outstanding voting securities.
It is the policy of the Fund that any illiquid securities may not constitute, at
the time of purchase or at anytime, more than ten percent of the value of the
total net assets of the Fund. The Fund does not intend to concentrate its
investments in any one industry and pursuant to Section 18(f) of the 1940 Act
may not issue senior securities.
As a general policy, it is the Fund's intention to hold investments until they
mature or until immediately prior to the expiration of an applicable Liquidity
Agreement. However, in an effort to increase portfolio yields, the Fund may
periodically trade securities to take advantage of perceived disparities between
markets for various short-term money market instruments. It is also possible
that redemptions of Fund shares could necessitate the sale of portfolio
investments prior to maturity and at times when such sale would be undesirable
because of unfavorable market conditions.
New issues of tax-exempt debt obligations are usually offered on a when-issued
basis with the securities to be delivered and paid for approximately 45 days
following the initial purchase commitment. The Fund may occasionally enter into
such commitments, subject to certain limitations and procedures discussed in the
Statement of Additional Information.
While investments by the Fund will be confined to high-quality financial
instruments, the complete elimination of risk is not possible. Under certain
circumstances, described in more detail in the Statement of Additional
Information, the net asset value of Fund shares could decrease. It is also
possible an issuer or bank will default on the provisions of their Liquidity
Agreements, which could cause the net asset value per share to decrease. In
light of these various contingencies, there can be no assurances the Fund will
achieve its investment objectives.
The Fund has adopted a number of investment policies and restrictions, some of
which can be changed by the Board of Directors. Others may be changed only by
holders of a majority of the outstanding shares and include the following:
Without shareholder approval the Fund may not: (1) purchase any securities other
than those described under "Investment Policy"; (2) invest more than 80 percent
of its total assets in tax-exempt fixed and variable rate debt obligations (or
participation interests therein) issued by state and local governmental units
within the United States which are backed by Liquidity Agreements; (3) invest
more than five percent of its total assets (determined as of the date of
purchase) in tax-exempt obligations or participation interests therein subject
to Liquidity Agreements issued by any one bank; (4) purchase or sell real
estate, commodities or commodity contracts, interests in oil, gas or other
mineral exploration or development programs; (5) make short sales of securities
or maintain a short position or write, purchase, or sell puts (excluding
Liquidity Agreements covering certain tax-exempt obligations purchased by the
Fund), calls, straddles, spreads or combinations thereof; (6) make loans to
other persons, provided the Fund may make investments and enter into repurchase
agreements as described above; (7) invest in securities with legal or
contractual restrictions on resale (except for tax-exempt debt obligations
subject to Liquidity Agreements) or for which no ready market exists; (8) enter
into a Liquidity Agreement with any bank unless such bank is a United States
bank which has a record, together with predecessors, of at least five years of
continuous operations; (9) enter into repurchase agreements if, as a result
thereof, more than five percent of the Fund's total assets (taken at market
value at the time of such investment) would be subject to repurchase agreements
maturing in more than seven days; and (10) enter into Liquidity Agreements with
any bank if five percent or more of the securities of such bank are owned by the
Advisor or by directors and officers of the Fund or the Advisor, or if any
director or officer of the Fund or the Advisor owns more than 1/2 percent of the
voting securities of such bank.
The foregoing investment restrictions are considered fundamental policies which
cannot be changed without the approval of a "majority" of the Fund's outstanding
voting securities, that is, by (1) 67 percent or more of the securities voting
at a special or annual meeting if more than 50 percent of the outstanding shares
of Common Stock are represented at such meeting in person or by proxy; or (2)
more than 50 percent of the outstanding Common Stock, whichever is less. The
Statement of Additional Information includes discussion of certain other
investment policies and restrictions, some of which are also considered
fundamental and may not be changed without shareholder approval.
PERFORMANCE
Performance of each Fund may be quoted in advertising in terms of current yield
and effective yield. CURRENT YIELD refers to the income generated by an
investment in either Fund over a seven-day period. This income is then
"annualized". That is, the amount of income generated by the investment during
that week is assumed to be generated each week over a 52-week period and is
shown as a percentage of the investment. The Fund may also present a 30-day
yield which is calculated similarly but instead refers to a 30-day period rather
than a seven-day period. EFFECTIVE YIELD is calculated similarly but, when
annualized, that income earned from the investment is assumed to be reinvested
weekly. Effective yield will be slightly higher than current yield because of
the compounding effect of this assumed reinvestment.
Performance of the Funds may also be compared to other mutual funds with similar
investment objectives, relevant indices or rankings prepared by independent
services or other financial publications, or yields on deposits at financial
institutions. Unlike the Funds, deposit accounts at financial institutions are
generally insured by the Federal Deposit Insurance Corporation and do not
fluctuate to the extent of the Funds.
Additionally, Municipal Assets may quote a taxable-equivalent yield based on a
stated income tax rate. Please see each Fund's Statement of Additional
Information for further discussion of the manner in which yields are calculated
and the comparative performance data which may be used.
Of course, the Funds' yields are not fixed nor is principal guaranteed. Yields
are functions of the type and quality of instruments held in the portfolio,
operating expenses, and market conditions. Consequently, current yields will
fluctuate and are not necessarily representative of the future results.
DISTRIBUTIONS AND TAXES
Dividends from the net income of each Fund are declared daily on each business
day and paid monthly to holders of record immediately before 3:00 p.m. Central
Time. Dividends are automatically reinvested in Sweep Shares unless cash payment
has been selected on the Account Application. If a shareholder has elected to
receive dividends and/or distributions in cash and the checks are returned and
marked as "undeliverable" or remain uncashed for six months, your cash election
will be changed automatically and future dividends will be reinvested in Sweep
Shares of the Fund. In addition, any undeliverable checks or checks that remain
uncashed for six months will be canceled and will be reinvested in Sweep Shares
of the Fund at the per share net asset value determined as of the date of
cancellation. If a shareholder redeems the entire amount in his account during
the month, dividends credited to the account from the beginning of the month
through the date of redemption are paid with the redemption proceeds.
Dividends on each class of shares are determined in the same manner and are paid
in the same amounts irrespective of class, except that each class bears separate
distribution and/or shareholder servicing fees (see "Organization and Shares of
the Funds").
Dividends declared in October, November, or December of any year, payable to
shareholders of record on a specified date in such months, will be deemed to
have been received by the shareholders and paid by the Funds on December 31 of
such year, in the event that such dividends are actually paid during January of
the following year.
Each Fund intends to qualify as a regulated investment company by distributing
substantially all of its taxable net income, including any realized capital
gains, and thus will not incur any Federal income taxes. Shareholders will
receive taxable dividend income, tax-exempt dividend income and/or capital
gains, as the case may be, from distributions whether paid in cash or received
in the form of additional shares.
Dividends derived from interest on federally tax-exempt debt obligations owned
by Municipal Assets are intended to constitute "exempt-interest dividends" which
are generally not Federally taxable to shareholders, although some could be
includable for purposes of the alternative minimum tax. Dividends derived from
other interest and the realization of capital gains are taxable to shareholders
whether or not reinvested.
Municipal Assets expenses will be allocated between tax-exempt and taxable
income in the same proportion as the Fund's tax-exempt income bears to the total
of such exempt income and its gross income (excluding from gross income the
excess of capital gains over capital losses).
Promptly after the end of each calendar year, each shareholder will receive a
statement of the Federal income tax status of all dividends and distributions
paid during the year. This discussion is only a summary and relates solely to
Federal tax matters. Further discussion of the Federal Income Tax consequences
of an investment in the Fund is provided in the Statement of Additional
Information. Dividends may also be subject to local taxation. Shareholders are
encouraged to consult with their personal tax advisors.
ORGANIZATION AND SHARES OF THE FUNDS
IMG Mutual Funds, Inc. is a Maryland corporation organized on November 16, 1994.
The Funds were created on October 30, 1997, to acquire the assets and continue
the business of the corresponding substantially identical investment portfolios
of the Liquid Assets Funds, Inc., and the Municipal Assets Funds, Inc., two
separately registered open-end, diversified management investment companies
organized as Iowa corporations. References herein to the "immediate predecessor"
of the Funds refer to the respective companies which correspond to such Fund. .
Each Share of a Fund represents an equal proportionate interest in that Fund
with other Shares of the same Fund, and is entitled to such dividends and
distributions out of the income earned on the assets belonging to that Fund as
are declared at the discretion of the Directors.
The Articles of Incorporation of the Company permit the Company, by resolution
of its Board of Directors, to create new series of common stock relating to new
investment portfolios or to subdivide existing series of Shares into subseries
or classes. Classes could be utilized to create differing expense and fee
structures for investors in the same Fund. Differences could exist, for example
in the sales load, Rule 12b-1 fees or service plan fees applicable to different
classes of Shares offered by a particular Fund. Such an arrangement could enable
the Company to tailor its marketing efforts to a broader segment of the
investing public with a goal of attracting additional investments in the Funds.
Sweep Shares of the Funds are described in this Prospectus. Trust Shares,
Institutional Shares and S2 Shares are offered in separate Prospectuses which
may be obtained by calling the Fund at 1-800-798-1819 or writing to the address
on the cover of this Prospectus. Please read the Prospectus carefully before
investing or sending money. All shares are offered to individual and
institutional investors acting on their own behalf or on behalf of their
customers and bear their pro rata portion of all operating expenses paid by the
Funds, except that Sweep Shares, Trust Shares and S2 Shares bear separate
distribution and/or shareholder servicing fees. Institutional Shares bear no
distribution or shareholder servicing fees.
Each class of shares offers different privileges. Sweep Shares and S2 Shares are
normally offered through financial institutions providing automatic "sweep"
investment programs to their customers, and offer a check writing privilege.
Trust Shares are normally offered through trust organizations or others
providing shareholder services such as establishing and maintaining accounts and
records for their customers who invest in Trust Shares, assisting customers in
processing purchase, exchange and redemption requests, and responding to
customers' inquiries concerning their investments. Institutional Shares are
available directly from the Distributor only and offer only the Exchange and
Telephone Transfer services. Each class of shares is exchangeable only for
shares of the same class. Financial institutions selling or servicing Sweep
Shares, Trust Shares and S2 Shares may receive different compensation with
respect to one class over another.
Shareholders are entitled to one vote for each full share held and proportionate
fractional votes for fractional shares held. Shares of each Fund will vote
together and not by class unless otherwise required by law or permitted by each
Fund's Board of Directors. All shareholders of each Fund will vote together as a
single class on matters relating to the Fund's investment advisory agreement,
investment objective and fundamental policies. Only holders of Sweep Shares and
S2 Shares will vote on matters relating to the Distribution Plan for Sweep
Shares and S2 Shares. Only holders of Sweep Shares, S2 Shares and Trust Shares
will vote on matters pertaining to the Shareholder Services Plan for Trust
Shares.
Shares of the Funds have non-cumulative voting rights and, accordingly, the
holders of more than 50 percent of each Fund's outstanding shares (irrespective
of class) may elect all of the Directors. Shares have no preemptive rights and
only such conversion and exchange rights as each Fund's Board may grant in its
discretion. When issued for payments as described in this Prospectus, shares
will be fully paid and nonassessable. All shares are held in uncertificated form
and will be evidenced by the appropriate notation on the books of the transfer
agent.
SHAREHOLDER REPORTS AND MEETINGS
Each shareholder will receive monthly Fund information, an unaudited semiannual
report, and an annual report containing audited financial statements. If you
have questions about your account, call 1-800-798-1819. You may also write the
Fund at the address on the cover of this Prospectus. You may order statements
for the current and preceding year at no charge. However, there will be a $10.00
fee per statement for statements ordered for other years.
The Fund may operate without an annual meeting of shareholders under specified
circumstances if an annual meeting is not required by the 1940 Act. The Funds
have adopted the appropriate provisions in their Bylaws and may, in their
discretion, not hold annual meetings of shareholders for the election of
Directors unless otherwise required by the 1940 Act. The Funds have also adopted
provisions in their Bylaws for the removal of Directors by the shareholders.
Shareholders may receive assistance in communicating with other shareholders as
provided in Section 16(c) of the 1940 Act.
There normally will be no meetings of shareholders for the purpose of electing
Directors unless and until such time as less than a majority of the Directors
holding office have been elected by shareholders, at which time the Directors
then in office will call a shareholders' meeting for the election of Directors.
Shareholders of the Funds may remove a Director by the affirmative vote of a
majority of the Funds' outstanding voting shares. In addition, the Directors are
required to call a meeting of shareholders for the purpose of voting upon the
question of removal of any such Director or for any other purpose when requested
in writing to do so by the shareholders or record of not less than 10 percent of
the Funds' outstanding voting securities.
To date, ten Funds have been authorized. All consideration received by the Funds
for shares of one of the Funds and all assets in which such consideration is
invested, belong to that Fund (subject only to the rights of creditors of the
Fund) and will be subject to the liabilities related thereto. The income and
expenses attributable to one Fund are treated separately from those of the other
Funds.
Rule 18f-2 under the 1940 Act provides that any matter required to be submitted
under the provisions of the 1940 Act or applicable state law or otherwise, to
the holders of the outstanding voting securities of an investment company, such
as the Funds, will not be deemed to have been effectively acted upon unless
approved by the holders of a majority of the outstanding shares of each Fund
affected by such matter. Rule 18f-2 further provides that a Fund shall be deemed
to be affected by a matter unless it is clear that the interests of each Fund in
the matter are identical or that the matter does not affect the interest of such
Fund. However, the Rule exempts the selection of independent auditors and the
election of Directors from the separate voting requirements of the Rule.
MANAGEMENT AND FEES
Overall responsibility for management of the Company rests with the Board of
Directors, who are elected by the Shareholders of the Company's Funds. The
Company will be managed by the Directors in accordance with laws of Maryland
governing corporations. The Directors, in turn, elect the officers of the
Company to supervise the day-to-day operations. The Directors receive fees and
are reimbursed for their expenses in connection with each meeting of the Board
of Directors they attend. The officers of the Company receive no compensation
directly from the Company for performing the duties of their offices.
Investors Management Group, ("IMG") manages the investments and business affairs
of the Funds. IMG is a federally registered Investment Advisor organized in 1982
and located at 2203 Grand Avenue, Des Moines, Iowa 50312-5338. IMG has been
providing continuous investment management to pension and profit-sharing plans,
insurance companies, public agencies, banks, endowments and charitable
institutions, other mutual funds, individuals and others for over 15 years. As
of November 30, 1997, IMG had approximately $1.6 billion in equity, fixed income
and money market assets under management.
The Funds are managed by Jeffrey D. Lorenzen, CFA, Managing Director, Kathryn D.
Beyer, CFA, Managing Director, and Elizabeth S. Pierson, CFA, Senior Fixed
Income Manager. Mr. Lorenzen is a fixed income strategist and is a member of
IMG's Investment Policy Committee. Prior to joining IMG in 1992, his experience
includes serving as a securities analyst and corporate fixed income analyst for
The Statesman Group from 1989 to 1992. Mr. Lorenzen received his Masters of
Business Administration degree from Drake University, Des Moines, Iowa, and his
Bachelor of Business Administration degree from the University of Iowa, Iowa
City, Iowa. Ms. Beyer is a fixed income strategist and is a member of IMG's
Investment Policy Committee. Prior to joining IMG in 1993, her experience
includes serving as a securities analyst and director of mortgage-backed
securities for Central Life Assurance Company from 1988 to 1993. Ms. Beyer
received her Master of Business Administration degree from Drake University, Des
Moines, Iowa, and her Bachelor of Science degree in agricultural engineering
from Iowa State University, Ames, Iowa. Ms. Pierson is a fixed income strategist
and is a member of IMG's Investment Policy Committee. She began her investment
career in 1984 with AMCORE Capital Management, Inc., which was merged with IMG
in December 1997. Ms. Pierson received her Bachelor of Science degree from the
University of Illinois, Champaign-Urbana.
Under a management contract between each Fund and IMG, a fee is paid to IMG for
investment advisory services. Each Fund is responsible for paying operating
expenses not assumed by IMG.
The management fee for each Fund is calculated daily and paid monthly. The
maximum management fee for each Fund is 0.35 percent of each Fund's average
daily net assets.
From time to time, IMG may voluntarily waive all or a portion of the management
fee and/or absorb certain expenses of a Fund or class of shares without further
notification of the commencement or termination of such waiver or absorption.
Any such waiver will have the effect of lowering the overall expense ratio for a
Fund or class of shares and increasing the overall yield to investors in that
Fund or class of shares at the time any such amounts are waived and/or absorbed.
IMG may not seek reimbursement of such waived fees at a later date. The waiver
of such fee will cause the yield of a Fund to be higher than it would otherwise
be in the absence of such a waiver.
IMG also provides management and administration, fund accounting, transfer
agency, and shareholder recordkeeping services to the Funds. IMG is compensated
for each of these services under separate written contracts with the Funds. The
fees received and the services provided under these contracts are in addition to
those received and paid to IMG under the Advisory Agreement.
At its expense, IMG provides office space and all necessary office facilities,
equipment, and personnel for servicing the investments of the Funds. Except for
the expenses expressly assumed by IMG pursuant to its investment advisory
agreement, each Fund is responsible for all its other expenses, including,
without limitation, governmental fees, interest charges, taxes if applicable,
membership dues in the Investment Company Institute allocable to the Fund,
broker commissions, and other expenses connected with the execution, recording
and settlement of Fund security transactions, expenses of repurchasing and
redeeming shares and expenses of servicing shareholder accounts; expenses for
preparing, printing and distributing periodic reports, notices and proxy
statements to shareholders and to governmental officers and commissions;
insurance premiums, fees and expenses of the Fund's custodian, including
safekeeping of funds and securities and maintaining required books and
accounting; expenses of calculating the net asset value of shares of the Funds;
fees and expenses of independent auditors, of legal counsel, and of any transfer
agent, registrar or dividend disbursing agent of the Funds; compensation and
expenses of Directors who are not "interested persons" of the Advisor; and
expenses of shareholder meetings. Expenses relating to the issuance,
registration and qualification of shares of the Funds and the preparation,
printing and mailing of prospectuses to existing shareholders are borne by the
Funds except that the Funds' Distribution Agreement requires that the
Distributor pay for prospectuses that are to be used for sales purposes with
persons other than current shareholders.
From time to time, IMG may voluntarily waive all or a portion of the management
fee and/or absorb certain expenses of a Fund without further notification of the
commencement or termination of such waiver or absorption. Any such waiver will
have the effect of lowering the overall expense ratio for that Fund and
increasing the Fund's overall yield to investors at the time any such amounts
are waived and/or absorbed.
Except as voluntarily absorbed by IMG, all expenses incurred in the operation of
the Funds will be borne by the Funds. Expenses attributable to a particular Fund
are charged against the assets of that Fund; other expenses of the Funds are
allocated among the Funds on a reasonable basis determined by the Board of
Directors, including, but not limited to, proportionately in relation to the net
assets of each Fund.
Each Fund pays certain distribution fees related to marketing, selling and
distribution of Shares including, but not limited to, preparation and
distribution of promotional materials, compensation to sales personnel employed
by the Distributor and for payment to institutions, including financial
institutions ("Participating Organizations") who render assistance in
distributing or promoting the sale of each Fund's Sweep Shares under plans
("12b-1 Plans") adopted pursuant to Rule 12b-1 under the Act. The maximum fees
payable under the 12b-1 Plans are an annual rate of 0.50 percent for Liquid
Assets and 0.25 percent for Municipal Assets, computed monthly on the basis of
the average net asset value of the Sweep Shares issued by each Fund. The
Directors of each Fund review quarterly a written report of the costs incurred
associated with the 12b-1 Plans. The Directors believe that the 12b-1 Plans are
in compliance with Rule 12b-1 and are in the best interests of the Funds.
Each Fund pays certain shareholder servicing fees to financial institutions
("Participating Organizations"), who render assistance in servicing their
customers who are direct or beneficial owners of each Fund's Shares under
Shareholder Services Plans (the "Services Plans") adopted by the Funds' Board of
Directors. The maximum fees payable under the Services Plans are an annual rate
of 0.25%, computed monthly on the basis of the average daily net asset value of
each Fund. The Directors of each Fund review quarterly a written report of the
costs incurred association with the Services Plans. The Directors believe that
the Services Plans are in the best interest of the Funds.
The Glass-Steagall Act and other applicable laws prohibit banks from engaging in
the business of underwriting, selling, or distributing securities. Insofar as
Participating Organizations (including banks) are compensated under the Plans,
their only function will be to perform administrative and shareholder services
for their clients who wish to invest in the Funds. If a Participating
Organization at a future date is prohibited from acting in this capacity, the
shareholder may lose the services provided by the Participating Organization;
however, it is not expected that the shareholders would incur any adverse
financial consequences. It is intended that none of the services provided by
such Participating Organizations other than through registered brokers will
involve the solicitation or sale of shares of the Funds.
AMCORE Investment Group, N.A., Rockford, Illinois, acts as custodian for the
Funds' cash and investments.
OPENING AN ACCOUNT
The Funds require a completed and signed application (which is attached) at the
time you open each new account. Additional paperwork may be required from
corporations, associations and certain fiduciaries. IF YOU HAVE QUESTIONS CALL
THE FUNDS AT 1-800-798-1819 FROM 8:00 A.M. TO 4:30 P.M. CENTRAL TIME.
SHARE PRICE
The shares of each Fund are sold without a sales charge. The price of one share
is its "net asset value" or NAV (generally $1.00). NAV is computed by adding the
value of each Fund's investments, plus cash and other assets, deducting
liabilities and then dividing the result by the number of shares outstanding.
The NAV of each Funds' shares is determined twice each business day, at 11:00
a.m. Central Time and at the close of the New York Stock Exchange (normally 3:00
p.m. Central Time). The Funds are open for business each day the Federal Reserve
is open.
Your purchase will be processed at the next NAV calculated after your investment
has been converted to federal funds. If you invest by check, the Funds must
generally allow one or more days for conversion into federal funds before
accepting your purchase.
Rule 2a-7 under the Investment Company Act of 1940 permits the Funds to compute
net asset value per share using the amortized cost method of valuing portfolio
securities. As a condition for using the amortized cost method of valuation, the
Board of Directors established procedures to stabilize each Fund's net asset
value at $1.00 per Share. These procedures are described in more detail in each
Fund's Statement of Additional Information.
Under the amortized cost method of valuation, a security is initially valued at
cost on the date of purchase and, thereafter, any discount or premium is
amortized on a straight-line basis to maturity, regardless of the effect of
fluctuating interest rates on the market value of the security. U.S. government
obligations, Student Loan Certificates and FmHA Certificates, which are subject
to mandatory repurchase at their original purchase price, investments in taxable
and tax-exempt debt obligations rated by a recognized bond rating agency and
regularly traded in the secondary market, and nonrated fixed and variable rate
tax-exempt obligations and participation interests therein, not regularly traded
in the secondary market but subject to Liquidity Agreements will be valued at
amortized cost. Other assets are valued at a fair value determined in good faith
by the board of directors of each Fund.
PURCHASING SHARES
Shares of each Fund may be purchased directly from BISYS Fund Services, Inc., as
the distributor. Shares may also be purchased by customers of qualified banks,
savings and loan associations, broker/dealers, investment advisory firms, and
other organizations ("Participating Organizations") that have entered into
servicing agreements with the Distributor. The Participating Organization is
responsible for transmitting purchase orders directly to the Fund's Distributor.
A Participating Organization may elect to hold record ownership of shares for
its customers and to show beneficial ownership of shares on the account
statements it provides to them. In the alternative, a Participating Organization
may elect to establish its customers' accounts of record with IMG as transfer
agent for the Funds. Generally, shares purchased through Participating
Organizations will be held by the Participating Organization as shareholder of
record.
Shares of each Fund are offered without any purchase or redemption charge
imposed by the Fund. The minimum initial investment that may be made in each
Fund is $250. Subsequent investments in each Fund must be made in amounts of not
less than $25, except where purchases are made through financial institutions
providing an automatic "sweep" investment program, in which case there is no
minimum. Participating organizations may aggregate their customers' purchases to
satisfy the required minimums.
Purchases may be effected on business days when the Advisor, Distributor and
Custodian are open for business. The Funds reserve the right to reject any
purchase order, including purchases made with foreign and third party drafts or
checks.
A purchase order for Sweep Shares received and accepted by the Funds by 10:00
a.m. Central Time on a business day is effected at the net asset value per share
calculated as of 11:00 a.m. Central Time, and investors will receive the
dividend declared that day, IF THE CUSTODIAN HAS RECEIVED THE PURCHASE PRICE IN
FEDERAL FUNDS OR OTHER IMMEDIATELY AVAILABLE FUNDS BY 3:00 P.M. CENTRAL TIME
THAT DAY. A purchase order for Sweep Shares received after 10:00 a.m. Central
Time and prior to 3:00 p.m. Central Time on a business day for which such funds
have been received by 3:00 p.m. Central Time will be effected as of 3:00 p.m.
Central Time, and will begin to accrue dividends on the following business day.
If federal funds are not available by 3:00 p.m. Central Time, the order will be
canceled. Payment for orders which are not accepted or are canceled will be
returned after prompt inquiry to the transmitting organization.
While the Funds themselves do not presently levy sales, redemption or account
service charges, Participating Organizations may elect to do so and the Funds
may elect to do so in the future. Investors should inquire regarding the nature
and costs of services provided by Participating Organizations and determine if
such services are desired, because the costs thereof will reduce the Funds'
yields to the investor below that obtainable by investing in the Funds directly.
Customers wishing to purchase shares through their Participating Organization
should contact such entity directly for appropriate instructions. (For a list of
the Participating Organizations in your area, CALL THE FUNDS AT 1-800-798-1819
OR 515-244-5426.) Direct investors may purchase shares in accordance with the
procedures described below, "Purchase Procedures".
Certificates representing Fund shares purchased will not be issued. However, all
purchases are confirmed in writing to the investor and credited to their account
in the shareholder records maintained by the Transfer Agent. Investors will have
the same rights to their shares as if certificates had been issued.
PURCHASE PROCEDURES
METHOD INITIAL INVESTMENT ADDITIONAL INVESTMENT
BY MAIL $250 (minimum) $25 (minimum)
Please make your check Please make your check
payable to the Fund selected payable to the Fund
and mail to the address selected, with your
indicated on the application. account number on the
check and mail to the
address printed on your
account statement.
BY WIRE Please call for an account See instructions below.
number before initial invest-
ment at 1-800-798-1819 or
515-244-5426.
Federal Funds should be wired to: Federal Reserve Bank of Chicago for AMCORE
Investment Group, N.A., Rockford, Illinois, together with the name of the
Fund, your account number and names.
Please note that when accounts are opened by wire you must send a completed
application at your earliest convenience. Your application must be received
by the Fund before any instructions for redemption will be accepted.
BY ELECTRONIC Not available for initial Shareholders who have
FUNDS TRANSFER purchase. an account with an
(ACH) institution which is a
member of the Automated
Clearing House, may
elect to purchase Fund
shares via electronic
funds transfer. Select
this service on your
application or call
the Fund.
SHAREHOLDER SERVICES
Some shareholder services may not be available if shares are purchased through
Participating Organizations. Call the Funds at 1-800-798-1819 for more
information.
EXCHANGE PRIVILEGE. You may exchange Sweep Shares of either Fund for Sweep
Shares in the other Fund described in this Prospectus. An exchange involves a
redemption of the shares of the Fund being liquidated and a purchase of the
shares of the Fund in which the redemption proceeds are to be invested. The
exchange privilege is offered as a convenience to shareholders and is not
intended to be a means of speculating on short-term movements in securities
prices by transactions involving frequent purchases and sales of shares. Each
Fund reserves the right at any time and without prior notice, to suspend, limit,
modify or terminate exchange privileges or their use by individual shareholders
in order to prevent transactions considered to be disadvantageous to existing
shareholders.
TELEPHONE TRANSFERS. This service allows you to authorize transfers of money to
purchase or sell shares. Using Telephone Transfer you can move money between
your bank account and your account in the Funds with one phone call. Moneys may
be transferred either by wire or electronic funds transfer with an institution
which is a member of the Automated Clearing House ("ACH").
Wire transfers may be used to transfer federal funds directly to/from the Funds'
custodian bank. A $15.00 fee may be charged to your account for redemptions by
wire.
Allow two (2) days after the call for electronic funds transfer via ACH to move
moneys between your bank account and your account with either Fund.
For moneys recently invested, allow normal clearing time before redemption
proceeds are sent to your bank. In order to change the financial institution
account designated to receive redemption proceeds, it will be necessary to send
a written request to the Fund with a signature guarantee from a national or
state bank, a trust company or a federal savings and loan association, or a
member firm of the New York, American, Boston, Midwest or Pacific Stock
Exchange.
You can also arrange SYSTEMATIC PERIODIC INVESTMENTS (minimum $50) into your
Fund account. Simply select the regular investment schedule you would like when
completing your account application. Your bank account will automatically be
debited to purchase shares of the Fund you select. You will receive confirmation
of each transaction.
Your bank must be a member of ACH and you must have a checking or NOW/Money
Market Deposit account to use electronic funds transfer or systematic investing.
Please allow 20 days after receipt of your application to activate the Telephone
Transfer capability.
STATEMENTS AND REPORTS. You will receive a statement of your account listing
every transaction that affects your share balance no less than once per month.
At least twice a year you will receive the financial statements of the Fund in
which you have invested with a summary of that Fund's portfolio composition and
performance. Each Fund's Annual Report is reported on by the Funds' independent
auditors, KPMG Peat Marwick LLP.
REDEEMING SHARES
Shareholders may request redemption of their shares at any time. Shares will be
redeemed at their net asset value as next determined after a redemption request
in good order is received by the Fund's Distributor. Redemption orders received
and accepted by the Distributor before 10:00 a.m. Central Time on a business day
will be redeemed as of 11:00 a.m. Central Time and will earn dividends through
the previous day; proceeds normally will be sent electronically the same day (or
mailed by check the next business day) to the organization that placed the
redemption order in good form. Redemption orders received after 10:00 a.m.
Central Time or on a non-business day will be redeemed as of 3:00 p.m. Central
Time or at the next determined net asset value and earn dividends through the
date the redemption request was received; proceeds will be sent electronically
on the next business day (or mailed by check on the second business day
thereafter). While the Funds use their best efforts to maintain their net asset
value per share at $1.00, the proceeds paid upon redemption may be more or less
than the amount originally invested.
If you purchase shares through a Participating Organization, you may redeem
shares in accordance with that Organization's rules regarding redemption
requests. Direct shareholders may redeem shares in accordance with the
procedures described under "How to Redeem Shares".
The Funds intend to pay redemption proceeds within two business days and in no
event will payment be made later than seven days after receipt of a redemption
request in good order. Payments to investors who request to redeem shares within
a few days after a purchase paid for by check may be delayed until the Funds can
verify the check has been collected.
The Funds reserve the right to suspend redemptions or to postpone the payment
therefore when: (a) trading on the New York Stock Exchange is restricted as
determined by the Securities and Exchange Commission, or the Exchange is closed
for other than customary weekend and holiday closings; (b) the Securities and
Exchange Commission has permitted such suspension; or (c) an emergency as
determined by the Securities and Exchange Commission exists, making sale of
portfolio securities or valuations of the Funds' net assets not reasonably
practicable.
A shareholder may not reduce the value of their account to less than $100 by
writing checks. The check writing privilege is not available when purchases are
made through a financial institution providing an automatic "sweep" investment
program. The Funds and the Custodian reserve the right to terminate the check
writing service or to institute charges for the service.
If an investor's account drops below $250 due to redemptions, the Funds reserve
the right to redeem any remaining shares if after 30 days' notice additional
investments to bring the account value to $250 are not made.
HOW TO REDEEM SHARES
BY MAIL-- Send a "letter of instruction": a
TO: 2203 GRAND AVENUE letter specifying the name of the
DES MOINES, IA 50312-5338 Fund, the number of shares to be
sold, your name, your account number,
and the additional requirements
listed below that apply to your
particular account.
TYPE OF REGISTRATION REQUIREMENTS
Individual, Joint Tenants, Sole Letter of instruction signed by all
Proprietorship, Custodial (Uniform persons required to sign for the
Gifts or Transfers To Minors Act), account, exactly as it is registered,
General Partners accompanied by signature guarantee(s).
Corporation, Association Letter of instruction and a corporate
resolution signed by person(s)
authorized to act on the account,
accompanied by signature guarantee(s).
Trust A letter of instruction signed by
the Trustee(s) (as Trustee), with a
signature guarantee. (If the Trustee's
name is not registered on your
account, also provide a copy of the
trust document, certified within the
last 60 days.)
If you do not fall into any of these registration categories (e.g.,
Executors, Administrators, Conservators or Guardians) please call for further
instructions.
A signature guarantee is designed to protect you and the Fund against
fraudulent transactions by unauthorized persons. A signature guarantee is
required for all persons registered on an account. A signature guarantee may
be obtained from an eligible guarantor institution, as defined by the
Securities and Exchange Commission. These institutions include banks, savings
and loan associations, credit unions, brokerage firms, and others. The words,
"SIGNATURE GUARANTEED" must be stamped or typed near each person's signature
and appear with the printed name, title, and signature of an officer and the
name of the guarantor institution. PLEASE NOTE THAT A NOTARY PUBLIC STAMP OR
SEAL IS NOT A SIGNATURE GUARANTEE.
FOR ALL OPTIONS BELOW, PLEASE CALL 1-800-798-1819
BY CHECK-- You must have applied for the check
(minimum $250 writing feature on your account
maximum $100,000) spplication. You may redeem pro-
vided that the signatures you
designated are on the check. (There
is no charge for this service and
you may write an unlimited number
of checks.)
BY EXCHANGE-- You must meet the minimum investment
requirement of the other fund. You
can only exchange between accounts
with identical names, addresses, and
taxpayer identification numbers.
BY ELECTRONIC FUNDS You must have applied for the
TRANSFER (ACH) OR WIRE-- Telephone Transfer feature on your
application. Allow two days via ACH.
Call before 10:00 a.m. for same day
wire. $15.00 fee for bank wires.
<PAGE>
TABLE OF CONTENTS
Expense Summary of Sweep Shares...............................................2
Highlights....................................................................3
Financial Highlights..........................................................4
Investment Objectives, Policies and Restrictions..............................7
Liquid Assets................................................................ 7
Municipal Assets..............................................................9
Performance..................................................................12
Distributions and Taxes......................................................13
Organization and Shares of the Funds.........................................14
Management and Fees..........................................................15
Opening an Account...........................................................16
Share Price..................................................................17
Purchasing Shares............................................................17
Shareholder Services.........................................................19
Redeeming Shares.............................................................21
NO SALESMAN, OR OTHER PERSON, HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN
CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE,
SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE FUNDS OR BY BISYS FUND SERVICES, INC. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING BY BISYS FUND SERVICES, INC., IN ANY STATE IN WHICH SUCH
OFFERING MAY NOT LAWFULLY BE MADE.
<PAGE>
LIQUID ASSETS FUND S2 SHARES
MUNICIPAL ASSETS FUND SWEEP SHARES
2203 Grand Avenue, Des Moines, Iowa 50312-5338
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FOR CURRENT YIELD, PURCHASE AND REDEMPTION INFORMATION CALL.........800-798-1819
....................................................................515-244-5426
- --------------------------------------------------------------------------------
PROSPECTUS ___, 1997
- --------------------------------------------------------------------------------
Liquid Assets Fund and Municipal Assets Fund, each of these a "Fund",
(collectively, the "Funds") are money market mutual funds designed to enable
investors to meet short-term goals. Investors choose whichever Fund best suits
their needs and may, without charge, exchange Funds as their investment outlook
or goals change.
Liquid Assets Fund offers four classes of shares and Municipal Assets Fund
offers three classes of shares. This Prospectus describes the "S2 Shares" of
Liquid Assets Fund and "Sweep Shares" of Municipal Assets Fund, (collectively,
the "Shares"). Sweep Shares and S2 are normally offered through financial
institutions providing automatic "sweep" investment programs to their own
customers. The Funds also offer "Trust Shares" and "Institutional Shares" which
accrue daily dividends in the same manner as Sweep Shares and S2 Shares except
that each class bears separate distribution and/or shareholder servicing fees
(see "Organization and Shares of the Funds").
LIQUID ASSETS FUND, ("Liquid Assets") seeks maximum current income consistent
with safety of principal and maintenance of liquidity. MUNICIPAL ASSETS FUND,
("Municipal Assets") seeks maximum current income exempt from federal income
tax, consistent with safety of principal and maintenance of liquidity. Shares
are offered and redeemed at $1.00 per share under rules which allow the Funds to
use the amortized cost method of valuing the Funds' assets.
An investment in Shares of the Funds is not insured or guaranteed by the United
States Government, by any state, or by the Federal Deposit Insurance
Corporation. Shares of the Funds are not deposits or other obligations of a
bank, or guaranteed by a bank. Investments in the Funds involve investment
risks, including possible loss of principal amount invested.
The Funds seek to maintain a constant net asset value of $1.00, but under
extraordinary circumstances the value of shares may vary from $1.00 and
consequently, there can be no assurance that the Funds will be able to maintain
a stable net asset value of $1.00 per share.
This Prospectus sets forth basic information about each Fund that investors
should know before investing and should be retained for future reference.
Statements of Additional Information (as of the date of this Prospectus) which
contain more detailed information about each Fund have been filed with the
Securities and Exchange Commission and are hereby incorporated by reference. The
Statements of Additional Information are available free upon request from the
Funds at the address and telephone number indicated 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 ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
PROSPECTUS SUMMARY
TYPE OF COMPANY
Each Fund is a diversified series of an open-end, management investment company.
INVESTMENT OBJECTIVE
For Liquid Assets, maximum current income consistent with safety of principal
and maintenance of liquidity.
For Municipal Assets, maximum current income exempt from federal income tax,
consistent with safety of principal and maintenance of liquidity.
INVESTMENT POLICY
Under normal market conditions, Liquid Assets will invest in a diversified
portfolio of high quality, U.S. dollar denominated short-term debt obligations
including, primarily, redeemable Certificates backed by federally insured
student loans and Farmers Home Administration guaranteed loans, commercial
paper, bank obligations, short-term corporate obligations and obligations issued
or guaranteed by the U.S. government, its agencies or instrumentalities and
repurchase agreements collateralized by such obligations having a
dollar-weighted average maturity of 90 days or less. The Fund seeks to maintain
a net asset value of $1.00 per share.
Under normal market conditions, Municipal Assets will invest in a diversified
portfolio of high quality, U.S. dollar denominated short-term municipal
securities which mature or have a demand feature exercisable in one year or less
from the date of acquisition having a dollar-weighted average maturity of 90
days or less. The Fund seeks to maintain a net asset value of $1.00 per share.
RISK FACTORS AND SPECIAL CONSIDERATIONS
An investment in the Funds is subject to certain risks, as set forth in detail
under "INVESTMENT OBJECTIVES, POLICIES AND Restrictions." As with all mutual
funds, there can be no assurance that the Funds will achieve their investment
objectives.
OFFERING PRICE
The public offering price of each Fund is equal to its net asset value of $1.00
per Share.
SHARES OFFERED
S-2 Shares of common stock of Liquid Assets and Sweep Shares of common stock
Municipal Assets ("Shares"), each a separate investment portfolio of the IMG
Mutual Funds, Inc., a Maryland Corporation.
MINIMUM PURCHASE
The minimum initial investment is $250 with $25 minimum subsequent investments
(subject to certain exceptions).
DIVIDENDS
Dividends are declared daily and paid monthly and will be automatically
reinvested unless the shareholder elects otherwise.
INVESTMENT ADVISOR
Investors Management Group, Ltd. (the "Advisor").
ADMINISTRATOR
Investors Management Group, Ltd. (the "Administrator").
DISTRIBUTOR
BISYS Fund Services Inc., Columbus, Ohio (the "Distributor").
<PAGE>
EXPENSE SUMMARY
SHAREHOLDER TRANSACTION EXPENSES
LIQUID MUNICIPAL
ASSETS ASSETS
Maximum Sales Charge Imposed on Purchases None None
Maximum Sales Charge on Reinvested Dividends None None
Deferred Sales Load None None
Redemption Fee* None None
Exchange Fee None None
* A $15.00 fee may be charged to an individual shareholder account for
redemption by wire.
LIQUID MUNICIPAL
ASSETS ASSETS
ESTIMATED ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
Management Fees...................................... 0.35% 0.35%
12b-1 Distribution Fees............................. 0.25% 0.25%
Shareholder Servicing Fees........................... 0.25% 0.25%
Other Expenses....................................... 0.07% 0.11%
Total Fund Operating Expenses After Waivers 1........ 0.92% 0.96%
The purpose of the above table is to assist a potential purchaser of a Fund's
Shares in understanding the various costs and expenses that an investor in S2
shares of Liquid Assets and Sweep Shares of Municipal Assets will bear directly
or indirectly. The table reflects current fees and estimates other expenses. The
Management Fees, Rule 12b-1 Distribution Fees and Shareholder Servicing Fees are
based on the maximum allowable under the Investment Advisory Agreements,
Distribution Plans and Shareholder Servicing Plans. Rule 12b-1 Distribution Fees
and Shareholder Servicing Fees are fees related to distribution and marketing
expenses incurred under plans adopted pursuant to Rule 12b-1 under the
Investment Company Act of 1940. From time to time, the Fund's Advisor and/or
Distributor may voluntarily waive the Management Fees, the 12b-1 Distribution
Fees and/or Shareholder Servicing Fees and/or absorb certain expenses for a Fund
or class of Shares of a Fund. Long-term shareholders may pay more than the
economic equivalent of the maximum front-end sales charge permitted by the
National Association of Securities Dealers. Wire transfers may be used to
transfer federal funds directly to/from the Funds' custodian bank.
1 The Company has entered into a Management and Administration Agreement
pursuant to which the Funds are authorized to pay a periodic amount calculated
at an annual rate of 0.20% of the average daily net assets of such Funds.
Currently, however, it is intended that 70% of the fees due to be paid under the
Agreement by Liquid Assets or Municipal Assets will be waived. Absent the waiver
of these fees, "Total Operating Expenses" as a percentage of average daily net
assets would have been 1.12% for Liquid Assets and 1.16% for Municipal Assets.
EXAMPLE
You would pay the following expenses on a $1,000 investment in each Fund
assuming, (1) a (hypothetical) five percent annual return and (2) redemption at
the end of each time period.
1 Year 3 Years 5 Years 10 Years
Liquid Assets $ 9 $29 $51 $113
Municipal Assets $10 $31 $53 $118
THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RATES OF RETURN. ACTUAL EXPENSES OR RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN. The above Example is based on the expense information
included in the previous Expense Summary. The Expense Summary and Examples do
not reflect any charges that may be imposed by financial institutions on their
customers. Please refer to "MANAGEMENT AND FEES" for a more complete discussion
of the Shareholder transaction expenses and annual operating expenses for the
Fund.
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
LIQUID ASSETS
The investment objective of Liquid Assets is maximum current income consistent
with safety of principal and maintenance of liquidity. The Fund invests in the
following money market instruments maturing in 397 days or less from time of
investment, (with certain exceptions):
(1) Obligations issued or guaranteed by the U.S. government or any agency or
instrumentality thereof. Such securities will include those supported by
the full faith and credit of the United States Treasury or the right of
the agency or instrumentality to borrow from the Treasury, as well as
those supported only by the credit of the issuing agency or
instrumentality.
(2) Repurchase agreements involving securities in the immediately foregoing
categories. A repurchase agreement involves the sale of such securities
to the Fund with the concurrent agreement of the seller to repurchase
them at a specified time and price to yield an agreed upon rate of
interest. Repurchase agreements may involve certain risks which are
described in greater detail in the Statement of Additional Information.
(3) Redeemable interest-bearing trust certificates ("Student Loan
Certificates") issued by the Iowa Student Loan Trust and/or other Student
Loan Trusts established by the Fund, ("Student Loan Trusts"), created for
the sole purpose of purchasing from banks (which qualify as "eligible
lenders") federally insured student loans originated by banks. The
Student Loan Certificates will have original maturities of no more than
397 days but will be redeemable by the Fund at their face amount upon not
more than five days' written notice to the issuing Student Loan Trust.
Further details concerning the Student Loan Trusts and the Fund's
investments in Student Loan Certificates are found in the Statement of
Additional Information.
(4) Redeemable interest-bearing ownership certificates ("FmHA Certificates")
issued by one or more guaranteed loan trusts ("FmHA Trusts"), each
created for the purpose of acquiring participation interests in the
guaranteed portion of Farmer's Home Administration ("FmHA") guaranteed
loans. The FmHA Certificates will have original maturities of no more
than 397 days but will be redeemable by the Fund at their face amount
upon not more than five days' written notice to the issuing FmHA Trust.
Further details concerning the FmHA Trusts and the Fund's investment in
FmHA Certificates and FmHA guaranteed loans are found in the Statement of
Additional Information.
(5) Commercial paper which at the time of investment (a) is rated (or the
issuer of which has been rated) highest quality by two nationally
recognized statistical rating organizations ("NRSRO") if rated by two or
more NRSROs; (b) is rated (or the issuer of which has been rated) highest
quality if rated by only one NRSRO; or (c) is determined to be of
equivalent quality by the Fund's Board of Directors if unrated.
(6) U.S. dollar-denominated bank obligations (certificates of deposit and
bankers' acceptances) issued by domestic offices of U.S. banks which, at
the date of investment, have capital, surplus, and undivided profits (as
of the date of their most recently published financial statements) in
excess of $10,000,000; and obligations of other banks or savings and
loans if such obligations are insured by the Federal Deposit Insurance
Corporation, provided that not more than 10 percent of the total assets
of the Fund will be invested in such insured obligations.
(7) Short-term (maturing in one year or less) corporate obligations which at
the time of investment (a) are rated in the highest rating category by
two NRSROs, if rated by two or more NRSROs; (b) are rated in the highest
rating category if rated by only one NRSRO; or (c) are determined to be
of equivalent quality by the Fund's Board of Directors if unrated.
In accordance with procedures adopted pursuant to Rule 2a-7 under the 1940 Act,
the Fund limits its investments to those U.S. dollar-denominated instruments
determined by the Board of Directors to present minimal credit risk and which
are "Eligible Securities" as that term is defined by Rule 2a-7. Pursuant to Rule
2a-7, the Fund shall not have invested more than five percent of its total
assets in securities issued by a single issuer. For additional requirements of
Rule 2a-7, see "Opening an Account -- Share Price". Assets of the Fund will
consist of securities with maturities of 397 days or less at date of purchase
or, if maturing beyond 397 days, will be backed by Liquidity and Servicing
Agreements or Guaranteed Funding Agreements and will have variable interest
rates adjustable at least semiannually. In determining whether particular
variable rate investments backed by Liquidity and Servicing Agreements or
Guaranteed Funding Agreements may be made, the period remaining until maturity
will be deemed to be the longer of the demand notice period required before the
Fund is entitled to receive payment of the principal amount or the period
remaining until the next interest adjustment. The dollar-weighted average
maturity of Fund investments will be 90 days or less, determined in the same
manner. While the underlying security in a repurchase agreement may have a
maturity of more than 397 days, the repurchase agreement itself will terminate
in less than 397 days, and typically within a few days. The Fund intends to
invest at least 25 percent of its total assets in Student Loan Certificates,
and/or FmHA Certificates, except when such investments are either not available
in sufficient quantity or do not carry yields competitive with alternative
investments.
It is the policy of the Fund that any illiquid securities (including repurchase
agreements of more than seven days duration) may not constitute, at the time of
purchase or at any time, more than ten percent of the value of the total net
assets of the Fund.
As a fundamental policy, the Fund does not intend to concentrate its investments
in any one industry and pursuant to Section 18(f) of the 1940 Act, the Fund may
not issue senior securities. As a general policy, it is the Fund's intention to
hold investments until they mature. However, in an effort to increase portfolio
yields the Fund may periodically trade securities to take advantage of perceived
disparities between markets for various short-term money market instruments. It
is also possible that redemptions of Fund shares could necessitate the sale of
portfolio investments prior to maturity and at times when such sale would be
undesirable because of unfavorable market conditions.
While investments by the Fund will be confined to high quality financial
instruments, the complete elimination of risk is not possible. Under certain
circumstances described in more detail in the Statement of Additional
Information, the net asset value of Fund shares could decrease. It is also
possible Participating Banks or borrowers will default on the provisions of
their agreements with the Fund or that banks will default on repurchase
agreements with the Student Loan Trusts or the FmHA Trusts, which could cause
the net asset value per share to decrease.
In light of these various contingencies, there can be no assurances the Fund
will achieve its investment objectives.
The Fund has adopted a number of investment policies and restrictions, some of
which can be changed by the Board of Directors. Others may be changed only by
holders of a majority of the outstanding shares and include the following:
Without shareholder approval the Fund may not: (1) purchase any securities other
than those described above; (2) invest more than 80 percent of its total assets
in Student Loan Certificates and/or FmHA Certificates; (3) purchase or sell real
estate (other than short-term loans secured by real estate or interests therein
or loans to companies which invest in or engage in other activities related to
real estate), commodities or commodity contracts, interests in oil, gas or other
mineral exploration or development programs; (4) make short sales of securities
or maintain a short position or write, purchase, or sell puts (excluding
repayment and guarantee arrangements on loan participations purchased from
Participating Banks), calls, straddles, spreads or combinations thereof; (5)
make loans to other persons, provided the Fund may invest up to 80 percent of
its total assets in Student Loan Certificates or FmHA Certificates, as described
in (2) above, and may make the investments and enter into repurchase agreements
as described above; (6) invest in securities with legal or contractual
restrictions on resale (except for repurchase agreements, Student Loan
Certificates, and FmHA Certificates) or for which no ready market exists; (7)
enter into repurchase agreements if, as a result thereof, more than five percent
of the Fund's total assets (taken at market value at the time of such
investment) would be subject to repurchase agreements maturing in more than
seven days.
The foregoing investment restrictions are considered fundamental policies which
cannot be changed without the approval of a "majority" of the Fund's outstanding
voting securities, that is, by (a) 67 percent or more of the securities voting
at a special or annual meeting if more than 50 percent of the outstanding shares
of Common Stock are represented at such meeting in person or by proxy; or (b)
more than 50 percent of the outstanding Common Stock, whichever is less. The
Statement of Additional Information includes discussion of certain other
investment policies and restrictions, some of which are also considered
fundamental and may not be changed without shareholder approval.
MUNICIPAL ASSETS
The investment objective of Municipal Assets is maximum current income exempt
from federal income tax, consistent with safety of
principal and maintenance of liquidity. The Fund invests in the following types
of money market instruments maturing in 397 days or less from time of investment
(with certain exceptions), as defined herein:
(1) Tax-exempt debt obligations issued by state and municipal governmental
units and public authorities within the United States and participation
interests therein. With few exceptions such obligations will be nonrated
and of limited marketability. However, they will be backed by demand
repurchase commitments of the issuers thereof and irrevocable bank
letters of credit or guarantees (collectively referred to herein as
"Liquidity Agreements"). The Liquidity Agreements will permit the holder
of the securities to demand payment of the unpaid principal balance plus
accrued interest upon a specified number of days' notice either from the
issuer or by drawing on an irrevocable bank letter of credit or
guarantee. In addition, all obligations with maturities longer than 397
days from date of purchase will, by their terms, bear rates of interest
that are adjusted upward or downward no less frequently than semiannually
by means of a formula intended to reflect market changes in interest
rates. Certain types of industrial development bonds issued by public
bodies to finance the construction of industrial and commercial
facilities and equipment are also purchased. The Statement of Additional
Information contains further details concerning the Fund's policies and
procedures with respect to investments in such tax-exempt obligations and
participation interests. (2) High quality tax-exempt debt obligations
issued by state and municipal governments and by public authorities,
including issues sold as interim financing in anticipation of tax
collections, revenue receipts or bond sales, and tax-exempt Project Notes
secured by the full faith and credit of the United States. Such
obligations will be purchased only if backed by the full faith and credit
of the United States or rated Aaa, Aa, MIG-1, MIG-2 or Prime-1 by Moody's
Investors Service, Inc., or AAA, AA, or A-1 by Standard & Poor's
Corporation. Nonrated securities may also be purchased if determined by
the Fund's board of directors to be of comparable quality to the rated
securities in which the Fund may invest.
(3) Taxable obligations issued or guaranteed by agencies or instrumentalities
of the U.S. government may be acquired from time to time on a temporary
basis for defensive purposes.
(4) Repurchase agreements involving securities in the immediate foregoing
category. A repurchase agreement involves the sale of such securities to
the Fund with the concurrent agreement of the seller to repurchase them
at a specified time and price, to yield an agreed upon rate of interest.
Repurchase agreements may involve certain risks which are described in
greater detail in the Statement of Additional Information.
In accordance with procedures adopted pursuant to Rule 2a-7 under the 1940 Act,
the Fund limits its investments to those U.S. dollar-denominated instruments
determined by the Board of Directors to present minimal credit risk and which
are "Eligible Securities" as that term is defined by Rule 2a-7. Pursuant to Rule
2a-7, the Fund shall not invest more than five percent of its total assets in
securities issued by a single issuer. For additional requirements of Rule 2a-7,
see "Opening an Account -- Share Price". Assets of the Fund will consist of
securities with maturities of 397 days or less at date of purchase or, if
maturing beyond 397 days, securities which are backed by Liquidity Agreements
and which have variable interest rates adjustable at least semi-annually and
upon the adjustment of the interest rate the value of the securities will be
approximately equal to par. In determining whether particular variable rate
investments backed by Liquidity Agreements may be made, the period remaining
until maturity will be deemed to be the longer of the demand notice period
required before the Fund is entitled to receive payment of the principal amount
or the period remaining until the next interest adjustment. The dollar-weighted
average maturity of Fund investments will be 90 days or less, determined in the
same manner.
Under normal market conditions, the Fund as a matter of fundamental policy, will
invest at least 80 percent of its total net assets in tax-exempt securities, the
interest on which is exempt from federal income tax, except to the extent that
some or all of which may be subject to the alternative minimum tax. This
fundamental policy may not be changed without the approval of a majority of the
Fund's outstanding voting securities.
It is the policy of the Fund that any illiquid securities may not constitute, at
the time of purchase or at anytime, more than ten percent of the value of the
total net assets of the Fund. The Fund does not intend to concentrate its
investments in any one industry and pursuant to Section 18(f) of the 1940 Act
may not issue senior securities.
As a general policy, it is the Fund's intention to hold investments until they
mature or until immediately prior to the expiration of an applicable Liquidity
Agreement. However, in an effort to increase portfolio yields, the Fund may
periodically trade securities to take advantage of perceived disparities between
markets for various short-term money market instruments. It is also possible
that redemptions of Fund shares could necessitate the sale of portfolio
investments prior to maturity and at times when such sale would be undesirable
because of unfavorable market conditions.
New issues of tax-exempt debt obligations are usually offered on a when-issued
basis with the securities to be delivered and paid for approximately 45 days
following the initial purchase commitment. The Fund may occasionally enter into
such commitments, subject to certain limitations and procedures discussed in the
Statement of Additional Information.
While investments by the Fund will be confined to high-quality financial
instruments, the complete elimination of risk is not possible. Under certain
circumstances, described in more detail in the Statement of Additional
Information, the net asset value of Fund shares could decrease. It is also
possible an issuer or bank will default on the provisions of their Liquidity
Agreements, which could cause the net asset value per share to decrease. In
light of these various contingencies, there can be no assurances the Fund will
achieve its investment objectives.
The Fund has adopted a number of investment policies and restrictions, some of
which can be changed by the Board of Directors. Others may be changed only by
holders of a majority of the outstanding shares and include the following:
Without shareholder approval the Fund may not: (1) purchase any securities other
than those described under "Investment Policy"; (2) invest more than 80 percent
of its total assets in tax-exempt fixed and variable rate debt obligations (or
participation interests therein) issued by state and local governmental units
within the United States which are backed by Liquidity Agreements; (3) invest
more than five percent of its total assets (determined as of the date of
purchase) in tax-exempt obligations or participation interests therein subject
to Liquidity Agreements issued by any one bank; (4) purchase or sell real
estate, commodities or commodity contracts, interests in oil, gas or other
mineral exploration or development programs; (5) make short sales of securities
or maintain a short position or write, purchase, or sell puts (excluding
Liquidity Agreements covering certain tax-exempt obligations purchased by the
Fund), calls, straddles, spreads or combinations thereof; (6) make loans to
other persons, provided the Fund may make investments and enter into repurchase
agreements as described above; (7) invest in securities with legal or
contractual restrictions on resale (except for tax-exempt debt obligations
subject to Liquidity Agreements) or for which no ready market exists; (8) enter
into a Liquidity Agreement with any bank unless such bank is a United States
bank which has a record, together with predecessors, of at least five years of
continuous operations; (9) enter into repurchase agreements if, as a result
thereof, more than five percent of the Fund's total assets (taken at market
value at the time of such investment) would be subject to repurchase agreements
maturing in more than seven days; and (10) enter into Liquidity Agreements with
any bank if five percent or more of the securities of such bank are owned by the
Advisor or by directors and officers of the Fund or the Advisor, or if any
director or officer of the Fund or the Advisor owns more than 1/2 percent of the
voting securities of such bank.
The foregoing investment restrictions are considered fundamental policies which
cannot be changed without the approval of a "majority" of the Fund's outstanding
voting securities, that is, by (1) 67 percent or more of the securities voting
at a special or annual meeting if more than 50 percent of the outstanding shares
of Common Stock are represented at such meeting in person or by proxy; or (2)
more than 50 percent of the outstanding Common Stock, whichever is less. The
Statement of Additional Information includes discussion of certain other
investment policies and restrictions, some of which are also considered
fundamental and may not be changed without shareholder approval.
PERFORMANCE
Performance of each Fund may be quoted in advertising in terms of current yield
and effective yield. CURRENT YIELD refers to the income generated by an
investment in either Fund over a seven-day period. This income is then
"annualized". That is, the amount of income generated by the investment during
that week is assumed to be generated each week over a 52-week period and is
shown as a percentage of the investment. The Fund may also present a 30-day
yield which is calculated similarly but instead refers to a 30-day period rather
than a seven-day period. EFFECTIVE YIELD is calculated similarly but, when
annualized, that income earned from the investment is assumed to be reinvested
weekly. Effective yield will be slightly higher than current yield because of
the compounding effect of this assumed reinvestment.
Performance of the Funds may also be compared to other mutual funds with similar
investment objectives, relevant indices or rankings prepared by independent
services or other financial publications, or yields on deposits at financial
institutions. Unlike the Funds, deposit accounts at financial institutions are
generally insured by the Federal Deposit Insurance Corporation and do not
fluctuate to the extent of the Funds.
Additionally, Municipal Assets may quote a taxable-equivalent yield based on a
stated income tax rate. Please see each Fund's Statement of Additional
Information for further discussion of the manner in which yields are calculated
and the comparative performance data which may be used.
Of course, the Funds' yields are not fixed nor is principal guaranteed. Yields
are functions of the type and quality of instruments held in the portfolio,
operating expenses, and market conditions. Consequently, current yields will
fluctuate and are not necessarily representative of the future results.
DISTRIBUTIONS AND TAXES
Dividends from the net income of each Fund are declared daily on each business
day and paid monthly to holders of record immediately before 3:00 p.m. Central
Time. Dividends are automatically reinvested in Sweep Shares unless cash payment
has been selected on the Account Application. If a shareholder has elected to
receive dividends and/or distributions in cash and the checks are returned and
marked as "undeliverable" or remain uncashed for six months, your cash election
will be changed automatically and future dividends will be reinvested in Shares
of the Fund. In addition, any undeliverable checks or checks that remain
uncashed for six months will be canceled and will be reinvested in Shares of the
Fund at the per share net asset value determined as of the date of cancellation.
If a shareholder redeems the entire amount in his account during the month,
dividends credited to the account from the beginning of the month through the
date of redemption are paid with the redemption proceeds.
Dividends on each class of shares are determined in the same manner and are paid
in the same amounts irrespective of class, except that each class bears separate
distribution and/or shareholder servicing fees (see "Organization and Shares of
the Funds").
Dividends declared in October, November, or December of any year, payable to
shareholders of record on a specified date in such months, will be deemed to
have been received by the shareholders and paid by the Funds on December 31 of
such year, in the event that such dividends are actually paid during January of
the following year.
Each Fund intends to qualify as a regulated investment company by distributing
substantially all of its taxable net income, including any realized capital
gains, and thus will not incur any Federal income taxes. Shareholders will
receive taxable dividend income, tax-exempt dividend income and/or capital
gains, as the case may be, from distributions whether paid in cash or received
in the form of additional shares.
Dividends derived from interest on federally tax-exempt debt obligations owned
by Municipal Assets are intended to constitute "exempt-interest dividends" which
are generally not Federally taxable to shareholders, although some could be
includable for purposes of the alternative minimum tax. Dividends derived from
other interest and the realization of capital gains are taxable to shareholders
whether or not reinvested.
Municipal Assets expenses will be allocated between tax-exempt and taxable
income in the same proportion as the Fund's tax-exempt income bears to the total
of such exempt income and its gross income (excluding from gross income the
excess of capital gains over capital losses).
Promptly after the end of each calendar year, each shareholder will receive a
statement of the Federal income tax status of all dividends and distributions
paid during the year. This discussion is only a summary and relates solely to
Federal tax matters. Further discussion of the Federal Income Tax consequences
of an investment in the Fund is provided in the Statement of Additional
Information. Dividends may also be subject to local taxation. Shareholders are
encouraged to consult with their personal tax advisors.
ORGANIZATION AND SHARES OF THE FUNDS
IMG Mutual Funds, Inc. is a Maryland corporation organized on November 16, 1994.
The Funds were created on October 30, 1997, to acquire the assets and continue
the business of the corresponding substantially identical investment portfolios
of the Liquid Assets Funds, Inc., and the Municipal Assets Funds, Inc., two
separately registered open-end, diversified management investment companies
organized as Iowa corporations. References herein to the "immediate predecessor"
of the Funds refer to the respective companies which correspond to such Fund.
Each Share of a Fund represents an equal proportionate interest in that Fund
with other Shares of the same Fund, and is entitled to such dividends and
distributions out of the income earned on the assets belonging to that Fund as
are declared at the discretion of the Directors.
The Articles of Incorporation of the Company permit the Company, by resolution
of its Board of Directors, to create new series of common stock relating to new
investment portfolios or to subdivide existing series of Shares into subseries
or classes. Classes could be utilized to create differing expense and fee
structures for investors in the same Fund. Differences could exist, for example
in the sales load, Rule 12b-1 fees or service plan fees applicable to different
classes of Shares offered by a particular Fund. Such an arrangement could enable
the Company to tailor its marketing efforts to a broader segment of the
investing public with a goal of attracting additional investments in the Funds.
S2 Shares of Liquid Assets and Sweep Shares of Municipal Assets are described in
this Prospectus. Trust Shares and Institutional Shares are offered in separate
Prospectuses which may be obtained by calling the Fund at 1-800-798-1819 or
writing to the address on the cover of this Prospectus. Please read the
Prospectus carefully before investing or sending money. All shares are offered
to individual and institutional investors acting on their own behalf or on
behalf of their customers and bear their pro rata portion of all operating
expenses paid by the Funds, except that Shares, S2 Shares and Trust Shares bear
separate distribution and/or shareholder servicing fees. Institutional Shares
bear no distribution or shareholder servicing fees.
Each class of shares offers different privileges. Shares are normally offered
through financial institutions providing automatic "sweep" investment programs
to their customers, and offer a check writing privilege. Trust Shares are
normally offered through trust organizations or others providing shareholder
services such as establishing and maintaining accounts and records for their
customers who invest in Trust Shares, assisting customers in processing
purchase, exchange and redemption requests, and responding to customers'
inquiries concerning their investments. Institutional Shares are available
directly from the Distributor only and offer only the Exchange and Telephone
Transfer services. Each class of shares is exchangeable only for shares of the
same class. Financial institutions selling or servicing Shares and Trust Shares
may receive different compensation with respect to one class over another.
Shareholders are entitled to one vote for each full share held and proportionate
fractional votes for fractional shares held. Shares of each Fund will vote
together and not by class unless otherwise required by law or permitted by each
Fund's Board of Directors. All shareholders of each Fund will vote together as a
single class on matters relating to the Fund's investment advisory agreement,
investment objective and fundamental policies. Only holders of Shares will vote
on matters relating to the Distribution Plan for Shares. Only holders of Trust
Shares will vote on matters pertaining to the Shareholder Services Plan for
Trust Shares.
Shares of the Funds have non-cumulative voting rights and, accordingly, the
holders of more than 50 percent of each Fund's outstanding shares (irrespective
of class) may elect all of the Directors. Shares have no preemptive rights and
only such conversion and exchange rights as each Fund's Board may grant in its
discretion. When issued for payments as described in this Prospectus, shares
will be fully paid and nonassessable. All shares are held in uncertificated form
and will be evidenced by the appropriate notation on the books of the transfer
agent.
SHAREHOLDER REPORTS AND MEETINGS
Each shareholder will receive monthly Fund information, an unaudited semiannual
report, and an annual report containing audited financial statements. If you
have questions about your account, call 1-800-798-1819. You may also write the
Fund at the address on the cover of this Prospectus. You may order statements
for the current and preceding year at no charge. However, there will be a $10.00
fee per statement for statements ordered for other years.
The Fund may operate without an annual meeting of shareholders under specified
circumstances if an annual meeting is not required by the 1940 Act. The Funds
have adopted the appropriate provisions in their Bylaws and may, in their
discretion, not hold annual meetings of shareholders for the election of
Directors unless otherwise required by the 1940 Act. The Funds have also adopted
provisions in their Bylaws for the removal of Directors by the shareholders.
Shareholders may receive assistance in communicating with other shareholders as
provided in Section 16(c) of the 1940 Act.
There normally will be no meetings of shareholders for the purpose of electing
Directors unless and until such time as less than a majority of the Directors
holding office have been elected by shareholders, at which time the Directors
then in office will call a shareholders' meeting for the election of Directors.
Shareholders of the Funds may remove a Director by the affirmative vote of a
majority of the Funds' outstanding voting shares. In addition, the Directors are
required to call a meeting of shareholders for the purpose of voting upon the
question of removal of any such Director or for any other purpose when requested
in writing to do so by the shareholders or record of not less than 10 percent of
the Funds' outstanding voting securities.
To date, ten Funds have been authorized. All consideration received by the Funds
for shares of one of the Funds and all assets in which such consideration is
invested, belong to that Fund (subject only to the rights of creditors of the
Fund) and will be subject to the liabilities related thereto. The income and
expenses attributable to one Fund are treated separately from those of the other
Funds.
Rule 18f-2 under the 1940 Act provides that any matter required to be submitted
under the provisions of the 1940 Act or applicable state law or otherwise, to
the holders of the outstanding voting securities of an investment company, such
as the Funds, will not be deemed to have been effectively acted upon unless
approved by the holders of a majority of the outstanding shares of each Fund
affected by such matter. Rule 18f-2 further provides that a Fund shall be deemed
to be affected by a matter unless it is clear that the interests of each Fund in
the matter are identical or that the matter does not affect the interest of such
Fund. However, the Rule exempts the selection of independent auditors and the
election of Directors from the separate voting requirements of the Rule.
MANAGEMENT AND FEES
Overall responsibility for management of the Company rests with the Board of
Directors, who are elected by the Shareholders of the Company's Funds. The
Company will be managed by the Directors in accordance with laws of Maryland
governing corporations. The Directors, in turn, elect the officers of the
Company to supervise the day-to-day operations. The Directors receive fees and
are reimbursed for their expenses in connection with each meeting of the Board
of Directors they attend. The officers of the Company receive no compensation
directly from the Company for performing the duties of their offices.
Investors Management Group, ("IMG") manages the investments and business affairs
of the Funds. IMG is a federally registered Investment Advisor organized in 1982
and located at 2203 Grand Avenue, Des Moines, Iowa 50312-5338. IMG has been
providing continuous investment management to pension and profit-sharing plans,
insurance companies, public agencies, banks, endowments and charitable
institutions, other mutual funds, individuals and others for over 15 years. As
of November 30, 1997, IMG had approximately $1.6 billion in equity, fixed income
and money market assets under management.
The Funds will be managed by Jeffrey D. Lorenzen, CFA, Managing Director,
Kathryn D. Beyer, CFA, Managing Director, and Elizabeth S. Pierson, CFA, Senior
Fixed Income Manager. Mr. Lorenzen is a fixed income strategist and is a member
of IMG's Investment Policy Committee. Prior to joining IMG in 1992, his
experience includes serving as a securities analyst and corporate fixed income
analyst for The Statesman Group from 1989 to 1992. Mr. Lorenzen received his
Masters of Business Administration degree from Drake University, Des Moines,
Iowa, and his Bachelor of Business Administration degree from the University of
Iowa, Iowa City, Iowa. Ms. Beyer is a fixed income strategist and is a member of
IMG's Investment Policy Committee. Prior to joining IMG in 1993, her experience
includes serving as a securities analyst and director of mortgage-backed
securities for Central Life Assurance Company from 1988 to 1993. Ms. Beyer
received her Master of Business Administration degree from Drake University, Des
Moines, Iowa, and her Bachelor of Science degree in agricultural engineering
from Iowa State University, Ames, Iowa. Ms. Pierson is a fixed income strategist
and is a member of IMG's Investment Policy Committee. She began her investment
career in 1984 with AMCORE Capital Management, Inc. Ms. Pierson received her
Bachelor of Science degree from the University of Illinois, Champaign-Urbana.
Under a management contract between each Fund and IMG, a fee is paid to IMG for
investment advisory services. Each Fund is responsible for paying operating
expenses not assumed by IMG.
The management fee for each Fund is calculated daily and paid monthly. The
maximum management fee for each Fund is 0.35 percent of each Fund's average
daily net assets.
From time to time, IMG may voluntarily waive all or a portion of the management
fee and/or absorb certain expenses of a Fund or class of shares without further
notification of the commencement or termination of such waiver or absorption.
Any such waiver will have the effect of lowering the overall expense ratio for a
Fund or class of shares and increasing the overall yield to investors in that
Fund or class of shares at the time any such amounts are waived and/or absorbed.
IMG may not seek reimbursement of such waived fees at a later date. The waiver
of such fee will cause the yield of a Fund to be higher than it would otherwise
be in the absence of such a waiver.
IMG also provides management and administration, fund accounting, transfer
agency, and shareholder recordkeeping services to the Funds. IMG is compensated
for each of these services under separate written contracts with the Funds. The
fees received and the services provided under these contracts are in addition to
those received and paid to IMG under the Advisory Agreement.
At its expense, IMG provides office space and all necessary office facilities,
equipment, and personnel for servicing the investments of the Funds. Except for
the expenses expressly assumed by IMG pursuant to its investment advisory
agreement, each Fund is responsible for all its other expenses, including,
without limitation, governmental fees, interest charges, taxes if applicable,
membership dues in the Investment Company Institute allocable to the Fund,
broker commissions, and other expenses connected with the execution, recording
and settlement of Fund security transactions, expenses of repurchasing and
redeeming shares and expenses of servicing shareholder accounts; expenses for
preparing, printing and distributing periodic reports, notices and proxy
statements to shareholders and to governmental officers and commissions;
insurance premiums, fees and expenses of the Fund's custodian, including
safekeeping of funds and securities and maintaining required books and
accounting; expenses of calculating the net asset value of shares of the Funds;
fees and expenses of independent auditors, of legal counsel, and of any transfer
agent, registrar or dividend disbursing agent of the Funds; compensation and
expenses of Directors who are not "interested persons" of the Advisor; and
expenses of shareholder meetings. Expenses relating to the issuance,
registration and qualification of shares of the Funds and the preparation,
printing and mailing of prospectuses to existing shareholders are borne by the
Funds except that the Funds' Distribution Agreement requires that the
Distributor pay for prospectuses that are to be used for sales purposes with
persons other than current shareholders.
From time to time, IMG may voluntarily waive all or a portion of the management
fee and/or absorb certain expenses of a Fund without further notification of the
commencement or termination of such waiver or absorption. Any such waiver will
have the effect of lowering the overall expense ratio for that Fund and
increasing the Fund's overall yield to investors at the time any such amounts
are waived and/or absorbed.
Except as voluntarily absorbed by IMG, all expenses incurred in the operation of
the Funds will be borne by the Funds. Expenses attributable to a particular Fund
are charged against the assets of that Fund; other expenses of the Funds are
allocated among the Funds on a reasonable basis determined by the Board of
Directors, including, but not limited to, proportionately in relation to the net
assets of each Fund.
Each Fund pays certain distribution fees related to marketing, selling and
distribution of Sweep Shares including, but not limited to, preparation and
distribution of promotional materials, compensation to sales personnel employed
by the Distributor and for payment to institutions, including financial
institutions ("Participating Organizations") who render assistance in
distributing or promoting the sale of each Fund's Sweep Shares under plans
("12b-1 Plans") adopted pursuant to Rule 12b-1 under the Act. The maximum fees
payable under the 12b-1 Plans are an annual rate of 0.25 percent for S2 Shares
of Liquid Assets and 0.25 percent for Sweep Shares of Municipal Assets, computed
monthly on the basis of the average net asset value of the respective Shares
issued by each Fund. The Directors of each Fund review quarterly a written
report of the costs incurred associated with the 12b-1 Plans. The Directors
believe that the 12b-1 Plans are in compliance with Rule 12b-1 and are in the
best interests of the Funds.
Each Fund pays certain shareholder servicing fees to financial institutions
("Participating Organizations"), who render assistance in servicing their
customers who are direct or beneficial owners of each Fund's Shares under
Shareholder Services Plans (the "Services Plans") adopted by the Funds' Board of
Directors. The maximum fees payable under the Services Plans are an annual rate
of 0.25%, computed monthly on the basis of the average daily net asset value of
each Fund. The Directors of each Fund review quarterly a written report of the
costs incurred association with the Services Plans. The Directors believe that
the Services Plans are in the best interest of the Funds.
The Glass-Steagall Act and other applicable laws prohibit banks from engaging in
the business of underwriting, selling, or distributing securities. Insofar as
Participating Organizations (including banks) are compensated under the Plans,
their only function will be to perform administrative and shareholder services
for their clients who wish to invest in the Funds. If a Participating
Organization at a future date is prohibited from acting in this capacity, the
shareholder may lose the services provided by the Participating Organization;
however, it is not expected that the shareholders would incur any adverse
financial consequences. It is intended that none of the services provided by
such Participating Organizations other than through registered brokers will
involve the solicitation or sale of shares of the Funds.
AMCORE Investment Group, N.A., Rockford, Illinois, acts as custodian for the
Funds' cash and investments.
OPENING AN ACCOUNT
The Funds require a completed and signed application (which is attached) at the
time you open each new account. Additional paperwork may be required from
corporations, associations and certain fiduciaries. IF YOU HAVE QUESTIONS CALL
THE FUNDS AT 1-800-798-1819 FROM 8:00 A.M. TO 4:30 P.M. CENTRAL TIME.
SHARE PRICE
The shares of each Fund are sold without a sales charge. The price of one share
is its "net asset value" or NAV (generally $1.00). NAV is computed by adding the
value of each Fund's investments, plus cash and other assets, deducting
liabilities and then dividing the result by the number of shares outstanding.
The NAV of each Funds' shares is determined twice each business day, at 11:00
a.m. Central Time and at the close of the New York Stock Exchange (normally 3:00
p.m. Central Time). The Funds are open for business each day the Federal Reserve
is open.
Your purchase will be processed at the next NAV calculated after your investment
has been converted to federal funds. If you invest by check, the Funds must
generally allow one or more days for conversion into federal funds before
accepting your purchase.
Rule 2a-7 under the Investment Company Act of 1940 permits the Funds to compute
net asset value per share using the amortized cost method of valuing portfolio
securities. As a condition for using the amortized cost method of valuation, the
Board of Directors established procedures to stabilize each Fund's net asset
value at $1.00 per Share. These procedures are described in more detail in each
Fund's Statement of Additional Information.
Under the amortized cost method of valuation, a security is initially valued at
cost on the date of purchase and, thereafter, any discount or premium is
amortized on a straight-line basis to maturity, regardless of the effect of
fluctuating interest rates on the market value of the security. U.S. government
obligations, Student Loan Certificates and FmHA Certificates, which are subject
to mandatory repurchase at their original purchase price, investments in taxable
and tax-exempt debt obligations rated by a recognized bond rating agency and
regularly traded in the secondary market, and nonrated fixed and variable rate
tax-exempt obligations and participation interests therein, not regularly traded
in the secondary market but subject to Liquidity Agreements will be valued at
amortized cost. Other assets are valued at a fair value determined in good faith
by the board of directors of each Fund.
PURCHASING SHARES
Shares of each Fund may be purchased directly from BISYS Fund Services, Inc., as
the distributor. Shares may also be purchased by customers of qualified banks,
savings and loan associations, broker/dealers, investment advisory firms, and
other organizations ("Participating Organizations") that have entered into
servicing agreements with the Distributor. The Participating Organization is
responsible for transmitting purchase orders directly to the Fund's Distributor.
A Participating Organization may elect to hold record ownership of shares for
its customers and to show beneficial ownership of shares on the account
statements it provides to them. In the alternative, a Participating Organization
may elect to establish its customers' accounts of record with IMG as transfer
agent for the Funds. Generally, shares purchased through Participating
Organizations will be held by the Participating Organization as shareholder of
record.
Shares of each Fund are offered without any purchase or redemption charge
imposed by the Fund. The minimum initial investment that may be made in each
Fund is $250. Subsequent investments in each Fund must be made in amounts of not
less than $25, except where purchases are made through financial institutions
providing an automatic "sweep" investment program, in which case there is no
minimum. Participating organizations may aggregate their customers' purchases to
satisfy the required minimums.
Purchases may be effected on business days when the Advisor, Distributor and
Custodian are open for business. The Funds reserve the right to reject any
purchase order, including purchases made with foreign and third party drafts or
checks.
A purchase order for Shares received and accepted by the Funds by 10:00 a.m.
Central Time on a business day is effected at the net asset value per share
calculated as of 11:00 a.m. Central Time, and investors will receive the
dividend declared that day, IF THE CUSTODIAN HAS RECEIVED THE PURCHASE PRICE IN
FEDERAL FUNDS OR OTHER IMMEDIATELY AVAILABLE FUNDS BY 3:00 P.M. CENTRAL TIME
THAT DAY. A purchase order for Shares received after 10:00 a.m. Central Time and
prior to 3:00 p.m. Central Time on a business day for which such funds have been
received by 3:00 p.m. Central Time will be effected as of 3:00 p.m. Central
Time, and will begin to accrue dividends on the following business day. If
federal funds are not available by 3:00 p.m. Central Time, the order will be
canceled. Payment for orders which are not accepted or are canceled will be
returned after prompt inquiry to the transmitting organization.
While the Funds themselves do not presently levy sales, redemption or account
service charges, Participating Organizations may elect to do so and the Funds
may elect to do so in the future. Investors should inquire regarding the nature
and costs of services provided by Participating Organizations and determine if
such services are desired, because the costs thereof will reduce the Funds'
yields to the investor below that obtainable by investing in the Funds directly.
Customers wishing to purchase shares through their Participating Organization
should contact such entity directly for appropriate instructions. (For a list of
the Participating Organizations in your area, CALL THE FUNDS AT 1-800-798-1819
OR 515-244-5426.) Direct investors may purchase shares in accordance with the
procedures described below, "Purchase Procedures".
Certificates representing Fund shares purchased will not be issued. However, all
purchases are confirmed in writing to the investor and credited to their account
in the shareholder records maintained by the Transfer Agent. Investors will have
the same rights to their shares as if certificates had been issued.
PURCHASE PROCEDURES
METHOD INITIAL INVESTMENT ADDITIONAL INVESTMENT
BY MAIL $250 (minimum) $25 (minimum)
Please make your check Please make your check
payable to the Fund selected payable to the Fund
and mail to the address selected, with your
indicated on the application. account number on the
check and mail to the
address printed on your
account statement.
BY WIRE Please call for an account See instructions below.
number before initial invest-
ment at 1-800-798-1819 or
515-244-5426.
Federal Funds should be wired to: Federal Reserve Bank of Chicago for AMCORE
Investment Group, N.A., Rockford, Illinois, together with the name of the
Fund, your account number and names.
Please note that when accounts are opened by wire you must send a completed
application at your earliest convenience. Your application must be received
by the Fund before any instructions for redemption will be accepted.
BY ELECTRONIC Not available for initial Shareholders who have
FUNDS TRANSFER purchase. an account with an
(ACH) institution which is a
member of the Automated
Clearing House, may
elect to purchase Fund
shares via electronic
funds transfer. Select
this service on your
application or call
the Fund.
SHAREHOLDER SERVICES
Some shareholder services may not be available if shares are purchased through
Participating Organizations. Call the Funds at 1-800-798-1819 for more
information.
EXCHANGE PRIVILEGE. You may exchange Shares of either Fund for Shares in the
other Fund described in this Prospectus. An exchange involves a redemption of
the shares of the Fund being liquidated and a purchase of the shares of the Fund
in which the redemption proceeds are to be invested. The exchange privilege is
offered as a convenience to shareholders and is not intended to be a means of
speculating on short-term movements in securities prices by transactions
involving frequent purchases and sales of shares. Each Fund reserves the right
at any time and without prior notice, to suspend, limit, modify or terminate
exchange privileges or their use by individual shareholders in order to prevent
transactions considered to be disadvantageous to existing shareholders.
TELEPHONE TRANSFERS. This service allows you to authorize transfers of money to
purchase or sell shares. Using Telephone Transfer you can move money between
your bank account and your account in the Funds with one phone call. Moneys may
be transferred either by wire or electronic funds transfer with an institution
which is a member of the Automated Clearing House ("ACH").
Wire transfers may be used to transfer federal funds directly to/from the Funds'
custodian bank. A $15.00 fee may be charged to your account for redemptions by
wire.
Allow two (2) days after the call for electronic funds transfer via ACH to move
moneys between your bank account and your account with either Fund.
For moneys recently invested, allow normal clearing time before redemption
proceeds are sent to your bank. In order to change the financial institution
account designated to receive redemption proceeds, it will be necessary to send
a written request to the Fund with a signature guarantee from a national or
state bank, a trust company or a federal savings and loan association, or a
member firm of the New York, American, Boston, Midwest or Pacific Stock
Exchange.
You can also arrange SYSTEMATIC PERIODIC INVESTMENTS (minimum $50) into your
Fund account. Simply select the regular investment schedule you would like when
completing your account application. Your bank account will automatically be
debited to purchase shares of the Fund you select. You will receive confirmation
of each transaction.
Your bank must be a member of ACH and you must have a checking or NOW/Money
Market Deposit account to use electronic funds transfer or systematic investing.
Please allow 20 days after receipt of your application to activate the Telephone
Transfer capability.
STATEMENTS AND REPORTS. You will receive a statement of your account listing
every transaction that affects your share balance no less than once per month.
At least twice a year you will receive the financial statements of the Fund in
which you have invested with a summary of that Fund's portfolio composition and
performance. Each Fund's Annual Report is reported on by the Funds' independent
auditors, KPMG Peat Marwick LLP.
REDEEMING SHARES
Shareholders may request redemption of their shares at any time. Shares will be
redeemed at their net asset value as next determined after a redemption request
in good order is received by the Fund's Distributor. Redemption orders received
and accepted by the Distributor before 10:00 a.m. Central Time on a business day
will be redeemed as of 11:00 a.m. Central Time and will earn dividends through
the previous day; proceeds normally will be sent electronically the same day (or
mailed by check the next business day) to the organization that placed the
redemption order in good form. Redemption orders received after 10:00 a.m.
Central Time or on a non-business day will be redeemed as of 3:00 p.m. Central
Time or at the next determined net asset value and earn dividends through the
date the redemption request was received; proceeds will be sent electronically
on the next business day (or mailed by check on the second business day
thereafter). While the Funds use their best efforts to maintain their net asset
value per share at $1.00, the proceeds paid upon redemption may be more or less
than the amount originally invested.
If you purchase shares through a Participating Organization, you may redeem
shares in accordance with that Organization's rules regarding redemption
requests. Direct shareholders may redeem shares in accordance with the
procedures described under "How to Redeem Shares".
The Funds intend to pay redemption proceeds within two business days and in no
event will payment be made later than seven days after receipt of a redemption
request in good order. Payments to investors who request to redeem shares within
a few days after a purchase paid for by check may be delayed until the Funds can
verify the check has been collected.
The Funds reserve the right to suspend redemptions or to postpone the payment
therefore when: (a) trading on the New York Stock Exchange is restricted as
determined by the Securities and Exchange Commission, or the Exchange is closed
for other than customary weekend and holiday closings; (b) the Securities and
Exchange Commission has permitted such suspension; or (c) an emergency as
determined by the Securities and Exchange Commission exists, making sale of
portfolio securities or valuations of the Funds' net assets not reasonably
practicable.
A shareholder may not reduce the value of their account to less than $100 by
writing checks. The check writing privilege is not available when purchases are
made through a financial institution providing an automatic "sweep" investment
program. The Funds and the Custodian reserve the right to terminate the check
writing service or to institute charges for the service.
If an investor's account drops below $250 due to redemptions, the Funds reserve
the right to redeem any remaining shares if after 30 days' notice additional
investments to bring the account value to $250 are not made.
HOW TO REDEEM SHARES
BY MAIL-- Send a "letter of instruction": a
TO: 2203 GRAND AVENUE letter specifying the name of the
DES MOINES, IA 50312-5338 Fund, the number of shares to be
sold, your name, your account number,
and the additional requirements
listed below that apply to your
particular account.
TYPE OF REGISTRATION REQUIREMENTS
Individual, Joint Tenants, Sole Letter of instruction signed by all
Proprietorship, Custodial (Uniform persons required to sign for the
Gifts or Transfers To Minors Act), account, exactly as it is registered,
General Partners accompanied by signature guarantee(s).
Corporation, Association Letter of instruction and a corporate
resolution signed by person(s)
authorized to act on the account,
accompanied by signature guarantee(s).
Trust A letter of instruction signed by
the Trustee(s) (as Trustee), with a
signature guarantee. (If the Trustee's
name is not registered on your
account, also provide a copy of the
trust document, certified within the
last 60 days.)
If you do not fall into any of these registration categories (e.g.,
Executors, Administrators, Conservators or Guardians) please call for further
instructions.
A signature guarantee is designed to protect you and the Fund against
fraudulent transactions by unauthorized persons. A signature guarantee is
required for all persons registered on an account. A signature guarantee may
be obtained from an eligible guarantor institution, as defined by the
Securities and Exchange Commission. These institutions include banks, savings
and loan associations, credit unions, brokerage firms, and others. The words,
"SIGNATURE GUARANTEED" must be stamped or typed near each person's signature
and appear with the printed name, title, and signature of an officer and the
name of the guarantor institution. PLEASE NOTE THAT A NOTARY PUBLIC STAMP OR
SEAL IS NOT A SIGNATURE GUARANTEE.
FOR ALL OPTIONS BELOW, PLEASE CALL 1-800-798-1819
BY CHECK-- You must have applied for the check
(minimum $250 writing feature on your account
maximum $100,000) spplication. You may redeem pro-
vided that the signatures you
designated are on the check. (There
is no charge for this service and
you may write an unlimited number
of checks.)
BY EXCHANGE-- You must meet the minimum investment
requirement of the other fund. You
can only exchange between accounts
with identical names, addresses, and
taxpayer identification numbers.
BY ELECTRONIC FUNDS You must have applied for the
TRANSFER (ACH) OR WIRE-- Telephone Transfer feature on your
application. Allow two days via ACH.
Call before 10:00 a.m. for same day
wire. $15.00 fee for bank wires.
<PAGE>
TABLE OF CONTENTS
Expense Summary of Shares...............................................2
Highlights..............................................................3
Financial Highlights....................................................4
Investment Objectives, Policies and Restrictions........................7
Liquid Assets.......................................................... 7
Municipal Assets........................................................9
Performance............................................................12
Distributions and Taxes................................................13
Organization and Shares of the Funds...................................14
Management and Fees....................................................15
Opening an Account.....................................................16
Share Price........................................................16
Purchasing Shares..................................................16
Shareholder Services...................................................19
Redeeming Shares.......................................................21
NO SALESMAN, OR OTHER PERSON, HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN
CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE,
SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE FUNDS OR BY BISYS FUND SERVICES, INC. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING BY BISYS FUND SERVICES, INC., IN ANY STATE IN WHICH SUCH
OFFERING MAY NOT LAWFULLY BE MADE.
<PAGE>
LIQUID ASSETS FUND AND TRUST SHARES
MUNICIPAL ASSETS FUND
2203 Grand Avenue, Des Moines, Iowa 50312-5338
- --------------------------------------------------------------------------------
FOR CURRENT YIELD, PURCHASE AND REDEMPTION INFORMATION CALL.........800-798-1819
....................................................................515-244-5426
- --------------------------------------------------------------------------------
PROSPECTUS ___ , 1997
- --------------------------------------------------------------------------------
Liquid Assets Fund and Municipal Assets Fund, each of these a "Fund",
(collectively, the "Funds") are money market mutual funds designed to enable
investors to meet short-term goals. Investors choose whichever Fund best suits
their needs and may, without charge, exchange Funds as their investment outlook
or goals change.
Liquid Assets Fund offers four classes of shares and Municipal Assets Fund
offers three classes of shares. This Prospectus describes the "Trust Shares" of
each Fund. Trust Shares are offered to customers of banks. Trust Shares are
normally offered through trust organizations or others providing shareholder
services such as establishing and maintaining accounts and records for their
customers who invest in Trust Shares, assisting customers in processing
purchase, exchange and redemption requests, and responding to customers'
inquiries regarding their accounts. The Funds also offer "Sweep Shares" and
"Institutional Shares" which accrue daily dividends in the same manner as Trust
Shares except that each class bears separate distribution and/or shareholder
administrative servicing fees. "S2 Shares" are also offered by Liquid Assets
Fund. (see "Organization and Shares of the Funds").
LIQUID ASSETS FUND, ("Liquid Assets") seeks maximum current income consistent
with safety of principal and maintenance of liquidity. MUNICIPAL ASSETS FUND,
("Municipal Assets") seeks maximum current income exempt from federal income
tax, consistent with safety of principal and maintenance of liquidity. Trust
Shares are offered and redeemed at $1.00 per share under rules which allow the
Funds to use the amortized cost method of valuing the Funds' assets.
AN INVESTMENT IN SHARES OF THE FUNDS IS NOT INSURED OR GUARANTEED BY THE UNITED
STATES GOVERNMENT, BY ANY STATE, OR BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION. SHARES OF THE FUNDS ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF ANY
BANK, OR GUARANTEED BY A BANK. INVESTMENTS IN THE FUNDS INVOLVE INVESTMENT
RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
THE FUNDS SEEK TO MAINTAIN A CONSTANT NET ASSET VALUE OF $1.00, BUT UNDER
EXTRAORDINARY CIRCUMSTANCES THE VALUE OF SHARES MAY VARY FROM $1.00 AND
CONSEQUENTLY, THERE CAN BE NO ASSURANCE THAT THE FUNDS WILL BE ABLE TO MAINTAIN
A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
This Prospectus sets forth basic information about each Fund that investors
should know before investing and should be retained for future reference.
Statements of Additional Information (as of the date of this Prospectus) which
contain more detailed information about each Fund have been filed with the
Securities and Exchange Commission and are hereby incorporated by reference. The
Statements of Additional Information are available free upon request from the
Funds at the address and telephone number indicated 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 ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
PROSPECTUS SUMMARY
TYPE OF COMPANY
Each Fund is a diversified series of an open-end, management investment company.
INVESTMENT OBJECTIVE
For Liquid Assets, maximum current income consistent with safety of principal
and maintenance of liquidity.
For Municipal Assets, maximum current income exempt from federal income tax,
consistent with safety of principal and maintenance of liquidity.
INVESTMENT POLICY
Under normal market conditions, Liquid Assets will invest in a diversified
portfolio of high quality, U.S. dollar denominated short-term debt obligations
including, primarily, redeemable Certificates backed by federally insured
student loans and Farmers Home Administration guaranteed loans, commercial
paper, bank obligations, short-term corporate obligations and obligations issued
or guaranteed by the U.S. government, its agencies or instrumentalities and
repurchase agreements collateralized by such obligations having a
dollar-weighted average maturity of 90 days or less. The Fund seeks to maintain
a net asset value of $1.00 per share.
Under normal market conditions, Municipal Assets will invest in a diversified
portfolio of high quality, U.S. dollar denominated short-term municipal
securities which mature or have a demand feature exercisable in one year or less
from the date of acquisition having a dollar-weighted average maturity of 90
days or less. The Fund seeks to maintain a net asset value of $1.00 per share.
RISK FACTORS AND SPECIAL CONSIDERATIONS
An investment in the Funds is subject to certain risks, as set forth in detail
under "INVESTMENT OBJECTIVES, POLICIES AND Restrictions." As with all mutual
funds, there can be no assurance that the Funds will achieve their investment
objectives.
OFFERING PRICE
The public offering price of each Fund is equal to its net asset value of $1.00
per Share.
SHARES OFFERED
Trust Shares of common stock ("Shares") of Liquid Assets and Municipal Assets,
each a separate investment portfolio of the IMG Mutual Funds, Inc., a Maryland
Corporation.
MINIMUM PURCHASE
The minimum initial investment is $250 with $25 minimum subsequent investments
(subject to certain exceptions).
DIVIDENDS
Dividends are declared daily and paid monthly and will be automatically
reinvested unless the shareholder elects otherwise.
INVESTMENT ADVISOR
Investors Management Group, Ltd (the "Advisor").
ADMINISTRATOR
Investors Management Group, Ltd (the "Administrator").
DISTRIBUTOR
BISYS Fund Services Inc., Columbus, Ohio (the "Distributor")
<PAGE>
EXPENSE SUMMARY
SHAREHOLDER TRANSACTION EXPENSES
LIQUID MUNICIPAL
ASSETS ASSETS
Maximum Sales Charge Imposed on Purchases None None
Maximum Sales Charge on Reinvested Dividends None None
Deferred Sales Load None None
Redemption Fee* None None
Exchange Fee None None
* A $15.00 fee may be charged to an individual shareholder account for
redemption by wire.
LIQUID MUNICIPAL
ASSETS ASSETS
ESTIMATED ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
Management Fees...................................... 0.35% 0.35%
12b-1 Distribution Fees............................. 0.00% 0.00%
Shareholder Servicing Fees After Waivers 1........... 0.15% 0.15%
Other Expenses....................................... 0.17% 0.21%
Total Fund Operating Expenses After Waivers 1........ 0.67% 0.71%
The purpose of the above table is to assist a potential purchaser of a Fund's
Shares in understanding the various costs and expenses that an investor in Trust
Shares of a Fund will bear directly or indirectly. The table reflects the
current fees and an estimate of other expenses. The Management Fees and
Shareholder Servicing Fees are based on the maximum allowable under the
Investment Advisory Agreements and Shareholder Servicing Plans. Shareholder
Servicing Fees are fees related to distribution and marketing expenses incurred
under a plan adopted pursuant to Rule 12b-1 under the Investment Company Act of
1940. From time to time, the Fund's Advisor and/or Distributor may voluntarily
waive the Management Fees and/or the Shareholder Servicing Fees and/or absorb
certain expenses for a Fund or class of Shares of a Fund. Long-term shareholders
may pay more than the economic equivalent of the maximum front-end sales charge
permitted by the National Association of Securities Dealers. Wire transfers may
be used to transfer federal funds directly to/from the Funds' custodian bank.
1 The Company has entered into Shareholder Servicing Agreements pursuant to
which the Funds are authorized to pay a periodic amount calculated at an annual
rate of 0.25% of the average daily net assets of such Funds. Currently, however,
it is intended that an annual rate of 0.15% of the average daily net assets of
each Fund will be paid under the Agreements by Liquid Assets or Municipal
Assets.
2 The Company has entered into a Management and Administration Agreement
pursuant to which the Funds are authorized to pay a periodic amount calculated
at an annual rate of 0.20% of the average daily net assets of such Funds.
Currently, however, it is intended that 70% of the fee due to be paid under the
Agreement by Liquid Assets or Municipal Assets will be waived. Absent the waiver
of these fees, "Total Operating Expenses" as a percentage of average daily net
assets would have been 0.87% for Liquid Assets and 0.91% for Municipal Assets.
EXAMPLE
You would pay the following expenses on a $1,000 investment in each Fund
assuming, (1) a (hypothetical) five percent annual return and (2) redemption at
the end of each time period.
1 Year 3 Years 5 Years 10 Years
Liquid Assets $ 7 $21 $37 $83
Municipal Assets $ 7 $23 $40 $88
THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RATES OF RETURN. ACTUAL EXPENSES OR RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN. The above Example is based on the expense information
included in the previous Expense Summary The Expense Summary and Examples do not
reflect any charges that may be imposed by financial institutions on their
customers. Please refer to "MANAGEMENT AND FEES" for a more complete discussion
of the Shareholder transaction expenses and annual operating expenses for the
Fund.
NVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
LIQUID ASSETS
The investment objective of Liquid Assets is maximum current income consistent
with safety of principal and maintenance of liquidity. The Fund invests in the
following money market instruments maturing in 397 days or less from time of
investment, (with certain exceptions):
(1) Obligations issued or guaranteed by the U.S. government or any agency or
instrumentality thereof. Such securities will include those supported by
the full faith and credit of the United States Treasury or the right of
the agency or instrumentality to borrow from the Treasury, as well as
those supported only by the credit of the issuing agency or
instrumentality.
(2) Repurchase agreements involving securities in the immediately foregoing
categories. A repurchase agreement involves the sale of such securities
to the Fund with the concurrent agreement of the seller to repurchase
them at a specified time and price to yield an agreed upon rate of
interest. Repurchase agreements may involve certain risks which are
described in greater detail in the Statement of Additional Information.
(3) Redeemable interest-bearing trust certificates ("Student Loan
Certificates") issued by the Iowa Student Loan Trust and/or other Student
Loan Trusts established by the Fund, ("Student Loan Trusts"), created for
the sole purpose of purchasing from banks (which qualify as "eligible
lenders") federally insured student loans originated by banks. The
Student Loan Certificates will have original maturities of no more than
397 days but will be redeemable by the Fund at their face amount upon not
more than five days' written notice to the issuing Student Loan Trust.
Further details concerning the Student Loan Trusts and the Fund's
investments in Student Loan Certificates are found in the Statement of
Additional Information.
(4) Redeemable interest-bearing ownership certificates ("FmHA Certificates")
issued by one or more guaranteed loan trusts ("FmHA Trusts"), each
created for the purpose of acquiring participation interests in the
guaranteed portion of Farmer's Home Administration ("FmHA") guaranteed
loans. The FmHA Certificates will have original maturities of no more
than 397 days but will be redeemable by the Fund at their face amount
upon not more than five days' written notice to the issuing FmHA Trust.
Further details concerning the FmHA Trusts and the Fund's investment in
FmHA Certificates and FmHA guaranteed loans are found in the Statement of
Additional Information.
(5) Commercial paper which at the time of investment (a) is rated (or the
issuer of which has been rated) highest quality by two nationally
recognized statistical rating organizations ("NRSRO") if rated by two or
more NRSROs; (b) is rated (or the issuer of which has been rated) highest
quality if rated by only one NRSRO; or (c) is determined to be of
equivalent quality by the Fund's Board of Directors if unrated.
(6) U.S. dollar-denominated bank obligations (certificates of deposit and
bankers' acceptances) issued by domestic offices of U.S. banks which, at
the date of investment, have capital, surplus, and undivided profits (as
of the date of their most recently published financial statements) in
excess of $10,000,000; and obligations of other banks or savings and
loans if such obligations are insured by the Federal Deposit Insurance
Corporation, provided that not more than 10 percent of the total assets
of the Fund will be invested in such insured obligations.
(7) Short-term (maturing in one year or less) corporate obligations which at
the time of investment (a) are rated in the highest rating category by
two NRSROs, if rated by two or more NRSROs; (b) are rated in the highest
rating category if rated by only one NRSRO; or (c) are determined to be
of equivalent quality by the Fund's Board of Directors if unrated.
In accordance with procedures adopted pursuant to Rule 2a-7 under the 1940 Act,
the Fund limits its investments to those U.S. dollar-denominated instruments
determined by the Board of Directors to present minimal credit risk and which
are "Eligible Securities" as that term is defined by Rule 2a-7. Pursuant to Rule
2a-7, the Fund shall not have invested more than five percent of its total
assets in securities issued by a single issuer. For additional requirements of
Rule 2a-7, see "Opening an Account -- Share Price". Assets of the Fund will
consist of securities with maturities of 397 days or less at date of purchase
or, if maturing beyond 397 days, will be backed by Liquidity and Servicing
Agreements or Guaranteed Funding Agreements and will have variable interest
rates adjustable at least semiannually. In determining whether particular
variable rate investments backed by Liquidity and Servicing Agreements or
Guaranteed Funding Agreements may be made, the period remaining until maturity
will be deemed to be the longer of the demand notice period required before the
Fund is entitled to receive payment of the principal amount or the period
remaining until the next interest adjustment. The dollar-weighted average
maturity of Fund investments will be 90 days or less, determined in the same
manner. While the underlying security in a repurchase agreement may have a
maturity of more than 397 days, the repurchase agreement itself will terminate
in less than 397 days, and typically within a few days. The Fund intends to
invest at least 25 percent of its total assets in Student Loan Certificates,
and/or FmHA Certificates, except when such investments are either not available
in sufficient quantity or do not carry yields competitive with alternative
investments.
It is the policy of the Fund that any illiquid securities (including repurchase
agreements of more than seven days duration) may not constitute, at the time of
purchase or at any time, more than ten percent of the value of the total net
assets of the Fund.
As a fundamental policy, the Fund does not intend to concentrate its investments
in any one industry and pursuant to Section 18(f) of the 1940 Act, the Fund may
not issue senior securities. As a general policy, it is the Fund's intention to
hold investments until they mature. However, in an effort to increase portfolio
yields the Fund may periodically trade securities to take advantage of perceived
disparities between markets for various short-term money market instruments. It
is also possible that redemptions of Fund shares could necessitate the sale of
portfolio investments prior to maturity and at times when such sale would be
undesirable because of unfavorable market conditions.
While investments by the Fund will be confined to high quality financial
instruments, the complete elimination of risk is not possible. Under certain
circumstances described in more detail in the Statement of Additional
Information, the net asset value of Fund shares could decrease. It is also
possible Participating Banks or borrowers will default on the provisions of
their agreements with the Fund or that banks will default on repurchase
agreements with the Student Loan Trusts or the FmHA Trusts, which could cause
the net asset value per share to decrease.
In light of these various contingencies, there can be no assurances the Fund
will achieve its investment objectives.
The Fund has adopted a number of investment policies and restrictions, some of
which can be changed by the Board of Directors. Others may be changed only by
holders of a majority of the outstanding shares and include the following:
Without shareholder approval the Fund may not: (1) purchase any securities other
than those described above; (2) invest more than 80 percent of its total assets
in Student Loan Certificates and/or FmHA Certificates; (3) purchase or sell real
estate (other than short-term loans secured by real estate or interests therein
or loans to companies which invest in or engage in other activities related to
real estate), commodities or commodity contracts, interests in oil, gas or other
mineral exploration or development programs; (4) make short sales of securities
or maintain a short position or write, purchase, or sell puts (excluding
repayment and guarantee arrangements on loan participations purchased from
Participating Banks), calls, straddles, spreads or combinations thereof; (5)
make loans to other persons, provided the Fund may invest up to 80 percent of
its total assets in Student Loan Certificates or FmHA Certificates, as described
in (2) above, and may make the investments and enter into repurchase agreements
as described above; (6) invest in securities with legal or contractual
restrictions on resale (except for repurchase agreements, Student Loan
Certificates, and FmHA Certificates) or for which no ready market exists; (7)
enter into repurchase agreements if, as a result thereof, more than five percent
of the Fund's total assets (taken at market value at the time of such
investment) would be subject to repurchase agreements maturing in more than
seven days.
The foregoing investment restrictions are considered fundamental policies which
cannot be changed without the approval of a "majority" of the Fund's outstanding
voting securities, that is, by (a) 67 percent or more of the securities voting
at a special or annual meeting if more than 50 percent of the outstanding shares
of Common Stock are represented at such meeting in person or by proxy; or (b)
more than 50 percent of the outstanding Common Stock, whichever is less. The
Statement of Additional Information includes discussion of certain other
investment policies and restrictions, some of which are also considered
fundamental and may not be changed without shareholder approval.
MUNICIPAL ASSETS
The investment objective of Municipal Assets is maximum current income exempt
from federal income tax, consistent with safety of
principal and maintenance of liquidity. The Fund invests in the following types
of money market instruments maturing in 397 days or less from time of investment
(with certain exceptions), as defined herein:
(1) Tax-exempt debt obligations issued by state and municipal governmental
units and public authorities within the United States and participation
interests therein. With few exceptions such obligations will be nonrated
and of limited marketability. However, they will be backed by demand
repurchase commitments of the issuers thereof and irrevocable bank
letters of credit or guarantees (collectively referred to herein as
"Liquidity Agreements"). The Liquidity Agreements will permit the holder
of the securities to demand payment of the unpaid principal balance plus
accrued interest upon a specified number of days' notice either from the
issuer or by drawing on an irrevocable bank letter of credit or
guarantee. In addition, all obligations with maturities longer than 397
days from date of purchase will, by their terms, bear rates of interest
that are adjusted upward or downward no less frequently than semiannually
by means of a formula intended to reflect market changes in interest
rates. Certain types of industrial development bonds issued by public
bodies to finance the construction of industrial and commercial
facilities and equipment are also purchased. The Statement of Additional
Information contains further details concerning the Fund's policies and
procedures with respect to investments in such tax-exempt obligations and
participation interests.
(2) High quality tax-exempt debt obligations issued by state and municipal
governments and by public authorities, including issues sold as interim
financing in anticipation of tax collections, revenue receipts or bond
sales, and tax-exempt Project Notes secured by the full faith and credit
of the United States. Such obligations will be purchased only if backed
by the full faith and credit of the United States or rated Aaa, Aa,
MIG-1, MIG-2 or Prime-1 by Moody's Investors Service, Inc., or AAA, AA,
or A-1 by Standard & Poor's Corporation. Nonrated securities may also be
purchased if determined by the Fund's board of directors to be of
comparable quality to the rated securities in which the Fund may invest.
(3) Taxable obligations issued or guaranteed by agencies or instrumentalities
of the U.S. government may be acquired from time to time on a temporary
basis for defensive purposes.
(4) Repurchase agreements involving securities in the immediate foregoing
category. A repurchase agreement involves the sale of such securities to
the Fund with the concurrent agreement of the seller to repurchase them
at a specified time and price, to yield an agreed upon rate of interest.
Repurchase agreements may involve certain risks which are described in
greater detail in the Statement of Additional Information.
In accordance with procedures adopted pursuant to Rule 2a-7 under the 1940 Act,
the Fund limits its investments to those U.S. dollar-denominated instruments
determined by the Board of Directors to present minimal credit risk and which
are "Eligible Securities" as that term is defined by Rule 2a-7. Pursuant to Rule
2a-7, the Fund shall not invest more than five percent of its total assets in
securities issued by a single issuer. For additional requirements of Rule 2a-7,
see "Opening an Account -- Share Price". Assets of the Fund will consist of
securities with maturities of 397 days or less at date of purchase or, if
maturing beyond 397 days, securities which are backed by Liquidity Agreements
and which have variable interest rates adjustable at least semi-annually and
upon the adjustment of the interest rate the value of the securities will be
approximately equal to par. In determining whether particular variable rate
investments backed by Liquidity Agreements may be made, the period remaining
until maturity will be deemed to be the longer of the demand notice period
required before the Fund is entitled to receive payment of the principal amount
or the period remaining until the next interest adjustment. The dollar-weighted
average maturity of Fund investments will be 90 days or less, determined in the
same manner.
Under normal market conditions, the Fund as a matter of fundamental policy, will
invest at least 80 percent of its total net assets in tax-exempt securities, the
interest on which is exempt from federal income tax, except to the extent that
some or all of which may be subject to the alternative minimum tax. This
fundamental policy may not be changed without the approval of a majority of the
Fund's outstanding voting securities.
It is the policy of the Fund that any illiquid securities may not constitute, at
the time of purchase or at anytime, more than ten percent of the value of the
total net assets of the Fund. The Fund does not intend to concentrate its
investments in any one industry and pursuant to Section 18(f) of the 1940 Act
may not issue senior securities.
As a general policy, it is the Fund's intention to hold investments until they
mature or until immediately prior to the expiration of an applicable Liquidity
Agreement. However, in an effort to increase portfolio yields, the Fund may
periodically trade securities to take advantage of perceived disparities between
markets for various short-term money market instruments. It is also possible
that redemptions of Fund shares could necessitate the sale of portfolio
investments prior to maturity and at times when such sale would be undesirable
because of unfavorable market conditions.
New issues of tax-exempt debt obligations are usually offered on a when-issued
basis with the securities to be delivered and paid for approximately 45 days
following the initial purchase commitment. The Fund may occasionally enter into
such commitments, subject to certain limitations and procedures discussed in the
Statement of Additional Information.
While investments by the Fund will be confined to high-quality financial
instruments, the complete elimination of risk is not possible. Under certain
circumstances, described in more detail in the Statement of Additional
Information, the net asset value of Fund shares could decrease. It is also
possible an issuer or bank will default on the provisions of their Liquidity
Agreements, which could cause the net asset value per share to decrease. In
light of these various contingencies, there can be no assurances the Fund will
achieve its investment objectives.
The Fund has adopted a number of investment policies and restrictions, some of
which can be changed by the Board of Directors. Others may be changed only by
holders of a majority of the outstanding shares and include the following:
Without shareholder approval the Fund may not: (1) purchase any securities other
than those described under "Investment Policy"; (2) invest more than 80 percent
of its total assets in tax-exempt fixed and variable rate debt obligations (or
participation interests therein) issued by state and local governmental units
within the United States which are backed by Liquidity Agreements; (3) invest
more than five percent of its total assets (determined as of the date of
purchase) in tax-exempt obligations or participation interests therein subject
to Liquidity Agreements issued by any one bank; (4) purchase or sell real
estate, commodities or commodity contracts, interests in oil, gas or other
mineral exploration or development programs; (5) make short sales of securities
or maintain a short position or write, purchase, or sell puts (excluding
Liquidity Agreements covering certain tax-exempt obligations purchased by the
Fund), calls, straddles, spreads or combinations thereof; (6) make loans to
other persons, provided the Fund may make investments and enter into repurchase
agreements as described above; (7) invest in securities with legal or
contractual restrictions on resale (except for tax-exempt debt obligations
subject to Liquidity Agreements) or for which no ready market exists; (8) enter
into a Liquidity Agreement with any bank unless such bank is a United States
bank which has a record, together with predecessors, of at least five years of
continuous operations; (9) enter into repurchase agreements if, as a result
thereof, more than five percent of the Fund's total assets (taken at market
value at the time of such investment) would be subject to repurchase agreements
maturing in more than seven days; and (10) enter into Liquidity Agreements with
any bank if five percent or more of the securities of such bank are owned by the
Advisor or by directors and officers of the Fund or the Advisor, or if any
director or officer of the Fund or the Advisor owns more than 1/2 percent of the
voting securities of such bank.
The foregoing investment restrictions are considered fundamental policies which
cannot be changed without the approval of a "majority" of the Fund's outstanding
voting securities, that is, by (1) 67 percent or more of the securities voting
at a special or annual meeting if more than 50 percent of the outstanding shares
of Common Stock are represented at such meeting in person or by proxy; or (2)
more than 50 percent of the outstanding Common Stock, whichever is less. The
Statement of Additional Information includes discussion of certain other
investment policies and restrictions, some of which are also considered
fundamental and may not be changed without shareholder approval.
PERFORMANCE
Performance of each Fund may be quoted in advertising in terms of current yield
and effective yield. CURRENT YIELD refers to the income generated by an
investment in either Fund over a seven-day period. This income is then
"annualized". That is, the amount of income generated by the investment during
that week is assumed to be generated each week over a 52-week period and is
shown as a percentage of the investment. The Fund may also present a 30-day
yield which is calculated similarly but instead refers to a 30-day period rather
than a seven-day period. EFFECTIVE YIELD is calculated similarly but, when
annualized, that income earned from the investment is assumed to be reinvested
weekly. Effective yield will be slightly higher than current yield because of
the compounding effect of this assumed reinvestment.
Performance of the Funds may also be compared to other mutual funds with similar
investment objectives, relevant indices or rankings prepared by independent
services or other financial publications, or yields on deposits at financial
institutions. Unlike the Funds, deposit accounts at financial institutions are
generally insured by the Federal Deposit Insurance Corporation and do not
fluctuate to the extent of the Funds.
Additionally, Municipal Assets may quote a taxable-equivalent yield based on a
stated income tax rate. Please see each Fund's Statement of Additional
Information for further discussion of the manner in which yields are calculated
and the comparative performance data which may be used.
Of course, the Funds' yields are not fixed nor is principal guaranteed. Yields
are functions of the type and quality of instruments held in the portfolio,
operating expenses, and market conditions. Consequently, current yields will
fluctuate and are not necessarily representative of the future results
DISTRIBUTIONS AND TAXES
Dividends from the net income of each Fund are declared daily on each business
day and paid monthly to holders of record immediately before 3:00 p.m. Central
Time. Dividends are automatically reinvested in Trust Shares unless cash payment
has been selected on the Account Application. If a shareholder has elected to
receive dividends and/or distributions in cash and the checks are returned and
marked as "undeliverable" or remain uncashed for six months, your cash election
will be changed automatically and future dividends will be reinvested in Trust
Shares of the Fund. In addition, any undeliverable checks or checks that remain
uncashed for six months will be canceled and will be reinvested in Trust Shares
of the Fund at the per share net asset value determined as of the date of
cancellation. If a shareholder redeems the entire amount in his account during
the month, dividends credited to the account from the beginning of the month
through the date of redemption are paid with the redemption proceeds.
Dividends on each class of shares are determined in the same manner and are paid
in the same amounts irrespective of class, except that each class bears separate
distribution and/or shareholder servicing fees (see "Organization and Shares of
the Funds").
Dividends declared in October, November, or December of any year, payable to
shareholders of record on a specified date in such months, will be deemed to
have been received by the shareholders and paid by the Funds on December 31 of
such year, in the event that such dividends are actually paid during January of
the following year.
Each Fund intends to qualify as a regulated investment company by distributing
substantially all of its taxable net income, including any realized capital
gains, and thus will not incur any Federal income taxes. Shareholders will
receive taxable dividend income, tax-exempt dividend income and/or capital
gains, as the case may be, from distributions whether paid in cash or received
in the form of additional shares.
Dividends derived from interest on federally tax-exempt debt obligations owned
by Municipal Assets are intended to constitute "exempt-interest dividends" which
are generally not Federally taxable to shareholders, although some could be
includable for purposes of the alternative minimum tax. Dividends derived from
other interest and the realization of capital gains are taxable to shareholders
whether or not reinvested.
Municipal Assets expenses will be allocated between tax-exempt and taxable
income in the same proportion as the Fund's tax-exempt income bears to the total
of such exempt income and its gross income (excluding from gross income the
excess of capital gains over capital losses).
Promptly after the end of each calendar year, each shareholder will receive a
statement of the Federal income tax status of all dividends and distributions
paid during the year. This discussion is only a summary and relates solely to
Federal tax matters. Further discussion of the Federal Income Tax consequences
of an investment in the Fund is provided in the Statement of Additional
Information. Dividends may also be subject to local taxation. Shareholders are
encouraged to consult with their personal tax advisors.
ORGANIZATION AND SHARES OF THE FUNDS
IMG Mutual Funds, Inc. is a Maryland corporation organized on November 16, 1994.
The Funds were created on October 30, 1997, to acquire the assets and continue
the business of the corresponding substantially identical investment portfolios
of the Liquid Assets Funds, Inc., and the Municipal Assets Funds, Inc., two
separately registered open-end, diversified management investment companies
organized as Iowa corporations. References herein to the "immediate predecessor"
of the Funds refer to the respective companies which correspond to such Fund.
Each Share of a Fund represents an equal proportionate interest in that Fund
with other Shares of the same Fund, and is entitled to such dividends and
distributions out of the income earned on the assets belonging to that Fund as
are declared at the discretion of the Directors.
The Articles of Incorporation of the Company permit the Company, by resolution
of its Board of Directors, to create new series of common stock relating to new
investment portfolios or to subdivide existing series of Shares into subseries
or classes. Classes could be utilized to create differing expense and fee
structures for investors in the same Fund. Differences could exist, for example
in the sales load, Rule 12b-1 fees or service plan fees applicable to different
classes of Shares offered by a particular Fund. Such an arrangement could enable
the Company to tailor its marketing efforts to a broader segment of the
investing public with a goal of attracting additional investments in the Funds.
Trust Shares of the Funds are described in this Prospectus. Sweep Shares,
Institutional Shares and S2 Shares are offered in separate Prospectuses which
may be obtained by calling the Fundat 1-800-798-1819 or writing to the address
on the cover of this Prospectus. Please read the Prospectus carefully before
investing or sending money. All shares are offered to individual and
institutional investors acting on their own behalf or on behalf of their
customers and bear their pro rata portion of all operating expenses paid by the
Funds, except that Sweep Shares, Trust Shares and S2 Shares bear separate
distribution and/or shareholder servicing fees. Institutional Shares bear no
distribution or shareholder servicing fees.
Each class of shares offers different privileges. Sweep Shares and S2 Shares are
normally offered through financial institutions providing automatic "sweep"
investment programs to their customers, and offer a check writing privilege.
Trust Shares are normally offered through trust organizations or others
providing shareholder services such as establishing and maintaining accounts and
records for their customers who invest in Trust Shares, assisting customers in
processing purchase, exchange and redemption requests, and responding to
customers' inquiries concerning their investments. Institutional Shares are
available directly from the Distributor only and offer only the Exchange and
Telephone Transfer services. Each class of shares is exchangeable only for
shares of the same class. Financial institutions selling or servicing Sweep
Shares, Trust Shares and S2 Shares may receive different compensation with
respect to one class over another.
Shareholders are entitled to one vote for each full share held and proportionate
fractional votes for fractional shares held. Shares of each Fund will vote
together and not by class unless otherwise required by law or permitted by each
Fund's Board of Directors. All shareholders of each Fund will vote together as a
single class on matters relating to the Fund's investment advisory agreement,
investment objective and fundamental policies. Only holders of Sweep Shares and
S2 Shares will vote on matters relating to the Distribution Plan for Sweep
Shares and S2 Shares. Only holders of Sweep Shares, S2 Shares and Trust Shares
will vote on matters pertaining to the Shareholder Services Plan for Trust
Shares.
Shares of the Funds have non-cumulative voting rights and, accordingly, the
holders of more than 50 percent of each Fund's outstanding shares (irrespective
of class) may elect all of the Directors. Shares have no preemptive rights and
only such conversion and exchange rights as each Fund's Board may grant in its
discretion. When issued for payments as described in this Prospectus, shares
will be fully paid and nonassessable. All shares are held in uncertified form
and will be evidenced by the appropriate notation on the books of the transfer
agent.
SHAREHOLDER REPORTS AND MEETINGS
Each shareholder will receive monthly Fund information, an unaudited semiannual
report, and an annual report containing audited financial statements. If you
have questions about your account, call 1-800-798-1819. You may also write the
Fund at the address on the cover of this Prospectus. You may order statements
for the current and preceding year at no charge. However, there will be a $10.00
fee per statement for statements ordered for other years.
The Fund may operate without an annual meeting of shareholders under specified
circumstances if an annual meeting is not required by the 1940 Act. The Funds
have adopted the appropriate provisions in their Bylaws and may, in their
discretion, not hold annual meetings of shareholders for the election of
Directors unless otherwise required by the 1940 Act. The Funds have also adopted
provisions in their Bylaws for the removal of Directors by the shareholders.
Shareholders may receive assistance in communicating with other shareholders as
provided in Section 16(c) of the 1940 Act.
There normally will be no meetings of shareholders for the purpose of electing
Directors unless and until such time as less than a majority of the Directors
holding office have been elected by shareholders, at which time the Directors
then in office will call a shareholders' meeting for the election of Directors.
Shareholders of the Funds may remove a Director by the affirmative vote of a
majority of the Funds' outstanding voting shares. In addition, the Directors are
required to call a meeting of shareholders for the purpose of voting upon the
question of removal of any such Director or for any other purpose when requested
in writing to do so by the shareholders or record of not less than 10 percent of
the Funds' outstanding voting securities.
To date, ten Funds have been authorized. All consideration received by the Funds
for shares of one of the Funds and all assets in which such consideration is
invested, belong to that Fund (subject only to the rights of creditors of the
Fund) and will be subject to the liabilities related thereto. The income and
expenses attributable to one Fund are treated separately from those of the other
Funds.
Rule 18f-2 under the 1940 Act provides that any matter required to be submitted
under the provisions of the 1940 Act or applicable state law or otherwise, to
the holders of the outstanding voting securities of an investment company, such
as the Funds, will not be deemed to have been effectively acted upon unless
approved by the holders of a majority of the outstanding shares of each Fund
affected by such matter. Rule 18f-2 further provides that a Fund shall be deemed
to be affected by a matter unless it is clear that the interests of each Fund in
the matter are identical or that the matter does not affect the interest of such
Fund. However, the Rule exempts the selection of independent auditors and the
election of Directors from the separate voting requirements of the Rule.
MANAGEMENT AND FEES
Overall responsibility for management of the Company rests with the Board of
Directors, who are elected by the Shareholders of the Company's Funds. The
Company will be managed by the Directors in accordance with laws of Maryland
governing corporations. The Directors, in turn, elect the officers of the
Company to supervise the day-to-day operations. The Directors receive fees and
are reimbursed for their expenses in connection with each meeting of the Board
of Directors they attend. The officers of the Company receive no compensation
directly from the Company for performing the duties of their offices.
Investors Management Group, ("IMG") manages the investments and business affairs
of the Funds. IMG,., is a federally registered Investment Advisor organized in
1982 and located at 2203 Grand Avenue, Des Moines, Iowa 50312-5338. IMG has been
providing continuous investment management to pension and profit-sharing plans,
insurance companies, public agencies, banks, endowments and charitable
institutions, other mutual funds, individuals and others for over 15 years. As
of November 30, 1997, IMG had approximately $1.6 billion in equity, fixed income
and money market assets under management.
The Funds will be managed by Jeffrey D. Lorenzen, CFA, Managing Director,
Kathryn D. Beyer, CFA, Managing Director, and Elizabeth S. Pierson, CFA, Senior
Fixed Income Manager. Mr. Lorenzen is a fixed income strategist and is a member
of IMG's Investment Policy Committee. Prior to joining IMG in 1992, his
experience includes serving as a securities analyst and corporate fixed income
analyst for The Statesman Group from 1989 to 1992. Mr. Lorenzen received his
Masters of Business Administration degree from Drake University, Des Moines,
Iowa, and his Bachelor of Business Administration degree from the University of
Iowa, Iowa City, Iowa. Ms. Beyer is a fixed income strategist and is a member of
IMG's Investment Policy Committee. Prior to joining IMG in 1993, her experience
includes serving as a securities analyst and director of mortgage-backed
securities for Central Life Assurance Company from 1988 to 1993. Ms. Beyer
received her Master of Business Administration degree from Drake University, Des
Moines, Iowa, and her Bachelor of Science degree in agricultural engineering
from Iowa State University, Ames, Iowa. Ms. Pierson is a fixed income strategist
and is a member of IMG's Investment Policy Committee. She began her investment
career in 1984 with AMCORE Capital Management, Inc. Ms. Pierson received her
Bachelor of Science degree from the University of Illinois, Champaign-Urbana.
Under a management contract between each Fund and IMG, a fee is paid to IMG for
investment advisory services. Each Fund is responsible for paying operating
expenses not assumed by IMG.
The management fee for each Fund is calculated daily and paid monthly. The
maximum management fee for each Fund is 0.35 percent of each Fund's average
daily net assets.
From time to time, IMG may voluntarily waive all or a portion of the management
fee and/or absorb certain expenses of a Fund or class of shares without further
notification of the commencement or termination of such waiver or absorption.
Any such waiver will have the effect of lowering the overall expense ratio for a
Fund or class of shares and increasing the overall yield to investors in that
Fund or class of shares at the time any such amounts are waived and/or absorbed.
IMG may not seek reimbursement of such waived fees at a later date. The waiver
of such fee will cause the yield of a Fund to be higher than it would otherwise
be in the absence of such a waiver.
IMG also provides management and administration, fund accounting, transfer
agency, and shareholder recordkeeping services tothe Funds. IMG is compensated
for each of these services under separate written contracts with the Funds. The
fees received and the services provided under these contracts are in addition to
those received and paid to IMG under the Advisory Agreement.
At its expense, IMG provides office space and all necessary office facilities,
equipment, and personnel for servicing the investments of the Funds. Except for
the expenses expressly assumed by IMG pursuant to its investment advisory
agreement, each Fund is responsible for all its other expenses, including,
without limitation, governmental fees, interest charges, taxes if applicable,
membership dues in the Investment Company Institute allocable to the Fund,
broker commissions, and other expenses connected with the execution, recording
and settlement of Fund security transactions, expenses of repurchasing and
redeeming shares and expenses of servicing shareholder accounts; expenses for
preparing, printing and distributing periodic reports, notices and proxy
statements to shareholders and to governmental officers and commissions;
insurance premiums, fees and expenses of the Fund's custodian, including
safekeeping of funds and securities and maintaining required books and
accounting; expenses of calculating the net asset value of shares of the Funds;
fees and expenses of independent auditors, of legal counsel, and of any transfer
agent, registrar or dividend disbursing agent of the Funds; compensation and
expenses of Directors who are not "interested persons" of the Advisor; and
expenses of shareholder meetings. Expenses relating to the issuance,
registration and qualification of shares of the Funds and the preparation,
printing and mailing of prospectuses to existing shareholders are borne by the
Funds except that the Funds' Distribution Agreement requires that the
Distributor pay for prospectuses that are to be used for sales purposes with
persons other than current shareholders.
From time to time, IMG may voluntarily waive all or a portion of the management
fee and/or absorb certain expenses of a Fund without further notification of the
commencement or termination of such waiver or absorption. Any such waiver will
have the effect of lowering the overall expense ratio for that Fund and
increasing the Fund's overall yield to investors at the time any such amounts
are waived and/or absorbed.
Except as voluntarily absorbed by IMG, all expenses incurred in the operation of
the Funds will be borne by the Funds. Expenses attributable to a particular Fund
are charged against the assets of that Fund; other expenses of the Funds are
allocated among the Funds on a reasonable basis determined by the Board of
Directors, including, but not limited to, proportionately in relation to the net
assets of each Fund.
Each Fund pays certain shareholder servicing fees to financial institutions
("Participating Organizations"), who render assistance in servicing their
customers who are direct or beneficial owners of each Fund's Shares under
Shareholder Services Plans (the "Services Plans") adopted by the Funds' Board of
Directors. The maximum fees payable under the Services Plans are an annual rate
of 0.25%, computed monthly on the basis of the average daily net asset value of
each Fund. The Directors of each Fund review quarterly a written report of the
costs incurred association with the Services Plans. The Directors believe that
the Services Plans are in the best interest of the Funds.
The Glass-Steagall Act and other applicable laws prohibit banks from engaging in
the business of underwriting, selling, or distributing securities. Insofar as
Participating Organizations (including banks) are compensated under the Plans,
their only function will be to perform administrative and shareholder services
for their clients who wish to invest in the Funds. If a Participating
Organization at a future date is prohibited from acting in this capacity, the
shareholder may lose the services provided by the Participating Organization;
however, it is not expected that the shareholders would incur any adverse
financial consequences. It is intended that none of the services provided by
such Participating Organizations other than through registered brokers will
involve the solicitation or sale of shares of the Funds.
AMCORE Investment Group, N.A., Rockford, Illinois, acts as custodian for the
Funds' cash and investments.
OPENING AN ACCOUNT
The Funds require a completed and signed application (which is attached) at the
time you open each new account. Additional paperwork may be required from
corporations, associations and certain fiduciaries. IF YOU HAVE QUESTIONS CALL
THE FUNDS AT 1-800-798-1819 FROM 8:00 A.M. TO 4:30 P.M. CENTRAL TIME.
SHARE PRICE
The shares of each Fund are sold without a sales charge. The price of one share
is its "net asset value" or NAV (generally $1.00). NAV is computed by adding the
value of each Fund's investments, plus cash and other assets, deducting
liabilities and then dividing the result by the number of shares outstanding.
The NAV of each Funds' shares is determined twice each business day, at 11:00
a.m. Central Time and at the close of the New York Stock Exchange (normally 3:00
p.m. Central Time). The Funds are open for business each day the Federal Reserve
is open.
Your purchase will be processed at the next NAV calculated after your investment
has been converted to federal funds. If you invest by check, the Funds must
generally allow one or more days for conversion into federal funds before
accepting your purchase.
Rule 2a-7 under the Investment Company Act of 1940 permits the Funds to compute
net asset value per share using the amortized cost method of valuing portfolio
securities. As a condition for using the amortized cost method of valuation, the
Board of Directors established procedures to stabilize each Fund's net asset
value at $1.00 per Share. These procedures are described in more detail in each
Fund's Statement of Additional Information.
Under the amortized cost method of valuation, a security is initially valued at
cost on the date of purchase and, thereafter, any discount or premium is
amortized on a straight-line basis to maturity, regardless of the effect of
fluctuating interest rates on the market value of the security. U.S. government
obligations, Student Loan Certificates and FmHA Certificates, which are subject
to mandatory repurchase at their original purchase price, investments in taxable
and tax-exempt debt obligations rated by a recognized bond rating agency and
regularly traded in the secondary market, and nonrated fixed and variable rate
tax-exempt obligations and participation interests therein, not regularly traded
in the secondary market but subject to Liquidity Agreements will be valued at
amortized cost. Other assets are valued at a fair value determined in good faith
by the board of directors of each Fund.
PURCHASING SHARES
Shares of each Fund may be purchased directly from BISYS, Fund Services, Inc.,
as the distributor. Shares may also be purchased by customers of qualified
banks, savings and loan associations, broker/dealers, investment advisory firms,
and other organizations ("Participating Organizations") that have entered into
servicing agreements with the Distributor. The Participating Organization is
responsible for transmitting purchase orders directly to the Fund's Distributor.
A Participating Organization may elect to hold record ownership of shares for
its customers and to show beneficial ownership of shares on the account
statements it provides to them. In the alternative, a Participating Organization
may elect to establish its customers' accounts of record with IMG as transfer
agent for the Funds. Generally, shares purchased through Participating
Organizations will be held by the Participating Organization as shareholder of
record.
Shares of each Fund are offered without any purchase or redemption charge
imposed by the Fund. The minimum initial investment that may be made in each
Fund is $250. Subsequent investments in each Fund must be made in amounts of not
less than $25, except where purchases are made through Participating
Organizations in which case there is no minimum. Participating Organizations may
aggregate their customers' purchases to satisfy the required minimums.
Purchases may be effected on business days when the Advisor, Distributor and
Custodian are open for business. The Funds reserve the right to reject any
purchase order, including purchases made with foreign and third party drafts or
checks.
A purchase order for Trust Shares received and accepted by the Funds by 10:00
a.m. Central Time on a business day is effected at the net asset value per share
calculated as of 11:00 a.m. Central Time, and investors will receive the
dividend declared that day, IF THE CUSTODIAN HAS RECEIVED THE PURCHASE PRICE IN
FEDERAL FUNDS OR OTHER IMMEDIATELY AVAILABLE FUNDS BY 3:00 P.M. CENTRAL TIME
THAT DAY. A purchase order for Trust Shares received after 10:00 a.m. Central
Time and prior to 3:00 p.m. Central Time on a business day for which such funds
have been received by 3:00 p.m. Central Time will be effected as of 3:00 p.m.
Central Time, and will begin to accrue dividends on the following business day.
If federal funds are not available by 3:00 p.m. Central Time, the order will be
canceled. Payment for orders which are not accepted or are canceled will be
returned after prompt inquiry to the transmitting organization.
While the Funds themselves do not presently levy sales, redemption or account
service charges, Participating Organizations may elect to do so and the Funds
may elect to do so in the future. Investors should inquire regarding the nature
and costs of services provided by Participating Organizations and determine if
such services are desired, because the costs thereof will reduce the Funds'
yields to the investor below that obtainable by investing in the Funds directly.
Customers wishing to purchase shares through their Participating Organization
should contact such entity directly for appropriate instructions. (For a list of
the Participating Organizations in your area, CALL THE FUNDS AT 1-800-798-1819
OR 515-244-5426.) Direct investors may purchase shares in accordance with the
procedures described below, "Purchase Procedures".
Certificates representing Fund shares purchased will not be issued. However, all
purchases are confirmed in writing to the investor and credited to their account
in the shareholder records maintained by the Transfer Agent. Investors will have
the same rights to their shares as if certificates had been issued.
PURCHASE PROCEDURES
METHOD INITIAL INVESTMENT ADDITIONAL INVESTMENT
BY MAIL $250 (minimum) $25 (minimum)
Please make your check Please make your check
payable to the Fund selected payable to the Fund
and mail to the address selected, with your
indicated on the application. account number on the
check and mail to the
address printed on your
account statement.
BY WIRE Please call for an account See instructions below.
number before initial invest-
ment at 1-800-798-1819 or
515-244-5426.
Federal Funds should be wired to: Federal Reserve Bank of Chicago for AMCORE
Investment Group, N.A., Rockford, Illinois, together with the name of the
Fund, your account number and names.
Please note that when accounts are opened by wire you must send a completed
application at your earliest convenience. Your application must be received
by the Fund before any instructions for redemption will be accepted.
BY ELECTRONIC Not available for initial Shareholders who have
FUNDS TRANSFER purchase. an account with an
(ACH) institution which is a
member of the Automated
Clearing House, may
elect to purchase Fund
shares via electronic
funds transfer. Select
this service on your
application or call
the Fund.
SHAREHOLDER SERVICES
Some shareholder services may not be available if shares are purchased through
Participating Organizations. Call the Funds at 1-800-798-1819 for more
information.
EXCHANGE PRIVILEGE. You may exchange Trust Shares of either Fund for Trust
Shares in the other Fund described in this Prospectus. An exchange involves a
redemption of the shares of the Fund being liquidated and a purchase of the
shares of the Fund in which the redemption proceeds are to be invested. The
exchange privilege is offered as a convenience to shareholders and is not
intended to be a means of speculating on short-term movements in securities
prices by transactions involving frequent purchases and sales of shares. Each
Fund reserves the right at any time and without prior notice, to suspend, limit,
modify or terminate exchange privileges or their use by individual shareholders
in order to prevent transactions considered to be disadvantageous to existing
shareholders.
TELEPHONE TRANSFERS. This service allows you to authorize transfers of money to
purchase or sell shares. Using Telephone Transfer you can move money between
your bank account and your account in the Funds with one phone call. Moneys may
be transferred either by wire or electronic funds transfer with an institution
which is a member of the Automated Clearing House ("ACH").
Wire transfers may be used to transfer federal funds directly to/from the Funds'
custodian bank. A $15.00 fee may be charged to your account for redemptions by
wire.
Allow two (2) days after the call for electronic funds transfer via ACH to move
moneys between your bank account and your account with either Fund.
For moneys recently invested, allow normal clearing time before redemption
proceeds are sent to your bank. In order to change the financial institution
account designated to receive redemption proceeds, it will be necessary to send
a written request to the Fund with a signature guarantee from a national or
state bank, a trust company or a federal savings and loan association, or a
member firm of the New York, American, Boston, Midwest or Pacific Stock
Exchange.
You can also arrange SYSTEMATIC PERIODIC INVESTMENTS (minimum $50) into your
Fund account. Simply select the regular investment schedule you would like when
completing your account application. Your bank account will automatically be
debited to purchase shares of the Fund you select. You will receive confirmation
of each transaction.
Your bank must be a member of ACH and you must have a checking or NOW/Money
Market Deposit account to use electronic funds transfer or systematic investing.
Please allow 20 days after receipt of your application to activate the Telephone
Transfer capability.
STATEMENTS AND REPORTS. You will receive a statement of your account listing
every transaction that affects your share balance no less than once per month.
At least twice a year you will receive the financial statements of the Fund in
which you have invested with a summary of that Fund's portfolio composition and
performance. Each Fund's Annual Report is reported on by the Funds' independent
auditors, KPMG Peat Marwick LLP.
REDEEMING SHARES
Shareholders may request redemption of their shares at any time. Shares will be
redeemed at their net asset value as next determined after a redemption request
in good order is received by the Fund's Distributor. Redemption orders received
and accepted by the Distributor before 10:00 a.m. Central Time on a business day
will be redeemed as of 11:00 a.m. Central Time and will earn dividends through
the previous day; proceeds normally will be sent electronically the same day (or
mailed by check the next business day) to the organization that placed the
redemption order in good form. Redemption orders received after 10:00 a.m.
Central Time or on a non-business Day will be redeemed as of 3:00 p.m. Central
Time or at the next determined net asset value and earn dividends through the
date the redemption request was received; proceeds will be sent electronically
on the next business day (or mailed by check on the second business day
thereafter). While the Funds use their best efforts to maintain their net asset
value per share at $1.00, the proceeds paid upon redemption may be more or less
than the amount originally invested.
If you purchase shares through a Participating Organization, you may redeem
shares in accordance with that Organization's rules regarding redemption
requests. Direct shareholders may redeem shares in accordance with the
procedures described under "How to Redeem Shares".
The Funds intend to pay redemption proceeds within two business days and in no
event will payment be made later than seven days after receipt of a redemption
request in good order. Payments to investors who request to redeem shares within
a few days after a purchase paid for by check may be delayed until the Funds can
verify the check has been collected.
The Funds reserve the right to suspend redemptions or to postpone the payment
therefore when: (a) trading on the New York Stock Exchange is restricted as
determined by the Securities and Exchange Commission, or the Exchange is closed
for other than customary weekend and holiday closings; (b) the Securities and
Exchange Commission has permitted such suspension; or (c) an emergency as
determined by the Securities and Exchange Commission exists, making sale of
portfolio securities or valuations of the Funds' net assets not reasonably
practicable.
If an investor's account drops below $250 due to redemptions, the Funds reserve
the right to redeem any remaining shares, if after 30 days' notice, additional
investments to bring the account value to $250 are not made.
HOW TO REDEEM SHARES
BY MAIL-- Send a "letter of instruction": a
TO: 2203 GRAND AVENUE letter specifying the name of the
DES MOINES, IA 50312-5338 Fund, the number of shares to be
sold, your name, your account number,
and the additional requirements
listed below that apply to your
particular account.
TYPE OF REGISTRATION REQUIREMENTS
Individual, Joint Tenants, Sole Letter of instruction signed by all
Proprietorship, Custodial (Uniform persons required to sign for the
Gifts or Transfers To Minors Act), account, exactly as it is registered,
General Partners accompanied by signature guarantee(s).
Corporation, Association Letter of instruction and a corporate
resolution signed by person(s)
authorized to act on the account,
accompanied by signature guarantee(s).
Trust A letter of instruction signed by
the Trustee(s) (as Trustee), with a
signature guarantee. (If the Trustee's
name is not registered on your
account, also provide a copy of the
trust document, certified within the
last 60 days.)
If you do not fall into any of these registration categories (e.g.,
Executors, Administrators, Conservators or Guardians) please call for further
instructions.
A signature guarantee is designed to protect you and the Fund against
fraudulent transactions by unauthorized persons. A signature guarantee is
required for all persons registered on an account. A signature guarantee may
be obtained from an eligible guarantor institution, as defined by the
Securities and Exchange Commission. These institutions include banks, savings
and loan associations, credit unions, brokerage firms, and others. The words,
"SIGNATURE GUARANTEED" must be stamped or typed near each person's signature
and appear with the printed name, title, and signature of an officer and the
name of the guarantor institution. PLEASE NOTE THAT A NOTARY PUBLIC STAMP OR
SEAL IS NOT A SIGNATURE GUARANTEE.
FOR ALL OPTIONS BELOW, PLEASE CALL 1-800-798-1819
BY EXCHANGE-- You must meet the minimum investment
requirement of the other fund. You
can only exchange between accounts
with identical names, addresses, and
taxpayer identification numbers.
BY ELECTRONIC FUNDS You must have applied for the
TRANSFER (ACH) OR WIRE-- Telephone Transfer feature on your
application. Allow two days via ACH.
Call before 10:00 a.m. for same day
wire. $15.00 fee for bank wires.
<PAGE>
TABLE OF CONTENTS
Expense Summary of Trust Shares..........................................2
Highlights...............................................................3
Financial Highlights.....................................................4
Investment Objectives, Policies and Restrictions.........................7
Liquid Assets........................................................... 7
Municipal Assets.........................................................9
Performance.............................................................12
Distributions and Taxes.................................................13
Organization and Shares of the Funds....................................14
Management and Fees.....................................................15
Opening an Account......................................................17
Share Price.........................................................17
Purchasing Shares...................................................17
Shareholder Services....................................................19
Redeeming Shares........................................................21
NO SALESMAN, OR OTHER PERSON, HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN
CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE,
SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE FUNDS OR BY BISYS FUND SERVICES, INC. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING BY BISYS FUND SERVICES, INC., IN ANY STATE IN WHICH SUCH
OFFERING MAY NOT LAWFULLY BE MADE.
<PAGE>
LIQUID ASSETS FUND AND INSTITUTIONAL SHARES
MUNICIPAL ASSETS FUND
2203 Grand Avenue, Des Moines, Iowa 50312-5338
- --------------------------------------------------------------------------------
For current yield, purchase and redemption information call.........800-798-1819
....................................................................515-244-5426
- --------------------------------------------------------------------------------
Prospectus ___, 1997
- --------------------------------------------------------------------------------
Liquid Assets Fund and Municipal Assets Fund, each of these a "Fund",
(collectively, the "Funds") are money market mutual funds designed to enable
investors to meet short-term goals. Investors choose whichever Fund best suits
their needs and may, without charge, exchange Funds as their investment outlook
or goals change.
Liquid Assets Fund offers four classes of shares and Municipal Assets Fund
offers three classes of shares. This Prospectus describes the "Institutional
Shares" of each Fund. Institutional Shares are offered to individual and
institutional customers (acting on their own behalf or on the behalf of
individuals). The Funds also offer "Sweep Shares" and "Trust Shares" which
accrue daily dividends in the same manner as Institutional Shares except that
each class bears separate distribution and/or shareholder administrative
servicing fees. "S2 Shares" are also offered by Liquid Assets Fund. (see
"Organization and Shares of the Funds").
LIQUID ASSETS FUND, ("Liquid Assets") seeks maximum current income consistent
with safety of principal and maintenance of liquidity. MUNICIPAL ASSETS FUND,
("Municipal Assets") seeks maximum current income exempt from federal income
tax, consistent with safety of principal and maintenance of liquidity.
Institutional Shares are offered and redeemed at $1.00 per share under rules
which allow the Funds to use the amortized cost method of valuing the Funds'
assets.
AN INVESTMENT IN SHARES OF THE FUNDS IS NOT INSURED OR GUARANTEED BY THE UNITED
STATES GOVERNMENT, BY ANY STATE, OR BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION. SHARES OF THE FUNDS ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF A
BANK, OR GUARANTEED BY A BANK. INVESTMENTS IN THE FUNDS INVOLVE INVESTMENT
RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
THE FUNDS SEEK TO MAINTAIN A CONSTANT NET ASSETS VALUE OF $1.00, BUT UNDER
EXTRAORDINARY CIRCUMSTANCES THE VALUE OF SHARES MAY VARY FROM $1.00 AND
CONSEQUENTLY, THERE CAN BE NO ASSURANCE THAT THE FUNDS WILL BE ABLE TO MAINTAIN
A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
This Prospectus sets forth basic information about each Fund that investors
should know before investing and should be retained for future reference.
Statements of Additional Information (as of the date of this Prospectus) which
contain more detailed information about each Fund have been filed with the
Securities and Exchange Commission and are hereby incorporated by reference. The
Statements of Additional Information are available free upon request from the
Funds at the address and telephone number indicated 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 ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
PROSPECTUS SUMMARY
TYPE OF COMPANY
Each Fund is a diversified series of an open-end, management investment company.
INVESTMENT OBJECTIVE
For Liquid Assets, maximum current income consistent with safety of principal
and maintenance of liquidity.
For Municipal Assets, maximum current income exempt from federal income tax,
consistent with safety of principal and maintenance of liquidity.
INVESTMENT POLICY
Under normal market conditions, Liquid Assets will invest in a diversified
portfolio of high quality, U.S. dollar denominated short-term debt obligations
including, primarily, redeemable Certificates backed by federally insured
student loans and Farmers Home Administration guaranteed loans, commercial
paper, bank obligations, short-term corporate obligations and obligations issued
or guaranteed by the U.S. government, its agencies or instrumentalities and
repurchase agreements collateralized by such obligations having a
dollar-weighted average maturity of 90 days or less. The Fund seeks to maintain
a net asset value of $1.00 per share.
Under normal market conditions, Municipal Assets will invest in a diversified
portfolio of high quality, U.S. dollar denominated short-term municipal
securities which mature or have a demand feature exercisable in one year or less
from the date of acquisition having a dollar-weighted average maturity of 90
days or less. The Fund seeks to maintain a net asset value of $1.00 per share.
RISK FACTORS AND SPECIAL CONSIDERATIONS
An investment in the Funds is subject to certain risks, as set forth in detail
under "INVESTMENT OBJECTIVES, POLICIES AND Restrictions." As with all mutual
funds, there can be no assurance that the Funds will achieve their investment
objectives.
OFFERING PRICE
The public offering price of each Fund is equal to its net asset value of $1.00
per Share.
SHARES OFFERED
Institutional Shares of common stock ("Shares") of Liquid Assets and Municipal
Assets, each a separate investment portfolio of the IMG Mutual Funds, Inc., a
Maryland Corporation.
MINIMUM PURCHASE
The minimum initial investment is $250 with $25 minimum subsequent investments
(subject to certain exceptions).
DIVIDENDS
Dividends are declared daily and paid monthly and will be automatically
reinvested unless the shareholder elects otherwise.
INVESTMENT ADVISOR
Investors Management Group, Ltd. (the "Advisor").
ADMINISTRATOR
Investors Management Group, Ltd. (the "Administrator").
DISTRIBUTOR
BISYS Fund Services Inc., Columbus, Ohio (the "Distributor").
<PAGE>
EXPENSE SUMMARY
SHAREHOLDER TRANSACTION EXPENSES
LIQUID MUNICIPAL
ASSETS ASSETS
Maximum Sales Charge Imposed on Purchases None None
Maximum Sales Charge on Reinvested Dividends None None
Deferred Sales Load None None
Redemption Fee* None None
Exchange Fee None None
* A $15.00 fee may be charged to an individual shareholder account for
redemption by wire.
LIQUID MUNICIPAL
ASSETS ASSETS
ESTIMATED ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
Management Fees...................................... 0.35% 0.35%
12b-1 Distribution Fees.............................. 0.00% 0.00%
Shareholder Servicing Fees........................... 0.00% 0.00%
Other Expenses....................................... 0.17% 0.21%
Total Fund Operating Expenses After Waivers 1........ 0.52% 0.56%
The purpose of the above table is to assist a potential purchaser of a Fund's
Shares in understanding the various costs and expenses that an investor in
Institutional Shares of a Fund will bear directly or indirectly. The table
reflects current fees and estimates other expenses. The Management Fees are
based on the maximum allowable under the Investment Advisory Agreements. From
time to time, the Fund's Advisor may voluntarily waive the Management Fees
and/or absorb certain expenses for a Fund or class of Shares of a Fund.
Long-term shareholders may pay more than the economic equivalent of the maximum
front-end sales charge permitted by the National Association of Securities
Dealers. Wire transfers may be used to transfer federal funds directly to/from
the Funds' custodian bank.
1 The Company has entered into a Management and Administration Agreement
pursuant to which the Funds are authorized to pay a periodic amount calculated
at an annual rate of 0.20% of the average daily net assets of such Funds.
Currently, however, it is intended that 70% of the fees due to be paid under the
Agreement by Liquid Assets or Municipal Assets will be waived. Absent the waiver
of these fees, "Total Operating Expenses" as a percentage of average daily net
assets would have been 0.72% for Liquid Assets and 0.76% for Municipal Assets.
EXAMPLE
You would pay the following expenses on a $1,000 investment in each Fund
assuming, (1) a (hypothetical) five percent annual return and (2) redemption at
the end of each time period.
1 Year 3 Years 5 Years 10 Years
Liquid Assets $ 5 $17 $29 $65
Municipal Assets $ 6 $18 $31 $70
THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RATES OF RETURN. ACTUAL EXPENSES OR RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN. The above Example is based on the expense information
included in the previous Expense Summary. The Expense Summary and Examples do
not reflect any charges that may be imposed by financial institutions on their
customers. Please refer to "MANAGEMENT AND FEES" for a more complete discussion
of the Shareholder transaction expenses and annual operating expenses for the
Fund.
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
LIQUID ASSETS
The investment objective of Liquid Assets is maximum current income consistent
with safety of principal and maintenance of liquidity. The Fund invests in the
following money market instruments maturing in 397 days or less from time of
investment, (with certain exceptions):
(1) Obligations issued or guaranteed by the U.S. government or any agency or
instrumentality thereof. Such securities will include those supported by
the full faith and credit of the United States Treasury or the right of
the agency or instrumentality to borrow from the Treasury, as well as
those supported only by the credit of the issuing agency or
instrumentality.
(2) Repurchase agreements involving securities in the immediately foregoing
categories. A repurchase agreement involves the sale of such securities
to the Fund with the concurrent agreement of the seller to repurchase
them at a specified time and price to yield an agreed upon rate of
interest. Repurchase agreements may involve certain risks which are
described in greater detail in the Statement of Additional Information.
(3) Redeemable interest-bearing trust certificates ("Student Loan
Certificates") issued by the Iowa Student Loan Trust and/or other Student
Loan Trusts established by the Fund, ("Student Loan Trusts"), created for
the sole purpose of purchasing from banks (which qualify as "eligible
lenders") federally insured student loans originated by banks. The
Student Loan Certificates will have original maturities of no more than
397 days but will be redeemable by the Fund at their face amount upon not
more than five days' written notice to the issuing Student Loan Trust.
Further details concerning the Student Loan Trusts and the Fund's
investments in Student Loan Certificates are found in the Statement of
Additional Information.
(4) Redeemable interest-bearing ownership certificates ("FmHA Certificates")
issued by one or more guaranteed loan trusts ("FmHA Trusts"), each
created for the purpose of acquiring participation interests in the
guaranteed portion of Farmer's Home Administration ("FmHA") guaranteed
loans. The FmHA Certificates will have original maturities of no more
than 397 days but will be redeemable by the Fund at their face amount
upon not more than five days' written notice to the issuing FmHA Trust.
Further details concerning the FmHA Trusts and the Fund's investment in
FmHA Certificates and FmHA guaranteed loans are found in the Statement of
Additional Information.
(5) Commercial paper which at the time of investment (a) is rated (or the
issuer of which has been rated) highest quality by two nationally
recognized statistical rating organizations ("NRSRO") if rated by two or
more NRSROs; (b) is rated (or the issuer of which has been rated) highest
quality if rated by only one NRSRO; or (c) is determined to be of
equivalent quality by the Fund's Board of Directors if unrated.
(6) U.S. dollar-denominated bank obligations (certificates of deposit and
bankers' acceptances) issued by domestic offices of U.S. banks which, at
the date of investment, have capital, surplus, and undivided profits (as
of the date of their most recently published financial statements) in
excess of $10,000,000; and obligations of other banks or savings and
loans if such obligations are insured by the Federal Deposit Insurance
Corporation, provided that not more than 10 percent of the total assets
of the Fund will be invested in such insured obligations.
(7) Short-term (maturing in one year or less) corporate obligations which at
the time of investment (a) are rated in the highest rating category by
two NRSROs, if rated by two or more NRSROs; (b) are rated in the highest
rating category if rated by only one NRSRO; or (c) are determined to be
of equivalent quality by the Fund's Board of Directors if unrated.
In accordance with procedures adopted pursuant to Rule 2a-7 under the 1940 Act,
the Fund limits its investments to those U.S. dollar-denominated instruments
determined by the Board of Directors to present minimal credit risk and which
are "Eligible Securities" as that term is defined by Rule 2a-7. Pursuant to Rule
2a-7, the Fund shall not have invested more than five percent of its total
assets in securities issued by a single issuer. For additional requirements of
Rule 2a-7, see "Opening an Account -- Share Price". Assets of the Fund will
consist of securities with maturities of 397 days or less at date of purchase
or, if maturing beyond 397 days, will be backed by Liquidity and Servicing
Agreements or Guaranteed Funding Agreements and will have variable interest
rates adjustable at least semiannually. In determining whether particular
variable rate investments backed by Liquidity and Servicing Agreements or
Guaranteed Funding Agreements may be made, the period remaining until maturity
will be deemed to be the longer of the demand notice period required before the
Fund is entitled to receive payment of the principal amount or the period
remaining until the next interest adjustment. The dollar-weighted average
maturity of Fund investments will be 90 days or less, determined in the same
manner. While the underlying security in a repurchase agreement may have a
maturity of more than 397 days, the repurchase agreement itself will terminate
in less than 397 days, and typically within a few days. The Fund intends to
invest at least 25 percent of its total assets in Student Loan Certificates,
and/or FmHA Certificates, except when such investments are either not available
in sufficient quantity or do not carry yields competitive with alternative
investments.
It is the policy of the Fund that any illiquid securities (including repurchase
agreements of more than seven days duration) may not constitute, at the time of
purchase or at any time, more than ten percent of the value of the total net
assets of the Fund.
As a fundamental policy, the Fund does not intend to concentrate its investments
in any one industry and pursuant to Section 18(f) of the 1940 Act, the Fund may
not issue senior securities. As a general policy, it is the Fund's intention to
hold investments until they mature. However, in an effort to increase portfolio
yields the Fund may periodically trade securities to take advantage of perceived
disparities between markets for various short-term money market instruments. It
is also possible that redemptions of Fund shares could necessitate the sale of
portfolio investments prior to maturity and at times when such sale would be
undesirable because of unfavorable market conditions.
While investments by the Fund will be confined to high quality financial
instruments, the complete elimination of risk is not possible. Under certain
circumstances described in more detail in the Statement of Additional
Information, the net asset value of Fund shares could decrease. It is also
possible Participating Banks or borrowers will default on the provisions of
their agreements with the Fund or that banks will default on repurchase
agreements with the Student Loan Trusts or the FmHA Trusts, which could cause
the net asset value per share to decrease.
In light of these various contingencies, there can be no assurances the Fund
will achieve its investment objectives.
The Fund has adopted a number of investment policies and restrictions, some of
which can be changed by the Board of Directors. Others may be changed only by
holders of a majority of the outstanding shares and include the following:
Without shareholder approval the Fund may not: (1) purchase any securities other
than those described above; (2) invest more than 80 percent of its total assets
in Student Loan Certificates and/or FmHA Certificates; (3) purchase or sell real
estate (other than short-term loans secured by real estate or interests therein
or loans to companies which invest in or engage in other activities related to
real estate), commodities or commodity contracts, interests in oil, gas or other
mineral exploration or development programs; (4) make short sales of securities
or maintain a short position or write, purchase, or sell puts (excluding
repayment and guarantee arrangements on loan participations purchased from
Participating Banks), calls, straddles, spreads or combinations thereof; (5)
make loans to other persons, provided the Fund may invest up to 80 percent of
its total assets in Student Loan Certificates or FmHA Certificates, as described
in (2) above, and may make the investments and enter into repurchase agreements
as described above; (6) invest in securities with legal or contractual
restrictions on resale (except for repurchase agreements, Student Loan
Certificates, and FmHA Certificates) or for which no ready market exists; (7)
enter into repurchase agreements if, as a result thereof, more than five percent
of the Fund's total assets (taken at market value at the time of such
investment) would be subject to repurchase agreements maturing in more than
seven days.
The foregoing investment restrictions are considered fundamental policies which
cannot be changed without the approval of a "majority" of the Fund's outstanding
voting securities, that is, by (a) 67 percent or more of the securities voting
at a special or annual meeting if more than 50 percent of the outstanding shares
of Common Stock are represented at such meeting in person or by proxy; or (b)
more than 50 percent of the outstanding Common Stock, whichever is less. The
Statement of Additional Information includes discussion of certain other
investment policies and restrictions, some of which are also considered
fundamental and may not be changed without shareholder approval.
MUNICIPAL ASSETS
The investment objective of Municipal Assets is maximum current income exempt
from federal income tax, consistent with safety of principal and maintenance of
liquidity. The Fund invests in the following types of money market instruments
maturing in 397 days or less from time of investment (with certain exceptions),
as defined herein:
(1) Tax-exempt debt obligations issued by state and municipal governmental
units and public authorities within the United States and participation
interests therein. With few exceptions such obligations will be nonrated
and of limited marketability. However, they will be backed by demand
repurchase commitments of the issuers thereof and irrevocable bank
letters of credit or guarantees (collectively referred to herein as
"Liquidity Agreements"). The Liquidity Agreements will permit the holder
of the securities to demand payment of the unpaid principal balance plus
accrued interest upon a specified number of days' notice either from the
issuer or by drawing on an irrevocable bank letter of credit or
guarantee. In addition, all obligations with maturities longer than 397
days from date of purchase will, by their terms, bear rates of interest
that are adjusted upward or downward no less frequently than semiannually
by means of a formula intended to reflect market changes in interest
rates. Certain types of industrial development bonds issued by public
bodies to finance the construction of industrial and commercial
facilities and equipment are also purchased. The Statement of Additional
Information contains further details concerning the Fund's policies and
procedures with respect to investments in such tax-exempt obligations and
participation interests.
(2) High quality tax-exempt debt obligations issued by state and municipal
governments and by public authorities, including issues sold as interim
financing in anticipation of tax collections, revenue receipts or bond
sales, and tax-exempt Project Notes secured by the full faith and credit
of the United States. Such obligations will be purchased only if backed
by the full faith and credit of the United States or rated Aaa, Aa,
MIG-1, MIG-2 or Prime-1 by Moody's Investors Service, Inc., or AAA, AA,
or A-1 by Standard & Poor's Corporation. Nonrated securities may also be
purchased if determined by the Fund's board of directors to be of
comparable quality to the rated securities in which the Fund may invest.
(3) Taxable obligations issued or guaranteed by agencies or instrumentalities
of the U.S. government may be acquired from time to time on a temporary
basis for defensive purposes.
(4) Repurchase agreements involving securities in the immediate foregoing
category. A repurchase agreement involves the sale of such securities to
the Fund with the concurrent agreement of the seller to repurchase them
at a specified time and price, to yield an agreed upon rate of interest.
Repurchase agreements may involve certain risks which are described in
greater detail in the Statement of Additional Information.
In accordance with procedures adopted pursuant to Rule 2a-7 under the 1940 Act,
the Fund limits its investments to those U.S. dollar-denominated instruments
determined by the Board of Directors to present minimal credit risk and which
are "Eligible Securities" as that term is defined by Rule 2a-7. Pursuant to Rule
2a-7, the Fund shall not invest more than five percent of its total assets in
securities issued by a single issuer. For additional requirements of Rule 2a-7,
see "Opening an Account -- Share Price". Assets of the Fund will consist of
securities with maturities of 397 days or less at date of purchase or, if
maturing beyond 397 days, securities which are backed by Liquidity Agreements
and which have variable interest rates adjustable at least semi-annually and
upon the adjustment of the interest rate the value of the securities will be
approximately equal to par. In determining whether particular variable rate
investments backed by Liquidity Agreements may be made, the period remaining
until maturity will be deemed to be the longer of the demand notice period
required before the Fund is entitled to receive payment of the principal amount
or the period remaining until the next interest adjustment. The dollar-weighted
average maturity of Fund investments will be 90 days or less, determined in the
same manner.
Under normal market conditions, the Fund as a matter of fundamental policy, will
invest at least 80 percent of its total net assets in tax-exempt securities, the
interest on which is exempt from federal income tax, except to the extent that
some or all of which may be subject to the alternative minimum tax. This
fundamental policy may not be changed without the approval of a majority of the
Fund's outstanding voting securities. It is the policy of the Fund that any
illiquid securities may not constitute, at the time of purchase or at anytime,
more than ten percent of the value of the total net assets of the Fund. The Fund
does not intend to concentrate its investments in any one industry and pursuant
to Section 18(f) of the 1940 Act may not issue senior securities.
As a general policy, it is the Fund's intention to hold investments until they
mature or until immediately prior to the expiration of an applicable Liquidity
Agreement. However, in an effort to increase portfolio yields, the Fund may
periodically trade securities to take advantage of perceived disparities between
markets for various short-term money market instruments. It is also possible
that redemptions of Fund shares could necessitate the sale of portfolio
investments prior to maturity and at times when such sale would be undesirable
because of unfavorable market conditions.
New issues of tax-exempt debt obligations are usually offered on a when-issued
basis with the securities to be delivered and paid for approximately 45 days
following the initial purchase commitment. The Fund may occasionally enter into
such commitments, subject to certain limitations and procedures discussed in the
Statement of Additional Information.
While investments by the Fund will be confined to high-quality financial
instruments, the complete elimination of risk is not possible. Under certain
circumstances, described in more detail in the Statement of Additional
Information, the net asset value of Fund shares could decrease. It is also
possible an issuer or bank will default on the provisions of their Liquidity
Agreements, which could cause the net asset value per share to decrease. In
light of these various contingencies, there can be no assurances the Fund will
achieve its investment objectives.
The Fund has adopted a number of investment policies and restrictions, some of
which can be changed by the Board of Directors. Others may be changed only by
holders of a majority of the outstanding shares and include the following:
Without shareholder approval the Fund may not: (1) purchase any securities other
than those described under "Investment Policy"; (2) invest more than 80 percent
of its total assets in tax-exempt fixed and variable rate debt obligations (or
participation interests therein) issued by state and local governmental units
within the United States which are backed by Liquidity Agreements; (3) invest
more than five percent of its total assets (determined as of the date of
purchase) in tax-exempt obligations or participation interests therein subject
to Liquidity Agreements issued by any one bank; (4) purchase or sell real
estate, commodities or commodity contracts, interests in oil, gas or other
mineral exploration or development programs; (5) make short sales of securities
or maintain a short position or write, purchase, or sell puts (excluding
Liquidity Agreements covering certain tax-exempt obligations purchased by the
Fund), calls, straddles, spreads or combinations thereof; (6) make loans to
other persons, provided the Fund may make investments and enter into repurchase
agreements as described above; (7) invest in securities with legal or
contractual restrictions on resale (except for tax-exempt debt obligations
subject to Liquidity Agreements) or for which no ready market exists; (8) enter
into a Liquidity Agreement with any bank unless such bank is a United States
bank which has a record, together with predecessors, of at least five years of
continuous operations; (9) enter into repurchase agreements if, as a result
thereof, more than five percent of the Fund's total assets (taken at market
value at the time of such investment) would be subject to repurchase agreements
maturing in more than seven days; and (10) enter into Liquidity Agreements with
any bank if five percent or more of the securities of such bank are owned by the
Advisor or by directors and officers of the Fund or the Advisor, or if any
director or officer of the Fund or the Advisor owns more than 1/2 percent of the
voting securities of such bank.
The foregoing investment restrictions are considered fundamental policies which
cannot be changed without the approval of a "majority" of the Fund's outstanding
voting securities, that is, by (1) 67 percent or more of the securities voting
at a special or annual meeting if more than 50 percent of the outstanding shares
of Common Stock are represented at such meeting in person or by proxy; or (2)
more than 50 percent of the outstanding Common Stock, whichever is less. The
Statement of Additional Information includes discussion of certain other
investment policies and restrictions, some of which are also considered
fundamental and may not be changed without shareholder approval.
PERFORMANCE
Performance of each Fund may be quoted in advertising in terms of current yield
and effective yield. CURRENT YIELD refers to the income generated by an
investment in either Fund over a seven-day period. This income is then
"annualized". That is, the amount of income generated by the investment during
that week is assumed to be generated each week over a 52-week period and is
shown as a percentage of the investment. The Fund may also present a 30-day
yield which is calculated similarly but instead refers to a 30-day period rather
than a seven-day period. EFFECTIVE YIELD is calculated similarly but, when
annualized, that income earned from the investment is assumed to be reinvested
weekly. Effective yield will be slightly higher than current yield because of
the compounding effect of this assumed reinvestment.
Performance of the Funds may also be compared to other mutual funds with similar
investment objectives, relevant indices or rankings prepared by independent
services or other financial publications, or yields on deposits at financial
institutions. Unlike the Funds, deposit accounts at financial institutions are
generally insured by the Federal Deposit Insurance Corporation and do not
fluctuate to the extent of the Funds.
Additionally, Municipal Assets may quote a taxable-equivalent yield based on a
stated income tax rate. Please see each Fund's Statement of Additional
Information for further discussion of the manner in which yields are calculated
and the comparative performance data which may be used.
Of course, the Funds' yields are not fixed nor is principal guaranteed. Yields
are functions of the type and quality of instruments held in the portfolio,
operating expenses, and market conditions. Consequently, current yields will
fluctuate and are not necessarily representative of the future results.
DISTRIBUTIONS AND TAXES
Dividends from the net income of each Fund are declared daily on each business
day and paid monthly to holders of record immediately before 3:00 p.m. Central
Time. Dividends are automatically reinvested in Institutional Shares unless cash
payment has been selected on the Account Application. If a shareholder has
elected to receive dividends and/or distributions in cash and the checks are
returned and marked as "undeliverable" or remain uncashed for six months, your
cash election will be changed automatically and future dividends will be
reinvested in Institutional Shares of the Fund. In addition, any undeliverable
checks or checks that remain uncashed for six months will be canceled and will
be reinvested in Institutional Shares of the Fund at the per share net asset
value determined as of the date of cancellation. If a shareholder redeems the
entire amount in his account during the month, dividends credited to the account
from the beginning of the month through the date of redemption are paid with the
redemption proceeds.
Dividends on each class of shares are determined in the same manner and are paid
in the same amounts irrespective of class, except that each class bears separate
distribution and/or shareholder servicing fees (see "Organization and Shares of
the Funds").
Dividends declared in October, November, or December of any year, payable to
shareholders of record on a specified date in such months, will be deemed to
have been received by the shareholders and paid by the Funds on December 31 of
such year, in the event that such dividends are actually paid during January of
the following year.
Each Fund intends to qualify as a regulated investment company by distributing
substantially all of its taxable net income, including any realized capital
gains, and thus will not incur any Federal income taxes. Shareholders will
receive taxable dividend income, tax-exempt dividend income and/or capital
gains, as the case may be, from distributions whether paid in cash or received
in the form of additional shares.
Dividends derived from interest on federally tax-exempt debt obligations owned
by Municipal Assets are intended to constitute "exempt-interest dividends" which
are generally not Federally taxable to shareholders, although some could be
includable for purposes of the alternative minimum tax. Dividends derived from
other interest and the realization of capital gains are taxable to shareholders
whether or not reinvested.
Municipal Assets expenses will be allocated between tax-exempt and taxable
income in the same proportion as the Fund's tax-exempt income bears to the total
of such exempt income and its gross income (excluding from gross income the
excess of capital gains over capital losses).
Promptly after the end of each calendar year, each shareholder will receive a
statement of the Federal income tax status of all dividends and distributions
paid during the year. This discussion is only a summary and relates solely to
Federal tax matters. Further discussion of the Federal Income Tax consequences
of an investment in the Fund is provided in the Statement of Additional
Information. Dividends may also be subject to local taxation. Shareholders are
encouraged to consult with their personal tax advisors.
ORGANIZATION AND SHARES OF THE FUNDS
IMG Mutual Funds, Inc. is a Maryland corporation organized on November 16, 1994.
The Funds were created on October 30, 1997, to acquire the assets and continue
the business of the corresponding substantially identical investment portfolios
of the Liquid Assets Funds, Inc., and the Municipal Assets Funds, Inc., two
separately registered open-end, diversified management investment companies
organized as Iowa corporations. References herein to the "immediate predecessor"
of the Funds refer to the respective companies which correspond to such Fund. .
Each Share of a Fund represents an equal proportionate interest in that Fund
with other Shares of the same Fund, and is entitled to such dividends and
distributions out of the income earned on the assets belonging to that Fund as
are declared at the discretion of the Directors.
The Articles of Incorporation of the Company permit the Company, by resolution
of its Board of Directors, to create new series of common stock relating to new
investment portfolios or to subdivide existing series of Shares into subseries
or classes. Classes are utilized to create differing expense and fee structures
for investors in the same Fund. Differences exist, for example in the sales
load, Rule 12b-1 fees or service plan fees applicable to different classes of
Shares offered by a particular Fund. Such an arrangement could enable the
Company to tailor its marketing efforts to a broader segment of the investing
public with a goal of attracting additional investments in the Funds.
Institutional Shares of the Funds are described in this Prospectus. Sweep Shares
and Trust Shares and S2 Shares are offered in separate Prospectuses which may be
obtained by calling the Fund at 1-800-798-1819 or writing to the address on the
cover of this Prospectus. Please read the Prospectus carefully before investing
or sending money. All shares are offered to individual and institutional
investors acting on their own behalf or on behalf of their customers and bear
their pro rata portion of all operating expenses paid by the Funds, except that
Sweep Shares, Trust Shares and S2 Shares bear separate distribution and/or
shareholder servicing fees. Institutional Shares bear no distribution or
shareholder servicing fees.
Each class of shares offers different privileges. Sweep Shares and S2 Shares are
normally offered through financial institutions providing automatic "sweep"
investment programs to their customers, and offer a check writing privilege.
Trust Shares are normally offered through trust organizations or others
providing shareholder services such as establishing and maintaining accounts and
records for their customers who invest in Trust Shares, assisting customers in
processing purchase, exchange and redemption requests, and responding to
customers' inquiries concerning their investments. Institutional Shares are
available directly from the Distributor only and offer only the Exchange and
Telephone Transfer services. Each class of shares is exchangeable only for
shares of the same class. Financial institutions selling or servicing Sweep
Shares, Trust Shares and S2 Shares may receive different compensation with
respect to one class over another.
Shareholders are entitled to one vote for each full share held and proportionate
fractional votes for fractional shares held. Shares of each Fund will vote
together and not by class unless otherwise required by law or permitted by each
Fund's Board of Directors. All shareholders of each Fund will vote together as a
single class on matters relating to the Fund's investment advisory agreement,
investment objective and fundamental policies. Only holders of Sweep Shares and
S2 Shares will vote on matters relating to the Distribution Plan for Sweep
Shares and S2 Shares. Only holders of Trust Shares will vote on matters
pertaining to the Shareholder Services Plan for Trust Shares.
Shares of the Funds have non-cumulative voting rights and, accordingly, the
holders of more than 50 percent of each Fund's outstanding shares (irrespective
of class) may elect all of the Directors. Shares have no preemptive rights and
only such conversion and exchange rights as each Fund's Board may grant in its
discretion. When issued for payments as described in this Prospectus, shares
will be fully paid and nonassessable. All shares are held in uncertificated form
and will be evidenced by the appropriate notation on the books of the transfer
agent.
SHAREHOLDER REPORTS AND MEETINGS
Each shareholder will receive monthly Fund information, an unaudited semiannual
report, and an annual report containing audited financial statements. If you
have questions about your account, call 1-800-798-1819. You may also write the
Fund at the address on the cover of this Prospectus. You may order statements
for the current and preceding year at no charge. However, there will be a $10.00
fee per statement for statements ordered for other years.
The Fund may operate without an annual meeting of shareholders under specified
circumstances if an annual meeting is not required by the 1940 Act. The Funds
have adopted the appropriate provisions in their Bylaws and may, in their
discretion, not hold annual meetings of shareholders for the election of
Directors unless otherwise required by the 1940 Act. The Funds have also adopted
provisions in their Bylaws for the removal of Directors by the shareholders.
Shareholders may receive assistance in communicating with other shareholders as
provided in Section 16(c) of the 1940 Act.
There normally will be no meetings of shareholders for the purpose of electing
Directors unless and until such time as less than a majority of the Directors
holding office have been elected by shareholders, at which time the Directors
then in office will call a shareholders' meeting for the election of Directors.
Shareholders of the Funds may remove a Director by the affirmative vote of a
majority of the Funds' outstanding voting shares. In addition, the Directors are
required to call a meeting of shareholders for the purpose of voting upon the
question of removal of any such Director or for any other purpose when requested
in writing to do so by the shareholders or record of not less than 10 percent of
the Funds' outstanding voting securities.
To date, ten Funds have been authorized. All consideration received by the Funds
for shares of one of the Funds and all assets in which such consideration is
invested, belong to that Fund (subject only to the rights of creditors of the
Fund) and will be subject to the liabilities related thereto. The income and
expenses attributable to one Fund are treated separately from those of the other
Funds.
Rule 18f-2 under the 1940 Act provides that any matter required to be submitted
under the provisions of the 1940 Act or applicable state law or otherwise, to
the holders of the outstanding voting securities of an investment company, such
as the Funds, will not be deemed to have been effectively acted upon unless
approved by the holders of a majority of the outstanding shares of each Fund
affected by such matter. Rule 18f-2 further provides that a Fund shall be deemed
to be affected by a matter unless it is clear that the interests of each Fund in
the matter are identical or that the matter does not affect the interest of such
Fund. However, the Rule exempts the selection of independent auditors and the
election of Directors from the separate voting requirements of the Rule.
MANAGEMENT AND FEES
Overall responsibility for management of the Company rests with the Board of
Directors, who are elected by the Shareholders of the Company's Funds. The
Company will be managed by the Directors in accordance with laws of Maryland
governing corporations. The Directors, in turn, elect the officers of the
Company to supervise the day-to-day operations. The Directors receive fees and
are reimbursed for their expenses in connection with each meeting of the Board
of Directors they attend. The officers of the Company receive no compensation
directly from the Company for performing the duties of their offices.
Investors Management Group, ("IMG") manages the investments and business affairs
of the Funds. IMG is a federally registered Investment Advisor organized in 1982
and located at 2203 Grand Avenue, Des Moines, Iowa 50312-5338. IMG has been
providing continuous investment management to pension and profit-sharing plans,
insurance companies, public agencies, banks, endowments and charitable
institutions, other mutual funds, individuals and others for over 15 years. As
of November 30, 1997, IMG had approximately $1.6 billion in equity, fixed income
and money market assets under management.
The Funds will be managed by Jeffrey D. Lorenzen, CFA, Managing Director,
Kathryn D. Beyer, CFA, Managing Director, and Elizabeth S. Pierson, CFA, Senior
Fixed Income Manager. Mr. Lorenzen is a fixed income strategist and is a member
of IMG's Investment Policy Committee. Prior to joining IMG in 1992, his
experience includes serving as a securities analyst and corporate fixed income
analyst for The Statesman Group from 1989 to 1992. Mr. Lorenzen received his
Masters of Business Administration degree from Drake University, Des Moines,
Iowa, and his Bachelor of Business Administration degree from the University of
Iowa, Iowa City, Iowa. Ms. Beyer is a fixed income strategist and is a member of
IMG's Investment Policy Committee. Prior to joining IMG in 1993, her experience
includes serving as a securities analyst and director of mortgage-backed
securities for Central Life Assurance Company from 1988 to 1993. Ms. Beyer
received her Master of Business Administration degree from Drake University, Des
Moines, Iowa, and her Bachelor of Science degree in agricultural engineering
from Iowa State University, Ames, Iowa. Ms. Pierson is a fixed income strategist
and is a member of IMG's Investment Policy Committee. She began her investment
career in 1984 with AMCORE Capital Management, Inc. Ms. Pierson received her
Bachelor of Science degree from the University of Illinois, Champaign-Urbana.
Under a management contract between each Fund and IMG, a fee is paid to IMG for
investment advisory services. Each Fund is responsible for paying operating
expenses not assumed by IMG.
The management fee for each Fund is calculated daily and paid monthly. The
maximum management fee for each Fund is 0.35 percent of each Fund's average
daily net assets.
From time to time, IMG may voluntarily waive all or a portion of the management
fee and/or absorb certain expenses of a Fund or class of shares without further
notification of the commencement or termination of such waiver or absorption.
Any such waiver will have the effect of lowering the overall expense ratio for a
Fund or class of shares and increasing the overall yield to investors in that
Fund or class of shares at the time any such amounts are waived and/or absorbed.
IMG may not seek reimbursement of such waived fees at a later date. The waiver
of such fee will cause the yield of a Fund to be higher than it would otherwise
be in the absence of such a waiver.
IMG also provides management and administration, fund accounting, transfer
agency, and shareholder recordkeeping services to the Funds. IMG is compensated
for each of these services under separate written contracts with the Funds. The
fees received and the services provided under these contracts are in addition to
those received and paid to IMG under the Advisory Agreement.
At its expense, IMG provides office space and all necessary office facilities,
equipment, and personnel for servicing the investments of the Funds. Except for
the expenses expressly assumed by IMG pursuant to its investment advisory
agreement, each Fund is responsible for all its other expenses, including,
without limitation, governmental fees, interest charges, taxes if applicable,
membership dues in the Investment Company Institute allocable to the Fund,
broker commissions, and other expenses connected with the execution, recording
and settlement of Fund security transactions, expenses of repurchasing and
redeeming shares and expenses of servicing shareholder accounts; expenses for
preparing, printing and distributing periodic reports, notices and proxy
statements to shareholders and to governmental officers and commissions;
insurance premiums, fees and expenses of the Fund's custodian, including
safekeeping of funds and securities and maintaining required books and
accounting; expenses of calculating the net asset value of shares of the Funds;
fees and expenses of independent auditors, of legal counsel, and of any transfer
agent, registrar or dividend disbursing agent of the Funds; compensation and
expenses of Directors who are not "interested persons" of the Advisor; and
expenses of shareholder meetings. Expenses relating to the issuance,
registration and qualification of shares of the Funds and the preparation,
printing and mailing of prospectuses to existing shareholders are borne by the
Funds except that the Funds' Distribution Agreement requires that the
Distributor pay for prospectuses that are to be used for sales purposes with
persons other than current shareholders.
From time to time, IMG may voluntarily waive all or a portion of the management
fee and/or absorb certain expenses of a Fund without further notification of the
commencement or termination of such waiver or absorption. Any such waiver will
have the effect of lowering the overall expense ratio for that Fund and
increasing the Fund's overall yield to investors at the time any such amounts
are waived and/or absorbed.
Except as voluntarily absorbed by IMG, all expenses incurred in the operation of
the Funds will be borne by the Funds. Expenses attributable to a particular Fund
are charged against the assets of that Fund; other expenses of the Funds are
allocated among the Funds on a reasonable basis determined by the Board of
Directors, including, but not limited to, proportionately in relation to the net
assets of each Fund.
The Glass-Steagall Act and other applicable laws prohibit banks from engaging in
the business of underwriting, selling, or distributing securities. Insofar as
Participating Organizations (including banks) are compensated under the Plans,
their only function will be to perform administrative and shareholder services
for their clients who wish to invest in the Funds. If a Participating
Organization at a future date is prohibited from acting in this capacity, the
shareholder may lose the services provided by the Participating Organization;
however, it is not expected that the shareholders would incur any adverse
financial consequences. It is intended that none of the services provided by
such Participating Organizations other than through registered brokers will
involve the solicitation or sale of shares of the Funds.
AMCORE Investment Group, N.A., Rockford, Illinois, acts as custodian for the
Funds' cash and investments.
OPENING AN ACCOUNT
The Funds require a completed and signed application (which is attached) at the
time you open each new account. Additional paperwork may be required from
corporations, associations and certain fiduciaries. IF YOU HAVE QUESTIONS CALL
THE FUNDS AT 1-800-798-1819 FROM 8:00 A.M. TO 4:30 P.M. CENTRAL TIME.
SHARE PRICE
The shares of each Fund are sold without a sales charge. The price of one share
is its "net asset value" or NAV (generally $1.00). NAV is computed by adding the
value of each Fund's investments, plus cash and other assets, deducting
liabilities and then dividing the result by the number of shares outstanding.
The NAV of each Funds' shares is determined twice each business day, at 11:00
a.m. Central Time and at the close of the New York Stock Exchange (normally 3:00
p.m. Central Time). The Funds are open for business each day the Federal Reserve
is open.
Your purchase will be processed at the next NAV calculated after your investment
has been converted to federal funds. If you invest by check, the Funds must
generally allow one or more days for conversion into federal funds before
accepting your purchase.
Rule 2a-7 under the Investment Company Act of 1940 permits the Funds to compute
net asset value per share using the amortized cost method of valuing portfolio
securities. As a condition for using the amortized cost method of valuation, the
Board of Directors established procedures to stabilize each Fund's net asset
value at $1.00 per Share. These procedures are described in more detail in each
Fund's Statement of Additional Information.
Under the amortized cost method of valuation, a security is initially valued at
cost on the date of purchase and, thereafter, any discount or premium is
amortized on a straight-line basis to maturity, regardless of the effect of
fluctuating interest rates on the market value of the security. U.S. government
obligations, Student Loan Certificates and FmHA Certificates, which are subject
to mandatory repurchase at their original purchase price, investments in taxable
and tax-exempt debt obligations rated by a recognized bond rating agency and
regularly traded in the secondary market, and nonrated fixed and variable rate
tax-exempt obligations and participation interests therein, not regularly traded
in the secondary market but subject to Liquidity Agreements will be valued at
amortized cost. Other assets are valued at a fair value determined in good faith
by the board of directors of each Fund.
PURCHASING SHARES
Shares of each Fund may be purchased directly from BISYS Fund Services, Inc., as
the distributor. Shares may also be purchased by customers of qualified banks,
savings and loan associations, broker/dealers, investment advisory firms, and
other organizations ("Participating Organizations") that have entered into
servicing agreements with the Distributor. The Participating Organization is
responsible for transmitting purchase orders directly to the Fund's Distributor.
A Participating Organization may elect to hold record ownership of shares for
its customers and to show beneficial ownership of shares on the account
statements it provides to them. In the alternative, a Participating Organization
may elect to establish its customers' accounts of record with IMG as transfer
agent for the Funds. Generally, shares purchased through Participating
Organizations will be held by the Participating Organization as shareholder of
record.
Shares of each Fund are offered without any purchase or redemption charge
imposed by the Fund. The minimum initial investment that may be made in each
Fund is $250. Subsequent investments in each Fund must be made in amounts of not
less than $25, except where purchases are made through Participating
Organizations in which case there is no minimum. Participating Organizations may
aggregate their customers' purchases to satisfy the required minimums.
Purchases may be effected on business days when the Advisor, Distributor and
Custodian are open for business. The Funds reserve the right to reject any
purchase order, including purchases made with foreign and third party drafts or
checks.
A purchase order for Institutional Shares received and accepted by the Funds by
10:00 a.m. Central Time on a business day is effected at the net asset value per
share calculated as of 11:00 a.m. Central Time, and investors will receive the
dividend declared that day, IF THE CUSTODIAN HAS RECEIVED THE PURCHASE PRICE IN
FEDERAL FUNDS OR OTHER IMMEDIATELY AVAILABLE FUNDS BY 3:00 P.M. CENTRAL TIME
THAT DAY. A purchase order for Institutional Shares received after 10:00 a.m.
Central Time and prior to 3:00 p.m. Central Time on a business day for which
such funds have been received by 3:00 p.m. Central Time will be effected as of
3:00 p.m. Central Time, and will begin to accrue dividends on the following
business day. If federal funds are not available by 3:00 p.m. Central Time, the
order will be canceled. Payment for orders which are not accepted or are
canceled will be returned after prompt inquiry to the transmitting organization.
While the Funds themselves do not presently levy sales, redemption or account
service charges, Participating Organizations may elect to do so and the Funds
may elect to do so in the future. Investors should inquire regarding the nature
and costs of services provided by Participating Organizations and determine if
such services are desired, because the costs thereof will reduce the Funds'
yields to the investor below that obtainable by investing in the Funds directly.
Customers wishing to purchase shares through their Participating Organization
should contact such entity directly for appropriate instructions. (For a list of
the Participating Organizations in your area, CALL THE FUNDS AT 1-800-798-1819
OR 515-244-5426.) Direct investors may purchase shares in accordance with the
procedures described below, "Purchase Procedures".
Certificates representing Fund shares purchased will not be issued. However, all
purchases are confirmed in writing to the investor and credited to their account
in the shareholder records maintained by the Transfer Agent. Investors will have
the same rights to their shares as if certificates had been issued.
PURCHASE PROCEDURES
METHOD INITIAL INVESTMENT ADDITIONAL INVESTMENT
BY MAIL $250 (minimum) $25 (minimum)
Please make your check Please make your check
payable to the Fund selected payable to the Fund
and mail to the address selected, with your
indicated on the application. account number on the
check and mail to the
address printed on your
account statement.
BY WIRE Please call for an account See instructions below.
number before initial invest-
ment at 1-800-798-1819 or
515-244-5426.
Federal Funds should be wired to: Federal Reserve Bank of Chicago for AMCORE
Investment Group, N.A., Rockford, Illinois, together with the name of the
Fund, your account number and names.
Please note that when accounts are opened by wire you must send a completed
application at your earliest convenience. Your application must be received
by the Fund before any instructions for redemption will be accepted.
BY ELECTRONIC Not available for initial Shareholders who have
FUNDS TRANSFER purchase. an account with an
(ACH) institution which is a
member of the Automated
Clearing House, may
elect to purchase Fund
shares via electronic
funds transfer. Select
this service on your
application or call
the Fund.
SHAREHOLDER SERVICES
Some shareholder services may not be available if shares are purchased through
Participating Organizations. Call IMG Financial Services, Inc., at
1-800-798-1819 for more information.
EXCHANGE PRIVILEGE. You may exchange Institutional Shares of either Fund for
Institutional Shares in the other Fund described in this Prospectus. An exchange
involves a redemption of the shares of the Fund being liquidated and a purchase
of the shares of the Fund in which the redemption proceeds are to be invested.
The exchange privilege is offered as a convenience to shareholders and is not
intended to be a means of speculating on short-term movements in securities
prices by transactions involving frequent purchases and sales of shares. Each
Fund reserves the right at any time and without prior notice, to suspend, limit,
modify or terminate exchange privileges or their use by individual shareholders
in order to prevent transactions considered to be disadvantageous to existing
shareholders.
TELEPHONE TRANSFERS. This service allows you to authorize transfers of money to
purchase or sell shares. Using Telephone Transfer you can move money between
your bank account and your account in the Funds with one phone call. Moneys may
be transferred either by wire or electronic funds transfer with an institution
which is a member of the Automated Clearing House ("ACH").
Wire transfers may be used to transfer federal funds directly to/from the Funds'
custodian bank. A $15.00 fee may be charged to your account for redemptions by
wire.
Allow two (2) days after the call for electronic funds transfer via ACH to move
moneys between your bank account and your account with either Fund.
For moneys recently invested, allow normal clearing time before redemption
proceeds are sent to your bank. In order to change the financial institution
account designated to receive redemption proceeds, it will be necessary to send
a written request to the Fund with a signature guarantee from a national or
state bank, a trust company or a federal savings and loan association, or a
member firm of the New York, American, Boston, Midwest or Pacific Stock
Exchange.
You can also arrange SYSTEMATIC PERIODIC INVESTMENTS (minimum $50) into your
Fund account. Simply select the regular investment schedule you would like when
completing your account application. Your bank account will automatically be
debited to purchase shares of the Fund you select. You will receive confirmation
of each transaction.
Your bank must be a member of ACH and you must have a checking or NOW/Money
Market Deposit account to use electronic funds transfer or systematic investing.
Please allow 20 days after receipt of your application to activate the Telephone
Transfer capability.
STATEMENTS AND REPORTS. You will receive a statement of your account listing
every transaction that affects your share balance no less than once per month.
At least twice a year you will receive the financial statements of the Fund in
which you have invested with a summary of that Fund's portfolio composition and
performance. Each Fund's Annual Report is reported on by the Funds' independent
auditors, KPMG Peat Marwick LLP.
REDEEMING SHARES
Shareholders may request redemption of their shares at any time. Shares will be
redeemed at their net asset value as next determined after a redemption request
in good order is received by the Fund's Distributor. Redemption orders received
and accepted by the Distributor before 10:00 a.m. Central Time on a business day
will be redeemed as of 11:00 a.m. Central Time and will earn dividends through
the previous day; proceeds normally will be sent electronically the same day (or
mailed by check the next business day) to the organization that placed the
redemption order in good form. Redemption orders received after 10:00 a.m.
Central Time or on a non-business Day will be redeemed as of 3:00 p.m. Central
Time or at the next determined net asset value and earn dividends through the
date the redemption request was received; proceeds will be sent electronically
on the next business day (or mailed by check on the second business day
thereafter). While the Funds use their best efforts to maintain their net asset
value per share at $1.00, the proceeds paid upon redemption may be more or less
than the amount originally invested.
If you purchase shares through a Participating Organization, you may redeem
shares in accordance with that Organization's rules regarding redemption
requests. Direct shareholders may redeem shares in accordance with the
procedures described under "How to Redeem Shares".
The Funds intend to pay redemption proceeds within two business days and in no
event will payment be made later than seven days after receipt of a redemption
request in good order. Payments to investors who request to redeem shares within
a few days after a purchase paid for by check may be delayed until the Funds can
verify the check has been collected.
The Funds reserve the right to suspend redemptions or to postpone the payment
therefore when: (a) trading on the New York Stock Exchange is restricted as
determined by the Securities and Exchange Commission, or the Exchange is closed
for other than customary weekend and holiday closings; (b) the Securities and
Exchange Commission has permitted such suspension; or (c) an emergency as
determined by the Securities and Exchange Commission exists, making sale of
portfolio securities or valuations of the Funds' net assets not reasonably
practicable.
If an investor's account drops below $250 due to redemptions, the Funds reserve
the right to redeem any remaining shares if after 30 days' notice additional
investments to bring the account value to $250 are not made.
HOW TO REDEEM SHARES
BY MAIL-- Send a "letter of instruction": a
TO: 2203 GRAND AVENUE letter specifying the name of the
DES MOINES, IA 50312-5338 Fund, the number of shares to be
sold, your name, your account number,
and the additional requirements
listed below that apply to your
particular account.
TYPE OF REGISTRATION REQUIREMENTS
Individual, Joint Tenants, Sole Letter of instruction signed by all
Proprietorship, Custodial (Uniform persons required to sign for the
Gifts or Transfers To Minors Act), account, exactly as it is registered,
General Partners accompanied by signature guarantee(s).
Corporation, Association Letter of instruction and a corporate
resolution signed by person(s)
authorized to act on the account,
accompanied by signature guarantee(s).
Trust A letter of instruction signed by
the Trustee(s) (as Trustee), with a
signature guarantee. (If the Trustee's
name is not registered on your
account, also provide a copy of the
trust document, certified within the
last 60 days.)
If you do not fall into any of these registration categories (e.g.,
Executors, Administrators, Conservators or Guardians) please call for further
instructions.
A signature guarantee is designed to protect you and the Fund against
fraudulent transactions by unauthorized persons. A signature guarantee is
required for all persons registered on an account. A signature guarantee may
be obtained from an eligible guarantor institution, as defined by the
Securities and Exchange Commission. These institutions include banks, savings
and loan associations, credit unions, brokerage firms, and others. The words,
"SIGNATURE GUARANTEED" must be stamped or typed near each person's signature
and appear with the printed name, title, and signature of an officer and the
name of the guarantor institution. PLEASE NOTE THAT A NOTARY PUBLIC STAMP OR
SEAL IS NOT A SIGNATURE GUARANTEE.
FOR ALL OPTIONS BELOW, PLEASE CALL 1-800-798-1819
BY EXCHANGE-- You must meet the minimum investment
requirement of the other fund. You
can only exchange between accounts
with identical names, addresses, and
taxpayer identification numbers.
BY ELECTRONIC FUNDS You must have applied for the
TRANSFER (ACH) OR WIRE-- Telephone Transfer feature on your
application. Allow two days via ACH.
Call before 10:00 a.m. for same day
wire. $15.00 fee for bank wires.
<PAGE>
TABLE OF CONTENTS
Expense Summary of Institutional Shares.................................2
Highlights..............................................................3
Financial Highlights....................................................4
Investment Objectives, Policies and Restrictions........................7
Liquid Assets.......................................................... 7
Municipal Assets........................................................9
Performance............................................................12
Distributions and Taxes................................................13
Organization and Shares of the Funds...................................14
Management and Fees....................................................15
Opening an Account.....................................................16
Share Price........................................................16
Purchasing Shares..................................................17
Shareholder Services...................................................19
Redeeming Shares.......................................................21
NO SALESMAN, OR OTHER PERSON, HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN
CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE,
SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE FUNDS OR BY BISYS FUND SERVICES, INC. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING BY BISYS FUND SERVICES, INC., IN ANY STATE IN WHICH SUCH
OFFERING MAY NOT LAWFULLY BE MADE.
<PAGE>
LIQUID ASSETS FUND 2203 GRAND AVENUE
DES MOINES, IA 50312-5338
STATEMENT OF ADDITIONAL INFORMATION __, 1997
This statement is not a Prospectus but should be read in conjunction with the
Fund's current Prospectuses (dated _____ __, 1997). Please retain this Statement
for future reference. To obtain the Annual Report or any Prospectus please call
the Fund at the number indicated below.
For current yield, purchase and redemption information call....... 800-798-1819
.................................................................. 515-244-5426
Table of Contents:
General Information and History.................................
Investment Objectives, Policies and Restrictions................
Purchases of Fund Shares........................................
The Distributor and Distribution Plan...........................
Administrative Services .......................................
Valuing the Fund's Shares.......................................
Calculation of Yield............................................
Dividends.......................................................
Taxation........................................................
Management......................................................
Compensation Table..............................................
The Investment Management Agreement.............................
Student Loan Trusts.............................................
Guaranteed Loan Trusts..........................................
Other Information...............................................
Federal Holidays............................................
Portfolio Transactions......................................
Organization and Shares of the Fund.........................
Reports to Shareholders.....................................
Principal Shareholders......................................
Custodian, Transfer Agent and Dividend Paying Agent.........
Legal Opinion...............................................
Independent Auditors........................................
<PAGE>
GENERAL INFORMATION
IMG Mutual Funds, Inc. (the "Company") is an open-end management investment
company which currently offers it shares in series representing eleven
diversified investment portfolios: IMG Core Stock Fund, IMG Bond Fund, Vintage
Equity Fund, Vintage Aggressive Growth Fund, Vintage Balanced Fund, Vintage
Municipal Bond Fund, Vintage Income Fund, Vintage Limited Term Bond Fund, Liquid
Assets Fund, Government Assets Fund and Municipal Assets Fund (Individually a
"Fund" and collectively the "Funds"). The Company was organized on November 16,
1994 under the laws of Maryland. Shares of the Funds are also issued in classes
with differing distribution and shareholder servicing arrangements. Subject to
the class level expenses, each Fund's share represents an equal proportionate
interest in a Fund with other shares of the same Fund, and is entitled to such
dividends and distributions out of the income earned on the assets belonging to
that Fund, subject to the class level expenses, as are declared at the
discretion of the Directors. The Liquid Assets Fund was created on October 30,
1997, to acquire the assets and continue the business of the corresponding
substantially identical investment portfolio of the Liquid Assets Funds, Inc., a
separately registered open-end diversified management investment company
organized as an Iowa corporation. References herein to the "immediate
predecessor" of the Fund refer to the respective corresponding company.
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
Liquid Assets Fund ("Liquid Assets" or the "Fund" hereafter) seeks to provide
maximum current income consistent with safety of principal and maintenance of
liquidity. In order to accomplish this goal, assets of the Fund will be invested
in the following money market instruments maturing in 397 days or less from time
of investment, (with certain exceptions):
(1) Securities issued or guaranteed by the United States Government. These
include, for example, Treasury Bills, Bonds and Notes which are direct
obligations of the United States Government.
(2) Obligations issued or guaranteed by agencies or instrumentalities of
the United States Government. Such agencies and instrumentalities
include for example, Federal Intermediate Credit Banks, Federal Home
Loan Banks, Federal National Mortgage Association and Farmers Home
Administration. Such securities will include, for example, those
supported by the full faith and credit of the United States Treasury or
the right of the agency or instrumentality to borrow from the Treasury
as well as those supported only by the credit of the issuing agency or
instrumentality.
(3) Repurchase agreements involving securities in the immediately foregoing
categories. A repurchase agreement involves the sale of such securities
to the Fund with the concurrent agreement of the seller to repurchase
them at a specified time and price, to yield an agreed upon rate of
interest. The Fund will enter into repurchase agreements with brokers
and banks. Thus, the Fund must initially rely upon the credit of a
particular broker or bank for completion of the repurchase agreement.
Such repurchase agreements are intended to be fully collateralized, in
an amount equal to at least the principal amount of the transaction
plus accrued interest earned thereon, by the underlying Government or
agency securities valued at their fair market value each day. Although
the Fund will normally have legal title to and constructive possession
of the collateral, it cannot eliminate the risk of a default by a
broker or bank which could result in a loss to the Fund on the sale of
the underlying securities or delays in obtaining the collateral because
of bankruptcy or insolvency proceedings.
(4) Redeemable interest-bearing Trust Certificates ("Student Loan
Certificates") issued by the Iowa Student Loan Trust and/or other
Student Loan Trusts established by the Fund, ("Student Loan Trusts"),
created for the sole purpose of purchasing from banks (which qualify as
"eligible lenders") federally insured student loans originated by
banks. The Student Loan Certificates will have original maturities of
not more than 397 days but will be redeemable by the Fund at their face
amount upon not more than five days' written notice to the issuing
Student Loan Trust. Funds will be made available to the issuing Student
Loan Trust to meet early redemptions of Student Loan Certificates under
an agreement between the Student Loan Trusts and various financial
institutions ("Participating Banks") requiring the Participating Banks
to repurchase, on not less than five business days' written notice, all
federally insured student loans sold to the Student Loan Trust or, if
permissible under applicable securities laws, to purchase an agreed to
amount of Student Loan Certificates. There will be no public market for
the Student Loan Certificates. See "Student Loan Trusts".
(5) Redeemable interest-bearing ownership certificates ("Certificates")
issued by one or more guaranteed loan trusts ("FmHA Trusts"), each
created for the purpose of acquiring participation interests in the
guaranteed portion of Farmer's Home Administration ("FmHA") guaranteed
loans. The FmHA Certificates will have original maturities of not more
than 397 days but will be redeemable by the Fund at their face amount
upon not more than five days' written notice to the issuing FmHA Trust.
Funds will be made available to the issuing FmHA Trust to meet early
redemption of FmHA Certificates under an unconditional purchase
commitment between the FmHA Trusts and various financial institutions
("Participating Banks") requiring the Participating Banks to
repurchase, on not less than five business days' written notice an
agreed to amount of the guaranteed portion of FmHA guaranteed loans
held by the FmHA Trust. See "Guaranteed Loan Trusts".
(6) Commercial paper which at the time of investment (a) is rated (or the
issuer of which has been rated) highest quality by two nationally
recognized statistical rating organizations ("NRSRO") if rated by two
or more NRSROs; (b) is rated (or the issuer of which has been rated)
highest quality if rated by only one NRSRO; of (c) is determined to be
of equivalent quality by the Fund's Board of Directors if unrated.
(7) U.S. dollar denominated obligations (certificates of deposit and
bankers' acceptances) issued by domestic offices of U.S. banks which,
at the date of investment, have capital, surplus, and undivided profits
(as of the date of their most recently published financial statements)
in excess of $10,000,000; and obligations of other banks or savings and
loans if such obligations are insured by the Federal Deposit Insurance
Corporation, provided that not more than 10 percent of the total assets
of the Fund will be invested in such insured obligations.
(8) Short-term (maturing in one year or less) corporate obligations which
at the time of investment (a) are rated in the top two categories by
two NRSROs, if rated by two or more NRSROs; (b) are rated in the top
two categories if rated by only one NRSRO; or (c) are determined to be
of equivalent quality by the Fund's Board of Directors if unrated.
Assets of the Fund will consist of securities with maturities of 397 days or
less at date of purchase or, if maturing beyond 397 days, securities which are
backed by Liquidity and Servicing Agreements or Guaranteed Funding Agreements
and which have variable interest rates adjustable at least semiannually. In
determining whether particular variable rate investments backed by Liquidity and
Servicing Agreements or Guaranteed Funding Agreements may be made, the period
remaining until maturity will be deemed to be the longer of the demand notice
period required before the Fund is entitled to receive payment of the principal
amount or the period remaining until the next interest adjustment. For purposes
of Rule 2a-7 and the diversification requirements thereunder, the unconditional
commitments are limited in amounts necessary to keep any one financial
institution from being obligated to purchase more than five percent of the total
assets held by the Fund (determined as of the date of purchase of the Student
Loan and/or FmHA Certificates). The dollar-weighted average maturity of Fund
investments will be 90 days or less, determined in the same manner. While the
underlying security in a repurchase agreement may have a maturity of more than
one year, the repurchase agreement itself will terminate in less than 397 days,
and typically within a few days. The underlying securities will be issued or
guaranteed by the United States Government, its agencies or instrumentalities.
In attempting to provide its shareholders with the highest income consistent
with safety of principal, the Fund will not necessarily purchase investments
bearing the highest interest rates available as such investments may also
involve a higher degree of risk.
As a fundamental policy the Fund does not intend to concentrate its investments
in any one industry and will not issue senior securities.
As a general policy, it is the Fund's intention to hold investments until they
mature. However, in an effort to increase portfolio yields the Fund may
periodically trade securities to take advantage of perceived disparities between
markets for various short-term money market instruments. It is also possible
that redemptions of Fund shares could necessitate the sale of portfolio
investments prior to maturity and at times when such sale would be undesirable.
While investments by the Fund will be confined to high-quality financial
instruments, the complete elimination of risk is not possible. Under certain
circumstances (see "Valuing the Fund's Shares" and "Dividends"), the net asset
value of Fund shares could decrease. It is also possible Participating Banks or
issuers will default on the provisions of their agreements with the Fund or that
banks originating student loans will default on their repurchase agreements with
the Student Loan Trusts or the FmHA Trusts, which could cause the net asset
value per share to decrease. In light of these various contingencies, there can
be no assurances the Fund will achieve its investment objectives.
The Fund has adopted a number of investment policies and restrictions, some of
which can be changed by the board of directors. Others may be changed only by
holders of a majority of the outstanding shares and include the following:
Without shareholder approval the Fund may not: (1) purchase any securities other
than those described under "Investment Objectives, Policies and Restrictions";
(2) invest more than 80 percent of its total assets in loans and/or loan
participations purchased from Participating Banks, Student Loan Certificates
and/or FmHA Certificates; (3) invest more than five percent of its total assets
in loan participations purchased from, or loans backed by letters of credit
issued by, any one Participating Bank (determined as of the date of purchase);
(4) invest with a view to exercising control or influencing management; (5)
invest more than ten percent of the value of its total assets in securities of
other investment companies, except in connection with a merger, acquisition,
consolidation or reorganization, subject to Section 12(d)(1) of the Investment
Company Act of 1940; (6) purchase or sell real estate, commodities or commodity
contracts, interests in oil, gas or other mineral exploration or development
programs; (7) purchase any securities on margin, except for the clearing of
occasional purchases or sales of portfolio securities; (8) make short sales of
securities or maintain a short position or write purchase or sell puts
(excluding repayment and guarantee arrangements on loan participations purchased
from Participating Banks), calls, straddles, spreads or combinations thereof;
(9) make loans to other persons, provided the Fund may invest up to 80 percent
of its total assets in loans and/or loan participations purchased from
Participating Banks, Student Loan Certificates and/or FmHA Certificates, as
described in (2) above, and may make the investments, and enter into repurchase
agreements, as described under "Investment Objectives, Policies and
Restrictions"; (10) borrow money, except to meet extraordinary or emergency
needs for funds, and then only from banks in amounts not exceeding ten percent
of its total assets, nor purchase securities at any time borrowings exceed five
percent of the Fund's total assets; (11) mortgage, pledge, hypothecate, or in
any manner transfer, as security for indebtedness, any securities owned by the
Fund except as may be necessary in connection with borrowings outlined in (10)
above and then securities mortgaged, hypothecated or pledge may not exceed five
percent of the Funds' total assets taken at market value; (12) invest in
securities with legal or contractual restrictions on resale (except for
repurchase agreements, loans, loan participations purchased from Participating
Banks and Student Loan and FmHA Certificates) or for which no ready market
exists; (13) purchase loan participations other than from banks which have
entered into a Liquidity and Servicing Agreement and which have a record,
together with predecessors, of at least five years of continuous operation; (14)
act as an underwriter of securities; (15) enter into repurchase agreements if,
as a result thereof, more than five percent of the Fund's total assets (taken at
market value at the time of such investment) would be subject to repurchase
agreements maturing in more than seven calendar days; and (16) purchase loan
participations from any Participating Bank if five percent or more of the
securities of such Bank are owned by the Advisor or by directors and officers of
the Fund or the Advisor, or if any director or officer of the Fund or the
Advisor owns more than 1/2 percent of the voting securities of such
Participating Bank.
The foregoing investment restrictions are considered fundamental policies which
cannot be changed without the approval of a "majority" of the Fund's outstanding
voting securities, that is, by (a) 67 percent or more of the securities voting
at a special or annual meeting if more than 50 percent of the outstanding shares
of Common Stock are represented at such meeting in person or by proxy; or (b)
more than 50 percent of the outstanding Common Stock, whichever is less.
The Fund intends to invest at least 25 percent of its total assets in Student
Loan Certificates and/or FmHA Certificates, except when such investments are
either not available in sufficient quantity or do not carry yields competitive
with alternative investments.
PURCHASES OF FUND SHARES
See "Opening An Account - Purchasing Shares" in the Prospectus for basic
information on how to purchase shares of the Fund.
An order to purchase shares of the Fund is accepted when the Fund's Custodian
Bank receives payment in Federal Funds (funds available for immediate
investment). This will occur upon receipt of the purchase price by Federal Funds
wire or electronic funds transfer via the ACH system from the purchaser's bank,
or when a check or other negotiable bank draft received by the Fund has been
converted into Federal Funds (normally one to two business days after its
receipt by the Fund).
An investor will become a shareholder when the net asset value applicable to his
order is determined. Net asset value of the Fund's shares is determined twice
each day at 11:00 a.m. Central Time and at the close of the New York Stock
Exchange (normally 3:00 p.m. Central Time). If a purchase order is received and
accepted by the Fund by 10:00 a.m. Central Time and Federal Funds are available
to the Fund before 3:00 p.m. Central Time, an order will be effective the same
day, the investor will become a shareholder of record that day, and shares will
commence earning dividends the day the order becomes effective. If a purchase
order is received and accepted by the Fund after 10:00 a.m. Central Time but
before 3:00 p.m. Central Time and Federal Funds are available before 3:00 p.m.
Central Time, the shares will not commence earning dividends until the day after
the order is received..
Investments in Shares in the Fund may be made through transactions directly with
the Fund's Distributor, BISYS Fund Services, Inc., nd through qualified banks,
savings and loan associations, broker/dealers, investment advisory firms, and
other organizations ("Participating Organizations") approved by the Board of
Directors of the Fund, based upon the Participating Organization's capacity to
provide processing of Fund transactions for its customers in conjunction with
other customer account relationships. Participating Organizations will be
required to enter into agreements to provide certain services to persons
("Participating Investors") who invest in the Fund through Participating
Organizations. These will include: distributing copies of the Prospectus and
sales literature to prospective investors who request it; furnishing
Participating Investors with periodic account statements containing information
regarding Fund share purchases and redemptions, income earned and Fund
investment balances; and forwarding to Participating Investors periodic reports
and proxy material mailed by the Fund to its shareholders. Participating
Organizations may satisfy the Fund's required minimum, initial and subsequent
purchase amounts by aggregating investments on behalf of customers whose
individual investments are less than the Fund's required minimums. Participating
Investors may, if they so elect, authorize their Participating Organizations to
purchase and redeem Fund shares by means of special investment arrangements
(including automatic "sweep" investment programs) offered by the Participating
Organization.
Trust Shares may be purchased only by financial institutions acting on their own
behalf or on behalf of certain customers' accounts. Institutional Shares may be
purchased by individual and institutional investors directly from the Fund's
Distributor.
The Fund reserves the right to reject any purchase order and to modify
investment minimums from time to time. All purchase orders are subject to
acceptance and are not binding until so accepted. Once a purchase order has been
accepted by the Fund, it may not be canceled or revoked by the investor although
the purchased shares may be redeemed.
THE DISTRIBUTER AND DISTRIBUTION PLAN
The Company has entered into a Distribution Agreement (the "Distribution
Agreement") with BISYS Fund Services, Inc., ("BISYS"). Under the Distribution
Agreement, BISYS serves as the Distributer of the Fund as well as some of the
other Funds. The Distribution Agreement continues in effect only if approved
annually by vote of the Board of Directors, including a majority of the
non-interested directors. The Distribution Agreement terminates automatically in
the event of its assignment and may be terminated without penalty on not less
than 60 days notice by the Board of Directors, by a majority of the outstanding
voting securities of the Fund, or by BISYS. BISYS receives no compensation from
the Fund for such services, but is paid a fee equal to 0.01percent of the
average daily net asset value of all Funds, distributed by BISYS, not to exceed
$100,000 annually by the Advisor.
The Fund adopted a distribution plan (the "Plan") pursuant to Rule 12b-1 under
the Investment Company Act of 1940 on November 3, 1997 in connection with its
organization which is substantially identical to the Plan adopted by the
immediate predecessor . The Plan continues in force only if approved annually by
the Board of Directors and by a majority of directors who are not parties to the
Plan or interested persons of any party to the Plan, cast in person at a meeting
called for the purpose of voting on such approval, or by a majority of the
outstanding securities of the Fund. In adopting the Plan, the directors
considered various factors and determined that the Plan would benefit the Fund
and its shareholders. The Distribution Plan is designed to promote sales,
thereby increasing the net assets of the Fund. Such an increase may reduce the
expense ratio to the extent the Fund's fixed costs are spread over a larger net
asset base. Also, an increase in net assets may lessen the adverse effects that
could result were the Fund required to liquidate portfolio securities to meet
redemptions. There is, however, no assurance that the net assets of the Fund
will increase or that the other benefits referred to above will be realized. The
Plan is only applicable to Sweep shares and S2 shares of the Fund.
The Distribution Plan provides that the Fund may pay various Participating
Organizations a daily distribution fee payable quarterly and equal to an annual
basis of a maximum fee payable of 0.50 percent of the average net asset value of
the Sweep Shares and 0.25 percent of the average net asset value of the S2
Shares. The purpose of such payments is to compensate the Participating
Organizations for their distribution services to the Fund. Participating
Organizations make available to their customers transaction services (including
automatic "sweep" investment programs) and may provide monthly shareholder
account reporting and related ministerial duties with respect to customer
accounts. Except as to securities dealers, none of the compensation paid to such
Participating Organizations constitute expenses relating to advertising,
distribution of prospectuses to other than current shareholders, underwriter's
compensation or compensation to dealers, or compensation of sales personnel, and
payments made are related solely to the Participating Organization's services in
providing the customer transaction services. Participating Organizations are not
authorized to actually make sales of shares of the Fund. All orders to purchase
shares are subject to acceptance by the Fund's Distributor on behalf of the
Fund. While the Fund itself does not presently levy sales, redemption or account
service charges, Participating Organizations may elect to do so and the Fund may
elect to do so in the future. Investors should inquire regarding the nature and
costs of services provided by Participating Organizations and determine if such
services are desired because the costs thereof will reduce the Fund's yield to
the investor below that obtainable by investing in the Fund directly. While the
Fund may purchase portfolio securities from Participating Organizations, it will
not give any preference to them in selecting their investments.
No director or officer of the Fund or the Advisor has any direct or indirect
financial interest in the Plan. The Fund's Plan results in an efficient system
of customer investment in the Fund thereby potentially increasing the Fund's
ability to attract shareholders. The services rendered by the Participating
Organizations with respect to customer transactions (including automatic sweep
investment programs) are more efficient and direct than that which the Fund
might otherwise provide. The Fund believes that the Plan and agreements with the
Participating Organizations reduce expenses for shareholder transactions thereby
reducing costs of the Fund and increasing yields
The Plan and any agreements related thereto will automatically terminate if
assigned and may be terminated by either party on 60 days' notice. The Plan may
be terminated by a majority of non-interested directors who have no direct or
indirect financial interest in the Plan or it may be terminated by a majority of
the outstanding voting shares of the Fund. Any changes in the Plan that would
materially increase the distribution costs require shareholder approval;
otherwise, the directors, including a majority of the non-interested directors,
may amend the Plan. The directors review quarterly a written report of
distribution costs incurred pursuant to the Plan.
The Glass-Steagall Act and other applicable laws prohibit banks from engaging in
the business of underwriting, selling, or distributing securities. Since the
only function of banks who may be engaged as Participating Organizations is to
perform administrative and shareholder servicing functions, the Fund believes
that such laws should not preclude banks from acting as Participating
Organizations; however, future changes in either Federal or State statutes or
regulations relating to the permissible activities of banks and their
subsidiaries or affiliates, as well as judicial or administrative decisions or
interpretations of statutes or regulations, could prevent a bank from continuing
to perform all or part of its shareholder servicing activities. If a bank were
prohibited from so acting, its shareholder customers would be permitted to
remain shareholders in the Fund, and alternative means for continuing the
servicing of such shareholders would be sought. In such event, changes in the
operation of the Fund might occur, and shareholders serviced by such bank might
no longer be able to avail themselves of any investment or other services then
being provided by the bank. It is not expected that shareholders would incur any
adverse financial consequences as a result of any of these occurrences. It is
intended that none of the services provided by Participating Organizations other
than registered broker/dealers will involve the solicitation or sale of shares
of the Fund.
ADMINISTRATIVE SERVICES
The Directors of the Fund have adopted a Administrative Services Plan ("Services
Plan") with respect to Trust Shares, Sweep Shares and S2 Shares. Pursuant to the
Services Plan, the Fund may enter into Servicing Agreements with Participating
Organizations providing that those Participating Organizations will render
certain shareholder administrative support services to their customers who are
record or beneficial owners of shares. Services provided pursuant to the
Services Plan may include some or all of the following: (i) processing dividend
and distribution payments from the Fund on behalf of customers; (ii) providing
information periodically to customers showing their position in Shares; (iii)
arranging for bank wires; (iv) responding to routine customer inquiries relating
to services performed by the Participating Organizations; (v) providing
sub-accounting with respect to shares owned of record or beneficially by
customers or the information needed for sub-accounting; (vi) forwarding
shareholder communications (such as proxies, shareholder reports, annual and
semi-annual financial reports, and dividend, distribution and tax notices) to
customers; (vii) forwarding to customers proxy statements and proxies containing
any proposals regarding the Services Plan; (viii) aggregating and processing
purchase, redemption, and exchange requests from customers and placing net
purchase and redemption orders with the Fund's Distributor; (ix) providing
customers with a service that invests the assets of their accounts in Shares
pursuant to specific or pre-authorized instructions; (x) maintaining records
relating to each customer's share transactions; or (xi) other similar services
if requested by the Fund and permitted by law. In addition, Participating
Organizations may also provide dedicated facilities and equipment in various
local locations to serve the needs of investors, including walk-in facilities,
800 numbers, and communication systems to handle shareholder inquiries, and in
connection with such facilities, provide on-site management personnel and
monitoring services for their customers who have invested in Shares, including
the operation of telephone lines for daily quotations of return information.
The Services Plan is an administrative support services plan. Pursuant to the
Services Plan, the Fund's arrangement with Participating Organizations must be
approved annually by a majority of the Fund's Directors, including a majority of
the Directors who are not "interested persons" of the Fund as defined in the
1940 Act and have no direct or indirect financial interest in such arrangements.
Under the terms of the Services Plan, the Fund may pay a fee to Participating
Organizations equal to maximum annual rate of 0.25 percent of the average net
assets of the Trust Shares, Sweep Shares and S2 Shares. At the present time it
is anticipated that fees paid under the Shareholder Services Plan with respect
to Trust shares will not exceed 0.15 percent of the annual average net asset
value of such shares.
The Company has also entered a Management and Administration Agreement with
Investors Management Group, Ltd. ("IMG") pursuant to which IMG provides the Fund
supervisory administrative services relating to all operations of the Fund,
except as may be provided under the Investment Advisory Agreement, the Custodian
Agreement, the Transfer Agency Agreement and the Fund Accounting Agreement. Some
of these services include the provision of office facilities, preparation of
reports and tax returns, assistance in preparing Annual and Semi-Reports to
shareholders and providing virtually all other day to day operational tasks for
the Fund. For these services the Fund will pay IMG a monthly fee equal to
0.20percent of the average daily net asset value of the Fund. At present IMG is
waiving 70percent of this fee until further notice.
IMG also provides fund accounting services to the Fund under a Fund Accounting
Agreement. Pursuant to this Agreement, IMG is responsible for maintaining all
usual, customary and required books, journals and ledgers of accounts and
providing pricing and reporting all computational services. Under the Agreement,
IMG will be paid a fee computed and paid monthly, at the annual rate of 0.03
percent of average daily net assets of each Fund.
VALUING THE FUND'S SHARES
The net asset value of the Fund's shares is determined twice each day, at 11:00
a.m. Central time and at the close of the New York Stock Exchange (normally 3:00
p.m. Central time). The Fund is required to compute its net asset value on each
day (except days on which no purchase or redemption orders are received) on
which the New York Stock Exchange is open for trading or during which there is a
sufficient degree of trading in its portfolio securities that its net asset
value might be materially affected. Net asset value is computed by adding the
value of all securities and other assets (including accrued interest),
subtracting liabilities (including dividends payable), and dividing by the
number of shares outstanding.
Rule 2a-7 under the Investment Company Act of 1940 permits the Fund to compute
its net asset value per share using the amortized cost method of valuing
portfolio securities. As a condition for using the amortized cost method of
valuation, the Board of Directors of the Fund established procedures to
stabilize the Fund's net asset value at $1.00 per share. These procedures
include a review by the Board of Directors as to the extent of any deviation of
net asset value based on available market quotations from the Fund's $1.00
amortized cost value per share. If such deviation exceeds $.005, the Board of
Directors will consider what action, if any, should be initiated to reasonably
eliminate or reduce material dilution or other unfair results to shareholders.
Such action may include redemption of shares in kind; selling portfolio
securities prior to maturity; withholding dividends or utilizing a net asset
value per share as determined by using available market quotations. In addition,
the Fund must maintain a dollar-weighted average portfolio maturity appropriate
to its investment objective, but in any event not longer than 90 days, must
limit portfolio investments to those instruments which the Board of Directors
determines present minimal credit risks, and must observe certain other
reporting and record keeping procedures.
Under the amortized cost method of valuation, a security is initially valued at
cost on the date of purchase and, thereafter, any discount or premium is
amortized on a straight-line basis to maturity, regardless of the effect of
fluctuating interest rates on the market value of the security.
Accordingly, U.S. Government obligations, and Student Loan Certificates and FmHA
Certificates which are subject to mandatory repurchase at their original
purchase price, will be valued at amortized cost. Other assets are valued at a
fair value determined in good faith by the Board of Directors of the Fund.
CALCULATION OF YIELD
"Current yield" (a seven-calendar-day historical yield) is calculated by first
dividing the average daily net investment income per share for that seven-day
period by the average daily net asset value per share for the same period. This
return is then annualized by multiplying the result times 365/7. That is, the
amount of income generated by the investment during that week is assumed to be
generated over an annual period and is shows as a percentage of the investment.
Net investment income does not include realized or unrealized gains or losses.
"Effective yield" is based on current yield and the distribution of dividends
monthly. When annualized, that income earned from the investment is assumed to
be reinvested weekly. Effective yield will be slightly higher than current yield
because of the compounding effect of this assumed reinvestment.
Yield on shares of the Fund may fluctuate daily and does not provide a basis for
determining future yields. Yield is not guaranteed nor is the principal of the
Fund insured. In comparing the Fund's yield with those of alternative
investments (such as savings accounts, various types of bank deposits and other
money market funds), investors should consider differences between the Fund and
the alternative investments, including differences in the periods and methods
used in calculating the yields being compared. In addition, unlike the Fund,
deposit accounts at financial institutions are generally insured by the Federal
Deposit Insurance Corporation and do not fluctuate to the extent of the Fund.
From time to time, the Fund may quote its yield in advertisements or in reports
and other communications to shareholders. The Fund's yield changes in response
to fluctuations in interest rates and in the Fund's expenses. Consequently, any
given yield quotations should not be considered as representative of what the
Fund's yields may be for any specified period in the future.
Yield information may be useful in reviewing performance of the Fund and for
providing a basis for comparison with other investment alternatives. However,
the Fund's yields will fluctuate, unlike other investments which may pay a fixed
yield for a stated period of time.
Investors should recognize that in periods of declining interest rates the
Fund's yield will tend to be somewhat higher than prevailing market rates, and
in periods of rising interest rates, the Fund's yield will tend to be somewhat
lower. Also, when interest rates are falling, the inflow of net new money to the
Fund from the continuous sale of its shares will likely be invested in
instruments producing lower yields in the balance of the Fund's holdings,
thereby reducing the current yields of the Fund. In periods of rising interest
rates, the opposite can be expected to occur.
Advertisements and other sales literature may, from time to time, include
comparative performance information including data relating to the yield on
deposits at banking and savings and loan institutions (including savings
accounts, interest-bearing checking accounts, NOW accounts and money market
deposit accounts). Yields are compiled periodically by the Advisor from a survey
of banking and savings and loan institutions and from reports published by major
newspapers. Additionally, such advertisements and other sales literature may
include references to yield information compiled by IBC's MONEY FUND REPORT, THE
BANK RATE MONITOR, BANXQUOTE and other recognized industry sources. Demand and
savings deposit accounts at banking and savings and loan institutions are
generally FDIC-insured and such yields generally do not fluctuate to the extent
of the Fund.
DIVIDENDS
The daily net income of the Fund is declared as a dividend each business day to
holders of record immediately before 3:00 p.m. Central Time. Dividends are
credited to shareholders' accounts each business day and distributed monthly.
Dividends are automatically reinvested in the Fund unless cash payment has been
selected on the Account Application. If a shareholder elects to receive
dividends and/or distributions in cash and the checks are returned and marked as
"undeliverable" or remain uncashed for six months, your cash election will be
changed automatically and future dividends will be reinvested. In addition, any
undeliverable checks or checks that remain uncashed for six months will be
canceled and will be reinvested in the Fund at the per share net asset value
determined as of the date of cancellation. If a shareholder redeems the entire
amount in his account during the month, dividends credited to the account from
the beginning of the month through the date of redemption are paid with the
redemption proceeds.
For purposes of calculating dividends, daily net income consists of interest
earned, including the amortization of any discount or premium to the date of
maturity, less accrued expenses of the Fund since the previous business day.
Monthly dividend distributions are reinvested in additional shares unless the
shareholder has requested payment in cash. A statement summarizing account
activity and a check for the amount of any dividends the shareholder may have
requested to be paid in cash are normally mailed monthly.
The Fund attempts to maintain its net asset value at $1.00 per share. See
"Valuing the Fund's Shares". While this is expected to be possible under most
conditions, should the Fund incur or anticipate any unusual expenses, loss,
depreciation, gain or appreciation which would affect either net asset value per
share or income, the Board of Directors of the Fund will consider whether to
adhere to the dividend policy previously described or revise it in light of the
existing circumstances.
If the Fund's net asset value per share were reduced, or was expected to be
reduced, below $.995, the Board of Directors might temporarily suspend or reduce
dividend payments in order to maintain a net asset value of $1.00 per share. As
a result of such suspension or reduction of dividends, an investor might receive
less income during a given period than he might otherwise. Such expenses, losses
or depreciation might therefore result in an investor receiving no dividends for
the period he held his shares and receiving upon redemption a price per share
lower than the price he paid.
In its endeavor to maintain net asset value at $1.00 per share, the Fund is
required to adhere to certain conditions of Rule 2a-7 promulgated by the
Securities and Exchange Commission which permits the Fund to value its assets at
their amortized cost. These conditions require that: (1) the Fund seek to
maintain a dollar-weighted average portfolio maturity appropriate to its
objective of maintaining a stable net asset value and, in no event, longer than
90 days; (2) the Board of Directors of the Fund undertake to assure, to the
extent reasonably practicable, when taking into account current market
conditions affecting its investment objective, that the Fund's market-based net
asset value per share (that is, its net asset value computed on the basis of
available market quotations and estimates) will not deviate from $1.00; and (3)
the Board of Directors consider reducing or suspending dividend payments if the
market-based net asset value per share declines below $.995.
TAXATION
The Fund has qualified as a regulated investment company under Subchapter M of
the Internal Revenue Code (the "Code") since its inception, and intends to
qualify as a regulated investment company in the current fiscal year by
distributing substantially all of its taxable net income, including any realized
capital gains, and thus will not incur any Federal income taxes. Shareholders
will receive taxable dividend income or capital gains, as the case may be, from
distributions whether paid in cash or received in the form of additional shares.
Promptly after the end of each calendar year, each shareholder will receive a
statement of the Federal income tax status of all dividends and distributions
paid during the year.
The Fund is subject to the backup withholding provisions of the Code. Under
these provisions, the Fund is required to deduct and withhold income tax from
dividends paid to Fund shareholders at a 31 percent rate if a shareholder fails
to furnish the Fund with his taxpayer identification number in the manner
required, if the Internal Revenue Service notifies the Fund that the taxpayer
identification number furnished by the shareholder is incorrect, or in certain
other instances involving the shareholder's under-reporting of dividend income
or failure to make proper certification with respect thereto. Accordingly, Fund
shareholders are urged to complete and return Internal Revenue Service Form W-9
when requested to do so by the Fund.
This discussion of the Fund's tax matters is only a summary and relates
principally to Federal tax matters. Thus, shareholders are encouraged to consult
with their personal tax advisors.
MANAGEMENT
Directors and Officers, together with information as to their principal business
occupations during the last five years, and other information are shown below.
Each Director who is deemed an "interested person", as defined in the Investment
Company Act, is indicated by an asterisk.
*David W. Miles, age 40, Director.
President, Treasurer and Senior Managing Director, Investors Management
Group, and IMG Financial Services, Inc.
*Mark A. McClurg, age 44, President and Director.
Vice President, Secretary and Senior Managing Director, Investors
Management Group, and IMG Financial Services, Inc.
David Lundquist, age 54, Chairman of the Board and Director.
Managing Director, Lundquist, Schiltz & Associates, a consulting company,
1996 to Present; Vice Chairman and CFO, New Heritage Association,
a cable television company, 1991-1996.
Johnny Danos, age 57, Director.
President, Danos, Inc., a personal investment company, 1994-Present;
Audit Partner, KPMG Peat Marwick, 1963-1994.
Debra Johnson, age 36, Director.
Vice President and CFO, Business Publications Corporation/Iowa Title
Company, a publishing and abstracting service company.
Edward J. Stanek, age 50, Director.
CEO, Iowa Lottery, a government operated lottery.
Ruth L. Prochaska, age 44, Secretary.
Controller/Compliance Officer, Investors Management Group,
and IMG Financial Services, Inc.
The address for Messrs. Miles, McClurg, and Ms. Prochaska is 2203 Grand Avenue,
Des Moines, Iowa 50312-5338.
As of the date hereof, Officers and Director beneficially owned no more than 1
percent of the shares of common stock of any of the Company's Funds or of the
Company's Funds in the aggregate.
Directors and Officers of the Fund who are officers, directors, employees, or
stockholders of the Advisor do not receive any remuneration from the Fund for
serving as Directors or Officers. Those Directors of the Funds who are not so
affiliated with the Advisor receive $250 for each Board of Directors meeting
attended, plus reimbursement for out-of-pocket expenses in attending meetings.
<TABLE>
<CAPTION>
COMPENSATION TABLE
(1) (2) (3) (4) (5)
Aggregate Pension or Retire- Estimated Total Compensation
Name of Compensa- ment Benefits Annual From Registrant
Person, tion From Accrue As Part of Benefits Upon and Fund Complex
Position Registrant Fund Expenses Retirement Paid to Director
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
David W. Miles $ 0 $ 0 $ 0 $ 0
Director
Mark A. McClurg 0 0 0 0
President &
Director
David Lundquist 0 0 0 1,000
Chairman &
Director
Johnny Danos 0 0 0 1,000
Director
Debra Johnson 0 0 0 1,000
Director
Edward J. Stanek 0 0 0 1,000
Director
</TABLE>
Management of the Advisor. David W. Miles and Mark A. McClurg each beneficially
own more than 20 percent of the outstanding voting securities of the Advisor and
are deemed to be control persons of the Advisor. Senior Managing Directors of
Investors Management Group are David W. Miles and Mark A. McClurg. They intend
to devote substantially all their time to the operation of the Advisor.
THE INVESTMENT ADVISORY AGREEMENT
The Advisor furnishes continuous investment supervision to the Fund under an
Investment Advisory Agreement (the "Management Agreement"). For its services the
Advisor is entitled to receive a fee, computed and accrued daily and payable
monthly at the rate of 0.35 percent of the average daily closing net asset value
of the Fund.
From time to time, the Advisor may voluntarily waive all or a portion of the
management fee and/or absorb certain expenses of the Fund without further
notification of the commencement or termination of such waiver or absorption.
Any such waiver will have the effect of lowering the overall expense ratio for
the Fund and increasing the Fund's overall yield to investors at the time any
such amounts are waiver and/or absorbed. The Advisor may not seek reimbursement
of such waived fees at a later date.
Under the Management Agreement, the Advisor agrees to provide a continuous
investment program for the Fund including investment research and management
with respect to all securities and investments. This would include the
solicitation and approval of commercial banks selected as Participating Banks
from which the Fund may purchase participation interests in short-term loans
subject to Liquidity and Servicing Agreements or which may issue irrevocable
letters of credit to back the demand repayment commitments of borrowers. A
careful review of the financial condition and loan loss record of a prospective
bank will be undertaken prior to the bank being approved to enter into a
Liquidity and Servicing Agreement and, once approved, a Participating Bank's
financial condition and loan loss record will be reviewed at least annually
thereafter.
The principal criteria which the Advisor will consider in approving, rejecting
or terminating Liquidity and Servicing Agreements with Participating Banks will
include a bank's (a) ratio of capital to deposits; (b) ratio of loan charge offs
to average loans outstanding; (c) ratio of loan loss reserves to net loans
outstanding; and (d) ratio of capital to total assets. Ordinarily, the Advisor
will recommend that the Fund not enter into or continue a Liquidity and
Servicing Agreement with any bank whose ratios (as described above) are less
favorable than the average of all Iowa banks. The Advisor will also consider a
bank's classified loan experience, historical and current earnings and growth
trends, quality and liquidity of investments and stability of management and
ownership. Typically, the Advisor will utilize a variety of information sources;
including, annual audited financial statements, unaudited interim financial
statements, quarterly reports of condition and income filed with regulatory
agencies and periodic examination reports (if available) and reports of
federally insured banks concerning past-due-loans, renegotiated loans and other
loan problems.
The Advisor has also agreed to reimburse the Fund, up to the amount of the
advisory fees paid to the Advisor, to the extent that the total annual expenses
of the Fund, exclusive of all taxes, interest, brokers' commissions and other
related charges but including fees paid to the Advisor, exceed the most
restrictive limits prescribed by any state in which the Fund's shares may
eventually be offered for sale. The Fund believes that it presently is not
subject to any such restrictions.
The Management Agreement will continue in effect as long as it is approved
annually by a majority of those directors who are not parties to the Management
Agreement or "interested persons" of such parties and by either the board of
directors of the Fund or a majority of the outstanding voting securities of the
Fund. The Management Agreement which was approved by the Fund's directors, as
described above, on November 3, 1997 may be terminated by either party without
penalty on 60 days' written notice and will automatically terminate in the event
of its assignment.
The Management Agreement provides that neither the Advisor nor any of its
officers or directors, agents or employees will have any liability to the Fund
or its shareholders for any error of judgment, mistake of law or any loss
arising out of any investments or for any other act or omission in the
performance of its duties as investment advisor under the Management Agreement,
except for liability resulting from willful misfeasance, bad faith or gross
negligence on the part of the Advisor in the performance of its duties or from
reckless disregard by the Advisor of its obligations under the Management
Agreement.
STUDENT LOAN TRUSTS
The Fund is authorized to purchase Student Loan Certificates from one or more
Student Loan Trusts. The Fund will only purchase Student Loan Certificates from
Student Loan Trusts formed for the purpose of purchasing federally insured
student loans originated and sold by banks subject to purchase, at the option of
the Student Loan Trust, on no more than five business days' written notice.
Student Loan Trusts are funded by the issuance and sale to the Fund of Student
Loan Certificates which have an original maturity of no more than 397 days and
which may be redeemed by the Fund upon not more than five business days' written
notice to the issuing Student Loan Trust. The Fund is under no obligation to
purchase Student Loan Certificates issued by any Student Loan Trust.
The Fund's election to purchase Student Loan Certificates will be based upon the
amount of funds available for investment, the investment yield borne by the
Student Loan Certificates compared with yields available on other short-term
liquid investments and upon the aggregate amount of Student Loan Certificates,
commercial and industrial loans and participation interests therein owned by the
Fund which may not exceed 80 percent of Fund assets. The yield to the Fund on
Student Loan Certificates will be commensurate with current net yields on
federally insured student loans. Presently, net of servicing and trust fees,
such loans yield approximately the 91-day U.S. Treasury Bill rate plus 0.65 to
0.75 percent. Such fees will be paid out of the Student Loan Trust assets and no
other fees will be paid directly or indirectly by the Fund.
The Higher Education Act (the "Act") sets forth provisions establishing a
program of (i) direct federal insurance to holders of student loans, and (ii)
reimbursement to state agencies or private non-profit corporations administering
student loan insurance programs of losses sustained in the operation of their
programs (the "Federal GSL Program"). Under the Federal GSL Program, the
Secretary of Education (the "Secretary") is authorized to enter into guarantee
and interest subsidy agreements with the Iowa College Aid Commission, and
similar organizations (collectively the "Agencies"). The Federal GSL Program
provides for reimbursements to the Agencies for default claims paid by them, the
payments of administrative cost allowances to the Agencies, advances for the
Agencies' reserve funds and interest subsidy payments and Special Allowance
Payments to the holders of qualifying student loans made pursuant to the Federal
GSL Program.
Pursuant to Section 428(c)(1)(A) of the Act, the Agencies have entered into
guarantee agreements with the Secretary under which the respective Agencies
operate a Guarantee Program, whereby the Secretary agrees to reimburse the
Agencies in an amount equal to 80 percent of the amount expended by them in the
discharge of their insurance obligations on the unpaid balance of principal and
accrued interest with respect to loans guaranteed by the Agencies. The Act also
authorizes the Secretary to enter into supplemental guarantee agreements whereby
such federal reimbursement will be increased to a maximum of 100 percent of the
amount expended by the agencies in the discharge of their insurance obligations.
The supplemental guarantee agreements are subject to annual renegotiation and
the Secretary is not authorized to renew them unless the Agencies' Guarantee
Programs comply with all the terms of the supplemental guarantee agreements and
all the provisions of applicable federal regulations.
The Secretary and the Agencies have entered into interest subsidy agreements
under Section 428 (b) of the Act whereby the Secretary agrees to pay interest
subsidy payments to the holders of qualifying student loans for the benefit of
students meeting certain requirements. To be eligible for federal reimbursement
programs, such loans must be made by an "eligible lender" under the Agencies'
Guarantee Program, which must meet requirements prescribed by the rules and
regulations promulgated under the Act. The Trustee will be an eligible lender
and will purchase only loans originated by eligible lenders.
The Act, as amended in 1976, provides for Special Allowance Payments by the
Secretary to holders of qualifying student loans such as the Trust. Special
Allowance Payments are computed on the basis of the average of the bond
equivalent rates of the 91-day U.S. Treasury Bills auctioned during the
preceding quarter, and are provided as an inducement to lenders or holders of
loans to compensate them for the difference between the interest rate carried by
the student loan and the current commercial interest rates.
The Student Loan Reform Act of 1993 made various changes to the Federal
Guaranteed Student Loan Program. Effective October 1, 1993, Agencies are only
required to guarantee student loans at 98 percent of the unpaid balance of
principal and accrued interest on loans made after October 1, 1993. In addition,
other changes were made relating to origination fees, borrower interest rates,
technical revisions on how consolidated loans are treated and a limitation on
the amount of guarantee fee that can be charged by Agencies. Commencing July 1,
1995, the lender yield for Guaranteed Student Loans disbursed after July 1,
1995, was reduced to the 90 day Treasury Bill rate plus 2.5 percent.
The Student Loan Trusts from which the Fund purchases Student Loan Certificates
have agreed that all student loans purchased by the Trust will be insured either
directly by the Secretary or under the Federal GSL Program and will qualify for
interest subsidy payments and Special Allowance Payments. Loans typically will
be in amounts of $25,000 or less, repayable over a term of 15 years or less.
These Certificates have an original maturity of not more than 364 days and may
be redeemed by the Fund upon not more than five business days' written notice to
the Iowa Student Loan Trust. Proceeds from the issuance of Student Loan
Certificates have been used by the Iowa Student Loan Trust to purchase federally
insured student loans initiated by Iowa banks which may be required to purchase
such loans from the Iowa Student Loan Trust on not more than five business days'
written notice. In the event a bank was unable to honor its purchase commitment
it would be necessary for the Iowa Student Loan Trust to seek other purchasers
of the loans. Because such loans are federally insured and bear a variable
interest rate the Fund believes that a ready market for them exists.
GUARANTEED LOAN TRUSTS
The Fund may purchase FmHA Certificates from one or more guaranteed loan trusts
created for the purpose of acquiring participation interests in the guaranteed
portion of FmHA guaranteed loans ("FmHA Trusts"). Interest and principal
payments of the FmHA Loans would accrue to the benefit of the Fund net of
certain FmHA Trust fees and other fees payable to certain parties for servicing
the FmHA Loans and arising out of the participation of the guaranteed portion of
the FmHA Loans. Each FmHA Certificate will provide certain identifying
information regarding the specific FmHA Loan acquired including the effective
rate and reset provision. Each FmHA Certificate will also be redeemable upon not
more than five business days' written notice by the Fund to the Trustee for an
amount equal to the unpaid balance of the participated portion of the FmHA Loan
and accrued interest due thereon. The redemption feature of the FmHA
Certificates is backed by unconditional purchase commitments between the
Trustee, and Participating Banks which require the banks to purchase such loans
at par less a processing fee upon no more than five business days prior written
notice. Such purchase commitments are unconditional and are operative whether
the FmHA Loans are in default or experiencing difficulties. The unconditional
purchase commitments by the Participating Banks are intended to provide
liquidity for the FmHA Loans held by the FmHA Trust and beneficially owned by
the Fund. Insofar as the unconditional commitment creates this liquidity, for
purposes of Rule 2a-7 and the diversification requirements thereunder, the
unconditional commitments are limited in amounts necessary to keep any one
Participating Bank from being obligated to purchase more than 5 percent of the
total assets held by the Fund (as of the date of purchase of the FmHA
Certificate).
The sole purpose of the trust arrangement is to provide a convenient structure
for servicing the FmHA Loans and to eliminate the premium risk that could arise
if the Fund invested directly in the FmHA Loans and prepayment were to occur.
The Board of Directors believes that the arrangement presents minimal credit
risk and that the arrangement is a permissible investment. For purposes of Rule
2a-7, the Fund does not consider the FmHA Loans or the certificates evidencing
ownership as illiquid and considers the arrangement with the participating banks
as standby unconditional put commitments.
FmHA guaranteed loans are originated by financial institutions, mostly
commercial banks, as a direct loan to the borrower. The FmHA guaranteed loans
acquired by the Fund will all have variable rates of interest which will rest no
less frequently than semi-annually and upon the adjustment of the interest rate
the value of the securities will be approximately equal to par. The FmHA, a
division of the U.S. Department of Agriculture, is an independent agency of the
United States Government and has the authority to grant the United States
Government's full faith and credit guarantee on loans originated by commercial
lenders. Through the Rural Development Act of 1972, the FmHA guaranteed loan
program was enacted by Congress to help meet the financing needs of small
businesses, farms and community facilities in rural areas. Guarantees are issued
on loans obtained by those persons who meet FmHA criteria. Typically borrowers
eligible for FmHA loans face a degree of financial stress which prevents them
from qualifying for non-guaranteed credit based on the standards of commercial
lenders. Applications for loan guarantees are submitted by the lender to the
local FmHA county officer for approval. The application is reviewed by local
officials to determine whether the borrower, lender and proposed loan meet
program requirements. Loan terms are negotiated with the lender and the
borrowers, but the terms must fall within FmHA guidelines. The FmHA will
guarantee up to 90 percent of the total loan depending upon the loan's
soundness.
Under the FmHA Loan program, the guaranteed portion of FmHA loans may be
participated, sold by the originating bank and traded in the secondary market.
The Fund will only invest in the guaranteed portions of FmHA Loans which are so
participated. While the most current government figures indicate the outstanding
balance on guaranteed loans to be over $4 billion, it is estimated that
approximately 20 percent of the total outstanding balance of guaranteed loans
have actually been participated in the secondary market.
The FmHA guaranty guarantees the repayment of principal and interest
unconditionally and accrues to the benefit of the person owning the participated
portion of the guaranteed FmHA loan. When the FmHA loans are sold the guaranty
is assigned to the purchaser and is unconditional and irrevocable. All FmHA
loans purchased by the Trust will be valued by the Fund at par.
The trustee will communicate to the Fund's Investment Adviser the status of loan
payments and delinquencies. In addition, Participating Banks, subject to the
unconditional commitments to purchase the participated FmHA Loans, will be
subject to on-going credit review by the Fund's Investment Adviser. To the
extent that any of the banks deteriorate in credit quality from the standard set
by regional banks with the highest credit ratings by NRSRO's the Investment
Adviser will take action to replace such banks with another bank with an
appropriate credit rating or if unrated, with a comparable credit quality based
on the Investment Adviser's analysis.
OTHER INFORMATION
FEDERAL HOLIDAYS. The Fund will be closed for business and, therefore, will not
accept purchase or redemption orders nor calculate net asset value, on all
Federal Holidays -- currently; New Year's Day, Martin Luther King, Jr. Day,
President's Day, Memorial Day, Independence Day, Labor Day, Columbus Day,
Thanksgiving Day, Veterans' Day and Christmas Day.
PORTFOLIO TRANSACTIONS. Subject to policies set forth by the board of directors
of the Fund, the Advisor is authorized to determine, consistent with the Fund's
investment objectives and policies, which securities will be purchased, sold and
held by the Fund. Most of the Fund's portfolio securities will be purchased on a
principal basis directly from the issuer, from banks, underwriters or market
makers and, thus, will not involve payment of a brokerage commission. There were
no agency transactions in the last three fiscal years and thus no brokerage
commissions have been paid. Such purchases may include a discount, concession or
mark-up retained by an underwriter or dealer. The Advisor is authorized to
select the brokers or dealers that will execute the purchases and sales of
portfolio securities and is directed to use its best efforts to obtain the best
available price and most favorable execution on brokerage transactions. Some of
the portfolio transactions may be directed to brokers who furnish special
research and statistical information or services rendered in the execution of
orders which are of benefit to the Advisor. These may include advice or
information with respect to particular securities or issuers, information
concerning general market or economic conditions and the obtaining of
information from brokers, underwriters or market makers. While no dollar value
can be placed on such information or services, it allows the Advisor to
supplement its own research and analysis activities which can reduce its costs
but not those of the Fund.
REPORTS TO SHAREHOLDERS. Semiannual and annual reports will include financial
statements which, in the case of the annual report, will be reported upon by the
Fund's independent auditors, KPMG Peat Marwick LLP. The Annual Report is
incorporated herein by reference into the Fund's Statement of Additional
Information and is available upon request without charge by calling the number
on the cover page of this Statement of Additional Information.
SHAREHOLDER MEETINGS. The Maryland Corporation Law permits registered investment
companies to operate without an annual meeting of shareholders under specified
circumstances if an annual meeting is not required by the 1940 Act. The Fund has
adopted the appropriate Bylaw provisions and may not hold an annual meeting in
any year in which the election of Directors is not required to be acted on by
shareholders under the 1940 Act.
The Bylaws also contain procedures for removal of Directors by shareholders. At
any meeting of shareholders, due called and at which a quorum is present, the
shareholders may, by the affirmative vote of the holders of a majority of the
votes entitled to be cast thereon, remove any Director or Directors from office
and may elect a successor or successors to fill any resulting vacancies for the
unexpired terms of removed Directors.
Upon the written request of the holders of shares entitled to not less than 10
percent of all the votes entitled to be cast at such meeting, the Secretary of
the Funds shall promptly call a special meeting of shareholders for the purpose
of voting upon the question of removal of any Director. Whenever 10 or more
shareholders of record who have been such for at least six months preceding the
date of application, and who hold in the aggregate either shares having a net
asset value of at least $25,000 or at least 1 percent of the total outstanding
shares, whichever is less, shall apply to the Secretary in writing, stating that
they wish to communicate with other shareholders with a view to obtaining
signatures to a request for a meeting as described above and accompanied by a
form of communication and request which they wish to transmit, the Secretary
shall within five business days after such application either: (1) afford to
such applicants access to a list of the names and addresses of all shareholders
of record; or (2) inform such applicants as to the approximate number of
shareholders of record and the approximate cost of mailing to them the proposed
communication and form of request.
If the Secretary elects to follow the course specified in clause (2) of the last
sentence of the preceding paragraph, the Secretary, upon the written request of
such applicants, accompanied by a tender or the material to be mails and of the
reasonable expenses of mailing, shall, with reasonable promptness, mail such
material to all shareholders of record at their addresses as recorded on the
books unless within five business days after such tender the Secretary shall
mail to such applicants and file with the Securities and Exchange Commission,
together with a copy of the material to be mailed, a written statement signed by
at least a majority of the Board of Directors to the effect that in their
opinion either such material contains untrue statements of fact or omits to
state facts necessary to make the statements contained therein not misleading,
or would be in violation of applicable law, and specifying the basis of such
opinion.
After opportunity for hearing upon the objections specified in the written
statement so filed, the Securities and Exchange Commission may, and if demanded
by the Board of Directors or by such applicants shall, enter an order either
sustaining one or more of such objections or refusing to sustain any of them. If
the Securities and Exchange Commission shall enter an order refusing to sustain
any of such objections, or if, after the entry of an order sustaining one or
more of such objections, the Securities and Exchange Commission shall find,
after notice and opportunity for hearing, that all objections so sustained have
been met, and shall enter an order so declaring, the Secretary shall mail copies
of such material to all shareholders with reasonable promptness after the entry
of such order and the renewal of such tender.
PRINCIPAL SHAREHOLDERS. As of the date hereof, to the knowledge of the Fund, no
shareholders owned beneficially five percent or more of the Fund's outstanding
shares and the Fund's officers and directors as a group owned less than one
percent of the Fund's shares.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND PAYING AGENT. AMCORE Investment Group,
N.A., 501 Seventh Street, Rockford, IL 61110-0037, (the "Custodian") serves as
the Fund's custodian. The Custodian's responsibilities include safekeeping and
controlling the Fund's cash and securities, handling the receipt and delivery of
securities, determining income and collecting interest and dividends on each
Fund investment, maintaining books of original entry for portfolio and fund
accounting and other required books and accounts, and calculating the daily net
asset value and public offering price of shares of the Fund. The Custodian does
not determine the investment policies of the Fund or decide which securities the
Fund will buy or sell. The Fund may, however, invest in securities of the
Custodian and may deal with the Custodian as principal in securities
INDEPENDENT AUDITORS. KPMG Peat Marwick LLP, 2500 Ruan Center, Des Moines, Iowa,
50309, has been selected unanimously by the members of the Board of Directors of
the Fund who are not interested persons of the Fund as the Fund's independent
auditors to examine the books and securities of the Fund and to report on the
financial statements of the Fund.
<PAGE>
MUNICIPAL ASSETS FUND 2203 GRAND AVENUE
DES MOINES, IA 50312-5338
STATEMENT OF ADDITIONAL INFORMATION _____, 1997
This statement is not a Prospectus but should be read in conjunction with the
Fund's current Prospectuses (dated ___ __, 1997). Please retain this Statement
for future reference. To obtain the Annual Report or any Prospectus please call
the Fund at the number indicated below.
For current yield, purchase and redemption information call.........800-798-1819
....................................................................515-244-5426
Table of Contents:
General Information and History............................................
Investment Objectives, Policies and Restrictions...........................
Purchases of Fund Shares...................................................
The Distributor and Distribution Plan......................................
Administrative Services....................................................
Valuing the Fund's Shares..................................................
Calculation of Yield.......................................................
Dividends..................................................................
Taxation...................................................................
Management.................................................................
Compensation Table.........................................................
The Investment Advisory Agreement..........................................
Other Information..........................................................
Federal Holidays........................................................
Portfolio Transactions..................................................
Reports to Shareholders.................................................
Shareholder Meetings....................................................
Principal Shareholders..................................................
Custodian, Transfer Agent and Dividend Paying Agent.....................
Independent Auditors....................................................
Appendix A.................................................................
Appendix B.................................................................
<PAGE>
GENERAL INFORMATION
IMG Mutual Funds, Inc. (the "Company") is an open-end management investment
company which currently offers it shares in series representing eleven
diversified investment portfolios: IMG Core Stock Fund, IMG Bond Fund, Vintage
Equity Fund, Vintage Aggressive Growth Fund, Vintage Balanced Fund, Vintage
Municipal Bond Fund, Vintage Income Fund, Vintage Limited Term Bond Fund, Liquid
Assets Fund, Government Assets Fund and Municipal Assets Fund (Individually a
"Fund" and collectively the "Funds"). The Company was organized on November 16,
1994 under the laws of Maryland. Shares of the Funds are also issued in classes
with differing distribution and shareholder servicing arrangements. Subject to
the class level expenses, each Fund's share represents an equal proportionate
interest in a Fund with other shares of the same Fund, and is entitled to such
dividends and distributions out of the income earned on the assets belonging to
that Fund, subject to the class level expenses, as are declared at the
discretion of the Directors. The Municipal Assets Fund was created on November
3, 1997, to acquire the assets and continue the business of the corresponding
substantially identical investment portfolio of the Municipal Assets Funds,
Inc., a separately registered open-end diversified management investment company
organized as an Iowa corporation. References herein to the "immediate
predecessor" of the Fund refer to the respective corresponding company.
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
Municipal Assets Fund, ("Municipal Assets") seeks to provide maximum current
income, exempt from Federal income taxes, consistent with safety of principal
and maintenance of liquidity. In order to accomplish this goal, assets of the
Fund will be invested in the following types of securities maturing in 397 days
or less from time of investment (with certain exceptions):
(1) Tax-exempt debt obligations issued by state and municipal
governmental units and public authorities within the United States
and participation interests therein. With few exceptions, such
obligations will be non-rated and of limited marketability. However,
they will be backed by demand repurchase commitments of the issuers
thereof and irrevocable bank letters of credit or guarantees
(collectively referred to herein as "Liquidity Agreements"). The
Liquidity Agreements will permit the holder of the securities to
demand payment of the unpaid principal balance plus accrued interest
upon a specified number of days notice either from the issuer or by
drawing on an irrevocable bank letter of credit or guarantee. The
issuer of the security may have a corresponding right to prepay the
principal and accrued interest. In addition, all obligations with
maturities longer than one year from date of purchase will, by their
terms, bear rates of interest that are adjusted upward or downward no
less frequently than semiannually by means of a formula intended to
reflect market changes in interest rates.
The time period covered by Liquidity Agreements may be shorter than
the final maturity of the obligations covered thereby. At or before
the expiration of such Liquidity Agreements, the Fund will seek to
obtain either extensions thereof or replace them with new agreements
and if unable to do so the Fund will exercise its rights under
existing Liquidity Agreements to require that the obligations be
purchased. Thus, at no time will the Fund's investments include
obligations with maturities longer than one year unless the
obligations bear interest rates subject to periodic adjustment at
least semiannually and are subject to sale on seven calendar days
notice under existing Liquidity Agreements.
The only banks (the "Participating Banks") which will be permitted to
sell participations in fixed and variable rate tax-exempt debt
obligations of United States governmental units to the Fund (or to
provide irrevocable letters of credit or guarantees to back the
demand repurchase commitments of the issuers of such obligations)
will be United States banks which have entered into irrevocable
written agreements with respect thereto and have agreed to furnish to
the Fund whatever financial information may be requested for purposes
of evaluating the Participating Banks financial condition and
capacity to fulfill its obligations to the Fund and to perform such
servicing duties as may be mutually agreed to by the parties.
The Fund's investments may include participation interests, purchased
from Participating Banks, in fixed and variable rate tax-exempt debt
obligations (including industrial development bonds hereinafter
described) owned by the banks. A participation interest gives the
Fund an undivided interest in the tax-exempt obligation in the
proportion that the Fund's participation interest bears to the total
principal amount of the obligation and carries a demand repurchase
feature. Each participation is backed by an irrevocable letter of
credit or guarantee of the Participating Bank which issued the
participation. The Fund has the right to liquidate the participation,
in whole or in part, by drawing on the letter of credit or guarantee
of the Participating Bank which issued the participation. The Fund
has the right to liquidate the participation, in whole or in part, by
drawing on the letter of credit on demand, after seven calendar days'
notice, for all or any part of the principal amount of the Fund's
participation, plus accrued interest.
The Fund intends to exercise its rights under Liquidity Agreements
only: (1) upon default in the terms of the tax-exempt debt
obligations covered thereby; (2) to provide the Fund with needed
liquidity to cover redemptions of Fund shares; or (3) to insure that
the value of the Fund's investment portfolio does not vary materially
from the amortized cost thereof. Participating Banks have no
contractual obligation to offer participations to the Fund, and the
Fund is not obligated to purchase or resell any participations
offered or sold by Participating Banks. The Liquidity Agreements
govern the obligations of the parties as to securities or
participations actually purchased by the Fund.
The financial condition and investment and loan loss record of all
banks seeking to sell participations in fixed and variable rate
tax-exempt debt obligations to the Fund (or to provide letters of
credit or guarantees to back the demand repurchase commitments of the
issuers of such obligations) will be carefully evaluated by the
Advisor, based upon guidelines established by the Board of Directors,
prior to the execution of a Liquidity Agreement by a Participating
Bank and periodically thereafter. Purchased obligations will bear
interest at or above current market rates and the rates borne by
obligations with maturities longer than one year will be adjustable
at least semi-annually to reflect changes in market rates subsequent
to issuance of the securities. It is anticipated that the tax-exempt
debt obligations purchased or participated in by the Fund will be
those traditionally acquired by United States banks. These include
both general obligation and revenue bonds issued for a variety of
public purposes such as the construction of a wide range of
facilities including schools, streets, water and sewer works,
highways, bridges, and housing. Also included are bonds issued to
refund outstanding obligations, to obtain funds for general operating
purposes and to lend to other public institutions and facilities.
Certain types of industrial development bonds issued by public bodies
to finance the construction of industrial and commercial facilities
and equipment are also purchased. Revenue generating facilities such
as parking garages, airports, sports and convention complexes and
water supply, gas, electricity, and sewage treatment and disposal
systems are financed through issuance of tax-exempt debt obligations
as well.
Tax-exempt debt obligations are normally categorized as "general
obligation" or "revenue" issues. General obligations are secured by a
pledge of the full taxing power of the issuer while revenue
obligations are payable only from revenues generated by a facility or
facilities, a specified source of tax or other revenues or, in the
case of industrial development bonds, from lease rental or loan
payments made by a commercial or industrial user of the facilities.
Revenue obligations do not generally carry the pledge of the credit
of the issuer.
Short-term tax-exempt debt obligations usually mature in less than
two years, are typically general obligations of the issuer and most
often issued in anticipation of receipts to be realized from tax
collections or the sale of long-term bonds. Project Notes are issued
by local agencies under a program administered by the United States
Department of Housing and Urban Development and are secured by the
full faith and credit of the United States.
From time to time the Fund may invest 25 percent or more of its
assets in tax-exempt debt obligations, or participations therein,
sufficiently similar in character that an economic, business or
political development or change affecting one such security would
also affect the other securities. Examples might be securities whose
principal and interest payments are dependent upon revenues derived
from similar projects or whose issuers are located in the same state.
In addition, investments in tax-exempt debt obligations of issuers
may from time to time become concentrated within a single state, and
the Fund may also invest 25 percent or more of its assets in
industrial development bonds or participations therein.
For entering into a Liquidity Agreement, a Participating Bank will
retain a service and letter of credit fee in an amount equal to the
excess of the interest paid on the tax-exempt obligations above the
negotiated yield at which the instruments were purchased by the Fund.
Such fees may be adjusted if adjustments are made in the interest
rate paid on the tax-exempt obligations. Each Participating Bank
executing a Liquidity Agreement must be approved by the Board of
Directors of the Fund prior to, or at the next quarterly Board
meeting following, such executions. See "The Investment Management
Agreement" on page 10 for a discussion of the criteria to be used in
selecting Participating Banks. The Board of Directors will review all
Participating Banks and Liquidity Agreements quarterly in an effort
to assure continued liquidity and high quality in the Fund's
portfolio.
(2) High quality tax-exempt debt obligations issued by state and
municipal governments and by public authorities, including issues
sold as interim financing in anticipation of tax collections, revenue
receipts or bond sales, and tax-exempt Project Notes secured by the
full faith and credit of the United States. Such obligations will be
purchased only if backed by the full faith and credit of the United
States or rated Aaa, Aa, MIG-1, MIG-2 or Prime-1 by Moody's Investors
Service, Inc. ("Moody's") or AAA, AA, or A-1 by Standard & Poor's
Corporation ("S & P"). See "Appendix A" on page 13. Following
purchase of a rated obligation by the Fund the rating may be
withdrawn or reduced below the Fund's minimum requirement. This will
not require sale of the issue by the Fund but the Advisor will take
such changes into consideration in determining whether the issue
should be retained by the Fund. Non-rated securities may also be
purchased if determined by the Fund's Board of Directors to be of
comparable quality to the rated securities in which the Fund may
invest.
(3) Taxable obligations issued or guaranteed by agencies or
instrumentalities of the United States Government may be acquired
from time to time on a temporary basis for defensive purposes. Such
agencies and instrumentalities include, for example, Federal
Intermediate Credit Banks, Federal Home Loan Banks, Federal National
Mortgage Association and Farmers Home Administration. Such securities
will include those supported by the full faith and credit of the
United States Treasury or the right of the agency or instrumentality
to borrow from the Treasury as well as those supported only by the
credit of the issuing agency or instrumentality.
(4) Repurchase agreements involving securities in the immediately
foregoing category. A repurchase agreement involves the sale of such
securities to the Fund with the concurrent agreement of the seller to
repurchase them at a specified time and price, to yield an agreed
upon rate of interest. The Fund will enter into repurchase agreements
with brokers and banks. Thus, the Fund must initially rely upon the
credit of a particular broker or bank for completion of the
repurchase agreement. Such repurchase agreements are intended to be
fully collateralized, in an amount equal to at least the principal
amount of the transaction plus accrued interest earned thereon, by
the underlying Government or agency securities valued at their fair
market value each day. Although the Fund will normally have legal
title to and constructive possession of the collateral, it cannot
eliminate the risk of a default by a broker or bank which could
result in a loss to the Fund on the sale of the underlying securities
or delays in obtaining the collateral because of bankruptcy or
insolvency proceedings. Repurchase agreements may be deemed to be
loans under the Investment Company Act of 1940.
Assets of the Fund will consist of securities with maturities of 397 days or
less at date of purchase or, if maturing beyond 397 days, securities which are
backed by Liquidity Agreements and which have variable interest rates adjustable
at least semiannually. In determining whether particular variable rate
obligations backed by Liquidity Agreements may be purchased, the period
remaining until maturity will be deemed to be the longer of the demand notice
period required before the Fund is entitled to receive payment of the principal
amount or the period remaining until the next interest adjustment. For purposes
of Rule 2a-7 and the diversification requirements thereunder, the unconditional
commitments are limited in amounts necessary to keep any one bank from being
obligated to purchase more than five percent of the total assets held by the
Fund (determined as of the date of purchase). The dollar weighted average
maturity of Fund investments will be 90 days or less, determined in the same
manner. In attempting to provide its shareholders with the highest income
consistent with preservation of capital, the Fund will not necessarily purchase
investments bearing the highest interest rates available as such investments may
also involve a higher degree of risk.
The Fund does not intend to concentrate its investments in any one industry and
will not issue senior securities.
As a general policy, it is the Fund's intention to hold investments until they
mature or until immediately prior to the expiration of an applicable Liquidity
Agreement. However, in an effort to increase portfolio yields, the Fund may
periodically trade securities to take advantage of perceived disparities between
markets for various short-term money market instruments. It is also possible
that redemptions of Fund shares could necessitate the sale of portfolio
investments prior to maturity and at times when such sale would be undesirable.
While investments by the Fund will be confined to high-quality financial
instruments which, in the case of tax-exempt obligations covered by Liquidity
Agreements, will be backed by demand repurchase commitments of the issuers
thereof and by irrevocable bank letters of credit or guarantees, the complete
elimination of risk is not possible. Under certain circumstances (see "Valuing
the Fund's Shares" and "Dividends"), the net asset value of the Fund's shares
could decrease. It is also possible a Participating Bank or an issuer will
default on the provisions of their Liquidity Agreements which could cause the
net asset value per share to decrease. In light of these various contingencies,
there can be no assurance the Fund will achieve its investment objectives.
New issues of tax-exempt debt obligations are usually offered on a when-issued
basis with the securities to be delivered and paid for approximately 45 days
following the initial commitment to purchase. The terms of the commitment
establish the price to be paid and the yield of the securities to be purchased.
Such commitments will only occasionally be entered into by the Fund and only
with the intention of actually acquiring the securities. It is possible that
market yields at time of delivery may exceed the negotiated yield on when-issued
securities. The Fund will maintain a separate account consisting of cash or
liquid securities, valued at market or fair value daily, equal to its
outstanding when-issued commitments. Settlement on when-issued securities may be
made by using available cash, selling securities or, though not expected,
selling the when-issued securities themselves (which may have a value greater or
lesser than the Fund's commitment). Sale of securities to meet such commitments
may result in realization of capital gains or losses which are not exempt from
Federal income tax. When-issued commitments outstanding at any one time will not
exceed ten percent of the Fund's net assets.
Yields on tax-exempt debt obligations are dependent on a variety of factors
including general economic and money market conditions as well as supply and
demand factors within the market for tax-exempt obligations. Yields actually
realized by Fund investors will be reduced by the management fees, operating
expenses and fees received by Participating Banks and Participating
Organizations.
The Fund has adopted a number of investment policies and restrictions, some of
which can be changed by the board of directors. Others may be changed only by
holders of a majority of the outstanding shares and include the following:
Without shareholder approval the Fund may not: (1) purchase any securities other
than those described under "Investment Objectives, Policies and Restrictions";
(2) invest more than 80 percent of its total assets in tax-exempt fixed and
variable rate debt obligations (or participation interests therein) issued by
state and local governmental units within the United States which are backed by
Liquidity Agreements; (3) invest more than five percent of its total assets in
tax-exempt obligations or participation interests therein subject to Liquidity
Agreements issued by any one Participating Bank; (4) invest with a view to
exercising control or influencing management; (5) invest more than ten percent
of the value of its total assets in securities of other investment companies,
except in connection with a merger, acquisition, consolidation or
reorganization, subject to Section 12(d)(1) of the Investment Company Act of
1940; (6) purchase or sell real estate, commodities or commodity contracts,
interests in oil, gas or other mineral exploration or development programs; (7)
purchase any securities on margin, except for the clearing of occasional
purchases or sales of portfolio securities; (8) make short sales of securities
or maintain a short position or write, purchase, or sell puts (excluding
Liquidity Agreements covering certain tax-exempt obligations purchased by the
Fund), calls, straddles, spreads or combinations thereof; (9) make loans to
other persons, provided the Fund may make investments and enter into repurchase
agreements as described under "Investment Objectives, Policies, and
Restrictions"; (10) borrow money, except to meet extraordinary or emergency
needs for funds, and then only from banks in amounts not exceeding ten percent
of its total assets, nor purchase securities at any time borrowings exceed five
percent of its total assets; (11) mortgage, pledge, hypothecate, or in any
manner transfer, as security for indebtedness, any securities owned by the Fund
except as may be necessary in connection with borrowings outlined in (10) above
and then securities mortgaged, hypothecated or pledged may not exceed five
percent of the Fund's total assets taken at market value; (12) invest in
securities with legal or contractual restrictions on resale (except for
tax-exempt debt obligations subject to Liquidity Agreements) or for which no
ready market exists; (13) enter into a Liquidity Agreement with any bank unless
such bank is a United States bank which has a record, together with its
predecessors, of at least five years of continuous operation; (14) act as an
underwriter of securities; (15) enter into repurchase agreements if, as a result
thereof, more than five percent of the Fund's total assets (taken at market
value at the time of such investment) would be subject to repurchase agreements
maturing in more than seven calendar days; and (16) enter into Liquidity
Agreements with any Participating Bank if five percent or more of the securities
of such Bank are owned by the Advisor or by directors and officers of the Fund
or the Advisor, or if any director or officer of the Fund or the Advisor owns
more than 1/2 percent of the voting securities of such Participating Bank.
The foregoing investment restrictions are considered fundamental policies which
cannot be changed without the approval of a "majority" of the Fund's outstanding
voting securities, that is, by (a) 67 percent or more of the securities voting
at a special or annual meeting if more than 50 percent of the outstanding shares
of Common Stock are represented at such meeting in person or by proxy; or (b)
more than 50 percent of the outstanding Common Stock, whichever is less.
The Fund intends to invest at least 25 percent of its total assets in tax-exempt
debt obligations or participation interests therein subject to Liquidity
Agreements, except when such investments are either not available in sufficient
quantity or do not carry yields competitive with alternative investments.
PURCHASES OF FUND SHARES
See "Opening An Account - Purchasing Shares" in the Prospectus for basic
information on how to purchase shares of the Fund.
An order to purchase shares of the Fund is accepted when the Fund's Custodian
Bank receives payment in Federal funds (funds available for immediate
investment). This will occur upon receipt of the purchase price by Federal funds
wire or electronic funds transfer via the ACH system from the purchaser's bank,
or when a check or other negotiable bank draft received by the Fund has been
converted into Federal funds (normally one to two business days after its
receipt by the Fund).
An investor will become a shareholder when the net asset value applicable to his
order is determined. Net asset value of the Fund's shares is determined twice
each day at 11:00 a.m. Central time and at the close of the New York Stock
Exchange (normally 3:00 p.m. Central Time). If a purchase order is received and
accepted by the fund by 10:00 a.m. Central Time and Federal funds are available
to the Fund before 3:00 p.m. Central Time, an order will be effective the same
day, the investor will become a shareholder of record that day, and shares will
commence earning dividends the day the order becomes effective. If a purchase
order is received and accepted by the Fund after 10:00 a.m. Central Time but
before 3:00 p.m. Central Time and Federal funds are available 3:00 p.m. Central
Time the shares will not commence earning dividends until the day after the
order is received.
Investments in Sweep Shares of the Fund may be made through transactions
directly with the Fund's Distributor, Bisys Fund Services, Inc., and through
qualified banks, savings and loan associations, broker/dealers, investment
advisory firms, and other organizations ("Participating Organizations") selected
by the Advisor and approved by the Board of Directors of the Fund, based upon
the Participating Organization's capacity to provide processing of Fund
transactions for its customers in conjunction with other customer account
relationships. Participating Organizations will be required to enter into
agreements with the Fund's Distributor to provide certain services to persons
("Participating Investors") who invest in the Fund through Participating
Organizations. These will include: distributing copies of the Prospectus and
sales literature to prospective investors who request it; furnishing
Participating Investors with periodic account statements containing information
regarding Fund share purchases and redemptions, income earned and Fund
investment balances; and forwarding to Participating Investors periodic reports
and proxy material mailed by the Fund to its shareholders. Participating
Organizations may satisfy the Fund's required minimum, initial and subsequent
purchase amounts by aggregating investments on behalf of customers whose
individual investments are less than the Fund's required minimums. Participating
Investors may, if they so elect, authorize their Participating Organizations to
purchase and redeem Fund shares by means of special investment arrangements
(including automatic "Sweep" investment programs) offered by the Participating
Organization.
"Trust Shares" may be purchased only by financial institutions acting on their
own behalf or on behalf of certain customers' accounts. "Institutional Shares"
may be purchased by individual and institutional customers directly from the
Fund's Distributor.
THE DISTRIBUTOR AND DISTRIBUTION PLAN
The Company has entered into a Distribution Agreement (the "Distribution
Agreement") with BISYS Fund Services, Inc., ("BISYS"). Under the Distribution
Agreement, BISYS serves as the Distributor of the Fund as well as some of the
other Funds. The Distribution Agreement continues in effect only if approved
annually by vote of the Board of Directors, including a majority of the
non-interested directors. The Distribution Agreement terminates automatically in
the event of its assignment and may be terminated without penalty on not less
than 60 days notice by the Board of Directors, by a majority of the outstanding
voting securities of the Fund, or by BISYS. BISYS receives no compensation from
the Fund for such services, but is paid a fee equal to 0.01 percent of the
average daily net asset value of all Funds, distributed by BISYS, not to exceed
$100,000 annually by the Advisor.
The Fund adopted a distribution plan (the "Plan") pursuant to Rule 12b-1 under
the Investment Company Act of 1940 on November 3, 1997 in connection with its
organization which is substantially identical to the Plan adopted by the
immediate predecessor . The Plan continues in force only if approved annually by
the Board of Directors and by a majority of directors who are not parties to the
Plan or interested persons of any party to the Plan, cast in person at a meeting
called for the purpose of voting on such approval, or by a majority of the
outstanding securities of the Fund. In adopting the Plan, the directors
considered various factors and determined that the Plan would benefit the Fund
and its shareholders. The Distribution Plan is designed to promote sales,
thereby increasing the net assets of the Fund. Such an increase may reduce the
expense ratio to the extent the Fund's fixed costs are spread over a larger net
asset base. Also, an increase in net assets may lessen the adverse effects that
could result were the Fund required to liquidate portfolio securities to meet
redemptions. There is, however, no assurance that the net assets of the Fund
will increase or that the other benefits referred to above will be realized. The
Plan is only applicable to Sweep shares of the Fund.
The Distribution Plan provides that the Fund may pay various Participating
Organizations a daily distribution fee payable quarterly and equal to an annual
basis of a maximum fee payable of 0..25 percent of the average net asset value
of the Sweep Shares.. The purpose of such payments is to compensate the
Participating Organizations for their distribution services to the Fund.
Participating Organizations make available to their customers transaction
services (including automatic "sweep" investment programs) and may provide
monthly shareholder account reporting and related ministerial duties with
respect to customer accounts. Except as to securities dealers, none of the
compensation paid to such Participating Organizations constitute expenses
relating to advertising, distribution of prospectuses to other than current
shareholders, underwriter's compensation or compensation to dealers, or
compensation of sales personnel, and payments made are related solely to the
Participating Organization's services in providing the customer transaction
services. Participating Organizations are not authorized to actually make sales
of shares of the Fund. All orders to purchase shares are subject to acceptance
by the Fund's Distributor on behalf of the Fund. While the Fund itself does not
presently levy sales, redemption or account service charges, Participating
Organizations may elect to do so and the Fund may elect to do so in the future.
Investors should inquire regarding the nature and costs of services provided by
Participating Organizations and determine if such services are desired because
the costs thereof will reduce the Fund's yield to the investor below that
obtainable by investing in the Fund directly. While the Fund may purchase
portfolio securities from Participating Organizations, it will not give any
preference to them in selecting their investments.
No director or officer of the Fund or the Advisor has any direct or indirect
financial interest in the Plan. The Fund's Plan results in an efficient system
of customer investment in the Fund thereby potentially increasing the Fund's
ability to attract shareholders. The services rendered by the Participating
Organizations with respect to customer transactions (including automatic sweep
investment programs) are more efficient and direct than that which the Fund
might otherwise provide. The Fund believes that the Plan and agreements with the
Participating Organizations reduce expenses for shareholder transactions thereby
reducing costs of the Fund and increasing yields
The Plan and any agreements related thereto will automatically terminate if
assigned and may be terminated by either party on 60 days' notice. The Plan may
be terminated by a majority of non-interested directors who have no direct or
indirect financial interest in the Plan or it may be terminated by a majority of
the outstanding voting shares of the Fund. Any changes in the Plan that would
materially increase the distribution costs require shareholder approval;
otherwise, the directors, including a majority of the non-interested directors,
may amend the Plan. The directors review quarterly a written report of
distribution costs incurred pursuant to the Plan.
The Glass-Steagall Act and other applicable laws prohibit banks from engaging in
the business of underwriting, selling, or distributing securities. Since the
only function of banks who may be engaged as Participating Organizations is to
perform administrative and shareholder servicing functions, the Fund believes
that such laws should not preclude banks from acting as Participating
Organizations; however, future changes in either Federal or State statutes or
regulations relating to the permissible activities of banks and their
subsidiaries or affiliates, as well as judicial or administrative decisions or
interpretations of statutes or regulations, could prevent a bank from continuing
to perform all or part of its shareholder servicing activities. If a bank were
prohibited from so acting, its shareholder customers would be permitted to
remain shareholders in the Fund, and alternative means for continuing the
servicing of such shareholders would be sought. In such event, changes in the
operation of the Fund might occur, and shareholders serviced by such bank might
no longer be able to avail themselves of any investment or other services then
being provided by the bank. It is not expected that shareholders would incur any
adverse financial consequences as a result of any of these occurrences. It is
intended that none of the services provided by Participating Organizations other
than registered broker/dealers will involve the solicitation or sale of shares
of the Fund.
ADMINISTRATIVE SERVICES
The Directors of the Fund have adopted a Administrative Services Plan ("Services
Plan") with respect to Trust Shares and Sweep Shares. Pursuant to the Services
Plan, the Fund may enter into Servicing Agreements with Participating
Organizations providing that those Participating Organizations will render
certain shareholder administrative support services to their customers who are
record or beneficial owners of shares. Services provided pursuant to the
Services Plan may include some or all of the following: (i) processing dividend
and distribution payments from the Fund on behalf of customers; (ii) providing
information periodically to customers showing their position in Shares; (iii)
arranging for bank wires; (iv) responding to routine customer inquiries relating
to services performed by the Participating Organizations; (v) providing
sub-accounting with respect to shares owned of record or beneficially by
customers or the information needed for sub-accounting; (vi) forwarding
shareholder communications (such as proxies, shareholder reports, annual and
semi-annual financial reports, and dividend, distribution and tax notices) to
customers; (vii) forwarding to customers proxy statements and proxies containing
any proposals regarding the Services Plan; (viii) aggregating and processing
purchase, redemption, and exchange requests from customers and placing net
purchase and redemption orders with the Fund's Distributor; (ix) providing
customers with a service that invests the assets of their accounts in Shares
pursuant to specific or pre-authorized instructions; (x) maintaining records
relating to each customer's share transactions; or (xi) other similar services
if requested by the Fund and permitted by law. In addition, Participating
Organizations may also provide dedicated facilities and equipment in various
local locations to serve the needs of investors, including walk-in facilities,
800 numbers, and communication systems to handle shareholder inquiries, and in
connection with such facilities, provide on-site management personnel and
monitoring services for their customers who have invested in Shares, including
the operation of telephone lines for daily quotations of return information.
The Services Plan is an administrative support services plan. Pursuant to the
Services Plan, the Fund's arrangement with Participating Organizations must be
approved annually by a majority of the Fund's Directors, including a majority of
the Directors who are not "interested persons" of the Fund as defined in the
1940 Act and have no direct or indirect financial interest in such arrangements.
Under the terms of the Services Plan, the Fund may pay a fee to Participating
Organizations equal to maximum annual rate of 0.25 percent of the average net
assets of the Trust Shares and Sweep Shares. At the present time it is
anticipated that fees paid under the Shareholder Services Plan with respect to
Trust shares will not exceed 0.15 percent of the annual average net asset value
of such shares.
The Company has also entered a Management and Administration Agreement with
Investors Management Group, Ltd. ("IMG") pursuant to which IMG provides the Fund
supervisory administrative services relating to all operations of the Fund,
except as may be provided under the Investment Advisory Agreement, the Custodian
Agreement, the Transfer Agency Agreement and the Fund Accounting Agreement. Some
of these services include the provision of office facilities, preparation of
reports and tax returns, assistance in preparing Annual and Semi-Reports to
shareholders and providing virtually all other day to day operational tasks for
the Fund. For these services the Fund will pay IMG a monthly fee equal to 0.20
percent of the average daily net asset value of the Fund. At present IMG is
waiving 70 percent of this fee until further notice.
IMG also provides fund accounting services to the Fund under a Fund Accounting
Agreement. Pursuant to this Agreement, IMG is responsible for maintaining all
usual, customary and required books, journals and ledgers of accounts and
providing pricing and reporting all computational services. Under the Agreement,
IMG will be paid a fee computed and paid monthly, at the annual rate of 0.03
percent of average daily net assets of each Fund.
VALUING THE FUND'S SHARES
The net asset value of the Fund's shares is determined twice each day, at 11:00
a.m. Central Time and at the close of the New York Stock Exchange (normally 3:00
p.m. Central Time). The Fund is required to compute its net asset value on each
day (except days on which no purchase or redemption orders are received) on
which the New York Stock Exchange is open for trading or during which there is a
sufficient degree of trading in its portfolio securities that its net asset
value might be materially affected. Net asset value is computed by adding the
value of all securities and other assets (including accrued interest),
subtracting liabilities (including dividends payable) and dividing by the number
of shares outstanding.
Rule 2a-7 under the Investment Company Act of 1940 permits the Fund to compute
its net asset value per share using the amortized cost method of valuing
portfolio securities. As a condition for using the amortized cost method of
valuation, the Board of Directors of the Fund established procedures to
stabilize the Fund's net asset value at $1.00 per share. These procedures
include a review by the Board of Directors as to the extent of any deviation of
net asset value based on available market quotations from the Fund's $1.00
amortized cost value per share. If such deviation exceeds $.005, the Board of
Directors will consider what action, if any, should be initiated to reasonably
eliminate or reduce material dilution or other unfair results to shareholders.
Such action may include redemption of shares in kind; selling portfolio
securities prior to maturity; withholding dividends or utilizing a net asset
value per share as determined by using available market quotations. In addition,
the Fund must maintain a dollar-weighted average portfolio maturity appropriate
to its investment objective; but in any event not longer than 90 days, must
limit portfolio investments to those instruments which the Board of Directors
determines present minimal credit risks, and must observe certain other
reporting and record keeping procedures.
Under the amortized cost method of valuation, a security is initially valued at
cost on the date of purchase and, thereafter, any discount or premium is
amortized on a straight-line basis to maturity, regardless of the effect of
fluctuating interest rates on the market value of the security.
Accordingly, the Fund's investments in taxable and tax-exempt debt obligations
rated by a recognized bond rating agency and regularly traded in the secondary
market, and non-rated fixed and variable rate tax-exempt obligations and
participation interests therein, not regularly traded in the secondary market,
but subject to Liquidity Agreements, will be valued at amortized cost. Other
assets are valued at a fair value determined in good faith by the Board of
Directors of the Fund.
CALCULATION OF YIELD
"Current yield" (a seven-calendar-day historical yield) is calculated by first
dividing the average daily net investment income per share for that seven-day
period by the average daily net asset value per share for the same period. This
return is then annualized by multiplying the result times 365/7. That is, the
amount of income generated by the investment during that week is assumed to be
generated over an annual period and is shown as a percentage of the net
investment income and does not include realized or unrealized gains or losses.
"Effective yield" is based on current yield and the distribution of dividends
monthly. When annualized, that income earned from the investment is assumed to
be reinvested weekly. Effective yield will be slightly higher than current yield
because of the compounding effect of this assumed reinvestment.
Yield on shares of the Fund may fluctuate daily and does not provide a basis for
determining future yields. Yield is not guaranteed nor is the principal of the
Fund insured. In comparing the Fund's yield with those of alternative
investments (such as savings accounts, various types of bank deposits and other
money market funds), investors should consider differences between the Fund and
the alternative investments, including differences in the periods and methods
used in calculating the yields being compared. In addition, unlike the Fund,
deposit accounts at financial institutions are generally insured by the Federal
Deposit Insurance Corporation and do not fluctuate to the extent of the Fund..
The Prospectus may be in use for several months and accordingly, it can be
expected that yields will fluctuate substantially from the example shown above.
From time to time the Fund may quote its yield in advertisements or in reports
and other communications to shareholders. The Fund's yield changes in response
to fluctuations in interest rates and in the Fund's expenses. Consequently, any
given yield quotations should not be considered as representative of what the
Fund's yields may be for any specified period in the future.
Yield information may be useful in reviewing performance of the Fund and for
providing a basis for comparison with other investment alternatives. However,
the Fund's yields will fluctuate, unlike other investments which may pay a fixed
yield for a stated period of time.
Investors should recognize that in periods of declining interest rates the
Fund's yield will tend to be somewhat higher than prevailing market rates, and
in periods of rising interest rates, the Fund's yield will tend to be somewhat
lower. Also, when interest rates are falling, the inflow of net new money to the
Fund from the continuous sale of it shares will likely be invested in
instruments producing lower yields in the balance of the Fund's holdings,
thereby reducing the current yields of the Fund. In periods of rising interest
rates, the opposite can be expected to occur.
Advertisements and other sales literature may from time to time include
comparative performance information including data relating to the yield on
deposits at banking and savings and loan institutions (including savings
accounts, interest bearing checking accounts, NOW accounts and money market
deposit accounts). Yields are compiled periodically by the Advisor from a survey
of banking and savings and loan institutions and from reports published by major
newspapers. Additionally, such advertisements and other sales literature may
include references to yield information compiled by IBC's MONEY FUND REPORT, THE
BANK RATE MONITOR, BANXQUOTE and other recognized industry sources. Demand and
savings deposit accounts at banking and savings and loan institutions are
generally FDIC-insured and such yields generally do not fluctuate to the extent
of the Fund.
DIVIDENDS
The daily net income of the Fund is declared as a dividend each business day to
holders of record immediately before 3:00 p.m. Des Moines time. Dividends are
credited to shareholders' accounts each business day and distributed monthly.
Dividends are automatically reinvested in the Fund unless cash payment has been
selected on the Account Application. If a shareholder elects to receive
dividends and/or distributions in cash and the checks are returned and marked as
"undeliverable" or remain uncashed for six months, your cash election will be
changed automatically and future dividends will be reinvested. In addition, any
undeliverable checks or checks that remain uncashed for six months will be
canceled and will be reinvested in the Fund at the per share net asset value
determined as of the date of cancellation. If a shareholder redeems the entire
amount in his account during the month, dividends credited to the account from
the beginning of the month through the date of redemption are paid with the
redemption proceeds.
For purposes of calculating dividends, daily net income consists of interest
earned, including the amortization of any discount or premium to the date of
maturity, less accrued expenses of the Fund since the previous business day.
Monthly dividend distributions are reinvested in additional shares unless the
shareholder has requested payment in cash. A statement summarizing account
activity and a check for the amount of any dividends the shareholder may have
requested to be paid in cash are normally mailed monthly.
The Fund attempts to maintain its net asset value at $1.00 per share. See
"Valuing the Fund's Shares" on page 6. While this is expected to be possible
under most conditions, should the Fund incur or anticipate any unusual expenses,
loss, depreciation, gain or appreciation which would affect either net asset
value per share or income, the Board of Directors of the Fund will consider
whether to adhere to the dividend policy previously described or revise it in
light of the existing circumstances.
If the Fund's net asset value per share were reduced, or was expected to be
reduced, below $.995, the Board of Directors might temporarily suspend or reduce
dividend payments in order to maintain a net asset value of $1.00 per share. As
a result of such suspension or reduction of dividends, an investor might receive
less income during a given period than he might otherwise. Such expenses, losses
or depreciation might therefore result in an investor receiving no dividends for
the period he held his shares and receiving upon redemption a price per share
lower than the price he paid.
In its endeavor to maintain net asset value at $1.00 per share, the Fund is
required to adhere to certain conditions of Rule 2a-7 promulgated by the
Securities and Exchange Commission which permits the Fund to value its assets at
their amortized cost. These conditions require that: (1) the Fund seek to
maintain a dollar-weighted average portfolio maturity appropriate to its
objective of maintaining a stable net asset value and, in no event, longer than
90 days; (2) the board of directors of the Fund undertake to assure, to the
extent reasonably practicable, when taking into account current market
conditions affecting its investment objective, that the Fund's market-based net
asset value per share (that is, its net asset value computed on the basis of
available market quotations and estimates) will not deviate from $1.00; and (3)
the Board of Directors consider reducing or suspending dividend payments if the
market-based net asset value per share declines below $.995.
TAXATION
The Fund has qualified as a regulated investment company under Subchapter M of
the Internal Revenue Code since its inception, and intends to qualify as a
regulated investment company in the current fiscal year by meeting certain
requirements relating to the sources of its income, diversification of its
assets and distributing substantially all of its taxable net income, including
any realized capital gains, and thus will not incur any Federal income taxes.
Shareholders will receive taxable dividend income or capital gains, as the case
may be, from distributions whether paid in cash or received in the form of
additional shares. Promptly after the end of each calendar year, each
shareholder will receive a statement of the Federal income tax status of all
dividends and distributions paid during the year.
Dividends derived from interest on tax-exempt debt obligations owned by the Fund
are intended to constitute "exempt-interest dividends" which are generally not
Federally taxable to Fund shareholders. Dividends derived from other interest
and the realization of capital gains are taxable to shareholders whether or not
reinvested. The Fund will elect to qualify as a "regulated investment company,"
and will distribute annually substantially all of its tax-exempt interest and
other income, including realized capital gains, and will thus not be liable for
Federal income taxes. Fund expenses will be allocated between tax-exempt and
taxable income in the same proportion as the Fund's tax-exempt income bears to
the total of such exempt income and its gross income (excluding from gross
income the excess of capital gains over capital losses).
Promptly after the end of each year, each shareholder will receive a statement
setting forth the dollar amount of income exempt from Federal tax and the dollar
amount, if any, subject to Federal tax. Daily dividends derived from taxable
interest will be designated as taxable in the same percentage as the actual
taxable income earned bears to total income earned on that day.
In accordance with the Internal Revenue Code, interest on indebtedness incurred,
or continued, to purchase or carry shares of the Fund is not deductible.
Dividends may also be subject to state and local taxation. The Fund may not be a
suitable investment for any person who is a "principal user" or "related
person," as defined in Section 144 of the Internal Revenue Code, of certain
facilities if qualified small issue bonds used to finance such facilities are
owned by the Fund.
This discussion of the Fund's tax matters is only a summary and relates
principally to Federal tax matters. Thus, shareholders are encouraged to consult
with their personal tax advisors.
MANAGEMENT
Directors and Officers, together with information as to their principal business
occupations during the last five years, and other information are shown below.
Each Director who is deemed an "interested person", as defined in the Investment
Company Act, is indicated by an asterisk.
*David W. Miles, age 40, Director.
President, Treasurer and Senior Managing Director, Investors Management
Group, and IMG Financial Services, Inc.
*Mark A. McClurg, age 44, President and Director.
Vice President, Secretary and Senior Managing Director, Investors
Management Group, and IMG Financial Services, Inc.
David Lundquist, age 54, Chairman of the Board and Director.
Managing Director, Lundquist, Schiltz & Associates, a consulting company,
1996 to Present; Vice Chairman and CFO, New Heritage Association,
a cable television company, 1991-1996.
Johnny Danos, age 57, Director.
President, Danos, Inc., a personal investment company, 1994-Present;
Audit Partner, KPMG Peat Marwick, 1963-1994.
Debra Johnson, age 36, Director.
Vice President and CFO, Business Publications Corporation/Iowa Title
Company, a publishing and abstracting service company.
Edward J. Stanek, age 50, Director.
CEO, Iowa Lottery, a government operated lottery.
Ruth L. Prochaska, age 44, Secretary.
Controller/Compliance Officer, Investors Management Group,
and IMG Financial Services, Inc.
The address for Messrs. Miles, McClurg, and Ms. Prochaska is 2203 Grand Avenue,
Des Moines, Iowa 50312-5338.
As of the date hereof, Officers and Director beneficially owned no more than 1
percent of the shares of common stock of any of the Company's Funds or of the
Company's Funds in the aggregate.
Directors and Officers of the Fund who are officers, directors, employees, or
stockholders of the Advisor do not receive any remuneration from the Fund for
serving as Directors or Officers. Those Directors of the Funds who are not so
affiliated with the Advisor receive $250 for each Board of Directors meeting
attended, plus reimbursement for out-of-pocket expenses in attending meetings.
<TABLE>
<CAPTION>
COMPENSATION TABLE
(1) (2) (3) (4) (5)
Aggregate Pension or Retire- Estimated Total Compensation
Name of Compensa- ment Benefits Annual From Registrant
Person, tion From Accrue As Part of Benefits Upon and Fund Complex
Position Registrant Fund Expenses Retirement Paid to Director
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
David W. Miles $ 0 $ 0 $ 0 $ 0
Director
Mark A. McClurg 0 0 0 0
President &
Director
David Lundquist 0 0 0 1,000
Chairman &
Director
Johnny Danos 0 0 0 1,000
Director
Debra Johnson 0 0 0 1,000
Director
Edward J. Stanek 0 0 0 1,000
Director
</TABLE>
Management of the Advisor. David W. Miles and Mark A. McClurg each beneficially
own more than 20 percent of the outstanding voting securities of the Advisor and
are deemed to be control persons of the Advisor. Senior Managing Directors of
Investors Management Group are David W. Miles and Mark A. McClurg. They intend
to devote substantially all their time to the operation of the Advisor.
THE INVESTMENT ADVISORY AGREEMENT
The Advisor furnishes continuous investment supervision to the Fund under an
Investment Advisory Agreement (the "Management Agreement"). For its services the
Advisor is entitled to receive a fee, computed and accrued daily and payable
monthly at the rate of 0.35 percent of the average daily closing net asset value
of the Fund.
From time to time, the Advisor may voluntarily waive all or a portion of the
management fee and/or absorb certain expenses of the Fund without further
notification of the commencement or termination of such waiver or absorption.
Any such waiver will have the effect of lowering the overall expense ratio for
the Fund and increasing the Fund's overall yield to investors at the time any
such amounts are waiver and/or absorbed. The Advisor may not seek reimbursement
of such waived fees at a later date.
Under the Management Agreement, the Advisor agrees to provide a continuous
investment program for the Fund including investment research and management
with respect to all securities and investments. This would include the
solicitation and approval of commercial banks selected as Participating Banks
from which the Fund may purchase participation interests in short-term loans
subject to Liquidity and Servicing Agreements or which may issue irrevocable
letters of credit to back the demand repayment commitments of borrowers. A
careful review of the financial condition and loan loss record of a prospective
bank will be undertaken prior to the bank being approved to enter into a
Liquidity and Servicing Agreement and, once approved, a Participating Bank's
financial condition and loan loss record will be reviewed at least annually
thereafter.
The principal criteria which the Advisor will consider in approving, rejecting
or terminating Liquidity and Servicing Agreements with Participating Banks will
include a bank's (a) ratio of capital to deposits; (b) ratio of loan charge offs
to average loans outstanding; (c) ratio of loan loss reserves to net loans
outstanding; and (d) ratio of capital to total assets. Ordinarily, the Advisor
will recommend that the Fund not enter into or continue a Liquidity and
Servicing Agreement with any bank whose ratios (as described above) are less
favorable than the average of all Iowa banks. The Advisor will also consider a
bank's classified loan experience, historical and current earnings and growth
trends, quality and liquidity of investments and stability of management and
ownership. Typically, the Advisor will utilize a variety of information sources;
including, annual audited financial statements, unaudited interim financial
statements, quarterly reports of condition and income filed with regulatory
agencies and periodic examination reports (if available) and reports of
federally insured banks concerning past-due-loans, renegotiated loans and other
loan problems.
The Advisor has also agreed to reimburse the Fund, up to the amount of the
advisory fees paid to the Advisor, to the extent that the total annual expenses
of the Fund, exclusive of all taxes, interest, brokers' commissions and other
related charges but including fees paid to the Advisor, exceed the most
restrictive limits prescribed by any state in which the Fund's shares may
eventually be offered for sale. The Fund believes that it presently is not
subject to any such restrictions.
The Management Agreement will continue in effect as long as it is approved
annually by a majority of those directors who are not parties to the Management
Agreement or "interested persons" of such parties and by either the board of
directors of the Fund or a majority of the outstanding voting securities of the
Fund. The Management Agreement which was approved by the Fund's directors, as
described above, on November 3, 1997 may be terminated by either party without
penalty on 60 days' written notice and will automatically terminate in the event
of its assignment.
The Management Agreement provides that neither the Advisor nor any of its
officers or directors, agents or employees will have any liability to the Fund
or its shareholders for any error of judgment, mistake of law or any loss
arising out of any investments or for any other act or omission in the
performance of its duties as investment advisor under the Management Agreement,
except for liability resulting from willful misfeasance, bad faith or gross
negligence on the part of the Advisor in the performance of its duties or from
reckless disregard by the Advisor of its obligations under the Management
Agreement.
OTHER INFORMATION
FEDERAL HOLIDAYS. The Fund will be closed for business and, therefore, will not
accept purchase or redemption orders nor calculate net asset value, on all
Federal Holidays -- currently New Year's Day, Martin Luther King, Jr. Day,
President's Day, Memorial Day, Independence Day, Labor Day, Columbus Day,
Thanksgiving Day, Veterans Day and Christmas Day.
PORTFOLIO TRANSACTIONS. Subject to policies set forth by the board of directors
of the Fund, the Advisor is authorized to determine, consistent with the Fund's
investment objectives and policies, which securities will be purchased, sold and
held by the Fund. Most of the Fund's portfolio securities will be purchased on a
principal basis directly from the issuer, from banks, underwriters or market
makers and, thus, will not involve payment of a brokerage commission. There were
no "agency" transactions in the last three fiscal years and hence, no brokerage
commissions paid. Such purchases may include a discount, concession or mark-up
retained by an underwriter or dealer. The Advisor is authorized to select the
brokers or dealers that will execute the purchases and sales of portfolio
securities and is directed to use its best efforts to obtain the best available
price and most favorable execution on brokerage transactions. Some of the
portfolio transactions may be directed to brokers who furnish special research
and statistical information or services rendered in the execution of orders
which are of benefit to the Advisor. These may include advice or information
with respect to particular securities or issuers, information concerning general
market or economic conditions and the obtaining of information from brokers,
underwriters or market makers. While no dollar value can be placed on such
information or services, it allows the Advisor to supplement its own research
and analysis activities which can reduce its costs but not those of the Fund.
REPORTS TO SHAREHOLDERS. Semiannual and annual reports will include financial
statements which, in the case of the annual report, will be reported upon by the
Fund's independent auditors, KPMG Peat Marwick LLP. The Annual Report is
incorporated herein by reference into the Fund's Statement of Additional
Information and is available upon request without charge by calling the number
on the cover page of this Statement of Additional Information.
SHAREHOLDER MEETINGS. The Maryland Corporation Law permits registered investment
companies to operate without an annual meeting of shareholders under specified
circumstances if an annual meeting is not required by the 1940 Act. The Fund has
adopted the appropriate Bylaw provisions and may not hold an annual meeting in
any year in which the election of Directors is not required to be acted on by
shareholders under the 1940 Act.
The Bylaws also contain procedures for removal of Directors by shareholders. At
any meeting of shareholders, duly called and at which a quorum is present, the
shareholders may, by the affirmative vote of the holders of a majority of the
votes entitled to be cast thereon, remove any Director or Directors from office
and may elect a successor or successors to fill any resulting vacancies for the
unexpired terms of removed Directors.
Upon the written request of the holders of shares entitled to not less than 10
percent of all the votes entitled to be cast at such meeting, the Secretary of
the Funds shall promptly call a special meeting of shareholders for the purpose
of voting upon the question of removal of any Director. Whenever 10 or more
shareholders of record who have been such for at least six months preceding the
date of application, and who hold in the aggregate either shares having a net
asset value of at least $25,000 or at least 1 percent of the total outstanding
shares, whichever is less, shall apply to the Secretary in writing, stating that
they wish to communicate with other shareholders with a view to obtaining
signatures to a request for a meeting as described above and accompanied by a
form of communication and request which they wish to transmit, the Secretary
shall within five business days after such application either: (1) afford to
such applicants access to a list of the names and addresses of all shareholders
of record; or (2) inform such applicants as to the approximate number of
shareholders of record and the approximate cost of mailing to them the proposed
communication and form of request.
If the Secretary elects to follow the course specified in clause (2) of the last
sentence of the preceding paragraph, the Secretary, upon the written request of
such applicants, accompanied by a tender or the material to be mailed and of the
reasonable expenses of mailing, shall, with reasonable promptness, mail such
material to all shareholders of record at their addresses as recorded on the
books unless within five business days after such tender the Secretary shall
mail to such applicants and file with the Securities and Exchange Commission,
together with a copy of the material to be mailed, a written statement signed by
at least a majority of the Board of Directors to the effect that in their
opinion either such material contains untrue statements of fact or omits to
state facts necessary to make the statements contained therein not misleading,
or would be in violation of applicable law, and specifying the basis of such
opinion.
After opportunity for hearing upon the objections specified in the written
statement so filed, the Securities and Exchange Commission may, and if demanded
by the Board of Directors or by such applicants shall, enter an order either
sustaining one or more of such objections or refusing to sustain any of them. If
the Securities and Exchange Commission shall enter an order refusing to sustain
any of such objections, or if, after the entry of an order sustaining one or
more of such objections, the Securities and Exchange Commission shall find,
after notice and opportunity for hearing, that all objections so sustained have
been met, and shall enter an order so declaring, the Secretary shall mail copies
of such material to all shareholders with reasonable promptness after the entry
of such order and the renewal of such tender.
PRINCIPAL SHAREHOLDERS. As of the date hereof, to the knowledge of the Fund, no
shareholders owned beneficially five percent or more of the Fund's outstanding
shares and the Fund's officers and directors as a group owned less than one
percent of the Fund's shares.
Custodian, Transfer Agent and Dividend Paying Agent. AMCORE Financial Group,
N.A., 501 seventh Street, Rockford, Illinois 61110-0037, (the "Custodian")
serves as the Fund's custodian. The Custodian's responsibilities include
safekeeping and controlling the Fund's cash and securities, handling the receipt
and delivery of securities, determining income and collecting interest and
dividends on each Fund investment, maintaining books of original entry for
portfolio and fund accounting and other required books and accounts, and
calculating the daily net asset value and public offering price of shares of the
Fund. The Custodian does not determine the investment policies of the Fund or
decide which securities the Fund will buy or sell. The Fund may, however, invest
in securities of the Custodian and may deal with the Custodian as principal in
securities transactions..
INDEPENDENT AUDITORS. KPMG Peat Marwick LLP, 2500 Ruan Center, Des Moines, Iowa
50309, has been selected unanimously by the members of the board of directors of
the Fund who are not interested persons of the Fund as the Fund's independent
auditors to examine the books and securities of the Fund and to report upon the
financial statements of the Fund.
<PAGE>
APPENDIX A
DESCRIPTION OF BOND RATINGS. The Fund invests in tax-exempt debt
obligations, including both bonds and notes, rated in the top two grades by
Moody's and S & P. These ratings have to do with the financial strength of the
issuer of the obligations at the time they are first issued. The ratings do not
reflect opinions regarding the market value or the marketability of the
obligations. Both could be affected by a change in rating, however. Moody's four
highest ratings are Aaa, Aa, A and Baa. S & P's are AAA, AA, A and BBB.
Bonds rated Aaa or AAA are judged to be of the best quality. Interest
and principal are secure with market prices responsive to changes in interest
rates.
Bonds rated Aa or AA are also judged to be of high quality although
interest and principal do not enjoy the margin of safety that would be true of
bonds rated Aaa or AAA. Long-term risks would be somewhat greater also, with
price fluctuations primarily the result of interest rate changes.
Bonds rated A by the two rating agencies are considered to be of upper
medium grade. While interest and principal protection is judged to be adequate,
it could be susceptible to future impairment. While the price of such
obligations will be affected principally by interest rate fluctuations, economic
conditions will also have an impact.
Bonds rated Baa or BBB are considered medium grade obligations.
Interest and principal are adequately secure over the short-term but the
obligations may be somewhat speculative. Changing economic conditions may also
impact the security of the indebtedness resulting in market prices being more
affected by changes therein than by interest rate fluctuations.
TAX-EXEMPT NOTE AND COMMERCIAL PAPER RATINGS. Ratings for tax-exempt
notes are designated "MIG" (Moody's Investment Grade) by Moody's. Notes rated
MIG-1 are the highest quality and enjoy excellent protection by virtue of
established cash flows available for debt service or ready access to the market
for refinancing, or both.
Notes rated MIG-2 are high quality with ample cash flow protection
although less than available to obligations bearing the top rating.
Notes rated MIG-3 are of good quality as measured by the relevant
factors associated with credit-worthiness. However, the unquestioned financial
strength ascribed to issues in the two preceding rating categories is lacking
and ready access to the market for refinancing is less well established.
Tax-exempt commercial paper rated Prime-1 (P-1) by Moody's is supported
by the issuer's superior capacity to repay, while commercial paper rated Prime-2
(P-2) is backed by strong repayment capacity.
S & P's commercial rating A-1 indicates the obligations enjoy extremely
strong credit backing in terms of the issuer's capacity to repay, while an A-2
rating indicates strong issuer repayment capacity exists.
<PAGE>
APPENDIX B
TAX-EXEMPT VS. TAXABLE YIELDS. Set forth below is a table which may be used to
compare equivalent taxable yields to tax-exempt rates of return based upon the
investor's level of taxable income. The rates shown are those in effect under
the Internal Revenue Code as of January 1, 1997 through December 31, 1997.
<TABLE>
<CAPTION>
Marginal The following TAX-EXEMPT INTEREST RATES:
TAXABLE INCOME* Single Income 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5%
Joint Return Return Tax
Bracket Equal the TAXABLE INTEREST RATES shown below:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 6,450-$ 45,450 $ 2,650-$ 26,150 15.0% 4.12% 4.71% 5.29% 5.88% 6.47% 7.06% 7.65%
45,450- 92,850 26,150- 55,500 28.0% 4.86% 5.56% 6.25% 6.94% 7.64% 8.33% 9.03%
92,850- 156,000 55,500- 126,150 31.0% 5.07% 5.80% 6.52% 7.25% 7.97% 8.70% 9.42%
156,000- 275,300 126,150- 272,550 36.0% 5.47% 6.25% 7.03% 7.81% 8.59% 9.38% 10.16%
Over 275,300 Over 272,550 39.6% 5.79% 6.62% 7.45% 8.28% 9.11% 9.93% 10.76%
Maximum Corporate Rate 34.0% 5.30% 6.06% 6.82% 7.58% 8.33% 9.09% 9.85%
</TABLE>
*Net amount subject to Federal income tax after deductions and exemptions.
Assumes alternative minimum tax is not applicable and receipt of tax-exempt
interest does not cause any portion of social security benefits received to
become taxable to the taxpayer. State tax considerations are excluded.
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits:
----------------------------------
(a) Financial Statements
(1) Included in Part A: None
(2) Incorporated by reference in Part B:
Independent Auditors' Report dated May 30, 1997
Schedule of Investments, April 30, 1997
Statement of Assets and Liabilities, April 30, 1997
Statement of Operations for Year Ended April 30, 1997
Statement of Changes in Net Assets for the Periods
Ended April 30, 1997, and April 30, 1996
(3) Included in Part C:
Consent of KPMG Peat Marwick LLP
(b) Exhibits
Exhibits denoted with * have been previously filed.
Exhibits denoted ** relate to newly-created portfolios
and are filed herewith unless otherwise indicated.
Exhibit No. Description
----------- -----------
*1. (a) Articles of Incorporation, incorporated by
reference to the Fund's Registration
Statement, filed December 14, 1994
*2. Bylaws, incorporated by reference to the
Fund's Registration Statement, filed
December 14, 1994
*5. (a)(1) Transfer Agent, Dividend Disbursing Agent and
Shareholder Servicing Agent Agreement,
incorporated by reference to the Fund's
Registration Statement, filed
December 14, 1994
**5.(a)(2) Form of Transfer Agency Agreement
*5.(b)(1) Investment Advisory Agreement, incorporated
by reference to the Fund's Registration
Statement, filed December 14, 1994
**5.(b)(2) Form of Investment Advisory Agreement
*5.(c)(1) Administrative Services Agreement,
incorporated by reference to the Fund's
Registration Statement, filed
December 14, 1994
**5.(c)(2) Form of Management and Administration
Agreement
*5.(d)(1) Fund Accounting Agreement, incorporated by
reference to the Fund's Registration
Statement, filed December 14, 1994
**5.(d)(2) Form of Fund Accounting Agreement
*6.(a) Distribution Agreement, incorporated by
reference to the Fund's Registration
Statement, filed December 14, 1994
**6.(b) Form of Distribution Agreement
*8.(a) Custodial Agreement, incorporated by
reference to the Fund's Registration
Statement, filed December 14, 1994
**8.(b) Form of Custodial Agreement
*9.(a) Shareholder Services Plan, incorporated by
reference to the Fund's Registration
Statement, filed December 14, 1994
**9.(b) Form of Administrative Services Plan
*10.(a) Opinion of Ober, Kaler, Grimes & Shriver,
incorporated by reference to Post-Effective
Amendment No. 4, filed March 18, 1996
**10.(b) Opinion of Ober, Kaler, Grimes & Shriver,
to be filed by amendment
*11. Power of Attorney, incorporated by
reference to the Fund's Registration
Statement, filed December 14, 1994
*13. Subscription Agreement of Initial
Stockholder, incorporated by reference
to the Fund's Registration Statement,
filed December 14, 1994
*15.(a) Distribution Plan, incorporated by
reference to the Fund's Registration
Statement, filed December 14, 1994
**15.(b) Distribution Plan
**15.(c) Distribution Plan
*16.(a) 18f3 Plan, incorporated by reference
to the Pre-Effective Amendment No. 3,
filed May 18, 1995
**16.(b) Amended 18f3 Plan to be filed by Amendment
*17. Calculation of Yield Quotations, included
in Part B of this Registration Statement
Item 25. Persons Controlled by or under Common Control with Registrant.
--------------------------------------------------------------
None
Item 26. Number of Holders of Securities.
--------------------------------
Title of Class Number of Record Holders
-------------- ------------------------
IMG Core Stock Fund 103 as of September 30, 1997
IMG Bond Fund 59 as of September 30, 1997
Item 27. Indemnification.
----------------
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification by the Registrant is against public policy as expressed in
the Act and, therefore, may be unenforceable. In the event that a claim for such
indemnification (except insofar as it provides for the payment by the Registrant
of expenses incurred or paid by a director, officer or controlling person in the
successful defense of any action, suit or proceeding) is asserted against the
Registrant by such director, officer or controlling person and the Securities
and Exchange Commission is still of the same opinion, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
or not such indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
Section 2-418 of the Maryland General Corporation Law permits the
Registrant to indemnify directors and officers. In addition, Section 2-405.1
sets forth the standard of care for directors and Section 2-405.2 allows the
Registrant to include in the Charter provisions further limiting the liability
of the directors and officers in certain circumstances. Article ELEVENTH of the
Articles of Incorporation included herewith as Exhibit 1(a) (the "Articles")
limits the liability of any director or officer of the Registrant arising out of
a breach of fiduciary duty, subject to the limits of the Investment Company Act
of 1940 (the "1940 Act"). Article TWELFTH of the Articles and Article VII of the
Bylaws, included herewith as Exhibit (2), makes mandatory the indemnification of
any person made or threatened to be made a party to any action by reason of the
facts that such person is or was a director, officer or employee, subject to the
limits otherwise imposed by law or by the 1940 Act.
In addition, Paragraph 7 of the Advisory Agreement included herewith as
Exhibit 5(b)(1), and Article III of the Distribution Agreement, included
herewith as Exhibit 6(a), provide that Investors Management Group ("IMG") and
IMG Financial Services, Inc. ("IFS"), shall not be liable to the Registrant for
any error, judgment or mistake of law or for any loss arising out of any
investment or for any act or omission in the management provided by IMG or for
any distribution services provided by IFS to the Registrant for the performance
of the duties under such agreements, except for willful misfeasance, bad faith
or gross negligence in the performance of their duties or by reason of reckless
disregard of their obligation and duties under such agreements. In addition,
Article IV of the Distribution Agreement and Paragraph 8 of the Transfer Agent,
Dividend Disbursing Agent and Shareholder Servicing Agent Agreement, included
herewith as Exhibit 5(a)(f), further indemnify IFS and IMG against certain
liabilities arising out of the performance of such agreements.
Item 28. Business and Other Connections of Investment Advisor.
-----------------------------------------------------
Investors Management Group
Positions with Principal Occupations
Name Advisor (Present and for Past Two Years)
Mark A. McClurg Vice President, Secretary, See caption "Directors and
Director and Senior Officers" in the Statement of
Managing Director Additional Information forming
a part of this Registration
Statement.
David W. Miles President, Treasurer See caption "Directors and
Director, and Senior Officers" in the Statement of
Managing Director Additional Information forming
a part of this Registration
Statement.
Item 29. Principal Underwriters.
(a)(1) IMG Financial Services, Inc. ("IFS") acts as distributor
to Liquid Assets Fund, Municipal Assets Fund,
and Capital Value Fund, Inc.
(a)(2) BISYS Fund Services, Limited Partnership ("BISYS Fund
Services") will act as distributor for BISYS Fund Services and
also distribute the securities of The Victory Funds, The
Riverfront Funds, Inc., The HighMark Group, The Parkstone
Group of Funds, The BB&T Mutual Funds Group, the Summit
Investment Trust, the Qualivest Funds, The ARCH Fund, Inc.,
the American Performance Funds, The Sessions Group, the
Pacific Capital Funds, the AmSouth Mutual Funds, the MMA
Praxos Mutual Funds, the Market Watch Funds and M.S.D.&T
Funds, each of which is a open-end management investment
company.
(b)(1)
Positions and Positions and
Name and Principal Offices with Offices with
Business Address IFS Registrant
- ------------------------------------------------------------------------------
Mark A. McClurg Vice President, Secretary, President,
2203 Grand Avenue Director and Senior Director
Des Moines, IA 50312-5338 Managing Director
David W. Miles President, Treasurer, Director
2203 Grand Avenue Director, and Senior
Des Moines, IA 50312-5338 Managing Director
(b)(2) Partners of BISYS Fund Services, as of March 31, 1997, were as
follows:
Positions and Positions and
Name and Principal Offices with Offices with
Business Address BISYS Fund Services Registrant
- ------------------------------------------------------------------------------
BISYS Fund Services, Inc. Sole General Partner None
3435 Stelzer Road
Columbus, Ohio 43219
WC Subsidiary Corporation Sole Limited Partner None
150 Clove Road
Little Falls, New Jersey 07424
The BISYS Group, Inc. Sole Shareholder of
150 Clove Road General Partner
Little Falls, New Jersey 07424
(c) Not applicable
Item 30. Location of Accounts and Records.
---------------------------------
All required accounts, books and records will be maintained by
Ruth L. Prochaska, 2203 Grant Avenue, Des Moines, Iowa 50312-5338.
Item 31. Management Services.
--------------------
Not applicable.
Item 32. Undertakings.
-------------
Subject to the terms and conditions of Section 15(d) of the
Securities Exchange Act of 1934, the undersigned Registrant hereby undertakes to
file with the Securities and Exchange Commission such supplementary and periodic
information, documents and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
Subject to the terms and conditions of Section 16(c) of the
Investment Company Act of 1940, the undersigned Registrant hereby undertakes to
call a meeting of shareholders for the purpose of voting upon the question of
removal of a director or directors if requested to do so by holders of at least
10 percent of a Fund's outstanding shares and to assist in communications with
other shareholders.
The Registrant hereby undertakes to file a post-effective amendment to
this Registration Statement, using financial statements which need not be
certified, within four to six months of the effective date of this
Post-Effective Amendment.
The Registrant hereby undertakes to furnish each person to whom a
Prospectus is delivered a copy of the Registrant's latest Annual Report to
Shareholders, upon request and without charge.
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
To the Directors and Shareholders of
IMG Mutual Funds, Inc."
We consent to the use of our report incorporated herein by reference and to the
references to our Firm under the headings "Financial Highlights" and
"Shareholder Reports and Meetings" in the Prospectus and "Reports to
Shareholders" and "Independent Auditors" in the Statement of Additional
Information.
KPMG Peat Marwick LLP
Des Moines, Iowa
November 7, 1997
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, and the Investment
Company Act of 1940, the Registrant certifies that it has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Des Moines, State of Iowa, on the 7th day of
November, 1997.
IMG MUTUAL FUNDS, INC.
By _/s/__Mark A. McClurg________________
Mark A. McClurg, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on the date indicated.
Signature Title
_/s/__David W. Miles________ Director
David W. Miles
_/s/__Mark A. McClurg_______ President, Principal
Mark A. McClurg Executive Officer,
Principal Financial and
Accounting Officer and
Director
__________________________
|
_/s/__Johnny Danos__________ Director > _/s/_David W. Miles__
Johnny Danos | by David W. Miles
| Attorney in Fact
_/s/__David Lundquist_______ Chairman & Director | November 7, 1997
David Lundquist |
|
_/s/__Debra Johnson_________ Director |
Debra Johnson |
|
_/s/__Edward Stanek_________ Director |
Edward Stanek |
__________________________|
<PAGE>
IMG MUTUAL FUNDS, INC.
EXHIBIT VOLUME
TO
POST-EFFECTIVE AMENDMENT NO. 7
FORM N-1A REGISTRATION STATEMENT
<PAGE>
IMG MUTUAL FUNDS, INC.
EXHIBIT INDEX
Exhibit
Number Description Page
*1. (a) Articles of Incorporation, incorporated by
reference to the Fund's Registration Statement,
filed December 14, 1994....................................
*2. Bylaws, incorporated by reference to the Fund's
Registration Statement, filed December 14, 1994............
*5. (a)(1) Transfer Agent, Dividend Disbursing Agent and
Shareholder Servicing Agent Agreement, incorporated
by reference to the Fund's Registration Statement,
filed December 14, 1994....................................
**5. (a)(2) Form of Transfer Agency Agreement,.........................
*5. (b)(1) Investment Advisory Agreement, incorporated by
reference to the Fund's Registration Statement,
filed December 14, 1994....................................
**5. (b)(2) Form of Investment Advisory Agreement......................
*5. (c)(1) Administrative Services Agreement, incorporated by
reference to the Fund's Registration Statement,
filed December 14, 1994....................................
**5. (c)(2) Form of Management and Administration Agreement............
*5. (d)(1) Fund Accounting Agreement, incorporation by
reference to the Fund's Registration Statement,
filed December 14, 1994....................................
**5. (d)(2) Form of Fund Accounting Agreement..........................
*6. (a) Distribution Agreement, incorporated by reference
to the Fund's Registration Statement, filed
December 14, 1994..........................................
**6. (b) Form of Distribution Agreement.............................
*8. (a) Custodial Agreement, incorporated by reference
to the Fund's Registration Statement, filed
December 14, 1994..........................................
**8. (b) Form of Custodial Agreement................................
*9. (a) Shareholder Services Plan, incorporated by
reference to the Fund's Registration Statement, filed
December 14, 1994..........................................
**9. (b) Form of Administrative Services Plan.......................
*10. (a) Opinion of Ober, Kaler, Grimes & Shriver,
incorporated by reference to the Fund's Post-Effective
Amendment No. 4, filed March 18, 1996......................
**10. (b) Opinion of Ober, Kaler, Grimes & Shriver to be
filed by amendment.........................................
*11. Power of Attorney, incorporated by reference
to the Fund's Registration Statement, filed
December 14, 1994..........................................
*13. Subscription Agreement of Initial Stockholder,
incorporated by reference to the Fund's Registration
Statement, filed December 14, 1994.........................
*15. (a) Distribution Plan, incorporated by reference to the
Fund's Registration Statement, filed December 14, 1994.....
**15. (b) Distribution Plan..........................................
**15. (c) Distribution Plan..........................................
*16. (a) 18f3 Plan, incorporated by reference to
Pre-Effective Amendment No. 3, filed May 18, 1995..........
**16. (b) Amended 18f3 Plan to be filed by amendment.................
*17. Calculation of Yield Quotations, included in
Part B of this Registration Statement......................
IMG MUTUAL FUNDS, INC.
EXHIBIT # 5(a)(2)
TO
POST-EFFECTIVE AMENDMENT NO. 7
FORM N-1A REGISTRATION STATEMENT
<PAGE>
TRANSFER AGENCY AGREEMENT
AGREEMENT made as of the ___ th day of ________________, 1997, between
IMG Mutual Finds, Inc., ("IMG Funds"), a Maryland corporation having its
principal place of business at 2203 Grand Avenue, Des Moines, Iowa 50312-5338,
and Investors Management Group ("IMG"), an Iowa corporation having its principal
place of business at 2203 Grand Avenue, Des Moines, Iowa 50312-5338.
WHEREAS, IMG Funds desires that IMG perform certain services (See
Schedule A) for the IMG Funds, and for each of its series identified on Schedule
B hereto, as such Schedule shall be amended from time to time, denominates as
funds and whose shares of beneficial interest comprise from time to time the
shares of the IMG Funds (individually referred to herein as a "Fund" and
collectively as the "Funds");
WHEREAS, IMG is willing to perform such services on the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. SERVICES. IMG shall perform for the IMG Funds the transfer agent
services set forth in Schedule A hereto.
IMG also agrees to perform for the IMG Funds such special services
incidental to the performance of the services enumerated herein as agreed to by
the parties from time to time. IMG shall perform such additional services as are
provided on an amendment to Schedule A hereof, in consideration of such fees as
the parties hereto may agree.
IMG may, in its discretion, appoint in writing other parties qualified
to perform transfer agency services reasonably acceptable to the IMG Funds
(individually, a "Sub-transfer Agent") to carry out some or all of its
responsibilities under this Agreement with respect to a Fund; provided, however,
that the Sub-transfer Agent shall be the agent of IMG and not the agent of the
IMG Funds or such Fund, and the IMG shall be fully responsible for the acts of
such Sub-transfer Agent and shall not be relieve of any of its responsibilities
hereunder by the appointment of such Sub-transfer Agent.
2. FEES. The IMG Funds shall pay IMG for the services to be provided by
IMG under this Agreement in accordance with, and in the manner set forth in,
Schedule C hereto. IMG may increase the fees it charges pursuant to the fee
schedule; provided, however, that IMG may not increase such fees until the
expiration of the Initial Term of this Agreement (as defined below), unless the
IMG Funds otherwise agrees to such change in writing. Fees for any additional
services to be provided by IMG pursuant to an amendment to Schedule A hereto
shall be subject to mutual agreement at the time such amendment to Schedule A is
proposed.
3. REIMBURSEMENT OF EXPENSES. In addition to paying IMG the fees
described in Section 2 hereof, the IMG Funds agrees to reimburse IMG for IMG's
out-of-pocket expenses in providing services hereunder, including without
limitation, the following:
A. All freight and other deliver and bonding charges incurred by
IMG in delivering materials to and from the IMG Funds and in
delivering all materials to shareholders;
B. All direct telephone, telephone transmission and telecopy or
other electronic transmission expenses incurred by IMG in
communication with the IMG Funds, the IMG Funds' investment
advisor or custodian, dealers, shareholders or others as
required for IMG to perform the services to be provided
hereunder;
C. Costs of postage, couriers, stock computer paper, statements,
labels, envelopes, checks, reports, letters, tax forms,
proxies, notices or other form of printed material which shall
be required by IMG for the performance of the services to be
provided hereunder;
D. The cost of microfilm or microfiche of records or other
materials; and
E. Any expenses IMG shall incur at the written direction of an
officer of the IMG Funds thereunto duly authorized.
4. EFFECTIVE DATE. This Agreement shall become effective as of the date
first written above (the "Effective Date").
5. TERM. This Agreement shall continue in effect unless earlier
terminated by either party hereto as provided hereunder, for an initial term
until _______________ ___, ____ (the "Initial Term"). Thereafter, this Agreement
shall continue in effect unless either party hereto terminates this Agreement by
giving 90 days' written notice to the other party, whereupon this Agreement
shall terminate automatically upon the expiration of said 90 days; provided,
however, that after such termination, for so long as IMG, with the written
consent of the IMG Funds, in fact continues to perform any one or more of the
services contemplated by this Agreement or any Schedule or exhibit hereto, the
provisions of this Agreement, including without limitation the provisions
dealing with indemnification, shall continue in full force and effect. Fees and
out-of-pocket expenses incurred by IMG but unpaid by the IMG Fund upon such
termination shall be immediately due and payable upon and notwithstanding such
termination. IMG shall be entitled to collect from the IMG Funds, in addition to
the fees and disbursements provided by Section 2 and 3 hereof, the amount of all
of IMG's cash disbursements and a reasonable fee (which fee shall be not less
than one hundred and two percent (102%) of the sum of the actual costs incurred
by IMG in performing such service) for services in connection with IMG's
activities in effecting such termination, including without limitation, the
delivery to the IMG Funds and/or its distributor or investment advisor and/or
other parties, of the IMG Funds' property, records, instruments and documents,
or any copies thereof. Subsequent to such termination, IMG, for a reasonable
fee, will provide the IMG Funds with reasonable access to any IMG Funds
documents or records, remaining in its possession. Further, this Agreement is
terminable with respect to a particular Fund only upon mutual agreement of the
parties hereto or for "cause" (as defined below) by the party alleging "cause",
in either case on not less than 60 days' notice by the IMG Funds' Board of
Directors or by IMG.
For purposes of this Agreement, "cause" shall mean (a) willful
misfeasance, bad faith, gross negligence, or reckless disregard on the part of
the party to be terminated with respect to its obligations and duties set forth
herein; (b) a final, unappealable judicial, regulatory or administrative ruling
or order in which the party to be terminated has been found guilty of criminal
or unethical behavior in the conduct of its business; (c) financial difficulties
on the part of the party to be terminated which are evidenced by the
authorization or commencement of, or involuntary case under Title 11 of the
United States Code, as from time to time is in effect, or any applicable law,
other than said Title 11, of any jurisdiction relating to the liquidation or
reorganization of debtors or to the modification or alteration of the rights of
creditors; or (d) any circumstance which substantially impairs the performance
of the obligations and duties of the party to be terminated, or the ability to
perform those obligations and duties, as contemplated herein.
If, for any reason other than "cause" as defined above, IMG is replaced
as transfer agent, or if a third party is added to perform all or a part of the
services provided by IMG under this Agreement (excluding any Sub-transfer Agent
appointed by IMG as provided in Section 1 hereof), then the IMG Funds shall made
a one-time cash payment, as liquidated damages, to IMG equal to the balance due
IMG for the remainder of the term of this Agreement, assuming for purposes of
calculation of the payment that the asset level of the IMG Funds on the date IMG
is replaced, or a third party is added, will remain constant for the remainder
of the contract term.
6. UNCONTROLLABLE EVENTS. IMG assumes no responsibility hereunder, and
shall not be liable for any damage, loss of data, delay or any other loss
whatsoever caused by events beyond its reasonable control.
7. LEGAL ADVICE. IMG shall notify the IMG Funds at any time IMG
believes that it is in need of the advice of counsel (other than counsel in the
regular employ of IMG or any affiliated companies) with regard to IMG's
responsibilities and duties pursuant to this Agreement; and after so notifying
the IMG Funds, IMG, at its discretion, shall be entitled to seek, receive and
act upon advice of legal counsel of its choosing, such advice to be at the
expense of the IMG Funds or Funds unless relating to a matter involving IMG's
willful misfeasance, bad faith, gross negligence or reckless disregard with
respect to IMG's responsibilities and duties hereunder and IMG shall in no event
be liable to the IMG Funds or any Fund or any shareholder or beneficial owner of
the IMG Funds for any action reasonably taken pursuant to such advice.
8. INSTRUCTIONS. Whenever IMG is requested or authorized to take action
hereunder pursuant to instructions from a shareholder; or a properly authorized
agent of a shareholder ("shareholder's agent"), concerning an account in a Fund,
IMG shall be entitled to rely upon any certificate, letter or other instrument
or communication, believed by IMG to be genuine and to have been properly made,
signed or authorized by an officer or other authorized agent of the IMG Funds or
by the shareholder or shareholder's agent, as the case may be, and shall be
entitled to receive as conclusive proof of any fact or matter required to be
ascertained by it hereunder a certificate signed by an officer of the IMG Funds
or any other person authorized by the IMG Funds' Board of Directors or by the
shareholder or shareholder's agent, as the case may be.
As to the services to be provided hereunder, IMG may rely conclusively
upon the terms of the Prospectuses and Statement of Additional Information of
the IMG Funds relating to the Funds to the extent that such services are
described therein unless IMG receives written instructions to the contrary in a
timely manner from the IMG Funds.
9. STANDARD OF CARE; RELIANCE ON RECORDS AND INSTRUCTIONS;
INDEMNIFICATION. IMG shall use its best efforts to ensure the accuracy of all
services performed under this Agreement, but shall not be liable to the IMG
Funds for any action taken or omitted by IMG in the absence of bad faith,
willful misfeasance, gross negligence or from reckless disregard by it of its
obligations and duties. The IMG Funds agrees to indemnify and hold harmless IMG,
its employees, agents, directors, officers and nominees from and against any and
all claims, demands, actions and suits, whether groundless or otherwise, and
from and against any and all judgments, liabilities, losses, damages, costs,
charges, counsel fees and other expenses of every nature and character arising
out of or in any way relating to IMG's actions taken or nonactions with respect
to the performance of services under this Agreement or based, if applicable,
upon reasonable reliance on information, records, instructions or requests given
or made to IMG by the IMG Funds, the investment advisor and on any records
provided by any fund accountant or custodian thereof; provided that this
indemnification shall not apply to actions or omissions of IMG in cases of its
own bad faith, willful misfeasance, gross negligence or from reckless disregard
by it of its obligations and duties; and further provided that prior to
confessing any claim against it which may be the subject of this
indemnification, IMG shall give the IMG Funds written notice of and reasonable
opportunity to defend against said claim in its own name or in the name of IMG.
10. RECORD RETENTION AND CONFIDENTIALITY. IMG shall keep and maintain
on behalf of the IMG Funds all books and records which the IMG Funds or IMG is,
or may be, required to keep and maintain pursuant to any applicable statutes,
rules and regulations, including without limitation Rules 31a-1 and 31a-2 under
the Investment Company Act of 1940, relating to the maintenance of books and
records in connection with the services to be provided hereunder. IMG further
agrees that all such books and records shall be the property of the IMG Funds
and to make such books and records available for inspection by the IMG Funds or
by the Securities and Exchange Commission at reasonable times and otherwise to
keep confidential all books and records and other information relative to the
IMG Funds and its shareholders, except when requested to divulge such
information by duly-constituted authorities or court process, or requested by a
shareholder or shareholder's agent with respect to information concerning an
account as to which such shareholder has either a legal or beneficial interest
or when requested by the IMG Funds, the shareholder, or shareholder's agent, or
the dealer of record as to such account.
11. REPORTS. IMG will furnish to the IMG Funds and to its
properly-authorized auditors, investment advisors, examiners, distributors,
dealers, underwriters, salesmen, insurance companies and others designated by
the IMG Funds in writing, such reports at such times as are prescribed in
Schedule D attached hereto, or as subsequently agreed upon by the parties
pursuant to an amendment to Schedule D. The IMG Funds agrees to examine each
such report or copy promptly and will report or cause to be reported any errors
or discrepancies therein not later than three business days from the receipt
thereof. In the event that any errors or discrepancies, except such errors and
discrepancies as may not reasonably be expected to be discovered by the
recipient within three days after conducting a diligent examination, are not so
reports within the aforesaid period of time, a report will for all purposes be
accepted by and be binding upon the IMG Funds and any other recipient, and IMG
shall have no liability for errors or discrepancies therein and shall have no
further responsibility with respect to such report except to perform reasonable
corrections of such errors and discrepancies within a reasonable time after
requested to do so by the IMG Funds.
12. RIGHTS OF OWNERSHIP. All computer programs and procedures developed
to perform services required to be provided by IMG under this Agreement are the
property of IMG. All records and other data except such computer programs and
procedures are the exclusive property of the IMG Funds and all such other
records and data will be furnished to the IMG Funds in appropriate form as soon
as practicable after termination of this Agreement for any reason.
13. RETURN OF RECORDS. IMG may at its option at any time, and shall
promptly upon the IMG Funds' demand, turn over to the IMG Funds and cease to
retain IMG's files, records and documents created and maintained by IMG pursuant
to this Agreement which are no longer needed by IMG in the performance of its
services or for its legal protection. If not so turned over to the IMG Funds,
such documents and records will be retained by IMG for six years from the year
of creation. At the end of such six-year period, such records and documents will
be turned over to the IMG Funds unless the IMG Funds authorizes in writing the
destruction of such records and documents.
14. BANK ACCOUNTS. The IMG Funds and the Funds shall establish and
maintain such bank accounts with such bank or banks as are selected by the IMG
Funds, as are necessary in order that IMG may perform the services required to
be performed hereunder. To the extent that the performance of such services
shall required IMG directly to disburse amounts for payment of dividends,
redemption proceeds or other purposes, the IMG Funds and Funds shall provide
such bank or banks with all instructions and authorizations necessary for IMG to
effect such disbursements.
15. REPRESENTATIONS OF THE IMG FUNDS. The IMG Funds certifies to IMG
that: (A) as of the close of business on the Effective Date; each Fund which is
in existence as of the Effective Date has authorized unlimited shares, and (B)
by virtue of its Articles of Incorporation, shares of each Fund which are
redeemed by the IMG Funds may be sold by the IMG Funds from its treasury; and
(C) this Agreement has been duly authorized by the IMG Funds and, when executed
and delivered by the IMG Funds, will constitute a legal, valid and binding
obligation of the IMG Funds, enforceable against the IMG Funds in accordance
with its terms, subject to bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting the rights and remedies of
creditors and secured parties.
16. REPRESENTATIONS OF IMG. IMG represents and warrants that: (A) IMG
has been in, and shall continue to be in, substantial compliance with all
provisions of law, including Section 17A(c) of the Securities Exchange Act of
1934, as amended, required in connection with the performance of its duties
under this Agreement; and (B) the various procedures and systems which IMG has
implemented with regard to safeguarding from loss or damage attributable to
fire, theft, or any other cause of the blank checks, records, and other data of
the IMG Funds and IMG's records, data, equipment, facilities and other property
used in the performance of its obligations hereunder are adequate and that it
will make such changes therein from time to time as are required for the secure
performance of its obligations hereunder.
17. INSURANCE. IMG shall notify the IMG Funds should its insurance
coverage with respect to professional liability or errors and omissions coverage
be canceled or reduced. Such notification shall include the date of change and
the reasons therefor. IMG shall notify the IMG Funds of any material claims
against it with respect to services performed under this Agreement, whether or
not they may be covered by insurance, and shall notify the IMG Funds from time
to time as may be appropriate of the total outstanding claims made by IMG under
its insurance coverage.
18. INFORMATION TO BE FURNISHED BY THE IMG FUNDS AND FUNDS. The IMG
Funds has furnished to IMG the following:
A. Copies of the Articles of Incorporation of the IMG Funds and
any amendments thereto, certified by the proper official of
the state in which such Articles of Incorporation has been
filed.
B. Copies of the following documents:
1. The IMG Funds' By-Laws and any amendments thereto;
2. Certified copies of resolutions of the Board of Directors
covering the following matters:
a. Approval of this Agreement and authorization of a
specified officer of the IMG Funds to execute and
deliver this Agreement and authorization for
specified officers of the IMG Funds to instruct IMG
hereunder; and
b. Authorization of IMG to act as Transfer Agent for
the IMG Funds on behalf of the Funds.
C. A list of all officers of the IMG Funds, together with
specimen signatures of those officers, who are authorized to
instruct IMG in all matters.
D. Two copies of the following (if such documents are employed by
the IMG Funds):
1. Prospectuses and Statement of Additional Information;
2. Distribution Agreement; and
3. All other forms commonly used by the IMG Funds or its
Distributor with regard to their relationships and
transactions with shareholders of the Funds.
E. A certificate as to shares of beneficial interest of the IMG
Funds authorized, issued, and outstanding as of the Effective
Date of IMG's appointment as Transfer Agent (or as of the date
on which IMG's services are commenced, whichever is the later
date) and as to receipt of full consideration by the IMG Funds
for all shares outstanding, such statement to be certified by
the Treasurer of the IMG Funds.
19. INFORMATION FURNISHED BY IMG. IMG has furnished to the IMG Funds
the following:
A. IMG's Articles of Incorporation.
B. IMG's Code of Regulations and any amendments thereto.
C. Certified copies of actions of IMG covering the following
matters:
1. Approval of this Agreement, and authorization of a
specified officer of IMG to execute and deliver this
Agreement;
2. Authorization of IMG to act as Transfer Agent for the IMG
Funds.
D. A copy of the most recent independent accountants' report
relating to internal accounting control systems as filed with
the Securities and Exchange Commission pursuant to Rule
17Ad-13 of the Securities Exchange Act of 1934, as amended.
20. AMENDMENTS TO DOCUMENTS. The IMG Funds shall furnish IMG written
copies of any amendment to, or changes in, any of the items referred to in
Section 18 hereof forthwith upon such amendments or changes becoming effective.
In addition, the IMG Funds agrees that no amendments will be made to the
Prospectuses or Statement of Additional Information of the IMG Funds which might
have the effect of changing the procedures employed by IMG in providing the
services agreed to hereunder or which amendment might affect the duties of IMG
hereunder unless the IMG Funds first obtains IMG's approval of such amendments
or changes.
21. RELIANCE ON AMENDMENTS. IMG may rely on any amendments to or
changes in any of the documents and other items to be provided by the IMG Funds
pursuant to Sections 18 and 20 of this Agreement and the IMG Funds hereby
indemnifies and holds harmless IMG from and against any and all claims, demands,
actions, suits, judgments, liabilities, losses, damages, costs, charges, counsel
fees and other expenses of every nature and character which may result from
actions or omissions on the part of IMG in reasonable reliance upon such
amendments and/or changes. Although IMG is authorized to rely on the
above-mentioned amendments to and changes in the documents and other items to be
provided pursuant to Sections 18 and 20 hereof, IMG shall be under no duty to
comply with or take any action as a result of any of such amendments or changes
unless the IMG Funds first obtains IMG's written consent to and approval of such
amendments or changes.
22. COMPLIANCE WITH LAW. Except for the obligations of IMG set forth in
Section 10 hereof, the IMG Funds assumes full responsibility for the
preparation, contents and distribution of each Prospectus of the IMG Funds as to
compliance with all applicable requirements of the Securities Act of 1933, as
amended, the Investment Company Act of 1940, as amended, and any other laws,
rules and regulations of governmental authorities having jurisdiction. IMG shall
have no obligation to take cognizance of any laws relating to the sale of the
IMG Funds' shares. The IMG Funds represents and warrants that no shares of the
IMG Funds will be offered to the public until the IMG Funds' registration
statement under the Securities Act of 1933 and the Investment Company Act of
1940 has been declared or becomes effective.
23. NOTICES. Any notice provided hereunder shall be sufficiently given
when sent by registered or certified mail to the party required to be served
with such notice at the following address: 2203 Grand Avenue, Des Moines, Iowa
50312-5338, or at such other address as such party may from time to time specify
in writing to the other party pursuant to this Section.
24. HEADINGS. Paragraph headings in this Agreement are included for
convenience only and are not to be used to construe or interpret this Agreement.
25. ASSIGNMENT. This Agreement and the rights and duties hereunder
shall not be assignable by either of the parties hereto except by the specific
written consent of the other party. This Section 25 shall not limit or in any
way affect IMG's right to appoint a Sub-transfer Agent pursuant to Section 1
hereof.
26. GOVERNING LAW. This Agreement shall be governed by and provisions
shall be construed in accordance with the laws of the State of Iowa.
27. LIMITATION OF LIABILITY OF THE DIRECTORS AND SHAREHOLDERS. The
names "IMG Funds" and "Directors of the IMG Funds" refer respectively to the IMG
Funds created and the Directors, as directors but not individually or
personally, acting from time to time under Articles of Incorporation dated as of
November 14, 1994, to which reference is hereby made and a copy of which is on
file at the officer of the Secretary of the State of Maryland and elsewhere as
required by law, and to any and all amendments thereto so filed or hereafter
filed. The obligations of "The IMG Funds" entered into in the name or on behalf
thereof by any of the Directors, representatives or agents are made not
individually, but in such capabilities, and are not binding upon any of the
Directors, Shareholders or representatives of the IMG Funds personally, but bind
only the assets of the IMG Funds, and all persons dealing with any series of
shares of the IMG Funds must look solely to the assets of the IMG Funds belongs
to such series for the enforcement of any claims against the IMG Funds.
IN WITNESS WHEREOF, the parties hereto have cause this Agreement to be
duly executed all as of the day and year first above written.
IMG MUTUAL FUNDS, INC.
By: _____________________________________
David W. Miles, President
INVESTORS MANAGEMENT GROUP
By: _____________________________________
Mark A. McClurg, Vice-President
<PAGE>
Schedule A
TRANSFER AGENCY SERVICES
1. Shareholder Transactions . a. Process shareholder purchase and
redemption orders.
b. Set up account information, including address, dividend
option, taxpayer identification numbers and wire instructions.
c. Issue confirmations in compliance with Rule 10 of the
Securities Exchange Act of 1934, as amended.
d. Issued periodic statements for shareholders
e. Process transfers and exchanges.
f. Process dividend payments, including the purchasing of new
shares through dividend reinvestment.
2. Shareholder Information Services
a. Make information available to shareholder servicing under and
other remote access units regarding trade date, share price,
current holdings, yields, and dividend information.
b. Produce detailed history of transactions through duplicate or
special order statements upon request.
c. Provide mailing labels for distribution of financial reports,
prospectuses, proxy statements, or marketing material to
current shareholders.
3. Compliance Reporting
a. Provide reports to the Securities and Exchange Commission, the
National Association of Securities Dealers and the States in
which the Fund is registered.
b. Prepare and distribute appropriate Internal Revenue Service
forms for corresponding Funds and shareholder income and
capital gains.
c. Issue tax-withholding reports to the Internal Revenue Service.
4. Dealer/Load Processing (If applicable)
a. Provide reports for tracking rights of accumulation and
purchases made under a Letter of Intent.
b. Account for separation of shareholder investments from
transaction sale charges for purchases of Fund shares.
c. Calculate fees due under 12b-1 Plans for distribution and
marketing expenses.
d. Track sales and commission statistics by dealer and provide
for payment of commissions on direct shareholder purchases in
a load Fund.
5. Shareholder Account Maintenance
a. Maintain all shareholder records for each account in the IMG
Funds.
b. Issue customer statements on scheduled cycle, providing
duplicate second and third party copies if required.
c. Record shareholder account information changes.
d. Maintain account documentation files for each shareholder.
<PAGE>
Schedule B
TO THE TRANSFER AGREEMENT
BETWEEN
IMG MUTUAL FUNDS, INC. AND
INVESTORS MANAGEMENT GROUP
Name of Fund
Vintage Equity Fund
Vintage Aggressive Growth Fund
Vintage Balanced Fund
Vintage Municipal Bond Fund
Vintage Bond Fund
Vintage Income Fund
Vintage Limited Term Bond Fund
Liquid Assets Fund
Government Assets Fund
Municipal Assets Fund
<PAGE>
Schedule C
TRANSFER AGENT FEES
Annual Fees:
Daily dividend base fee $ 16 per shareholder account
Non-daily dividend base fee $ 14 per shareholder account
Annual Minimums:
Institutional transfer agent services:
Per class for less than 100 shareholder accounts: $ 10,000
Per class for 100 to 499 shareholder accounts: $ 18,000
Per class for 500 or more shareholder accounts: $ 24,000
Retail transfer agent services:
This schedule applies to any portfolio or class with any of the following
features: combined statementing, 12b-1 fees, load features, checkwriting,
auto-invest or auto-withdrawal processing or special database reports.
Per class for less than 100 shareholder accounts: $ 18,000
Per class for 100 to 499 shareholder accounts: $ 24,000
Per class for 500 or more shareholder accounts: $ 36,000
Multiple classes of shares:
Classes of shares, which have different net asset values or pay different daily
dividends, will be treated as separate classes, and the fee schedule above,
including the appropriate minimums, will be charged for each separate class.
Additional services:
Additional services such as IRA processing are subject to additional fees, which
will be quoted upon request. Programming costs or data base management fees for
special reports or specialized processing will be quoted upon request.
Out of pocket expenses:
IMG shall be entitled to be reimbursed for all reasonable out-of-pocket expenses
including, but not limited to, the expenses set forth in Section 3 of the
Transfer Agency Agreement to which this Schedule C is attached.
<PAGE>
Schedule D
REPORTS
I. Daily Shareholder Activity Journal
II. Daily Fund Activity Summary Report
A. Beginning Balance
B. Dealer Transactions
C. Shareholder Transactions
D. Reinvested Dividends
E. Exchanges
F. Adjustments
G. Ending Balance
III. Daily Wire and Check Registers
IV. Monthly Dealer Processing Reports
V. Monthly Dividend Reports
VI. Sales Data Reports for Blue Sky Registration
VII. Annual report by independent public accounts concerning IMG's
shareholder system and internal accounting control systems to be filed
with the Securities and Exchange Commission pursuant to Rule 17Ad-13 of
the Securities Exchange Act of 1934, as amended.
IMG MUTUAL FUNDS, INC.
EXHIBIT # 5(b)(2)
TO
POST-EFFECTIVE AMENDMENT NO. 7
FORM N-1A REGISTRATION STATEMENT
<PAGE>
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT made as of December ___, 1997, between the IMG Mutual
Funds, Inc., a Maryland Corporation (herein called the "Company"), and Investors
Management Group, a federally registered investment advisor having its principal
place of business in Des Moines, Iowa (herein called the "Investment Advisor").
WHEREAS, the Company is registered as an open-end, diversified,
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Company desires to retain the Investment Advisor to
furnish investment advisory and administrative services to the ten existing
investment portfolios of the Company and may retain the Investment Advisor to
serve in such capacity to certain additional investment portfolios of the
Company, all as now or hereafter may be identified in Schedule A hereto (such
initial investment portfolio and any such additional investment portfolios
together called the "Funds") and the Investment Advisor represents that it is
willing and possess legal authority to so furnish such services without
violation of applicable laws (including the Glass-Steagall Act) and regulations:
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Company hereby appoints the Investment Advisor to act
as investment adviser to the Funds for the period and on the terms set
forth in this Agreement. The Investment Advisor accepts such
appointment and agrees to furnish the services herein set forth for the
compensation herein provided. Additional investment portfolios may from
time to time be added to those covered by this Agreement by the parties
executing a new Schedule A which shall become effective upon its
execution and shall supersede any Schedule A having an earlier date.
2. Delivery of Documents. The Company has furnished the Investment Advisor
with copies properly certified or authenticated of each of the
following:
(a) The Company's Articles of Incorporation, dated November 15,
1994, and filed with the Secretary of State of Maryland on
November 16, 1994, and any and all amendments thereto or
restatements thereof (such Articles, as presently in effect
and as it shall from time to time be amended or restates, is
herein called the "Articles of Incorporation");
(b) The Company's By Laws and any amendments thereto:
(c) Resolutions of the Company's Board of Directors authorizing
the appointment of the Investment Advisor and approving this
Agreement;
(d) The Company's Notification of Registration on Form N-8A under
the 1940 Act as filed with the Securities and Exchange
Commission on December 13, 1994, and all amendments thereto;
(e) The Company's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended (the "1933 Act"), and under
the 1940 Act as filed with the Securities and Exchange
Commission and all amendment thereto; and
(f) The most recent Prospectus and Statement of Additional
Information of each of the Funds (such Prospectus and
Statement of Additional Information, as presently in effect,
and all amendments and supplements thereto, are herein
collectively called the "Prospectus").
The Company will furnish the Investment Advisor from time to time with
copies of all amendments of or supplements to the foregoing.
3. Management. Subject to the supervision of the Company's Board of
Directors, the Investment Advisor will provide a continuous investment
program for the Funds, including investment research and management
with respect to all securities and investments and cash equivalents in
the Funds. The Investment Advisor will determine from time to time what
securities and other investments will be purchased, retained or sold by
the Company with respect to the funds. The Investment Advisor will
provide the services under this Agreement in accordance with each of
the Fund's investment objectives, policies, and restrictions as stated
in the Prospectus and resolutions of the Company's Board of Directors.
The Investment Advisor further agrees that it:
(a) Will use the same skill and care in providing such services as
it uses in providing services to fiduciary accounts for which
it has investment responsibilities;
(b) Will conform with all applicable Rules and Regulations of the
Securities and Exchange Commission under the 1940 Act and in
addition will conduct its activities under this Agreement in
accordance with any applicable regulations of any governmental
authority pertaining to the investment advisory activities of
the Investment Advisor;
(c) Will not make loans to any person to purchase or carry units
of beneficial interest ("shares") in the Company or make loans
to the Company;
(d) Will place or cause to be placed orders for the funds either
directly with the issuer or with any broker or dealer. In
placing orders with brokers and dealers, the Investment
Advisor will attempt to obtain prompt execution of orders in
an effective manner at the most favorable price. The
Investment Advisor may cause a Fund to pay a broker which
provides brokerage and research services to the Investment
Advisor a commission for effecting a securities transaction in
excess of the amount another broker might have charged. Such
higher commissions may not be paid unless the Investment
Advisor determines in good faith that the amount paid is
reasonable in relation to the services received in terms of
the particular transaction or the Investment Advisor's overall
responsibilities to the Company and any other of the
Investment Advisor's clients. In no instance will portfolio
securities by purchase from or sold to the Investment Advisor,
or any affiliated person of the Company or the Investment
Advisor;
(e) Will maintain all books and records with respect to the
securities transactions of the Funds and will furnish the
Company's Board of Directors with such periodic and special
reports as the Board may request;
(f) Will treat confidentially and as proprietary information of
the Company all records and other information relative to the
Company and the funds and prior, present, or potential
shareholders, and will not use such records and information
for any purpose other than performance of its responsibilities
and duties hereunder, except after prior notification to and
approval in writing by the Company, which approval shall not
be unreasonably withheld and may not be withheld where the
Investment Advisor may be exposed to civil or criminal
contempt proceedings for failure to comply, when requested to
divulge such information by duly constituted authorities, or
when so requested by the Company, and;
(g) Will maintain its policy and practice of conducting its
fiduciary functions independently. In making investment
recommendations for the Funds, the Investment Advisor's
personnel will not inquire or take into consideration whether
the issuers of securities proposed for purchase or sale for
the Company's account are customers of the Investment Advisor
or of its parent or its subsidiaries or affiliates. In dealing
with such customers, the Investment Advisor and its parent,
subsidiaries, and affiliates will not inquire or take into
consideration whether securities of those customers are held
by the Company.
4. Services Not Exclusive. The investment management services furnished by
the Investment Advisor hereunder are not to be deemed exclusive, and
the Investment Advisor shall be free to furnish similar services to
others so long as its services under this Agreement are not impaired
thereby.
5. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Investment Advisor hereby agrees that all
records which it maintains for the funds are the property of the
Company and further agrees to surrender promptly to the Company any of
such records upon the Company's request. The Investment Advisor further
agrees to preserve for the periods prescribed by Rule 31a-2 under the
1940 Act the records required to be maintained by Rule 31a-1 under the
1940 Act.
6. Expenses. During the term of this Agreement, the Investment Advisor
will pay all expenses incurred by it in connection with its activities
under this Agreement other than the cost of securities (including
brokerage commissions, if any) purchased for the Funds.
7. Compensation. For the services provided and the expenses assumed
pursuant to this Agreement, each of the funds will pay the Investment
Advisor and the Investment Advisor will accept as full compensation
therefor a fee equal to the fee set forth on Schedule A hereto. The
obligations of the funds to pay the above described fee to the
Investment Advisor will begin as of the respective dates of the initial
public sale of shares in the Funds.
If in any fiscal year the aggregate expenses of any of the Funds (as
defined under the securities regulations of any state having
jurisdiction over the Company) exceed the expense limitations of any
such state, the Investment Advisor will reimburse the Fund for a
portion of such excess expenses equal to such excess times the ratio of
the fees otherwise payable by the Fund to the Investment Advisor
hereunder and to IMG under the Management and Administration Agreement
between IMG and the Company. The obligation of the Investment Advisor
to reimburse the Funds hereunder is limited in any fiscal year to the
amount of its fee hereunder for such fiscal year, provided however,
that notwithstanding the foregoing, the Investment Adviser shall
reimburse the Funds for such proportion of such excess expenses
regardless of the amount paid to it during such fiscal year to the
extent that the securities regulations of any state having jurisdiction
over the Company so require. Such expense reimbursement, if any will be
estimated daily and reconciled and paid on a monthly basis.
8. Limitation of Liability. The Investment Advisor shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the
Funds in connection with the performance of this Agreement, except a
loss resulting from a breach of fiduciary duty with respect to the
receipt of compensation for services or a loss resulting from willful
misfeasance, bad faith, or gross negligence on the part of the
Investment Advisor in the performance of its duties or from reckless
disregard by it of its obligations and duties under this Agreement.
9. Duration and Termination. This Agreement will become effective as of
the date first written above (of, if a particular fund is not in
existence on that date, on the date a registration statement relating
to that Fund becomes effective with the Securities and Exchange
Commission), provided that it shall have been approved by vote of a
majority of the outstanding voting securities of such Fund, in
accordance with the requirements under the 1940 Act, and, unless sooner
terminated as provided herein, shall continue in effect until December
__, 1999.
Thereafter, if not terminated, this Agreement shall continue in effect
as to a particular Fund for successive annual periods, provided such
continuance is specifically approved at least annually (a) by the vote
of a majority of those members of the Company's Board of Directors who
are not parties to this Agreement or interested persons of any party to
this Agreement, cast in person at a meeting called for the purpose of
voting on such approval, and (b) by the vote of a majority of the
Company's Board of Directors or by vote of a majority of all votes
attributable to the outstanding shares of such Fund. Notwithstanding
the foregoing, this Agreement may be terminated as to a particular Fund
at any time on sixty days' written notice, without the payment of any
penalty, by the Company (by vote of the Company's Board of Directors or
by vote of a majority of the outstanding voting securities of such
Fund) or by the Investment Advisor. This Agreement will immediately
terminate in the event of its assignment. (As used in this Agreement,
the terms "majority of the outstanding voting securities", "interested
persons" and "assignment" shall have the same meanings as ascribed to
such terms in the 1940 Act.)
10. Investment Advisor's Representations. The Investment Advisor hereby
represents and warrants that it is willing and possess all requisite
legal authority to provide the services contemplated by this Agreement
without violation of applicable law and regulations, including but not
limited to the Glass-Steagall Act and the regulations promulgated
thereunder.
11. Amendment to this Agreement. No provision of this Agreement may be
changed, waived, discharges or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of
the change, waiver, discharge or termination is sought.
12. Miscellaneous. The names "IMG Mutual Funds, Inc." and Directors of the
IMG Mutual Funds, Inc." refer respectively to the Company created and
the Directors, as directors but not individually or personally. The
obligations of the Company entered into in the name or on behalf
thereof by any of the Directors, representatives or agents are made not
individually, but in such capacities, and are not binding upon any of
the Directors, Shareholders or representatives of the Company
personally, but bind only the assets of the Company, and all persons
dealing with any series of shares of the Company must look solely to
the assets of the Company belonging to such series for the enforcement
of any claims against the Company.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
IMG Mutual Funds, Inc.
By: ____________________________________
Title: ___________________________________
Investors Management Group
By: ____________________________________
Title: ___________________________________
<PAGE>
Schedule A to the
Investment Advisory Agreement
Between the IMG Mutual Funds, Inc. and
Investors Management Group
Name of Fund Compensation
Vintage Equity Fund Annual rate of seventy-five
one-hundredths of one percent
(0.75%) of the average daily
net assets of such Fund.
Vintage Aggressive Growth Fund Annual rate of ninety-five
one-hundredths of one percent
(0.95%) of the average daily
net assets of such Fund.
Vintage Balanced Fund Annual rate of seventy-five
one-hundredths of one percent
(0.75%) of the average daily
net assets of such Fund.
Vintage Municipal Bond Fund Annual rate of sixty
one-hundredths of one percent
(0.60%) of the average daily
net assets of such Fund.
Vintage Bond Fund Annual rate of fifty-five
one-hundredths of one percent
(0.55%) of the average daily
net assets of such Fund
Vintage Income Fund Annual rate of sixty
one-hundredths of one percent
(0.60%) of the average daily
net assets of such Fund.
Vintage Limited Term Bond Fund Annual rate of sixty
one-hundredths of one percent
(060%) of the average daily
net assets of such Fund.
Liquid Assets Fund Annual rate of thity-five
one-hundredths of one percent
(0.35%) of the average daily
net assets of such Fund.
Government Assets Fund Annual rate of forty
one-hundredths of one percent
(0.40%) of the average daily
net assets of such Fund.
Municipal Assets Fund Annual rate of thirty-five
one-hundredths of one percent
(0.35%) of the average daily
net assets of such Fund.
* All fees are computed daily and paid monthly.
IMG MUTUAL FUNDS, INC.
EXHIBIT # 5(c)(2)
TO
POST-EFFECTIVE AMENDMENT NO. 7
FORM N-1A REGISTRATION STATEMENT
<PAGE>
MANAGEMENT AND ADMINISTRATION AGREEMENT
As of December ___, 1997
IMG Mutual Funds, Inc., a Maryland corporation (the "Company") herewith confirms
its Agreement with Investors Management Group (the "Administrator") as follows:
The Company desires to employ a portion of its capital by investing and
reinvesting the same in investments of the type and in accordance with the
limitations specified in its Prospectus and Statement of Additional Information
relating to the investment portfolios and any additional investment portfolios
of the Company as each are or will be identified in Schedule A hereto (such
investment portfolios and any additional investment portfolios together called
the "Funds"), copies of which have been or will be submitted to the
Administrator, and in resolutions of the Company's Board of Directors. The
Company and the Administrator hereby agree that the Administrator will serve as
the manager and administrator for the Funds upon the following terms and
conditions.
1. Services as Manager and Administrator
Subject to the direction and control of the Board of Directors of the
Company, the Administrator will assist in supervising all aspects of the
operations of the Funds except those performed by the investment advisor for the
Funds under its Investment Advisory Agreement, the custodian for the Funds under
its Custodian Agreement, the transfer agent for the Funds under its Transfer
Agency Agreement and the fund accountant for the Funds under its Fund Accounting
Agreement.
The Administrator will maintain office facilities (which may be in the
offices of the Administrator or an affiliate but shall by in such location as
the Company shall reasonably determine); furnish statistical and research data,
clerical and certain bookkeeping services and stationery and office supplies;
prepare the periodic reports to the Securities and Exchange Commission (the
"Commission") on Form N-SAR or any replacement forms therefor; compile data for,
prepare for execution by the Funds and file all the Funds' federal and state tax
returns and required tax filings other than those required to be made by the
Funds' custodian and transfer agent; prepare compliance filings pursuant to
state securities laws with the advice of the Company's counsel; assist to the
extent requested by the Company with the Company's preparation of its Annual and
Semi-Annual Reports to Shareholders and its Registration Statements (on Form
N-1A or any replacement therefor); compile data for, prepare and file timely
Notices to the Commission required pursuant to Rule 24f-2 under the Investment
Company Act of 1940 (the "1940 Act"); keep and maintain the financial accounts
and records of the Funds, including calculations of daily expense accruals; in
the case of money market funds, periodic review of the amount of the deviation,
if any, of the current net asset value per share (calculated using available
market quotations or an appropriate substitute that reflects current market
conditions) from each money market fund's amortized cost price per share; and
generally assist in all aspects of the operations of the Funds. In compliance
with the requirements of Rule 31a-3 under the 1940 Act, the Administrator hereby
agrees that all records which it maintains for the Company are the property of
the Company and further agrees to surrender promptly to the Company any of such
records upon the Company's request. The Administrator further agrees to preserve
for the periods prescribed by Rule 31a-2 under the 1940 Act the records required
to be maintained by Rule 31a-1 under the 1940 Act. The Administrator may
delegate some or all of its responsibilities under this Agreement.
The Administrator may, at its expense, subcontract with any entity or
person concerning the provision of the services contemplated hereunder;
provided, however, that the Administrator shall not be relieved of any of its
obligations under this Agreement by the appointment of such subcontractor and
provided further, that the Administrator shall be responsible, to the extent
provided in Section 4 hereof, for all acts of such subcontractor as if such acts
were its own.
2. Fees; Expenses; Expense Reimbursement
In consideration of services rendered and expenses assumed pursuant to
this Agreement, each of the Funds will pay the Administrator on the first
business day of each month, or at such time(s) as the Administrator shall
request and the parties hereto shall agree, a fee computed daily and paid as
specified below equal to the fee calculated at the applicable annual rate set
forth on Schedule A hereto. The fee for the period from the day of the month
this Agreement is entered into until the end of that month shall be prorated
according to the proportion which such period bears to the full monthly period.
Upon any termination of this Agreement before the end of any month, the fee for
such part of a month shall be prorated according to the proportion which such
period bears to the full monthly period and shall be payable upon the date of
termination of this Agreement.
For the purpose of determining fees payable to the Administrator, the
value of the net assets of a particular Fund shall be computed in the manner
described in the Company's Prospectus or Statement of Additional Information
respecting that Fund as from time to time is in effect for the computation of
the value of such net assets in connection with the determination of the
liquidating value of the shares of such Fund.
The Administrator will from time to time employ or associate with
itself such person or persons as the Administrator may believe to be
particularly fitted to assist it in the performance of this Agreement. Such
person or persons may be partners, officers, or employees who are employed by
both the Administrator and the Company. The compensation of such person or
persons shall be paid by the Administrator and no obligation may be incurred on
behalf of the Funds in such respect. Other expenses to be incurred in the
operation of the Funds including taxes, interest, brokerage fees and
commissions, if any, fees of Directors who are not partners, officers,
directors, shareholders or employees of the Administrator or the investment
advisor or distributor for the Funds, commission fees and state Blue Sky
qualification and renewal fees and expenses, investment advisory fees, custodian
fees, transfer and dividend disbursing agents' fees, fund accounting fees
including pricing of portfolio securities, certain insurance premiums, to the
extent authorized by the Company, outside and inside auditing and legal fees and
expenses, costs of maintenance of corporate existence, typesetting and printing
prospectuses for regulatory purposes and for distribution to current
Shareholders of the Funds, costs of Shareholders' and Directors' reports and
meetings and any extraordinary expenses will be borne by the Funds; provided,
however, that the Funds will not bear, directly or indirectly, the cost of any
activity which is primarily intended to result in the distribution of shares of
the Funds.
If in any fiscal year the aggregate expenses of a particular Fund (as
defined under the securities regulations of any state having jurisdiction over
the Company) exceed the expense limitations of any such state, the Administrator
will reimburse such Fund for a portion of such excess expenses equal to such
excess times the ratio of the fees respecting such Fund otherwise payable to the
Administrator hereunder to the aggregate fees respecting such Fund otherwise
payable to the Administrator hereunder and the Investors Management Group under
the Investment Advisory Agreement between Investors Management Group and the
Company. The expense reimbursement obligation of the Administrator is limited to
the amount of its fees hereunder for such fiscal year, provided, however, that
notwithstanding the foregoing, the Administrator shall reimburse a particular
Fund for such proportion of such excess expenses regardless of the amount of
fees paid to it during such fiscal year to the extent that the securities
regulations of any state having jurisdiction over the Company so require. Such
expense reimbursement, if any will be estimated daily and reconciled and paid on
a monthly basis.
3. Proprietary and Confidential Information
The Administrator agrees on behalf of itself and its partners and
employees to treat confidentially and as proprietary information of the Company
all records and other information relative to the Company and prior, present, or
potential Shareholders, and not to use such records and information for any
purpose other than performance of its responsibilities and duties hereunder,
except after prior notification to and approval in writing by the Company, which
approval shall not be unreasonably withheld and may not be withheld where the
Administrator may be exposed to civil or criminal contempt proceedings for
failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Company.
4. Limitation of Liability
The Administrator shall not be liable for any loss suffered by the
Funds in connection with the matters to which this Agreement relates, except for
a loss resulting from willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement. Any person, even though also a
partner, employee, or agent of the Administrator, who may be or become an
officer, Directors, employee, or agent of the Company or the Funds shall be
deemed, when rendering services to the Company or the Funds, or acting on any
business of that party, to be rendering such services to or acting solely for
that party and not as a partner, employee, or agent or one under the control or
direction of the Administrator even though paid by it.
5. Term
This Agreement shall become effective as of the date first written
above (or, if a particular Fund is not in existence on the date, on the date an
amendment to Schedule A to this Agreement relating to that Fund is executed) and
shall continue until December __, 2000, and unless sooner terminated as provided
herein, thereafter shall be renewed automatically for successive three year
terms, unless written notice not to renew is given by the non-renewing party to
the other party at least 60 days prior to the expiration of the then current
term. This Agreement shall be reviewed and ratified at least annually by the
Company's Board of Directors, provided that this Agreement is also reviewed and
ratified by the majority of the Company's Directors who are not parties to the
Agreement or interested persons (as defined in the 1940 Act) of any party to
this Agreement, by vote cast in person at a meeting called for the purpose of
reviewing this Agreement. The scope of such review shall be whether there is any
"cause" (as defined below) that would justify terminating the Agreement. This
Agreement is terminable with respect to a particular Fund only upon mutual
agreement of the parties hereto or for "cause" by the party alleging "cause", in
either case on not less than 60 days' notice by the Company's Board of Directors
or by the Administrator.
For purposes of this Agreement, "cause" shall mean (a) willful
misfeasance, bad faith, gross negligence or reckless disregard on the part of
the party to be terminated with respect to its obligations and duties set forth
herein; (b) a final, unappealable judicial, regulatory or administrative ruling
or order in which the party to be terminated has been found guilty of criminal
or unethical behavior in the conduct of its business; (c) financial difficulties
on the part of the party to be terminated which is evidenced by the
authorization or commencement of, or involvement by way of pleading, answer,
consent, or acquiescence in, a voluntary or involuntary case under Title 11 of
the United States Code, as from time to time is in effect, or any applicable
law, other than said Title 11, of any jurisdiction relating to the liquidation
or reorganization of debtors or to the modification or alteration of the rights
of creditors; or (d) any circumstances which substantially impairs the
performance of the obligations and duties, as contemplated herein.
Notwithstanding the foregoing, the absence of either or both an annual review or
ratification of this Agreement by the Board of Directors shall not, in and of
itself, constitute "cause" as used herein.
If, for any reason other than "cause" as defined above, the
Administrator is replaced as fund manager and administrator, or if a third party
is engaged to perform all or a part of the services provided by the
Administrator under this Agreement (excluding any sub-administrator appointed by
the Administrator as provided in Section 1 hereof), then the Company shall make
a one-time cash payment, as liquidated damages, to the Administrator equal to
the balance due the Administrator for the remainder of the term of this
Agreement, assuming for purposes of calculation of the payment that the asset
level of the Company on the date the Administrator is replaced, or a third party
is added, will remain constant for the balance of the contract term.
6. Governing Law
The laws of the State of Iowa shall govern this Agreement. The names
the "IMG Mutual Funds, Inc." and "Directors of the IMG Mutual Funds, Inc." refer
respectively to the Company created and the Directors, as directors but not
individually or personally. The obligations of the Company entered into in the
name or on behalf thereof by any of the Directors, representatives or agents are
made not individually, but in such capacities, and are not binding upon any of
the Directors, Shareholders or representatives of the Company personally, but
bind only the assets of the Company, and all persons dealing with any series of
shares of the Company must look solely to the assets of the Company belonging to
such series for the enforcement of any claims against the Company.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
IMG Mutual Funds, Inc.
By: ____________________________________
Title: ___________________________________
Investors Management Group
By: ____________________________________
Title: ___________________________________
<PAGE>
Schedule A
to the
Management and Administration Agreement
Between the IMG Mutual Funds, Inc. and
Investors Management Group
Name of Fund Compensation*
Vintage Equity Fund Annual rate of twenty-six
one-hundredths of one percent
(0.26%) of the average daily
net assets of such Fund.
Vintage Aggressive Growth Fund Annual rate of twenty-six
one-hundredths of one percent
(0.26%) of the average daily
net assets of such Fund.
Vintage Balanced Fund Annual rate of twenty-six
one-hundredths of one percent
(0.26%) of the average daily
net assets of such Fund.
Vintage Municipal Bond Fund Annual rate of twenty-six
one-hundredths of one percent
(0.26%) of the average daily
net assets of such Fund.
Vintage Bond Fund Annual rate of twenty-six
one-hundredths of one percent
(0.26%) of the average daily
net assets of such Fund.
Vintage Income Fund Annual rate of twenty-six
one-hundredths of one percent
(0.26%) of the average daily
net assets of such Fund.
Vintage Limited Term Bond Fund Annual rate of twenty-six
one-hundredths of one percent
(0.26%) of the average daily
net assets of such Fund.
Liquid Assets Fund Annual rate of twenty
one-hundredths of one percent
(0.20%) of the average daily
net assets of such Fund.
Government Assets Fund Annual rate of twenty-one
one-hundredths of one percent
(0.21%) of the average daily
net assets of such Fund.
Municipal Assets Fund Annual rate of twenty
one-hundredths of one percent
(0.20%) of the average daily
net assets of such Fund.
*All fees are computed daily and paid periodically.
IMG MUTUAL FUNDS, INC.
EXHIBIT # 5(d)(2)
TO
POST-EFFECTIVE AMENDMENT NO. 7
FORM N-1A REGISTRATION STATEMENT
<PAGE>
FUND ACCOUNTING AGREEMENT
AGREEMENT made this ___ th day of December, 1997, between the IMG
Mutual Funds, Inc., (the "Company"), a Maryland Corporation having its principal
place of business at 2203 Grand Avenue, Des Moines, Iowa 50312-5338, and
Investors Management Group, ("IMG"), a corporation organized under the laws of
the State of Iowa and having its principal place of business at 2203 Grand
Avenue, Des Moines, Iowa 50312-5338.
WHEREAS, the Company desire that IMG perform certain fund accounting
services for each investment portfolio of the Company identified on Schedule A
hereto, as such Schedule shall be amended from time to time (individually
referred to herein as the "Fund" and collectively as the "Funds"); and
WHEREAS, IMG is willing to perform such services on the terms and
conditions set forth in this Agreement;
NOW THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. Services as Fund Accountant. IMG will keep and maintain the
following books and records of each Fund pursuant to Rule 31a-1 under the
Investment Company Act of 1940 (the "Rule"):
(a) Journals containing an itemized daily record in detail of all
purchases and sales of securities, all receipts and
disbursements of cash and all other debits and credits, as
required by subsection (b)(1) of the Rule;
(b) General and auxiliary ledgers reflecting all asset, liability,
reserve, capital, income and expense accounts, including
interest accrued and interest received, as required by
subsection (b)(2)(i) of the Rule;
(c) Separate ledger accounts required by subsection (b)(2)(ii) and
(iii) of the Rule; and
(d) A monthly trial balance of all ledger accounts (except
shareholder accounts) as required by subsection (b)(8) of the
Rule.
In addition to the maintenance of the books and records specified
above, IMG shall perform the following accounting services daily for each Fund:
(a) Calculate the net asset value per Share;
(b) Calculate the dividend and capital gain distribution, if any;
(c) Calculate the yield;
(d) Reconcile cash movements with the Fund's custodian;
(e) Affirm to the Fund's custodian all portfolio trades and cash
movements;
(f) Verify and reconcile with the Fund's custodian all daily trade
activity;
(g) Provide the following reports:
(i) A current security position report;
(ii) A summary report of transactions and pending
maturities (including the principal, cost, and
accrued interest on each portfolio security in
maturity date order); and
(iii) A current cash position report (including cash
available from portfolio sales and maturities and
sales of a Fund's Shares less cash needed for
redemptions and settlement of portfolio purchased);
(h) Such other similar services with respect to a Fund as may be
reasonably requested by the Company.
IMG shall perform the following accounting services for each Fund:
(a) Obtain at least daily for variable net asset value funds and
weekly for money market funds actual dealer quotations, prices
from a pricing service, or matrix prices on all portfolio
securities (including those with less than 60 days to
maturity) in order to mark the entire portfolio to the market;
and
(b) Prepare an interim balance sheet, statement of income and
expense, and statement of changes in net assets for the Fund
as of each month-end.
2. Subcontracting. IMG may, at its expense, subcontract with any entity
or person concerning the provision of the services contemplated hereunder;
provided, however, that IMG shall not be relieved of any of its obligations
under this Agreement by the appointment of such sub-contractor and provided
further, that IMG shall be responsible, to the extent provided in Section 7
hereof, for all acts of such sub-contractor as if such acts were its own.
3. Compensation. The Company shall pay IMG for the services to be
provided by IMG under this Agreement in accordance with, and in the manner set
forth in, Schedule A hereto.
4. Reimbursement of Expenses. In addition to paying IMG the fees
described in Section 3 hereof, the Company agrees to reimburse IMG for IMG's
out-of-pocket expenses in providing services hereunder, including without
limitation the following:
A. All freight and other deliver and bonding charges incurred by
IMG in delivering materials to and from the Company;
B. All direct telephone, telephone transmission and telecopy or
other electronic transmission expenses incurred by IMG in
communication with the Company, the Company's investment
advisor or custodian, dealers or others as required for IMG to
perform the services to be provided hereunder;
C. Costs of pricing the portfolio securities of each Fund;
D. The cost of microfilm or microfiche of records or other
materials; and
E. Any expenses IMG shall incur at the written direction of an
officer of the Company thereunto duly authorized.
5. Effective Date. This Agreement shall become effective with respect
to a Fund as of the date first written above (or, if a particular fund is not in
existence on that date, on the date an amendment to Schedule A to this Agreement
relating to the Fund is executed) ( the "Executed Date").
6. Term. This Agreement shall continue in effect with respect to a
Fund, unless earlier terminated by either party hereto as provided hereunder,
until December __, 2000 and thereafter shall be renewed automatically for
successive three year terms unless written notice not to renew is given by the
non-renewing party to the other party at least 60 days prior to the expiration
of the then current term, provided, however, that after such termination for so
long as IMG, with the written consent of the Company, in fact continues to
perform any one or more of the service contemplated by this Agreement or any
schedule or exhibit hereto, the provisions of this Agreement, including without
limitation the provisions dealing with indemnification, shall continue in full
force and effect. Compensation due IMG and unpaid by the Company upon such
termination shall be immediately due and payable upon and notwithstanding such
termination. IMG shall be entitled to collect from the Company, in addition to
the compensation described under Section 3 hereof, the amount of all of IMG's
cash disbursements for services in connection with IMG's activities in effecting
such termination, including without limitation, the delivery to the Company
and/or its designees of the Company's property, records, instruments and
documents, or any copies thereof. Subsequent to such termination for a
reasonable fee, IMG will provide the Company with reasonable access to any
Company documents or records remaining in its possession. This Agreement is
terminable with respect to a particular Fund only upon mutual agreement of the
parties hereto or for "cause" (as defined below) by the party alleging "cause",
in either case on not less than 60 days' notice by the Company's Board of
Directors or by IMG.
For purposes of this Agreement, "cause" shall mean (a) willful
misfeasance, bad faith, gross negligence or reckless disregard on the part of
the party to be terminated with respect to its obligations and duties set forth
herein; (b) a final, unappealable judicial, regulatory or administrative ruling
or order in which the party to be terminated has been found guilty of criminal
or unethical behavior in the conduct of its business; (c) financial difficulties
on the part of the party to be terminated which is evidenced by the
authorization or commencement of, or involvement by way of pleading, answer,
consent, or acquiescence in, a voluntary or involuntary case under Title 11 of
the United States Code, as from time to time is in effect, or any applicable
law, other than said Title 11, of any jurisdiction relating to the liquidation
or reorganization of debtors or to the modification or alteration of the rights
of creditors; or (d) any circumstances which substantially impairs the
performance of the obligations and duties of the party to be terminated, or the
ability to perform those obligations and duties as contemplated herein.
If, for any reason other than "cause" as defined above, IMG is replace
as Fund Accountant, or if a third party is added to perform all or a part of the
services provided by IMG under this Agreement (excluding any sub-accountant
appointed by IMG as provided in Section 2 hereof), then the Company shall make a
one-time cash payment, as liquidated damages, to IMG equal to the balance due
IMG for the remainder of the term of this Agreement, assuming for purposes of
calculation of the payment that the asset level of the Company on the date IMG
is replaces, or a third party is added, will remain constant for the balance of
the contract term.
7. Standard of Care: Reliance on Records and Instruction:
Indemnification. IMG shall use its best efforts to insure the accuracy of all
services performed under this Agreement, but shall not be liable to the Company
for any action taken or omitted by IMG in the absence of bad faith, willful
misfeasance, negligence or from reckless disregard by it of its obligations and
duties. A Fund agrees to indemnify and hold harmless IMG, its employees, agents,
directors, officers and nominees from and against any and all claims, demands,
actions and suits, whether groundless or otherwise, and from and against any and
all judgments, liabilities, losses, damages, costs, charges, counsel fees and
other expenses of every nature and character arising out of or in any way
relating to IMG's actions taken or nonactions with respect to the performance of
services under this Agreement with respect to such Fund or based, if applicable,
upon reasonable reliance on information, records, instructions or requests with
respect to such Fund given or made to IMG by a duly authorized representative of
the Company; provided that this indemnification shall not apply to actions or
omissions of IMG in cases of its own bad faith, willful misfeasance, negligence
or from reckless disregard by it of its obligations and duties, and further
provided that prior to confessing any claim against it which may be the subject
of this indemnification, IMG shall give the Company written notice of and
reasonable opportunity to defend against said claim in its own name or in the
name of IMG.
8. Records Retention and Confidentiality. IMG shall keep and maintain
on behalf of the Company all books and records which the Company and IMG are, or
may be, required to keep and maintain pursuant to any applicable statutes, rules
and regulations, including without limitation Rules 31a-1 and 31a-2 under the
Investment Company Act of 1940, as amended (the "1940 Act"), relating to the
maintenance of books and records in connection with the services to be provided
hereunder. IMG further agrees that all such books and records shall be the
property of the Company and to make such books and records available for
inspection by the Company or by the Securities and Exchange Commission at
reasonable times and otherwise to keep confidential all books and records and
other information relative to the Company and its shareholders; except when
requested to divulge such information by duly-constituted authorities or court
process.
9. Uncontrollable Events. IMG assumes no responsibilities hereunder,
and shall not be liable, for any damage, loss of data, delay or any other loss
whatsoever cause by events beyond its reasonable control.
10. Reports. IMG will furnish to the Company and to its properly
authorized auditors, investment advisors, examiners, distributors, dealers,
underwriters, salesmen, insurance companies and others designated by the Company
in writing, such reports and at such times as are prescribed pursuant to the
terms and the conditions of this Agreement to be provided or completed by IMG,
or as subsequently agreed upon by the parties pursuant to an amendment hereto.
The Company agrees to examine each such report or copy promptly and will report
or cause to be reported any errors or discrepancies therein no later than three
business days from the receipt thereof. In the event that errors or
discrepancies, except such errors and discrepancies as may not reasonably be
expected to be discovered by the recipient within three days after conducting a
diligent examination, are not so reports within the aforesaid period of time, a
report will for all purposes be accepted by and binding upon the Company and any
other recipient, and IMG shall have no liability for errors or discrepancies
therein and shall have no further responsibility with respect to such report
except to perform reasonable corrections of such errors and discrepancies within
a reasonable time after requested to do so by the Company.
11. Rights of Ownership. All computer programs and procedures developed
to perform services required to be provided by IMG under this Agreement are the
property of IMG. All records and other data except such computer programs and
procedures are the exclusive property of the Company and all such other records
and data will be furnished to the Company in appropriate form as soon as
practicable after termination of this Agreement for any reason.
12. Return of Records. IMG may at its option at any time, and shall
promptly upon the Company's demand, turn over to the Company and cease to retain
IMG's files, records and documents created and maintained by IMG pursuant to
this Agreement which are no longer needed by IMG in the performance of its
services or for its legal protection. If not so turned over to the Company, such
documents and records will be retained by IMG for six years from the year of
creation. At the end of such six-year period, such records and documents will be
turned over to the Company unless the Company authorizes in writing the
destruction of such records and documents.
13. Representations of the Company. The Company certifies to IMG that:
(1) as of the close of business on the Effective Date, each Fund that is in
existence as of the Effective Date has authorized unlimited shares, and (2) this
Agreement has been duly authorized by the Company and, when executed and
delivered by the Company, will constitute a legal, valid and binding obligation
of the Company, enforceable against the Company, enforceable against the Company
in accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting the rights and
remedies of creditors and secured parties.
14. Representations of IMG. IMG represents and warrants that: (1) the
various procedures and systems which IMG has implemented with regard to
safeguarding from loss or damage attributable to fire, theft, or any other cause
of the records, and other data of the Company and IMG's records, data, equipment
facilities and other property used in the performance of its obligations
hereunder are adequate and that it will make such changes therein from time to
time as are required for the secure performance of its obligations hereunder,
and (2) this Agreement has been duly authorized by IMG and, when executed and
delivered by IMG, will constitute a legal, valid and binding obligation of IMG,
enforceable against IMG in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting the rights and remedies of creditors and secured parties.
15. Insurance. IMG shall notify the Company should any of its insurance
coverage be canceled or reduced. Such notification shall include the date of
change and the reasons therefor. IMG shall notify the Company of any material
claims against it with respect to services performed under this Agreement,
whether or not they may be covered by insurance, and shall notify the Company
from time to time as may be appropriate of the total outstanding claims made by
IMG under its insurance coverage.
16. Information Furnished by the Company and Funds. The Company has
furnished to IMG the following:
A. Copies of the Articles of Incorporation of the Company and of
any amendments thereto, certified by the proper official of
the State in which the Articles has been filed.
B. Copies of the following documents:
1. The Company's By-Laws and any amendments thereto;
2. Certified copies of resolutions of the Board of
Directors covering the approval of this Agreement,
authorization of a specified officer of the Company
to execute and deliver this Agreement and
authorization for specified officers of the Company
to instruct IMG thereunder.
C. A list of all the officers of the Company, together with
specimen signatures of those officers who are authorized to
instruct IMG in all matters.
D. Two copies of the following (if such documents are employed by
the Company):
1. Prospectuses and Statements of Additional
Information for each Fund.
17. Information Furnished by IMG. IMG has furnished to the Company the
following:
A. IMG's Articles of Incorporation.
B. IMG's Code of Regulations and any amendments thereto.
C. Certified copies of actions of IMG covering the following
matters:
1. Approval of this Agreement, and authorization of a
specified officer of IMG to execute and deliver this
Agreement;
2. Authorization of IMG to act as fund accountant for
the Company and to provide accounting services for
the Company.
18. Amendments to Documents. The Company shall furnish IMG written
copies of any amendments to, or changes in, any of the items referred to in
Section 16 hereof forthwith upon such amendments or changes becoming effective.
In addition, the Company agrees that no amendments will be made to the
Prospectuses or Statements of Additional Information of the Company which might
have the effect of changing the procedures employed by IMG in providing the
services agreed to hereunder or which amendment might effect the duties of IMG
hereunder unless the Company first obtains IMG's approval of such amendments or
changes.
19. Compliance with Law. Except for the obligations of IMG set forth in
Section 8 hereof, the Company assumes full responsibility for the preparation,
contents and distribution of each Prospectus of the Company as to compliance
with all applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act"), the 1940 Act and any other laws, rules and regulations of
governmental authorities having jurisdiction. IMG shall have no obligation to
take cognizance of any laws relating to the sale of the Company's shares. The
Company represents and warrants that no shares of the Company will be offered to
the public until the Company's registration statements under the Securities Act
and the 1940 Act has been declared or becomes effective.
20. Notices. Any notice provided hereunder shall be sufficiently given
when sent by registered or certified mail to the party required to be served
with such notice, at the following address: 2203 Grand Avenue, Des Moines, Iowa
50312-5338, or at such other address as such party may from time to time specify
in writing to the other party pursuant to this Section.
21. Headings. Paragraph headings in this Agreement are included for
conveniences only and are not to be used to construe or interpret this
Agreement.
22. Assignment. This Agreement and the rights and duties hereunder
shall not be assignable with respect to a Fund by either of the parties hereto
except by the specific written consent of the other party.
23. Governing Law. This Agreement shall be governed by and provisions
shall be construed in accordance with the laws of the State of Iowa.
24. Limitation of Liability of the Directors and Shareholders. The
names "the IMG Mutual Funds, Inc." and "Directors of the IMG Mutual Funds, Inc."
refer respectively to the Company created and the Directors, as directors but
not individually or personally. The obligations of the IMG Mutual Funds, Inc.,
entered into in the name or on behalf thereof by any of the Directors,
representatives or agents are made not individually, but in such capacities, and
are not binding upon any of the Directors, Shareholders or representatives of
the Company personally, but bind only the assets of the Company, and all persons
dealing with any series of shares of the Company must look solely to the assets
of the Company belonging to such series for the enforcement of any claims
against the Company.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
IMG Mutual Funds, Inc.
By: ____________________________________
Title: ___________________________________
Investors Management Group
By: ____________________________________
Title: ___________________________________
<PAGE>
Schedule A to the
Fund Accounting Agreement
Between the IMG Mutual Funds, Inc. and
Investors Management Group
Name of Fund Compensation
Vintage Equity Fund Annual rate of three one-hundredths
of one percent (0.03%) of the average
daily net assets of such Fund plus
IMG's reasonable out-of-pocket expenses
Vintage Aggressive Growth Fund incurred in the performance of its
services as provided in Section 4
of the Fund Accounting Agreement to
which this Schedule is attached.
Vintage Balanced Fund
Vintage Municipal Bond Fund
Vintage Bond Fund
Vintage Income Fund
Vintage Limited Term Bond Fund
Liquid Assets Fund
Government Assets Fund
Municipal Assets Fund
IMG MUTUAL FUNDS, INC.
EXHIBIT # 6(b)
TO
POST-EFFECTIVE AMENDMENT NO. 7
FORM N-1A REGISTRATION STATEMENT
<PAGE>
DISTRIBUTION AGREEMENT
AGREEMENT dated as of ___________ ___, 199__, between BISYS Fund
Services, Inc., (the "Distributor") and IMG Mutual Funds, Inc., (the "IMG
Funds").
WHEREAS, the IMG Funds desires to appoint the Distributor as
distributor of the units of beneficial interest of each of the investment
portfolios (the "Funds") of the IMG Funds identified on Schedule A hereto, (such
units of beneficial interest are hereinafter called "Shares") and the
Distributor has agreed to so act as distributor.
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
1. Services as Distributor.
1.1 Distributor will act as agent for the distribution of the Shares
covered by the registration statement and prospectus of the IMG Funds then in
effect under the Securities Act of 1933, as amended (the "Securities Act"). As
used in this Agreement, the term "registration statement" shall mean Part A (the
prospectus), B (the Statement of Additional Information) and C of each
registration statement that is filed on Form N-1A, or any successor thereto,
with the Securities and Exchange Commission (the "Commission"), together with
any amendments thereto. The term "prospectus" shall mean each form of prospectus
and Statement of Additional Information used by the Funds for delivery to
shareholders and prospective shareholders after the effective date of the above
referenced registration statements, together with any amendments and supplements
thereto.
1.2 Distributor agrees to use appropriate efforts to solicit orders for
the sale of the Shares and will undertake such advertising and promotion as it
believes reasonable in connection with such solicitation. The IMG Funds
understands that Distributor is now and may in the future be the distributor of
the shares of several investment companies or series (together, "Companies")
including Companies having investment objectives similar to those of the IMG
Funds. The IMG Funds further understands that investors and potential investors
in the IMG Funds may invest in shares of such other Companies. The IMG Funds
agrees that Distributor's duties to such Companies shall not be deemed in
conflict with its duties to the IMG Funds under this paragraph 1.2
Distributor shall, at its own expense, finance accounting activities
which it deems reasonable which are primarily intended to result in the sale of
the Shares, including, but not limited to, advertising, compensation of
underwriters, dealers and sales personnel, the printing and mailing of
prospectuses to other than current Shareholders, and the printing and mailing of
sales literature.
1.3 In its capacity as distributor of the Shares, all activities of
Distributor and its partners, agents, and employees shall comply with all
applicable laws, rules and regulations including, without limitation, the
Investment Company Act of 1940, as amended (the "1940 Act"), all rules and
regulations promulgated by the Commission thereunder and all rules and
regulations adopted b any securities association registered under the Securities
Exchange Act of 1934.
1.4 Distributor will provide one or more persons, during normal
business hours, to respond to telephone questions with respect to the IMG Funds.
1.5 Distributor will transmit any orders received by it for purchase or
redemption of the Shares to the transfer agent and custodian for the Funds.
1.6 Whenever in their judgment such action is warranted by unusual
market, economic or political conditions, or by abnormal circumstances of any
kind, the IMG Funds' officers may decline to accept any orders for, or make any
sales of, the Shares until such time as those officers deem it advisable to
accept such orders and to make such sales.
1.7 Distributor will act only on its own belief as principal if it
chooses to enter into selling agreements with selected dealers or others.
1.8 The IMG Funds agrees at its own expense to execute any and all
documents and to furnish any and all information and otherwise to take all
actions that may be reasonably necessary in connection with the qualification of
the Shares for sale in such states as Distributor may designate.
1.9 The IMG Funds shall furnish from time to time, for use in
connection with the sale of the Shares, such information with respect to the
Funds and the Shares as Distributor may reasonably request; and the IMG Funds
warrants that the statements contained in any such information shall fairly show
or represent what they purport to show or represent. The IMG Funds shall also
furnish Distributor upon request with: (a) unaudited semi-annual statements of
the Funds' books and accounts prepared by the IMG Funds, (b) a monthly itemized
list of the securities in the Funds, (c) monthly balance sheets as soon as
practicable after the end of each month, and (d) from time to time such
additional information regarding the financial condition of the Funds as
Distributor may reasonably request.
1.10 The IMG Funds represents to Distributor that, with respect to the
Shares, all registration statements and prospectuses filed by the IMG Funds with
the Securities and Exchange Commission under the Securities Act have been
carefully prepared in conformity with requirements of said Act and rules and
regulations of the Commission thereunder. The registration statement and
prospectus contain all statements required to be stated therein in conformity
with said Act and the rules and regulations of said Commission and all
statements of fact contained in any such registration statement and prospectus
are true and correct. Furthermore, neither any registration statement nor any
prospectus includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading to a purchaser of the Shares. The IMG Funds may, but
shall not be obligated to, propose from time to time such amendment or
amendments to any registration statement and such supplement or supplements to
any prospectus as, in the light of future developments, may, in the opinion of
the IMG Funds' counsel, be necessary or advisable. If the IMG Funds shall not
propose such amendment or amendments and/or supplement or supplements within
fifteen (15) days after receipt by the IMG Funds of a written request from
Distributor to do so, Distributor may, at its option, terminate this Agreement.
The IMG Funds shall not file any amendment to any registration statement or
supplement to any prospectus without giving Distributor reasonable notice
thereof in advance; provided, however, that nothing contained in this Agreement
shall in any way limit the IMG Funds' right to file at any time such amendments
to any registration statement and/or supplements to any prospectus, of whatever
character, as the IMG Funds may deem advisable, such right being in all respects
absolute and unconditional.
1.11 The IMG Funds authorizes Distributor and dealers to use any
prospectus in the form furnished from time to time in connection with the sale
of the Shares. The IMG Funds agrees to indemnify, defend and hold Distributor,
its several partners and employees, and any person who controls Distributor
within the meaning of Section 15 of the Securities Act free and harmless from
and against any and all claims, demands, liabilities and expenses (including the
cost of investigating or defending such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which Distributor, its partners
and employees, or any such controlling person, may incur under the Securities
Act or under common law or otherwise, arising out of or based upon any untrue
statement, or alleged untrue statement, of a material fact contained in any
registration statement or any prospectus or arising out of or based upon any
omissions, or alleged omission, to state a material fact required to be stated
in either any registration statement or any prospectus or necessary to make the
statements in either thereof not misleading. Provided, however, that the IMG
Funds' agreement to indemnify Distributor, its partners or employees, and any
such controlling person shall not be deemed to cover any claims, demands,
liabilities or expenses arising out of any statements or representations as are
contained in any prospectus and in such financial and other statements as are
furnished in writing to the IMG Funds by Distributor and used in the answers to
the registration statement or in the corresponding statements made in the
prospectus, or arising out of or based upon any omission to state a material
fact in connection with the giving of such information required to be stated in
such answers or necessary to make the answers not misleading; and further
provided that the IMG Funds' agreement to indemnify Distributor and the IMG
Funds' representations and warranties hereinbefore set forth in paragraph 1.10
shall not be deemed to cover any liability to the IMG Funds or its Shareholders
to which Distributor would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties, or
by reason of Distributor's reckless disregard of its obligations and duties
under this Agreement. The IMG Funds' agreement to indemnify Distributor, its
partners and employees and any such controlling person, as aforesaid, is
expressly conditioned upon the IMG Funds being notified of any action brought
against Distributor, its partners or employees, or any such controlling person,
such notification to be given by letter or by telegram addressed to the IMG
Funds at its principal office in Des Moines, Iowa and sent to the IMG Funds by
the person against whom such action is brought, within 10 days after the summons
or other first legal process shall have been served. The failure to so notify
the IMG Funds of any such action shall not relieve the IMG Funds from any
liability which the IMG Funds may have to the person against whom such action is
brought by reason of any such untrue, or allegedly untrue, statement or
omission, or alleged omission, otherwise than on account of the IMG Funds'
indemnity agreement contained in this paragraph 1.11. The IMG Funds will be
entitled to assume the defense of any suit brought to enforce any such claim,
demand or liability, but, in such case, such defense shall be conducted by
counsel of good standing chosen by the IMG Funds and approved by Distributor,
which approval shall not be reasonably withheld. In the event the IMG Funds
elects to assume the defense of any such suit and retain counsel of good
standing approved by Distributor, the defendant or defendants in such suit shall
bear the fees and expenses of any additional counsel retained by any of them;
but in case the IMG Funds does not elect to assume the defense of any such suit,
or in case Distributor reasonably does not approve of counsel chosen by the IMG
Funds, the IMG Funds will reimburse Distributor, its partners and employees, or
the controlling person or persons named as defendant or defendants in such suit,
for the fees and expenses of any counsel retained by Distributor or them. The
IMG Funds' indemnification agreement contained in this paragraph 1.11 and the
IMG Funds' representations and warranties in this Agreement shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of Distributor, its partners and employees, or any controlling
person, and shall survive the delivery of any Shares.
This Agreement of indemnity will inure exclusively to Distributor's
benefit, to the benefit of its several partners and employees, and their
respective estates, and to the benefit of the controlling persons and their
successors. The IMG Funds agrees promptly to notify Distributor of the
commencement of any litigation or proceedings against the IMG Funds or any of
its officers or IMG Funds in connection with the issue and sale of any Shares.
1.12 Distributor agrees to indemnify, defend and hold the IMG Funds,
its several officers and Directors and any person who controls the IMG Funds
within the meaning of Section 15 of the Securities Act free and harmless from
and against any and all claims, demands, liabilities and expenses (including the
costs of investigating or defending such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which the IMG Funds, its officers
or Directors or any such controlling person, may incur under the Securities Act
or under common law or otherwise, but only to the extent that such liability or
expense incurred by the IMG Funds, its officers or Directors or such controlling
person resulting from such claims or demands, shall arise out of or be based
upon any untrue, or alleged untrue, statement of a material fact contained in
information furnished in writing by Distributor to the IMG Funds and used in the
answers to any of the items of the registration statement or in the
corresponding statements made in the prospectus, or shall arise out of or be
based upon any omission, or alleged omission, to state a material fact in
connection with such information furnished in writing by Distributor to the IMG
Funds required to be stated in such answers or necessary to make such
information not misleading. Distributor's agreement to indemnify the IMG Funds,
its officers and Directors being notified of any action brought against the IMG
Funds, its officers or Directors, or any such controlling person, such
notification to be given by letter or telegram addressed to Distributor at its
principal office in Des Moines, Iowa, and sent to Distributor by the person
against whom such action is brought, within 10 days after the summons or other
first legal process shall have been served. Distributor shall have the right of
first control of the defense of such action, with counsel of its own choosing,
satisfactory to the IMG Funds, if such action is based solely upon such alleged
misstatement or omission on Distributor's part, and in any other event the IMG
Funds, its officers or Directors or such controlling person shall each have the
right to participate in the defense or preparation of the defense of any such
action. The failure to so notify Distributor of any such action shall not
relieve Distributor from any liability which Distributor may have to the IMG
Funds, its officers or Directors, or to such controlling person by reason of any
such untrue or alleged untrue statement, or omission or alleged omission,
otherwise than on account of Distributor's indemnity agreement contained in this
paragraph 1.12.
1.13 No Shares shall be offered by either Distributor or the IMG Funds
under any of the provisions of this Agreement and no orders for the purchase or
sale of Shares hereunder shall be accepted by the IMG Funds if and so long as
the effectiveness of the registration statement then in effect or any necessary
amendments thereto shall be suspended under any of the provisions of the
Securities Act or if and so long as a current prospectus as required by Section
10(b)(2) of said Act is not on file with the Commission; provided, however, that
nothing contained in this paragraph 1.13 shall in any way restrict or have an
application to or bearing upon the IMG Funds' obligation to repurchase Shares
from any Shareholders in accordance with the provisions of the IMG Funds'
prospectus, Agreement and Articles of Incorporation, or Bylaws.
1.4 The IMG Funds agrees to advise Distributor as soon as reasonably
practical by a notice in writing delivered to Distributor or its counsel:
(a) of any request by the Commission for amendments to the
registration statement or prospectus then in effect or for
additional information;
(b) in the event of the issuance by the Commission of any stop
order suspending the effectiveness of the registration
statement or prospectus then in effect or the initiation by
service of process on the IMG Funds of any proceeding for that
purpose;
(c) of the happening of any event that makes untrue any statement
of a material fact made in the registration statement or
prospectus then in effect or which requires the making of a
change in such registration statement or prospectus in order
to make the statements therein not misleading; and
(d) of all actions of the Commission with respect to any amendment
to any registration statement or prospectus which may from
time to time be filed with the Commission.
For purposes of this section, informal requests by or acts of the Staff
of the Commission shall not be deemed actions of or requests by the Commission.
1.15 Distributor agrees on behalf of itself and its partners and
employees to treat confidentiality and as proprietary information of the IMG
Funds all records and other information relative to the IMG Funds and its prior,
present or potential Shareholders, and not to use such records and information
for any purpose other than performance of its responsibilities and duties
hereunder, except, after prior notification to and approval in writing by the
IMG Funds, which approval shall not be unreasonably withheld and may not be
withheld where Distributor may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge such information by
duly constituted authorities, or when so requested by the IMG Funds.
1.16 This Agreement shall be governed by the laws of the Commonwealth
of Massachusetts.
2. Fee.
2.1 The Distributor shall receive from the Funds identified on Schedule
B hereto (the "Distribution Plan Funds") a distribution fee at the rate and upon
the terms and conditions set forth in the Distribution and Shareholder Services
Plan attached as Schedule C hereto, and as amended from time to time. The
distribution fee shall be accrued daily and shall be paid on the first business
day of each month, or at such time(s) as the Distributor shall reasonably
request.
3. Sale and Payment.
Under this Agreement, the following provisions shall apply with respect
to the sale of, and payment for, those Shares sold at an offering price which
includes a sales load as described in the prospectus of the Funds identified on
Schedule D hereto (collectively, the "Load Funds"; individually, a "Load Fund"):
(a) The Distributor shall have the right, as principal, to purchase
Shares from the Load Funds at their net asset value and to sell such Shares to
the public against orders therefor at the applicable public offering price, as
defined in Section 4 hereof. The Distributor shall also have the right, as
principal, to sell Shares to dealers against orders therefor at the public
offering price less a concession determined by the Distributor, which concession
shall not exceed the amount of the sales charge or underwriting discount, if
any, referred to in Section 4 below.
(b) Prior to the time of deliver of any Shares by a Load Fund to, or on
the order of, the Distributor, the Distributor shall pay or cause to be paid to
the Load Fund or to its order an amount in Boston or New York clearing house
funds equal to the applicable net asset value of such Shares. The Distributor
may retain so much of any sales charge or underwriting discount as is not
allowed by the Distributor as a concession to dealers.
4. Public Offering Price.
The public offering price of a Share of a Load Fund shall be the net
asset value of a Share, plus any applicable sales charge, all as set forth in
the current prospectus of the Load Fund. The net asset value of Shares shall be
determined in accordance with the provisions of the Agreement and Articles of
Incorporation and Bylaws of the IMG Funds and the then current prospectus of the
Load Fund.
5. Issuance of Shares.
The IMG Funds reserves the right to issue, transfer or sell Shares of
the Load Funds at net asset value (a) in connection with the merger or
consolidation of the IMG Funds or the Load Fund(s) with any other investment
company or the acquisition by the IMG Funds or the Load Fund(s) of all or
substantially all of the assets or of the outstanding Shares of any other
investment company; (b) in connection with a pro rata distribution directly to
the holders of Shares in the nature of a stock dividend or split; (c) upon the
exercise of subscription rights granted to the holders of Shares on a pro rata
basis; (d) in connection with the issuance of Shares pursuant to any exchange
and reinvestment privileges described in any then current prospectus of the Load
Fund; and (e) otherwise in accordance with any then current prospectus of the
Load Fund.
6. Term and Matter Relating to the IMG Funds.
This Agreement shall become effective on _______________ __, 199__ and,
unless sooner terminated as provided herein, shall continue until _____________
__, 199__, and thereafter shall continue automatically for successive annual
periods, provided such continuance is specifically approved at least annually by
a majority of the IMG Funds' Board of Directors who are not parties to the
Agreement or interested persons (as defined in the 1940 Act) of any party to
this Agreement, by vote cast in person at a meeting called for the purpose of
voting on such approval. This Agreement is terminable without penalty, on not
less than sixty (60) days' notice, by the IMG Funds' Board of Directors, by vote
of a majority of the outstanding voting securities (as defined in the 1940 Act)
of the IMG Funds or by the Distributor. This Agreement will also terminate
automatically in the event of its assignment (as defined in the 1940 Act).
The names "IMG Mutual Funds, Inc." and "Directors of the IMG Mutual
Funds, Inc." refer respectively to the IMG Funds created and the Directors, as
directors but not individually or personally, acting from time to time under the
Agreement and Articles of Incorporation dated as of November 17, 1994 to which
reference is hereby made a copy of which is on file at the office of the
Secretary of the State of Maryland and elsewhere as required by law, and to any
and all amendments thereto so filed or hereafter filed. The obligations of "IMG
Mutual Funds, Inc." entered into in the name or on behalf thereof by any of the
Directors, representatives or agents are made not individually, but in such
capacities, and are not binding upon any of the Directors, Shareholders or
representatives of IMG Funds personally, but bind only the assets of IMG Funds,
and all persons dealing with any series of Shares of IMG Fund must look solely
to the assets of the IMG Funds belonging to such series for the enforcement of
any claims against the IMG Funds.
IN WITNESS WHEREOF, each of the parties has caused its duly authorized
signatories to execute this Agreement as of the date first written above.
IMG Mutual Funds, Inc.
By:
Name:
Title:
BISYS Fund Services, Inc.
By:
Name:
Title:
<PAGE>
Schedule A
TO THE DISTRIBUTION AGREEMENT
BETWEEN IMG MUTUAL FUNDS, INC. AND
BISYS FUND SERVICES, INC.
Names of Funds
Vintage Equity Fund Vintage Aggressive Growth Fund Vintage Balanced Fund Vintage
Municipal Bond Fund Vintage Bond Fund Vintage Income Fund Vintage Limited Term
Bond Fund Liquid Assets Fund Government Assets Fund Municipal Assets Fund
<PAGE>
Schedule B
TO THE DISTRIBUTION AGREEMENT
BETWEEN IMG MUTUAL FUNDS, INC. AND
BISYS FUND SERVICES, INC.
Names of Funds
Vintage Equity Fund Vintage Aggressive Growth Fund Vintage Balanced Fund Vintage
Municipal Bond Fund Vintage Bond Fund Vintage Income Fund Vintage Limited Term
Bond Fund Liquid Assets Fund Government Assets Fund Municipal Assets Fund
<PAGE>
Schedule C
TO THE DISTRIBUTION AGREEMENT
BETWEEN IMG MUTUAL FUNDS, INC. AND
BISYS FUND SERVICES, INC.
DISTRIBUTION AND SHAREHOLDER SERVICE PLAN
This Plan (the "Plan") constitutes the distribution and shareholder service plan
of the IMG Mutual Funds, Inc., a Maryland corporation (the "IMG Funds"), adopted
pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the "1940
Act"). The Plan relates to those investment portfolios ("Funds") identified on
Schedule B of the IMG Funds' Distribution Agreement, as amended from time to
time (the "Distribution Plan Funds").
Section 1. Each Distribution Plan Fund shall pay to BISYS Fund Services, Inc.,
the distributor (the "Distributor") of the IMG Funds' units of beneficial
interest (the "Shares"), a fee in an amount not to exceed on an annual basis
0.01% of the average daily net asset value of such Fund (the "Distribution Fee")
, up to an annual maximum of $100,000 for all Funds, for: (a) payments the
Distributor makes to banks and other institutions and broker/dealers (a
"Participating Organization") for distribution assistance and/or Shareholder
service pursuant to an agreement between the Distributor and the Participating
Organization; or (b) reimbursement of expenses incurred by a Participating
Organization pursuant to an agreement in connection with distribution assistance
and/or Shareholder service including, but not limited to, the reimbursement of
expenses relating to printing and distributing prospectuses to persons other
than Shareholders of a Distribution Plan Fund, printing and distributing
advertising and sales literature and reports to Shareholders used in connection
with the sale of Shares, and personnel and communication equipment used in
servicing Shareholder accounts and prospective Shareholder inquiries. For
purposes of the Plan, a Participating Organization may include the Distributor
or any of its affiliates or subsidiaries.
Section 2. The Distribution Fee shall be paid by the Distribution Plan Funds to
the Distributor only to compensate or to reimburse the Distributor for payments
or expenses incurred pursuant to Section 1.
Section 3. The Plan shall not take effect with respect to a Distribution Plan
Fund until it has been approved by a vote of at least a majority of the
outstanding voting securities of such Fund.
Section 4. The Plan shall not take effect until it has been approved, together
with any related agreements, by votes of the majority (or whatever greater
percentage may, from time to time, be required by Section 12(b) of the 1940 Act
or the rules and regulations thereunder) of both (a) the Directors of the IMG
Funds, and (b) the Independent Directors of the IMG Funds cast is person at a
meeting called for the purpose of voting on the Plan or such agreement.
Section 5. The Plan shall continue in effect for a period of more than one year
after it takes effect only so long as such continuance is specifically approved
at least annually in the manner provided for approval of the Plan in section 4.
Section 6. Any person authorized to direct the disposition of monies paid or
payable by the Distribution Plan Funds pursuant to the Plan or any related
agreement shall provide to the Directors of the IMG Funds, and the Directors
shall review, at least quarterly, a written report of the amounts so expended
and the purposes for which such expenditures were made.
Section 7. The Plan may be terminated at any time by vote of a majority of the
Independent Directors, or by vote of a majority of a Distribution Plan Fund's
outstanding voting securities.
Section 8. All agreements with any person relating to implementation of the Plan
shall be in writing, and any agreement related to the Plan shall provide:
(a) That such agreement may be terminated at any time, without
payment of any penalty, by vote of a majority of the
Independent Directors or by vote of a majority of the
outstanding voting securities of the Distribution Plan Fund,
on not more than 60 days' written notice to any other party to
the agreement; and
(b) That such agreement shall terminated automatically in the event of
its assignment.
Section 9. The Plan may not be amended to increase materially the amount of
distribution expenses permitted pursuant to Section 1 hereof without approval in
the manner provided in Section 3 hereof, and all material amendments to the Plan
shall be approved in the manner provided for approval of the Plan in Section 4.
Section 10. As used in the Plan, (a) the term "Independent Directors" shall mean
those Directors of the IMG Funds who are not interested persons of the IMG
Funds, and have no direct or indirect financial interest in the operation of the
Plan or any agreements related to it, and (b) the terms "assignment",
"interested persons" and "majority of the outstanding voting securities" shall
have the respective meanings specified in the 1940 Act and the rules and
regulations thereunder, subject to such exemptions as may be granted by the
Securities Exchange Commissions.
IMG MUTUAL FUNDS, INC.
EXHIBIT # 8(b)
TO
POST-EFFECTIVE AMENDMENT NO. 7
FORM N-1A REGISTRATION STATEMENT
<PAGE>
CUSTODIAL AGREEMENT
AGREEMENT between AMCORE Investment Group, N.A. (the "Custodian") and
IMG Mutual Funds, Inc. (the "Company")
WHEREAS, the Company may be organized with one or more series of
shares, each of which shall represent an interest in a separate portfolio of
securities and cash, all such existing and additional series now or hereafter
listed on Exhibit A being hereafter referred to individually as a "Fund" and
collectively, as the "Funds"); and
WHEREAS, the Company desires to appoint the Custodian as custodian on
behalf of the Funds under the terms and conditions set forth in this Agreement
and the Custodian has agreed to so act as custodian.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. Appointment of Custodian and Property to be Held by It
The Funds hereby appoint the Custodian as the custodian of assets owned
by each Fund. Each Fund agrees to deliver to the Custodian all securities and
cash owned by it, and all payments of income, payments of principal or capital
distributions received by it with respect to all securities owned by the Fund
from time to time, and the cash consideration received by it for such shares of
capital stock ("Shares") of the Fund as may be issued or sold from time to time.
The Custodian shall not be responsible for any property of the Funds held or
received by the Funds and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Section
2.17), the Custodian shall from time to time employ one or more sub-custodians,
but only in accordance with an applicable vote by the Board of Directors of the
Funds, and provided that the Custodian shall have no more or less responsibility
or liability to the funds on account of any actions or omissions or any
sub-custodian so employed than any such sub-custodian has to the Custodian.
2. Duties of the Custodian with Respect to Property of the Funds Held by the
Custodian
2.1 Holding Securities.
The Custodian shall hold and physically segregate for each Fund all
non-cash property, including all securities owned by each Fund, other than (a)
securities which are maintained pursuant to Section 2.12 in a clearing agency
which acts as a securities depository or in a Federal Reserve Bank, as Custodian
may select, and to permit such deposited assets to be registered in the name of
Custodian or Custodian's agent or nominee on the records of such Federal Reserve
Bank or such registered clearing agency or the nominee of either, and to employ
and use securities depositories, clearing agencies, clearance systems,
sub-custodians or agents located outside the United States in connection with
transactions involving foreign securities, collectively referred to herein as a
"Securities System".
2.2 Delivery of Securities.
The Custodian shall release and deliver securities owned by the Funds
held by the Custodian or in a Securities System account of the Custodian only
upon receipt of Proper Instructions, which may be continuing instructions when
deemed appropriate by the parties, and only in the following cases:
1) Upon sale of such securities for the account of the Funds and
receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the
Funds;
3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.12 hereof;
4) To the depository agent in connection with tender or other
similar offers for portfolio securities of the Funds;
5) To the issues thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the
name of the Funds or into the name of any nominee or nominees
of the Custodian or into the name of nominee name of any agent
appointed pursuant to Section 2.11 or into the name or nominee
name of any sub-custodian appointed pursuant to Paragraph 1;
or for exchange for a different number of bonds, certificates
or other evidence representing the same aggregate face amount
or number of units; provided that, in any such case, the new
securities are to be delivered to the Custodian;
7) Upon the sale of such securities for the account of the Funds,
to the broker or its clearing agent, against a receipt, for
examination in accordance with "street deliver" custom;
provided that in any such case, the Custodian shall have no
responsibility or liability for any loss arising from the
delivery of such securities prior to receiving payment for
such securities except as may arise from the Custodian's own
negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan or merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion contained
in such securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities and cash,
if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts of
temporary securities for definitive securities; provided that,
in any such case, the securities and cash, if any, are to be
delivered to the Custodian;
10) For delivery in connection with any loans of securities made
by the Funds, but only against receipt of adequate collateral
as agreed upon from time to time by the Custodian and the
Funds, which may be in the form of cash or obligations issued
by the United States government, its agencies or
instrumentalities, except that in connection with any loans
for which collateral is to be credited to the Custodian's
account in the book-entry system authorized by the U.S.
Department of the Treasury, the Custodian will not be held
liable or responsible for the deliver of securities owned by
the Funds prior to the receipt of such collateral;
11) For deliver as security in connection with any borrowings by
the Funds requiring a pledge of assets by the Funds, but only
against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any
agreement among the Funds, the Custodian and a broker-dealer
registered under the Securities and Exchange Act of 1934 (the
"Exchange Act") and a member of the National Association of
Securities Dealers, Inc. ("NASD"), relating to the compliance
with the rules of The Options Clearing Corporation and of any
registered national securities exchange, or of any similar
organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Fund;
13) For delivery in accordance with the provisions of any
agreement among the Funds, the Custodian, and a Futures
Commission Merchant registered under the Commodity Exchange
Act, relating to compliance with the rules of the Commodity
Futures Trading Commission and/or any Contract market, or any
similar organization or organizations, regarding account
deposits in connection with transactions by the Funds;
14) Upon receipt of instructions from the transfer agent
("Transfer Agent") for the Funds, for delivery to such
Transfer Agent or to the holders of shares in connection with
distributions in kind, as may be described from time to time
in the Funds' currently effective prospectus and statement of
additional information ("prospectus"), in satisfaction of
requests by holders of Shares for repurchase or redemptions;
and
15) For any other proper corporate purpose, but only upon receipt
of, in addition to Proper Instructions, a certified copy of a
resolution of the Board of Directors or of the Executive
Committee signed by an officer of the Funds and certified by
the Secretary or an Assistance Secretary, specifying the
securities to be delivered, setting forth the purpose for
which such delivery is to be made, declaring such purpose to
be a proper corporate purpose, and naming the person or
persons to whom delivery of such securities shall be made.
2.3 Registration of Securities.
Securities held by the Custodian (other than bearer securities) shall
be registered in the name of each Fund or in the name of any nominee of the Fund
or of any nominee of the Custodian.
2.4 Bank Accounts.
The Custodian shall open and maintain a separate account or accounts in
the name of each Funds, subject only to draft or order by the Custodian acting
pursuant to the terms of this Agreement, and shall hold in such account or
accounts, subject to the provisions hereof, all cash received by it from or for
the account of the Funds segregated by Fund, other than cash maintained by the
Funds in bank accounts established and used in accordance with Rule 17f-3 under
the Investment Company Act of 1940 (the "1940 Act"). Monies held by the
Custodian for the Funds may be deposited by it to the Funds' credit in the
Banking Department of the Custodian or in such other banks or trust companies as
it may in its discretion deem necessary or desirable; provided, however, that
every such bank or trust company and the Funds to be deposited with each such
bank or trust company shall be approved by vote of a majority of the Board of
Directors of the Funds. Such monies shall be deposited by the Custodian in its
capacity as Custodian and shall be withdrawable by the Custodian only in that
capacity.
2.5 Payments for Shares.
The Custodian shall receive from the distributor for the Funds' Shares
or from the Transfer Agent of the Funds and deposit into the Funds' accounts for
each Fund, such payments as are received for Shares of that Fund issued or sold
from time to time by the Funds. The Custodian will provide timely notification
to the Company and the Transfer Agent of any receipt by it of payments for
Shares of the Funds.
2.6 Availability of Federal Funds.
Upon mutual agreement between the Funds and the Custodian, the
Custodian shall, upon the receipt of Proper Instructions, made federal funds
available to the Funds as of specified times agreed upon from time to time by
the Funds and the Custodian in the amount of checks received in payment for
Shares of the Funds which are deposited into the Funds' account.
2.7 Collection of Income.
The Custodian shall collect on a timely basis all income and other
payments with respect to registered securities held hereunder to which each Fund
shall be entitled either by law or pursuant to custom in the securities
business, and shall collect on a timely basis all income and other payments with
respect to bearer securities if, on the date of payment by the issuer, such
securities are held by the Custodian or its agent thereof and shall credit such
income, as collected, to the respective Fund's custodian account. Without
limiting the generality of the foregoing, the Custodian shall detach and present
for payment all coupons and other income items requiring presentation as and
when they become due and shall collect interest when die on securities held
hereunder. Income due to Funds on securities loaned pursuant to the provisions
of Section 2.2 (10) shall be the responsibility of the Funds. The Custodian will
have no duty or responsibility in connection therewith, other than to provide
the Funds with such information or data as may be necessary to assist the funds
in arranging for the timely delivery to the Custodian of the income to which the
Funds and each respective Fund are properly entitled.
2.8 Payment of Fund Monies.
Upon receipt of Proper Instructions, which may be continuing
instructions when deemed appropriate by the parties, the Custodian shall pay out
monies of each Fund's accounts in the following cases only:
1) Upon the purchase of securities, options, futures contracts or
options on futures contracts for the account of the Funds but
only (a) against the delivery of such securities or evidence
of title to such options, futures contracts or option son
futures contracts, to the Custodian (or any bank, banking firm
or trust company doing business in the United States or abroad
which is qualified under the 1940 Act to act as a custodian
and has been designated by the Custodian as its agent for this
purpose) registered in the name of the Funds or in the name of
a nominee of the Custodian referred to in Section 2.3 hereof
or in proper form for transfer; (b) in the case of a purchase
effected through a Securities System, in accordance with the
conditions set forth in Section 2.12 hereof or (c) in the case
of the repurchase agreements entered into between the Funds
and the Custodian, or another bank, or a broker-dealer which
is a member of NASD, (i) against delivery of the securities
either in certificate form or through an entry crediting the
Custodian's account at the Federal Reserve Bank with such
securities or (ii) against delivery of the receipt evidencing
purchase by the Funds of securities owned by the Custodian
along with written evidence of the agreement by the Custodian
to repurchase such securities form the Funds;
2) In connection with conversion, exchange or surrender of
securities owned by the Funds as set forth in Section 2.2
hereof;
3) For the redemption or repurchase of Shares issued by the Funds
as set forth in Section 2.10 hereof;
4) For the payment of any expense or liability incurred by the
Funds, including but not limited to the following payments for
the account of the Funds: interest , taxes, management,
auditing, transfer agent and legal fees, and operating
expenses of the Funds whether or not such expenses are to be
in whole or part capitalized or treated as deferred expenses;
5) For the payment of any dividends declared pursuant to the
governing documents of the Funds; 6) For payment of the amount
of dividends received in respect of securities sold short; 7)
For any other purpose, but only upon receipt of, in addition
to Proper Instructions, a certified copy of a resolution of
the Board of Directors or of the Executive Committee of the
Funds signed by an officer of the Funds and certified by their
Secretary or an Assistant Secretary, specifying the amount of
such payment, setting forth the purpose for which such payment
is to be made, declaring such purpose to be a proper purpose,
and naming the person or persons to whom such payment is to be
made.
2.9 Liability for Payment in Advance of Receipt of Securities Purchased.
In any and every case where payment for purchase of securities for the
account of the Funds is made by the Custodian in advance of receipt of the
securities purchased in the absence of specific written instructions form the
Funds to so pay in advance, the Custodian shall be absolutely liable to the
Funds for such securities to the same extent as if the securities had been
received by the Custodian.
2.10 Payments for Repurchases or Redemption of Shares of the Funds.
From such monies as may be available for the purpose but subject to the
limitations of the Articles of Incorporation and any applicable votes of the
Board of Directors of the Company pursuant thereto, the Custodian, shall, upon
receipt of instructions from the Transfer Agent, make monies available for
payment to holders of Shares who have delivered to the Transfer Agent a request
for redemption or repurchase of their Shares. In connection with the redemption
or repurchase of Shares of the Funds, the Custodian is authorized upon receipt
of instructions from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders. In connection with the redemption
or repurchase of Shares of the Funds, the Custodian shall honor checks drawn on
the Custodian in accordance with such procedures and controls as are mutually
agreed upon from time to time between the Funds and the Custodian.
2.11 Appointment of Agents.
The Custodian may from time to time in its discretion appoint (and may
at any time remove) any other bank or trust company which is itself qualified
under the 1940 Act to act as a custodian, as its agent to carry out such of the
provisions of this Paragraph 2 as the Custodian may from time to time direct;
provided, however, that the appointment of any agent shall not relieve the
Custodian of its responsibilities or liabilities hereunder.
2.12 Deposit of Assets of the Funds in Securities Systems.
The Custodian may deposit and/or maintain securities owned by the Funds
in a clearing agency registered with the Securities and Exchange Commission
under Section 17A of the Exchange Act, which acts as a securities depository, or
in a Federal Reserve Bank, as Custodian may select, and to permit such deposited
assets to be registered in the name of Custodian or Custodian's agent or nominee
on the records of such Federal Reserve Bank or such registered clearing agency
or the nominee of either, and to employ and use securities depositories,
clearing agencies, clearance systems, sub-custodians or agents located outside
the United States in connection with transactions involving foreign securities
in accordance with applicable Federal Reserve Board and Securities and Exchange
Commission rules and regulations, if any, and subject to the following
provisions:
1) The Custodian may keep securities of the Funds in a Securities
System.
2) The records of the Custodian with respect to securities of the
Funds which are maintained in a Securities System shall
reflect those securities in book-entry form belonging to the
Funds.
3) The Custodian shall pay for securities purchased for the
account of the funds upon (i) receipt of advice from the
Securities System that such securities have been transferred
to the Account, and (ii) the making of any entry on the
records of the Custodian to reflect such payment and transfer
for the account of the Funds. The Custodian shall transfer
securities sold for the account of the Funds upon (i) receipt
of advice from the Securities System that payment for such
securities has been transferred to the Account, and (ii) the
making of en entry on the records of the Custodian to reflect
such transfer and payment for the accounts of the Funds.
Copies of all advices from the Securities System of transfers
of securities for the account of the Funds shall identify the
Funds, be maintained for the Funds by the Custodian and be
provided to the Company upon request. Upon request, the
Custodian shall furnish the Company confirmation of each
transfer to or from the account of the Funds in the form of a
written advice or notice and shall furnish to the Company
copies of daily transaction sheets reflecting the day's
transactions in the Securities System for the account of the
Funds.
4) The Custodian shall provide the Company with any report
obtained by the Custodian on the Securities System's
accounting system, internal accounting control and procedures
for safeguarding securities deposited in the Securities
System.
5) The Custodian shall have received the initial or annual
certificate, as the case may be, required by Paragraph 10
hereof.
6) Anything to the contrary of this Agreement notwithstanding,
the Custodian shall be liable to the Funds for any loss or
damage to the Funds resulting from use of the Securities
System by reason of any negligence, misfeasance or misconduct
of the Custodian or any of its agents or of any of its or
their employees or from failure of the Custodian or any such
agent to enforce effectively such rights as it may have
against the Securities System; at the election of the Funds,
the funds shall be entitled to be subrogated to the rights of
the Custodian with respect to any claim against the Securities
System or any other person which the Custodian may have as a
consequence of any such loss or damage if and to the extent
that the Funds have not been made whole for any such loss or
damage.
2.13 Ownership Certificates for Tax Purposes.
The Custodian shall execute ownership and other certificates and
affidavits for all federal and state tax purposes in connection with receipt of
income or other payments with respect to securities of the Funds held by it and
in connection with transfers of securities.
2.14 Proxies.
The Custodian shall, with respect to the securities held hereunder,
cause to be promptly executed by the registered holder of such securities, if
the securities are registered otherwise than in the name of the Funds or a
nominee of the Funds, all proxies, without indication of the matter in which
such proxies are to be voted, and shall promptly deliver to the Funds such
proxies, all proxy soliciting materials and all notices relating to such
securities.
2.15 Communications Relating to the Funds' Portfolio Securities.
The Custodian shall transmit promptly to the Funds all written
information (including, without limitation, pendency of calls and maturities of
securities and expirations of rights in connection therewith and notices of
exercise of call and put options written by the Funds and the maturity of
futures contracts purchased or sold by the Funds) received by the Custodian from
issuers of the securities being held for the Funds. With respect to tender or
exchange offers, the Custodian shall transmit promptly to the Funds all written
information received by the Custodian from issuers of the securities whose
tender or exchange is sought and from the party (or his agents) making the
tender or exchange offer. If the Funds desire to take action with respect to any
tender offer, exchange offer or any other similar transaction, the Funds shall
notify the Custodian at least three business days prior to the date on which the
Custodian is to take such action.
2.16 Proper Instructions.
Proper Instructions as used throughout this Paragraph 2 means a writing
signed or initialed by one or more person or persons as the Board of Directors
shall have from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral instructions
will be considered Proper Instructions if the Custodian reasonably believes them
to have been given by a person authorized to give such instructions with respect
to the transaction involved. The Funds shall cause all oral instructions to be
confirmed in writing. Upon receipt of a certificate of the Secretary or an
Assistant Secretary as to the authorization by the Board of Directors of the
Funds accompanied by a detailed description of procedures approved by the Board
of Directors, the Custodian may accept instructions reasonably believed by the
Custodian to be valid and may then execute the specific transaction or type of
transaction as specified. Proper Instructions may also include communications
effected directly between electro-mechanical or electronic devices provided that
the Board of Directors and the Custodian are satisfied that such procedures
afford adequate safeguards for the Funds' assets.
2.17 Actions Permitted Without Express Authority.
The Custodian may in its discretion, without express authority from the
Funds:
1) Make payments to itself or others for minor expenses of
handling securities, provided that all such payments shall be
accounted for by the Funds;
2) Surrender securities in temporary form for securities in
definitive form;
3) Endorse for collection, in the name of the Funds, checks,
drafts and other negotiable instruments; and
4) In general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with the securities and property
of the Funds except as otherwise directed by the Board of
Directors of the Funds.
2.18 Evidence of Authority.
The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper believed by
it to be genuine and to have been properly executed by or on behalf of the
Funds. The Custodian may receive and accept a certified copy of a vote of the
Board of Directors of the Funds as conclusive evidence (a) of the authority of
any person to act in accordance with such vote or (b) of any determination or of
any action by the Board of Directors pursuant to the Articles of Incorporation
as described in such vote, and such vote may be considered as in full force and
effect until receipt by the Custodian of written notice to the contrary.
2.19 Class Actions.
The Custodian shall transmit promptly to the Funds all notices or other
communications received by it in connection with any class action lawsuit
relating to securities currently or previously held for the Funds within the
period of this Agreement. Upon being directed by the Funds to do so, the
Custodian shall furnish to the Funds any and all written materials which
establish the holding/ownership, amount held/owned, and period of
holding/ownership of the securities in question.
3 Duties of Custodian With Respect to the Books of Account and
Calculation of Net Asset Value and Net Income The Custodian shall
cooperate with and supply necessary information to Investors Management
Group or such other
entities appointed by the Board of Directors of the Fund to keep the books of
the account of the Funds and/or compute the net asset value per share of the
outstanding shares of each Fund.
4. Records
The Custodian shall create and maintain all records relating to its
activities and obligations under this Agreement in such manner as will meet the
obligations of the Funds under the 1940 Act, with particular attention to
Section 31 thereof and Rule 31a-1 and 31a-2 thereunder, applicable federal and
state tax laws and any other law or administrative rules or procedures which may
be applicable to the Funds. All such records shall be the property of the Funds
and shall at all times during the regular business hours of the Custodian be
open for inspection by duly authorized officers, employees or agents of the
Funds and employees and agents of the Securities and Exchange Commission. The
Custodian shall, at the Funds' request, supply the Company with a tabulation of
securities owned by the Funds and held by the Custodian and shall, when
requested to do so by the Funds and for such compensation as shall be agreed
upon between the Funds and Custodian.
5. Opinion of Company's Independent Auditors
The Custodian shall take all reasonable action, as the Funds may from
time to time request, to obtain from year to year favorable opinions from the
Funds' independent auditors with respect to its activities hereunder in
connection with the preparation of the Company's Form N-1A, and Form N-SAR or
other annual reports to the Securities and Exchange Commission and with respect
to any other requirements of such Commission.
6. Reports to Company by Independent Auditors
The Custodian shall provide the Funds, at such time as the Funds may
reasonably require, with reports by independent auditors on the accounting
system, internal accounting control and procedures for safeguarding securities,
futures contracts and options on futures contracts, including securities
deposited and/or maintained in a Securities System, relating to the services
provided by the Custodian under this Agreement; such reports shall be of
sufficient scope, and in sufficient detail, as may reasonably be required by the
Funds to provide reasonable assurance that any material inadequacies would be
disclosed by such examination, and, if there are no such inadequacies, the
reports shall so state.
7. Compensation of Custodian
For performance by the Custodian pursuant to this Agreement, the Funds
agree to pay the Custodian annual fees and supplemental charges as set out in
Exhibit A attached hereto. Fees and supplemental charges may be changed from
time to time subject to mutual written agreement between the Funds and the
Custodian.
8. Responsibility of Custodian
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Agreement and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties.
The Custodian shall be held to the exercise of reasonable care in carrying out
the provisions of this Agreement, but shall be kept indemnified by and shall be
without liability to the company for any action taken or omitted by it without
negligence. It shall be entitled to rely on and may act upon advice of counsel
(who may be counsel for the Funds) on all matters, and shall be without
liability for any action reasonable taken or omitted pursuant to such advice.
Notwithstanding the foregoing, the responsibility of the Custodian with respect
to redemptions effected by check shall be in accordance with a separate
Agreement entered into between the Custodian and the Funds.
If the Funds require the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may, in
the opinion of the Custodian, result in the Custodian or its nominee assigned to
the Funds being liable for the payment of money or incurring liability of some
other form, the Funds, as a prerequisite to requiring the Custodian to take such
action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.
If the Funds require the Custodian to advance cash or securities for
any purpose or in the event that the Custodian or its nominee shall incur or be
assessed any taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Agreement, except such as may arise from
its or its nominee's own negligent action, negligent failure to act or willful
misconduct, any property at any time held for the account of the Funds shall be
security therefor and should the Funds fail to repay the Custodian promptly, the
Custodian shall be entitled to utilize available cash and to dispose of assets
of the Funds to the extent necessary to obtain reimbursement.
9. Effective Period, Termination and Amendment
As to each Fund, the Agreement shall become effective as of its
execution, shall continue in full force and effect for one year from the date of
this Agreement, and thereafter, shall continue automatically for successive
annual periods, provided such continuance is specifically approved as to the
Company at least annually by (a) the Company's Board of Directors or (b) vote of
a majority (as defined in the 1940 Act) of each Fund's outstanding voting
securities, provided that in either event its continuance is also approved by a
majority of the Company's Directors who are not "interested person" (as defined
in the 1940 Act) of any party to this Agreement by vote cast in person at a
meeting called for the purpose of voting on such approval. As to each Fund, the
Agreement may be terminated as hereinafter provided, may be amended at any time
by mutual agreement of the parties hereto and may be terminated by either party
by an instrument in writing delivered or mailed, postage prepaid to the other
party, such termination to take effect not sooner than sixty (60) days after the
date of such delivery or mailing; provided, however, that the Custodian shall
not act under Section 2.12 hereof in the absence of receipt of an initial
certificate of the Secretary or an Assistant Secretary that the Board of
Directors of each Fund have approved the initial use of a particular Securities
System and the receipt of an annual certificate of the Secretary or an Assistant
Secretary that the Board of Directors has reviewed the use of the Funds of such
Securities System, as required in each case by Rule 17f-4 under the 1940 Act,
provided further, however, that the Funds shall not amend or terminate this
Agreement in contravention of any applicable federal or state regulations, or
any provisions of the Articles of Incorporation, and further provided, that the
Funds may at any time by action of their Board of Directors (i) substitute
another bank or trust company for the Custodian by giving notice as described
above to the Custodian, or (ii) immediately terminate this Agreement in the
event of assignment (as described in the 1940 Act), or the appointment of a
conservator or receiver for the Custodian by the Comptroller of the Currency or
upon the happening of a like event at the direction of an appropriate regulatory
agency or court of competent jurisdiction.
Upon termination of the Agreement, the Funds shall pay to the Custodian
such compensation as may be due as of the date of such termination and shall
likewise reimburse the Custodian for its costs, expenses and disbursements.
10. Successor Custodian
If a successor custodian shall be appointed by the Board of Directors
of the Company, the Custodian shall, upon termination, deliver to such successor
custodian at the office of the Custodian, duly endorsed and in the form for
transfer all of the Funds' securities held in a Securities System to an account
of the successor custodian.
If no such successor custodian shall be appointed, the Custodian shall,
in like manner, upon receipt of a certified copy of a vote of the Board of
Directors of the Funds, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Directors shall have been delivered to
the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the 1940 Act, of its own selection,
having an aggregate capital, surplus, and undivided profits, as shown by its
last published report, of not less than $10,000,000, all securities, funds and
other properties held by the Custodian and all instruments held by the Custodian
relative thereto and all other property held by it under this Agreement and to
transfer to an account of such successor custodian all of the Funds' securities
held in any Securities System. Thereafter, such bank or trust company shall be
the successor of the Custodian under this Agreement.
In the event that securities, monies and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Funds to procure the certified copy of the vote referred to or of
the Board of Directors to appoint a successor custodian, the Custodian in
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, monies and other properties and
the provisions of this Agreement relating to the duties and obligation of the
Custodian shall remain in full force and effect.
11. Interpretive and Additional Provisions
In connection with the operation of this Agreement, the Custodian and
the Funds may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Agreement as may in their joint opinion be
consistent with the general tenor of this Agreement. Any such interpretive or
additional provisions shall be in writing signed by both parties and shall be
annexed hereto, provided that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision of
the Articles of Incorporation of the Company. No interpretive or additional
provisions made as provided in the preceding sentence shall de deemed to be an
amendment of this Agreement.
12. Illinois Law to Apply
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with laws of The State of Illinois.
13. Prior Agreements
This Agreement supersedes and terminates, as of the date hereof, all
prior Agreements between the Funds and the Custodian relating to the custody of
the Funds' assets.
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative as of
the ___ day of December, 1997.
IMG Mutual Funds, Inc.
By: ____________________________________
Name: ___________________________________
Title: ___________________________________
AMCORE Investment Group, N.A.
By: ____________________________________
Name: ___________________________________
Title: ___________________________________
<PAGE>
EXHIBIT A
LIST OF PORTFOLIOS
The following is a list of Funds referred to in the first WHEREAS
clause of the Custodian Agreement. Terms used herein as defined terms unless
otherwise defined shall have the meanings ascribed to them in the Custodian
Agreement.
Liquid Assets Fund
Municipal Assets Fund
COMPENSATION DUE CUSTODIAN
Annual fees prorate and payable monthly
* Total Fund Values
$0 - $100 million 0.10%
Next $150 million 0.05%
Next $250 million 0.04%
Above $500 million 0.03%
* Included in the asset fee are all portfolio, transaction and wire activity
charges. No other charges for custody related to activities will accrue to Funds
during the term of this Agreement.
IMG MUTUAL FUNDS, INC.
EXHIBIT # 9(b)
TO
POST-EFFECTIVE AMENDMENT NO. 7
FORM N-1A REGISTRATION STATEMENT
<PAGE>
IMG MUTUAL FUNDS, INC.
Administrative Services Plan
Section 1. Upon the recommendation of the administrator of the IMG
Mutual Funds, Inc., (the "Company"), any officer of the Company is authorized to
execute and deliver, in the name and on behalf of the Company, written
agreements in substantially the form attached hereto as Appendix A or in any
other form duly approved by the Board of Directors ("Servicing Agreements") with
financial institutions which are shareholders of record or which have a
servicing relationship ("Service Organizations") with the beneficial owners of a
class of the Company's shares of beneficial interest ("Shares") of one or more
of the Company's investment portfolios (such portfolios hereinafter individually
called a "Fund" and collectively the "Funds"). Such Servicing Agreements shall
require the Service Organizations to provide administrative support services as
set forth therein and described in the Company's applicable Prospectuses to
their customers who own of record or beneficially Shares in consideration for a
fee, computed daily and paid monthly in the manner set forth in the Servicing
Agreements, at the annual rate of up to 0.25% of the average daily net asset
value of Shares owned of record or beneficially by such customers. Any bank,
trust company, thrift institution, broker-dealer or other financial institution
is eligible to become a Service Organization and to receive fees under this
Plan. All expenses incurred by the Company with respect to Shares of a
particular Fund in connection with the Servicing Agreements and the
implementation of this Plan shall be borne entirely by the holders of Shares of
the Fund.
Section 2. So long as this Plan is in effect, the administrator shall
provide to the Company's Board of Directors, and the Directors shall review, at
least quarterly, a written report of the amounts expended pursuant to this Plan
and the purposes for which such expenditures were made.
Section 3. The Plan shall not take effect with respect to the Shares of
a Fund until it has been approved, together with the form of the Servicing
Agreements, by a vote of a majority of the Directors who are not "interested
persons" of the Company (as defined by the Investment Company Act of 1940) and
who have no direct or indirect financial interest in the operation of this Plan
or in any agreements related to this Plan (the "Disinterested Directors") cast
in person at a meeting called for the purpose of voting on the Plan or such
Servicing Agreement provided, however, that the Plan shall not be implemented
for a particular Fund prior to the effective date of the post-effective
amendment to the Company's registration statement describing the Plan and its
implementation with respect to that Fund.
Section 4. Unless sooner terminated, this Plan shall continue until
December ___, 1999, and thereafter, shall continue automatically for successive
annual periods provided such continuance is approved at least annually by a
majority of the Board of Directors including a majority of the Disinterested
Directors.
Section 5. This Plan may be amended at any time with respect to any
Fund by the Board of Directors, provided that any material amendments of the
terms of this Plan shall become effective only upon the approvals set forth in
Section 4.
Section 6. This Plan is terminable at any time with respect to any
Funds by vote of a majority of the Disinterested Directors.
Section 7. While this Plan is in effect, the selection and nomination
of those Disinterested Directors shall be committed to the discretion of the
Company's Disinterested Directors.
Section 8. This Plan has been adopted as of December ___, 1997.
Section 9. The names "IMG Mutual Funds, Inc." and "Directors of IMG
Mutual Funds, Inc." refer respectively to the Company created and the Directors,
as directors but not individually or personally, acting from time to time under
Articles of Incorporation dated November 17, 1994, to which reference is hereby
made and a copy of which is o file at the office of the Secretary of the State
of Maryland and elsewhere as required by law, and to any and all amendments
thereto so filed or hereafter filed. The obligations of "IMG Mutual Funds, Inc."
entered into in the name or on behalf thereof by any of the Directors,
representatives or agents are made not individually, but in such capacities, and
are not binding upon any of the Directors, Shareholders or representatives of
the Company personally, but bind only the assets of the Company, and all persons
dealing with any series and/or class of Shares of the Company must look solely
to the assets of the Company belonging to such series and/or class for the
enforcement of any claims against the Company
.
<PAGE>
IMG MUTUAL FUNDS, INC.
(the "Company")
SERVICING AGREEMENT
to
ADMINISTRATIVE SERVICES PLAN
Ladies and Gentlemen:
We wish to enter into this Servicing Agreement with you concerning the provision
of administrative support services to your customers who may from time to time
be the record or beneficial owners of shares (such shares referred to herein as
the "Shares") of one or more of the Company's investment portfolios
(individually, a "Fund" and collectively, the "Funds"), which are listed on
Appendix A.
The terms and conditions of this Servicing Agreement are as follows:
Section 1. You agree to provide administrative support services to your
customers who may from time to time own of record or beneficially a Fund's
Shares. Services provided may include some or all of the following: (i)
processing dividend and distribution payments from a Fund on behalf of
customers; (ii) providing periodic statements to your customers showing their
positions in the Shares; (iii) arranging for bank wires; (iv) responding to
routine customer inquiries relating to services performed by you; (v) providing
sub-accounting with respect to the Shares beneficially owned by your customers
or the information necessary for sub-account; (vi) if required by law,
forwarding shareholder communications from a Fund (such as proxies, shareholder
reports, annual and semi-annual financial statements and dividend, distribution
and tax notices) to your customers; (vii) forwarding to customers proxy
statements and proxies containing any proposals regarding this Agreement or the
Administrative Services Plan related hereto; (vii) aggregating and processing
purchase, exchange, and redemption requests from customers and placing net
purchase, exchange, and redemption orders for your customers; (ix) providing
customers with a service that invests the assets of their accounts in the Shares
pursuant to specific or pre-authorized instructions; (x) establishing and
maintaining accounts and records relating to transaction in the Shares; (ix)
assisting customers in changing dividend or distribution options , account
designations and addresses; or (xii) other similar services if requested by the
Company.
Section 2. You will provide such office space and equipment, telephone
facilities and personnel (which may be any part of the space, equipment and
facilities currently used in your business, or any personnel employed by you) as
may be reasonable necessary or beneficial in order to provide the aforementioned
services to customers.
Section 3. Neither you nor any of your officers, employees or agents are
authorized to make any representations concerning the Company, a Fund or its
Shares except those contained in our then current prospectus for such shares,
copies of which will be supplied by BISYS Fund Services, Inc., the Company's
distributor, to you, or in such supplemental literature or advertising as may be
authorized by the Company in writing.
Section 4. For all purposes of this Agreement you will be deemed to be an
independent contractor, and will have no authority to act as agent for the
Company in any matter or in any respect. By your written acceptance of this
Agreement, you agree to and do release, indemnify and hold us harmless from and
against any and all direct or indirect liabilities or losses resulting from
requests, directions, actions or inactions of or by you or your officers,
employees or agents regarding your responsibilities hereunder or the purchase,
redemption, transfer or registration of the Shares by or on behalf of customers.
You and your employees will upon request, be available during normal business
hours to consult with the Company or its designees concerning the performance of
your responsibilities under this Agreement.
Section 5. In consideration for the services and facilities provided by you
hereunder, the Company will pay to you, and you will accept as full payment
therefore, a fee at the annual rate of up to 0.25% of the average daily net
assets of a Fund's Shares owned of record or beneficially by your customers from
time to time for which you provide services hereunder, which fee will be
computed daily and payable monthly. For purposes of determining the fees payable
under this Section 5, the average daily net asset value of the customers' Shares
will be computed in the manner specified in our then current Prospectus in
connection with the computation of the net asset value of a Fund's Shares for
purposes of purchases, exchanges and redemptions. The fee rate stated above may
be prospectively increased or decreased by the Company, in its sole discretion,
at any time upon notice to you. Further, the Company may, in its discretion and
without notice, suspend or withdraw the sale of such Shares, including the sale
of such shares to you for the account of any customer(s).
Section 6. Any person authorized to direct the disposition of monies paid or
payable by the Company pursuant to this Agreement, will provide to the Company's
Board of Directors, and the Directors will review, at least quarterly, a written
report of the amounts so expended and the purposes for which such expenditures
were made. In addition, you will furnish the Company or its designees with such
information as the Company or its designees may reasonably request (including,
without limitation, periodic certifications confirming the provision to
customers of some or all of the services described herein), and will otherwise
cooperate with the Company and its designees (including, without limitation, any
auditors designated by the Company), in connection with the preparation of
reports to the Company's Board of Directors concerning this Agreement and the
monies paid or payable by the Company pursuant hereto, as well as any other
reports of filings that may be required by law.
Section 7. We may enter into other similar Servicing Agreements with any other
person or persons without your consent.
Section 8. By your written acceptance of this Agreement, you represent, warrant
and agree that: (i) in no event will any of the services provided by you
hereunder be primarily intended to result in the sale of any shares issued by
the Company; (ii) the compensation payable to you hereunder, together with any
other compensation you receive from customers for services contemplated by this
Agreement, will be fully disclosed to your customers, and will not be excessive
or unreasonable under the laws and instruments governing your relationships with
your customers; and (iii) if you are subject to the provisions of the
Glass-Steagall Act and other laws governing, among other things, the conduct of
activities by federally chartered and supervised banks and other affiliated
banking organizations, you will perform only those activities which are
consistent with your statutory and regulatory obligations and will act solely as
agent for, upon the order of, and for the account of, your customers.
Section 9. This Agreement will become effective on the date a fully executed
copy of this Agreement is received by the Company or its designee. This
Agreement may be terminated at any time, without the payment of any penalty by
the vote of a majority of the members of the Board of Directors of the Company
and who have no direct or indirect financial interest in the operation of the
Administrative Services Plan and in any related agreements to the Administrative
Servicing Plan ("Disinterested Directors") or by a majority of the outstanding
voting securities of the Company on not more than sixty (60) days written notice
to the parties to this Agreement.
Section 10. All notices and other communications to either you or the Company
will be duly given if mailed, telegraphed, telexed or transmitted by similar
telecommunications device to the appropriate address shown above.
Section 11. This Agreement will be construed in accordance with the laws of the
State of Ohio and in non-assignable by the parties hereto.
Section 12. This Agreement has been approved by vote of a majority of (i) the
Company's Board of Directors and (ii) the Disinterested Directors, cast in
person at a meeting called for the purpose of voting on such approval.
Section 13. The names "The IMG Mutual Funds, Inc." and "Directors of the IMG
Mutual Funds, Inc." refer respectively to the Fund created and the Directors, as
directors but not individually or personally, acting from time to time under
Articles of Incorporation dated November 17, 1994 which is hereby referred to
and a copy of which is on file at the office of Secretary of the State of
Maryland and at our principal office. The obligations of "The IMG Mutual Funds,
Inc." entered in the name or on behalf thereof by any of the Directors,
representatives or agents are made not individually, but in such capacities, and
are not binding upon any of the Directors, Shareholders or representatives of
the Company personally, but bind only the Fund Property (as defined in the
Articles of Incorporation), and all persons dealing with any class of Shares of
the Company must look solely to the Fund Property belonging to such class for
the enforcement of any claims against the Company.
<PAGE>
If you agree to be legally bound by the provisions of this Agreement,
please sign a copy of this letter where indicated below and promptly return to
the Company's designee, Investors Management Group, 2203 Grand Avenue, Des
Moines, Iowa 50312-5338.
Very truly yours,
THE IMG MUTUAL FUNDS, INC.
By: _____________________________________
Authorized Officer
Date: ___________________________________
Accepted and Agree to:
Firm: ___________________________________
By: _____________________________________
Authorized Officer, Title
Date: ___________________________________
_________________________________________
Taxpayer Identification Number
<PAGE>
APPENDIX A
TO SERVICING AGREEMENT FOR
ADMINISTRATIVE SERVICES PLAN
FOR THE IMG MUTUAL FUNDS, INC.
Names of Funds
Vintage Equity Fund Vintage Aggressive Growth Fund Vintage Balanced Fund Vintage
Municipal Bond Fund Vintage Bond Fund Vintage Income Fund Vintage Limited Term
Bond Fund Liquid Assets Fund Government Assets Fund Municipal Assets Fund
IMG MUTUAL FUNDS, INC.
EXHIBIT # 15(b)
TO
POST-EFFECTIVE AMENDMENT NO. 7
FORM N-1A REGISTRATION STATEMENT
<PAGE>
LIQUID ASSETS FUND
DISTRIBUTION PLAN UNDER RULE 12B-1
I. Shares of the Fund are classified as "Sweep Shares", "S2 Shares", "Trust
Shares" and "Institutional Shares". "S2 Shares" and "Sweep Shares" will be
subject to this Distribution Plan pursuant to Rule 12b-1. This Distribution Plan
will only be applicable to Trust Shares and Institutional Shares if approved by
the Board of Directors and shareholders of Trust Shares and/or Institutional
Shares.
II. Payments by the S2 Shares and Sweep Shares of the Liquid Assets Fund (the
"Fund") to Promote the Sale of the Fund Shares
Subject to the following conditions, the Fund may make payments from
the assets of the S2 Shares and Sweep Shares of the Fund to the Fund's
Underwriter for the following purposes:
(A) to compensate any securities dealer, financial institution or
any other Person (a "Participating Organization") who renders
services in distributing or promoting the sale of the Fund's
S2 Shares and Sweep Shares pursuant to a written agreement
(the "Related Agreement"), provided:
(1) No Related Agreement shall be entered into, and no
payments shall be made pursuant to any Related
Agreement, unless such Related Agreement is in
writing and has first been delivered to and approved
by a vote of the board of directors of the Fund, and
of a majority of the members of the board of
directors of the Fund who are not interested Persons
of the Fund and have no direct or indirect financial
interests in the operation of the Plan or in any
Related Agreement (the "Disinterested Directors"),
cast in person at a meeting called for the purpose of
voting on such Related Agreement.
(2) Any Related Agreement shall describe the services to
be performed by the Participating Organization and
shall specify the amount of, or the method for
determining compensation to the Participating
Organization.
(3) No Related Agreement may be entered into unless it
provides that it may be terminated at any time,
without the payment of any penalty, by vote of a
majority of the Disinterested Directors or by vote of
a Majority of the Outstanding Voting Securities of
the Fund on not more than 60 days' written notice to
other party to the Related Agreement and that the
Related Agreement shall automatically terminate in
the event of its assignment.
(4) Any Related Agreement shall continue in effect for a
period of more than one year from the date of its
execution or adoption only if it provides that such
continuance is specifically approved at least
annually by a vote of the board of directors of the
Fund, and of the Disinterested Directors, cast in
person at a meeting called for the purpose of voting
on such Related Agreement.
(B) Aggregate payments by the Fund under this Plan in any month
shall not exceed the annual rate of 0.50 of 1% of the average
net asset value (determined as of the close of business on the
last business day of the prior month) of all issued and
outstanding S2 Shares of the Fund and shall not exceed the
annual rate of 0.75 of 1% of the average net asset value
(determined as of the close of business on the last business
day of the prior month) of all issued and outstanding Sweep
Shares of the Fund.
(C) If and to the extent that the Fund is deemed to be acting as a
distributor of its shares by reason of payments to the Fund's
investment adviser under any investment advisory contract,
such payments are authorized. If and to the extent that the
investment advisory contract in effect as of the effective
date of this plan is inconsistent with any provision of this
plan, the provisions of this plan shall supersede the
provisions of such investment advisory contract. If and to the
extent that the Fund is deemed to be acting as a distributor
of its shares by reason of any payments by the Fund's
investment adviser to third parties to assist in distribution
of the Fund's shares, such payments are authorized if made
pursuant to an agreement that satisfies the requirements of a
Related Agreement set forth in Section 1. Notwithstanding any
other provision in this plan, payments to the Fund's
investment adviser under any investment advisory contract and
any payments by the investment adviser shall not be subject to
the limitations set forth in paragraph (C) of Section I and
such payments shall not be included in calculating the maximum
aggregate payments to all Participating Organizations set
forth in paragraph (C) of Section I.
III. Quarterly Reports
The Administrator of the Fund shall provide to the board of directors,
and the board of directors shall review, at least quarterly, a written report of
all amounts expended pursuant to this Plan. This report shall include the
identities of all Participating Organizations and the payments received by them,
and explain the purposes for which all amounts were expended.
IV. Effective Date and Duration of the Plan
This Plan shall become effective immediately upon the later of the
approval by (a) both the vote of the Board of Directors of the Fund, and of the
Disinterested Directors, cast in person at the meeting called for the purpose of
voting on the approval of this plan and (b) the vote of a Majority of the
Outstanding Voting Securities of the Fund and the date the Fund's Registration
disclosing the terms of the Amended becoming effective, whichever is later. This
plan shall continue in effect for a period of one year from its effective date
unless terminated pursuant to its terms. Thereafter, this plan shall continue
from year to year, provided that such continuance is approved at least annually
by a vote of the board of directors of the Fund, and of the Disinterested
Directors, cast in person at a meeting called for the purpose of voting on such
continuance. This plan may be terminated at any time by the vote of (a) the
board of directors, (b) a majority of the Disinterested Directors or (c) a
Majority of the Outstanding Voting Securities of the Fund.
V. Selection of Disinterested Directors
During the period in which this plan is effective, the selection and
nomination of those directors of the Fund who are not Interested Persons of the
Fund shall be committed to the discretion of the directors who are not
Interested Persons of the Fund.
VI. Amendments
All material amendments of this plan shall be in writing and shall be
approved by a vote of the board of directors of the Fund, and of the
Disinterested Directors, cast in person at a meeting called for the purpose of
voting on such amendment. This plan may not be amended to increase materially
the amount to be spent by the Fund hereunder without approval by a Majority of
the Outstanding Voting Securities of the Fund.
VII. Capitalized Terms
Capitalized terms used herein without definition shall have the meaning
set forth in the Investment Company Act of 1940, as amended.
IMG MUTUAL FUNDS, INC.
EXHIBIT # 15(c)
TO
POST-EFFECTIVE AMENDMENT NO. 7
FORM N-1A REGISTRATION STATEMENT
<PAGE>
MUNICIPAL ASSETS FUND
DISTRIBUTION PLAN UNDER RULE 12B-1
I. Shares of the Fund are classified as "Sweep Shares", "Trust Shares" and
"Institutional Shares". Only "Sweep Shares" will be subject to this Amended
Distribution Plan pursuant to Rule 12b-1. This Distribution Plan will only be
applicable to Trust Shares and Institutional Shares if approved by the Board of
Directors and shareholders of Trust Shares and/or Institutional Shares.
II. Payments by the Sweep Shares of the Municipal Assets Fund (the "Fund") to
Promote the Sale of the Fund Shares
Subject to the following conditions, the Fund may make payments from
the assets of the Sweep Shares of the Fund to the Fund's Underwriter for the
following purposes:
(A) to compensate any securities dealer, financial institution or
any other Person (a "Participating Organization") who renders
services in distributing or promoting the sale of the Fund's
Sweep Shares pursuant to a written agreement (the "Related
Agreement"), provided:
(1) No Related Agreement shall be entered into, and no
payments shall be made pursuant to any Related
Agreement, unless such Related Agreement is in
writing and has first been delivered to and approved
by a vote of the board of directors of the Fund, and
of a majority of the members of the board of
directors of the Fund who are not interested Persons
of the Fund and have no direct or indirect financial
interests in the operation of the Plan or in any
Related Agreement (the "Disinterested Directors"),
cast in person at a meeting called for the purpose of
voting on such Related Agreement.
(2) Any Related Agreement shall describe the services to
be performed by the Participating Organization and
shall specify the amount of, or the method for
determining compensation to the Participating
Organization.
(3) No Related Agreement may be entered into unless it
provides that it may be terminated at any time,
without the payment of any penalty, by vote of a
majority of the Disinterested Directors or by vote of
a Majority of the Outstanding Voting Securities of
the Fund on not more than 60 days' written notice to
other party to the Related Agreement and that the
Related Agreement shall automatically terminate in
the event of its assignment.
(4) Any Related Agreement shall continue in effect for a
period of more than one year from the date of its
execution or adoption only if it provides that such
continuance is specifically approved at least
annually by a vote of the board of directors of the
Fund, and of the Disinterested Directors, cast in
person at a meeting called for the purpose of voting
on such Related Agreement.
(B) Aggregate payments by the Fund under this Plan in any month
shall not exceed the annual rate of 0.50 of 1% of the average
net asset value (determined as of the close of business on the
last business day of the prior month) of all issued and
outstanding shares of the Fund.
(C) If and to the extent that the Fund is deemed to be acting as a
distributor of its shares by reason of payments to the Fund's
investment adviser under any investment advisory contract,
such payments are authorized. If and to the extent that the
investment advisory contract in effect as of the effective
date of this plan is inconsistent with any provision of this
plan, the provisions of this plan shall supersede the
provisions of such investment advisory contract. If and to the
extent that the Fund is deemed to be acting as a distributor
of its shares by reason of any payments by the Fund's
investment adviser to third parties to assist in distribution
of the Fund's shares, such payments are authorized if made
pursuant to an agreement that satisfies the requirements of a
Related Agreement set forth in Section 1. Notwithstanding any
other provision in this plan, payments to the Fund's
investment adviser under any investment advisory contract and
any payments by the investment adviser shall not be subject to
the limitations set forth in paragraph (C) of Section I and
such payments shall not be included in calculating the maximum
aggregate payments to all Participating Organizations set
forth in paragraph (C) of Section I.
III. Quarterly Reports
The Administrator of the Fund shall provide to the board of directors,
and the board of directors shall review, at least quarterly, a written report of
all amounts expended pursuant to this Plan. This report shall include the
identities of all Participating Organizations and the payments received by them,
and explain the purposes for which all amounts were expended.
IV. Effective Date and Duration of the Plan
This Plan shall become effective immediately upon the later of the
approval by (a) both the vote of the Board of Directors of the Fund, and of the
Disinterested Directors, cast in person at the meeting called for the purpose of
voting on the approval of this plan and (b) the vote of a Majority of the
Outstanding Voting Securities of the Fund and the date the Fund's Registration
disclosing the terms of the Amended becoming effective, whichever is later. This
plan shall continue in effect for a period of one year from its effective date
unless terminated pursuant to its terms. Thereafter, this plan shall continue
from year to year, provided that such continuance is approved at least annually
by a vote of the board of directors of the Fund, and of the Disinterested
Directors, cast in person at a meeting called for the purpose of voting on such
continuance. This plan may be terminated at any time by the vote of (a) the
board of directors, (b) a majority of the Disinterested Directors or (c) a
Majority of the Outstanding Voting Securities of the Fund.
V. Selection of Disinterested Directors
During the period in which this plan is effective, the selection and
nomination of those directors of the Fund who are not Interested Persons of the
Fund shall be committed to the discretion of the directors who are not
Interested Persons of the Fund.
VI. Amendments
All material amendments of this plan shall be in writing and shall be
approved by a vote of the board of directors of the Fund, and of the
Disinterested Directors, cast in person at a meeting called for the purpose of
voting on such amendment. This plan may not be amended to increase materially
the amount to be spent by the Fund hereunder without approval by a Majority of
the Outstanding Voting Securities of the Fund.
VII. Capitalized Terms
Capitalized terms used herein without definition shall have the meaning
set forth in the Investment Company Act of 1940, as amended.
