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. 8 [x]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [x]
Amendment No. 11 [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
N-1A Item No. Location in Prospectus
- ------------- ----------------------
1. Cover Page...............................COVER PAGE
2. Synopsis.................................EXPENSE SUMMARY
3. Financial Highlights.....................NOT APPLICABLE
4. General Description of Registrant........INVESTMENT OBJECTIVES, POLICIES
AND RISK FACTORS OF THE FUNDS;
INVESTMENT RESTRICTIONS; GENERAL
INFORMATION-DESCRIPTION OF THE
COMPANY AND ITS SHARES
5. Management of the Fund...................MANAGEMENT OF THE COMPANY
6. Capital Stock and Other Securities.......HOW TO PURCHASE AND REDEEM SHARES;
DIVIDENDS AND TAXES; GENERAL
INFORMATION-DESCRIPTION OF THE
COMPANY AND ITS SHARES; GENERAL
INFORMATION-MISCELLANEOUS
7. Purchase of Securities Being Offered.....VALUATION OF SHARES; HOW TO
PURCHASE AND REDEEM SHARES
8. Redemption or Repurchase.................HOW TO PURCHASE AND REDEEM SHARES
9. Legal Proceedings........................NOT APPLICABLE
PART B
Location in Statement of
Additional Information
----------------------
10. Cover Page..............................COVER PAGE
11. Table of Contents.......................TABLE OF CONTENTS
12. General Information and History.........THE COMPANY; ADDITIONAL INFORMATION
13. Investment Objective and Policies.......INVESTMENT OBJECTIVES AND POLICIES
14. Management of the Fund..................MANAGEMENT OF THE COMPANY-DIRECTORS
AND OFFICERS
15. Control Persons and Principal Holders
of Securities...........................ADDITIONAL INFORMATION-DESCRIPTION
OF SHARES
16. Investment Advisory and Other Services..MANAGEMENT OF THE COMPANY
17. Brokerage Allocation....................MANAGEMENT OF THE COMPANY-
PORTFOLIO TRANSACTIONS
18. Capital Stock and Other Securities......ADDITIONAL INFORMATION-
DESCRIPTION OF SHARES
19. Purchase, Redemption and Pricing
of Securities Being Offered.............NET ASSET VALUE; ADDITIONAL
PURCHASE AND REDEMPTION INFORMATION
20. Tax Status..............................ADDITIONAL INFORMATION-
ADDITIONAL TAX INFORMATION
21. Underwriters............................MANAGEMENT OF THE COMPANY-
DISTRIBUTOR
22. Calculation of Performance data.........ADDITIONAL INFORMATION
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>
VINTAGE GOVERNMENT ASSETS FUND
VINTAGE INCOME FUND
VINTAGE MUNICIPAL BOND FUND
VINTAGE EQUITY FUND
VINTAGE BALANCED FUND
VINTAGE AGGRESSIVE GROWTH FUND
VINTAGE LIMITED TERM BOND FUND
For current yield, purchase, and
redemption information, call (800)
798-1819.
IMG Mutual Funds, Inc. (the "Company") is a Maryland corporation
organized as an open-end management investment company issuing its shares in
series (each series referred to as a "Fund" and collectively as "Funds"), each
representing a diversified portfolio of investments with its own investment
objectives and policies. The portfolios offered in this prospectus are the
Vintage Government Assets Fund (the "Government Fund"), the Vintage Income Fund,
the Vintage Municipal Bond Fund, the Vintage Equity Fund, the Vintage Balanced
Fund, the Vintage Aggressive Growth Fund, and the Vintage Limited Term Bond Fund
(the "Limited Term Fund"). The IMG Core Stock Fund, IMG Bond Fund, Vintage
Liquid Assets Fund and Vintage Municipal Assets Fund are offered in separate
Prospectuses which can be obtained by calling the Company at the number
indicated above.
The Government Fund's investment objective is to seek current income
consistent with maintaining liquidity and stability of principal. The Government
Fund invests exclusively in short-term U.S. Treasury bills, notes and other
short-term obligations issued or guaranteed by the U.S. Government or its
agencies or instrumentalities, and repurchase agreements with respect thereto.
The Government Fund offers two classes of shares. This Prospectus describes "T
Shares". T Shares are normally offered through trust organizations or others
providing shareholder services such as establishing and maintaining records and
accounts for their customers who invest in T Shares, assisting customers in
processing purchase, exchange and redemption requests, and responding to
customers' inquiries regarding their accounts. The Government Fund also offers
"S Shares" which accrue daily dividends in the same manner as T Shares except
that each class bears separate distribution and/or shareholder administrative
servicing fees (see "GENERAL INFORMATION - Description of the Fund and Its
Shares"). THE GOVERNMENT FUND SEEKS TO MAINTAIN A CONSTANT NET ASSET VALUE OF
$1.00 PER SHARE, BUT THERE CAN BE NO ASSURANCE THAT THE NET ASSET VALUE WILL NOT
VARY. AN INVESTMENT IN THE GOVERNMENT FUND IS NEITHER INSURED NOR GUARANTEED BY
THE UNITED STATES GOVERNMENT.
The investment objective of the Income Fund is to seek current income,
consistent with the preservation of capital. The Income Fund invests primarily
in fixed income securities and expects to maintain a dollar-weighted average
portfolio maturity of 4 to 10 years.
The investment objective of the Municipal Bond Fund is to seek current
income, consistent with the preservation of capital, that is exempt from federal
income taxes. The Municipal Bond Fund invests primarily in a diversified
portfolio of tax-exempt fixed income securities and expects to maintain a
dollar-weighted average portfolio maturity of 4 to 10 years.
The investment objective of the Equity Fund is long-term capital
appreciation. The Equity Fund invests primarily in a diversified portfolio of
equity securities of mainly large capitalization companies with strong earnings
potential. The Equity Fund offers two classes of shares. This Prospectus
describes "T Shares". T Shares are normally offered through trust organizations
or others providing shareholder services such as establishing and maintaining
records and accounts for their customers who invest in T Shares, assisting
customers in processing purchase, exchange and redemption requests, and
responding to customers' inquiries regarding their accounts. The Equity Fund
also offers "S Shares" which accrue daily dividends in the same manner as T
Shares except that each class bears separate distribution and/or shareholder
administrative servicing fees (see "GENERAL INFORMATION - Description of the
Fund and Its Shares").
The investment objective of the Balanced Fund is to seek long-term
growth of capital and income. The Balanced Fund invests primarily in a
diversified portfolio of equity securities and fixed income securities. The
Balanced Fund expects to maintain a dollar-weighted average portfolio maturity
of 4 to 10 years on the fixed income portion of the portfolio.
The investment objective of the Aggressive Growth Fund is long-term
capital growth. The Aggressive Growth Fund invests primarily in common stocks
and other equity-type securities of small, medium and large capitalized
companies that exhibit a strong potential for price appreciation relative to
other equity securities.
The investment objective of the Limited Term Fund is to seek total
return from a portfolio of limited term fixed income securities. The Limited
Term Fund invests primarily in a diversified portfolio of fixed income
securities including certain types of fixed income securities that may exhibit
greater volatility. The Limited Term Bond Fund expects to maintain a
dollar-weighted average portfolio maturity of 1to 4 years.
Investors Management Group acts as the investment adviser to the Funds.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY A BANK OR ANY BANKING AFFILIATE AND THE SHARES ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY. INVESTMENTS IN THE FUNDS ARE SUBJECT TO INVESTMENT RISKS, INCLUDING
POSSIBLE LOSS OF PRINCIPAL.
Additional information about the Funds, contained in a Statement of
Additional Information, has been filed with the Securities and Exchange
Commission (the "Commission") and is available upon request without charge by
writing to the Funds at their address or by calling the Funds at the telephone
number shown above. The Statement of Additional Information bears the same date
as this Prospectus and is incorporated by reference in its entirety into this
Prospectus.
This Prospectus sets forth concisely the information about the Funds
that a prospective investor ought to know before investing. Please read this
Prospectus carefully and retain it for future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION ("COMMISSION") OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this Prospectus is December ____, 1997
<PAGE>
PROSPECTUS SUMMARY
The Funds Vintage Government Assets Fund (the "Government
Fund"), Vintage Income Fund, Vintage Municipal
Bond Fund, Vintage Equity Fund, Vintage Balanced
Fund, Vintage Aggressive Growth Fund, and Vintage
Limited Term Bond Fund (the "Limited Term Fund"),
each a diversified investment portfolio
(collectively, the "Funds") of IMG Mutual Funds,
Inc., an open-end management investment company
organized as a Maryland corporation.
Shares Offered Shares of common stock ("Shares") of the Funds.
Offering Price The public offering price of the Government
Fund's Shares is equal to the net asset value per
Share, which the Government Fund will seek to
maintain at $1.00.
The public offering price of the Income Fund, the
Municipal Bond Fund, the Equity Fund, the
Balanced Fund, the Aggressive Growth Fund and the
Limited Term Fund's Shares is equal to the net
asset value per Share.
Minimum Purchase $1,000 minimum for the initial investment with a
$50 minimum for subsequent investments. (See "HOW
TO PURCHASE AND REDEEM SHARES--Purchases of
Shares and Auto Invest Plan" for a discussion of
lower minimum purchase amounts).
Investment Objective The Government Fund seeks current income
consistent with maintaining liquidity and
stability of principal.
The Income Fund seeks current income, consistent
with the preservation of capital.
The Municipal Bond Fund seeks current income,
consistent with the preservation of capital, that
is exempt from federal income taxes.
The Equity Fund seeks long-term capital
appreciation.
The Balanced Fund seeks long-term growth of
capital and income.
The Aggressive Growth Fund seeks long-term
capital growth.
The Limited Term Fund seeks total return from a
portfolio of limited term fixed income
securities.
Investment Policy The Government Fund invests exclusively in
short-term U.S. Treasury bills, notes and other
short-term obligations issued or guaranteed by
the U.S. Government or its agencies or
instrumentalities, and repurchase agreements with
respect thereto.
Under normal market conditions, the Income Fund
invests primarily in fixed income securities and
expects to maintain a dollar-weighted average
portfolio maturity of 4 to 10 years.
Under normal market conditions, the Municipal
Bond Fund invests primarily in tax-exempt
obligations that have a stated maturity of 25
years or less and expects to maintain a
dollar-weighted average portfolio maturity of 4
to 10 years.
Under normal market conditions, the Equity Fund
invests primarily in equity securities of mainly
large capitalization companies with strong
earnings potential.
Under normal market conditions, the Balanced Fund
invests primarily in a diversified portfolio of
equity securities and fixed income securities,
and expects to maintain a dollar-weighted average
portfolio maturity of 4 to 10 years on the fixed
income portion of the portfolio.
Under normal market conditions, the Aggressive
Growth Fund invests primarily in equity
securities of small, medium and large capitalized
companies that exhibit a strong potential for
price appreciation relative to other equity
securities.
Under normal market conditions, the Limited Term
Fund invests primarily in a diversified portfolio
of fixed income securities including certain
types of fixed income securities that may exhibit
greater volatility and expects to maintain a
dollar-weighted average portfolio maturity of 1
to 4 years.
Investment Adviser Investors Management Group, Ltd., Des Moines,
and Administrator Iowa ("IMG").
Dividends The Government Fund intends to declare dividends
from net income daily and pay such dividends
monthly. The Income Fund and the Municipal Bond
Fund intend to declare dividends from net
investment income and pay such dividends monthly.
The Equity Fund, the Balanced Fund, the
Aggressive Growth Fund and the Limited Term Fund
intend to declare dividends from net investment
income quarterly and pay such dividends
quarterly.
Distributor BISYS Fund Services, Inc.
<TABLE>
<CAPTION>
EXPENSE SUMMARY
GOVERNMENT INCOME MUNICIPAL BOND EQUITY
FUND FUND FUND FUND
---- ---- ---- ----
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES1
Maximum Sales Load Imposed on
Purchases (as a percentage of
offering price) 0.00% 0.00% 0.00% 0.00%
Maximum Sales Load Imposed on
Reinvested Dividends (as a
percentage of offering price) 0.00% 0.00% 0.00% 0.00%
Deferred Sales Load (as a
percentage of original purchase
price or redemption proceeds,
as applicable) 0.00% 0.00% 0.00% 0.00%
Redemption Fees (as a percentage
of amount redeemed, if applicable) 0.00% 0.00% 0.00% 0.00%
Exchange Fee $ 0.00 $ 0.00 $ 0.00 $ 0.00
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees 0.40% 0.60% 0.60% 0.75%
12b-1 Fees2 0.00% 0.00% 0.00% 0.00%
Other Expenses3 0.37% 0.41% 0.49% 0.39%
----- ------ ------- ------
Total Fund Operating Expenses
After Waivers4 0.77% 1.01% 1.09% 1.14%
------ ----- ----- -----
</TABLE>
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 a Fund will bear directly or indirectly. The table reflects the current fees
for the Funds. The Management Fees and Rule 12b-1 Distribution Fees are based on
the maximum allowable under the Investment Advisory Agreements and Distribution
Plans. Rule 12b-1 Distribution 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 12b-1
Distribution Fees and/or absorb certain expenses for a Fund or class of Shares
of a Fund. See "MANAGEMENT OF THE FUNDS" and "GENERAL INFORMATION" for a more
complete discussion of the Shareholder transaction expenses and annual operating
expenses for the Fund. THE FOREGOING SUMMARY SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN.
1 A Participating Organization (as defined in this Prospectus) or a Bank
(as defined in this Prospectus) may charge a Customer's (as defined in
the Prospectus) account fees for automatic investment and other
investment management services provided in connection with investment
in the Fund. (See "HOW TO PURCHASE AND REDEEM SHARES--Purchases of
Shares.")
2 The Company has adopted a Distribution and Shareholder Service Plan
(the "Plan") pursuant to which a Fund is authorized to pay or reimburse
the Distributor a periodic amount calculated at an annual rate not to
exceed 0.25% of the average daily net assets of such Fund
("distribution fees"). Currently, however, it is intended that no such
amounts will be paid under the Plan by any of the Funds. Shareholders
will be given at least 30 days' notice prior to the payment of any fees
under the Plan. As a result of expenses payable in connection with the
Plan, it is possible that long-term shareholders may pay more than the
economic equivalent of the maximum front-end sales charges permitted by
the National Association of Securities Dealers.
3 The Company has adopted an Administrative Services Plan (the "Services
Plan") pursuant to which a Fund is authorized to pay banks and other
financial institutions which agree to provide certain ministerial,
recordkeeping and/or administrative support services for their
customers or account holders a periodic amount calculated at an annual
rate not to exceed 0.25% of the average daily net assets of such Fund
("services fees"). Currently the Company is not paying any services
fees under the Services Plan for the Funds; however, it may elect to
pay such fees at any time without further notice to shareholders.
4 Absent the reduction of distribution fees and services fees, "Total
Fund Operating Expenses" as a percentage of average daily net assets
would have been 1.01% for the Government Fund, 1.50% for the Income
Fund, 1.58% for the Municipal Bond Fund and 1.63% for the Equity Fund.
EXAMPLE
You would pay the following expenses on a $1,000 investment in each Fund
assuming, (1) 5% annual return and (2) redemption at the end of each time
period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Government Fund $8 $25 $43 $95
Income Fund $10 $32 $56 $124
Municipal Bond Fund $11 $35 $60 $133
Equity Fund $12 $36 $63 $139
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
Funds.
<TABLE>
<CAPTION>
AGGRESSIVE
BALANCED GROWTH LIMITED TERM
FUND FUND FUND
---- ---- ----
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES1
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 0.00% 0.00% 0.00%
Maximum Sales Load Imposed on Reinvested
Dividends (as a percentage of offering price) 0.00% 0.00% 0.00%
Deferred Sales Load (as a percentage of
original purchase price or redemption
proceeds, as applicable) 0.00% 0.00% 0.00%
Redemption Fees (as a percentage of amount
redeemed, if applicable) 0.00% 0.00% 0.00%
Exchange Fee $ 0.00 $ 0.00 $ 0.00
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees 0.75% 0.95% 0.60%
12b-1 Fees After Fee Waivers2 0.00% 0.00% 0.00%
Other Expenses3 0.61% 0.49% 0.46%
------ ------ ------
Total Fund Operating Expenses After Fee Waivers4 1.36% 1.44% 1.06%
----- ----- -----
</TABLE>
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 a Fund will bear directly or indirectly. The table reflects the current fees
for the Funds. The Management Fees and Rule 12b-1 Distribution Fees are based on
the maximum allowable under the Investment Advisory Agreements and Distribution
Plans. Rule 12b-1 Distribution 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 12b-1
Distribution Fees and/or absorb certain expenses for a Fund or class of Shares
of a Fund. See "MANAGEMENT OF THE FUND" and "GENERAL INFORMATION" for a more
complete discussion of the Shareholder transaction expenses and annual operating
expenses for the Fund. THE FOREGOING SUMMARY SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN.
1 A Participating Organization (as defined in this Prospectus) or a Bank
(as defined in this Prospectus) may charge a Customer's (as defined in
the Prospectus) account fees for automatic investment and other
investment management services provided in connection with investment
in the Fund. (See "HOW TO PURCHASE AND REDEEM SHARES--Purchases of
Shares.")
2 The Company has adopted a Distribution and Shareholder Service Plan
(the "Plan") pursuant to which a Fund is authorized to pay or reimburse
the Distributor a periodic amount calculated at an annual rate not to
exceed 0.25% of the average daily net assets of such Fund. Currently,
however, it is intended that no more than 0.01% will be paid under the
Plan by any of the Funds. Shareholders will be given at least 30 days'
notice prior to the payment of any increased fees under the Plan. As a
result of expenses payable in connection with the Plan, it is possible
that long-term shareholders may pay more than the economic equivalent
of the maximum front-end sales charges permitted by the National
Association of Securities Dealers.
3 The Company has adopted an Administrative Services Plan (the "Services
Plan") pursuant to which a Fund is authorized to pay banks and other
financial institutions which agree to provide certain ministerial,
recordkeeping and/or administrative support services for their
customers or account holders a periodic amount calculated at an annual
rate not to exceed 0.25% of the average daily net assets of such Fund
("services fees"). Currently the Company is not paying any services
fees under the Services Plan for the Funds; however, it may elect to
pay such fees at any time without further notice to shareholders.
4 Absent the reduction of distribution fees and services fees, "Total
Fund Operating Expenses" as a percentage of average daily net assets
would have been 1.85% for the Balanced Fund, 1.93% for the Aggressive
Growth Fund, and 1.55% for the Limited Term Fund.
EXAMPLE
You would pay the following expenses on a $1,000 investment in each Fund
assuming, (1) 5% annual return and (2) redemption at the end of each time
period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Balanced Fund $14 $43 $74 $164
Aggressive Growth Fund $15 $46 $79 $172
Limited Term Bond Fund $11 $34 $58 $129
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
Funds.
INVESTMENT OBJECTIVES, POLICIES AND RISK FACTORS OF THE FUNDS
Each Fund has its own investment objective and policies, which are
described below. There is no assurance that a Fund will be successful in
achieving its investment objective. The investment objective of each Fund is a
fundamental policy and, as such, may not be changed without a vote of the
holders of a majority of the outstanding Shares of a Fund (as described in the
Statement of Additional Information). The other policies of a Fund may be
changed without a vote of the holders of a majority of Shares unless (1)the
policy is expressly deemed to be a fundamental policy of the Fund or (2)the
policy is expressly deemed to be changeable only by such majority vote.
GOVERNMENT ASSETS FUND
The investment objective of the Government Fund is to seek current
income consistent with maintaining liquidity and stability of principal. The
Fund seeks to maintain a stable net asset value of $1.00 per Share.
The Government Fund invests exclusively in U.S. Treasury bills, notes
and other obligations issued or guaranteed by the U.S. Government or its
agencies or instrumentalities ("U.S. Government Obligations") which have
remaining maturities of 397calendar days (thirteen months) or less, and in
repurchase agreements with respect to U.S. Government Obligations. The
short-term U.S. Government Obligations in the Fund's portfolio will differ only
in their interest rates, maturities and times of issuance. The dollar-weighted
average maturity of the obligations held by the Government Fund will not exceed
90days.
INCOME FUND
The investment objective of the Income Fund is to seek current income,
consistent with the preservation of capital. Because the market value of fixed
income securities can be expected to vary inversely to changes in prevailing
interest rates, investing in such fixed income securities can provide an
opportunity for capital appreciation when interest rates are expected to
decline.
Under normal conditions, the Income Fund will invest substantially all,
but in no event less than 65%, of the value of its total assets in fixed income
securities rated within the three highest rating categories at the time of
purchase by a nationally recognized statistical rating organization (an "NRSRO")
or, if unrated, found by the Advisor to be of comparable quality. Such
securities will include but not be limited to, corporate debt securities
(including notes, bonds and debentures), U.S. Government Obligations and
mortgage-related securities, variable and floating rate notes, taxable municipal
bonds, asset backed securities, high quality money market instruments
(commercial paper, certificates of deposit and bankers' acceptances), variable
amount master demand notes, leasing instruments and trust certificates. In
addition, the Income Fund may engage in certain loans of portfolio securities,
repurchase agreements and reverse repurchase agreements and futures and options.
The Income Fund may also invest in securities of other investment companies and
in other investment portfolios advised by IMG. The Income Fund expects to
maintain a dollar-weighted average portfolio maturity of four to ten years.
The Income Fund expects to invest in bonds, notes and debentures of a
wide range of U.S. corporate issuers. Such obligations, in the case of
debentures, will represent unsecured promises to pay, in the case of notes and
bonds, may be secured by mortgages on real property or security interests in
personal property and will in most cases differ in their interest rates,
maturities and times of issuance. The Income Fund will invest in such corporate
debt securities only if they are rated within the five highest rating categories
at the time of purchase by a nationally recognized statistical rating
organization (an "NRSRO") or, if unrated, found by the Advisor to be of
comparable quality. Securities rated in the fourth highest rating category have
speculative characteristics, even though they are of investment-grade quality.
Up to 25% of the Income Fund's total assets could be invested in securities
rated in the fifth highest rating category, which are considered
below-Investment Grade securities (commonly known as "junk bonds"). See
"INVESTMENT OBJECTIVE AND POLICIES--Additional Information on Portfolio
Instruments" in the Statement of Additional Information for information
concerning risks associated with investing in below investment grade bonds.
Currently, the Fund does not expect to invest in (i) securities rated lower than
"Ba" by Moody's or "BB" by S&P, Fitch, D&P, or of similar quality by another
NRSRO; and (ii) unrated debt securities of similar quality. Securities of
"BBB/Baa" or lower quality may have speculative characteristics and poor credit
protection. The rating services' descriptions of the below- Investment Grade
securities ratings categories in which the Income Fund may invest are as
follows:
Moody's Investors Services, Inc., Bond Ratings: Bonds which are rated
"Ba" are judged to have speculative elements; their future cannot be
considered as well-assured. Often the protection of interest and
principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty
of position characterizes bonds in this class.
Standard and Poor's Corporation Bond Ratings: Debt rated, "BB", "B",
"CCC", and "CC" is regarded, on balance, as predominately speculative
with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. "BB" indicates the lowest
degree of speculation and "CC" the highest degree of speculation. While
such debt will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk exposures to
adverse conditions.
Fitch Investors Services, Inc., Bond Ratings: Bonds which are rated
"BB" are considered speculative and of low investment grade. The
obligor's ability to pay interest and repay principal is not strong and
is considered likely to be affected over time by adverse economic
changes.
Duff & Phelps, Inc., Long Term Ratings: Bonds which are rated "BB+",
"BB", and "BB-", are below investment grade but deemed likely to meet
obligations when due. Present or prospective financial protection
factors fluctuate according to industry conditions or company fortunes.
Overall quality may move up or down frequently according to industry
conditions or company fortunes. Overall quality may move up or down
frequently within this category.
The respective rating services apply classifications in each rating
category to indicate the security's ranking within the category. The Income Fund
may invest in securities within any of the classifications in a category. For a
description of the rating symbols of certain NRSROs, see the Appendix to the
Statement of Additional Information.
Subject to the foregoing limitations, the Income Fund may invest in
U.S. dollar-denominated international certificates of deposit, banker's
acceptances and foreign fixed income issues for which the primary trading market
is in the United States ("Yankee Obligations").
The Income Fund will purchase commercial paper rated at the time of
purchase within the two highest rating categories by an NRSRO or, if not rated,
found by IMG to be of comparable quality. See the Appendix to the Statement of
Additional Information for a description of these ratings.
For temporary defensive purposes, the Income Fund may invest all or any
portion of its assets in the money market instruments and repurchase agreements
described above when, in the opinion of the Advisor, it is in the best interests
of the Fund to do so.
MUNICIPAL BOND FUND
The Municipal Bond Fund seeks to produce current income, consistent
with the preservation of capital, that is exempt from federal income taxes to
the extent described below. The Municipal Bond Fund invests primarily in a
diversified portfolio of tax-exempt fixed income securities.
Under normal market conditions at least 80% of the net assets of the
Municipal Bond Fund will be invested in a diversified portfolio of obligations
(such as bonds, notes, and debentures) issued by or on behalf of states,
territories and possessions of the United States, the District of Columbia and
other political subdivisions, agencies, instrumentalities and authorities, the
interest on which is both exempt from regular federal income taxes and not
treated as a preference item for individuals for purposes of the federal
alternative minimum tax ("Municipal Securities"). It should be noted that
interest on such bonds will nonetheless be part of an adjustment to the
alternative minimum taxable income for purposes of the alternative minimum tax
imposed on corporations as well as the environmental tax imposed on corporations
under Section 59A of the Internal Revenue Code of 1986, as amended. Under normal
market conditions, the Municipal Bond Fund will invest in Municipal Securities
that have a stated or remaining maturity of 25 years or less or in Municipal
Securities with a stated or remaining maturity in excess of 25 years if such
securities have an unconditional put to sell or redeem the securities within 25
years from the date of purchase. The Municipal Bond Fund expects to maintain a
dollar-weighted average portfolio maturity of four to ten years.
Under normal market conditions, the Municipal Bond Fund may invest up
to 20% of its net assets in obligations the interest on which is either subject
to regular federal income taxation or treated as a preference item for purposes
of the federal alternative minimum tax ("Taxable Obligations"). At times, the
Advisor may determine that, because of unstable conditions in the markets for
Municipal Securities, pursuing the Municipal Bond Fund's basic investment
strategies is inconsistent with the best interests of the Shareholders of the
Municipal Bond Fund. At such times, the Advisor may use temporary defensive
strategies differing from those designed to achieve the Municipal Bond Fund's
investment objective, by increasing the Municipal Bond Fund's holdings in
Taxable Obligations to over 20% of the Municipal Bond Fund's total assets and by
holding uninvested cash reserves pending investment. Taxable Obligations may
include U.S. Government Obligations (some of which may be subject to repurchase
agreements), certificates of deposit, demand and time deposits, and bankers'
acceptances of selected banks, and commercial paper meeting the Municipal Bond
Fund's quality standards (as described below) for tax-exempt commercial paper.
These obligations are described further in the Statement of Additional
Information.
The Municipal Bond Fund may also invest in private activity bonds.
Interest on private activity bonds is exempt from the regular federal income tax
only if the bonds fall within certain defined categories of qualified private
activity bonds and meet the requirements specified in those respective
categories. Even if private activity bonds so qualify, interest on private
activity bonds may be subject to the alternative minimum tax, and, in the case
of corporate investors, to the environmental tax under Code Section 59A.
However, private activity bonds will only be considered Municipal Securities for
the purposes of this Prospectus if the interest thereon is not an item of tax
preference for individuals. For additional information on the federal
alternative minimum tax, see "DIVIDENDS AND TAXES."
The Municipal Bond Fund invests in Municipal Securities that are rated
within the five highest rating categories at the time of purchase by an NRSRO in
the case of bonds and rated within the two highest rating categories in the case
of notes, tax-exempt commercial paper, and variable rate demand obligations. The
respective rating services apply classifications in each rating category to
indicate the security's ranking within the category. The Municipal Bond Fund may
invest in securities within any of the classifications in a category. Securities
rated in the fourth highest rating category have speculative characteristics,
even though they are of investment-grade quality. Up to 25% of the Municipal
Bond Fund's total assets could be invested in securities rated in the fifth
highest rating category, which are considered below-Investment Grade securities
(commonly known as "junk bonds"). See "INVESTMENT OBJECTIVE AND
POLICIES--Additional Information on Portfolio Instruments" in the Statement of
Additional Information for information concerning risks associated with
investing in below investment grade bonds. Currently, the Fund does not expect
to invest in (i) securities rated lower than "Ba" by Moody's or "BB" by S&P,
Fitch, D&P, or of similar quality by another NRSRO; and (ii) unrated debt
securities of similar quality. Securities of "BBB/Baa" or lower quality may have
speculative characteristics and poor credit protection. The rating services'
descriptions of the below- Investment Grade securities ratings categories in
which the Municipal Bond Fund may invest are described above with respect to the
Income Fund.
The Fund may also invest up to 10% of the Municipal Bond Fund's total
assets in Municipal Securities that are unrated at the time of purchase but are
determined to be of comparable quality by the Advisor pursuant to guidelines
approved by the Fund's Board of Directors. Municipal Securities may be purchased
in reliance upon a rating only when the rating organization is not affiliated
with the issuer or guarantor of the Municipal Securities. The applicable
Municipal Securities ratings are described in the Appendix to the Statement of
Additional Information.
The two principal classifications of Municipal Securities that may be
held by the Municipal Bond Fund are "general obligation" securities and
"revenue" securities. General obligation securities are secured by the issuer's
pledge of its full faith, credit and taxing power for the payment of principal
and interest. Revenue securities are payable only from the revenues derived from
a particular facility or class of facilities, or, in some cases, from the
proceeds of a special excise tax or other specific revenue source such as the
user of the facility being financed. Private activity bonds held by the
Municipal Bond Fund are in most cases revenue securities and are not payable
from the unrestricted revenues of the issuer. Consequently, the credit quality
of private activity bonds is usually directly related to the credit standing of
the corporate user of the facility involved.
Municipal Securities in which the Municipal Bond Fund may invest may
also include "moral obligation" bonds, which are normally issued by special
purpose public authorities. If the issuer of moral obligation bonds is unable to
meet its debt service obligations from current revenues, it may draw on a
reserve fund, the restoration of which is a moral commitment but not a legal
obligation of the state or municipality that created the issue.
Opinions relating to the validity of Municipal Securities and to the
exemption of interest thereon from federal income tax are rendered by bond
counsel to the respective issuers at the time of issuance. Neither the Municipal
Bond Fund, the Advisor, nor legal counsel to either will review the proceedings
relating to the issuance of Municipal Securities or the basis for such opinions.
The Municipal Bond Fund does not intend to invest more than 25% of its
total assets in Municipal Securities which are related in such a way that an
economic, business, or political development or change affecting one such
security would likewise affect the other Municipal Securities. Examples of such
securities are obligations the repayment of which is dependent upon similar
types of projects or projects located in the same state. Such investments would
be made only if deemed necessary or appropriate by the Advisor. To the extent
that the Municipal Bond Fund's assets are concentrated in Municipal Securities
that are so related, the Municipal Bond Fund will be subject to the peculiar
risks presented by such Municipal Securities, such as negative developments in a
particular industry or state, to a greater extent than it would be if the
Municipal Bond Fund's assets were not so concentrated.
Municipal Securities purchased by the Municipal Bond Fund may include
rated and unrated variable and floating rate tax-exempt notes. There may be no
active secondary market with respect to a particular variable or floating rate
note. Nevertheless, the periodic readjustments of their interest rates tend to
assure that their value to the Municipal Bond Fund will approximate their par
value. Variable and floating rate notes for which no readily available market
exists will be purchased in an amount which, together with other securities
which are not readily marketable, exceeds 15% of the Municipal Bond Fund's net
assets only if such notes are subject to a demand feature that will require
payment of the principal within seven days after demand by the Municipal Bond
Fund.
The Municipal Bond Fund may also invest in master demand notes in order
to satisfy short-term needs or, if warranted, as part of its temporary defensive
investment strategy. Such notes are demand obligations that permit the
investment of fluctuating amounts at varying market rates of interest pursuant
to arrangements between the issuer and a United States commercial bank acting as
agent for the payees of such notes. Master demand notes are direct lending
arrangements between the Municipal Bond Fund and the issuer of such notes.
Master demand notes are callable on demand by the Municipal Bond Fund, but are
not marketable to third parties. The quality of master demand notes will be
reviewed by the Advisor at least quarterly, which review will consider the
earning power, cash flow and debt-to-equity ratios indicating the borrower's
ability to pay principal together with accrued interest on demand. While master
demand notes are not typically rated by credit rating agencies, issuers of such
notes must satisfy the same criteria for the Municipal Bond Fund set forth above
for commercial paper.
EQUITY FUND
The investment objective of the Equity Fund is long term capital
appreciation. The Equity Fund will invest primarily in equity securities of
mainly large capitalization companies with strong earnings potential and will
strive for high over-all return while minimizing risk through the selection of a
majority of quality dividend paying equity securities.
Under normal market conditions, the Equity Fund will invest
substantially all, but in no event less than 75%, of its total assets in equity
securities, which are defined as common stocks, preferred stocks, securities
convertible into common stocks, warrants and any rights to purchase common
stocks. The remainder of the Equity Fund's assets may be invested in U.S.
Government Obligations and repurchase agreements with respect thereto. The
Equity Fund may also use call options on equity securities, as described below.
Because the market value of fixed income securities, such as U.S. Government
Obligations, can be expected to vary inversely to changes in prevailing interest
rates, investing in such fixed income securities can provide an opportunity for
capital appreciation when interest rates are expected to decline.
The Equity Fund may, for daily cash management purposes, also invest in
high quality money market securities (commercial paper, certificates of deposit
and bankers' acceptances), as well as the repurchase agreements referred to
above. In addition, the Equity Fund may invest, without limit, in any
combination of U.S. Government Obligations, money market instruments and
repurchase agreements referred to above when, in the opinion of the Advisor, it
is determined that a temporary defensive position is warranted based upon
current market conditions. The Equity Fund may also invest in securities of
other investment companies including the other investment portfolios advised by
IMG, as described more fully under "Other Investment Policies."
Subject to the foregoing limitations, the Equity Fund may invest in
foreign securities through the purchase of American Depository Receipts
("ADRs"). Ownership of unsponsored ADRs may not entitle the Equity Fund to
financial or other reports from the issuer, to which it would be entitled as the
owner of sponsored ADRs. Investment in foreign securities is subject to special
risks that differ in some respects from those related to investments in
securities of U.S. domestic issuers. Such risks include trade balances and
imbalances, and related economic policies, future adverse political, economic
and social developments, the possible imposition of withholding taxes on
interest and dividend income and other taxes, possible seizure, nationalization,
or expropriation of foreign investments or deposits, currency blockage, less
stringent disclosure requirements, the possible establishment of exchange
controls or taxation at the source, or the adoption of other foreign
governmental restrictions. For additional information regarding the special
risks associated with investments in foreign securities, see "FOREIGN
INVESTMENTS" in the Statement of Additional Information.
BALANCED FUND
The investment objective of the Balanced Fund is to seek long-term
growth of capital and income. The Balanced Fund will invest in a diversified
portfolio of equity securities and fixed income securities. The investment
manager will allocate holdings within established ranges to best take advantage
of economic conditions, general market trends, interest rate levels, and changes
in fiscal and monetary policies.
To the extent that the Balanced Fund invests in equity securities, it
will invest in equity securities which consist of common stocks, preferred
stocks, securities convertible into common stocks, warrants and any rights to
purchase common stocks. Under normal market conditions, the Balanced Fund may
invest up to 75% of its total assets in equity securities. The Balanced Fund may
also invest in foreign securities through the purchase of ADR's.
Under normal conditions, the Balanced Fund will invest at least 25%, of
the value of its total assets in fixed income securities. Such securities will
include but not be limited to, corporate debt securities (including notes, bonds
and debentures), U.S. Government Obligations, mortgage-related securities, high
quality money market instruments (commercial paper, certificates of deposit and
bankers' acceptances), variable amount master demand notes, variable and
floating rate notes, taxable municipal bonds, leasing instruments and trust
certificates and asset backed securities. In addition, the Balanced Fund may
engage in certain loans of portfolio securities, repurchase agreements and
reverse repurchase agreements and futures and options. The Balanced Fund may
also invest in securities of other investment companies and in other investment
portfolios advised by IMG. The Balanced Fund expects to maintain a
dollar-weighted average portfolio maturity of four to ten years on the fixed
income portion of the portfolio.
The Balanced Fund expects to invest in bonds, notes and debentures of a
wide range of U.S. Corporate issuers. Such obligations, in the case of
debentures, will represent unsecured promises to pay, in the case of notes and
bonds, may be secured by mortgages on real property or security interests in
personal property and will in most cases differ in their interest rates,
maturities and times of issuance. The Balanced Fund will invest in such
corporate debt securities only if they are rated within the five highest rating
categories at the time of purchase by a nationally recognized statistical rating
organization (an "NRSRO") or, if unrated, found by the Advisor to be of
comparable quality. Securities rated in the fourth highest rating category have
speculative characteristics, even though they are of investment-grade quality.
Up to 25% of the Balanced Fund's total assets could be invested in securities
rated in the fifth highest rating category, which are considered
below-Investment Grade securities (commonly known as "junk bonds"). See
"INVESTMENT OBJECTIVE AND POLICIES--Additional Information on Portfolio
Instruments" in the Statement of Additional Information for information
concerning risks associated with investing in below investment grade bonds.
Currently, the Fund does not expect to invest in (i) securities rated lower than
"Ba" by Moody's or "BB" by S&P, Fitch, D&P, or of similar quality by another
NRSRO; and (ii) unrated debt securities of similar quality. Securities of
"BBB/Baa" or lower quality may have speculative characteristics and poor credit
protection. The rating services' descriptions of the below- Investment Grade
securities ratings categories in which the Income Fund may invest are described
above with respect to the Income Fund.
The respective rating services apply classifications in each rating
category to indicate the security's ranking within the category. The Balanced
Fund may invest in securities within any of the classifications in a category.
For a description of the rating symbols of certain NRSROs, see the Appendix to
the Statement of Additional Information.
Under normal market conditions the Balanced Fund will invest at least
25% of its total assets in fixed income securities. In addition, the Balanced
Fund may invest, without limit, in any combination of U.S. Government
Obligations, money market instruments and repurchase agreements when, in the
opinion of the Advisor, it is determined that a temporary defensive position is
warranted based upon current market conditions.
AGGRESSIVE GROWTH FUND
The investment objective of the Aggressive Growth Fund is long-term
capital growth. The Aggressive Growth Fund will invest primarily in equity
securities of small, medium and large capitalization companies that exhibit a
strong potential for price appreciation relative to the general equity markets.
Dividend income is not a factor in selecting investment securities.
The Aggressive Growth Fund may invest in equity securities which
consist of common stocks, preferred stocks, securities convertible into common
stocks, warrants and any rights to purchase common stocks.
The manager will consider numerous factors in a company, among them:
quality of management over time, the company's leadership in its field,
distinctive marketing capabilities, return on equity over the past 3-5 years,
cash flows, debt levels, and earnings growth. The Fund will seek positions in
high growth industries, firms with products in niche markets, and stocks which
are perceived to be temporarily undervalued. Positions may be accumulated in
industry sectors or firms which are felt to be particularly attractive;
positions may be decreased or eliminated in industry sectors or firms which are
less attractive.
The Aggressive Growth Fund may, for daily cash management purposes,
also invest in high quality money market securities (commercial paper,
certificates of deposit and bankers' acceptances), as well as the repurchase
agreements referred to above. In addition, the Aggressive Growth Fund may
invest, without limit, in any combination of U.S. Government Obligations, money
market instruments and repurchase agreements when, in the opinion of the
Advisor, it is determined that a temporary defensive position is warranted based
upon current market conditions. The Aggressive Growth Fund may also invest in
securities of other investment companies including the other investment
portfolios advised by the Advisor, as described more fully under "Other
Investment Policies."
Subject to the foregoing limitations, the Aggressive Growth Fund may
invest in foreign securities through the purchase of American Depository
Receipts ("ADRs"). Ownership of unsponsored ADRs may not entitle the Aggressive
Growth Fund to financial or other reports from the issuer, to which it would be
entitled as the owner of sponsored ADRs. Investment in foreign securities is
subject to special risks that differ in some respects from those related to
investments in securities of U.S. DOMESTIC issuers. Such risks include trade
balances and imbalances, and related economic policies, future adverse
political, economic and social developments, the possible imposition of
withholding taxes on interest and dividend income and other taxes, possible
seizure, nationalization, or expropriation of foreign investments or deposits,
currency blockage, less stringent disclosure requirements, the possible
establishment of exchange controls or taxation at the source, or the adoption of
other foreign governmental restrictions. For additional information regarding
the special risks associated with investments in foreign securities, see
"FOREIGN INVESTMENTS" in the Statement of Additional Information.
LIMITED TERM BOND FUND
The investment objective of the Limited Term Fund is to seek total
return from a portfolio of limited term fixed income securities. Total return
includes a combination of interest income from the Fund's underlying fixed
income securities, appreciation or depreciation in the value of these fixed
income securities and gains or losses realized upon the sale of such securities.
Because the market value of fixed income securities can be expected to vary
inversely to changes in prevailing interest rates, investing in such fixed
income securities provides an opportunity for appreciation when interest rates
decline and depreciation when interest rates rise. It is anticipated that the
Fund will place primary emphasis on capital appreciation as well as capital
preservation through periodic adjustment of the average maturity or duration of
the Fund's portfolio through securities selection, maturity structure and sector
allocation, with the level of current income being a secondary consideration and
that investments will be made without regard to tax ramifications.
Under normal conditions, the Limited Term Fund will invest
substantially all of the value of its total assets in fixed income securities
rated within the five highest rating categories at the time of purchase by a
NRSRO or, if unrated, found by the Advisor to be of comparable quality. Such
securities will include but not be limited to, corporate debt securities
(including notes, bonds and debentures), U.S. Government Obligations,
mortgage-related securities, high quality money market instruments (commercial
paper, certificates of deposit and bankers' acceptances), variable amount master
demand notes, variable and floating rate notes, taxable municipal bonds, leasing
instruments and trust certificates and asset backed securities. The Limited Term
Fund expects to invest in bonds, notes and debentures of a wide range of U.S.
Corporate issuers. Such obligations, in the case of debentures, will represent
unsecured promises to pay, in the case of notes and bonds, may be secured by
mortgages on real property or security interests in personal property and will
in most cases differ in their interest rates, maturities and times of issuance.
The Limited Term Fund will invest in such corporate debt securities only if they
are rated within the five highest rating categories at the time of purchase by a
nationally recognized statistical rating organization (an "NRSRO") or, if
unrated, found by IMG to be of comparable quality. Securities rated in the
fourth highest rating category have speculative characteristics, even though
they are of investment-grade quality. Up to 25% of the Limited Term Fund's total
assets could be invested in securities rated in the fifth highest rating
category, which are considered below-Investment Grade securities (commonly known
as "junk bonds"). See "INVESTMENT OBJECTIVE AND POLICIES--Additional Information
on Portfolio Instruments" in the Statement of Additional Information for
information concerning risks associated with investing in below investment grade
bonds. Currently, the Fund does not expect to invest in (i) securities rated
lower than "Ba" by Moody's or "BB" by S&P, Fitch, D&P, or of similar quality by
another NRSRO; and (ii) unrated debt securities of similar quality. Securities
of "BBB/Baa" or lower quality may have speculative characteristics and poor
credit protection. The rating services' descriptions of the below- Investment
Grade securities ratings categories in which the Income Fund may invest are
described above with respect to the Income Fund.
The respective rating services apply classifications in each rating
category to indicate the security's ranking within the category. The Limited
Term Fund may invest in securities within any of the classifications in a
category. For a description of the rating symbols of certain NRSROs, see the
Appendix to the Statement of Additional Information.
In addition, the Limited Term Fund may engage in certain loans of
portfolio securities, repurchase agreements and reverse repurchase agreements
and futures and options. The Limited Term Fund may also invest in securities of
other investment companies and in other investment portfolios advised by IMG, as
described more fully under "Other Investment Policies." The Limited Term Bond
Fund expects to maintain a dollar-weighted average portfolio maturity of one to
four years. The Limited Term Bond Fund, unlike the Income Fund, may invest in
Treasury Zero Coupon securities but it will not invest more than 10% of its
total assets in such securities.
U.S. GOVERNMENT OBLIGATIONS
The types of U.S. Government Obligations invested in by a Fund will
include obligations issued or guaranteed as to payment of principal and interest
by the full faith and credit of the U.S. Treasury, such as Treasury bills,
notes, bonds and certificates of indebtedness, and obligations issued or
guaranteed by the agencies or instrumentalities of the U.S. Government, but not
supported by such full faith and credit. Obligations of certain agencies and
instrumentalities of the U.S. Government, such as the Government National
Mortgage Association and the Export-Import Bank of the United States, are
supported by the full faith and credit of the U.S. Treasury; others, such as
those of the Federal National Mortgage Association, are supported by the right
of the issuer to borrow from the Treasury; others are supported by the
discretionary authority of the U.S. Government to purchase the agency's
obligations; still others, such as those of the Federal Farm Credit Banks or the
Federal Home Loan Mortgage Corporation, are supported only by the credit of the
instrumentality. No assurance can be given that the U.S. Government would
provide financial support to U.S. Government sponsored agencies or
instrumentalities if it is not obligated to do so by law. A Fund will invest in
the obligations of such agencies or instrumentalities only when IMG believes
that the credit risk with respect thereto is minimal. The U.S. Government does
not guarantee the market value of any security; therefore, the market value of
the U.S. Government Obligations in a Fund's portfolio and of the Shares of a
Fund can be expected to fluctuate as interest rates change.
MORTGAGE-RELATED AND ASSET-BACKED SECURITIES
Mortgage-related securities in which each of the Income Fund, the
Limited Term Bond Fund, the Balanced Fund and the Municipal Bond Fund may invest
represent pools of mortgage loans assembled for sale to investors by various
governmental agencies (such as the Government National Mortgage Association) and
government-related organizations (such as the Federal National Mortgage
Association and the Federal Home Loan Mortgage Corporation), as well as by
private issuers (such as commercial banks, savings and loan institutions,
mortgage bankers and private mortgage insurance companies). Collateralized
mortgage obligations structured as pools of mortgage pass-through certificates
or mortgage loans ("CMOs") will be purchased only if they meet the rating
requirements set forth above with respect to each of the Income Fund, Limited
Term Bond Fund, the Balanced Fund and the Municipal Bond Fund's investments in
debt securities of U.S. Corporations. For additional information on the Income
Fund, Limited Term Bond Fund, the Balanced Fund and the Municipal Bond Fund
investments in mortgage-related securities, see the Statement of Additional
Information.
Although certain mortgage-related securities may be guaranteed by a
third party or otherwise similarly secured, the market value of the security,
which may fluctuate, is not so secured. Thus, for example, if the Funds purchase
a mortgage-related security at a premium, that portion may be lost if there is a
decline in the market value of the security whether due to changes in interest
rates or prepayments of the underlying mortgage collateral. As with other
interest-bearing securities, the prices of mortgage-related securities are
inversely affected by changes in interest rates. However, although the value of
a mortgage-related security may decline when interest rates rise, the converse
is not necessarily true since, in periods of declining interest rates, the
mortgages underlying the securities are prone to prepayment. For this and other
reasons, the stated maturity of a mortgage-related security may be shortened by
unscheduled prepayments on the underlying mortgages and, accordingly, it is not
possible to predict accurately the security's return to the Fund(s). In
addition, regular payments received in respect to mortgage-related securities
include both interest and principal. No assurance can be given to the return the
Fund(s) will receive when these amounts are reinvested.
Asset-backed securities (unrelated to first mortgage loans) in which
the Income Funds may invest represent fractional interests in pools or leases,
retail installment loans or revolving credit receivables, both secured (such as
Certificates for Automobile Receivables or "CARSSM") and unsecured (such as
Credit Card Receivable Securities or "CARDSSM"). These assets are generally held
by a trust and payments of principal and interest or interest only are passed
through monthly or quarterly to certificate holders and may be guaranteed up to
certain amounts by letters of credit issued by a financial institution
affiliated or unaffiliated with the trustee or originator of the trust.
Asset-backed securities will be purchased only if they meet the rating
requirements set forth above with respect to the Income Fund, the Limited Term
Bond Fund, the Balanced Fund and the Municipal Bond Fund's investments in debt
securities of U.S. Corporations.
Like mortgages underlying mortgage-backed securities, underlying
automobile sales contracts or credit card receivables are subject to prepayment,
which may reduce the overall return to certificate holders. Nevertheless,
principal repayment rates tend not to vary much with interest rates and the
short-term nature of the underlying car loans or other receivables tend to
dampen the impact of any change in the prepayment level. Certificate holders may
also experience delays in payment on the certificates if the full amounts due on
underlying sales contracts or receivables are not realized by the trust because
of unanticipated legal or administrative costs or enforcing the contracts or
because of depreciation or damage to the collateral (usually automobiles)
securing certain contracts, or other factors. If consistent with its investment
objective and policies, the Income Fund, the Limited Term Bond Fund, the
Balanced Fund and the Municipal Bond Fund may invest in other asset-backed
securities that may be developed in the future.
Issuers of mortgage-backed and asset-backed securities often issue one
or more classes of which one (the "Residual") is in the nature of equity. The
Income Fund, the Limited Term Bond Fund or the Balanced Fund will not invest in
any Residual.
REPURCHASE AGREEMENTS
Securities held by a Fund may be subject to repurchase agreements.
Under the terms of a repurchase agreement, a Fund would acquire securities from
member banks of the Federal Deposit Insurance Corporation and from registered
broker-dealers which the Advisor deems creditworthy under guidelines approved by
the Company's Board of Directors. The seller agrees to repurchase such
securities at a mutually agreed-upon date and price. The repurchase price would
generally equal the price paid by a Fund plus interest negotiated on the basis
of current short-term rates, which may be more or less than the rate on the
underlying portfolio securities. Securities subject to repurchase agreements
must be of the same type and quality although, for the Government Fund, not
subject to the same maturity requirements as those in which a Fund may invest
directly. The seller under a repurchase agreement will be required to maintain
at all times the value of collateral held pursuant to the agreement at not less
than the repurchase price (including accrued interest). This requirement will be
continually monitored by IMG. In addition, securities subject to a repurchase
agreement will be held in a segregated account. If the seller were to default on
its repurchase obligation or become insolvent, a Fund would suffer a loss if the
proceeds from a sale of the underlying portfolio securities were less than the
repurchase price under the agreement, or the disposition of such securities by a
Fund were delayed pending court action. Repurchase agreements are considered to
be loans collateralized by the underlying security under the Investment Company
Act of 1940 (the "1940 Act"). For further information about repurchase
agreements, see "INVESTMENT OBJECTIVE AND POLICIES--Additional Information on
Portfolio Instruments--Repurchase Agreements" in the Statement of Additional
Information.
REVERSE REPURCHASE AGREEMENTS
Each Fund may borrow funds for temporary purposes by entering into
reverse repurchase agreements in accordance with the investment restrictions
described below. Pursuant to such agreements, a Fund would sell certain of its
securities to financial institutions such as banks and broker-dealers, and agree
to repurchase them at a mutually agreed upon date and price. At the time a Fund
enters into a reverse repurchase agreement, it will place in a segregated
custodial account liquid high grade debt securities, such as U.S. Government
Obligations, consistent with its investment restrictions having a value equal to
the repurchase price (including accrued interest), and will subsequently
continually monitor the account to ensure that such equivalent value is
maintained at all times. Reverse repurchase agreements involve the risk that the
market value of securities sold by a Fund may decline below the price at which
it is obligated to repurchase the securities. Reverse repurchase agreements are
considered to be borrowings by an investment company under the 1940 Act. For
further information about reverse repurchase agreements, see "INVESTMENT
OBJECTIVES AND POLICIES--Additional Information on Portfolio
Instruments--Reverse Repurchase Agreements" in the Statement of Additional
Information.
FUTURES CONTRACTS AND RELATED OPTIONS
The Funds may invest in futures contracts and options on futures
contracts to the extent permitted by the Commodity Futures Trading Commission
("CFTC") and the Commission and thus will engage in such transactions solely for
bona fide hedging purposes to manage risk associated with various portfolio
securities and not for speculative purposes. Such transactions, including stock
or bond index futures contracts, or options thereon, act as a hedge to protect a
Fund from fluctuations in the value of its securities caused by anticipated
changes in interest rate or market conditions without necessarily buying or
selling the securities. Hedging is a specialized investment technique that
entails skills different from other investment management. A stock or bond index
futures contract is an agreement in which one party agrees to take or make
delivery of an amount of cash equal to a specified dollar amount times the
difference between the index value (which assigns relative values to the common
stock or bonds included in the index) at the close of the last trading day of
the contract and the price at which the agreement is originally made. No
physical delivery of the underlying stock or bond in the index is contemplated.
Similarly, it may be in the best interest of a Fund to purchase or sell interest
rate futures contracts, or options thereon, which provide for the future
delivery of specified securities.
The purchase and sale of futures contracts or related options will not
be a primary investment technique of the Funds. The Funds will not purchase or
sell futures contracts (or related options thereon) if, immediately after
purchase, the aggregate initial margin deposits and premiums paid by a Fund on
its open futures and options positions, exceeds 5% of the liquidation value of
the Fund after taking into account any unrealized profits and unrealized losses
on any such futures or related options contracts into which it has entered.
CALL OPTIONS
The Equity Fund, the Balanced Fund and the Aggressive Growth Fund may
write covered call options on securities owned by the Fund. Such instruments may
also be referred to as equity derivatives. Derivatives generally are instruments
whose value is derived from or related to the value of some other instrument,
asset or specified benchmark, such as a specific stock or stock index. A call
option gives the purchaser of the option the right to buy, and obligates the
seller of the option to sell, the underlying security at the stated exercise
price at any time prior to the expiration date of the option, regardless of the
market price of the security. When a Fund writes a covered call option and such
option is exercised, it will forgo the appreciation, if any, on the underlying
security in excess of the exercise price. In order to close out a call option it
has written, a Fund may enter into a "closing purchase transaction"--the
purchase of a call option on the same security with the same exercise price and
expiration date as the call option which the Fund previously wrote on any
particular securities. When a portfolio security subject to a call option is
sold, the Fund may effect a closing purchase transaction to close out any
existing call option on that security. If a Fund is unable to effect a closing
purchase transaction, it will not be able to sell the underlying security until
the option expires or the Fund delivers the underlying security upon exercise.
Under normal conditions, it is not expected that these Funds would permit the
underlying value of their portfolio securities subject to such options to exceed
15% of net assets.
PUTABLE SECURITIES
The Income Fund, the Limited Term Bond Fund, the Balanced Fund and the
Municipal Bond Fund may acquire puts with respect to fixed income securities or
Municipal Securities as described above. Under a put, a Fund would have the
right to sell or redeem a specified security at a certain time or within a
certain period of time at a specified price. The security is sold to a third
party or redeemed by the issuer as provided contractually. The put may be an
independent feature or may be combined with a reset feature that is designed to
reduce downward price volatility as interest rates rise by enabling the holder
to liquidate the investment prior to maturity. The Funds may acquire putable
securities to facilitate portfolio liquidity, shorten the maturity of the
underlying security, or to permit the investment of funds at a more favorable
rate of return. The price of a putable security may be higher than the price
which otherwise would be paid for the security without such put feature, thereby
increasing the security's cost and reducing its yield. The time remaining to the
put date will apply for purposes of determining the maximum maturity of such
securities.
LENDING OF PORTFOLIO SECURITIES
From time to time in order to generate additional income, a Fund may
lend its portfolio securities, provided such action is consistent with its
investment objective, policies, and restrictions. During the time portfolio
securities are on loan, the borrower will pay a Fund any dividends or interest
paid on the securities. In addition, loans will be subject to termination by a
Fund or the borrower at any time.
A Fund will enter into loan arrangements only with broker-dealers,
banks or other institutions that are not affiliated directly or indirectly with
the Company and which IMG has determined are creditworthy under guidelines
established by the Company's Board of Directors. While the lending of securities
may subject a Fund to certain risks, such as delays or an inability to regain
the securities in the event the borrower defaults on its lending agreement or
enters into bankruptcy, a Fund will receive 100% collateral on loaned securities
in the form of cash or U.S. Government Obligations. This collateral will be
valued daily by IMG and, should the market value of the loaned securities
increase, the borrower will be required to furnish additional collateral to the
Fund. Although each of the Funds does not expect to do so on a regular basis, it
may lend portfolio securities in amounts representing up to 15% of the value of
the Fund's total assets. Fees earned by the Municipal Bond Fund from lending its
securities will constitute taxable income to the Fund which, when distributed to
shareholders, will likewise generally be treated as taxable income.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS
A Fund may purchase securities on a when-issued or delayed-delivery
basis. A Fund will engage in when-issued and delayed-delivery transactions only
for the purpose of acquiring portfolio securities consistent with its investment
objectives and policies, not for investment leverage. When-issued securities are
securities purchased for delivery beyond the normal settlement date at a stated
price and yield and thereby involve a risk that the yield obtained in the
transaction will be less than those available in the market when delivery takes
place. A Fund will generally not pay for such securities or start earning
interest on them until they are received. When a Fund agrees to purchase such
securities, however, the Fund's custodian will set aside cash or liquid
securities equal to the amount of the commitment in a separate account.
Securities purchased on a when-issued basis are recorded as an asset and are
subject to changes in the value based upon changes in the general level of
interest rates. In when-issued and delayed-delivery transactions, a Fund relies
on the seller to complete the transaction; the seller's failure to do so may
cause a Fund to miss a price or yield considered to be advantageous.
The Income Fund's, the Limited Term Bond Fund's, the Municipal Bond
Fund's and the Government Fund's commitments to purchase when-issued securities
will not exceed 25%, and the Equity Fund's, the Balanced Fund's and the
Aggressive Growth Fund's commitments will not exceed 5%, of the value of its
total assets absent unusual market conditions. Each of the Funds does not intend
to purchase when-issued securities for speculative purposes but only in
furtherance of its investment objectives.
OTHER INVESTMENT POLICIES
Each of the Funds, except the Government Fund, may also invest up to 5%
of its total assets in another investment company, including the Government
Fund, not to exceed 10% of the value of its total assets in the securities of
other investment companies. In order to avoid the imposition of additional fees
as a result of investing in Shares of the Government Fund, the Advisor and the
Administrator (see "MANAGEMENT OF THE COMPANY--Investment Adviser", "MANAGEMENT
OF THE COMPANY--Administrator and Distributor") will waive any portion of their
usual service fees from that Fund that are attributable to investments therein
by another Fund. A Fund will incur additional expenses due to the duplication of
expenses as a result of investing in mutual funds other than the Funds.
Additional restrictions on a Fund's investments in the securities of other
mutual funds are contained in the Statement of Additional Information.
INVESTMENT RESTRICTIONS
A Fund is subject to a number of investment restrictions that may be
changed only by a vote of a majority of the outstanding Shares of such a Fund
(as defined in the Statement of Additional Information).
Each of the Income Fund, the Municipal Bond Fund, the Equity Fund, the
Balanced Fund, the Aggressive Growth Fund and the Limited Term Bond Fund will
not:
1. Purchase securities of any one issuer, other than
obligations issued or guaranteed by the U.S. Government or its agencies
or instrumentalities, if, immediately after such purchase, with respect
to 75% of its portfolio, more than 5% of the value of the total assets
of the Fund would be invested in such issuer, or the Fund would hold
more than 10% of any class of securities of the issuer or more than 10%
of the outstanding voting securities of the issuer.
Each of the Income Fund, the Equity Fund, the Balanced Fund, the
Aggressive Growth Fund and the Limited Term Bond Fund will not:
1. Purchase any securities which would cause more than 25% of
the value of the Fund's total assets at the time of purchase to be
invested in securities of one or more issuers conducting their
principal business activities in the same industry, provided that
(a)there is no limitation with respect to obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities
and repurchase agreements secured by obligations of the U.S. Government
or its agencies or instrumentalities; (b)wholly-owned finance companies
will be considered to be in the industries of their parents if their
activities are primarily related to financing the activities of their
parents; and (c)utilities will be divided according to their services.
For example, gas, gas transmission, electric and gas, electric, and
telephone will each be considered a separate industry.
The Municipal Bond Fund will not:
1. Purchase any securities which would cause more than 25% of
the value of the Fund's total assets at the time of purchase to be
invested in securities of one or more issuers conducting their
principal business activities in the same industry, provided that
(a)there is no limitation with respect to obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities
and repurchase agreements secured by obligations of the U.S. Government
or its agencies or instrumentalities; (b)there is no limitation with
respect to Municipal Securities, which, for purposes of this limitation
only, do not include private activity bonds that are backed only by the
assets and revenues of a non-governmental user; (c)wholly-owned finance
companies will be considered to be in the industries of their parents
if their activities are primarily related to financing the activities
of their parents; and (d)utilities will be divided according to their
services. For example, gas, gas transmission, electric and gas,
electric, and telephone will each be considered a separate industry.
2. Write or sell puts, calls, straddles, spreads or
combinations thereof except that the Fund may acquire puts with respect
to Municipal Obligations in its portfolio and sell those puts in
conjunction with a sale of those Municipal Obligations.
Each of the Funds will not:
1. Borrow money or issue senior securities, except that the
Fund may borrow from banks or enter into reverse repurchase agreements
for temporary purposes in amounts up to 10% of the value of its total
assets at the time of such borrowing; or mortgage, pledge, or
hypothecate any assets, except in connection with any such borrowing
and in amounts not in excess of the lesser of the dollar amounts
borrowed or 10% of the value of the Fund's total assets at the time of
its borrowing. The Fund will not purchase securities while borrowings
(including reverse repurchase agreements) in excess of 5% of its total
assets are outstanding.
2. Make loans, except that the Fund may purchase or hold debt
securities and lend portfolio securities in accordance with its
investment objective and policies, and may enter into repurchase
agreements.
In addition to the above investment restrictions, each Fund is subject
to certain other investment restrictions set forth under "INVESTMENT OBJECTIVES
AND POLICIES--Investment Restrictions" in the Funds' Statement of Additional
Information.
VALUATION OF SHARES
The net asset value of each of the Funds, except the Government Fund,
is determined and its Shares are priced as of the close of regular trading on
the New York Stock Exchange ("NYSE") (generally 3:00p.m. Central Time) on each
Business Day. The net asset value of the Government Fund is determined and its
Shares are priced as of 11:00 a.m. Central Time ("Valuation Times"). As used
herein, a "Business Day" constitutes any day on which the NYSE is open for
trading, and any other day except days on which there are not sufficient changes
in the value of the Fund's portfolio securities that the Fund's net asset value
might be materially affected and days during which no Shares are tendered for
redemption and no orders to purchase Shares are received. Currently, the NYSE is
closed on New Year's Day, Martin Luther King, Jr. Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. Net asset value per Share for purposes of pricing sales and
redemptions is calculated by dividing the value of all securities and other
assets of the Fund less the liabilities charged to the Fund by the number of its
outstanding Shares.
For the Income Fund, the Municipal Bond Fund, the Equity Fund, The
Balanced Fund, the Aggressive Growth Fund and the Limited Term Bond Fund (the
"Variable NAV Funds"), the net asset value per share will fluctuate as the value
of each of the Variable NAV Fund's investment portfolio changes.
The securities in the Variable NAV Funds will be valued at market
value. If market quotations are not available, the securities will be valued by
a method which the Board of Directors believes accurately reflects fair value.
For further information about valuation of investments, see "NET ASSET VALUE" in
the Statement of Additional Information.
The assets in the Government Fund are valued based upon the amortized
cost method, which the Directors of the Company believe fairly reflects the
market-based net asset value per Share. Pursuant to rules and regulations of the
Commission regarding the use of the amortized cost method, the Government Fund
will maintain a dollar-weighted average portfolio maturity of 90 days or less.
Although the Company seeks to maintain the Government Fund's net asset value per
share at $1.00, there can be no assurance that the net asset value will not
vary.
HOW TO PURCHASE AND REDEEM SHARES
DISTRIBUTOR
Shares of the Funds are sold on a continuous basis by the Company's
Distributor, BISYS Fund Services, Inc. The principal office of the distributor
is 3435 Stelzer Road, Columbus, Ohio 43219. If you wish to purchase Shares,
contact the Funds at (800)798-1819.
PURCHASES OF SHARES
Shares of the Funds are continuously offered and may be purchased
directly either by mail, by telephone or by electronic transfer. Shares may also
be purchased through a broker-dealer who has established a dealer agreement with
the Distributor. The minimum investment is generally $1,000 for the initial
purchase of Shares and $50 for subsequent purchases. For purchases that are made
in connection with 401(k) plans, 403(b) plans and other similar plans or payroll
deduction plans, the minimum investment amount for initial and subsequent
purchases is $25. In the case of such retirement plan investments, the minimum
purchase amounts are not restricted to the purchase of Shares of one Fund. Thus,
the $25 minimum amount may be spread among any of the Funds. (But, see "HOW TO
PURCHASE AND REDEEM SHARES--Auto Invest Plan" below for minimum investment
requirements under the Auto Invest Plan).
Purchasers of Shares of the Funds will pay the next calculated net
asset value per Share after the Distributor's receipt of an order to purchase
Shares in good form ("public offering price") (see "HOW TO PURCHASE AND REDEEM
SHARES" below).
In the case of orders for the purchase of Shares placed through a
broker-dealer, the public offering price will be the net asset value as so
determined, but only if the broker-dealer receives the order prior to the
Valuation Time for that day and transmits it to the Funds by the Valuation Time.
The broker-dealer is responsible for transmitting such orders promptly. If the
broker-dealer fails to do so, the investor's right to that day's closing price
must be settled between the investor and the broker-dealer. If the broker-dealer
receives the order after the Valuation Time for that day, the price will be
based on the net asset value determined as of the Valuation Time for the next
Business Day.
PURCHASES BY MAIL
To purchase Shares of a Fund, complete an Account Application and
return it along with a check (or other negotiable bank draft or money order) in
at least the minimum initial purchase amount, made payable to the appropriate
Fund to:
IMG Mutual Funds, Inc.
2203 Grand Avenue
Des Moines, Iowa 50312-5338
An Account Application form can be obtained by calling the Funds at
(800)798-1819. Subsequent purchases of Shares of a Fund may be made at any time
by mailing a check payable to a Fund, to the above address.
PURCHASES BY TELEPHONE
Shares of a Fund may be purchased by calling the Funds at
(800)798-1819, if your Account Application has been previously received by the
Distributor. Payment for Shares ordered by telephone is made by electronic
transfer to the Funds' custodian. Prior to wiring funds and in order to ensure
that wire orders are invested promptly, investors must call the Funds at the
number above to obtain instructions regarding the bank account number to which
the funds should be wired and other pertinent information.
OTHER INFORMATION REGARDING PURCHASES
Shares may also be purchased through selected financial services firms
such as broker-dealer firms and banks ("Firms"). Shares of a Funds sold to the
Firms acting in a fiduciary, advisory, custodial, or other similar capacity on
behalf of customers will normally be held of record by the Firms. With respect
to Shares sold, it is the responsibility of the holder of record to transmit
purchase or redemption orders to the Distributor and to deliver funds for the
purchase thereof by the Fund's custodian within the settlement requirements
defined in the Securities Exchange Act of 1934. If payment is not received
within the prescribed time periods or a check timely received does not clear,
the purchase will be canceled and the investor could be liable for any losses or
fees incurred. Any questions regarding current settlement requirements or
electronic payment instructions should be directed to the Funds at (800)
798-1819.
Purchases of Shares in a Fund will be effected only on a Business Day
(as defined in "VALUATION OF SHARES"). The public offering price of the Variable
NAV Funds will be the net asset value per Share (see "VALUATION OF SHARES") as
determined on the Business Day the order is received by the Distributor, but
only if the Distributor receives the order by the Valuation Time. Otherwise, the
price will be determined as of the Valuation Time on the next Business Day. In
the case of an order for the purchase of Shares placed through a broker-dealer,
it is the responsibility of the broker-dealer to transmit the order to the
Distributor promptly.
Firms provide varying arrangements for their clients to purchase and
redeem Fund shares. Some may establish higher minimum investment requirements
than set forth above. They may arrange with their clients for other investment
or administrative services. Such Firms may independently establish and charge
additional amounts to their clients for such services, which charges would
reduce the client's yield or return. Firms may also hold Fund shares positions
in nominee or street name as agent for and on behalf of their customers. In such
instances, the Fund's transfer agent will have no information with respect to or
control over accounts of specific shareholders. Such shareholders may obtain
access to their accounts and information about their accounts only from their
Firms. Some of the Firms may receive compensation from the Fund's Shareholder
Service Agent for recordkeeping and other expenses related to these nominee
accounts. In addition, certain privileges with respect to the purchase and
redemption of shares or the reinvestment of dividends may not be available
through such Firms. Some Firms may participate in a program allowing them access
to their clients' accounts for servicing including, without limitation,
transfers of registration and dividend payee changes; and may perform functions
such as generation of confirmation statements and disbursement of cash
dividends. This Prospectus should be read in connection with such Firms'
material regarding their fees and services. Shareholders should also consider
that certain Firms may offer services which may not be available directly from
the Fund.
Shares of the Government Fund are purchased at the net asset value per
Share (see "VALUATION OF SHARES") next determined after receipt by the
Distributor of an order to purchase Shares. An order to purchase Shares of the
Government Fund will be deemed to have been received by the Distributor only
when federal funds with respect thereto are available to the Funds' custodian
for investment. Federal funds are monies credited to a bank's account with a
Federal Reserve Bank. Payment for an order to purchase Shares of the Government
Fund which is transmitted by federal funds wire will be available the same day
for investment by the Funds' custodian, if received prior to the last Valuation
Time (see "VALUATION OF SHARES"). Payments transmitted by other means (such as
by check drawn on a member of the Federal Reserve System) will normally be
converted into federal funds within two banking days after receipt. The
Government Fund strongly recommends that investors of substantial amounts use
federal funds to purchase Shares.
An order received prior to a Valuation Time on any Business Day for the
Government Fund will be executed at the net asset value determined as of the
next Valuation Time on the date of receipt. An order received after the
Valuation Time on any Business Day will be executed at the net asset value
determined as of the next Valuation Time on the next Business Day of the
Government Fund. Shares purchased before 11:00 a.m., Central Time, begin earning
dividends on the same Business Day. Shares purchased after 11:00 a.m., Central
Time, begin earning dividends on the next Business Day. All Shares of the
Government Fund continue to earn dividends through the day before their
redemption.
Depending upon the terms of the particular Customer account, a Bank may
charge a Customer account fees for services provided in connection with
investments in a Fund. Information concerning these services and any charges
will be provided by the Bank. This Prospectus should be read in conjunction with
any such information so received from a Bank.
The Company reserves the right to reject any order for the purchase of
a Fund's Shares in whole or in part including purchases made with foreign and
third party checks.
Every Shareholder of record will receive a confirmation of each
transaction in his or her account, which will also show the total number of
Shares of a Fund owned by the Shareholder. Sending confirmations for purchases
and redemptions of Shares held by a Bank on behalf of its Customer will be the
responsibility of the Bank. Shareholders may rely on these statements in lieu of
certificates. Certificates representing Shares of the Funds will not be issued.
The Distributor, at its expense, will also provide other compensation
to dealers in connection with sales of Shares of a Fund. Compensation may
include financial assistance to dealers in connection with conferences, sales or
training programs for their employees, seminars for the public, advertising
campaigns regarding one or more of the Funds, and other dealer-sponsored special
events. In some instances, this compensation may be made available only to
certain dealers whose representatives have sold or are expected to sell a
significant amount of Shares. Compensation will also include payment for travel
expenses, including lodging, incurred in connection with trips taken by invited
registered representatives and members of their families to locations within or
outside of the United States for meetings or seminars of a business nature.
Compensation will also include the following types of non-cash compensation
offered through sales contests: (1)vacation trips, including the provision of
travel arrangements and lodging at luxury resorts at exotic locations;
(2)tickets for entertainment events (such as concerts, cruises and sporting
events) and (3)merchandise (such as clothing, trophies, clocks and pens).
Dealers may not use sales of Shares to qualify for this compensation to the
extent such may be prohibited by the laws of any state or any self-regulatory
agency, such as the National Association of Securities Dealers, Inc. None of the
aforementioned compensation is paid for by the Funds or their Shareholders.
INDIVIDUAL RETIREMENT ACCOUNT ("IRA")
An IRA enables individuals, even if they participate in an
employer-sponsored retirement plan, to establish their own retirement program.
IRA contributions may be tax-deductible and earnings are tax-deferred. Under the
Tax Reform Act of 1986, the tax deductibility of IRA contributions is restricted
or eliminated for individuals who participate in certain employer pension plans
and whose annual income exceeds certain limits. Existing IRAs and future
contributions up to the IRA maximums, whether deductible or not, still earn
income on a tax-deferred basis.
All IRA distribution requests must be made in writing to the
Distributor. Any additional deposits to an IRA must distinguish the type and
year of the contribution.
For more information on an IRA call the Funds at (800) 798-1819.
Investment in Shares of the Municipal Bond Fund would not be appropriate for any
IRA. Shareholders are advised to consult a tax adviser on IRA contribution and
withdrawal requirements and restrictions.
AUTO INVEST PLAN
The Auto Invest Plan enables Shareholders of the Funds to make regular
monthly or quarterly purchases of Shares through automatic deductions from their
bank accounts (which must be with a domestic member of the Automatic Clearing
House). With Shareholder authorization, the Transfer Agent or Sub-Transfer Agent
will deduct the amount specified from the Shareholder's bank account which will
automatically be invested in Shares at the public offering price on the dates of
the deduction. The required minimum initial investment when opening an account
using the Auto Invest Plan is $250; the minimum amount for subsequent
investments in a Fund is $25. To participate in the Auto Invest Plan,
Shareholders should complete the appropriate section of the account application
which can be acquired by calling (800) 798-1819. For a Shareholder to change the
Auto Invest instructions, the request must be made in writing to the
Distributor.
EXCHANGE PRIVILEGE
The Funds offer an exchange program whereby Shareholders are entitled
to exchange their Shares for Shares of the other Funds. Such exchanges will be
executed on the basis of the relative net asset values of the Shares exchanged.
The Shares exchanged must have a current value that equals or exceeds the
minimum investment that is required (either the minimum amount required for
initial or subsequent investments as the case may be) for the Fund whose Shares
are being acquired. Share exchanges will only be permitted where the Shares to
be acquired may legally be sold in the investor's state of residence. An
exchange is considered to be a sale of Shares for federal income tax purposes on
which a Shareholder may realize a taxable gain or loss. A Shareholder may make
an exchange request by calling the Funds at (800) 798-1819 or by providing
written instructions to the Funds. An investor should consult the Funds for
further information regarding exchanges. During periods of significant economic
or market change, telephone exchanges may be difficult to complete. If a
Shareholder is unable to contact the Funds by telephone, a Shareholder may also
mail the exchange request to the Funds at the address listed under "HOW TO
PURCHASE AND REDEEM SHARES--Redemption By Mail." The Funds reserve the right to
modify or terminate the exchange privilege described above at any time and to
reject any exchange request. If an exchange request in good order is received by
the Distributor by the Valuation Time, on any Business Day, the exchange usually
will occur on that day. Any Shareholder who wishes to make an exchange should
obtain and review the current prospectus of the Fund in which he or she wishes
to invest before making the exchange. Shareholders wishing to make use of the
Funds' exchange program must so indicate on the Account Application.
This option will be suspended for a period of 30 days following a
telephonic address change.
AUTO EXCHANGE
Auto Exchange enables Shareholders to make regular, automatic
withdrawals from the Government Fund and use those proceeds to benefit from
dollar-cost averaging by automatically making purchases of shares of another
Fund. With shareholder authorization, the Company's transfer agent will withdraw
the amount specified (subject to the applicable minimums) from the shareholder's
Government Fund account and will automatically invest that amount in the Fund
designated by the Shareholder at the public offering price on the date of such
deduction. In order to participate in the Auto Exchange, Shareholders must have
a minimum initial purchase of $10,000 in their Government Fund account and
maintain a minimum account balance of $1,000. To participate in the Auto
Exchange, Shareholders should complete the appropriate section of the Account
Application Form, which can be acquired by calling the Distributor. To change
the Auto Exchange instructions or to discontinue the feature, a Shareholder must
send a written request to the IMG Mutual Funds, Inc., 2203 Grand Avenue, Des
Moines, IA 50312-5338. The Auto Exchange may be amended or terminated without
notice at any time by the Distributor.
REDEMPTION OF SHARES
Shareholders may redeem their Shares on any day that net asset value is
calculated (see "VALUATION OF SHARES"). Redemptions will be effected at the net
asset value per share next determined after receipt of a redemption request in
good order. Redemptions may ordinarily be requested by mail or by telephone.
All or part of a Customer's Shares may be required to be redeemed in
accordance with instructions and limitations pertaining to his or her account
held by a Bank. For example, if a Customer has agreed to maintain a minimum
balance in his or her account, and the balance in that account falls below that
minimum, the Customer may be obliged to redeem, or the Bank may redeem for and
on behalf of the Customer, all or part of the Customer's Shares to the extent
necessary to maintain the required minimum balance. There may be no notice
period affording Shareholders an opportunity to increase the account balance in
order to avoid an involuntary redemption under these circumstances.
REDEMPTION BY MAIL
A written request for redemption must be received by the Funds in order
to honor the request. The Funds' address is: IMG Mutual Funds, Inc., 2203 Grand
Avenue, Des Moines, IA 50312-5338. The Transfer Agent or Sub-Transfer Agent may
require a signature guarantee by an eligible guarantor institution. For purposes
of this policy, the term "eligible guarantor institution" shall include banks,
brokers, dealers, credit unions, securities exchanges and associations, clearing
agencies and savings associations as those terms are defined in Rule17Ad-15
under the Securities Exchange Act of 1934. The Transfer Agent or Sub-Transfer
Agent reserves the right to reject any signature guarantee if (1)it has reason
to believe that the signature is not genuine, (2)it has reason to believe that
the transaction would otherwise be improper, or (3)the guarantor institution is
a broker or dealer that is neither a member of a clearing corporation nor
maintains net capital of at least $100,000. The signature guarantee requirement
will be waived if all of the following conditions apply: (1)the redemption check
is payable to the Shareholder(s)of record and (2)the redemption check is mailed
to the Shareholder(s) at the address of record or the proceeds are either mailed
or wired to a commercial bank account previously designated on the Account
Application. There is no charge for having redemption requests mailed to a
designated bank account.
If the Company receives a redemption order but a shareholder has not
clearly indicated the amount of money or number of shares involved, the Company
cannot execute the order. In such cases, the Company will request the missing
information and process the order on the day such information is received.
REDEMPTION BY TELEPHONE
Shares may be redeemed by telephone if the Shareholder selected that
option on the Account Application. The Shareholder may have the proceeds mailed
to his or her address or mailed or sent electronically to a commercial bank
account previously designated on the Account Application. Electronic payment
requests may be made by the Shareholder by telephone to the Funds at (800)
798-1819. For a wire redemption, the then-current wire redemption charge may be
deducted from the proceeds of a wire redemption. This charge, if applied, will
vary depending on the receiving institution for each wire redemption. It is not
necessary for Shareholders to confirm telephone redemption requests in writing.
During periods of significant economic or market change, telephone redemptions
may be difficult to complete. If a Shareholder is unable to contact the Funds by
telephone, a Shareholder may also mail the redemption request to the Distributor
at the address listed above under "HOW TO PURCHASE AND REDEEM SHARES--Redemption
by Mail". Neither the Distributor, the Transfer Agent, the Sub-Transfer Agent,
the Advisor nor the Company will be liable for any losses, damages, expense or
cost arising out of any telephone transaction (including exchanges and
redemptions) effected in accordance with the Funds' telephone transaction
procedures, upon instructions reasonably believed to be genuine. The Fund will
employ procedures designed to provide reasonable assurance that instructions by
telephone are genuine; if these procedures are not followed, the Fund or its
service contractors may be liable for any losses due to unauthorized or
fraudulent instructions. These procedures include recording all phone
conversations, sending confirmations to shareholders within 72hours of the
telephone transaction, verification of account name and account number or tax
identification number, and sending redemption proceeds only to the address of
record or to a previously authorized bank account.
This option will be suspended for a period of 30 days following a
telephonic address change.
REDEMPTION BY CHECK
Free check writing is available for the Government Fund. With this
service, a Shareholder may write up to five checks a month in amounts of $250 or
more. To establish this service and to obtain checks at the time the account is
opened, a Shareholder must complete the Signature Card section of the Account
Application Form. To establish this service and obtain checks after opening an
account in the Government Fund, the Shareholder must contact the Funds by
telephone or mail to obtain an Account Application Form and complete and return
the signature card. A Shareholder will receive the dividends and distributions
declared on the Shares to be redeemed up to the day that a check is presented
for payment. Upon 30 days' prior written notice to Shareholders, the check
writing privilege may be modified or terminated. An investor may not close a
Fund account by writing a check.
AUTO WITHDRAWAL PLAN
The Auto Withdrawal Plan enables Shareholders of a Fund to make regular
monthly or quarterly redemptions of Shares. With Shareholder authorization, the
Transfer Agent or Sub-Transfer Agent will automatically redeem Shares at the net
asset value on the dates of the withdrawal and have a check in the amount
specified mailed to the Shareholder. The required minimum withdrawal is $100. To
participate in the Auto Withdrawal Plan, Shareholders should call (800) 798-1819
for more information. Purchases of additional Shares concurrent with withdrawals
may be disadvantageous to certain Shareholders because of tax liabilities. For a
Shareholder to change the Auto Withdrawal instructions the request must be made
in writing to the Distributor.
DIRECTED DIVIDEND OPTION
A Shareholder may elect to have all income dividends and capital gains
distributions paid by check or reinvested in any of the Company's other Funds,
(provided the other Fund is maintained at the minimum required balance).
The Directed Dividend Option may be modified or terminated by the
Company at any time after notice to participating Shareholders. Participation in
the Directed Dividend Option may be terminated or changed by the Shareholder at
any time by writing the Distributor. The Directed Dividend Option is not
available to participants in an IRA.
PAYMENTS TO SHAREHOLDERS
Redemption orders are effected at the net asset value per Share next
determined after the Shares are properly tendered for redemption, as described
above. Payment to Shareholders for Shares redeemed will be made within the
settlement requirements defined in the Securities Exchange Act of 1934 after
receipt by the Distributor of the request for redemption. However, to the
greatest extent possible, the Company will attempt to honor requests from
Shareholders for (a)same day payments upon redemption of Government Fund Shares
if the request for redemption is received by the Distributor before 11:00 a.m.
Central Time on a Business Day or, if the request for redemption is received
after 11:00 a.m. Central Time, to honor requests for payment on the next
Business Day, or (b)next day payments upon redemption of the Variable NAV Funds
if received by the Distributor before the Valuation Time on a Business Day or if
the request for redemption is received after the Valuation Time, to honor
requests for payment within two Business Days, unless it would be
disadvantageous to the Fund or the Shareholders of the Fund to sell or liquidate
portfolio securities in an amount sufficient to satisfy requests for payments in
that manner.
At various times, a Fund may be requested to redeem Shares for which it
has not yet received good payment. In such circumstances, a Fund may delay the
forwarding of proceeds until payment has been collected for the purchase of such
Shares, which delay may be for up to 10 days or more. A Fund intends to pay cash
for all Shares redeemed, but under abnormal conditions which make payment in
cash unwise, a Fund may make payment wholly or partly in portfolio securities at
their then-current market value equal to the redemption price. In such cases, an
investor may incur brokerage costs in converting such securities to cash.
Due to the relatively high cost of handling small investments, the
Funds reserve the right to redeem, at net asset value, the Shares of any
Shareholder if, because of redemptions of Shares by or on behalf of the
Shareholder (but not as a result of a decrease in the market price of such
Shares), the account of such Shareholder has a value of less than $500. Before
the Funds exercise their right to redeem such Shares and to send the proceeds to
the Shareholder, the Shareholder will be given notice that the value of the
Shares in his or her account is less than the minimum amount and will be allowed
60 days to make an additional investment in an amount which will increase the
value of the account to at least $500.
See "ADDITIONAL PURCHASE AND REDEMPTION INFORMATION--Matters Affecting
Redemption" in the Statement of Additional Information for examples of when the
Company may, under applicable law and regulation, suspend the right of
redemption if it appears appropriate to do so in light of the Company's
responsibilities under the 1940 Act.
DIVIDENDS AND TAXES
DIVIDENDS
The Income Fund and Municipal Bond Fund each intend to declare their
net investment income monthly as a dividend to Shareholders at the close of
business on the day of declaration. The Government Fund intends to declare its
net investment income daily as a dividend to Shareholders at the close of
business on the day of declaration. These Funds will generally pay such
dividends monthly. Each Fund also intends to distribute its capital gains, if
any, at least annually, normally in December of each year. The Equity Fund, the
Balanced Fund, the Aggressive Growth Fund and the Limited Term Bond Fund intend
to declare their net investment income quarterly as a dividend to Shareholders
at the close of business on the day of declaration, and generally will pay such
dividends quarterly. A Shareholder will automatically receive all income
dividends and capital gains distributions in additional full and fractional
Shares of a Fund at net asset value as of the ex-dividend date, unless the
Shareholder elects to receive dividends or distributions in cash. Such election
must be made on the Account Application; any change in such election must be
made in writing to the Funds at 2203 Grand Avenue, Des Moines, IA 50312-5338,
and will become effective with respect to dividends and distributions having
record dates after its receipt by the Transfer Agent or Sub-Transfer Agent.
Dividends are paid in cash not later than seven business days after a
Shareholder's complete redemption of his or her Shares.
If you elect to receive distributions in cash, and checks (1) are
returned and marked as "undeliverable" or (2) remain uncashed for six months,
your cash election will be changed automatically and your future dividend and
capital gains distributions will be reinvested in the Fund at the per share net
asset value determined as of the date of payment of the distribution. 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.
FEDERAL TAXES
The following discussion is intended for general information only.
Investors should consult with their tax adviser as to the tax consequences of an
investment in the Funds, including the status of distributions from the Funds
under applicable state or local law.
Each Fund intends to qualify annually and elect to be treated as a
regulated investment company under the Internal Revenue Code of 1986, as amended
(the "Code"). To qualify, each Fund must meet certain income, distribution and
diversification requirements. In any year in which a Fund qualifies as a
regulated investment company and timely distributes all of its income and
substantially all of its net tax-exempt interest income, the Fund generally will
not pay any U.S. federal income or excise tax.
Dividends that are distributed by a Fund that are derived from interest
income exempt from federal income tax and are designated by the Fund as
"exempt-interest dividends" will be exempt from regular federal income taxation.
However, if tax exempt interest earned by the Fund constitutes an item of tax
preference for purposes of the alternative minimum tax, then a portion of the
exempt-interest dividends paid by the Fund may likewise constitute an item of
tax preference. In addition, any exempt-interest dividends received by corporate
shareholders may constitute an adjustment to alternative minimum taxable income
for purposes of the alternative minimum tax and the environmental tax imposed
under Code Sections 55 and 59A, respectively. Only the Municipal Bond Fund is
expected to be eligible to designate certain of its dividends as
"exempt-interest dividends."
Exempt-interest dividends of a Fund, although exempt from regular
federal income tax, are includible in the tax base for determining the extent to
which Social Security and railroad benefits will be subject to federal income
tax. All shareholders are required to report the receipt of dividends and
distributions, including exempt-interest dividends, on their federal income tax
returns.
Dividends paid out of a Fund's investment company taxable income
(including dividends, taxable interest and net short-term capital gains) will be
taxable to a U.S. Shareholder as ordinary income. A portion of the Equity Fund,
Balanced Fund and Aggressive Growth Fund's income may consist of dividends paid
by U.S. Corporations. Therefore, a portion of the dividends paid by these Funds
may be eligible for the corporate dividends-received deduction. Because no
portion of the other Funds' income is expected to consist of dividends paid by
U.S. Corporations, no portion of the dividends paid by those Funds is expected
to be eligible for the corporate dividends-received deduction. Distributions of
net capital gains (the excess of net long-term capital gains over net short-term
capital losses), if any, designated by a Fund as capital gain dividends are
taxable as long-term capital gains, regardless of the length of time the
Shareholder has held a Fund's Shares. Dividends are generally treated in the
same manner whether received in cash or reinvested in additional Fund Shares.
A distribution will be treated as paid on December 31 of the current
calendar year if it is declared by a Fund in October, November or December of
that year to shareholders of record on a date in such a month and paid by a Fund
during January of the following calendar year. Such distributions will be
treated as received by Shareholders in the calendar year in which the
distributions are declared, rather than the calendar year in which the
distributions are received.
Each year the Funds will notify Shareholders of the tax status of
dividends and distributions.
Investments in securities that are issued at a discount will result
each year in income to a Fund equal to a portion of the excess of the face value
of the securities over their issue price, even though the Fund receives no cash
interest payments from the securities. Such income generally will, however, have
to be distributed to shareholders on a timely basis.
A portion of the income earned by the Municipal Bond Fund may be
taxable rather than tax-exempt. Accordingly, a portion of the dividends paid by
the Municipal Bond Fund may be taxable to Shareholders.
Any gain or loss realized by a Shareholder upon the sale or other
disposition of Shares of a Fund, or upon receipt of a distribution in complete
liquidation of a Fund, generally will be a taxable capital gain or loss which
will be long-term or short-term, generally depending upon the Shareholder's
holding period for the Shares. In some cases, Shareholders will not be permitted
to take sales charges into account in determining the amount of gain or loss
realized on the disposition of their shares.
See "Additional Tax Information" in the Statement of Additional Information.
Shareholders should be aware that redeeming shares of the Municipal
Bond Fund after tax-exempt interest income has been accrued by the Fund but
before that income has been declared as a dividend may be disadvantageous. This
is because the gain, if any, on the redemption will be taxable, even though such
gain may be attributable in part to the accrued tax-exempt interest which, if
distributed to the shareholder as a dividend rather than as redemption proceeds,
might have qualified as an exempt-interest dividend.
The Funds may be required to withhold U.S. federal income tax at the
rate of 31% of all reportable dividends (which does not include exempt-interest
dividends) and capital gain distributions (as well as redemptions for all Funds
except the Government Fund), payable to Shareholders who fail to provide the
Fund with their correct taxpayer identification number or to make required
certifications, or who have been notified by the IRS that they are subject to
backup withholding. Backup withholding is not an additional tax. Any amounts
withheld may be credited against the Shareholder's U.S. FEDERAL income tax
liability.
Further information relating to tax consequences is contained in the
Statement of Additional Information.
STATE AND LOCAL TAXES
Distributions from all of the Funds may be subject to state and local
taxes. Distributions of a Fund which are derived from interest on obligations of
the U.S. Government and certain of its agencies and instrumentalities may be
exempt from state and local taxes in certain states. In certain states,
distributions of the Municipal Bond Fund which are derived from interest on
obligations of that state or its municipalities or any political subdivisions
thereof may be exempt from state and local taxes. Shareholders should consult
their tax advisers regarding the possible exclusion for state and local income
tax purposes of the portion of dividends paid by a Fund which is attributable to
interest from obligations of the U.S. Government and its agencies, authorities
and instrumentalities, and the particular tax consequences to them of an
investment in a Fund, including the application of state and local tax laws.
MANAGEMENT OF THE COMPANY
DIRECTORS OF THE COMPANY
Under the laws of the State of Maryland, the property, affairs and
business of the Company and the Funds are managed by the Board of Directors. The
Directors elect officers who are charged with the responsibility for the
day-to-day operation of the Funds and the execution of policies formulated by
the Directors.
The Directors receive fees and are reimbursed for their expenses in
connection with each meeting of the Board of Directors they attend. However, no
officer or employee of Investors Management Group, Ltd., AMCORE Financial, Inc.,
or any of its subsidiaries, or BISYS Fund Services, Inc., receives any
compensation from the Company for acting as a Director of the Company. The
officers of the Company (see the Statement of Additional Information) receive no
compensation directly from the Company for performing the duties of their
offices. Investors Management Group receives fees from the Funds for acting as
investment adviser, administrator and transfer agent and for providing certain
fund accounting services. BISYS Fund Services receives fees from the Funds for
acting as distributor and sub-transfer agent.
INVESTMENT ADVISER
Investors Management Group, Ltd., ("IMG"), manages the investments and
business affairs of the Company. IMG a wholly owned subsidiary of AMCORE
Financial Inc., is a federally registered Investment Adviser organized in 1982
and located at 2203 Grand Avenue, Des Moines, Iowa. Since then its principal
business 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. As of
November 30, 1997, IMG had approximately $1.6 billion in equity, fixed income
and money market assets under management.
The following individuals serve as portfolio managers for the Funds and
are primarily responsible for the day-to-day management of the Fund's
portfolios:
GOVERNMENT, INCOME, MUNICIPAL BOND, LIMITED TERM, AND BALANCED FUNDS
JEFFREY D. LORENZEN, CFA, MANAGING DIRECTOR. 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 from the University of Iowa, Iowa
City, Iowa.
KATHRYN D. BEYER, CFA, MANAGING DIRECTOR. 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 Masters 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.
ELIZABETH S. PIERSON, VICE PRESIDENT AND SENIOR FIXED INCOME MANAGER.
AMCORE Capital Management, Inc. (or a predecessor) since 1984 when she
began her investment career. AMCORE Capital Management, Inc., was
merged with IMG in December 1997. She has a B.S. degree from the
University of Illinois, Champaign-Urbana and is a Chartered Financial
Analyst. She has been responsible for investment management and credit
responsibilities in numerous individually managed advisory portfolios.
She also manages the fixed securities of the Balanced Fund.
EQUITY, AGGRESSIVE GROWTH, AND BALANCED FUNDS
DARRELL C. THOMPSON, SENIOR VICE PRESIDENT AND SENIOR EQUITY MANAGER.
AMCORE Capital Management, Inc. (or a predecessor) since 1973. AMCORE
Capital Management, Inc., was merged with IMG in December 1997. He
began his investment career in 1957. He has a B.S. from Southern
Illinois University. He has been responsible for investment operations
in the Equity Fund since its inception.
JULIE A. O'ROURKE, VICE PRESIDENT AND EQUITY MANAGER. AMCORE Capital
Management, Inc. (or a predecessor) since 1991 where she began her
investment career. AMCORE Capital Management, Inc., was merged with IMG
in December 1997. She has a B.S. from Rockford College, Rockford,
Illinois, and is a Chartered Financial Analyst. Other responsibilities
include equity research and equity account management. She is
chairperson of the Equity Research Committee. She has the
responsibility of managing the equity securities of the Balanced Fund.
Subject to the general supervision of the Company's Board of Directors
and in accordance with a Fund's investment objective and restrictions, IMG
manages the investments of a Fund, makes decisions with respect to and places
orders for all purchases and sales of a Fund's portfolio securities, and
maintains a Fund's records relating to such purchases and sales.
For the services provided and expenses assumed pursuant to its
investment advisory agreement with the Company, IMG receives a fee computed
daily and paid monthly, at the annual rate of sixty one-hundredths of one
percent (0.60%) of each of the Income Fund, Limited Term Bond Fund, and the
Municipal Bond Fund's average daily net assets, at the annual rate of forty
one-hundredths of one percent (0.40%) of the Government Fund's average daily net
assets, at the annual rate of seventy-five one-hundredths of one percent (0.75%)
of each of the Equity Fund and the Balanced Fund's average daily net assets, and
at the annual rate of ninety-five one-hundredths of one percent (0.95%) of the
Aggressive Growth Fund's average daily net assets. The investment advisory fees
and administrative fees paid by the Income Fund, Municipal Bond Fund, Equity
Fund, Balanced Fund, Aggressive Growth Fund and Limited Term Bond Fund, absent
fee waivers, are higher than those paid by most other investment companies. IMG
may periodically waive all or a portion of its advisory fee or otherwise absorb
other expenses to increase the net income of a Fund available for distribution
as dividends. IMG may not seek reimbursement of such waived fees at a later
date. The waiver or absorption of such fee or expenses will cause the yield of a
Fund to be higher than it would otherwise be in the absence of such a waiver.
ADMINISTRATOR
IMG is also the administrator for the Funds (the "Administrator"). The
Administrator generally assists in all aspects of the Funds' administration and
operation. For expenses assumed and services provided as administrator pursuant
to its management and administration agreement with the Funds, the Administrator
receives a fee computed daily and paid periodically, calculated at an annual
rate of twenty-six one-hundredths of one percent (0.26%) of the Fund's average
daily net assets. The Administrator may periodically waive all or a portion of
its administrative fee to increase the net income of a Fund available for
distribution as dividends. The Administrator 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.
DISTRIBUTOR
BISYS Fund Services, Inc., serves as distributor and principal
underwriter (the "Distributor") for the Company pursuant to a Distribution
Agreement and a Distribution and Shareholder Services Plan. The Distributor acts
as agent for the Funds in the distribution of their Shares and, in such
capacity, solicits orders for the sale of Shares, advertises, and pays the costs
of advertising, office space and its personnel involved in such activities.
EXPENSES AND PORTFOLIO TRANSACTIONS
The Advisor and the Administrator each bear all expenses in connection
with the performance of their services as investment adviser and general manager
and administrator, respectively, other than the cost of securities (including
brokerage commissions, if any) purchased for the Funds.
The policy of each of the Funds, regarding purchases and sales of
securities for its portfolio, is that primary consideration be given to
obtaining the most favorable prices and efficient execution of transactions. In
seeking to implement the Fund's policies, IMG effects transactions with those
brokers and dealers whom IMG believes provide the most favorable prices and are
capable of providing efficient executions. If IMG believes such price and
executions are obtainable from more than one broker or dealer, it may give
consideration to placing portfolio transactions with those brokers and dealers
who also furnish research and other services to the Fund or IMG. Such services
may include, but are not limited to, any one or more of the following:
information as to the availability of securities for purchase or sale;
statistical or factual information or opinions pertaining to investments; wire
services; and appraisals or evaluations of portfolio securities. Such
information may be useful to IMG in serving both the Funds and other clients
and, conversely, supplemental information obtained by the placement of business
of other clients may be useful to IMG in carrying out its obligations to the
Funds.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are in
excess of the amount of commission charged by other broker-dealers in
recognition of their research or execution services. In order to cause the Funds
to pay such higher commissions, IMG must determine in good faith that such
commissions are reasonable in relation to the value of the brokerage and/or
research services provided by such executing broker-dealers, viewed in terms of
a particular transaction or IMG's overall responsibilities to the Funds. In
reaching this determination, IMG will not attempt to place a specific dollar
value on the brokerage and/or research services provided, or to determine what
portion of the compensation should be related to those services.
DISTRIBUTION PLAN
Pursuant to Rule 12b-1 under the 1940 Act, the Company has adopted a
Distribution and Shareholder Service Plan (the "Plan"), under which each Fund is
authorized to pay or reimburse BISYS Fund Services, Inc., as Distributor, a
periodic amount calculated at an annual rate not to exceed twenty-five one
hundredths of one percent (0.25%) of the average daily net assets of the Fund.
Such amount may be used to pay banks for administrative and shareholder services
and to pay broker-dealers and other institutions for similar services, including
distribution services (each such bank, broker-dealer and other institution is
hereafter referred to as a "Participating Organization"), pursuant to an
agreement between BISYS Fund Services, Inc., and the Participating Organization.
Under the Plan, a Participating Organization may include BISYS Fund Services,
Inc., its subsidiaries and its affiliates.
As authorized by the Plan, the Distributor has entered into a Rule
12b-1 Agreement with AMCORE Bank pursuant to which AMCORE Bank has agreed to
provide certain administrative and shareholder support services in connection
with Shares of a Fund purchased and held by AMCORE Bank for the accounts of its
Customers and Shares of a Fund purchased and held by Customers of AMCORE Bank
directly, including, but not limited to, processing automatic investments of
AMCORE Bank's Customer account cash balances in Shares of a Fund and
establishing and maintaining the systems, accounts and records necessary to
accomplish this service, establishing and maintaining Customer accounts and
records, processing purchase and redemption transactions for Customers,
answering routine Customer questions concerning the Funds and providing such
office space, equipment, telephone facilities and personnel as is necessary and
appropriate to accomplish such matters. In consideration of such services,
AMCORE Bank may receive a monthly fee, computed at the annual rate of
twenty-five one-hundredths of one percent (.25%) of the average aggregate net
asset value of the Shares of the Fund held during the period in Customer
accounts for which AMCORE Bank has provided services under this Agreement. The
Distributor will be compensated by a Fund in an amount equal to any payments it
makes to AMCORE Bank under the Rule 12b-1 Agreement. Currently, it is intended
that no such amounts will be paid under the Plan or the Rule 12b-1 Agreement by
any of the Funds.
ADMINISTRATIVE SERVICES PLAN
The Company has adopted an Administrative Services Plan (the "Services
Plan") pursuant to which each Fund is authorized to pay compensation to banks
and other financial institutions (each a "Service Organization"), including
AMCORE Financial, Inc. and its correspondent and affiliated banks, which agree
to provide certain ministerial, recordkeeping and/or administrative support
services for their customers or account holders (collectively, "customers") who
are the beneficial or record owner of Shares of that Fund. In consideration for
such services, a Service Organization receives a fee from a Fund, computed daily
and paid monthly, at an annual rate of up to 0.25% of the average daily net
asset value of Shares of that Fund owned beneficially or of record by such
Service Organization's customers for whom the Service Organization provides such
services.
The servicing agreements adopted under the Services Plan (the
"Servicing Agreements") require the Service Organizations receiving such
compensation to perform certain ministerial, recordkeeping and/or administrative
support services with respect to the beneficial or record owners of Shares of
the Funds, such as processing dividend and distribution payments from the Fund
on behalf of customers, providing periodic statements to customers showing their
positions in the Shares of the Fund, providing sub-accounting with respect to
Shares beneficially owned by such customers and providing customers with a
service that invests the assets of their accounts in Shares of the Fund pursuant
to specific or pre-authorized instructions.
As authorized by the Services Plan, the Company has entered into
Servicing Agreements with Service Organizations pursuant to which the Service
Organization has agreed to provide certain administrative support services in
connection with Shares of the Funds owned of record or beneficially by its
customers. Such administrative support services may include, but are not limited
to, (i)processing dividend and distribution payments from a Fund on behalf of
customers, (ii)providing periodic statements to its customers showing their
positions in the Shares; (iii)arranging for bank wires; (iv)responding to
routine customer inquiries relating to services performed by the affiliate;
(v)providing sub-accounting with respect to the Shares beneficially owned by the
affiliate's customers or the information necessary for sub-accounting; (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 its customers; (vii)aggregating and
processing purchase, exchange, and redemption requests from customers and
placing net purchase, exchange, and redemption orders for customers; and
(viii)providing customers with a service that invests the assets of their
account in the Shares pursuant to specific or pre-authorized instructions. In
consideration of such services, the Company, on behalf of each Fund, has agreed
to pay the affiliate a monthly fee, computed at an annual rate of twenty-five
one-hundredths of one percent (.25%) of the average aggregate net asset value of
Shares of that Fund held during the period by customers for whom the affiliate
has provided services under the Servicing Agreement. At present, the Company
pays no servicing fees on the Funds, although it may begin to do so at any time
without further notice to shareholders.
CUSTODIAN
Bankers Trust Company, One Bankers Trust Plaza, New York, New York
10006 (the "Custodian") serves as custodian for the Funds' assets. Pursuant to
the Custodian Agreement with the Company, the Custodian receives compensation
from each Fund for such services in an amount equal to a designated annual fee
plus fixed fees charged for certain portfolio transactions and out-of-pocket
expenses.
TRANSFER AGENCY AND FUND ACCOUNTING SERVICES
IMG, 2203 Grand Avenue, Des Moines, Iowa 50312-5338, serves as the
Funds' transfer agent pursuant to a Transfer Agency Agreement for the Funds and
receives a fee for such services. BISYS Fund Services, Inc., 3435 Stelzer Road,
Columbus, Ohio 43219, serves as sub-transfer agent to the Funds through an
agreement with the Funds and IMG. IMG also provides certain accounting services
for the Funds pursuant to a Fund Accounting Agreement and receives a fee for
such services. The fees received and the services provided as fund accountant,
transfer agent, dividend disbursing agent and shareholder servicing agent are in
addition to those received and paid under the Advisory Agreement and the
Administrative Services Agreement. See "MANAGEMENT OF THE COMPANY - Transfer
Agency and Fund Accounting Services" in the Statement of Additional Information
for further information.
GENERAL INFORMATION
DESCRIPTION OF THE COMPANY AND ITS SHARES
The Company is a Maryland corporation organized on November 16, 1994.
The Company consists of several Funds organized as separate series of shares.
Each 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 as are declared at the
discretion of the Directors (see "Miscellaneous" below).
The Government Fund and Equity Fund are each authorized to offer shares
in two separate classes, however, only Trust Shares of each are offered by this
Prospectus. 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 each Fund. Each class of shares
offers different privileges. T Shares, which are offered in this Prospectus, 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 T Shares, assisting customers in processing purchase,
exchange and redemption requests, and responding to customers' inquiries
concerning their investments. Participating Organizations selling or servicing T
Shares may receive different compensation with respect to one class over
another.
Shareholders are entitled to one vote for each full share held and a
proportionate fractional vote for any fractional shares held, and will vote in
the aggregate and not by series or class except as otherwise expressly required
by law. For example, shareholders of each fund will vote in the aggregate with
other shareholders of the Company with respect to the election of Directors and
ratification of the selection of independent auditors. However, shareholders of
a particular Fund will vote as a Fund, and not in the aggregate with other
shareholders of the Company, for purposes of approval of that Fund's investment
advisory agreement, Plan and Services Plan, except that shareholders of the
Government Fund will vote by class on matters relating to that Fund's Plan and
Services Plan.
Under the laws of the State of Maryland, the Company may operate
without an annual meeting of shareholders under specified circumstances if an
annual meeting is not required by the 1940 Act. The Company has adopted the
appropriate provisions in its Bylaws and may, in its discretion, not hold annual
meetings of shareholders for the election of Directors unless otherwise required
by the 1940 Act. The Company has adopted provisions in its 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 Company may remove a Director by the affirmative
vote of a majority of the Company's 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 Directors or for any other
purpose when requested in writing to do so by the shareholders of record of not
less than 10 percent of the Company's outstanding voting shares.
To date, eleven 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.
PERFORMANCE INFORMATION
From time to time the Funds may advertise their average annual total
return, aggregate total return, yield and effective yield in advertisements,
sales literature and shareholder reports. SUCH PERFORMANCE FIGURES ARE BASED ON
HISTORICAL EARNINGS AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. Average
annual total return will be calculated for the period since the establishment of
the Fund and will reflect the imposition of the maximum sales charge. Average
annual total return is measured by comparing the value of an investment in the
Fund at the beginning of the relevant period to the redemption value of the
investment at the end of the period (assuming immediate reinvestment of any
dividends or capital gains distributions) and annualizing the difference.
Aggregate total return is calculated similarly to average annual total return
except that the return figure is aggregated over the relevant period instead of
annualized. Yield for each of the Variable NAV Funds will be computed by
dividing the Fund's net investment income per share earned during a recent
one-month period by the Fund's per share maximum offering price (reduced by any
undeclared earned income expected to be paid shortly as a dividend) on the last
day of the period and annualizing the result.
The yield of the Government Fund refers to the income generated by an
investment therein over a seven-day period (which period will be stated in the
advertisement). 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 an annual period and is shown as a percentage of the investment. The
effective yield is calculated similarly but, when annualized, the income earned
by an investment in the Government Fund is assumed to be reinvested weekly. The
effective yield is slightly higher than the yield because of the compounding
effect of this assumed reinvestment.
Distribution rates will be computed by dividing the distribution per
share made by the Fund over a twelve-month period by the maximum offering price
per share. The distribution rate includes both income and capital gain dividends
and does not reflect unrealized gains or losses. The distribution rate differs
from the yield, because it includes capital items which are often non-recurring
in nature, whereas yield does not include such items.
The Municipal Bond Fund may also present its tax equivalent yield and
tax equivalent effective yield which reflect the amount of income subject to
federal income taxation that a taxpayer would have to earn in order to obtain
the same after-tax income as that derived from the yield and effective yield,
respectively, of the Municipal Bond Fund. The tax equivalent yield and tax
equivalent effective yield will be significantly higher than the yield and
effective yield of the Municipal Bond Fund.
Investors may also judge the performance of the Fund by comparing its
performance to the performance of other mutual funds or mutual fund portfolios
with comparable investment objectives and policies through various mutual fund
or market indices and to data prepared by various services which may be
published by such services or by other services or publications. In addition to
performance information, general information about the Fund that appears in such
publications may be included in advertisements, sales literature and in reports
to Shareholders.
Yield and total return are functions of the type and quality of
instruments held in the portfolio, operating expenses, and market conditions.
Consequently, current yields and total return will fluctuate and are not
necessarily representative of future results. Any fees charged by IMG or any of
its affiliates with respect to customer accounts for investing in shares of the
Funds will not be included in performance calculations; such fees, if charged,
will reduce the actual performance from that quoted.
Additional information regarding the investment performance of the
Funds is contained in the annual report of the Funds which may be obtained
without charge by writing or calling the Funds.
MISCELLANEOUS
Shareholders will receive unaudited semi-annual reports and annual
reports audited by independent auditors.
As used in this Prospectus and in the Statement of Additional
Information, "assets belonging to a Fund" means the consideration received by
the Fund upon the issuance or sale of shares in that Fund, together with all
income, earnings, profits, and proceeds derived from the investment thereof,
including any proceeds from the sale, exchange, or liquidation of such
investments, and any funds or amounts derived from any reinvestment of such
proceeds, and any general assets of the Company not readily identified as
belonging to a particular Fund that are allocated to the Fund by the Company's
Board of Directors. The Board of Directors may allocate such general assets in
any manner it deems fair and equitable. Determinations by the Board of Directors
of the Company as to the timing of the allocation of general liabilities and
expenses and as to the timing and allocable portion of any general assets with
respect to the Fund are conclusive.
As used in this Prospectus and in the Statement of Additional
Information, a "vote of a majority of the outstanding Shares" of a Fund means
the affirmative vote, at a meeting of Shareholders duly called, of the lesser of
(a)67% or more of the votes of Shareholders of a Fund present at a meeting at
which the holders of more than 50% of the votes attributable to Shareholders of
record of the Fund are represented in person or by proxy, or (b)the holders of
more than 50% of the outstanding votes of Shareholders of a Fund.
Inquiries regarding the Funds may be directed in writing to the Funds
at 2203 Grand Avenue, Des Moines, Iowa 50312-5338, or by calling toll free (800)
798-1819.
<PAGE>
Vintage Government Assets Fund
Vintage Income Fund
Vintage Municipal Bond Fund
Vintage Equity Fund
Vintage Balanced Fund
Vintage Aggressive Growth Fund
Vintage Limited Term Bond Fund
Each an Investment Portfolio of the IMG Mutual Funds, Inc.
Statement of Additional Information
________________, 1997
This Statement of Additional Information is not a prospectus, but should be read
in conjunction with the prospectus for the Vintage Government Assets Fund (the
"Government Assets Fund"), the Vintage Income Fund (the "Income Fund"), the
Vintage Municipal Bond Fund (the "Municipal Bond Fund"), the Vintage Equity Fund
(the "Equity Fund"), the Vintage Balanced Fund (the "Balanced Fund"), the
Vintage Aggressive Growth Fund (the "Aggressive Growth Fund") and the Vintage
Limited Term Bond Fund (the "Limited Term Fund") each dated the same date as the
date hereof (the "Prospectus"), hereinafter referred to collectively as the
"Funds" and singly, a "Fund". This Statement of Additional Information is
incorporated in its entirety into the Prospectus. Copies of the Prospectus may
be obtained by writing the Funds at 2203 Grand Avenue, Des Moines, Iowa
50312-5338 or by calling 1-800-798-1819.
<PAGE>
TABLE OF CONTENTS
Page
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THE COMPANY
INVESTMENT OBJECTIVE AND POLICIES
Additional Information on Portfolio Instruments
Investment Restrictions
Portfolio Turnover
NET ASSET VALUE
Valuation of the Government Assets Fund
Valuation of the Variable NAV Funds
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Matters Affecting Redemption
MANAGEMENT OF THE COMPANY
Directors and Officers
Investment Adviser
Portfolio Transactions
Banking Laws
Administrator
Distributor
Administrative Services Plan
Custodian
Transfer Agency and Fund Accounting Services
Independent Auditors
Legal Counsel
ADDITIONAL INFORMATION
Description of Shares
Vote of a Majority of the Outstanding Shares
Additional Tax Information
Additional Tax Information Concerning the Municipal Bond Fund
Yields and Total Returns of the Government Assets Fund
Yields and Total Returns of the Variable NAV Funds
Performance Comparisons
Miscellaneous
FINANCIAL STATEMENTS
APPENDIX
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
IMG Mutual Funds, Inc.
IMG Mutual Funds, Inc. (the "Company") is an open-end management
investment company which currently offers it shares in series representing
eleven 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 some of the Funds may also be issued in
classes with differing distribution and shareholder servicing arrangements.
Subject to the class level expenses, each Fund's share ("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. Investors Management Group, Ltd
("IMG") acts as the Company's investment adviser and provides various other
services to the Funds. This Statement of Additional Information deals with seven
Funds, the Vintage Government Assets Fund, the Vintage Income Fund, the Vintage
Municipal Bond Fund, the Vintage Equity Fund, the Vintage Balanced Fund, the
Vintage Aggressive Growth Fund and the Vintage Limited Term Bond Fund which were
established November 3, 1997 to acquire the assets and succeed to the business
of the Vintage Government Obligations Fund, Vintage Fixed Income Fund, Vintage
Intermediate Tax-Free Fund, Vintage Equity Fund, Vintage Balanced Fund, Vintage
Aggressive Growth Fund and Vintage Total Return Fund, respectively. Capitalized
terms not defined herein are defined in the Prospectus. No investment in Shares
of a Fund should be made without first reading the Prospectus. References to the
"Variable NAV Funds" shall mean all of the Funds except the Government Assets
Fund.
INVESTMENT OBJECTIVE AND POLICIES
Additional Information on Portfolio Instruments
- -----------------------------------------------
The following policies supplement the investment objective and policies
of the Funds as set forth in their respective Prospectuses.
BANK OBLIGATIONS. Each Fund, with the exception of the Government
Assets Fund, may invest in bank obligations such as bankers' acceptances,
certificates of deposit, and time deposits.
Bankers' acceptances are negotiable drafts or bills of exchange
typically drawn by an importer or exporter to pay for specific merchandise,
which are "accepted" by a bank, meaning, in effect, that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Bankers' acceptances invested in by the Funds will be those guaranteed by
domestic and foreign banks having, at the time of investment, capital, surplus,
and undivided profits in excess of $100,000,000 (as of the date of their most
recently published financial statements).
Certificates of deposit are negotiable certificates issued against
funds deposited in a commercial bank or a savings and loan association for a
definite period of time and earning a specified return. Certificates of deposit
and time deposits will be those of domestic and foreign banks and savings and
loan associations, if (a) at the time of investment the depository institution
has capital, surplus, and undivided profits in excess of $100,000,000 (as of the
date of its most recently published financial statements), or (b) the principal
amount of the instrument is insured in full by the Federal Deposit Insurance
Corporation.
COMMERCIAL PAPER. Commercial paper consists of unsecured promissory
notes issued by corporations. Issues of commercial paper normally have
maturities of less than nine months and fixed rates of return.
The Income Fund and the Municipal Bond Fund may purchase commercial
paper consisting of issues rated at the time of purchase within the four highest
rating categories by a nationally recognized statistical rating organization (an
"NRSRO"). The Balanced Fund, Aggressive Growth Fund and Equity Fund may purchase
commercial paper consisting of issues rated at the time of purchase within the
three highest rating categories by an NRSRO. The Limited Term Fund may purchase
commercial paper consisting of issues rated at the time of purchase within the
four highest rating categories by an NRSRO. These Funds may also invest in
commercial paper that is not rated but is determined by IMG under guidelines
established by the Company's Board of Directors, to be of comparable quality.
VARIABLE AMOUNT MASTER DEMAND NOTES. Variable amount master demand
notes, in which the Income Fund, the Limited Term Fund, the Balanced Fund and
the Municipal Bond Fund may invest, are unsecured demand notes that permit the
indebtedness thereunder to vary and provide for periodic readjustments in the
interest rate according to the terms of the instrument. They are also referred
to as variable rate demand notes. Because master demand notes are direct lending
arrangements between a Fund and the issuer, they are not normally traded.
Although there is no secondary market in the notes, a Fund may demand payment of
principal and accrued interest at any time or during specified periods not
exceeding one year, depending upon the instrument involved, and may resell the
note at any time to a third party. IMG will consider the earning power, cash
flow, and other liquidity ratios of the issuers of such notes and will
continuously monitor their financial status and ability to meet payment on
demand. In determining dollar-weighted average portfolio maturity, a variable
amount master demand note will be deemed to have a maturity equal to the longer
of the period of time remaining until the next interest rate adjustment or the
period of time remaining until the principal amount can be recovered from the
issuer through demand.
VARIABLE AND FLOATING RATE NOTES. The Municipal Bond Fund, the
Government Assets Fund, the Limited Term Fund, the Balanced Fund and the Income
Fund may acquire variable and floating rate notes, subject to such Fund's
investment objective, policies and restrictions. A variable rate note is one
whose terms provide for the readjustment of its interest rate on set dates and
which, upon such readjustment, can reasonably be expected to have a market value
that approximates its par value. A floating rate note is one whose terms provide
for the readjustment of its interest rate whenever a specified interest rate
changes and which, at any time, can reasonably be expected to have a market
value that approximates its par value. Such notes are frequently not rated by
credit rating agencies; however, unrated variable and floating rate notes
purchased by a Fund will be determined by IMG under guidelines approved by the
Company's Board of Directors to be of comparable quality at the time of purchase
to rated instruments eligible for purchase under the Fund's investment policies.
In making such determinations, IMG will consider the earning power, cash flow
and other liquidity ratios of the issuers of such notes (such issuers include
financial, merchandising, bank holding and other companies) and will
continuously monitor their financial condition. Although there may be no active
secondary market with respect to a particular variable or floating rate note
purchased by a Fund, the Fund may resell the note any time to a third party. The
absence of an active secondary market, however, could make it difficult for the
Fund to dispose of a variable or floating rate note in the event the issuer of
the note defaulted on its payment obligations and the Fund could, as a result or
for other reasons, suffer a loss to the extent of the default. Variable or
floating rate notes may be secured by bank letters of credit.
U.S. GOVERNMENT OBLIGATIONS. The Government Assets Fund will invest
exclusively in short-term U.S. Treasury bills, notes and other obligations
issued or guaranteed by the U.S. Government or its agencies or instrumentalities
subject to its investment objective and policies (collectively, "U.S. Government
Obligations"). The Variable NAV Funds may also invest in U.S. Government
Obligations. Obligations of certain agencies and instrumentalities of the U.S.
Government are supported by the full faith and credit of the U.S. Treasury;
others are supported by the right of the issuer to borrow from the Treasury;
others are supported by the discretionary authority of the U.S. Government to
purchase the agency's obligations; and still others are supported only by the
credit of the instrumentality. No assurance can be given that the U.S.
Government would provide financial support to U.S. Government-sponsored agencies
or instrumentalities if it is not obligated to do so by law. A Fund will invest
in the obligations of such agencies or instrumentalities only when IMG believes
that the credit risk with respect thereto is minimal.
STRIPPED TREASURY SECURITIES. The Variable NAV Funds may invest in
certain U.S. Government Obligations referred to as "Stripped Treasury
Securities." Stripped Treasury Securities are U.S. Treasury securities that have
been stripped of their unmatured interest coupons (which typically provide for
interest payments semi-annually), interest coupons that have been stripped from
such U.S. Treasury securities, and receipts and certificates for such stripped
debt obligations and stripped coupons. Stripped bonds and stripped coupons are
sold at a deep discount because the buyer of those securities receives only the
right to receive a future fixed payment on the security and does not receive any
rights to periodic interest payments on the security.
Stripped Treasury Securities will include coupons that have been
stripped from U.S. Treasury bonds, which may be held through the Federal Reserve
Bank's book-entry system called "Separate Trading of Registered Interest and
Principal of Securities" ("STRIPS") or through a program entitled "Coupon Under
Book-Entry Safekeeping" ("CUBES").
The U.S. Government does not issue Stripped Treasury Securities
directly. The STRIPS program, which is ongoing, is designed to facilitate the
secondary market in the stripping of selected U.S. Treasury notes and bonds into
separate interest and principal components. Under the program, the U.S. Treasury
continues to sell its notes and bonds through its customary auction process. A
purchaser of those specified notes and bonds who has access to a book-entry
account at a Federal Reserve bank, however, may separate the Treasury notes and
bonds into interest and principal components. The selected Treasury securities
thereafter may be maintained in the book-entry system operated by the Federal
Reserve in a manner that permits the separate trading and ownership of the
interest and principal payments.
CUBES, like STRIPS, are direct obligations of the U.S. Government.
CUBES are coupons that have previously been physically stripped from U.S.
Treasury notes and bonds, but which were deposited with the Federal Reserve
Bank's book-entry system and are now carried and transferable in book-entry form
only. Only stripped U.S. Treasury coupons maturing on or after January 15, 1988,
that were stripped prior to January 5, 1987, were eligible for conversion to
book-entry form under the CUBES program.
By agreement, the underlying debt obligations will be held separate
from the general assets of the custodian and nominal holder of such securities,
and will not be subject to any right, charge, security interest, lien or claim
of any kind in favor of or against the custodian or any person claiming through
the custodian, and the custodian will be responsible for applying all payments
received on those underlying debt obligations to the related receipts or
certificates without making any deductions other than applicable tax
withholding. The custodian is required to maintain insurance for the protection
of holders of receipts or certificates in customary amounts against losses
resulting from the custody arrangement due to dishonest or fraudulent action by
the custodian's employees. The holders of receipts or certificates, as the real
parties in interest, are entitled to the rights and privileges of the underlying
debt obligations, including the right, in the event of default in payment of
principal or interest to proceed individually against the issuer without acting
in concert with other holders of those receipts or certificates or the
custodian.
FOREIGN INVESTMENTS. The Equity Fund, the Income Fund, the Limited Term
Fund, the Balanced Fund and the Aggressive Growth Fund may, subject to their
respective investment objectives and policies, invest in certain obligations or
securities of foreign issuers. Permissible investments include American
Depository Receipts ("ADRs") for the Equity Fund, the Balanced Fund and the
Aggressive Growth Fund and Yankee Obligations (as described in the Prospectus)
for the Income Fund, the Limited Term Fund, the Balanced Fund and the Aggressive
Growth Fund. Investment in securities issued by foreign branches of U.S. banks,
foreign banks, or other foreign issuers, including ADRs may subject such Funds
to investment risks that differ in some respects from those related to
investment in obligations of U.S. domestic issuers. Such risks include future
adverse political and economic developments, possible seizure, nationalization,
or expropriation of foreign investments, less stringent disclosure requirements,
the possible establishment of exchange controls or taxation at the source or
other taxes, and the adoption of other foreign governmental restrictions.
Additional risks include less publicly available information, the risk
that companies may not be subject to the accounting, auditing and financial
reporting standards and requirements of U.S. companies, the risk that foreign
securities markets may have less volume and therefore many securities traded in
these markets may be less liquid and their prices more volatile than U.S.
securities, and the risk that custodian and brokerage costs may be higher.
Foreign issuers of securities or obligations are often subject to accounting
treatment and engage in business practices different from those respecting
domestic issuers of similar securities or obligations. Foreign branches of U.S.
banks and foreign banks may be subject to less stringent reserve requirements
than those applicable to domestic branches of U.S. banks.
FUTURE CONTRACTS. As discussed in the Prospectus, the Funds may invest
in futures contracts and options thereon (stock or bond index futures contracts
or interest rate futures or options) to hedge or manage risks associated with a
Fund's securities investments. To enter into a futures contract, an amount of
cash and cash equivalents, equal to the market value of the futures contracts,
is deposited in a segregated account with the Fund's Custodian and/or in a
margin account with a broker to collateralize the position and thereby ensure
that the use of such futures is unleveraged. Positions in futures contracts may
be closed out only on an exchange that provides a secondary market for such
futures. However, there can be no assurance that a liquid secondary market will
exist for any particular futures contract at any specific time. Thus, it may not
be possible to close a futures position. In the event of adverse price
movements, a Fund would continue to be required to make daily cash payments to
maintain its required margin. In such situations, if a Fund had insufficient
cash, it might have to sell portfolio securities to meet daily margin
requirements at a time when it would be disadvantageous to do so. In addition, a
Fund might be required to make delivery of the instruments underlying futures
contracts it holds. The inability to close options and futures positions also
could have an adverse impact on a Fund's ability to hedge or manage risks
effectively.
Successful use of futures by a Fund is also subject to the Adviser's
ability to predict movements correctly in the direction of the market. There is
an imperfect correlation between movements in the price of the future and
movements in the price of the securities that are the subject of the hedge. In
addition, the price of futures may not correlate perfectly with movement in the
cash market due to certain market distortions. Due to the possibility of price
distortion in the futures market and because of the imperfect correlation
between the movements in the cash market and movements in the price of futures,
a correct forecast of general market trends or interest rate movements by the
Adviser may still not result in a successful hedging transaction over a short
time frame.
The trading of futures contracts is also subject to the risk of trading
halts, suspension, exchange or clearing house equipment failures, government
intervention, insolvency of a brokerage firm or clearing house or other
disruption of normal trading activity, which could at times make it difficult or
impossible to liquidate existing position or to recover excess variation margin
payments.
CALL OPTIONS. The Equity Fund, the Balanced Fund and the Aggressive
Growth Fund may write (sell) "covered" call options and purchase options to
close out options previously written by them. Such options must be listed on a
National Securities Exchange and issued by the Options Clearing Corporation. The
purpose of writing covered call options is to generate additional premium income
for a Fund. This premium income will serve to enhance the Fund's total return
and will reduce the effect of any price decline of the security involved in the
option. Covered call options will generally be written on securities which, in
IMG's opinion, are not expected to make any major price moves in the near future
but which, over the long term, are deemed to be attractive investments for a
Fund.
A call option gives the holder (buyer) the "right to purchase" a
security at a specified price (the exercise price) at any time until a certain
date (the expiration date). So long as the obligation of the writer of a call
option continues, he may be assigned an exercise notice by the broker-dealer
through whom such option was sold, requiring him to deliver the underlying
security against payment of the exercise price. This obligation terminates upon
the expiration of the call option, or such earlier time at which the writer
effects a closing purchase transaction by repurchasing an option identical to
that previously sold. To secure his obligation to deliver the underlying
security in the case of a call option, a writer is required to deposit in escrow
the underlying security or other assets in accordance with the rules of the
Options Clearing Corporation. A Fund will write only covered call options. (In
order to comply with the requirements of the securities laws in several states,
a Fund will not write a covered call option if, as a result, the aggregate
market value of all portfolio securities covering all call options exceeds 15%
of the market value of its net assets.)
Fund securities on which call options may be written will be purchased
solely on the basis of investment considerations consistent with a Fund's
investment objective. The writing of covered call options is a conservative
investment technique believed to involve relatively little risk (in contrast to
the writing of naked or uncovered options, which the Funds will not do), but
capable of enhancing a Fund's total return. When writing a covered call option,
a Fund, in return for the premium, gives up the opportunity for profit from a
price increase in the underlying security above the exercise price, but retains
the risk of loss should the price of the security decline. Unlike one who owns
securities not subject to an option, a Fund has no control over when it may be
required to sell the underlying securities, since it may be assigned an exercise
notice at any time prior to the expiration of its obligation as a writer. If a
call option which a Fund has written expires, the Fund will realize a gain in
the amount of the premium; however, such gain may be offset by a decline in the
market value of the underlying security during the option period. If the call
option is exercised, the Fund will realize a gain or loss from the sale of the
underlying security. The security covering the call will be maintained in a
segregated account of a Fund's Custodian. The Funds do not consider a security
covered by a call to be "pledged" as that term is used in each Fund's policy
which limits the pledging or mortgaging of its assets.
The premium received is the market value of an option. The premium a
Fund will receive from writing a call option will reflect, among other things,
the current market price of the underlying security, the relationship of the
exercise price to such market price, the historical price volatility of the
underlying security, and the length of the option period. Once the decision to
write a call option has been made, IMG in determining whether a particular call
option should be written on a particular security, will consider the
reasonableness of the anticipated premium and the likelihood that a liquid
secondary market will exist for such option. The premium received by a Fund for
writing covered call options will be recorded as a liability in the Fund's
statement of assets and liabilities. This liability will be adjusted daily to
the option's current market value, which will be the latest sale price at the
time at which the net asset value per share of a Fund is computed (close of the
New York Stock Exchange), or, in the absence of such sale, the latest asked
price. The liability will be extinguished upon expiration of the option, the
purchase of an identical option in a closing transaction, or delivery of the
underlying security upon the exercise of the option.
Closing transactions will be effected in order to realize a profit on
an outstanding call option, to prevent an underlying security from being called,
or to permit the sale of the underlying security. Furthermore, effecting a
closing transaction will permit a Fund to write another call option on the
underlying security with either a different exercise price or expiration date or
both. If a Fund desires to sell a particular security from its portfolio on
which it has written a call option, it will seek to effect a closing transaction
prior to, or concurrently with, the sale of the security. There is, of course,
no assurance that a Fund will be able to effect such closing transactions at a
favorable price. If a Fund cannot enter into such a transaction, it may be
required to hold a security that it might otherwise have sold, in which case it
would continue to be at market risk on the security. This could result in higher
transaction costs. The Funds will pay transaction costs in connection with the
writing of options to close out previously written options. Such transaction
costs are normally higher than those applicable to purchases and sales of
portfolio securities.
Call options written by a Fund will normally have expiration dates of
less than nine months from the date written. The exercise price of the options
may be below, equal to, or above the current market values of the underlying
securities at the time the options are written. From time to time, a Fund may
purchase an underlying security for delivery in accordance with an exercise
notice of a call option assigned to it, rather than delivering such security
from its portfolio. In such cases, additional costs will be incurred.
A Fund will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the premium
received from the writing of the option. Because increases in the market price
of a call option will generally reflect increases in the market price of the
underlying security, any loss resulting from the repurchase of a call option is
likely to be offset in whole or in part by appreciation of the underlying
security owned by the Fund.
PUT OPTIONS. The Municipal Bond Fund may acquire "puts" with respect to
Municipal Securities held in its portfolio and the Income Fund, the Limited Term
Fund and the Balanced Fund may acquire "puts" with respect to debt securities
held in their portfolio. A put is a right to sell or redeem a specified security
(or securities) at a certain time or within a certain period of time at a
specified exercise price. The put may be an independent feature or may be
combined with a reset feature that is designed to reduce downward price
volatility as interest rates rise by enabling the holder to liquidate the
investment prior to maturity.
The amount payable to a Fund upon its exercise of a "put" is normally
(i) the Fund's acquisition cost of the securities subject to the put (excluding
any accrued interest which the Fund paid on the acquisition), less any amortized
market premium or plus any amortized market or original issue discount during
the period the Fund owned the securities, plus (ii) all interest accrued on the
securities since the last interest payment date during that period.
Puts may be acquired by a Fund to facilitate the liquidity of the
portfolio assets. Puts may also be used to facilitate that reinvestment of
assets at a rate of return more favorable than that of the underlying security.
Puts may, under certain circumstances, also be used to shorten the maturity of
underlying variable rate or floating rate securities for purposes of calculating
the remaining maturity of those securities and the dollar-weighted average
portfolio maturity of a Fund's assets.
The Municipal Bond Fund, the Income Fund, the Limited Term Bond Fund
and the Balanced Fund will, if necessary or advisable, pay for puts either
separately in cash or by paying a higher price for portfolio securities which
are acquired subject to the puts (thus reducing the yield to maturity otherwise
available for the same securities).
WHEN-ISSUED SECURITIES. As discussed in the Prospectuses of the Funds,
each of the Funds may purchase securities on a when-issued or delayed-delivery
basis. When-issued securities are securities purchased for delivery beyond the
normal settlement date at a stated price and yield and thereby involve a risk
that the yield obtained in the transaction will be less than those available in
the market when delivery takes place. A Fund will generally not pay for such
securities or start earning interest on them until they are received. When a
Fund agrees to purchase securities on a when-issued basis, the Custodian will
set aside cash or liquid portfolio securities equal to the amount of the
commitment in a separate account. Normally, the Custodian will set aside
portfolio securities to satisfy the purchase commitment, and in such a case, the
Fund may be required subsequently to place additional assets in the separate
account in order to assure that the value of the account remains equal to the
amount of the Fund's commitment. It may be expected that the Fund's net assets
will fluctuate to a greater degree when it sets aside portfolio securities to
cover such purchase commitments than when it sets aside cash. In addition,
because a Fund will set aside cash or liquid portfolio securities to satisfy its
purchase commitments in the manner described above, the Fund's liquidity and the
ability of IMG to manage it might be affected in the event its commitments to
purchase when-issued securities ever exceeded 25% of the value of its total
assets.
When a Fund engages in when issued transactions, it relies on the
seller to consummate the trade. Failure of the seller to do so may result in the
Fund incurring a loss or missing the opportunity to obtain a price considered to
be advantageous. The Funds will engage in when issued delivery transactions only
for the purpose of acquiring portfolio securities consistent with the Funds'
investment objectives and policies, not for investment leverage.
MORTGAGE-RELATED SECURITIES. The Income Fund, the Limited Term Fund and
the Balanced Fund may, consistent with their respective investment objectives
and policies, invest in mortgage-related securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities. Mortgage-related
securities, for purposes of the Prospectus and this Statement of Additional
Information, represent pools of mortgage loans assembled for sale to investors
by various governmental agencies such as the Government National Mortgage
Association and government-related organizations such as the Federal National
Mortgage Association and the Federal Home Loan Mortgage Corporation, as well as
by nongovernmental issuers such as commercial banks, savings and loan
institutions, mortgage bankers and private mortgage insurance companies.
Although certain mortgage-related securities are guaranteed by a third party or
otherwise similarly secured, the market value of the security, which may
fluctuate, is not so secured. If a Fund purchases a mortgage-related security at
a premium, that portion may be lost if there is a decline in the market value of
the security whether resulting from changes in interest rates or prepayments in
the underlying mortgage collateral. As with other interest-bearing securities,
the prices of such securities are inversely affected by changes in interest
rates. However, though the value of a mortgage-related security may decline when
interest rates rise, the converse is not necessarily true, since in periods of
declining interest rates the mortgages underlying the securities are prone to
prepayment, thereby shortening the average life of the security and shortening
the period of time over which income at the higher rate is received. Conversely,
when interest rates are rising, the rate of prepayment tends to decrease,
thereby lengthening the average life of the security and lengthening the period
of time over which income at the lower rate is received. For these and other
reasons, a mortgage-related security's average maturity may be shortened or
lengthened as a result of interest rate fluctuations and, therefore, it is not
possible to predict accurately the security's return to the Fund. In addition,
regular payments received in respect of mortgage-related securities include both
interest and principal. No assurance can be given as to the return a Fund will
receive when these amounts are reinvested.
There are a number of important differences among the agencies and
instrumentalities of the U.S. Government that issue mortgage-related securities
and among the securities that they issue. Mortgage-related securities issued by
the Government National Mortgage Association ("GNMA") include GNMA Mortgage
Pass-Through Certificates (also known as "Ginnie Maes") which are guaranteed as
to the timely payment of principal and interest by GNMA and such guarantee is
backed by the full faith and credit of the United States. GNMA is a wholly-owned
U.S. Government corporation within the Department of Housing and Urban
Development. GNMA certificates also are supported by the authority of GNMA to
borrow Funds from the U.S. Treasury to make payments under its guarantee.
Mortgage-related securities issued by the Federal National Mortgage Association
("FNMA") include FNMA Guaranteed Mortgage Pass-Through Certificates (also known
as "Fannie Maes") which are solely the obligations of the FNMA and are not
backed by or entitled to the full faith and credit of the United States. The
FNMA is a government-sponsored organization owned entirely by private
stockholders. Fannie Maes are guaranteed as to timely payment of the principal
and interest by FNMA. Mortgage-related securities issued by the Federal Home
Loan Mortgage Corporation ("FHLMC") include FHLMC Mortgage Participation
Certificates (also known as "Freddie Macs" or "PCs"). The FHLMC is a corporate
instrumentality of the United States, created pursuant to an Act of Congress,
which is owned entirely by Federal Home Loan Banks. Freddie Macs are not
guaranteed by the United States or by any Federal Home Loan Banks and do not
constitute a debt or obligation of the United States or of any Federal Home Loan
Bank. Freddie Macs entitle the holder to timely payment of interest, which is
guaranteed by the FHLMC. The FHLMC guarantees either ultimate collection or
timely payment of all principal payments on the underlying mortgage loans. When
the FHLMC does not guarantee timely payment of principal, FHLMC may remit the
amount due on account of its guarantee of ultimate payment of principal at any
time after default on an underlying mortgage, but in no event later than one
year after it becomes payable.
The Income Fund, the Limited Term Fund and the Balanced Fund may also
invest in mortgage-related securities which are collateralized mortgage
obligations ("CMOs") structured on pools of mortgage pass-through certificates
or mortgage loans. The CMOs in which these Funds may invest represent securities
issued by a private corporation or a U.S. Government instrumentality that are
backed by a portfolio of mortgages or mortgage-backed securities held under an
indenture. The issuer's obligations to make interest and principal payments is
secured by the underlying portfolio of mortgages or mortgage-backed securities.
CMOs are issued with a number of classes or series which have different
maturities and which may represent interests in some or all of the interest or
principal on the underlying collateral or a combination thereof. CMOs of
different classes are generally retired in sequence as the underlying mortgage
loans in the mortgage pool are repaid. In the event of sufficient early
prepayments on such mortgages, the class or series of a CMO first to mature
generally will be retired prior to its maturity. Thus, the early retirement of a
particular class or series of a CMO held by a Fund would have the same effect as
the prepayment of mortgages underlying a mortgage-backed pass-through security.
Mortgage-related securities will be purchased only if rated within the three
highest bond rating categories assigned by an NRSRO or, if unrated, which IMG
deems to present attractive opportunities and are of comparable quality.
OTHER ASSET-BACKED SECURITIES. The Income Fund and the Limited Term
Fund may also invest in interests in pools of receivables, such as motor vehicle
installment purchase obligations (known as Certificates of Automobile
Receivables or CARSSM) and credit card receivables (known as Certificates of
Amortizing Revolving Debts or CARDSSM). Such securities are generally issued as
pass-through certificates, which represent undivided fractional ownership
interests in the underlying pools of assets. Such securities may also be debt
instruments which are also known as collateralized obligations and are generally
issued as the debt of a special purpose entity organized solely for the purpose
of owning such assets and issuing such debt.
Such securities are not issued or guaranteed by the U.S. Government or
its agencies or instrumentalities; however, the payment of principal and
interest on such obligations may be guaranteed up to certain amounts and for a
certain time period by a letter of credit issued by a financial institution
(such as a bank or insurance company) unaffiliated with the issuers of such
securities. Non-mortgage backed securities will be purchased by the Income Fund
only when rated within the three highest rating categories by an NRSRO at the
time of purchase. In addition, such securities generally will have remaining
estimated lives at the time of purchase of 7 years or less.
SECURITIES OF OTHER INVESTMENT COMPANIES. Each Fund, except the
Government Assets Fund, may invest in securities issued by the other investment
companies, including Shares of the Government Assets Fund. Each of these Funds
currently intends to limit its investments so that, as determined immediately
after a securities purchase is made: (a) not more than 5% of the value of its
total assets will be invested in the securities of any one investment company;
(b) not more than 10% of the value of its total assets will be invested in the
aggregate in securities of investment companies as a group; (c) not more than 3%
of the outstanding voting stock of any one investment company will be owned by
any of the Funds; and (d) not more than 10% of the outstanding voting stock of
any one investment company will be owned in the aggregate by the Funds. As a
shareholder of another investment company, a Fund would bear, along with other
shareholders, its pro rata portion of that company's expenses, including
advisory fees. These expenses would be in addition to the advisory and other
expenses that the Fund bears directly in connection with its own operations. In
order to avoid the imposition of additional fees as a result of investing in
Shares of the Government Assets Fund, IMG and the Administrator will waive any
portion of their usual service fees that are attributable to investments therein
by another Fund. Investment companies in which a Fund may invest may also impose
a sales or distribution charge in connection with the purchase or redemption of
their shares and other types of commissions or charges. Such charges will be
payable by the Funds and, therefore, will be borne directly by Shareholders.
REPURCHASE AGREEMENTS. Securities held by each Fund may be subject to
repurchase agreements. Under the terms of a repurchase agreement, a Fund would
acquire securities from member banks of the Federal Deposit Insurance
Corporation and registered broker-dealers which IMG deems creditworthy under
guidelines approved by the Company's Board of Directors, subject to the seller's
agreement to repurchase such securities at a mutually agreed-upon date and
price. The repurchase price would generally equal the price paid by the Fund
plus interest negotiated on the basis of current short-term rates, which may be
more or less than the rate on the underlying portfolio securities. The seller
under a repurchase agreement will be required to maintain continually the value
of collateral held pursuant to the agreement at not less than the repurchase
price (including accrued interest). If the seller were to default on its
repurchase obligation or become insolvent, the Fund holding such obligation
would suffer a loss to the extent that the proceeds from a sale of the
underlying portfolio securities were less than the repurchase price under the
agreement, or to the extent that the disposition of such securities by the Fund
were delayed pending court action. Additionally, there is no controlling legal
precedent confirming that a Fund would be entitled, as against a claim by such
seller or its receiver or trustee in bankruptcy, to retain the underlying
securities, although the Board of Directors of the Company believes that, under
the regular procedures normally in effect for custody of a Fund's securities
subject to repurchase agreements and under federal laws, a court of competent
jurisdiction would rule in favor of the Company if presented with the question.
Securities subject to repurchase agreements will be held by that Fund's
custodian or another qualified custodian or in the Federal Reserve/Treasury
book-entry system. Repurchase agreements are considered to be loans by a Fund
under the 1940 Act.
REVERSE REPURCHASE AGREEMENTS. As discussed in the Prospectuses, each
Fund may borrow funds for temporary purposes by entering into reverse repurchase
agreements in accordance with that Fund's investment restrictions. Pursuant to
such agreements, a Fund would sell portfolio securities to financial
institutions such as banks and broker-dealers, and agree to repurchase the
securities at a mutually agreed-upon date and price. At the time a Fund enters
into a reverse repurchase agreement, it will place in a segregated custodial
account assets such as U.S. Government securities or other liquid, high grade
debt securities consistent with the Fund's investment restrictions having a
value equal to the repurchase price (including accrued interest), and will
subsequently continually monitor the account to ensure that such equivalent
value is maintained at all times. Reverse repurchase agreements involve the risk
that the market value of the securities sold by a Fund may decline below the
price at which a Fund is obligated to repurchase the securities. Reverse
repurchase agreements are considered to be borrowings by a Fund under the 1940
Act.
MUNICIPAL SECURITIES. Under normal market conditions, at least 80% of
the net assets of the Municipal Bond Fund will be invested in Municipal
Securities, the interest on which is exempt from the regular federal income tax
and not treated as a preference item for purposes of the federal alternative
minimum tax imposed on non-corporate taxpayers.
Municipal Securities include debt obligations issued by governmental
entities to obtain Funds for various public purposes, such as the construction
of a wide range of public facilities, the refunding of outstanding obligations,
the payment of general operating expenses, and the extension of loans to other
public institutions and facilities. Private activity bonds that are issued by or
on behalf of public authorities to finance various privately-operated facilities
are included within the term Municipal Securities if the interest paid thereon
is exempt from regular federal individual income taxes and is not treated as a
preference item for purposes of the federal alternative minimum tax.
Other types of Municipal Securities which the Municipal Bond Fund may
purchase are short-term General Obligation Notes, Tax Anticipation Notes, Bond
Anticipation Notes, Revenue Anticipation Notes, Tax-Exempt Commercial Paper,
Project Notes, Construction Loan Notes and other forms of short-term tax-exempt
loans. Such instruments are issued with a short-term maturity in anticipation of
the receipt of tax funds, the proceeds of bond placements or other revenues. The
Municipal Bond Fund will not purchase municipal lease obligations.
Project Notes are issued by a state or local housing agency and are
sold by the Department of Housing and Urban Development. While the issuing
agency has the primary obligation with respect to its Project Notes, they are
also secured by the full faith and credit of the United States through
agreements with the issuing authority which provide that, if required, the
federal government will lend the issuer an amount equal to the principal of and
interest on the Project Notes.
As described in the Prospectus, the two principal classifications of
Municipal Securities consist of "general obligation" and "revenue" issues. The
Municipal Bond Fund may also acquire "moral obligation" issues, which are
normally issued by special purpose authorities. There are, of course, variations
in the quality of Municipal Securities, both within a particular classification
and between classifications, and the yields on Municipal Securities depend upon
a variety of factors, including general money market conditions, the financial
condition of the issuer, general conditions of the municipal bond market, the
size of a particular offering, the maturity of the obligation and the rating of
the issue. The ratings of Moody's and S&P represent their opinions as to the
quality of Municipal Securities. It should be emphasized, however, that ratings
are general and are not absolute standards of quality, and securities with the
same maturity, interest rate and rating may have different yields, while
securities of the same maturity and interest rate with different ratings may
have the same yield. Subsequent to purchase, an issue of Municipal Securities
may cease to be rated or its rating may be reduced below the minimum rating
required for purchase by the Municipal Bond Fund. IMG will consider such an
event in determining whether the Fund should continue to hold the obligation.
An issuer's obligations for Municipal Securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights and
remedies of creditors, such as the federal bankruptcy code, and laws, if any,
which may be enacted by Congress or state legislatures extending the time for
payment of principal or interest, or both, or imposing other constraints upon
the enforcement of such obligations or upon the ability of municipalities to
levy taxes. The power or ability of an issuer to meet its obligations for the
payment of interest on and principal of its Municipal Securities may be
materially adversely affected by litigation or other conditions.
LOW-RATED AND COMPARABLE UNRATED FIXED INCOME SECURITIES. The Income
Fund, the Balanced Fund, the Municipal Bond Fund and the Limited Term Bond Fund
may invest in below-Investment-Grade Securities. Below-Investment-Grade
Securities (hereinafter referred to as "junk bonds" or "low-rated and comparable
unrated securities") include (i) bonds rated as low as "Ba" by Moody's Investors
Service, Inc. ("Moody's"), or "BB" by Standard & Poor's Corporation ("S&P"),
Fitch Investors Services, Inc. ("Fitch") or Duff & Phelps, Inc. ("D&P") or of
similar quality by another NRSRO; and (ii) unrated debt securities of comparable
quality.
Low-rated and comparable unrated securities, while generally offering
higher yields than investment-grade securities with similar maturities, involve
greater risks, including the possibility of default or bankruptcy. They are
regarded as predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal. The special risk considerations in connection
with such investments are discussed below.
EFFECT OF INTEREST RATES AND ECONOMIC CHANGES
The low-rated and comparable unrated securities market is relatively
new, and its growth paralleled a long economic expansion. As a result, it is not
clear how this market may withstand a prolonged recession or economic downturn.
Such a prolonged economic downturn could severely disrupt the market for and
adversely affect the value of such securities.
All interest-bearing securities typically experience appreciation when
interest rates decline and depreciation when interest rates rise. The market
values of low-rated and comparable unrated securities tend to reflect individual
corporate development to a greater extent than do higher-rated securities, which
react primarily to fluctuations in the general level of interest rates.
Low-rated and comparable unrated securities also tend to be more sensitive to
economic conditions than are higher-rated securities. As a result, they
generally involve more credit risk than securities in the higher-rated
categories. During an economic downturn or a sustained period of rising interest
rates, highly leveraged issuers of low-rated and comparable unrated securities
may experience financial stress and may not have sufficient revenues to meet
their payment obligations. The issuer's ability to service its debt obligations
may also be adversely affected by specific corporate developments, the issuer's
inability to meet specific projected business forecasts, or the unavailability
of additional financing. The risk of loss due to default by an issuer of
low-rated and comparable unrated securities is significantly greater than that
of issuers of higher-rated securities because such securities are generally
unsecured and are often subordinated to other creditors. Further, if the issuer
of a low-rated and comparable unrated security defaulted, the Fund might incur
additional expenses to seek recovery. Periods of economic uncertainty and
changes would also generally result in increased volatility in the market prices
of low-rated and comparable unrated securities and thus in the Fund's net asset
value.
As previously stated, the value of such a security will decrease in a
rising interest rate market and accordingly, so will the Fund's net asset value.
If the Fund experiences unexpected net redemptions in such a market, it may be
forced to liquidate a portion of its Fund securities without regard to their
investment merits. Due to the limited liquidity of high-yield securities
(discussed below) the Fund may be forced to liquidate these securities at a
substantial discount. Any such liquidation would reduce the Fund's asset base
over which expenses could be allocated and could result in a reduced rate of
return for the Fund.
PAYMENT EXPECTATIONS
Low-rated and comparable unrated securities typically contain redemption, call
or prepayment provisions which permit the issuer of such securities containing
such provisions to, at their discretion, redeem the securities. During periods
of falling interest rates, issuers of high-yield securities are likely to redeem
or prepay the securities and refinance them with debt securities with a lower
interest rate. To the extent an issuer is able to refinance the securities, or
otherwise redeem them, the Fund may have to replace the securities with a
lower-yielding security, which would result in a lower return for the Fund.
CREDIT RATINGS
Credit ratings issued by credit-rating agencies evaluate the safety of principal
and interest payments of rated securities. They do not, however, evaluate the
market value risk of low-rated and comparable unrated securities and, therefore,
may not fully reflect the true risks of an investment. In addition,
credit-rating agencies may or may not make timely changes in a rating to reflect
changes in the economy or in the condition of the issuer that affect the market
value of the security. Consequently, credit ratings are used only as a
preliminary indicator of investment quality. Investments in low-rated and
comparable unrated securities will be more dependent on the credit analysis than
would be the case with investments in investment-grade debt securities. The
Advisor employs its own credit research and analysis, which includes a study of
existing debt, capital structure, ability to service debt and to pay dividends,
the issuer's sensitivity to economic conditions, its operating history, and the
current trend of earnings. The Advisor continually monitors the investments
owned by the Funds and carefully evaluates whether to dispose of or to retain
low-rated and comparable unrated securities whose credit ratings or credit
quality may have changed.
LIQUIDITY AND VALUATION
The Fund may have difficulty disposing of certain low-rated and comparable
unrated securities because there may be a thin trading market for such
securities. Because not all dealers maintain markets in low-rated and comparable
unrated securities, there is no established retail secondary market for many of
these securities. The Fund anticipates that such securities could be sold only
to a limited number of dealers or institutional investors. To the extent a
secondary trading market does exist, it is generally not as liquid as the
secondary market for higher-rated securities. As a result, the Fund's asset
value and the Fund's ability to dispose of particular securities, when necessary
to meet the Fund's liquidity needs or in response to a specific economic event,
may be impacted. The lack of a liquid secondary market for certain securities
may also make it more difficult for the Fund to obtain accurate market
quotations for purposes of valuing the Fund's securities. Market quotations are
generally available on many low-rated and comparable unrated securities only
from a limited number of dealers and may not necessarily represent firm bids of
such dealers or prices for actual sales. During periods of thin trading, the
spread between bid and asked prices is likely to increase significantly. In
addition, adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the values and liquidity of low-rated and
comparable unrated securities, especially in a thinly-traded market.
NEW AND PROPOSED LEGISLATION
Legislation has been adopted and, from time to time, proposals have been
discussed regarding new legislation designed to limit the use of certain
low-rated and comparable unrated securities by certain issuers. An example of
legislation is a recent law which requires federally insured savings and loan
associations to divest their investment in these securities over time. New
legislation could further reduce the market because such securities, generally,
could negatively affect the financial condition of the issuers of high-yield
securities, and could adversely affect the market in general. It is not
currently possible to determine the impact of the recent legislation on this
market. However, it is anticipated that if additional legislation is enacted or
proposed, it could have a material effect on the value of low-rated and
comparable unrated securities and the existence of a secondary trading market
for the securities.
Investment Restrictions
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The following are fundamental investment restrictions and are in
addition to the investment restrictions set forth in the Prospectus. Under these
restrictions a Fund may not:
1. Underwrite securities issued by other persons, except to the extent
that a Fund may be deemed to be an underwriter under certain securities laws in
the disposition of "restricted securities";
2. Purchase or sell commodities or commodities contracts, except to the
extent disclosed in the current Prospectus of the Funds;
3. Purchase or sell real estate (although investments by the Equity
Fund and the Income Fund in marketable securities of companies engaged in such
activities are not prohibited by this restriction);
The following additional investment restrictions are not fundamental
and may be changed with respect to a particular Fund without the vote of a
majority of the outstanding Shares of that Fund. A Fund may not:
1. Enter into repurchase agreements with maturities in excess of seven
days if such investments, together with other instruments in that Fund that are
not readily marketable or are otherwise illiquid, exceed 15% of that Fund's
total assets (10% of total assets in the case of the Government Assets Fund).
2. Purchase securities on margin, except for use of short-term credit
necessary for clearance of purchases of portfolio securities;
3. Engage in any short sales;
4. Purchase participation or direct interests in oil, gas or other
mineral exploration or development programs (although investments by the Equity
Fund and the Income Fund in marketable securities of companies engaged in such
activities are not prohibited in this restriction);
5. Purchase securities of other investment companies, except (a) in
connection with a merger, consolidation, acquisition or reorganization, and (b)
a Fund may invest in other investment companies, including other Funds for which
IMG acts as adviser, as specified in the Prospectus subject to such restrictions
as may be imposed by the 1940 Act or any state laws.
6. Invest more than 5% of total assets in puts, calls, straddles,
spreads or any combination thereof.
7. With respect to the Equity Fund, the Balanced Fund, the Aggressive
Growth Fund, the Limited Term Fund, and the Fixed Income Fund, invest more than
5% of total assets in securities of issuers which together with any predecessors
have a record of less than three years continuous operation.
If any percentage restriction described above is satisfied at the time
of investment, a later increase or decrease in such percentage resulting from a
change in asset value will not constitute a violation of such restriction.
Portfolio Turnover
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The portfolio turnover rate for each of the Funds is calculated by
dividing the lesser of a Fund's purchases or sales of portfolio securities for
the year by the monthly average value of the portfolio securities. The
calculation excludes all securities whose remaining maturities at the time of
acquisition were one year or less.
Portfolio turnover for any of the Funds may vary greatly from year to
year as well as within a particular year. High turnover rates will generally
result in higher transaction costs to a Fund. Portfolio turnover will not be a
limiting factor in making investment decisions.
Because the Government Assets Fund intends to invest entirely in
securities with maturities of less than one year and because the Commission
requires such securities to be excluded from the calculation of the portfolio
turnover rate, the portfolio turnover with respect to the Government Assets Fund
is expected to be zero percent for regulatory purposes.
NET ASSET VALUE
As indicated in the Prospectuses, the net asset value of each Fund is
determined and the Shares of each Fund are priced as of the Valuation Times
applicable to such Fund on each Business Day of the Company. A "Business Day"
constitutes any day on which the New York Stock Exchange (the "NYSE") is open
for trading, the Federal Reserve Bank of Chicago is open, and any other day
except days on which there are not sufficient changes in the value of the Fund's
portfolio securities that the Fund's net asset value might be materially
affected and days during which no Shares are tendered for redemption and no
orders to purchase Shares are received. Currently, either the NYSE or Federal
Reserve Bank of Chicago are closed on New Year's Day, Martin Luther King, Jr.
Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Columbus Day, Veteran's Day, Thanksgiving Day and Christmas Day.
Valuation of the Government Asset Fund
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The Government Assets Fund has elected to use the amortized cost method
of valuation pursuant to Rule 2a-7 under the 1940 Act. This involves valuing an
instrument at its cost initially and thereafter assuming a constant amortization
to maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the instrument. This method may result in
periods during which value, as determined by amortized cost, is higher or lower
than the price the Government Assets Fund would receive if it sold the
instrument. The value of securities in the Government Assets Fund can be
expected to vary inversely with changes in prevailing interest rates.
Pursuant to Rule 2a-7, the Government Assets Fund will maintain a
dollar-weighted average portfolio maturity appropriate to the Fund's objective
of maintaining a stable net asset value per share, provided that the Fund will
not purchase securities with a remaining maturity of more than 397 days
(thirteen months) (securities subject to repurchase agreements may bear longer
maturities) nor maintain a dollar-weighted average portfolio maturity which
exceeds 90 days. The Company's Board of Directors has also undertaken to
establish procedures reasonably designed, taking into account current market
conditions and the investment objective of the Fund, to stabilize the net asset
value per share of the Fund for purposes of sales and redemptions at $1.00.
These procedures include review by the Directors, at such intervals as they deem
appropriate, to determine the extent, if any, to which the net asset value per
Share of the Fund calculated by using available market quotations deviates from
$1.00 per Share. In the event such deviation exceeds one-half of one percent,
Rule 2a-7 requires that the Board of Directors promptly consider what action, if
any, should be initiated. If the Directors believe that the extent of any
deviation from the Fund's $1.00 amortized cost price per Share may result in
material dilution or other unfair results to new or existing investors, they
will take such steps as they consider appropriate to eliminate or reduce, to the
extent reasonably practicable, any such dilution or unfair results. These steps
may include selling portfolio instruments prior to maturity, shortening the
average portfolio maturity, withholding or reducing dividends, reducing the
number of the Government Assets Fund's outstanding Shares without monetary
consideration, or utilizing a net asset value per share determined by using
available market quotations.
Valuation of the Variable NAV Funds
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Portfolio securities for which market quotations are readily available
are valued based upon their current available bid prices in the principal market
(closing sales prices if the principal market is an exchange) in which such
securities are normally traded. Unlisted securities for which market quotations
are readily available will be valued at the current quoted bid prices. Other
securities and assets for which quotations are not readily available, including
restricted securities and securities purchased in private transactions, are
valued at their fair value in IMG's best judgment under the supervision of the
Company's Board of Directors.
Among the factors that will be considered, if they apply, in valuing
portfolio securities held by the Variable NAV Funds are the existence of
restrictions upon the sale of the security by the Fund, the absence of a market
for the security, the extent of any discount in acquiring the security, the
estimated time during which the security will not be freely marketable, the
expenses of registering or otherwise qualifying the security for public sale,
underwriting commissions if underwriting would be required to effect a sale, the
current yields on comparable securities for debt obligations traded
independently of any equity equivalent, changes in the financial condition and
prospects of the issuer, and any other factors affecting fair value. In making
valuations, opinions of counsel may be relied upon as to whether or not
securities are restricted securities and as to the legal requirements for public
sale.
The Company may use a pricing service to value certain portfolio
securities where the prices provided are believed to reflect the fair market
value of such securities. A pricing service would normally consider such factors
as yield, risk, quality, maturity, type of issue, trading characteristics,
special circumstances and other factors it deems relevant in determining
valuations of normal institutional trading units of debt securities and would
not rely exclusively on quoted prices. The methods used by the pricing service
and the valuations so established will be reviewed by the Company under the
general supervision of the Company's Board of Directors. Several pricing
services are available, one or more of which may be used by the Adviser from
time to time.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Matters Affecting Redemption
- ----------------------------
Shares in each of the Company's Funds are sold on a continuous basis by
BISYS Fund Services, Inc., (the "Distributor") which has agreed to use
appropriate efforts to solicit all purchase orders. In addition to purchasing
Shares directly from the Distributor, Shares may be purchased through procedures
established by the Distributor in connection with the requirements of accounts
at AMCORE Bank, N.A., ("AMCORE Bank") or AMCORE Bank's affiliated entities
(collectively, "Banks"). Customers purchasing Shares of the Funds may include
officers, directors, or employees of the Banks.
The Company may suspend the right of redemption or postpone the date of
payment for Shares during any period when (a) trading on the New York Stock
Exchange (the "Exchange") is restricted by applicable rules and regulations of
the Commission, (b) the Exchange is closed for other than customary weekend and
holiday closings, (c) the Commission has by order permitted such suspension for
the protection of security holders of the Company, or (d) the Commission has
determined that an emergency exists as a result of which (i) disposal by the
Company of securities owned by it is not reasonably practical, or (ii) it is not
reasonably practical for the Company to determine the fair value of its net
assets.
The Company may redeem Shares of each of the Funds involuntarily if
redemption appears appropriate in light of the Company's responsibilities under
the 1940 Act. See "NET ASSET VALUE" in this Statement of Additional Information.
MANAGEMENT OF THE COMPANY
DIRECTORS AND OFFICERS
Overall responsibility for management of the Company rests with its
Board of Directors, which is elected by the Shareholders of the Company. The
Directors elect the officers of the Company to supervise actively its day-to-day
operations.
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 to 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 Directors beneficially owned no more
than 1 percent of the shares of common stock of the Fund.
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)
Name of Person, Aggregate Pension or Estimated Total Comp-
Position Compensation Retirement Bene- Annual Bene- ensation
From Registrant fits Accrue as fits Upon From Regis-
Part of Fund Retirement trant and
Expenses and Fund
Complex
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>
Investment Adviser
- ------------------
Investment advisory services are provided by IMG, Des Moines, Iowa,
pursuant to an Investment Advisory Agreement dated as of ____________, 1997 (the
"Investment Advisory Agreement").
Under the Investment Advisory Agreement, the Adviser has agreed to
provide investment advisory services as described in the Prospectus of the
Funds. For the services provided pursuant to the Investment Advisory Agreement,
each of the Funds pays IMG a fee computed daily and paid monthly, at an annual
rate, calculated as a percentage of the average daily net assets of that Fund,
of sixty one-hundredths of one percent (.60%) for both the Income Fund, the
Municipal Bond Fund and Limited Tem Fund, of forty one-hundredths of one percent
(.40%) for the Government Assets Fund, of seventy-five one- hundredths of one
percent (.75%) for the Equity Fund and the Balanced Fund and ninety-five
one-hundredths of one percent (.95%) for the Aggressive Growth Fund. IMG may
periodically waive all or a portion of its advisory fee with respect to any Fund
to increase the net income of the Fund available for distribution as dividends.
Unless sooner terminated, the Investment Advisory Agreement will
continue in effect as to each Fund until December 1999 and from year to year
thereafter, if such continuance is approved at least annually by the Company's
Board of Directors or by vote of a majority of the outstanding Shares of the
relevant Fund (as defined under "GENERAL INFORMATION - Miscellaneous" in the
Funds' Prospectus), and a majority of the Directors who are not parties to the
Investment Advisory Agreement or interested persons (as defined in the 1940 Act)
of any party to the Investment Advisory Agreement by votes cast in person at a
meeting called for such purpose. The Investment Advisory Agreement is terminable
as to a Fund at any time on 60 days' written notice without penalty by the
Directors, by vote of a majority of the outstanding Shares of that Fund, or by
IMG. The Investment Advisory Agreement also terminates automatically in the
event of any assignment, as defined in the 1940 Act.
The Investment Advisory Agreement provides that IMG shall not be liable
for any error of judgment or mistake of law or for any loss suffered by a Fund
in connection with the performance of the Investment Advisory 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 IMG in the performance of its duties,
or from reckless disregard by IMG of its duties and obligations thereunder.
Portfolio Transactions
- ----------------------
Pursuant to the Investment Advisory Agreement, IMG determines, subject
to the general supervision of the Board of Directors of the Company and in
accordance with each Fund's investment objective and restrictions, which
securities are to be purchased and sold by a Fund, and which brokers are to be
eligible to execute such Fund's portfolio transactions. Purchases and sales of
portfolio securities with respect to the Funds usually are principal
transactions in which portfolio securities are normally purchased directly from
the issuer or from an underwriter or market maker for the securities. Purchases
from underwriters of portfolio securities generally include a commission or
concession paid by the issuer to the underwriter, and purchases from dealers
serving as market makers may include the spread between the bid and asked price.
Transactions on stock exchanges involve the payment of negotiated brokerage
commissions. Transactions in the over-the-counter market are generally principal
transactions with dealers. With respect to the over-the-counter market, IMG,
where possible, will deal directly with dealers who make a market in the
securities involved except in those circumstances where better price and
execution are available elsewhere.
The Company, on behalf of the Funds, will not execute portfolio
transactions through, acquire portfolio securities issued by, make savings
deposits in, or enter into repurchase or reverse repurchase agreements with
AMCORE Investment Group, N.A. the Distributor, or their affiliates, and will not
give preference to AMCORE Investment Group, N.A. correspondents with respect to
such transactions, securities, savings deposits, repurchase agreements, and
reverse repurchase agreements.
Investment decisions for each Fund are made independently from those
for the other Funds or any other investment company or account managed by IMG.
Any such other Fund, investment company or account may also invest in the same
securities as the Company on behalf of the Funds. When a purchase or sale of the
same security is made at substantially the same time on behalf of more than one
Fund or a Fund and another investment company or account, the transaction will
be averaged as to price, and available investments will be allocated as to
amount in a manner which IMG believes to be equitable to the Fund(s) and such
other investment company or account. In some instances, this investment
procedure may adversely affect the price paid or received by a Fund or the size
of the position obtained by a Fund. To the extent permitted by law, IMG may
aggregate the securities to be sold or purchased for a Fund with those to be
sold or purchased for the other Funds or for other investment companies or
accounts in order to obtain best execution. As provided by the Investment
Advisory Agreement, in making investment recommendations for the Funds, IMG will
not inquire or take into consideration whether an issuer of securities proposed
for purchase or sale by the Funds is a customer of AMCORE its parent or its
subsidiaries or affiliates and, in dealing with its customers, AMCORE, its
parent, subsidiaries, and affiliates will not inquire or take into consideration
whether securities of such customers are held by the Funds.
Banking Laws
- ------------
IMG, AMCORE Investment Group N.A. and their brokerage affiliates
believe that they possesses the legal authority to perform the services for the
Funds contemplated by the Prospectus, this Statement of Additional Information,
and Rule 12b-1 Agreement described below without violation of applicable
statutes and regulations. IMG, AMCORE Investment Group N.A. and their brokerage
affiliates have been advised by its counsel that, while the question is not free
from doubt, such laws should not prevent IMG, AMCORE Investment Group N.A. and
their brokerage affiliates from providing the services required of it under the
Rule 12b-1 Agreement. Future changes in either federal or state statutes and
regulations relating to the permissible activities of banks or bank holding
companies and the subsidiaries or affiliates of those entities, as well as
further judicial or administrative decisions or interpretations of present and
future statutes and regulations, could prevent or restrict IMG, AMCORE
Investment Group N.A. or their brokerage affiliates from continuing to perform
such services for the Funds. Depending upon the nature of any changes in the
services which could be provided by IMG, AMCORE Investment Group N.A. or their
brokerage affiliates the Board of Directors of the Company would review the
Funds' relationship with IMG or AMCORE Investment Group N.A. and consider taking
all action necessary in the circumstances.
Should future legislative, judicial, or administrative action prohibit
or restrict the proposed activities of IMG, AMCORE Investment Group, N.A. and
their brokerage affiliates and/or its affiliated and correspondent banks in
connection with Customer purchases of Shares of the Funds, those banks might be
required to alter materially or discontinue the services offered by them to
Customers. It is not anticipated, however, that any change in the Company's
method of operations would affect its net asset value per share or result in
financial losses to any Customer.
Administrator
- -------------
IMG serves as administrator (the "Administrator") to the Funds pursuant
to a Management and Administration Agreement dated ______, 1997 (the
"Administration Agreement"). The Administrator assists in supervising all
operations of each Fund (other than those performed by the Adviser under the
Investment Advisory Agreement, the Custodian under the Custodian Agreement, the
Transfer Agency Agreement and Fund Accounting Agreement.
Under the Administration Agreement, the Administrator has agreed to
maintain office facilities; furnish statistical and research data, clerical,
certain bookkeeping services and stationery and office supplies; prepare the
periodic reports to the Commission on Form N-SAR or any replacement forms
therefor; compile data for, prepare for execution by the Funds and file all of
the Funds' federal and state tax returns and required tax filings other than
those required to be made by the Funds' Custodian and Sub-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 Funds with the
Fund's preparation of its Annual and Semi-Annual Reports to Shareholders and its
Registration Statement; compile data for, prepare and file timely Notices to the
Commission required pursuant to Rule 24f-2 under the 1940 Act; keep and maintain
the financial accounts and records of each Fund, including calculation of daily
expense accruals; and generally assists in all aspects of the Funds' operations
other than those performed by IMG under the Investment Advisory Agreement, by
the Custodian under the Custodian Agreement and by BISYS Fund Services Ohio,
Inc. under the Sub-Transfer Agency Agreement. Under the Administration
Agreement, the Administrator may delegate all or any part of its
responsibilities thereunder.
The Administrator receives a fee from each Fund for its services as
Administrator and expenses assumed pursuant to the Administration Agreement,
equal to the lesser of (1) a fee calculated daily and paid periodically, at the
annual rate equal to twenty-six one-hundredths of one percent (0.26%) of that
Fund's average daily net assets or (2) such other fee as may be agreed upon in
writing by the Company and the Administrator. The Administrator may periodically
waive all or a portion of its fee with respect to any Fund in order to increase
the net income of one or more of the Funds available for distribution as
dividends.
Unless sooner terminated as provided therein, the Administration
Agreement will continue in effect until ________ 1999. The Administration
Agreement thereafter shall be renewed automatically for successive five-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. The Administration Agreement is terminable with respect to a particular
Fund only upon mutual agreement of the parties to the Administration Agreement
and for cause (as defined in the Administration Agreement) by the party alleging
cause, on not less than 60 days' notice by the Company's Board of Directors or
by the Administrator.
The Administration Agreement provides that the Administrator shall not
be liable for any error of judgment or mistake of law or any loss suffered by
any of the Funds in connection with the matters to which the Administration
Agreement relates, except a loss resulting from willful misfeasance, bad faith,
or gross negligence in the performance of its duties, or from the reckless
disregard by the Administrator of its obligations and duties thereunder.
Distributor
- -----------
BISYS Fund Services, Inc., serves as distributor to the Funds pursuant
to the Distribution Agreement dated ___________ ___, 1997, (the "Distribution
Agreement"). Unless otherwise terminated, the Distribution Agreement will
continue in effect until _______, 1999, if such continuance is approved at least
annually (i) by the Company's Board of Directors or by the vote of a majority of
the outstanding Shares of the Funds and (ii) by the vote of a majority of the
Directors of the Company who are not parties to the Distribution Agreement or
interested persons (as defined in the 1940 Act) of any party to the Distribution
Agreement, cast in person at a meeting called for the purpose of voting on such
approval. The Distribution Agreement may be terminated in the event of any
assignment, as defined in the 1940 Act.
In its capacity as Distributor, BISYS Fund Services, Inc., solicits
orders for the sale of Shares, advertises and pays the costs of advertising,
office space and the personnel involved in such activities. The Distributor
receives no compensation under the Distribution Agreement with the Company, but
may receive compensation under the Distribution and Shareholder Service Plan
described below.
As described in the Prospectus, the Company has adopted a Distribution
and Shareholder Service Plan (the "Plan") pursuant to Rule 12b-1 under the 1940
Act under which the Funds are authorized to pay the Distributor for payments it
makes to banks, including AMCORE Investment Group, N.A., other institutions and
broker-dealers, and for expenses the Distributor and any of its affiliates or
subsidiaries incur (with all of the foregoing organizations being referred to as
"Participating Organizations") for providing administration, distribution or
shareholder service assistance. Payments to such Participating Organizations may
be made pursuant to agreements entered into with the Distributor. The Plan
authorizes the Funds to make payments to the Distributor in an amount not to
exceed, on an annual basis, 0.25% of the average daily net asset value of the
"S" Shares of the Equity Fund and Government Assets Fund and the shares of the
other Funds.
As required by Rule 12b-1, the Plan was approved by the sole
Shareholder of each class of shares of a Fund and by the Board of Directors,
including a majority of the Directors who are not interested persons of the
Funds and who have no direct or indirect financial interest in the operation of
the Plan (the "Independent Directors"). The Plan may be terminated with respect
to a Fund by vote of a majority of the Independent Directors, or by vote of a
majority of the outstanding Shares of the Fund. The Directors review quarterly a
written report of such costs and the purposes for which such costs have been
incurred. The Plan may be amended by vote of the Directors including a majority
of the Independent Directors, cast in person at a meeting called for that
purpose. However, any change in the Plan that would materially increase the
distribution cost to a Fund requires Shareholder approval. For so long as the
Plan is in effect, selection and nomination of the Independent Directors shall
be committed to the discretion of such disinterested persons.
All agreements with any person relating to the implementation of the
Plan may be terminated, with respect to a Fund, at any time on 60 days' written
notice without payment of any penalty, by vote of a majority of the Independent
Directors or by vote of a majority of the outstanding Shares of the Fund. The
Plan will continue in effect for successive one-year periods, provided that each
such continuance is specifically approved (i) by the vote of a majority of the
Independent Directors, and (ii) by the vote of a majority of the entire Board of
Directors cast in person at a meeting called for that purpose. The Board of
Directors has a duty to request and evaluate such information as may be
reasonably necessary for it to make an informed determination of whether the
Plan should be implemented or continued. In addition the Directors in approving
the Plan must determine that there is a reasonable likelihood that the Plan will
benefit each Fund and its Shareholders.
The Board of Directors of the Company believes that the Plan is in the
best interests of each of the Funds to which it applies since it encourages Fund
growth. As a Fund grows in size, certain expenses, and therefore total expenses
per Share, may be reduced and overall performance per Share may be improved.
As authorized by the Plan, the Distributor has entered into a Rule
12b-1 Agreement with AMCORE Investment Group, N.A. pursuant to which AMCORE
Investment Group, N.A. has agreed to provide certain administrative and
shareholder support services in connection with Shares of the Funds purchased
and held by AMCORE Investment Group, N.A. for the accounts of its Customers and
Shares of the Fund purchased and held by Customers of AMCORE Investment Group,
N.A. directly, including, but not limited to, processing automatic investments
of AMCORE Investment Group, N.A.'s Customer account cash balances in Shares of a
Fund and establishing and maintaining the systems, accounts and records
necessary to accomplish this service, establishing and maintaining Customer
accounts and records, processing purchase and redemption transactions for
Customers, answering routine Customer questions concerning the Funds and
providing such office space, equipment, telephone and personnel as is necessary
and appropriate to accomplish such matters. In consideration of such services
the Distributor has agreed to pay AMCORE Investment Group, N.A. a monthly fee,
computed at the annual rate of 0.25% of the average aggregate net asset value of
Shares of the Funds held during the period in Customer accounts for which AMCORE
Investment Group, N.A. has provided services under this Agreement. The
Distributor will be compensated by each Fund in an amount equal to its payments
to AMCORE Investment Group, N.A. with respect to each Fund's Shares under the
Rule 12b-1 Agreement.
Administrative Services Plan
- ----------------------------
The Company has adopted an Administrative Services Plan (the "Services
Plan") pursuant to which each Fund is authorized to pay compensation to banks
and other financial institutions (each a "Service Organization"), which may
include the Adviser, its correspondent and affiliated banks, and the
Distributor, which agree to provide certain ministerial, recordkeeping and/or
administrative support services for their customers or account holders
(collectively, "customers") who are the beneficial or record owner of Shares of
that Fund. In consideration for such services, a Service Organization receives a
fee from a Fund, computed daily and paid monthly, at an annual rate of up to
0.25% of the average daily net asset value of Shares of that Fund owned
beneficially or of record by such Service Organization's customers for whom the
Service Organization provides such services.
The servicing agreements adopted under the Services Plan (the
"Servicing Agreements") require the Service Organizations receiving such
compensation to perform certain ministerial, recordkeeping and/or administrative
support services with respect to the beneficial or record owners of Shares of
the Funds, such as processing dividend and distribution payments from the Fund
on behalf of customers, providing periodic statements to customers showing their
positions in the Shares of the Fund, providing sub-accounting with respect to
Shares beneficially owned by such customers and providing customers with a
service that invests the assets of their accounts in Shares of the Fund pursuant
to specific or pre-authorized instructions.
As authorized by the Services Plan, the Company has entered into
Servicing Agreements with the Adviser pursuant to which the Adviser has agreed
to provide certain administrative support services in connection with Shares of
the Funds owned of record or beneficially by its customers. Such administrative
support services may include, but are not limited to, (i) processing dividend
and distribution payments from a Fund on behalf of customers, (ii) providing
periodic statements to its customers showing their positions in the Shares;
(iii) arranging for bank wires; (iv) responding to routine customer inquiries
relating to services performed by the Adviser; (v) providing sub-accounting with
respect to the Shares beneficially owned by the Adviser's customers or the
information necessary for sub-accounting; (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 its customers; (vii) aggregating and processing purchase, exchange,
and redemption requests from customers and placing net purchase, exchange, and
redemption orders for customers; and (viii) providing customers with a service
that invests the assets of their account in the Shares pursuant to specific or
pre-authorized instructions. In consideration of such services, the Company, on
behalf of each Fund, has agreed to pay the Adviser a monthly fee, computed at an
annual rate of twenty-five one-hundredths of one percent (0.25%) of the average
aggregate net asset value of Shares of that Fund held during the period by
customers for whom the Adviser has provided services under the Servicing
Agreement.
Custodian
- ---------
Bankers Trust Company, New York, New York, serves as custodian (the
"Custodian") to the Funds pursuant to the Custodian Agreement dated as of
___________, 1997, between the Company and the Custodian (the "Custodian
Agreement"). The Custodian's responsibilities include safeguarding and
controlling each Fund's cash and securities, handling the receipt and delivery
of securities, and collecting interest on each Fund's investments. In
consideration of such services, each of the Funds pays the Custodian an annual
fee plus fixed fees charged for certain portfolio transactions and out-of-pocket
expenses.
Unless sooner terminated, the Custodian Agreement will continue in
effect until terminated by either party upon 60 days' advance written notice to
the other party. Notwithstanding the foregoing, the Custodian Agreement, with
respect to a Fund, must be approved at least annually by the Company's Board of
Directors or by vote of a majority of the outstanding Shares of that Fund (as
defined under "GENERAL INFORMATION - Miscellaneous" in the Prospectus), and a
majority of the Directors who are not parties to the Custodian Agreement or
interested persons (as defined in the 1940 Act) of any party to the Custodian
Agreement ("Disinterested Persons") by votes cast in person at a meeting called
for such purpose.
Transfer Agency and Fund Accounting Services
- --------------------------------------------
IMG also serves as transfer agent and dividend disbursing agent (the
"Transfer Agent") for the Funds, pursuant to the Transfer Agency Agreement dated
_____________, 1997. Pursuant to such Agreement, the Transfer Agent, among other
things, performs the following services in connection with each of the Funds'
Shareholders of record: maintenance of shareholder records for each of the
Fund's Shareholders of record; processing shareholder purchase and redemption
orders; processing transfers and exchanges of Shares of the Funds on the
shareholder files and records; processing dividend payments and reinvestments;
and assistance in the mailing of shareholder reports and proxy solicitation
materials. For such services the Transfer Agent receives a fee based on the
number of shareholders of record. IMG has contracted with BISYS Fund Services
Ohio, Inc. ("BISYS Fund Services Ohio" of the "Sub-Transfer Agent") to serve as
Sub-Transfer Agent.
In addition, IMG provides certain fund accounting services to the Funds
pursuant to a Fund Accounting Agreement dated ________, 1997. IMG receives a fee
from each Fund for such services equal to a fee computed daily and paid
periodically at an annual rate of three one-hundredths of one percent (.03%) of
that Fund's average daily net assets. Under such Agreement, IMG maintains the
accounting books and records for each Fund, including journals containing an
itemized daily record of all purchases and sales of portfolio securities, all
receipts and disbursements of cash and all other debits and credits, general and
auxiliary ledgers reflecting all asset, liability, reserve, capital, income and
expense accounts, including interest accrued and interest received, and other
required separate ledger accounts; maintains a monthly trial balance of all
ledger accounts; performs certain accounting services for the Fund, including
calculation of the net asset value per Share, calculation of the dividend and
capital gain distributions, if any, and of yield, reconciliation of cash
movements with the Custodian, affirmation to the Custodian of all portfolio
trades and cash settlements, verification and reconciliation with the Custodian
of all daily trade activity; provides certain reports; obtains dealer
quotations, prices from a pricing service or matrix prices on all portfolio
securities in order to mark the portfolio to the market; and prepares an interim
balance sheet, statement of income and expense, and statement of changes in net
assets for each Fund.
Independent Auditors
- --------------------
KPMG Peat Marwick LLP, P.O. Box 772, Des Moines, Iowa 50309, have been
selected as independent auditors for the Company for the fiscal year ended April
30, 1998. KPMG Peat Marwick LLP will perform an annual audit of the Funds'
financial statements and provide other services related to filings with respect
to securities regulations. Reports of their activities will be provided to the
Company's Board of Directors.
Legal Counsel
- -------------
Cline, Williams, Wright, Johnson & Oldfather, 1900 First Bank Building,
Lincoln, Nebraska 68508, is counsel to the Company.
ADDITIONAL INFORMATION
Description of Shares
- ---------------------
The Company is a Maryland corporation, organized on November 16, 1994.
The Company's Articles of Incorporation are on file with the Secretary of State
of Maryland. The Articles of Incorporation authorize the Board of Directors to
issue 100,000,000,000 shares, which are shares of beneficial interest, with a
par value of $0.001 per share. The Company consists of several funds organized
as separate series of shares. There are eleven series which represent the
various Funds that the Company offers. Some series are further divided presently
in up to four additional "classes" of shares which bear differing class level
fees. Additional classes of a series may be authorized in the future. At
present, only the Equity Fund and the Government Assets Fund are offered with
classes. In both cases, the classes are referred to "Trust shares" and "S
shares." S shares bear the Rule 12b-1 distribution fees described herein and in
the Prospectus, while Trust shares are not subject to Rule 12b-1 distribution
fees. The establishment of classes of Shares was approved by the Board of
Directors under the provisions of a plan adopted pursuant to Rule 18f-3, which
Plan sets forth the basis for allocating certain expenses among the classes of
the Company's shares. Under Rule 18f-3 and the plan the Company is permitted to
establish separate classes that allow for different arrangement for shareholder
services, distribution of shares and other services and to pay different amounts
of the expenses.
Shares have no subscription or preemptive rights and only such
conversion or exchange rights as the Board of Directors may grant in its
discretion. When issued for payment as described in the Prospectuses and this
Statement of Additional Information, the shares will be fully paid and
nonassessable. In the event of a liquidation or dissolution of the Company,
shareholders of a fund are entitled to receive the assets available for
distribution belonging to that fund, and a proportionate distribution, based
upon the relative asset values of the respective funds, of any general assets
not belonging to any particular fund which are available for distribution. All
shares are held in uncertificated form and will be evidenced by the appropriate
notation on the books of the Transfer Agent.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted to the holders of the outstanding voting securities of an investment
company such as the Company shall 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 the matter. For purposes of determining whether the
approval of a majority of the outstanding Shares of a Fund will be required in
connection with a matter, a Fund will 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 any interest of the Fund. Under Rule 18f-2,
the approval of an investment advisory agreement or any change in investment
policy would be effectively acted upon with respect to a Fund only if approved
by a majority of the outstanding Shares of such Fund. Approval of changes to the
Rule 12b-1 Plan applicable to a Fund, or to a class of shares of a Fund would
only be effectively acted upon with respect to the Fund or to a class of shares
of a Fund, if approved by a majority of the outstanding Shares of such Fund or
class of Shares. However, Rule 18f-2 also provides that the ratification of
independent public accountants, the approval of principal underwriting
contracts, and the election of Directors may be effectively acted upon by
Shareholders of the Company voting without regard to series.
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.
Vote of a Majority of the Outstanding Shares
- --------------------------------------------
As used in the Prospectus and this Statement of Additional Information,
a "vote of a majority of the outstanding Shares" of a Fund means the affirmative
vote, at a meeting of Shareholders duly called, of the lesser of (a) 67% or more
of the votes of Shareholders of that Fund present at a meeting at which the
holders of more than 50% of the votes attributable to Shareholders of record of
that Fund are represented in person or by proxy, or (b) the holders of more than
50% of the outstanding votes of Shareholders of that Fund.
Additional Tax Information
- --------------------------
TAXATION OF THE FUNDS. Each Fund intends to qualify annually and to
elect to be treated as a regulated investment company under the Internal Revenue
Code of 1986, as amended (the "Code").
To qualify as a regulated investment company, each Fund must, among
other things, (a) derive in each taxable year at least 90% of its gross income
from dividends, interest, and gains from the sale of securities, invest in
securities within certain statutory limits, and distribute at least 90% of its
net income each taxable year. Each Fund intends to distribute to its
Shareholders, at least annually, substantially all of its investment company
taxable income and net capital gains.
There are tax uncertainties with respect to whether increasing rate
securities will be treated as having an original issue discount. If it is
determined that the increasing rate securities have original issue discount, a
holder will be required to include as income in each taxable year, in addition
to interest paid on the security for that year, an amount equal to the sum of
the daily portions of original issue discount for each day during the taxable
year that such holder holds the security. There may be tax uncertainties with
respect to whether an extension of maturity on an increasing rate note will be
treated as a taxable exchange. In the event it is determined that an extension
of maturity is a taxable exchange, a holder will recognize a taxable gain or
loss, which will be a short-term capital gain or loss if the holder holds the
security as a capital asset, to the extent that the value of the security with
an extended maturity differs from the adjusted basis of the security deemed
exchanged therefor.
FOREIGN TAXES. Investment income on certain foreign securities may be
subject to foreign withholding or other taxes that could reduce the return on
these securities. Tax treaties between the United States and foreign countries,
however, may reduce or eliminate the amount of foreign taxes to which a Fund
would be subject. However, if a Fund invests in the stock of certain foreign
corporations that constitute a Passive Foreign Investment Company ("PFIC"), then
federal income taxes may be imposed on a Fund upon disposition of PFIC
investments.
SHAREHOLDERS' TAX STATUS. Shareholders are subject to federal income
tax on dividends and capital gains received as cash or additional shares. The
dividends received deduction for corporations will apply to ordinary income
distributions to the extent the distribution represents amounts that would
qualify for the dividends received deduction to the Funds if those Funds were
regular corporations, and to the extent designated by those Funds as so
qualifying. These dividends, and any short-term capital gains are taxable as
ordinary income.
CAPITAL GAINS. Capital gains, when experienced by a Fund, could result
in an increase in dividends. Capital losses could result in a decrease in
dividends. When a Fund realizes net long-term capital gains, it will distribute
them at least once every 12 months.
BACKUP WITHHOLDING. Each Fund may be required to withhold U.S. federal
income tax at the rate of 31% of all reportable dividends (which does not
include exempt-interest dividends) and capital gain distributions (as well as
redemptions for all Funds except the Government Assets Fund) payable to
Shareholders who fail to provide the Fund with their correct taxpayer
identification number or to make required certifications, or who have been
notified by the IRS that they are subject to backup withholding. Corporate
Shareholders and certain other Shareholders specified in the Code generally are
exempt from such backup withholding. Backup withholding is not an additional
tax. Any amounts withheld may be credited against the Shareholder's U.S. federal
income tax liability.
Additional Tax Information Concerning the Municipal Bond Fund
- -------------------------------------------------------------
The Municipal Bond Fund intends to qualify under the Code to pay
"exempt-interest dividends" to its Shareholders. The Municipal Bond Fund will be
so qualified if, at the close of each quarter of its taxable year, at least 50%
of the value of its total assets consists of securities on which the interest
payments are exempt from the regular federal income tax. To the extent that
dividends distributed by the Municipal Bond Fund to its Shareholders are derived
from interest income exempt from federal income tax and are designated as
"exempt-interest dividends" by the Fund, they will be excludable from the gross
incomes of the Shareholders for regular federal income tax purposes. The
Municipal Bond Fund will inform Shareholders annually as to the portion of the
distributions from the Fund which constituted "exempt-interest dividends."
Shareholders are advised to consult their own tax advisers with respect
to the particular tax consequences to them of an investment in a Fund.
The foregoing is only a summary of some of the important federal tax
considerations generally affecting purchasers of Shares of the Municipal Bond
Fund. No attempt is made to present a detailed explanation of the income tax
treatment of the Municipal Bond Fund or its Shareholders, and this discussion is
not intended as a substitute for careful tax planning. Accordingly, potential
purchasers of shares of the Municipal Bond Fund are urged to consult their tax
advisers with specific reference to their own tax situation.
Yields and Total Returns of the Government Assets Fund
- ------------------------------------------------------
As summarized in the Prospectus of the Government Assets Fund under the
heading "Performance Information," the yield of the Government Assets Fund for a
seven-day period (the "base period") will be computed by determining the net
change in value (calculated as set forth below) of a hypothetical account having
a balance of one share at the beginning of the period, dividing the net change
in account value by the value of the account at the beginning of the base period
to obtain the base period return, and multiplying the base period return by
365/7 with the resulting yield figure carried to the nearest hundredth of one
percent. Net changes in value of a hypothetical account will include the value
of additional Shares purchased with dividends from the original Share and
dividends declared on both the original Share and any such additional Shares,
but will not include realized gains or losses or unrealized appreciation or
depreciation on portfolio investments. Yield may also be calculated on a
compound basis (the "effective yield") which assumes that net income is
reinvested in Fund Shares at the same rate as net income is earned for the base
period.
The yield and effective yield of the Government Assets Fund will vary
in response to fluctuations in interest rates and in the expenses of the Fund.
For comparative purposes the current and effective yields should be compared to
current and effective yields offered by competing financial institutions for the
same base period and calculated by the methods described below.
The Government Assets Fund may wish to publish total return figures in
its sales literature and other advertising materials. For a discussion of the
manner in which such total return figures are calculated, see "Yields and Total
Returns of the Variable NAV Funds--Total Return Calculations" below.
Yields and Total Returns of the Variable NAV Funds
- --------------------------------------------------
YIELD CALCULATIONS. As summarized in the Prospectuses of the Funds
under the heading "PERFORMANCE INFORMATION", yields of each of the Funds except
the Government Assets Fund will be computed by dividing the net investment
income per share (as described below) earned by the Fund during a 30-day (or one
month) period by the maximum offering price per share on the last day of the
period and annualizing the result on a semi-annual basis by adding one to the
quotient, raising the sum to the power of six, subtracting one from the result
and then doubling the difference. A Fund's net investment income per share
earned during the period is based on the average daily number of Shares
outstanding during the period entitled to receive dividends and includes
dividends and interest earned during the period minus expenses accrued for the
period, net of reimbursements. This calculation can be expressed as follows:
a - b
Yield = 2 [(------- + 1)exp(6) - 1]
cd
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of Shares outstanding during the period
that were entitled to receive dividends.
d = maximum offering price per Share on the last day of the period.
For the purpose of determining net investment income earned during the
period (variable "a" in the formula), dividend income on equity securities held
by a Fund is recognized by accruing 1/360 of the stated dividend rate of the
security each day that the security is in that Fund. Interest earned on any debt
obligations held by a Fund is calculated by computing the yield to maturity of
each obligation held by that Fund based on the market value of the obligation
(including actual accrued interest) at the close of business on the last
Business Day of each month, or, with respect to obligations purchased during the
month, the purchase price (plus actual accrued interest) and dividing the result
by 360 and multiplying the quotient by the market value of the obligation
(including actual accrued interest) in order to determine the interest income on
the obligation for each day of the subsequent month that the obligation is held
by that Fund. For purposes of this calculation, it is assumed that each month
contains 30 days. The maturity of an obligation with a call provision is the
next call date on which the obligation reasonably may be expected to be called
or, if none, the maturity date. With respect to debt obligations purchased at a
discount or premium, the formula generally calls for amortization of the
discount or premium. The amortization schedule will be adjusted monthly to
reflect changes in the market values of such debt obligations.
Undeclared earned income will be subtracted from the net asset value
per share (variable "d" in the formula). Undeclared earned income is the net
investment income which, at the end of the base period, has not been declared as
a dividend, but is reasonably expected to be and is declared as a dividend
shortly thereafter.
During any given 30-day period, the Advisor or the Administrator may
voluntarily waive all or a portion of their fees with respect to a Fund. Such
waiver would cause the yield of that Fund to be higher than it would otherwise
be in the absence of such a waiver.
From time to time, the tax equivalent 30-day yield of the Municipal
Bond Fund may be presented in advertising and sales literature. The tax
equivalent 30-day yield will be computed by dividing that portion of the Fund's
yield which is tax-exempt by one minus a stated tax rate and adding the product
to that portion, if any, of the yield of the Fund that is not tax-exempt.
TOTAL RETURN CALCULATIONS. As summarized in the Prospectuses of the
Funds under the heading "PERFORMANCE INFORMATION", average annual total return
is a measure of the change in value of an investment in a Fund over the period
covered, which assumes any dividends or capital gains distributions are
reinvested in the Fund immediately rather than paid to the investor in cash. The
Funds compute their average annual total returns by determining the average
annual compounded rates of return during specified periods that equate the
initial amount invested to the ending redeemable value of such investment. This
is done by dividing the ending redeemable value of a hypothetical $1,000 initial
payment by $1,000 and raising the quotient to a power equal to one divided by
the number of years (or fractional portion thereof) covered by the computation
and subtracting one from the result. This calculation can be expressed as
follows:
Average Annual ERV
Total Return = [(------)exp (1/n) - 1]
P
Where: ERV = ending redeemable value a t the end of the period covered by
the computation of a hypothetical $1,000 payment made at the
beginning of the period.
P = hypothetical initial payment of $1,000.
n = period covered by the computation, expressed in terms of
years.
The Funds compute their aggregate total returns by determining the
aggregate compounded rates of return during specified periods that likewise
equate the initial amount invested to the ending redeemable value of such
investment. The formula for calculating aggregate total return is as follows:
Aggregate Total ERV
Return = [(------] - 1]
P
ERV = ending redeemable value at the end of the period covered by
the computation of a hypothetical $1,000 payment made at the
beginning of the period.
P = hypothetical initial payment of $1,000.
The calculations of average annual total return and aggregate total
return assume the reinvestment of all dividends and capital gain distributions
on the reinvestment dates during the period. The ending redeemable value
(variable "ERV" in each formula) is determined by assuming complete redemption
of the hypothetical investment and the deduction of all nonrecurring charges at
the end of the period covered by the computations.
Performance Comparisons
- -----------------------
Investors may judge the performance of the Funds by comparing them to
the performance of other mutual funds or mutual fund portfolios with comparable
investment objectives and policies through various mutual fund or market indices
such as those prepared by Dow Jones & Co., Inc. and Standard & Poor's
Corporation and to data prepared by Lipper Analytical Services, Inc., a widely
recognized independent service which monitors the performance of mutual funds or
Ibbotson Associates, Inc. Comparisons may also be made to indices or data
published in IBC's MONEY FUND REPORT, a nationally recognized money market fund
reporting service, Money Magazine, Forbes, Barron's, The Wall Street Journal,
The New York Times, Business Week, and U.S.A. Today. In addition to performance
information, general information about the Funds that appears in a publication
such as those mentioned above may be included in advertisements and in reports
to Shareholders. The Funds may also include in advertisements and reports to
Shareholders information comparing the performance of IMG or its predecessors to
other investment advisers; such comparisons may be published by or included in
Nelsons Directory of Investment Managers, Roger's, Casey/PIPER Manager Database
or CDA/Cadence.
Current yields or performance will fluctuate from time to time and are
not necessarily representative of future results. Accordingly, a Fund's yield or
performance may not provide for comparison with bank deposits or other
investments that pay a fixed return for a stated period of time. Yield and
performance are functions of a Fund's quality, composition and maturity, as well
as expenses allocated to the Fund. Fees imposed upon Customer accounts by the
Adviser or its affiliated or correspondent banks for cash management services
will reduce a Fund's effective yield to Customers.
From time to time, the Fund may include general comparative
information, such as statistical data regarding inflation, securities indices or
the features or performance of alternative investments, in advertisements, sales
literature and reports to shareholders. The Funds may also include calculations,
such as hypothetical compounding examples, which describe hypothetical
investment results in such communications. Such performance examples will be
based on an express set of assumptions and are not indicative of the performance
of any Fund.
Miscellaneous
- -------------
The Funds may include information in their Annual Reports and
Semi-Annual Reports to Shareholders that (1) describes general economic trends,
(2) describes general trends within the financial services industry or the
mutual fund industry, (3) describes past or anticipated portfolio holdings for a
fund within the Company or (4) describes investment management strategies for
such funds. Such information is provided to inform Shareholders of the
activities of the Funds for the most recent fiscal year or half-year and to
provide the views of IMG and/or Company officers regarding expected trends and
strategies.
Individual Directors are elected by the Shareholders and, subject to
removal by the vote of two-thirds of the Board of Directors, serve for a term
lasting until the next meeting of Shareholders at which Directors are elected.
Such meetings are not required to be held at any specific intervals.
Shareholders owning not less than 10% of the outstanding Shares of the Company
entitled to vote may cause the Directors to call a special meeting, including
for the purpose of considering the removal of one or more Directors. Any Trustee
may be removed at any meeting of Shareholders by vote of two-thirds of the
Company's outstanding shares. The Declaration of Trust provides that the
Directors will assist shareholder communications to the extent required by
Section 16(c) of the 1940 Act in the event that a shareholder request to hold a
special meeting is made.
The Prospectus and this Statement of Additional Information omit
certain of the information contained in the Registration Statement filed with
the Commission. Copies of such information may be obtained from the Commission
upon payment of the prescribed fee.
The Prospectuses and this Statement of Additional Information are not
an offering of the securities herein described in any state in which such
offering may not lawfully be made. No salesman, dealer, or other person is
authorized to give any information or make any representation other than those
contained in the Prospectuses and this Statement of Additional Information.
<PAGE>
APPENDIX
The nationally recognized statistical rating organizations
(individually, an "NRSRO") that may be utilized by the Adviser with regard to
portfolio investments for the Funds include Moody's Investors Service, Inc.
("Moody's") and Standard & Poor's Corporation ("S&P") and Duff & Phelps, Inc.
("D&F"). Set forth below is a description of the relevant ratings of each such
NRSRO. The NRSROs that may be utilized by the Advisor and the description of
each NRSRO's ratings is as of the date of this Statement of Additional
Information, and may subsequently change.
LONG TERM DEBT RATINGS (may be assigned, for example, to corporate and municipal
bonds)
Description of the three highest long-term debt ratings by Moody's (Moody's
applies numerical modifiers (1, 2, and 3) in each rating category to indicate
the security's ranking within the category):
Aaa Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and
are generally referred to as "gilt edged." Interest payments
are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are
most unlikely to impair the Fundamentally strong position of
such issues.
Aa Bonds which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise what
are generally known as high grade bonds. They are rated lower
than the best bonds because margins of protection may not be
as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other
elements present which make the long-term risk appear somewhat
larger than in Aaa securities.
A Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade
obligations. Factors giving security to principal and interest
are considered adequate, but elements may be present which
suggest a susceptibility to impairment some time in the
future.
Description of the three highest long-term debt ratings by S&P (S&P may apply a
plus (+) or minus (-) to a particular rating classification to show relative
standing within that classification):
AAA Debt rated AAA has the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely
strong.
AA Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the higher rated issues only
in small degree.
A Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
Description of the three highest long-term debt ratings by D&P;
AAA Highest credit quality. The risk factors are negligible being
only slightly more than for risk-free U.S. Treasury debt.
AA+ High credit quality Protection factors are strong. AA Risk is
modest but may vary slightly from time to time AA- because of economic
conditions.
A+ Protection factors are average but adequate. However,
A risk factors are more variable and greater in periods of
A- economic stress.
SHORT-TERM DEBT RATINGS (may be assigned, for example, to commercial paper,
master demand notes, bank instruments, and letters of credit)
Moody's description of its three highest short-term debt ratings:
Prime-1 Issuers rated Prime-1 (or supporting institutions) have a
superior capacity for repayment of senior short-term
promissory obligations. Prime-1 repayment capacity will
normally be evidenced by many of the following
characteristics:
- Leading market positions in well-established industries.
- High rates of return on Funds employed.
- Conservative capitalization structures with moderate
reliance on debt and ample asset protection.
- Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
- Well-established access to a range of financial markets
and assured sources of alternate liquidity.
Prime-2 Issuers rated Prime-2 (or supporting institutions) have a
strong capacity for repayment of senior short-term debt
obligations. This will normally be evidenced by many of the
characteristics cited above but to a lesser degree. Earnings
trends and coverage ratios, while sound, may be more subject
to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions.
Ample alternate liquidity is maintained.
Prime-3 Issuers rated Prime-3 (or supporting institutions) have an
acceptable ability for repayments of senior short-term
obligations. The effect of industry characteristics and market
compositions may be more pronounced. Variability in earnings
and profitability may result in changes in the level of debt
protection measurements and may require relatively high
financial leverage. Adequate alternate liquidity is
maintained.
S&P's description of its three highest short-term debt ratings:
A-1 This designation indicates that the degree of safety regarding
timely payment is strong. Those issues determined to have
extremely strong safety characteristics are denoted with a
plus sign (+).
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as
high as for issues designated "A-1".
A-3 Issues carrying this designation have adequate capacity for
timely payment. They are, however, more vulnerable to the
adverse effects of changes in circumstances than obligations
carrying the higher designations.
D&P's description of the short-term debt ratings (D&P incorporates gradations of
"1+" (one plus) and "1-" (one minus) to assist investors in recognizing quality
differences within the highest rating category);
Duff 1+ Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is
just below risk-free U.S. Treasury short-term obligations.
Duff 1 Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection
factors. Risk factors are minor.
Duff 1- High certainty of timely payment. Liquidity factors are
strong and supported by good fundamental protection factors.
Risk factors are very small.
Duff 2 Good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing funding needs
may enlarge total financing requirements, access to capital
markets is good. Risk factors are small.
Short-Term Loan/Municipal Note Ratings
- --------------------------------------
Moody's description of its two highest short-term loan/municipal note ratings:
MIG-1/VMIG-1 This designation denotes best quality. There is present
strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the
market for refinancing.
MIG-2/VMIG-2 This designation denotes high quality. Margins of
protection are ample although not so large as in the preceding
group.
S&P's description of its two highest municipal note ratings:
SP-1 Very strong or strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety
characteristics will be given a plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest.
Definitions of Certain Money Market Instruments
- -----------------------------------------------
Commercial Paper
Commercial paper consists of unsecured promissory notes issued by
corporations. Issues of commercial paper normally have maturities of less than
nine months and fixed rates of return.
Certificates of Deposit
Certificates of Deposit are negotiable certificates issued against
funds deposited in a commercial bank or a savings and loan association for a
definite period of time and earning a specified return.
Bankers' Acceptances
Bankers' acceptances are negotiable drafts or bills of exchange,
normally drawn by an importer or exporter to pay for specific merchandise, which
are "accepted" by a bank, meaning, in effect, that the bank unconditionally
agrees to pay the face value of the instrument on maturity,
U.S. Treasury Obligations
U.S. Treasury Obligations are obligations issued or guaranteed as to
payment of principal and interest by the full faith and credit of the U.S.
Government. These obligations may include Treasury bills, notes and bonds, and
issues of agencies and instrumentalities of the U.S. Government, provided such
obligations are guaranteed as to payment of principal and interest by the full
faith and credit of the U.S. Government.
U.S. Government Agency and Instrumentality Obligations
Obligations of the U.S. Government include Treasury bills, certificates
of indebtedness, notes and bonds, and issues of agencies and instrumentalities
of the U.S. Government, such as the Government National Mortgage Association,
the Export-Import Bank of the United States, the Tennessee Valley Authority, the
Farmers Home Administration, the Federal Home Loan Banks, the Federal
Intermediate Credit Banks, the Federal Farm Credit Banks, the Federal Land
Banks, the Federal Housing Administration, the Federal National Mortgage
Association, the Federal Home Loan Mortgage Corporation, and the Student Loan
Marketing Association. Some of these obligations, such as those of the
Government National Mortgage Association and the Export-Import Bank of the
United States, are supported by the full faith and credit of the U.S. Treasury;
others, such as those of the Federal National Mortgage Association are supported
by the right of the issuer to borrow from the Treasury; others, such as those of
the Student Loan Marketing Association, are supported by the discretionary
authority of the U.S. Government to purchase the agency's obligations; still
others, such as those of the Federal Farm Credit Banks, are supported only by
the credit of the instrumentality. No assurance can be given that the U.S.
Government would provide financial support to U.S. Government-sponsored
instrumentalities if it is not obligated to do so by law.
<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,
incorporated by reference to Post-Effective
Amendment No. 7 filed November 7, 1997
*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,
incorporated by reference to Post-Effective
Amendment No. 7 filed November 7, 1997
*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, incorporated by reference to
Post-Effective Amendment No. 7 filed
November 7, 1997
*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,
incorporated by reference to Post-Effective
Amendment No. 7 filed November 7, 1997
*6.(a) Distribution Agreement, incorporated by
reference to the Fund's Registration
Statement, filed December 14, 1994
*6.(b) Form of Distribution Agreement,
incorporated by reference to Post-Effective
Amendment No. 7 filed November 7, 1997
*8.(a) Custodial Agreement, incorporated by
reference to the Fund's Registration
Statement, filed December 14, 1994
*8.(b) Form of Custodial Agreement, incorporated by
reference to Post-Effective Amendment
No. 7 filed November 7, 1997
**8. (c) 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,
incorporated by reference to Post-Effective
Amendment No. 7 filed November 7, 1997
*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, incorporated by reference
to Post-Effective Amendment No. 7 filed
November 7, 1997
*15.(c) Distribution Plan, incorporated by reference
to Post-Effective Amendment No. 7 filed
November 7, 1997
**15.(d) 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
*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 12, 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 11th 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 11, 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. 8
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, incorporated by
reference to Post-Effective Amendment No. 7 filed
November 7, 1997...........................................
*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, incorporated
by reference to Post-Effective Amendment No. 7 filed
November 7, 1997...........................................
*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,
incorporated by reference to Post-Effective Amendment
No. 7 filed November 7, 1997...............................
*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, incorporated by
reference to Post-Effective Amendment No. 7 filed
November 7, 1997...........................................
*6. (a) Distribution Agreement, incorporated by reference
to the Fund's Registration Statement, filed
December 14, 1994..........................................
*6. (b) Form of Distribution Agreement, incorporated by
reference to Post-Effective Amendment No. 7 filed
November 7, 1997...........................................
*8. (a) Custodial Agreement, incorporated by reference
to the Fund's Registration Statement, filed
December 14, 1994..........................................
*8. (b) Form of Custodial Agreement, incorporated by
reference to Post-Effective Amendment No. 7 filed
November 7, 1997...........................................
**8. (c) 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, incorporated by
reference to Post-Effective Amendment No. 7 filed
November 7, 1997...........................................
*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, incorporated by reference to
Post-Effective Amendment No. 7 filed November 7, 1997......
*15. (c) Distribution Plan, incorporated by reference to
Post-Effective Amendment No. 7 filed November 7, 1997......
**15. (d) Distribution and Shareholder Services Plan.................
*16. (a) 18f3 Plan, incorporated by reference to
Pre-Effective Amendment No. 3, filed May 18, 1995..........
**16. (b) Amended 18f3 Plan..........................................
*17. Calculation of Yield Quotations, included in
Part B of this Registration Statement......................
IMG MUTUAL FUNDS, INC.
EXHIBIT # 8(c)
TO
POST-EFFECTIVE AMENDMENT NO. 8
FORM N-1A REGISTRATION STATEMENT
<PAGE>
CUSTODIAN AGREEMENT
AGREEMENT dated as of ___________ ___, 1997, between BANKERS TRUST
COMPANY (The "Custodian") and IMG Mutual Funds, Inc. (the "Customer").
WHEREAS, the Customer 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 (each as hereinafter defined) (all such existing and
additional series now or hereafter listed on Exhibit A being hereafter referred
to individually as a "Portfolio" and collectively, as the "Portfolios"); and
WHEREAS, the Customer desires to appoint the Custodian as custodian on
behalf of the Portfolios 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
herein contained, the parties hereto agree as follows:
1. EMPLOYMENT OF CUSTODIAN. The Customer hereby employs the Custodian
as custodian of all assets of each Portfolio which are delivered to and accepted
by the Custodian or any Subcustodian (as that term is defined in Section 4) (the
"Property") pursuant to the terms and conditions set forth herein. Without
limitation, such Property shall include stocks and other equity interests of
every type, evidences of indebtedness, other instruments representing sale or
rights or obligations to receive, purchase, deliver or sell same and other
non-cash investment property of a Portfolio which is acceptable for deposit
("Securities") and cash from any source and in any currency ("Cash"). The
Custodian shall not be responsible for any property of a Portfolio held or
received by the Customer or others and not delivered to the Custodian or any
Subcustodian.
2. MAINTENANCE OF SECURITIES AND CASH AT CUSTODIAN AND SUBCUSTODIAN
LOCATIONS. Pursuant to Instructions, the Customer shall direct the Custodian to
(a) settle Securities transactions and maintain cash in the country or other
jurisdiction in which the principal trading market for such Securities is
located, where such Securities are to be presented for payment or where such
Securities are acquired and (b) maintain cash and cash equivalents in such
countries in amounts reasonably necessary to effect the Customer's transactions
in such Securities. Instructions to settle Securities transactions in any
country shall be deemed to authorize the holding of such Securities and Cash in
that country.
3. CUSTODY ACCOUNT. The Custodian agrees to establish and maintain one
or more custody accounts on its books each in the name of a Portfolio (each, an
"Account") for any and all Property from time to time received and accepted by
the Custodian or any Subcustodian for the account of such Portfolio. Upon
deliver by the Customer to the Custodian of any Property belonging to any
Portfolio, the Customer shall, by Instructions (as hereinafter defined in
Section 14), specifically indicate which Portfolio such Property belongs or if
such Property belongs to more than one Portfolio shall allocate such Property to
the appropriate Portfolio. The Custodian shall allocate such Property to the
Accounts in accordance with the Instructions; provided that the Custodian shall
have the right, in its sole discretion, to refuse to accept any Property that is
not in proper form for deposit for any reason. The Customer on behalf of each
Portfolio, acknowledges its responsibility as a principal for all of its
obligations to the Custodian arising under or in connection with this Agreement,
warrants its authority to deposit in the appropriate Account any Property
received therefor by the Custodian or a Subcustodian and to give, and authorize
others to give, instructions relative thereto. The Custodian may deliver
securities of the same class in place of those deposited in the Account.
The Custodian shall hold, keep safe and protect as custodian for each
Account, on behalf of the Customer, all Property in such Account. All
transactions, including, but not limited to, foreign exchange transactions,
involving the Property shall be executed or settled solely in accordance with
Instructions (which shall specifically reference the Account for which such
transaction is being settled), except that until the Custodian received
Instructions to the contrary, the Custodian will:
(a) collect all interest and dividends and all other income and
payments, whether paid in cash or in kind, on the Property, as
the same become payable and credit the same to the appropriate
Account.
(b) Present for payment all Securities held in an Account which
are called, redeemed or retired or otherwise become payable
and all coupons and other income items which call for payment
upon presentation to the extent that the Custodian or
Subcustodian is actually aware of such opportunities and hold
the cash received in such Account pursuant to this Agreement;
(c) (i) exchange Securities where the exchange is purely
ministerial (including, without limitation, the exchange of
temporary securities for those in definitive form and the
exchange of warrants, or other documents of entitlement to
securities, for the Securities themselves) and (ii) when
notification of a tender or exchange offer (other than
ministerial exchanges described in (i) above is received for
an Account, endeavor to receive Instructions, provided that if
such Instructions are not received in time for the Custodian
to take timely action, no action shall be taken with respect
thereto;
(d) whenever notification of a rights entitlement or a fractional
interest resulting from a rights issue, stock dividend or
stock split is received for an Account and such rights
entitlement or fractional interest bears an expiration date,
if after endeavoring to obtain Instructions such Instructions
are not received in time for the Custodian to take timely
action or if actual notice of such actions was received too
late to seek Instructions, sell in the discretion of the
Custodian (which sale the Customer hereby authorizes the
Custodian to make) such rights entitlement or fractional
interest and credit the Account with the net proceeds of such
sale;
(e) execute in the Customer's name for an Account, whenever the
Custodian deems it appropriate, such ownership and other
certificates as may be required to obtain the payment of
income from the Property in such Account;
(f) pay for each Account, any and all taxes and levies in the
nature of taxes imposed on interest, dividends or other
similar income on the Property in such Account by any
governmental authority. In the event there is insufficient
Cash available in such Account to pay such taxes and levies,
the Custodian shall notify the Customer of the amount of the
shortfall and the Customer, at its option, may deposit
additional Cash in such Account or take steps to have
sufficient Cash available. The Customer agrees, when and if
requested by the Custodian and required in connection with the
payment of any such taxes to cooperate with the Custodian in
furnishing information, executing documents or otherwise; and
(g) appoint brokers and agents for any of the ministerial
transactions involving the Securities described in (a) - (f),
including, without limitation, affiliates of the Custodian or
any Subcustodian.
4. SUBCUSTODIAN AND SECURITIES SYSTEMS. The Customer authorizes and
instructs the Custodian to hold the Property in each Account in custody accounts
which have been established by the Custodian with (a) one of its U.S. branches
or another U.S. bank or trust company or branch thereof located in the U.S.
which is itself qualified under the Investment Company Act of 1940, as amended
("1940 Act"), to act as custodian (individually, a "U.S. Subcustodian"). Or a
U.S. securities depository or clearing agency or system in which the Custodian
or a U.S. Subcustodian participates (individually, a "U.S. Securities System")
or (b) one of its non-U.S. branches or majority-owned non-U.S. subsidiaries, a
non-U.S. branch or majority-owned subsidiary of a U.S. bank or a non-U.S. bank
or trust company, acting as custodian (individually, a "non-U.S. Subcustodian";
U.S. Subcustodians and non-U.S. Subcustodians, collectively, "Subcustodian"), or
a non-U.S. depository or clearing agency or system in which the Custodian or any
Subcustodian participates (individually, a "non-U.S. Securities System"; U.S.
Securities System and non-U.S. Securities System, collectively, "Securities
System", provided that in each case in which a U.S. Subcustodian or U.S.
Securities System is employed, each such Subcustodian or Securities System shall
have been approved by Instructions; provided further that in each case in which
a non-U.S. Subcustodian or non-U.S. Securities System is employed, (a) such
Subcustodian or Securities System either is (i) a "qualified U.S. bank" as
defined by Rule 17f-5 under the 1940 Act ("Rule 17f-5") or (ii) an "eligible
foreign custodian" within the meaning of Rule 17f-5 or such Subcustodian or
Securities System is the subject of an order granted by the U.S. Securities and
Exchange Commission ("SEC") exempting such agent or the subcustody arrangements
thereto from all or part of the provisions of Rule 17f-5 and (b) the agreement
between the Custodian and such non-U.S. Subcustodian has been approved by
Instructions; it being understood that the Custodian shall have no liability or
responsibility for determining whether the approval of any Subcustodian or
Securities System has been proper under the 1940 Act or any rule or regulation
thereunder.
Upon receipt of Instructions, the Custodian agrees to cease the
employment of any Subcustodian or Securities System with respect to the
Customer, and if desirable and practicable, appoint a replacement Subcustodian
or securities system in accordance with the provisions of this Section. In
addition, the Custodian may, at any time in its discretion, upon written
notification to the Customer, terminate the employment of any Subcustodian or
Securities System.
Upon request of the Customer, the Custodian shall deliver to the
Customer annually a certificate stating: (a) the identity of each non-U.S.
Subcustodian and non-U.S. Securities System then acting on behalf of the
Custodian and the name and address of the governmental agency or other
regulatory authority that supervises or regulates such no-U.S. Subcustodian and
non-U.S. Securities System is located; and (c) so long as rule 17f-5 requires
the Customer's Board of Directors to directly approve its foreign custody
arrangements, such other information relating to such non-U.S. Subcustodians and
non-U.S. Securities Systems as may reasonable be requested by the Customer to
ensure compliance with Rule 17f-5. So long as Rule 17f-5 requires the Customer's
Board of Directors to directly approve its foreign custody arrangements, the
Custodian also shall furnish annually to the Customer information concerning
such non-U.S. Subcustodians and non-U.S. Securities Systems similar in kind and
scope as that furnished to the Customer in connection with the initial approval
of this Agreement. Custodian agrees to promptly notify the Customer if, in the
normal course of its custodial activities, the Custodian has reason to believe
that any non-U.S. Subcustodian or non-U.S. Securities System has ceased to be a
qualified U.S. bank or an eligible foreign custodian each within the meaning of
Rule 17f-5 or has ceased to be subject to an exemptive order from the SEC.
5. USE OF SUBCUSTODIAN. With respect to Property in an Accounts which
is maintained by the Custodian in the custody of a Subcustodian employed
pursuant to Section 4:
(a) The Custodian will identify on its books as belonging to the
Customer on behalf of a Portfolio, any Property held by such
Subcustodian.
(b) Any Property in the Account held by a Subcustodian will be
subject only to the instructions of the Custodian or its
agents.
(c) Property deposited with a Subcustodian will be maintained in
an account holding only assets for customers of the Custodian.
(d) Any agreement the Custodian shall enter into with a non-U.S.
Subcustodian with respect to the holding of Property shall
require that (i) the Account will be adequately indemnified or
its losses adequately insured; (ii) the Securities are not
subject to any right, charge, security interest, lien or claim
of any kind in favor of such Subcustodian or its creditors
except a claim for payment in accordance with such agreement
for their safe custody or administration and expenses related
thereto, (iii) beneficial ownership of such Securities be
freely transferable without the payment of money or value other
than for safe custody or administration and expenses related
thereto, (iv) adequate records will be maintained identifying
the Property held pursuant to such Agreement as belonging to
the Custodian, on behalf of its customers and (v) to the extent
permitted by applicable law, officers of or auditors employed
by, or other representatives of or designated by, the
Custodian, including the independent public accountants of or
designated by, the Customer be given access to the books and
records of such Subcustodian relating to its actions under its
agreement pertaining to any Property held by it thereunder or
confirmation or of pertinent information contained in such
books and records be furnished to such persons designated by
the Custodian.
6. USE OF SECURITIES SYSTEM. With respect to Property in the Account(s)
which are maintained by the Custodian or any Subcustodian in the custody of a
Securities System employed pursuant to Section 4:
(a) The Custodian shall, and the Subcustodian will be required by
its assignment with the Custodian to, identify on its books
such Property as being held for the account of the Custodian
or Subcustodian for its customers.
(b) Any Property held in a Securities System for the account of
the Custodian or a Subcustodian will be subject only to the
instructions of the Custodian or such Subcustodian, as the
case may be.
(c) Property deposited with a Securities System will be maintained
in an account holding only assets for customers of the
Custodian or Subcustodian, as the case may be, unless
precluded by applicable law, rule, or regulation.
(d) The Custodian shall provide the Customer 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.
7. AGENTS. The Custodian may at any time or times in its sole
discretion appoint (or remove) any other U.S. bank or trust company which is
itself qualified under the 1940 Act to act as custodian, as its agent to carry
out such of the provisions of this Agreement 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.
8. RECORDS, OWNERSHIP OF PROPERTY, STATEMENTS, OPINIONS OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS.
(a) The ownership of the Property whether Securities, Cash and/or other
property, and whether held by the Custodian or Subcustodian or in a Securities
System as authorized herein, shall be clearly recorded on the Custodian's books
as belonging to the appropriate Account and not for the Custodian's own
interest. The Custodian shall keep accurate and detailed account of all
investments, receipts, disbursements and other transactions for each Account.
All accounts, books and records of the Custodian relating thereto shall be open
to inspection and audit at all reasonable times during normal business hours by
any person designated by the Customer. The Custodian will supply to the Customer
from time to time, as mutually agreed upon, a statement in respect to any
Property in an Account held by the Custodian or by a Subcustodian. In the
absence of the filing in writing with the Custodian by the Customer of
exceptions or objections to any such statement within sixty (60) days of the
mailing thereof, the Customer shall be deemed to have approved such statement
and in such case or upon written approval of the Customer of any such statement,
such statement shall be presumed to be for all purposes correct with respect to
all information set forth therein, absent a showing by the Customer of an error
supported by clear and convincing evidence.
(b) The Custodian shall take all reasonable action as the Customer may
request to obtain from year to year favorable opinions from the Customer's
independent certified public accountants with respect to the Custodian's
activities hereunder in connection with the preparation of the Customer's Form
N-1A and the Customer's Form N-SAR or other periodic reports to the SEC and with
respect to any other requirements of the SEC.
(c) At the request of the Customer, the Custodian shall deliver to the
Customer a written report prepared by the Custodian's independent certified
public accountants with respect to the services provided by the Custodian under
this Agreement, including, without limitation, the Custodian's accounting
system, internal accounting control and procedures for safeguarding Cash and
Securities, including Cash and Securities deposited and/or maintained in a
securities system or with a Subcustodian. Such report shall be of sufficient
scope and in sufficient detail as may reasonably by required by the Customer and
as may reasonably be obtained by the Custodian.
(d) The Customer may elect to participate in any of the electronic
on-line service and communications systems offered by the Custodian which can
provide the Customer, on a daily basis, with the ability to view on-line or to
print on hard copy various reports of Account activity and of Securities and/or
Cash being held in any Account. To the extent that such service shall include
market values of Securities in an Account, the Customer hereby acknowledges that
the Custodian now obtains and may in the future obtain information on such
values from outside sources that the Custodian considers to be reliable and the
Customer agrees that the Custodian (i) does not verify or represent or warrant
either the reliability of such service and (ii) shall be without liability in
selecting and utilizing such services or furnishing any information derived
therefrom.
9. HOLDING OF SECURITIES, NOMINEES, ETC. Securities in an Account which
are held by the Custodian or any Subcustodian may be held by such entity in the
name of the Customer, on behalf of a Portfolio, in the Custodian's or
Subcustodian's names, in the name of the Custodian's or Subcustodian's nominee,
or in bearer form. Securities that are held by a Subcustodian or which are
eligible for deposit in a Securities System as provided above may be maintained
with the Subcustodian or the Securities System in an account for the Custodian's
or Subcustodian's customers, unless prohibited by law, rule, or regulation. The
Custodian or Subcustodian, as the case may be, may combine certificates
representing Securities held in an Account with certificates of the same issue
held by it as fiduciary or as a custodian. In the event that any Securities in
the name of the Custodian or its nominee or held by a Subcustodian and
registered in the name of such Subcustodian or its nominee are called for
partial redemption by the issuer of such Security, the Custodian may, subject to
the rules or regulations pertaining to allocation of any Securities System in
which such Securities have been deposited, allot, or cause to be allotted, the
called portion of the respective beneficial holders of such class of security in
any manner the Custodian deems to be fair and equitable.
10. PROXIES, ETC. With respect to any proxies, notices, reports or
other communications relative to any of the Securities in any Account, the
Custodian shall perform such services and only such services relative thereto as
are (i) set forth in Section 3 of this Agreement, (ii) described in Exhibit B
attached hereto (as such service therein described may be in effect from time to
time) (the "Proxy Service") and (iii) as may otherwise be agreed upon between
the Custodian and the Customer. The liability and responsibility of the
Custodian in connection with the Proxy Service referred to in (ii) of the
immediately preceding sentence and in connection with any additional services
which the Custodian and the Customer may agree upon as provided in (iii) of the
immediately preceding sentence shall be as set forth in the description of the
Proxy Service and as may be agreed upon by the Custodian and the Customer in
connection with the furnishing of any such additional service and shall not be
affected by any other term of this Agreement. Neither that Custodian nor its
nominees or agents shall vote upon or in respect of any of the Securities in an
Account, execute any form of proxy to vote thereon, or give any consent or take
any action (except as provided in Section 3) with respect thereto except upon
the receipt of Instructions relative thereto.
11. SEGREGATED ACCOUNT. To assist the Customer in complying with the
requirements of the 1940 Act and the rules and regulations thereunder, the
Custodian shall, upon receipt of Instructions, establish and maintain a
segregated account or accounts on its books for and on behalf of a Portfolio.
12. SETTLEMENT PROCEDURES. Securities will be transferred, exchanged or
delivered by the Custodian or a Subcustodian upon receipt by the Custodian of
Instructions that include all information required by the Custodian. Settlement
and payment for Securities received for an Account and delivery of Securities
out of such Account may be effected in accordance with the customary or
established securities trading or securities processing practices and procedures
in the jurisdiction or market in which the transaction occurs, including,
without limitation, delivering Securities to the purchaser thereof or to a
dealer therefor (or an agent for such purchaser or dealer) against a receipt
with the expectation of receiving later payment for such Securities from such
purchaser or dealer, as such practices and procedures may be modified or
supplemented in accordance with the standard operating procedures of the
Custodian in effect from time to time for that jurisdiction or market. The
Custodian shall not be liable for any loss which results from effecting
transactions in accordance with the customary or established securities trading
or securities processing practices and procedures in the applicable jurisdiction
or market.
Notwithstanding that the Custodian may settle purchases and sales
against, or credit income to, an Account, on a contractual basis, as outlined in
the applicable Service Standards as defined below and provided to the Customer
by the Custodian, the Custodian may, at its sole option, reverse such credits or
debits to the appropriate Account in the event that the transaction does not
settle, or the income is not received in a timely manner, and the Customer
agrees to hold the Custodian harmless from any losses which may result
therefrom.
The applicable Service Standards shall be defined as the Global Guide,
the Policies and Standards Manual, and any other documents issued by the
Custodian from time to time specifying the procedures for communicating with the
Customer, the terms of any additional services to be provided to the Customer,
and such other matters as may be agreed between the Customer and the Custodian
from time to time.
13. CONDITIONAL CREDITS.
(a) Notwithstanding any other provisions of this Agreement, the
Custodian shall not be required to comply with any Instructions to settle the
purchase of any securities for the Account, unless there are sufficient
immediately available funds in the relevant currency in the Account, provided
that, if, after all expenses, debits and withdrawals of Cash in the relevant
currency ("Debits") applicable to the Account have been made and if after all
Conditional Credits, as defined below, applicable to the Account have been made
final entries as set forth in (c) below, the amount of immediately available
funds of the relevant currency in such Account is at least equal to the
aggregate purchase price of all securities for which the Custodian has received
Instructions to settle on that date ("Settlement Date"), the Custodian, upon
settlement, shall credit the Securities to the Account by making a final entry
on its books and record.
(b) Notwithstanding the foregoing, if after all Debits applicable to
the Account have been made, there remains outstanding any Conditional Credit (as
defined below) applicable to the Account or the amount of immediately available
funds in a given currency in such Account are less than the aggregate purchase
price in such currency of all securities for which the Custodian has received
Instructions to settle on the Settlement Date, the Custodian, upon settlement,
may credit the securities to the Account by making a conditional entry on its
books and records ("Conditional Credit"), pending receipt of sufficient
immediately available funds in the relevant currency in the Account.
(c) If, within a reasonable time from the posting of a Conditional
Credit and after all Debits applicable to the Account have been made,
immediately available funds in the relevant currency at least equal to the
aggregate purchase price in such currency of all securities subject to a
Conditional Credit on a Settlement Date are deposited into the Account, the
Customer shall be liable to the Custodian only for late charges at a rate which
the Custodian customarily charges for similar extensions of credit.
(d) If, within a reasonable time from the posting of a Conditional
Credit and after all Debits applicable to the Account have been made,
immediately available funds in the relevant currency at least equal to the
aggregate purchase price in such currency of all securities subject to a
Conditional Credit on a Settlement Date are not deposited into the Account, the
Customer authorizes the Custodian, as agent, to sell the securities and credit
the Account with the proceeds of such sale. In such case, the Customer shall be
liable to the Custodian for any deficiencies, out-of-pocket costs and expenses
associated with the sale of the securities, including but not limited tom
shortfalls in the sales proceeds and the Custodian is hereby authorized to sell
such other securities to the extent necessary to satisfy such shortfalls with
the net proceeds of such sales, such sales to take place only upon prior written
notification to the Customer.
(e) The Customer agrees that it will not use the Account to facilitate
the purchase of securities without sufficient funds in the Account on the
Settlement Date or the date provided in the applicable Service Standards,
whichever is earlier.
(f) For the payment of interest, taxes, management or supervisory fees,
distributions or operating expenses.
(g) In connection with any borrowings by the Customer requiring a
pledge of Securities, but only against receipt of amounts borrowed.
(h) In connection with any loans, but only against receipt of
collateral as specified in Instructions which shall reflect any restrictions
applicable to the Customer.
(i) For the purpose of redeeming shares of the capital stock of the
Customer against delivery of the shares to be redeemed to the Custodian, a
Subcustodian or the Customer's transfer agent.
(j) For the purpose of redeeming in kind shares of the Customer against
delivery of the shares to be redeemed to the Custodian, a Subcustodian or the
Customer's transfer agent.
(k) For delivery in accordance with the provisions of any agreement
among the Customer, on behalf of a Portfolio, the Custodian and a broker-dealer
registered under the Securities Exchange Act of 1934 and a member of the
National Association of Securities Dealers, Inc., relating to compliance with
the rules of The Options Clearing Corporation, the Commodities Futures Trading
Commissions 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 Customer.
(l) For release of Securities to designated brokers under covered call
options, provided, however, that such Securities shall be released only upon
payment to the Custodian of monies for the premium due and a receipt for the
Securities which are to be held in escrow. Upon exercise of the option, or at
expiration, the Custodian will receive the Securities previously deposited from
broker. The Custodian will act strictly in accordance with Instructions in the
delivery of Securities to be held in escrow and will have no responsibility or
liability for any such Securities which are not returned promptly when due other
than to made proper request for such return.
(m) For spot or forward foreign exchange transactions to facilitate
security trading or receipt of income from Securities related transactions.
(n) Upon the termination of this Agreement as set forth in Section 20.
(o) For other purposes.
The Customer agrees that the Custodian shall have no obligation to
verify the purpose for which a transaction is being effected.
15. INSTRUCTIONS. The term "Instructions" means instructions from the
Customer in respect of any of the Custodian's duties hereunder which have been
received by the Custodian at its address set forth in Section 22 below (i) in
writing (including, without limitation, facsimile transmission) or by tested
telex signed or given by such one or more person or persons as the Customer
shall have from time to time authorized in writing to give the particular class
of Instructions in question and whose name and (if applicable) signature and
office address have been filed with the Custodian, or (ii) which have been
transmitted electronically through as electronic on-line service and
communications system offered by the Custodian or other electronic instruction
system acceptable to the Custodian, or (iii) a telephonic or oral communication
by one or more persons as the Customer shall have from time to time authorized
to give the particular class of Instructions in question and whose name has been
filed with the Custodian; or (iv) upon receipt of such other form of
instructions as the Customer may from time to time authorize in writing and
which the Custodian has agreed in writing to accept. Instructions in the form of
oral communications shall be confirmed by the Customer by tested telex or
writing in the manner set forth in clause (i) above, but the lack of such
confirmation shall in no way affect any action taken by the Custodian in
reliance upon such oral instructions prior to the Custodian's receipt of such
confirmation. Instructions may relate to specific transactions or to types or
classes of transactions, and may be in the form of standing instructions.
The Custodian shall have the right to assume in the absence of notice
to the contrary from the Customer that any person whose name is on file with the
Custodian pursuant to this Section has been authorized by the Customer or give
the Instructions in question and that such authorization has not been revoked.
The Custodian may act upon and conclusively rely on, without any liability to
the Customer or any other person or entity for any losses resulting therefrom,
any Instructions reasonably believed by it to be furnished by the proper person
or persons as provided above.
16. STANDARD OF CARE. The Custodian shall be responsible for the
performance of only such duties as are set forth herein or contained in
Instructions given to the Custodian which are not contrary to the provisions of
this Agreement. The Custodian will use reasonable care with respect to the
safeguarding of Property in each Account and, except as otherwise expressly
provided herein, in carrying out its obligations under this Agreement. So long
as and to the extent that it has exercised reasonable care, the Custodian shall
not be responsible for the title, validity or genuineness of any Property or
other 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, and may
conclusively rely on, without liability for any loss resulting therefrom, any
notice, request, consent, certificate or other instrument reasonably believed by
it to be genuine and to be signed or furnished by the proper party or parties,
including, without limitation, Instructions, and shall be indemnified by the
Customer for any losses, damages, costs and expenses (including, without
limitation, the fees and expenses of counsel) incurred by the Custodian and
arising out of action taken or omitted with reasonable care by the Custodian
hereunder or under any Instructions. The Custodian shall be liable to the
Customer for any act or omission to act of any Subcustodian to the same extent
as if the Custodian committed such act itself. With respect to a Securities
System, the Custodian shall only be responsible or liable for losses arising
from employment of such Securities System caused by the Custodian's own failure
to exercise reasonable care. In the event of any loss to the Customer by reason
of the failure of the Custodian or a Subcustodian to utilize reasonable care,
the Custodian shall be liable to the Customer to the extent of the Customer's
actual damages at the time such loss was discovered without reference to any
special conditions or circumstances. In no event shall the Custodian be liable
for any consequential or special damages. The Custodian shall be entitled to
rely, and may act, on advice of counsel (who may be counsel for the Customer) on
all matters and shall be without liability for any action reasonably taken or
omitted pursuant to such advice.
In the event the Customer subscribes to an electronic on-line service
and communications system offered by the Custodian, the Customer shall be fully
responsible for the security of the Customer's connecting terminal, access
thereto and the proper and authorized use thereof and the initiation and
application of continuing effective safeguards with respect thereto and agree to
defend and indemnify the Custodian and hold the Custodian harmless from and
against any and all losses, damages, costs and expenses (including the fees and
expenses of counsel) incurred by the Custodian as a result of any improper or
unauthorized use of such terminal by the Customer or by any others.
All collection of funds or other property paid or distributed in
respect of Securities in an Account, including funds involved in third-party
foreign exchange transactions, shall be made at the risk of the Customer.
Subject to the exercise of reasonable care, The Custodian shall have no
liability for any loss occasioned by delay in the actual receipt of notice by
the Custodian or by a Subcustodian of any payment, redemption or other
transaction regarding Securities in each Account in respect of which the
Custodian has agreed to take action as provided in Section 3 hereof. The
Custodian shall not be liable for any loss resulting from, or caused by, or
resulting from acts of governmental authorities (whether de jure or de facto),
including, without limitation, nationalization, expropriation, and the
imposition of currency restrictions; devaluation's of or fluctuations in the
value of currencies; changes in laws and regulations applicable to the banking
or securities industry; market conditions that prevent the orderly execution of
securities transactions or affect the value of Property; acts of war, terrorism,
insurrection or revolution; strikes or work stoppages; the inability of a local
clearing and settlement system to settle transactions for reasons beyond the
control of the Custodian; hurricane, cyclone, earthquake, volcanic eruption,
nuclear fusion, fission or radioactivity, or other acts of God.
The Custodian shall have no liability in respect of any loss, damage or
expense suffered by the Customer, insofar as such loss, damage or expense arises
from the performance of the Custodian's duties hereunder by reason of the
Custodian's reliance upon records that were maintained for the Customer by
entities other than the Custodian prior to the Custodian's employment under this
Agreement.
The provisions of this Section shall survive termination of this
Agreement.
17. INVESTMENT LIMITATIONS AND LEGAL OR CONTRACTUAL RESTRICTIONS OR
REGULATIONS. The Custodian shall not be liable to the Customer and the Customer
agrees to indemnify the Custodian and its nominees, for any loss, damage or
expense suffered or incurred by the Custodian or its nominees arising out of any
violation of any investment restriction or other restriction or limitation
applicable to the Customer of any Portfolio pursuant to any contract or any law
or regulation. The provisions of this Section shall survive termination of this
Agreement.
18. FEES AND EXPENSES. The Customer agrees to pay to the Custodian such
compensation for its services pursuant to this Agreement as may be mutually
agreed upon in writing from time to time and the Custodian's reasonable
out-of-pocket or incidental expenses in connection with the performance of this
Agreement, including (but without limitation) legal fees as described herein
and/or deemed necessary on the judgment of the Custodian to keep safe or protect
the Property in the Account. The initial fee schedule is attached hereto as
Exhibit C. The Customer hereby agrees to hold the Custodian harmless from any
liability or loss resulting from any taxes or other governmental charges, and
any expenses related thereto, which may be imposed, or assessed with respect to
any Property in an Account and also agrees to hold the Custodian, its
Subcustodians, and their respective nominees harmless from any liability as a
record holder of Property in such Account. The Custodian is authorized to charge
the applicable Account for such items and the Custodian shall have a lien on the
Property in the applicable Account for nay amount payable to the Custodian under
this Agreement, including but not limited to amounts payable pursuant to Section
13 and pursuant to indemnities granted by the Customer under this Agreement. The
provisions of this Section shall survive the termination of this Agreement.
19. TAX RECLAIMS. With respect to withholding taxes deducted and which
may be deducted from any income received from any Property in an Account, the
Custodian shall perform such services with respect thereto as are described in
Exhibit D attached hereto and shall in connection therewith be subject to the
standard of care set forth in such Exhibit D. Such standard of care shall not be
affected by any other term of this Agreement.
20. AMENDMENT, MODIFICATIONS, ETC. No provision of this Agreement may
be amended, modified or waived except in a writing signed by the parties hereto.
No waiver of any provision hereto shall be deemed a continuing waiver unless it
is so designated. No failure or delay on the part of either party in exercising
any power or right under this Agreement operates as a waiver, not does any
single or partial exercise of any power or right preclude any other or further
exercise thereof or the exercise of any other power or right.
21. TERMINATION.
(a) TERMINATION OF ENTIRE AGREEMENT. This Agreement may be
terminated by the Customer or the Custodian by ninety (90)
days' written notice to the other; PROVIDED that notice by the
Customer shall specify the names of the persons to who the
Custodian shall deliver the Securities in each Account and to
whom the Cash is such Account shall be paid. If notice of
termination is given by the Custodian, the Customer shall,
within ninety (90) days following the giving of such notice,
deliver to the Custodian a written notice specifying the names
of the persons to whom the Custodian shall deliver the
Securities in each Account and to whom the Cash in such Account
shall be paid. In either case, the Custodian will deliver such
Securities and Cash to the persons so specified, after
deducting therefrom any amounts which the Custodian determines
to be owed to it under Sections 13, 18, and 24. In addition,
the Custodian may in its discretion withhold from such delivery
such Cash and Securities as may be necessary to settle
transactions pending at the time of such delivery. The Customer
grants tot the Custodian a lien and right of setoff against the
Account and all Property held therein from time to time in the
full amount of the foregoing obligations. If within ninety (90)
days following the giving of a notice of termination by the
Custodian, the Custodian does not receive from the Customer a
written notice specifying the names of the persons to whom the
Custodian shall deliver the Securities in each Account and to
whom the Cash in such Account shall be paid, the Custodian, at
its election, may deliver such Securities and pay such Cash to
a bank or trust company doing business in the State of New York
to be held and disposed of pursuant to the provisions of this
Agreement, or may continue to hold such Securities and Cash
until a written notice as aforesaid is delivered to the
Custodian, provided that the Custodian's obligations shall be
limited to safekeeping.
(b) Notwithstanding Section 21(a) above, this Agreement may only be
terminated by Custodian by one hundred eighty (180) days'
written notice to the Customer if the Custodian has furnished
written notice to its custody customers that it is exiting the
custodial business. The Customer shall, within one hundred
eighty (180) days following the giving of such notice, deliver
to the Custodian a written notice specifying the names of the
persons to whom the Custodian shall deliver the Securities in
the Account and to whom the Cash in the Account shall be paid.
(c) TERMINATION AS TO ONE OR MORE PORTFOLIOS. This Agreement may be
terminated by the Customer or the Custodian as to one or more
Portfolios (but less than all of the Portfolios) by delivery of
an amended Exhibit A deleting such Portfolios, in which case
termination as to such deleted Portfolios shall take effect
ninety (90) days after the date of such delivery, or such
earlier time as mutually agreed. The execution and deliver of
an amended Exhibit A which deletes one or more Portfolios shall
constitute a termination of this Agreement only with respect to
such deleted Portfolio(s), shall be governed by the preceding
provisions of Section 21 as to the identification of a
successor custodian and the delivery of Cash and Securities of
the Portfolio(s) so deleted to such successor custodian and the
delivery of Cash and Securities of the Portfolio(s) so deleted
to such successor custodian, and shall not affect the
obligations of the Custodian and the Customer hereunder with
respect to the other Portfolios set forth in Exhibit A, as
amended from time to time.
22. NOTICES. Except as otherwise provided in this Agreement, all
requests, demands or other communications between the parties or notices in
connection herewith (a) shall be in writing, hand delivered or sent by telex,
telegram, cable, facsimile or other means of electronic communication agreed
upon by the parties hereto addressed, if to the Customer, to:
IMG Mutual Funds, Inc.
2203 Grand Avenue
Des Moines, Iowa 50312-5338
Phone: 515-244-5426
Fax: 515-244-2353
if to the Custodian, to:
Bankers Trust Company
Attn.: James McDermott
16 Wall Street
New York, NY 10005
Phone: 212-618-2647
Fax: 212-618-2008
or in either case to such other address as shall have been furnished to the
receiving party pursuant to the provisions hereof and (b) shall be deemed
effective when received, or, in the case of a telex, when sent to the proper
number and acknowledged by a proper answerback.
23. SEVERAL OBLIGATIONS OF THE PORTFOLIOS. With respect to any
obligations of the Customer on behalf of each Portfolio and each of its related
Accounts arising out of this Agreement, the Custodian shall look for payment or
satisfaction of any obligation solely to the assets and property of the
Portfolio and such Accounts to which such obligation relates as though the
Customer had separately contracted with the Custodian by separate written
instrument with respect to each Portfolio and its related Accounts.
24. SECURITY FOR PAYMENT. To secure payment of all obligations due
hereunder, the Customer hereby grants to Custodian a continuing security
interest in and right of setoff against each Account and all Property held
therein from time to time in the full amount of such obligations; provided that,
if there is more than one Account and the obligations secured pursuant to this
Section can be allocated to a specific Account or the Portfolio related to such
Account, such security interest and right of setoff will be limited to Property
held for that Account only and its related Portfolio. Should the Customer fail
to pay promptly any amounts owed hereunder, Custodian shall be entitled to use
available Cash in the Account or applicable Account, as the case may be, and to
dispose of Securities in the Account or such applicable Account as is necessary.
In any such case and without limiting the foregoing, Custodian shall be entitled
to take such other action(s) or exercise such other options, powers and rights
as Custodian now or hereafter has as a secured creditor under the New York
Uniform Commercial Code or any other applicable law.
25. REPRESENTATIONS AND WARRANTIES.
(a) The Customer hereby represents and warrants to the Custodian
that:
(i) the employment of the Custodian and the allocation of
fees, expenses and other charges to any Account as herein provided, is not
prohibited by law or any governing documents or contracts to which the Customer
is subject;
(ii) the terms of this Agreement do not violate any obligation
by which the Customer is bound, whether arising by contract, operation of law or
otherwise;
(iii) this Agreement has been duly authorized by appropriate
action and when executed and delivered will be binding upon the Customer and
each Portfolio in accordance with its terms; and
(iv) the Customer will deliver to the Custodian a duly
executed Secretary's Certificate in the form of Exhibit E hereto or such other
evidence of such authorization as the Custodian may reasonably require, whether
by way of a certified resolution or otherwise.
(b) The Custodian hereby represents and warrants to the Customer
that:
(i) the terms of this Agreement do not violate any obligation
by which the Custodian is bound, whether arising by contract, operation of law
or otherwise;
(ii) this Agreement has been duly authorized by appropriate
action and when executed and delivered will be binding upon the Custodian in
accordance with its terms;
(iii) the Custodian will deliver to the Customer such evidence
of such authorization as the Customer may reasonably require, whether by way of
a certified resolution or otherwise; and
(iv) Custodian is qualified as a custodian under Section 26(a)
of the 1940 Act and warrants that it will remain so qualified or upon ceasing to
be qualified shall promptly notify the Customer in writing.
26. GOVERNING LAW AND SUCCESSORS AND ASSIGNS. This Agreement shall be
governed by the law of the State of New York and shall not be assignable by
either party, but shall bind the successors in interest of the Customer and the
Custodian.
27. PUBLICITY. Customer shall furnish to Custodian at its office
referred to in Section 22 above, prior to any distribution thereof, copies of
any material prepared for distribution to any persons who are not parties hereto
that refer in any way to the Custodian. Customer shall not distribute or permit
the distribution of such materials if Custodian reasonably objects in writing
within ten (10) business days of receipt thereof (or such other time as may be
mutually agreed) after receipt thereof. The provisions of this Section shall
survive the termination of this Agreement. The foregoing shall not be applicable
to any information that is publicly available when provided or thereafter
becomes publicly available other than through a breach of this Agreement., or
that is required or requested to be disclosed by any bank or other regulatory
examiner of the Custodian, Customer, or any Subcustodian, any auditor of the
parties hereto, the SEC, NASD, by judicial or administrative process or
otherwise by applicable law or regulation.
28. REPRESENTATIVE CAPACITY AND BINDING OBLIGATION. A copy of the
Articles of Incorporation Instrument of the Customer is on file with the
Secretary of the State of Maryland, and notice is hereby given that this
Agreement is not executed on behalf of the Directors of the Customer as
individuals, and the obligations of this Agreement are not binding upon any of
the Directors, officers or shareholders of the Customer individually but are
binding only upon the assets and property of the Portfolios.
The Custodian agrees that no shareholder, director, or officer of the
Customer may be held personally liable or responsible for any obligations of the
Customer arising out of this Agreement.
29. SUBMISSION TO JURISDICTION. Any suit, action or proceeding arising
out of this Agreement may be instituted in any State or Federal court sitting in
the City of New York, State of New York, United States of America, and the
Customer irrevocably submits to the non-exclusive jurisdiction of any such court
in any such suit, action or proceeding and waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of venue of any such suit, action or proceeding brought in such a court and any
claim that such suit, action or proceeding was brought in an inconvenient forum.
30. CONFIDENTIALITY. The parties hereto agree that each shall treat
confidentially the terms and conditions of this Agreement and all information
provided by each party to the other regarding its business and operations. All
confidential information provided by a party hereto shall be used by any other
party hereto solely for the purpose of rendering services pursuant to this
Agreement and, except as may be required in carrying out this Agreement, shall
not be disclosed to any third party without the prior consent of such providing
party. The foregoing shall not be applicable to any information that is publicly
available when provided or thereafter becomes publicly available other than
through a breach of this Agreement, or that is required or requested to be
disclosed by any bank or other regulatory examiner of the Custodian, Customer,
or any Subcustodian, any auditor of the parties hereto, by judicial or
administrative process or otherwise by applicable law or regulation. The
provisions of this Section shall survive the termination of this Agreement.
31. SEVERABILITY. If any provisions of this Agreement is determined to
be invalid or unenforceable, such determination shall not affect the validity or
enforceability of any other provision of this Agreement.
32. ENTIRE AGREEMENT. This Agreement together with any exhibits
attached hereto, contains the entire agreement between the parties relating to
the subject matter hereof and supersedes any oral statements and prior writings
with respect thereto.
33. HEADINGS. The headings of the paragraphs hereof are included for
convenience of reference only and do not form a part of this Agreement.
34. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original. This Agreement shall
become effective when one or more counterparts have been signed and delivered by
each of the parties hereto.
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: _____________________________________
Bankers Trust Company
By: ________________________________________
Name: ______________________________________
Title: _____________________________________
<PAGE>
EXHIBIT A
LIST OF PORTFOLIOS
The following is a list of Portfolios 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.
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>
EXHIBIT B
PROXY SERVICE
The following is a description of the Proxy Service referred to in
Section 10 of the Custodian Agreement. Terms used herein as define terms shall
have the meanings ascribed them therein unless otherwise defined below.
The Custodian provides a service, described below, for the transmission
of corporation communications in connection with shareholder meetings relating
to Securities held in the countries specified in the Global Guide. For the
United States and Canada, the term "corporate communications" means the prosy
statements or meeting agenda, proxy cards, annual reports and any other meeting
materials received by the Custodian. For countries other than the United States
and Canada, the term "corporate communications" means the meeting agenda only
and does not include any meeting circulars, proxy statements or any other
corporate communications furnished by the issuer in connection with such
meeting. Non-meeting related corporate communications are not included in the
transmission service to be provided by the Custodian except upon request as
provided below.
The Custodian's process for transmitting and translating meeting
agendas will be as follows:
1) If the meeting agenda is not provided by the issuer in the
English language, and if the language of such agenda is in the
official language of the country in which the related security
is held, the Custodian will as soon as practicable after
receipt of the original meeting agenda by a Subcustodian
provide an English translation prepared by that Subcustodian.
2) If an English translation of the meeting agenda is furnished,
the local language agenda will not be furnished unless
requested.
Translations will be free translation and neither the Custodian nor any
Subcustodian will be liable or held responsible for the accuracy thereof or any
direct or indirect consequences arising therefrom, including, without
limitation, arising out of any action taken or omitted to be taken based
thereon.
If requested, the Custodian will, on a reasonable efforts basis,
endeavor to obtain any additional corporate communication such as annual or
interim reports, proxy statements, meeting circulars, or local language agendas,
and provide them in the form obtained.
Timing in the voting process is important and, in that regard, upon
receipt by the Custodian of notice from a Subcustodian, the Custodian will
provide a notice to the Customer indicating the deadline for receipt of its
instructions to enable the voting process to take place effectively and
efficiently. As voting procedures will vary from market to market, attention to
any required procedures will be very important. Upon timely receipt of voting
instructions, the Custodian will promptly forward such instructions to the
applicable Subcustodian. If voting instructions are not timely received, the
Custodian shall have no liability or obligation to take any action.
For Securities held in markets other than those set forth in the first
paragraph, the Custodian will not furnish the material described above or seek
voting instructions. However, if requested to exercise voting rights at a
specific meeting, the Custodian will endeavor to do so on a reasonable efforts
basis without any assurance that such rights will be so exercised at such
meeting.
If the Custodian or any Subcustodian incurs extraordinary expenses in
exercising voting rights related to any Securities pursuant to appropriate
instructions or directors (e.g., by way of illustration only and not by way of
limitation, physical presence is required at a meeting and/or travel expenses
are incurred), such expenses will be reimbursed out of the Account containing
such Securities unless other arrangements have been made for such reimbursement.
It is the intent of the Custodian to expand the Proxy Services to
include jurisdictions which are not currently included as set forth in the
Global Guide. The Custodian will notify the Customer as to the inclusion of
additional countries or deletion of existing countries after their inclusion or
deletion and this Exhibit B will be deemed to be automatically amended to
include or delete such countries as the case may be.
<PAGE>
EXHIBIT C
PRICING SCHEDULE FOR THE IMG MUTUAL FUNDS, INC.
CUSTODY
Account Maintenance $100 month/account
Holdings
Physical $1.50/month
Depository $0.75/month
Cedel/Euroclear 4 BP/year
Transactions
Physical Automated $15.00
DTC Automated $ 5.00
Fed Automated $ 5.00
PTC Automated $ 7.00
P&I Payments $ 2.50
Maturities $ 6.00
Reorganizations $25.00
Account Transfer-Physical $15.00
Account Transfer-DTC $ 5.00
Account Transfer-PTC $ 7.00
Account Transfer-Fed $ 5.00
Globe*View Usage $100.00/month
*A $5.00 surcharge will be added to any ticket input manually by Bankers Trust.
Excludes out-of-pocket expenses (i.e.: postage & handling charges, insurance and
agent fees.)
<PAGE>
CASH
DDA Account Maintenance $60.00 concentration
account maintenance
$15.00 each additional
DDA Debits/Credits $0.40 each
Wires
- -----
Incoming payment $4.00
Outgoing payment $4.00
Fed payment surcharge $0.53
Book entry movements $1.00
Balance Reporting (Cash connector) $125.00/month
Global Cash software $100.00/month
Information Services (intraday balance reporting) $ 50.00/account/month
PERFORMANCE MEASUREMENT
BT World software $3,000.00/year
Performance Measurement Service $1,200.00/Portfolio
<PAGE>
EXHIBIT D
TAX RECLAIMS
Pursuant to Section 18 of the Custodian Agreement, the Custodian shall
perform the following services with respect to withholding taxes imposed or
which may be imposed on income from Property in any Account. Terms used herein
as defined terms shall unless otherwise defined have the meanings ascribed to
them in the Custodian Agreement.
When withholding tax has been deducted with respect to income from any
Property in an Account, the Custodian will actively pursue on a reasonable
efforts basis the reclaim process, provided that the Custodian shall not be
required to institute any legal or administrative proceeding against any
Subcustodian or other person. The Custodian will provide fully detailed
advices/vouchers to support reclaims submitted to the local authorities by the
Custodian or its designee. In all cases of withholding, the Custodian will
provide full details to the Customer. If exemption from withholding at the
source can be obtained in the future, the Custodian will notify the Customer and
advise what documentation, if any, is required to obtain the exemption. Upon
receipt of such documentation from the Customer, the Custodian will file for
exemption on the Customer's behalf and notify the Customer when it has been
obtained.
In connection with providing the foregoing service, the Custodian shall be
entitled to apply categorical treatment of the Customer according to the
Customer's nationality, the particulars of its organization and other relevant
details that shall be supplied by the Customer. It shall be the duty of the
Customer to inform the Custodian of any change in the organization, domicile or
other relevant fact concerning tax treatment of the Customer and further to
inform the Custodian if the Customer is or becomes the beneficiary of any
special ruling or treatment not applicable to the general nationality and
category or entity of which the Customer is a part under general laws and treaty
provisions. The Custodian may rely on any such information provided by the
Customer.
In connection with providing the foregoing service, the Custodian may also
rely on professional tax services published by a major international accounting
firm and/or advice received from a Subcustodian in the jurisdictions in
question. In addition, the Custodian may seek the advice of counsel or other
professional tax advisers in such jurisdictions. The Custodian is entitled to
rely, and may act, on information set forth in such services and on advice
received from a Subcustodian, counsel or other professional tax advisers and
shall be without liability to the Customer for any action reasonably taken or
omitted pursuant to information contained in such services or such advice.
<PAGE>
EXHIBIT E
Certificate of the Secretary
I __________________________, hereby certify that I am the Secretary of the
IMG Mutual Funds, Inc., a corporation organized under the laws of the State of
Maryland (the "Company"), and as such I am duly authorized to, and do hereby,
certify that:
1. ORGANIZATIONAL DOCUMENTS. The Company's organizational documents,
and all amendments thereto, have been filed with the appropriate governmental
officials of the State of Maryland, the Company continues to be in existence and
is in good standing, and no action has been taken to repeal such organizational
documents, the same being in full force and effect on the date hereof.
2. BYLAWS. The Company's Bylaws have been duly adopted and no action
has been taken to repeal such Bylaws, the same being in full force and effect.
3. RESOLUTIONS. Resolutions have been duly adopted on behalf of the
Company, which resolutions (i) have not in any way been revoked or rescinded,
(ii) have been in full force and effect since their adoption, to and including
the date hereof, and are now in full force and effect, and (iii) are the only
corporate proceedings of the Company now in force relating to or affecting the
matters referred to therein, including, without limitation, confirming that the
Company is duly authorized to enter into a certain custody agreement with
Bankers Trust Company (the "Agreement"), and that certain designated officers,
including those identified in paragraph 4 of this Certificate, are authorized to
execute said Agreement on behalf of the Company, in conformity with the
requirements of the Company's organizational documents, Bylaws, and other
pertinent documents to which the Company may be bound.
4. INCUMBENCY. The following named individuals individually are duly
elected (or appointed), qualified, and acting officers of the Company holding
those offices set forth opposite their respective names as of the date hereof,
each having full authority, acting individually, to bind the Company, as a legal
matter, with respect to all matters pertaining to the Agreement, and to execute
and deliver said Agreement on behalf of the Company, and the signatures set
forth opposite the respective names and titles of said officers are their true,
authentic signatures:
Name Title Signature
---- ----- ---------
___________________ _______________ ________________________________
___________________ _______________ ________________________________
___________________ _______________ ________________________________
IN WITNESS WHEREOF, I have hereunto set my hand this ______ day of
______________, 19____.
IMG MUTUAL FUNDS, INC.
EXHIBIT # 15(d)
TO
POST-EFFECTIVE AMENDMENT NO. 8
FORM N-1A REGISTRATION STATEMENT
<PAGE>
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")
and/or classes of shares thereof identified on Schedule B of the IMG Funds'
Distribution Agreement, as amended from time to time (the "Distribution Plan
Funds").
SECTION 1. The Adviser, Investors Management Group, Ltd., 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 Funds up to
an annual maximum of $100,000 for all Funds, for acting as Distributor under the
Distribution Agreement.
SECTION 2. Each Fund, or class of Shares to a Fund which is a
Distribution Plan Fund, shall pay to banks and other institutions and
broker/dealers (a "Participating Organization") a fee in an amount not to exceed
.50% of the average daily net asset value of such Fund (the "Distribution Fee")
or as further limited in amount as set forth in the Fund's current Prospectus
and as set forth in a Schedule to be approved from time to time as provided in
Section 5 of this Plan and attached to this Plan. Such fee shall be paid for
distribution assistance and/or Shareholder service pursuant to an agreement
between the Distribution Plan Funds 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 3. 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 2.
SECTION 4. 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 5. 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 6. 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 5.
SECTION 7. 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 8. 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 9. 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 terminate automatically in the
event of its assignment.
SECTION 10. 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 5.
SECTION 11. 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 # 16(b)
TO
POST-EFFECTIVE AMENDMENT NO. 8
FORM N-1A REGISTRATION STATEMENT
<PAGE>
PLAN ADOPTED PURSUANT TO RULE 18F-3
PROVIDING FOR THE ISSUANCE
OF MULTIPLE CLASSES OF SHARES
ADOPTED AS OF NOVEMBER 3, 1997
BY THE BOARD OF DIRECTORS
A. SUMMARY OF MULTI-CLASS STRUCTURE.
In order to accommodate the requirements of a variety of groups of
investors in a cost-efficient and equitable manner, the Company may offer an
unlimited number of classes or series of new Shares ("new Classes") in their
existing and future investment portfolios. These might be offered (1) in
connection with a plan or plans adopted pursuant to Rule 12b-1 under the Act
(the "12b-1 Plan(s)") and/or (2) in connection with a non-Rule 12b-1 shareholder
services plan or plans (the "Shareholder Services Plan(s)"); and/or (3) in
connection with the allocation of certain expenses (referred to herein as "Class
Expenses") that are directly attributable only to certain of such new or
existing class(es) and (4) subject to certain conversion features. The 12b-1
Plan(s) and the Shareholder Services Plan(s) are sometimes collectively referred
to herein as "Plans".1 Any references herein to "Board of Directors" shall be
deemed to include the Board of Directors of the Company.
Each class of Shares in the Portfolio is intended to bear Class
Expenses which are related to the level of services provided to the investors in
such Portfolio. Currently, Shares are anticipated to bear the expense of a 12b-1
Plan fee. In addition, Trust Shares would bear the expense of a Shareholder
Services Plan, including a service fee as defined in Article III, Section
2(b)(9) of the National Association of Securities Dealers, Inc.'s ("NASD") Rules
of Fair Practice of up to 0.25% of the average annual net asset value of the
Portfolio's outstanding Trust Shares.
DESCRIPTION OF CLASSES OF SHARES REPRESENTING INTERESTS IN THE PORTFOLIOS.
As a result of increased competition for the assets of public
investors, the Board of Directors believe that it is imperative that the Company
be able to tailor its services and expenses, to the extent possible, to the
investment needs of the particular investor.
Except for its class designation, the allocation of certain expenses,
voting rights, differences in exchange privileges, and conversion features as
described below, each class of Shares would be identical in all respects and
would be subject to the same investment objective, policies and limitations that
apply to the existing class of Shares or other class(es) of Shares in the same
Portfolio. The net asset value per share in each Portfolio would be calculated
and would be determined in the same manner and on the same days and at the same
times, regardless of class; the net investment income and capital gains, if any,
of each Portfolio would be declared and paid at the same times to all
shareholders of the Portfolio; and expenses, other than Plan payments and Class
Expenses described below, would be borne on a pro rata basis by each class on
the basis of the relative net asset value of the respective class.
B. UNLIMITED NUMBER OF CLASSES.
The Company is permitted to offer an unlimited number of classes of
Shares in its existing and future investment Portfolios. These classes might be
offered (1) in connection with a 12b-1 Plan or Plans; and/or (2) in connection
with a Shareholder Services Plan or Plans; and/or (3) in connection with the
allocation of certain Class Expenses attributable directly only to certain of
such classes; and/or (4) subject to certain conversion features.
C. 12B-1 PLAN(S) AND SHAREHOLDER SERVICES PLAN(S).
With respect to each class, the Company could adopt a 12b-1 Plan and/or
a Shareholder Services Plan concerning the financing of marketing programs
intended to result in the sale of Shares (for example, the payment of printing
costs for prospectuses and sales literature) and the provision of various
distribution and administrative services. Such services might be provided
directly by a Company's distributor and/or administrator, or by groups,
organizations or institutions ("Organizations") which have entered into
agreements (collectively, "Plan Agreements") with that Company or its
distributor or administrator concerning the provision of services to the
clients, members or customers of such Organizations who from time to time
beneficially own Shares of a particular class ("Class Shareholders").
Organizations may charge other fees directly to their Class
Shareholders who are the beneficial owners of Shares in connection with their
Class Shareholder accounts. These fees would be in addition to any amounts
received by the Organization under a Plan Agreement with a Company. Under the
terms of such Plan Agreements, Organizations would be required to provide their
Class Shareholders with a schedule of fees charged to such Class Shareholders
which relate to their investments in Shares.
D. NO DUPLICATION OF SERVICES.
The provision of services under the Plans would augment or replace (and
not be duplicative of) the services otherwise provided by a Company's investment
adviser, transfer agent and administrator. The services provided by these
service contractors generally relate either to the internal operations of the
Company (for example, investment of assets and maintenance of books and records)
or to the Company's relationships with the shareholders of record (for example,
the transmission of proxy materials and shareholder reports to record
shareholders, and the processing of purchase and redemption orders from record
shareholders), or are otherwise intended to benefit all classes of Shares in a
Portfolio. On the other hand, the support services described above that would be
provided pursuant to the Shareholder Services Plan(s) will relate either to the
indirect relationship between a Company and the beneficial owners of Shares, or
to the services available only to certain Share classes. Similarly, payments by
a Company for distribution activities that are authorized by a 12b-1 Plan would
be for distribution-related expenses and services undertaken in connection with
the sale of Shares covered by the Plan. When a class is subject to both a 12b-1
Plan and a Shareholder Services Plan, the provision of services under one Plan
would augment (and not be duplicative of) the services provided under the other
Plan.
E. PLAN PAYMENTS.
With respect to each class, the Company could pay its distributor,
administrator or Organizations for expenses, services and assistance in
accordance with the terms of the particular Plan (such payments are herein
referred to as "Plan Payments") and such Plan Payments would be borne entirely
by the beneficial owners of the class of the Portfolio to which the payments
relate. The maximum level of payments made pursuant to a Plan might vary based
upon an independent determination by the Board of Directors and, in the case of
a 12b-1 Plan, subject to shareholder approval of the affected class. In all
cases, however, the Company shall comply with Article III, Section 26 of the
Rules of Fair Practice of the NASD as it relates to the maximum amount of
asset-based sales charges and service fees that may be imposed by an investment
company, when and in the form (as amended from time to time) the provisions of
such Rules relating to such charges become effective, and for as long as they
remain in effect.
F. ALLOCATION OF EXPENSES.
Expenses of the Company that can not be attributed directly to any one
Portfolio ("Company Expenses") shall be allocated to each Portfolio based on the
relative net assets of such Portfolio or as otherwise determined under the
supervision of its Board of Directors. Company Expenses could include, for
example, directors' fees and expenses, audit fees and legal fees, insurance
premiums, SEC and state blue sky registration fees, and dues paid to
organizations such as the Investment Company Institute.
Certain expenses may be attributable to a Portfolio but not to a
particular class ("Portfolio Expenses"). All such Portfolio Expenses incurred by
the Portfolio shall be allocated to each class on the basis of the relative net
asset value of the respective classes in the Portfolio. Portfolio Expenses could
include, for example, advisory fees, Portfolio accounting fees, custodian fees,
and fees related to preparation of separate documents of the Portfolio.
Class Expenses consist of the following types of fees or expenses which
the Company identifies and determines are directly attributable to a particular
class and are to be allocated to that class exclusively: (a) transfer agent fees
identified by the transfer agent as being attributable to a specific class of
Shares; (b) fees and expenses of the administrator that are identified and
approved by the Company's Board of Directors as being attributable to a specific
class of Shares; (c) printing and postage expenses related to preparing and
distributing materials such as shareholder reports, prospectuses and proxies to
current shareholders of a class; (d) blue sky registration fees incurred by a
class of Shares; (e) SEC registration fees incurred by a class of Shares; (f)
the expense of administration personnel and services as required to support the
shareholders of a specific class; (g) litigation or other legal expenses or
audit or other accounting expenses relating solely to one class of Shares; and
(h) directors' fees incurred as a result of issues relating to one class of
Shares.
To the extent that a class may bear transfer agency or other expenses
not being borne by other classes of the same Portfolio, appropriate disclosure
would be included in the applicable Portfolio's prospectus.
The Company's investment adviser or other service contractor may choose
to reimburse or waive Class Expenses on certain classes on a voluntary,
temporary basis. The amount of Class Expenses waived or reimbursed by the
investment adviser or other service contractor may vary from class to class.
Class Expenses are by their nature specific to a given class and obviously
expected to vary from one class to another. Applicants believe that it is
acceptable and consistent with shareholder expectations to reimburse or waive
Class Expenses at different levels for different classes of the same Portfolio.
In addition, the investment adviser or other service contractor way
waive or reimburse Company Expenses and/or Portfolio Expenses (with or without a
waiver or reimbursement of Class Expenses) but only if the same proportionate
amount of Company Expenses and/or Portfolio Expenses are waived or reimbursed
for each class of a Portfolio. Thus, any Company Expenses that are waived or
reimbursed would be credited to each class of a Portfolio based on the relative
net assets of the classes. Similarly, any Portfolio Expenses that are waived or
reimbursed would be credited to each class of that Portfolio according to the
relative net assets of the classes. Company Expenses and Portfolio Expenses
apply equally to all classes of a given Portfolio. Accordingly, it may not be
appropriate to waive or reimburse Company Expenses or Portfolio Expenses at
different levels for different classes of the same portfolio.
Certain expenses shall be allocated differently if their method of
imposition changes. Thus, if a Class Expense can no longer be attributed to a
class or the Company determines that it should not be allocated to a particular
class exclusively, it will be charged as a Portfolio Expense or a Company
Expense, as may be appropriate; similarly, if a Company Expense becomes
attributable to a Portfolio, it will become a Portfolio Expense. However, any
additional Class Expenses (including Plan Payments) not specifically identified
above which are subsequently identified and determined to be properly allocated
to one class of Shares shall not be so allocated until approved by the Board of
Directors.
G. DIFFERENCES IN NET INCOME PER SHARE; NET ASSET VALUE.
Because of the Plan Payments and Class Expenses that may be borne by
each class of Shares, the per Share net income of, and dividends to, each class
may be different from the net income of, and dividends to, the other classes of
Shares of the Portfolio. For example, if one class bore the expense of a Plan
Payment that did not apply to another class, the per Share net income and
dividends of the former class would be expected to be lower than the per Share
net income and dividends of the latter class. In addition and apart from the
allocation of Plan Payments, to the extent aggregate Class Expenses (such as
transfer agency fees, administration fees and prospectus printing costs) are
higher with respect to one class of a Portfolio, the per Share net income and
dividends of that class would be lower than the per Share net income and
dividends of the other classes of the Portfolio's Shares. Dividends paid to each
class of Shares in a Portfolio would, however, be declared and paid on the same
days and at the same times, and, except as noted with respect to the expenses of
Plan Payments and Class Expenses, would be determined in the same manner and
paid in the same amounts.
The net asset value of all outstanding Shares in a Portfolio would be computed
on the same days and at the same times.
The issuance of multiple classes of shares as described herein shall be
subject to the requirements of Rule 18f-3 and to the following conditions:
1. Each class of Shares representing interests in the same
Portfolio of a Company will be identical in all respects, except as set forth
below. The only differences between the classes of Shares of the same Portfolio
will relate solely to: (a) the impact of (i) expenses assessed to a class
pursuant to a Plan, (ii) other Class Expenses which would be limited to (A)
transfer agent fees identified by the transfer agent as being attributable to a
specific class of Shares; (B) fees and expenses of a Company's administrator
that are identified and approved by the Company's Board of Directors as being
attributable to a specific class of Shares; (C) printing and postage expenses
related to preparing and distributing materials such as shareholder reports,
prospectuses and proxies to current shareholders of a class; (D) blue sky
registration fees incurred by a class of Shares; (E) SEC registration fees
incurred by a class of Shares; (F) the expense of administrative personnel and
services as required to support the shareholders of a specific class; (G)
litigation or other legal expenses or audit or other accounting expenses
relating solely to one class of Shares; and (H) directors' fees incurred as a
result of issues relating no one class of Shares; and (iii) any other
incremental expenses subsequently identified that should be properly allocated
to one class: (b) the fact that the classes will vote separately with respect to
a Portfolio's Plans, except as provided below; and (c) the designation of each
class of Shares of a Portfolio.
Each class of Shares representing interests in the same Portfolio of a
Company will be identical in all respects, except as set forth below. The only
differences between the classes of Shares of the same Portfolio will relate
solely to (a) the impact of (i) expenses assessed to a class pursuant to a Plan,
(ii) other Class Expenses which would be limited to (A) transfer agent fees
identified by the transfer agent as being attributable to a specific class of
Shares; (B) fees and expenses of a Company's administrator that are identified
and approved by the Company's Board of Directors as being attributable to a
specific class of Shares; (C) printing and postage expenses related to preparing
and distributing materials such as shareholder reports, prospectuses and proxies
to current shareholders of a class; (D) blue sky registration fees incurred by a
class of Shares; (E) SEC registration fees incurred by a class of Shares; (F)
the expense of administrative personnel and services as required to support the
shareholders of a specific class; (G) litigation or other legal expenses or
audit or other accounting expenses relating solely to one class of Shares; and
(H) directors' fees incurred as a result of issues relating no one class of
Shares; and (iii) any other incremental expenses subsequently identified that
should be properly allocated to one class (b) the fact that the classes will
vote separately with respect to a Portfolio's Plans, except as provided below;
and (c) the designation of each class of Shares of a Portfolio.
2. Any Shareholder Services Plan will be adopted and operated
in accordance with the procedures set forth in Rule 12b-1(b) through (f) as if
the expenditures made thereunder were subject to Rule 12b-1, except that
shareholders need not enjoy the voting rights specified in Rule 12b-1.
Any Shareholder Services Plan will be adopted and operated in
accordance with the procedures set forth in Rule 12b-1(b) through (f) as if the
expenditures made thereunder were subject to Rule 12b-1, except that
shareholders need not enjoy the voting rights specified in Rule 12b-1.
3. The Board of Directors shall receive quarterly and annual
statements concerning distribution and shareholder servicing expenditures
complying with paragraph (b)(3)(ii) of Rule 12b-1, as it may be amended from
time to time. In the statements, only expenditures properly attributable to the
sale or servicing of a particular class of Shares will be used to justify any
distribution or servicing expenditure charged to that class. Expenditures not
related to the sale or servicing of a particular class will not be presented to
the directors to justify any fee attributable to that class. The statements,
including the allocations upon which they are based, will be subject to the
review and approval of the independent directors in the exercise of their
fiduciary duties.
The Board of Directors shall receive quarterly and annual statements
concerning distribution and shareholder servicing expenditures complying with
paragraph (b)(3)(ii) of Rule 12b-1, as it may be amended from time to time. In
the statements, only expenditures properly attributable to the sale or servicing
of a particular class of Shares will be used to justify any distribution or
servicing expenditure charged to that class. Expenditures not related to the
sale or servicing of a particular class will not be presented to the directors
to justify any fee attributable to that class. The statements, including the
allocations upon which they are based, will be subject to the review and
approval of the independent directors in the exercise of their fiduciary duties.
4. Dividends paid by a Portfolio with respect to each class of
its Shares, to the extent any dividends are paid, will be calculated in the same
manner, at the same time, on the same day, and will be in the same amount,
except that Plan Payments relating to each respective class of Shares and the
Class Expenses relating to each class of Shares will be borne exclusively by
that class.
Dividends paid by a Portfolio with respect to each class of its Shares,
to the extent any dividends are paid, will be calculated in the same manner, at
the same time, on the same day, and will be in the same amount, except that Plan
Payments relating to each respective class of Shares and the Class Expenses
relating to each class of Shares will be borne exclusively by that class.
5. The Administrator shall have adequate facilities in place
to ensure implementation of the methodology and procedures for calculating the
net asset value and dividends and distributions of the various classes of Shares
and the proper allocation of expenses among the classes of Shares.
The Administrator shall have adequate facilities in place to ensure
implementation of the methodology and procedures for calculating the net asset
value and dividends and distributions of the various classes of Shares and the
proper allocation of expenses among the classes of Shares.
6. The Distributor of the Company will adopt compliance
standards for any Portfolio which has a multi-class system, which standards will
relate to when each class of Shares may appropriately be sold to particular
investors.
7. Each Portfolio having a multi-class system will disclose
the respective expenses, performance data, distribution arrangements, services,
fees, front-end sales loads, CDSCs, conversion features, and exchange privileges
applicable to each class of Shares in a Portfolio in every prospectus relating
to such Portfolio, regardless of whether all classes of Shares are offered
through each prospectus. Each such Portfolio will disclose the respective
expenses and performance data applicable to all classes of Shares in a Portfolio
in every shareholder report relating to such Portfolio. The shareholder reports
for each such Portfolio will contain, in the statement of assets and liabilities
and statement of operations, information related to the Portfolio as a whole
generally and not on a per class basis (each Portfolio's per Share data,
however, will be prepared on a per class basis with respect to all classes of
Shares of such Portfolio). To the extent any advertisement or sales literature
describes the expenses or performance data applicable to any class of Shares, it
will also disclose the respective expenses and/or performance data applicable to
all classes of Shares. The information provided by the Applicants for
publication in any newspaper or similar listing of any Portfolio's net asset
value and public offering price will present each class of Shares separately.
Each Portfolio having a multi-class system will disclose the respective
expenses, performance data, distribution arrangements, services, fees, front-end
sales loads, CDSCs, conversion features, and exchange privileges applicable to
each class of Shares in a Portfolio in every prospectus relating to such
Portfolio, regardless of whether all classes of Shares are offered through each
prospectus. Each such Portfolio will disclose the respective expenses and
performance data applicable to all classes of Shares in a Portfolio in every
shareholder report relating to such Portfolio. The shareholder reports for each
such Portfolio will contain, in the statement of assets and liabilities and
statement of operations, information related to the Portfolio as a whole
generally and not on a per class basis (each Portfolio's per Share data,
however, will be prepared on a per class basis with respect to all classes of
Shares of such Portfolio). To the extent any advertisement or sales literature
describes the expenses or performance data applicable to any class of Shares, it
will also disclose the respective expenses and/or performance data applicable to
all classes of Shares. The information provided by the Applicants for
publication in any newspaper or similar listing of any Portfolio's net asset
value and public offering price will present each class of Shares separately.
8. As of the date hereof classes are authorized as set forth
below for the Company's presently existing and pending Funds:
LIQUID ASSETS FUND - four classes designated Sweep Shares,
Trust Shares, Institutional Shares and S2 Shares, with the class level expenses
described in the Fund's Registration Statement.
MUNICIPAL ASSETS FUND - three classes designated Sweep Shares,
Trust Shares and Institutional Shares, with the class level expenses described
in the Fund's Registration Statement.
IMG CORE STOCK FUND - three classes designated Advisor Shares,
Select Shares and Institutional Shares, with the class level expenses described
in the Fund's Registration Statement.
IMG BOND FUND - three classes designated Advisor Shares,
Select Shares and Institutional Shares, with the class level expenses described
in the Fund's Registration Statement.
VINTAGE GOVERNMENT ASSETS FUND - two classes designated "S"
Shares and Trust Shares, with the class level expenses described in the Fund's
Registration Statement.
VINTAGE EQUITY FUND - two classes designated "S" Shares and
Trust Shares, with the class level expenses described in the Fund's Registration
Statement.
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1 The Company will not implement the multiple class structure with respect to
any Portfolio or allocate Class Expenses until after the Company amends its
Registration Statement as necessary to reflect the offering of additional
classes of Shares in a Portfolio.
