January 21, 1998
Dear Shareholder:
I am writing to ask you for your vote on important questions that affect your
investment in Liquid Assets Fund and Municipal Assets Fund (the "Funds"). While
you are, of course, welcome to join us at the Funds' Special Shareholder
Meeting, most shareholders cast their vote by filling out and signing the
enclosed proxy card.
As you may be aware, Investors Management Group, which provides investment
services to the Funds, has signed a definitive agreement to be acquired by
AMCORE Financial, Inc., of Rockford, Illinois. This transaction will not result
in any change to your Funds' advisory services or the high quality shareholder
services that you have come to expect over the years.
As required by the Investment Company Act of 1940, the transaction will result
in the automatic termination of the agreements under which Investors Management
Group provides investment advisory services to the Funds. This transaction thus
requires the approval by the holders of shares of each Fund of a new investment
advisory agreement--which will be substantially identical to the agreement
currently in effect.
As part of our continuing effort to maximize the benefits to shareholders of
investing in the Funds, the Board of Directors of your Funds has recently
reviewed and unanimously endorsed a proposal for the reorganization of the
Funds, which they have determined to be in the best interest of the
shareholders. This proposal calls for the reorganization of the Funds as Iowa
corporations to two series of a Maryland corporation which will be named Liquid
Assets Fund and Municipal Assets Fund ("New Funds"). New Liquid Assets Fund and
New Municipal Assets Fund will have comparable investment objectives and
substantially identical investment policies, respectively, as Liquid Assets Fund
and Municipal Assets Fund.
As a result of this transaction, you will become a shareholder of the New Funds.
You will own the same class of shares of the New Funds as you currently own of
the Funds and the aggregate net asset value of shares of the New Funds will be
equal to the aggregate net asset value of the current shares that you own. No
sales charge will be imposed in the transaction.
Investors Management Group will serve as investment advisor to the New Funds, so
consistency of portfolio management will be maintained following the
transaction.
The Directors of Liquid Assets Fund and Municipal Assets Fund recommend that the
shareholders of the Funds approve the reorganization. The Directors believe the
transaction would benefit the Funds and their shareholders by enhancing their
capacity to attract and retain investors. In making their determination, the
Directors reviewed several factors, including the qualifications and
capabilities of the service providers of the New Funds. If, as expected, the
distributor of the New Funds is able to distribute the New Funds shares
successfully, growth in assets would make possible the realization of economies
of scale and attendant savings in costs to the New Funds and their shareholders.
Of course, achievement of these goals cannot be assured.
Detailed information about the proposed transaction and the reasons for it is
contained in the enclosed combined Proxy Statement/Prospectus. The enclosed
proxy card is, in essence, a ballot. It tells us how to vote on your behalf on
<PAGE>
important issues relating to your Fund. If you complete and sign the proxy,
we'll vote it exactly as you tell us. If you simply sign the proxy card, we'll
vote it according to the Directors' recommendation. We urge you to review
carefully the Proxy Statement/Prospectus, fill out your proxy card, and return
it to us. A self-addressed, postage-paid envelope has been enclosed for your
convenience. It is very important that you vote and that your voting
instructions be received no later than February 12, 1998.
NOTE: You may receive more than one proxy package if you hold shares in more
than one account in a Fund, or if you hold shares in more than one Fund. You
must return ALL proxy cards you receive. We have provided postage-paid return
envelopes for each. If you have any questions, please call Investors Management
Group at (515) 244-5426 or 1-800-798-1819.
Sincerely,
David W. Miles, President
Liquid Assets Fund, Inc.
Municipal Assets Fund, Inc.
2
<PAGE>
NOTICE OF SPECIAL MEETINGS OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 13, 1998
TO THE SHAREHOLDERS OF LIQUID ASSETS FUND AND MUNICIPAL ASSETS FUND :
You are cordially invited to attend the Special Meetings of Shareholders of
Liquid Assets Fund and Municipal Assets Fund, (the "Funds"), which will be held
at 2203 Grand Avenue, Des Moines, Iowa 50312-5338, on February 13, 1998, at
10:00 a.m., for the following purposes:
1. To consider and vote on a proposed Agreement and Plan of Reorganization
(the "Plan") providing for (a) the transfer of all the assets of Liquid
Assets Fund and Municipal Assets Fund in exchange for shares of New
Liquid Assets Fund and New Municipal Assets Fund, ("New Funds"); (b)
the assumption by the New Funds of all of the liabilities of the
corresponding Funds; and (c) the distribution of shares of the New
Funds to the shareholders of Liquid Assets Fund and Municipal Assets
Fund in complete liquidation of Liquid Assets Fund and Municipal Assets
Fund.
2. To consider and vote on a proposed Investment Advisory Agreement with
Investors Management Group ("IMG") to be in effect after a proposed
change of ownership of IMG.
3. To act upon such other matters as may properly come before the Meetings
or any adjournments thereof.
The Board of Directors has fixed the close of business on Wednesday, December
31, 1997, as the record date for determination of shareholders entitled to
notice of, and to vote at, the Special Shareholders Meetings. As of the record
date, there were 113,511,069.34 shares of Liquid Assets Fund and 31,558,239.50
shares of Municipal Assets Fund outstanding and eligible to vote at the Special
Shareholders Meeting. A list of such shareholders will be maintained at the
offices of Investors Management Group at 2203 Grand Avenue, Des Moines, Iowa
50312-5338, during the ten day period preceding the Special Shareholders
Meetings. Please read the Proxy Statement/Prospectus carefully before telling
us, through your proxy card, how you wish your shares to be voted. THE BOARD OF
DIRECTORS OF EACH FUND UNANIMOUSLY RECOMMENDS A VOTE IN FAVOR OF EACH OF THE
PROPOSALS.
WE URGE YOU TO SIGN AND DATE THE ENCLOSED PROXY CARD AND PROMPTLY RETURN IT IN
THE ENVELOPE PROVIDED. No postage is required. Prompt return of your proxy card
will be appreciated. Your vote is important no matter how many shares you own.
Des Moines, Iowa BY ORDER OF THE BOARDS OF DIRECTORS
January 21, 1998
Ruth Prochaska, Secretary
<PAGE>
PROXY STATEMENT/PROSPECTUS
RELATING TO THE REORGANIZATION OF
LIQUID ASSETS FUND
AND
MUNICIPAL ASSETS FUND
2203 GRAND AVENUE
DES MOINES, IOWA 50312-5338
TELEPHONE 1-800-798-1819
BY AND IN EXCHANGE FOR SHARES OF
NEW LIQUID ASSETS FUND AND
NEW MUNICIPAL ASSETS FUND
2203 GRAND AVENUE
DES MOINES, IOWA 50312-5338
TELEPHONE 1-800-798-1819
This Proxy Statement/Prospectus is being furnished to shareholders of Liquid
Assets Fund and Municipal Assets Fund in connection with the solicitation by the
Boards of Directors of proxies to be used at the Special Meetings of
Shareholders of Liquid Assets Fund and Municipal Assets Fund to be held at 2203
Grand Avenue, Des Moines, Iowa 50312-5338 at 10:00 a.m. on February 13, 1998,
and any adjournments thereof. Liquid Assets Fund and Municipal Assets Fund are
each Iowa corporations operating as diversified registered open-end investment
companies. Shareholders of record as of the close of business on December 31,
1997 are entitled to vote at the Special Meetings. It is expected that this
Proxy Statement/Prospectus will be mailed to shareholders of Liquid Assets Fund
and Municipal Assets Fund on or about January 21, 1998.
This Proxy Statement/Prospectus relates to the proposed Reorganization in which
all of the assets and liabilities of Liquid Assets Fund and Municipal Assets
Fund will be acquired by two new funds of the same name and organized as series
of IMG Mutual Funds, Inc., (collectively the "New Funds" or "New Liquid Assets
Fund" and "New Municipal Assets Fund"), in exchange for shares of the New Funds.
The shares thereby received will then be distributed to shareholders of Liquid
Assets Fund and Municipal Assets Fund, and Liquid Assets Fund and Municipal
Assets Fund will be terminated. As a result of the proposed Reorganization, each
shareholder of Liquid Assets Fund and Municipal Assets Fund will receive that
number of full and fractional shares of the corresponding class and series of
shares of the New Funds having a net asset value equal to the net asset value of
such shareholder's shares of Liquid Assets Fund and Municipal Assets Fund held
as of the date of the proposed Reorganization.
IMG Mutual Funds, Inc., is a diversified registered open-end investment company
that issues its shares in separate portfolios or series, each with its own
investment objectives and policies. The New Funds' investment objectives,
policies and restrictions (and, consequently, the risks of investing in them)
are substantially identical to those of Liquid Assets Fund and Municipal Assets
Fund. For a comparison of the investment objectives, policies and restrictions
of Liquid Assets Fund, Municipal Assets Fund and the New Funds, see "Proposal 1:
Agreement and Plan of Reorganization--Investment Objectives, Policies and
Restrictions." Investors Management Group ("IMG") serves as the investment
advisor for the New Funds as well as Liquid Assets Fund and Municipal Assets
Fund.
2
<PAGE>
This Proxy Statement/Prospectus also relates to the proposal to continue the
Investment Advisory Agreements between IMG and, respectively, Liquid Assets Fund
and Municipal Assets Fund after a change of ownership of IMG. See "Proposal 2:
Approval of Investment Advisory Agreement."
This Proxy Statement/Prospectus, which should be retained for future reference,
sets forth concisely the information about the New Funds that a prospective
investor should know before investing. This document will give you the
information you need to vote on the proposed Reorganization and the other
matters described herein. Much of the information is required under rules of the
Securities and Exchange Commission and some of it is technical in nature. If
there is anything you do not understand, please contact us at our toll-free
number, 1-800-798-1819. Shareholders should return proxies and any
correspondence to Investors Management Group, 2203 Grand Avenue, Des Moines,
Iowa 50312-5338.
The following documents have been filed with the Securities and Exchange
Commission and are incorporated into this Proxy Statement/Prospectus by
reference: (i) a Statement of Additional Information dated the date hereof and
relating to this Proxy Statement/Prospectus; (ii) the Prospectus and Statement
of Additional Information of the New Funds dated January 16, 1998; and (iii) the
Prospectus and Statement of Additional Information of Liquid Assets Fund and
Municipal Assets Fund, dated September 30, 1997. Copies of the referenced
documents are available upon request and without charge by calling
1-800-798-1819.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE REGULATOR, NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE REGULATOR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
SHARES OF THE NEW FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FINANCIAL INSTITUTION, AND ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY,
AND INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
No person has been authorized to give any information or to make any
representation not contained in this Proxy Statement/Prospectus and, if so given
or made, such information or representation must not be relied upon as having
been authorized. This Proxy Statement/Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy any securities in any jurisdiction in
which, or to any person to whom, it is unlawful to make such offer or
solicitation.
This Proxy Statement/Prospectus is dated January 16, 1998.
3
<PAGE>
SYNOPSIS
WHO IS ASKING FOR MY VOTE?
The enclosed proxy is solicited by the Directors of Liquid Assets Fund and
Municipal Assets Fund for use at the Special Meetings of Shareholders of the
Funds to be held on February 13, 1998 (and if your Fund's meeting is adjourned,
at any adjourned meetings) for the purposes stated in the Notice of Special
Meetings.
HOW DO YOUR FUND'S DIRECTORS RECOMMEND THAT SHAREHOLDERS VOTE ON THESE
PROPOSALS?
The Directors recommend that you vote
1. FOR the proposed Reorganization in which assets of Liquid
Assets Fund and Municipal Assets Fund would be transferred to
the New Funds in exchange for shares of the New Funds with an
equal net asset value.
2. FOR the new Investment Advisory Agreement to be effective upon
the completion of the proposed acquisition of Investors
Management Group by AMCORE Financial, Inc. of Rockford,
Illinois.
WHO IS ELIGIBLE TO VOTE?
Shareholders of record at the close of business on December 31, 1997,
are entitled to be present and vote at the meetings or any adjourned meetings.
On December 31, 1997, there were outstanding 113,511,069.34 shares of Liquid
Assets Fund and 31,558,239.50 shares of Municipal Assets Fund. The Notice of
Special Meetings, the combined Proxy Statement/Prospectus and the enclosed form
of proxy are being mailed to shareholders of record on or about January 21,
1998.
Each share is entitled to one vote, with fractional shares voting
proportionately. Shares represented by duly executed proxies will be voted in
accordance with shareholder's instructions. Any shareholder giving a proxy has
the power to revoke it by mail (addressed to the Funds' Secretaries at the
principal offices of the Funds, 2203 Grand Avenue, Des Moines, Iowa 50312-5338)
or in person at the meeting, by executing a superseding proxy, or by submitting
a notice of revocation to the Funds. If you sign the proxy, but don't fill in a
vote, your shares will be voted in accordance with the Directors'
recommendations. If any other business is brought before the meeting, your
shares will be voted at the Directors' discretion.
WHAT IS BEING PROPOSED?
First, the Directors of your Fund are recommending that shareholders
approve the reorganization (the "Reorganization") of Liquid Assets Fund and
Municipal Assets Fund into the New Funds. An Agreement and Plan of
Reorganization provides for the transfer of all of the assets and liabilities of
Liquid Assets Fund and Municipal Assets Fund to the New Funds in exchange for
shares of the New Funds. The completion of these transactions, followed by the
distribution of the New Funds shares received by Liquid Assets Fund and
Municipal Assets Fund to their shareholders, will result in the shareholders of
Liquid Assets Fund and Municipal Assets Fund becoming shareholders of the New
Funds followed by the dissolution of Liquid Assets Fund and Municipal Assets
Fund. Upon completion of the Reorganization:
4
<PAGE>
* Shareholders of Liquid Assets Fund will be Shareholders of New
Liquid Assets Fund ("New Liquid Assets") which will have
substantially identical investment objectives, policies and
restrictions, fees and purchase and redemption procedures as
Liquid Assets Fund.
* Shareholders of Municipal Assets Fund will be shareholders of
New Municipal Assets Fund ("New Municipal Assets") which will
have substantially identical investment objectives, policies
and restrictions, fees and purchase and redemption procedures
as Municipal Assets Fund.
* There should be no federal income tax consequences to
Shareholders of Liquid Assets Fund and Municipal Assets Fund.
Second, the Directors of your Fund are recommending that shareholders
approve continuation of the Investment Advisory Agreement with IMG after a
change of ownership of IMG. The Investment Advisory Agreement would only
continue until such time as the Reorganization becomes effective. ALL EXPENSES
RELATED TO THIS PROXY STATEMENT/PROSPECTUS AND THE REORGANIZATIONS WILL BE BORNE
BY IMG.
RISK FACTORS
The Directors of your Fund believe that ownership of shares of New
Liquid Assets and New Municipal Assets will not involve any unique or special
risks compared to ownership of shares of Liquid Assets Fund and Municipal Assets
Fund. However, there can be no assurance that New Liquid Assets or New Municipal
Assets will achieve their investment objectives. The Funds and the New Funds are
subject to yield variations resulting from changes in prevailing interest rates.
New Liquid Assets as well as Liquid Assets are subject to the risk that parties
to repurchase agreements may default on their obligations or that banks may
default on agreements with Student Loan Trusts or FmHA Trusts. See New Liquid
Assets Prospectus dated January 16, 1998, for more detailed information. New
Municipal Assets as well as Municipal Assets are subject to the same repurchase
agreement risks and to the risk that an issuer or bank may default on a
Liquidity Agreement. See New Municipal Assets Prospectus dated January 16, 1998,
for more detailed information.
PROPOSAL 1: AGREEMENT AND PLAN OF REORGANIZATION
GENERAL INFORMATION
The Boards of Directors of Liquid Assets Fund and Municipal Assets Fund
have unanimously approved proposed Agreements and Plans of Reorganization (the
"Plans") providing for the acquisition of all of the assets of Liquid Assets
Fund and Municipal Assets Fund by the New Funds in exchange for shares of the
New Funds and the assumption by the New Funds of the liabilities of Liquid
Assets Fund and Municipal Assets Fund (the "Reorganization"). If the Plans are
approved, the proposed transaction would occur on or about February 14, 1998
(the "Exchange Date"). The value of the acquired assets of Liquid Assets Fund
and Municipal Assets Fund will be determined as of 3:00 p.m. Central Time on the
business day immediately prior to the Exchange Date. The aggregate net asset
value of the shares of New Liquid Assets and New Municipal Assets issued in
exchange will equal the aggregate net asset value of Liquid Assets Fund and
Municipal Assets Fund shares, respectively, then outstanding. In connection with
the proposed Reorganization, shares of the New Funds will be distributed to
shareholders of Liquid Assets Fund and Municipal Assets Fund and Liquid Assets
5
<PAGE>
Fund and Municipal Assets Fund will be terminated. Shareholders of Liquid Assets
Fund and Municipal Assets Fund will be the first public shareholders of New
Liquid Assets and New Municipal Assets. As a result of the proposed
Reorganization, each shareholder of Liquid Assets Fund and Municipal Assets Fund
will cease to be a Shareholder of Liquid Assets Fund and Municipal Assets Fund
and will receive that number of full and fractional shares of New Liquid Assets
and New Municipal Assets, respectively, of the same class as, and having a net
asset value equal to the net asset value of, such shareholder's shares of Liquid
Assets Fund and Municipal Assets Fund. The foregoing is only a summary and is
qualified in its entirety by reference to the Plans, copies of which are
attached as Exhibits A and B.
Because all shares of Liquid Assets Fund, Municipal Assets Fund and the
New Funds are in uncertificated book-entry form, the exchange of shares will
take place automatically on the Exchange Date. If will not be necessary for
shareholders to submit transmittal forms or other documents.
SHAREHOLDER SERVICES AND PRIVILEGES
Shareholders of the newly created portfolios in the New Funds will
enjoy all the same services and privileges as other shareholders of the New
Funds including the opportunity to exchange into portfolios with a wide variety
of investment objectives and policies. Purchase and redemption procedures for
New Liquid Assets and New Municipal Assets are substantially identical to those
of Liquid Assets Fund and Municipal Assets Fund.
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
New Liquid Assets and New Municipal Assets, respectively, have
substantially similar investment objectives, policies and restrictions as Liquid
Assets Fund and Municipal Assets Fund. Thus, the risks of investing in New
Liquid Assets and New Municipal Assets should also be substantially similar. THE
ONLY DIFFERENCE IN INVESTMENT POLICIES AND RESTRICTIONS BETWEEN NEW LIQUID
ASSETS AND LIQUID ASSETS FUND IS THAT NEW LIQUID ASSETS IS PERMITTED TO INVEST
IN COMMERCIAL PAPER OF THE HIGHEST RATING OR OF COMPARABLE QUALITY AS DETERMINED
BY THE BOARD OF DIRECTORS. THERE ARE NO DIFFERENCES IN INVESTMENT POLICIES AND
RESTRICTIONS BETWEEN NEW MUNICIPAL ASSETS AND MUNICIPAL ASSETS FUND.
For a detailed description of the investment objectives, policies and
restrictions of New Liquid Assets, New Municipal Assets, Liquid Assets Fund and
Municipal Assets Fund, see the New Funds Prospectus dated January 16, 1998, and
the Liquid Assets Fund and Municipal Assets Fund Prospectus dated September 30,
1997, both of which are delivered herewith.
BACKGROUND AND REASONS FOR THE PROPOSED REORGANIZATION
For the reasons set forth below, the Boards of Directors of Liquid
Assets Fund and Municipal Assets Fund, including all of the Directors who are
not "interested persons" as defined by the Investment Company Act of 1940 (the
"Disinterested Directors"), have unanimously concluded that the Reorganization
will be in the best interests of the shareholders of Liquid Assets Fund and
Municipal Assets Fund and that the interests of the existing shareholders of
Liquid Assets Fund and Municipal Assets Fund will not be diluted as a result of
the transactions contemplated by the Plan. The Boards of Directors of Liquid
Assets Fund and Municipal Assets Fund therefore have submitted the Plans for
approval by the shareholders of Liquid Assets Fund and Municipal Assets Fund at
the Special Meetings of Shareholders to be held on February 13, 1998. Approval
of the Plans require the vote of a majority of the outstanding voting securities
of Liquid Assets Fund and Municipal Assets Fund. The Plans will not become
6
<PAGE>
effective unless the requisite approval is given by shareholders of both Liquid
Assets Fund and Municipal Assets Fund.
The Directors of Liquid Assets Fund and Municipal Assets Fund have
approved the Plans because they believe it will benefit shareholders of Liquid
Assets Fund and Municipal Assets Fund through the expected greater ability of
the New Funds to attract and retain investors. In determining whether to
recommend the approval of the proposed Reorganization to the shareholders, the
Directors considered a number of factors, including, but not limited to: (i) the
fact that IMG will manage the investments of the New Funds in the same manner as
it has managed the assets of Liquid Assets Fund and Municipal Assets Fund; (ii)
the capabilities and resources of the other service providers of the New Funds
in the areas of marketing, investment and shareholder services; (iii) the
expenses and advisory fees applicable to Liquid Assets Fund and Municipal Assets
Fund before the Reorganization and the estimated expense ratios of the New
Funds, after the Reorganization; (iv) the terms and conditions of the Plans and
whether the proposed Reorganization will result in dilution of Liquid Assets
Fund and Municipal Assets Fund shareholder interests; (v) the anticipated
economies of scale which may be realized (although not presently determined)
through the reorganization of the funds; (vi) the assumption by IMG of the costs
estimated to be incurred to complete the proposed Reorganization; and (vii) the
future growth prospects of the New Funds
In this regard, the Directors of Liquid Assets Fund and Municipal
Assets Fund reviewed information provided by IMG relating to the anticipated
impact to the shareholders of Liquid Assets Fund and Municipal Assets Fund as a
result of the proposed Reorganization. The Directors noted that while the New
Funds presently have no assets or shareholders, and there were not any
demonstrated present economies, the Directors considered the probability that
the elimination of duplicative operations and the increase in the asset levels
of the New Funds after the proposed Reorganization will result in the following
potential benefits for shareholders of Liquid Assets Fund and Municipal Assets
Fund, although there can, of course, be no assurances in this regard:
(1) ACHIEVEMENT OF ECONOMIES OF SCALE AND REDUCED PER SHARE
EXPENSES. Combining the net assets of Liquid Assets Fund and
Municipal Assets Fund with the assets of the New Funds
generally should lead to reduced total operating expenses for
shareholders of Liquid Assets Fund and Municipal Assets Fund,
on a per share basis, by allowing fixed and relatively fixed
costs, such as accounting, legal and printing expenses, to be
spread over a larger asset base.
(2) ELIMINATION OF SEPARATE OPERATIONS. Consolidating Liquid
Assets Fund and Municipal Assets Fund and the New Funds should
eliminate any duplication of services and expenses that
currently exists as a result of their separate operations and
will promote more efficient operations on a more
cost-effective basis in the future.
The Directors of Liquid Assets Fund and Municipal Assets Fund also
considered the distribution capabilities of BISYS Fund Services, Inc., which
will become the Distributor of the shares of the New Funds If BISYS Fund
Services, Inc. is able to distribute the New Funds shares successfully, growth
in assets will make possible the realization of economies of scale and attendant
savings in costs to the New Funds and its shareholders. Of course, achievement
of these goals cannot be assured.
7
<PAGE>
EXPENSE SUMMARY
The purpose of the following tables is to inform investors of the
various costs and expenses they will bear, directly or indirectly, as
shareholders of New Liquid Assets or New Municipal Assets, and to compare those
costs and expenses with the costs and expenses borne by shareholders of Liquid
Assets Fund and Municipal Assets Fund during the past fiscal year.
NEW LIQUID ASSETS AND LIQUID ASSETS FUND
SHAREHOLDER TRANSACTION EXPENSES
Liquid New
Assets Liquid
Fund Assets
Maximum Sales Charge Imposed on Purchases None None
Maximum Sales Charge on Reinvested Dividends None None
Deferred Sales Load None None
Redemption Fee * None None
Exchange Fee None None
* A $15.00 fee may be charged to an individual shareholder account for
redemption by wire.
ESTIMATED ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
<TABLE>
<CAPTION>
CURRENT NEW CURRENT NEW CURRENT NEW CURRENT NEW
FUND FUND FUND FUND FUND FUND FUND FUND
SWEEP S S-2 S-2 TRUST T INSTITUTIONAL I
SHARES SHARES SHARES SHARES SHARES SHARES SHARES SHARES
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees................................. 0.25% 0.35% 0.25% 0.35% 0.25% 0.35% 0.25% 0.35%
12b-1 Distribution Fees 1....................... 0.75% 0.40% 0.50% 0.15% 0.25% 0.00% 0.00% 0.00%
Other Expenses
Shareholder Servicing Fees 2 ................ 0.00% 0.25% 0.00% 0.25% 0.00% 0.15% 0.00% 0.00%
Administrative Fees 3....................... 0.00% 0.06% 0.00% 0.06% 0.00% 0.06% 0.00% 0.06%
Other Fees................................... 0.20% 0.11% 0.20% 0.11% 0.20% 0.11% 0.20% 0.11%
Total Other Expenses......................... 0.20% 0.42% 0.20% 0.42% 0.20% 0.32% 0.20% 0.17%
Total Fund Operating Expenses After Waivers 4... 1.20% 1.17% 0.95% 0.92% 0.70% 0.67% 0.45% 0.52%
</TABLE>
The table reflects the current fees and an estimate of other expenses.
From time to time, the Advisor and/or Distributor may voluntarily waive the
Management Fees, the 12b-1 Distribution Fees and/or Shareholder Servicing Fees
and/or absorb certain expenses for a Fund or class of Shares of a Fund.
Long-term shareholders may pay more than the economic equivalent of the maximum
front-end sales charge permitted by the National Association of Securities
Dealers. Wire transfers may be used to transfer federal funds directly to/from
the Funds' custodian bank.
1 Pursuant to New Liquid Assets' Rule 12b-1 Plan, the maximum 12b-1 Distribution
Fees for S Shares of New Liquid Assets are 0.50% and for S-2 Shares 0.25%, but
have voluntarily agreed to limit such fees to 0.40% and 0.15% until further
notice.
2 Pursuant to New Liquid Assets' Shareholder Servicing Plans, the maximum
Shareholder Servicing Fees for S Shares, S-2 Shares and T Shares is 0.25%.
Currently, however, New Liquid Assets has limited these fees to an annual rate
of 0.15% for T Shares.
3 New Liquid Assets has entered into a Management and Administration Agreement
pursuant to which New Liquid Assets is authorized to pay a periodic amount
calculated at an annual rate of 0.21% of the average daily net assets of such
Fund. Currently, however, it is intended that no more than 0.06% will be paid
under the Agreement by New Liquid Assets.
4 Absent the waiver of these fees, "Total Operating Expenses" as a percentage of
average daily net assets would have been 1.42% for New Liquid Assets S Shares,
1.17% for New Liquid Assets S-2 Shares, 0.92% for New Liquid Assets T Shares,
and 0.67% for New Liquid Assets I Shares. No fee waivers have been in effect for
Liquid Assets Fund.
8
<PAGE>
EXAMPLE
You would pay the following expenses on a $1,000 investment in each Fund
assuming, (1) a (hypothetical) five percent annual return and (2) redemption at
the end of each time period.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Current Liquid Assets Fund-Sweep Shares $12 $38 $66 $145
New Liquid Assets-S Shares $12 $37 $64 $142
Current Liquid Assets Fund-S2 Shares $10 $30 $53 $117
New Liquid Assets-S2 Shares $9 $29 $51 $113
Current Liquid Assets Fund-Trust Shares $7 $22 $39 $87
New Liquid Assets-T Shares $7 $21 $37 $83
Current Liquid Assets Fund-Institutional Shares $5 $14 $25 $57
New Liquid Assets-I Shares $5 $17 $29 $65
</TABLE>
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.
NEW MUNICIPAL ASSETS AND MUNICIPAL ASSETS FUND
SHAREHOLDER TRANSACTION EXPENSES
Municipal New
Assets Municipal
Fund Assets
Maximum Sales Charge Imposed on Purchases None None
Maximum Sales Charge on Reinvested Dividends None None
Deferred Sales Load None None
Redemption Fee * None None
Exchange Fee None None
* A $15.00 fee may be charged to an individual shareholder account for
redemption by wire.
ESTIMATED ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
<TABLE>
<CAPTION>
CURRENT NEW CURRENT NEW CURRENT NEW
FUND FUND FUND FUND FUND FUND
SWEEP S TRUST T INSTITUTIONAL I
SHARES SHARES SHARES SHARES SHARES SHARES
<S> <C> <C> <C> <C> <C> <C>
Management Fees................................. 0.25% 0.35% 0.25% 0.35% 0.25% 0.35%
12b-1 Distribution Fees 1....................... 0.50% 0.15% 0.00% 0.00% 0.00% 0.00%
Other Expenses
Shareholder Servicing Fees 2................. 0.00% 0.25% 0.25% 0.15% 0.00% 0.00%
Administrative Fees 3........................ 0.00% 0.06% 0.00% 0.06% 0.00% 0.06%
Other Fees................................... 0.40% 0.15% 0.40% 0.15% 0.40% 0.15%
Total Other Expenses......................... 0.40% 0.46% 0.65% 0.36% 0.40% 0.21%
Total Fund Operating Expenses After Waivers 4... 1.15% 0.96% 0.90% 0.71% 0.65% 0.56%
</TABLE>
9
<PAGE>
The table reflects the current fees and an estimate of other expenses.
From time to time, the Advisor and/or Distributor may voluntarily waive the
Management Fees, the 12b-1 Distribution Fees and/or Shareholder Servicing Fees
and/or absorb certain expenses for a Fund or class of Shares of a Fund.
Long-term shareholders may pay more than the economic equivalent of the maximum
front-end sales charge permitted by the National Association of Securities
Dealers. Wire transfers may be used to transfer federal funds directly to/from
the Funds' custodian bank.
1 Pursuant to New Municipal Assets' Rule 12b-1 Plan, the maximum 12b-1
Distribution Fees for S Shares of New Municipal Assets are 0.25%, but have
voluntarily agreed to limit such fees to 0.15% until further notice.
2 Pursuant to New Municipal Assets' Shareholder Servicing Plans, the maximum
Shareholder Servicing Fees for S Shares and T Shares is 0.25%. Currently,
however, New Municipal Assets has limited these fees to an annual rate of 0.15%
for T Shares.
3 New Municipal Assets has entered into a Management and Administration
Agreement pursuant to which New Municipal Assets is authorized to pay a periodic
amount calculated at an annual rate of 0.21% of the average daily net assets of
such Fund. Currently, however, it is intended that no more than 0.06% will be
paid under the Agreement by New Municipal Assets.
4 Absent the waiver of these fees, "Total Operating Expenses" as a percentage of
average daily net assets would have been 1.21% for New Municipal Assets S
Shares, 0.96% for New Municipal Assets T Shares, and 0.71% for New Municipal
Assets I Shares. No fee waivers have been in effect for Municipal Assets Fund.
EXAMPLE
You would pay the following expenses on a $1,000 investment in each Fund
assuming, (1) a (hypothetical) five percent annual return and (2) redemption at
the end of each time period.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Current Municipal Assets Fund-Sweep Shares $12 $37 $63 $140
New Municipal Assets-S Shares $10 $31 $53 $118
Current Municipal Assets Fund-Trust Shares $9 $29 $50 $111
New Municipal Assets-T Shares $7 $23 $40 $88
Current Municipal Assets Fund-Institutional Shares $7 $21 $36 $81
New Municipal Assets-I Shares $6 $18 $31 $70
</TABLE>
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.
The purpose of the foregoing tables is to assist in understanding the various
costs and expenses that may be directly or indirectly borne by investors.
Certain figures contained in the above tables are based on amounts incurred
during each Fund's most recent fiscal year and have been adjusted as necessary
to reflect current services provider fees and/or reimbursements. Long-term
shareholders may eventually pay more than the economic equivalent of the maximum
front-end sales charge otherwise permitted by the National Association of
Securities Dealers, Inc. Wire transfers may be used to transfer federal funds
directly to/from the Funds' custodian bank. A $15.00 fee may be charged to an
individual shareholder account for redemption by wire.
10
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES
Consummation of the Reorganization is subject to the condition that the
New Funds, Liquid Assets Fund and Municipal Assets Fund receive an opinion from
Cline, Williams, Wright, Johnson & Oldfather (which opinion has now been
received) to the effect that for federal income tax purposes: (i) the transfer
of all of the assets and liabilities of Liquid Assets Fund and Municipal Assets
Fund (the "Acquired Funds") to the New Funds in exchange for shares of New
Liquid Assets and New Municipal Assets and the distribution to shareholders of
the Acquired Funds of the shares of New Liquid Assets and New Municipal Assets
so received, as described in the Plan, will constitute a reorganization within
the meaning of Section 368(a)(1)(C) or Section 368(a)(1)(D) of the Internal
Revenue Code of 1986, as amended (the "Code"); (ii) in accordance with Sections
361(a), 361(c)(1) and 357(a) of the Code, no gain or loss will be recognized by
the Acquired Funds as a result of such transactions; (iii) in accordance with
Section 354(a)(1) of the Code, no gain or loss will be recognized by the
shareholders of the Acquired Funds or the New Funds on the distribution of
shares of New Liquid Assets and New Municipal Assets to shareholders of the
Acquired Funds in exchange for shares of the Acquired Funds; (iv) in accordance
with Section 358(a)(1) of the Code, the basis of New Liquid Assets or New
Municipal Assets shares received by a shareholder of an Acquired Fund will be
the same as the basis of the shareholder's shares immediately before the
Effective Time of the Reorganization; (v) in accordance with Section 362(b) of
the Code, the basis to the New Funds of the assets of the Acquired Funds
received pursuant to such transactions will be the same as the basis of the
assets in the hands of the Acquired Funds immediately before such transactions;
(vi) in accordance with Section 1223(1) of the Code, a shareholder's holding
period for shares of New Liquid Assets or New Municipal Assets will be
determined by including the period for which the shareholder held the shares of
the Acquired Fund exchanged therefor, provided such shares of the Acquired Fund
were held as a capital asset; and (vii) in accordance with Section 1223(2) of
the Code, the holding period for the New Funds with respect to the assets
received in the Reorganization will include the period for which such assets
were held by the Acquired Funds.
No party to the Reorganization has sought a tax ruling from the
Internal Revenue Service ("IRS"). The opinion of counsel is not binding on the
IRS and does not preclude the IRS from adopting a contrary position.
Shareholders should consult their own advisers concerning the potential tax
consequences to them, including state and local income tax consequences.
Both the New Funds and the Acquired Funds have conformed their
operations to the requirements of Subchapter M of the Code and, as a result, do
not bear any corporate level federal or state income tax.
SHARES AND SHAREHOLDER RIGHTS
IMG Mutual Funds, Inc. is a Maryland corporation organized on November
16, 1994. New Liquid Assets and New Municipal Assets were created on October 30,
1997, as separate series with classes of shares to acquire the assets and
continue the business of the corresponding substantially identical investment
portfolios of the Liquid Assets Fund and the Municipal Assets Fund. Each share
of New Liquid Assets and New Municipal Assets represents an equal proportionate
interest in it and is entitled to such dividends and distributions out of the
income earned on the assets belonging to it as are declared at the discretion of
the Directors.
The Charter of IMG Mutual Funds, Inc. permits it, by resolution of its
Board of Directors, to create new series of common stock relating to new
investment portfolios or to subdivide existing series of Shares into subseries
11
<PAGE>
or classes. Classes could be utilized to create differing expense and fee
structures for investors in the same Fund. Differences could exist, for example,
in the sales load, Rule 12b-1 fees or service plan fees applicable to different
classes of Shares offered by a particular Fund. Such an arrangement could enable
the New Funds to tailor their marketing efforts to a broader segment of the
investing public with a goal of attracting additional investments. Reference is
made to the New Liquid Assets and New Municipal Assets Prospectus for a detailed
description of the classes of shares now offered under the heading "Organization
and Shares of the Funds."
Shareholders are entitled to one vote for each full share held and
proportionate fractional votes for fractional shares held. Shares of each Fund
will vote together and not by class unless otherwise required by law or
permitted by the Board of Directors. All shareholders of each Fund will vote
together as a single class on matters relating to the Fund's investment advisory
agreement, investment objective and fundamental policies.
Shares of the Funds have non-cumulative voting rights and, accordingly,
the holders of more than 50 percent of IMG Mutual Funds, Inc.'s outstanding
shares (irrespective of class) may elect all of the Directors. Shares have no
preemptive rights and only such conversion and exchange rights as the Board may
grant in its discretion. When issued for payments as described in the
Prospectus, shares will be fully paid and nonassessable. All shares are held in
uncertificated form and will be evidenced by the appropriate notation on the
books of the transfer agent.
The New Funds may operate without an annual meeting of shareholders
under specified circumstances if an annual meeting is not required by the 1940
Act. IMG Mutual Funds, Inc., 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. IMG Mutual
Funds, Inc., has also 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 has been elected by shareholders, at which time the
Directors then in office will call a shareholders' meeting for the election of
Directors. Shareholders may remove a Director by the affirmative vote of a
majority of the outstanding voting shares. In addition, the Directors are
required to call a meeting of shareholders for the purpose of voting upon the
question of removal of any such Director or for any other purpose when requested
in writing to do so by the shareholders of record of not less than 10 percent of
the outstanding voting securities.
Liquid Assets Fund and Municipal Assets Fund are Iowa corporations. For
a detailed description of the characteristics of the shares of Liquid Assets
Fund and Municipal Assets Fund and the rights of their shareholders, see
"Organization and Shares of the Funds" in the September 30, 1997 Prospectus.
The principal difference in the rights of shareholders of Liquid Assets
Fund and Municipal Assets Fund, as compared to New Liquid Assets and New
Municipal Assets, is that Iowa law and the Articles of Incorporation require
Liquid Assets Fund and Municipal Assets Fund to have annual meetings of
shareholders for the election of Directors.
12
<PAGE>
CAPITALIZATION
The following table shows the pro forma capitalization of the combined
New Liquid Assets-Liquid Assets Fund and the combined New Municipal
Assets-Municipal Assets Fund when the Reorganization is completed:
(In millions, except net asset value per share)
Net Asset
Total Net Shares Value
(As of November 30, 1997) Assets Outstanding Per Share
------------ ----------- ---------
Liquid Assets Fund $ 77.319 77.319 $ 1.00
New Liquid Assets $ - 0 - - 0 - $ 0.00
Pro Forma Combined $ 77.319 77.319 $ 1.00
Municipal Assets Fund $ 28.593 28.593 $ 1.00
New Municipal Assets $ - 0 - - 0 - $ 0.00
Pro Forma Combined $ 28.593 28.593 $ 1.00
The foregoing table assumes that all relevant reorganization
transactions occurred on November 30, 1997, and that initial capital of $10 (10
shares at $1.00 per share) was invested in New Liquid Assets and New Municipal
Assets immediately thereto.
IMG MUTUAL FUNDS, INC.
GENERAL. IMG Mutual Funds, Inc. ("IMG Funds") is a Maryland corporation
organized in November 1994, and operates as an open-end diversified management
investment company. For a general discussion of New Liquid Assets and New
Municipal Assets, see the accompanying New Funds Prospectus dated January 16,
1998. For the convenience of Liquid Assets Fund and Municipal Assets Fund
shareholders, cross-references to such Prospectus are set forth below.
CERTAIN EXPENSES AND FINANCIAL INFORMATION. No information on per-share income
and capital changes is included in the New Funds Prospectus because New Liquid
Assets and New Municipal Assets have not yet commenced operations. For a
discussion of New Liquid Assets's and New Municipal Assets's expenses, see
"Proposal 1: Agreement and Plan of Reorganization--Expense Summary" above and
"Expense Summary" in the New Funds Prospectus.
INVESTMENT OBJECTIVES AND POLICIES. For a discussion of New Liquid Assets's and
New Municipal Assets's investment objectives and policies, see "Investment
Objectives, Policies and Restrictions" in the New Funds Prospectus.
DIRECTORS AND OFFICERS. Overall responsibility for management of IMG Mutual
Funds, Inc., rests with the Board of Directors who are elected by the
shareholders of IMG Funds. There are currently five Directors, two of whom are
"interested persons" within the meaning of that term under the 1940 Act. The
Directors, in turn, elect the officers to supervise actively its day-to-day
operations.
13
<PAGE>
The names of the Directors and officers of IMG Mutual Funds, Inc.,
their addresses, and principal occupations during the past five years are as
follows:
* David W. Miles President, Treasurer and Senior Managing Director,
Director Investors Management Group, and
IMG Financial Services, Inc.
* Mark A. McClurg Vice President, Secretary and Senior Managing
President and Director Director, Investors Management Group, and
IMG Financial Services, Inc.
Johnny Danos President, Danos, Inc., a personal investment
Director company, 1994-present; Audit Partner,
KPMG Peat Marwick, 1963-1994
Debra Johnson Vice President and CFO, Business Publications
Director Corporation/Iowa Title Company, a publishing and
abstracting service company
Edward J. Stanek CEO, Iowa Lottery, a government-operated lottery
Director
* Ruth L. Prochaska Controller/Compliance Officer, Investors Management
Secretary Group, and IMG Financial Services, Inc.
* Denotes "interested persons," as defined in the 1940 Act, of IMG
Funds and the Advisor.
INVESTMENT ADVISER AND ADMINISTRATOR. For a discussion of IMG and the services
performed by it and its fees, see "Management and Fees" in the New Funds
Prospectus.
DISTRIBUTOR. For a discussion of BISYS Fund Services, Inc.'s activities as the
New Funds distributor, the services performed by it and its fees, see
"Management and Fees" in the New Funds Prospectus.
SHARES. For a discussion of voting rights of shares of the New Funds, see
"Organization and Shares of the Funds" in the New Funds Prospectus.
REDEMPTION OF SHARES. For a discussion concerning redemption of shares of New
Liquid Assets and New Municipal Assets, see "Purchasing Shares" and "Redeeming
Shares" in the New Funds Prospectus.
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS. For a discussion of the New Funds'
policies with respect to dividends and distributions, see "Distributions and
Taxes" in the New Funds Prospectus.
EXCHANGE PRIVILEGES. For a discussion of an New Liquid Assets or New Municipal
Assets shareholder's right to exchange shares for shares of another New Fund,
see "Purchasing Shares - Exchange Privilege" in the New Funds Prospectus.
LEGAL PROCEEDINGS. There are no pending material legal proceedings to which the
New Funds is a party.
SHAREHOLDER INQUIRIES. Shareholder inquiries relating to New Liquid Assets, New
14
<PAGE>
Municipal Assets or other New Funds may be addressed by writing to IMG, 2203
Grand Avenue, Des Moines, Iowa 50312-5338, or by calling toll free 800-798-1819.
MANAGEMENT DISCUSSION OF FUND PERFORMANCE. Management discussion of fund
performance is not included for New Liquid Assets and New Municipal Assets,
which have not yet commenced operations.
LIQUID ASSETS FUND AND MUNICIPAL ASSETS FUND
GENERAL. Liquid Assets Fund, Inc. and Municipal Assets Fund, Inc. are Iowa
corporations which operate as open-end diversified management investment
companies. For a general discussion of the Funds, see the accompanying Funds
Prospectus dated September 30, 1997. For the convenience of shareholders,
certain cross-references to such Prospectus are set forth below.
CERTAIN EXPENSES AND FINANCIAL INFORMATION. The Funds Prospectus contains
information on per share income and capital changes, under the heading
"Financial Highlights." For a discussion of the Funds' expenses, see "Proposal
1: Agreement and Plan of Reorganization--Expense Summary" above and "Expense
Summary" in the Funds Prospectus.
INVESTMENT OBJECTIVES AND POLICIES. For a discussion of the Funds' investment
objectives and policies, see "Investment Objective, Policies and Restrictions"
in the Funds Prospectus.
DIRECTORS AND OFFICERS. Overall responsibility for management of the Funds rests
with their Boards of Directors, which are elected by their shareholders. The
Directors elect the officers to supervise actively the day-to-day operations.
The names of the Directors and officers, their addresses, and principal
occupations during the past five years are as follows:
Robert F. Galligan Business Administration Department Chairman,
Director Associate Professor, Grand View College
Chad L. Hensley Retired President and CEO, Preferred Risk Mutual
Director Insurance Company
Fred Lorber Chairman of Board, Lortex Inc., a manufacturer of
Chairman and Director textiles
Darwin T. Lynner, Jr. President, Darwin T. Lynner Co., Inc., a property
Director management company
Mark A. McClurg * Vice President, Secretary and Senior Managing
Treasurer & Director Director of Investors Management Group and
IMG Financial Services, Inc.
David W. Miles * President, Treasurer and Senior Managing
President & Director Director of Investors Management Group, and
IMG Financial Services, Inc.
15
<PAGE>
Richard A. Miller Vice President & General Counsel, Farmers
Director Casualty Company Mutual
Ruth L. Prochaska * Controller/Compliance Officer of Investors
Secretary Management Group, and IMG Financial Services, Inc.
William E. Timmons Partner in Patterson, Lorentzen, Duffield, Timmons,
Director Irish & Becker
Steven E. Zumbach Attorney at Belin, Harris, Lamson, McCormick
Director
* Messrs. McClurg and Miles, and Ms. Prochaska are deemed to be
"interested persons" (as that term is defined in the Investment Company Act of
1940) of the Fund and the Advisor.
The mailing address for all officers and Directors is 2203 Grand
Avenue, Des Moines, Iowa 50312-5338.
INVESTMENT ADVISOR AND ADMINISTRATOR. For a discussion of IMG, the services
performed by it and its fees, see "Management Fees" in the Funds Prospectus.
DISTRIBUTOR. For a discussion of IMG Financial Services, Inc.'s activities as
distributor, see "Management and Fees" in the Funds Prospectus.
SHARES. For a discussion of the significant attributes of the Funds shares, see
"Organization and Shares of the Funds" in the Funds Prospectus.
REDEMPTION OR REPURCHASE OF SHARES. For a discussion concerning redemption or
repurchase of shares of the Funds, see "Redeeming Shares" in the Funds
Prospectus.
DIVIDENDS AND DISTRIBUTIONS. For a discussion of the Funds policies with respect
to dividends and distributions, see "Distributions and Taxes" in the Funds
Prospectus.
EXCHANGE PRIVILEGES. For a discussion of a Fund shareholder's right to exchange
shares of a Fund, see "Shareholder Services" in the Funds Prospectus.
LEGAL PROCEEDINGS. There are no pending material legal proceedings to which
either Fund is a party.
SHAREHOLDER INQUIRIES. Shareholder inquiries relating to the Funds may be
addressed by writing to IMG Financial Services, Inc., 2203 Grand Avenue, Des
Moines, Iowa 50312-5338, or calling toll-free 800-798-1819.
MANAGEMENT DISCUSSION OF FUND PERFORMANCE. Management's discussion of the
performance of the Funds is found in the annual report of the Funds, which is
incorporated by reference into the Statement of Additional Information relating
to the September 30, 1997 Prospectus of the Funds.
16
<PAGE>
PROPOSAL 2: APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The sole purpose of this Proposal is to permit shareholders of the
Funds to consider the New Advisory Agreement (herein described) to take effect
following the consummation of the transactions contemplated by an Agreement and
Plan of Reorganization by and among AMCORE Financial, Inc., IMG Acquisition,
Inc., Investors Management Group, David W. Miles and Mark A. McClurg, dated
September 30, 1997 (the "Acquisition Agreement"). Pursuant to the Acquisition
Agreement, Investors Management Group will become a wholly owned subsidiary of
AMCORE Financial Inc. This Proposal will be adopted if approved by the lesser of
(a) more than 50% of the outstanding shares of each Fund or (b) 66 2/3% of the
shares of each Fund voting at a meeting at which a majority of such shares are
represented in person or by proxy.
THE INVESTMENT ADVISOR
Investors Management Group has served as the investment advisor to the
Funds since they commenced operations. Investors Management Group is a federally
registered investment advisor organized in 1982. 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, mutual funds, individuals and others. As of
November 30, 1997, Investors Management Group had approximately $1.6 billion in
equity, fixed income and money market assets under management.
Investors Management Group is also the investment advisor of the New
Funds, the Vintage Funds, IMG Core Stock Fund, IMG Bond Fund, Iowa Schools Joint
Investment Trust, Iowa Public Agency Investment Trust and sub-advisor of Capital
Value Fund, Inc., and engages in certain other activities unrelated to
investment companies. David W. Miles is President, Treasurer and Director and
Mark A. McClurg is Vice President, Secretary and Director of Investors
Management Group. Each directly owns 50% of the outstanding Class A voting
securities of Investors Management Group and the IMG ESOP owns 100% of the
outstanding ESOP voting securities. David W. Miles owns an additional 13% of the
total outstanding voting securities beneficially through the ESOP, and Mark A.
McClurg beneficially owns an additional 5% of the total outstanding voting
securities. Mr. Miles and Mr. McClurg intend to devote substantially all their
time to the operation of Investors Management Group. Their address is 2203 Grand
Avenue, Des Moines, Iowa 50312-5338.
THE ACQUISITION
Pursuant to the Acquisition Agreement, Investors Management Group will
become a wholly owned subsidiary of AMCORE Financial, Inc. (the "Acquisition").
Investors Management Group will continue to be headquartered in the historic
Crawford Mansion located in Des Moines, Iowa. AMCORE Financial, Inc. is a
publicly traded northern Illinois financial services holding company with assets
exceeding $3.5 billion. AMCORE Financial, Inc. presently owns an investment
advisory firm called AMCORE Capital Management, which is primarily known for its
equity management. AMCORE Capital Management is the advisor to the nationally
recognized AMCORE Vintage Mutual Funds, a family of seven funds investing in
stocks and bonds to meet various investor objectives. Investors Management Group
and AMCORE Capital Management intend to merge operations and to operate as
Investors Management Group after the Acquisition.
Under the terms of the Acquisition Agreement, each of Investors
Management Group's ESOP shares will be converted into the right to receive
2.0038 shares of AMCORE Financial, Inc. common stock and each of Investors
17
<PAGE>
Management Group's Class A common shares will be converted into (i) the right to
receive 0.9808 shares of AMCORE Financial, Inc. common stock and (ii) the
contingent right to receive additional AMCORE shares based on certain
performance benchmarks in 1998, 1999 and 2000, with the shares issued in 1999,
2000 and 2001. The Acquisition is expected to be consummated on or about
February 13, 1998, and is subject to certain closing conditions, including
certain regulatory approvals and the approval of shareholders of Investors
Management Group.
Investors Management Group does not anticipate any reduction in the
quality of services now provided to the Funds. As a condition of the
Acquisition, certain officers of Investors Management Group have agreed to enter
into employment agreements with AMCORE Financial, Inc., which are intended to
assure that the services of such officers are available to Investors Management
Group (and thus to the Funds) after the Acquisition.
As a result of the Acquisition, Mr. Miles will become Chief Operating
Officer and Mr. McClurg will become Managing Director for Client Development for
AMCORE Investment Group, N.A., a trust subsidiary owned by AMCORE Financial,
Inc., in addition to retaining their responsibilities with Investors Management
Group. Jay Evans, presently Chief Investment Officer of AMCORE Capital
Management, Inc., will assume that role at Investors Management Group.
THE ADVISORY AGREEMENT
The Directors of the Funds are proposing that shareholders approve new
investment advisory agreements (the "New Advisory Agreements") between the Funds
and Investors Management Group to be effective upon consummation of the
Acquisition. In anticipation of the Acquisition, a majority of the Directors
(including a majority of the "Disinterested Directors") of each of the Funds
approved the New Advisory Agreement on October 21, 1997. The shareholders of the
Funds are being asked to approve the New Advisory Agreement.
THE CURRENT ADVISORY AGREEMENT. The existing Investment Advisory
Agreements (the "Current Advisory Agreements") were last approved by a majority
of the Disinterested Directors of each Fund, voting in person at a meeting
called for that purpose on July 15, 1997. The Current Advisory Agreements for
each Fund providesthat the Advisor will supply investment research and portfolio
management, including adequate personnel to market and supervise continuously
the investment programs of the Funds, the administration of the investment
programs and the composition of the portfolios.
The Current Advisory Agreements provide that the Advisor shall not be
liable for any error of judgment or of law, or for any loss suffered by the
Funds in connection with any matters to which the Current Advisory Agreement
relates, except a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of the Advisor in the performance of its obligations and
duties, or by reason of its reckless disregard of obligations or duties under
the Current Advisory Agreement. The Current Advisory Agreements may be
terminated at any time by either party without the payment of any penalty upon
ninety (90) days written notice, and automatically terminates in the event of
its assignment.
For the fiscal year ended June 30, 1997, Liquid Assets Fund and
Municipal Assets Fund paid $428,125, and $51,871, respectively, for services
provided, under the current Advisory Agreements.
The Fund pays all other expenses incurred in its operation including,
but not limited to, direct charges relating to the purchase and sale of its
portfolio securities, interest charges, fees and expenses of legal counsel and
18
<PAGE>
independent auditors, taxes and governmental fees, expenses of regular and
special meetings of the Directors, fees and disbursements of custodians,
insurance premiums, indemnification and other expenses not expressly provided
for in the Current Advisory Agreement and any extraordinary expenses of a
nonrecurring nature.
THE NEW ADVISORY AGREEMENT. The Boards of Directors fo the Funds
approved the proposed New Advisory Agreement between the Funds and Investors
Management Group on October 21, 1997. The form of the proposed New Advisory
Agreement which is identical for both Funds, attached as Exhibit C, is
substantially similar to the Current Advisory Agreement. There are no material
differences between the Current Advisory Agreement and the New Advisory
Agreement for the Funds.
The investment advisory fee as a percent of net assets payable by the
Funds will be the same under the New Advisory Agreement as under the Current
Advisory Agreement, that is 0.25 percent of the average daily net assets. If the
investment advisory fee under the New Advisory Agreement had been in effect for
the Funds' most recently completed fiscal year, contractual advisory fees
payable to the Advisor by the Funds would have been identical to those payable
under the Current Advisory Agreement.
In connection with approving the New Advisory Agreements, the Directors
of each Fund held a meeting on October 21, 1997. At these meetings, the
Directors considered the possible effects of the Acquisition on the Funds and
Investors Management Group and its ability to provide investment advisory
services with respect to the Funds. In evaluating the New Advisory Agreements,
the Boards of Directors took into account that the Funds' Current Advisory
Agreement and the New Advisory Agreement, including the terms relating to the
services to be provided thereunder by the Advisor and the fees and expenses
payable by the Funds are identical. The Directors considered the skills and
capabilities of the Advisor and the representation that no material change was
planned in the current management or facilities of the Advisor as a result of
the Acquisition. The Directors considered the continued employment of members of
senior management of the Advisor pursuant to future employment contracts to be
important to help assure the continuity of the personnel primarily responsible
for maintaining the quality of investment advisory and other services for the
Funds. The Funds considered the possible benefits the Advisor may receive as a
result of the Acquisition.
The Directors, including a majority of the Disinterested Directors,
concluded that if the Acquisition occurs, entry by the Funds into a New Advisory
Agreement would be in the best interest of the Funds and the shareholders of the
Funds. The Board of Directors of each Fund unanimously approved the New Advisory
Agreement and recommended such agreement for approval by the shareholders. The
New Advisory Agreement will take effect upon the later to occur of (i) obtaining
of shareholder approval or (ii) closing of the Acquisition. The New Advisory
Agreement will continue in effect until December 31, 1999, and thereafter for
successive annual periods as long as such continuance is approved in accordance
with the 1940 Act. In the event that shareholders of the Funds do not approve
the New Advisory Agreement and the Acquisition is consummated, the Board of
Directors would be forced to seek investment advisory services from another
advisory organization. In the event the Acquisition is not consummated, the
Advisor would continue to serve as investment advisor of the Funds pursuant to
the terms of the Current Advisory Agreement.
In the event that the Reorganization described in Proposal 1 above is
consummated, the New Advisory Agreement would be superseded by a similar
agreement between Investors Management Group and IMG Mutual Funds, Inc.
19
<PAGE>
INFORMATION RELATING TO VOTING MATTERS
GENERAL INFORMATION
This combined Proxy Statement/Prospectus is being furnished in
connection with the solicitation of proxies by the Board of Directors of Liquid
Assets Fund and Municipal Assets Fund (the "Funds") for use at the Special
Meetings of Shareholders to be held on February 13, 1998 (the "Meeting"). It is
expected that the solicitation of proxies by the Board of Directors will be
primarily by mail. The Funds' officers may also solicit proxies by telephone
facsimile transmission or personal interview.
The following table gives the total number of shares of the Funds
outstanding at the close of business December 31, 1997, the record date for the
meeting.
Liquid Assets Fund........................... 113,511,069.34
Municipal Assets Fund........................ 31,558,239.50
Each shareholder of record on the record date is entitled to one vote
for each share owned and a fractional vote for each fractional share owned on
each matter presented for shareholder vote.
If the accompanying proxy is executed and returned in time for the
Meeting, the shares presented thereby will be voted in accordance with the proxy
on all matters that may properly come before the Meeting. If no specification is
made, the proxy will be voted FOR all enumerated proposals. Any shareholder
submitting a proxy may revoke it at any time before it is exercised by
submitting to the Funds, c/o Secretary, 2203 Grand Avenue, Des Moines, Iowa
50312-5338, a written notice of revocation or a subsequently executed proxy or
by attending the meeting and electing to vote in person.
SHAREHOLDER AND BOARD APPROVAL
The Agreement and Plan of Reorganization will not become effective
unless approved by a majority of shares of each Fund. The New Advisory Agreement
must be approved by each Fund by a "majority" vote, as defined in the 1940 Act
and described in Proposal 2 above. Under Iowa law, abstentions do not constitute
a vote "for" or "against" a matter and will be disregarded in determining the
"votes cast" on an issue. Broker "non-votes" (i.e., proxies from brokers or
nominees indicating that such persons have not received instructions from the
beneficial owner or other persons entitled to vote shares on a particular mater
with respect to which the brokers or nominees do not have discretionary power)
will be deemed to be abstentions.
The vote of the shareholders of IMG Mutual Funds, Inc. is not being
solicited in connection with the approval of the Plan since their approval or
consent is not necessary for the completion of the Reorganization.
As of the Record Date, all of the officers and Directors of the Funds
beneficially owned, individually and as a group, less than 1% of the shares of
the Funds. As of the record date, Emprise Financial Corporation, AMCORE Bank,
N.A., Rockford and Swebak & Co., directly or indirectly owned approximately
9,329,500 shares (8.2%), 11,065,378 shares (9.7%) and 22,780,278 shares (20.1%),
respectively, of the outstanding shares of Liquid Assets Fund and Microtronics,
Inc., directly or indirectly owned approximately 2,110,572 shares (6.7%) of the
outstanding shares of Municipal Assets Fund. No other person or persons is
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believed to own of record or beneficially 5% or more of the outstanding shares
of either Fund as of December 31 , 1997.
QUORUM
In the event that a quorum is not present at the Meeting, or in the
event that a quorum is present at the Meeting but sufficient votes to approve a
particular proposal are not received, the persons named as proxies, or their
substitutes, may propose one or more adjournments of the Meeting to permit
further solicitation of proxies. Any such adjournment will require the
affirmative vote of a majority of those shares represented at the meeting in
person or by proxy. If a quorum is present, the persons named as proxies will
vote those proxies which they are entitled to vote FOR the particular proposal
in favor of such adjournments, and will vote those proxies required to be voted
AGAINST such proposal against any adjournment. Under the Bylaws of the Funds, a
quorum is constituted by the presence in person or by proxy of the holders of
more than 50% of the aggregate outstanding shares of the Portfolios entitled to
vote at the Meeting. If a proxy is properly executed and returned and is marked
with an abstention, the shares represented thereby will be considered to be
present at the Meeting for the purpose of determining the existence of a quorum
for the transaction of business.
INFORMATION FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION
This combined Proxy Statement/Prospectus and the related Statement of
Additional information do not contain all of the information set forth in the
registration statements and the exhibits relating thereto which the New Funds,
Liquid Assets Fund and Municipal Assets Fund, respectively, have filed with the
Securities and Exchange Commission ("SEC") under the Securities Act of 1933 and
the 1940 Act to which reference is hereby made. The SEC file number for the
Funds Prospectus and the related Statement of Additional Information which are
incorporated by reference herein is Registration No. 33-78054. The SEC file
number for the New Liquid Assets and New Municipal Assets Prospectus and related
Statement of Additional Information which are incorporated by reference herein
is Registration No. 33-81998.
The New Funds, Liquid Assets Fund and Municipal Assets Fund are subject
to the informational requirements of the Securities Exchange Act of 1934 and the
1940 Act, and in accordance therewith, file reports and other information with
the SEC. Proxy material, reports, proxy and information statements, registration
statements and other information can be inspected and copied at the public
reference facilities of the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549. Copies of such filings may also be available at the following SEC
regional offices: Northwestern Atrium, 500 West Madison Street, Suite 1400,
Chicago, IL 60661-2511; 7 World Trade Center, Suite 1300, New York, NY 10048 and
73 Tremont Street, Suite 600, Boston, MA 02108-3912. Copies of such materials
can also be obtained by mail from the Public Reference Branch, Office of
Consumer Affairs and Information Services, SEC, Washington, D.C. 20549, at
prescribed rates.
OTHER BUSINESS
The Funds' Board of Directors knows of no other business to be brought
before the Meeting. However, if any other matters come before the Meeting, it is
the intention that proxies which do not contain specific restrictions to the
contrary will be voted on such matters in accordance with the judgment of the
persons named in the enclosed form of proxy.
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LEGAL MATTERS
Certain legal matters concerning the issuance of shares in the
Reorganization will be passed upon for the New Funds by Ober, Kaler, Grimes &
Shriver, 120 E. Baltimore Street, Baltimore, Maryland 21202. Certain tax matters
will be passed upon for Liquid Assets Fund and Municipal Assets Fund by Cline,
Williams, Wright, Johnson & Oldfather, 1900 First Bank Building, 233 South 13th
Street, Lincoln, Nebraska 68508. Cline, Williams, Wright, Johnson & Oldfather
acts as legal counsel to the New Funds, Investors Management Group, and other
funds and entities managed by Investors Management Group.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to the Funds in writing at the
address on the cover page of this combined Proxy Statement/Prospectus or by
telephoning 800-798-1819.
* * *
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING ARE REQUESTED TO
DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE. NO
POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
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EXHIBIT A
[FORM OF]
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT made as of the 30th day of October 1997, is made by and
among the IMG Mutual Funds, Inc., a Maryland corporation (the "IMG Funds"),
Liquid Assets Fund, Inc., an Iowa corporation ("LAF"), and Investors Management
Group, an Iowa corporation ("IMG").
WITNESSETH:
WHEREAS the Board of Directors of the IMG Funds, and the Board of
Directors of LAF, each an open-end management investment company, deem it
advisable that the IMG Funds acquire all of the assets of LAF in exchange for
the assumption by the IMG Funds of all of the liabilities of LAF and shares
issued by the IMG Funds which are thereafter to be distributed by LAF pro rata
to its shareholders in complete liquidation and termination of LAF and in
exchange for all of LAF's outstanding shares with the intent that the
transactions described herein shall qualify as a tax-free reorganization under
Section 368(a)(1)(C) of the Internal Revenue Code of 1986;
NOW THEREFORE, in consideration of the mutual promises herein
contained, each of the parties hereto represents and warrants to, and agrees
with each of the other parties as follows:
1. IMG Funds hereby represents and warrants to LAF that:
(a) The IMG Funds is a corporation with transferable shares duly
organized and validly existing under the laws of Maryland and has full power to
own its properties and assets and to carry on its business as such business is
now being conducted.
(b) The IMG Funds' statement of assets and liabilities as of April
30, 1997, and the related statements of operations and changes in net assets for
the fiscal year ended April 30, 1997, all as audited by KPMG Peat Marwick LLP,
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis. Such statement of assets and liabilities fairly
presents the financial position and net assets of the IMG Funds as of such date
and such statements of operations and changes in net assets fairly present the
results of it operations for the period covered thereby;
(c) There are no claims, actions, suits or proceedings pending or,
to its knowledge, threatened against or affecting the IMG Funds or its
properties or business or its right to issue and sell shares, or which would
prevent or hinder consummation of the transactions contemplated hereby, and it
is not charged with or, to the IMG Funds' knowledge, threatened with any charge
or investigation of, any violation of any provision of any federal, state or
local law or any administrative ruling or regulation relating to any aspect of
its business or the issuance or sale of its shares;
(d) The IMG Funds is not a party to or subject to any judgment or
decree or order entered in any suit or proceeding brought by any governmental
agency or by any other person enjoining it in respect of, or the effect of which
is to prohibit, any business practice or the acquisition of any property or the
conduct of business by it or the issuance or sale of its shares in any area;
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(e) The IMG Funds has filed all tax returns required to be filed,
has no liability for any unpaid taxes and has made a proper election to be
treated as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986 (the "Code") for each of its taxable years. The IMG Funds
has not committed any action or failed to perform any necessary action that
would render invalid its election to be treated as a regulated investment
company for any of its taxable years;
(f) The authorization, execution and delivery of this Agreement on
behalf of the IMG Funds does not, and the consummation of the transactions
contemplated hereby will not violate, or conflict with any provision of the IMG
Funds' Charter or By-Laws, or any provision of, or result in the acceleration of
any obligation under, any mortgage, lien, lease, agreement, instrument, order,
arbitration award, judgment or decree to which it is party or by which it or any
of its assets is bound, or violate or conflict with any other material
contractual or statutory restriction of any kind or character to which it is
subject;
(g) This Agreement has been duly authorized, executed, and
delivered by the IMG Funds and constitutes a valid and binding agreement of the
IMG Funds and all governmental and other approvals required for the IMG Funds to
carry out the transactions contemplated hereunder have been or on or prior to
the Closing Date (as herein defined) will have been obtained;
(h) The IMG Funds is registered under the Investment Company Act
of 1940, as amended (the "1940 Act"), as an open-end, diversified management
investment company. The IMG Funds is currently in compliance with the 1940 Act
and the rules of the Securities and Exchange Commission (the "Commission")
promulgated thereunder. Neither the IMG Funds nor its affiliates has violated
Section 9 of the 1940 Act, is currently subject to an exemptive order of the
Securities and Exchange Commission pursuant to Section 9(c) of the 1940 Act, or
is currently subject to any current or threatened investigation or enforcement
action by the Securities and Exchange Commission or any other federal or state
authority which could result in a violation of Section 9(a) of the 1940 Act;
(i) On the Closing Date, The IMG Funds will own its assets free
and clear of all liens, claims, charges, options and encumbrances;
(j) On the Closing Date, the IMG Funds will have registered shares
of a new series named the Liquid Assets Fund series of the IMG Funds (or some
other name) (the "Liquid Assets Fund"), and will have registered four classes of
shares of such Liquid Assets Fund, the four classes of shares to be named the
Class A shares, the Class B shares, the Class C shares and the Class D shares
(or, with respect to each class, some other name), and shares of the Class A,
Class B, Class C and Class D shares of the Liquid Assets Fund will represent
interests in a portfolio of securities managed under investment objectives,
policies and restrictions substantially identical to the Class A, Class B, Class
C and Class D shares of LAF;
(k) On the Closing Date, the shares of the Liquid Assets Fund to
be delivered to LAF hereunder shall have been registered under the Securities
Act of 1933, as amended (the "1933 Act") and duly authorized, and, when issued
and delivered pursuant to this Agreement, will be validly issued, fully paid and
nonassessable; and the IMG Funds will comply with all applicable laws in
connection with the issuance of such shares and shall not be subject to a
stop-order of the Commission in connection therewith; and
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(l) On the Closing Date, the shares of the Liquid Assets Fund to
be delivered to LAF hereunder shall have been registered with the securities
administrator of each state under whose securities law such registration is
required.
2. LAF hereby represents and warrants to the IMG Funds that:
(a) LAF is a corporation with transferable shares duly organized
and validly existing under the laws of Iowa and has full power to own its
properties and assets and to carry on its business as such business is now being
conducted.
(b) LAF's statement of assets and liabilities as of June 30, 1997,
and the related statements of operations and changes in net assets for the
fiscal year ended June 30, 1997, all as audited by KPMG Peat Marwick LLP, have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis. Such statement of assets and liabilities fairly
presents the financial position and net assets of LAF as of such date and such
statements of operations and changes in net assets fairly present the results of
it operations for the period covered thereby;
(c) There are no claims, actions, suits or proceedings pending or,
to its knowledge, threatened against or affecting LAF or its properties or
business or its right to issue and sell shares, or which would prevent or hinder
consummation of the transactions contemplated hereby, and it is not charged with
or, to LAF's knowledge, threatened with any charge or investigation of, any
violation of any provision of any federal, state or local law or any
administrative ruling or regulation relating to any aspect of its business or
the issuance or sale of its shares;
(d) LAF is not a party to or subject to any judgment or decree or
order entered in any suit or proceeding brought by any governmental agency or by
any other person enjoining it in respect of, or the effect of which is to
prohibit, any business practice or the acquisition of any property or the
conduct of business by it or the issuance or sale of its shares in any area;
(e) LAF has filed all tax returns required to be filed, has no
liability for any unpaid taxes and has made a proper election to be treated as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986 (the "Code") for each of its taxable years. LAF has not committed any
action or failed to perform any necessary action that would render invalid its
election to be treated as a regulated investment company for any of its taxable
years;
(f) The authorization, execution and delivery of this Agreement on
behalf of LAF does not, and the consummation of the transactions contemplated
hereby will not violate, or conflict with any provision of LAF's Articles of
Incorporation or By-Laws, or any provision of, or result in the acceleration of
any obligation under, any mortgage, lien, lease, agreement, instrument, order,
arbitration award, judgment or decree to which it is party or by which it or any
of its assets is bound, or violate or conflict with any other material
contractual or statutory restriction of any kind or character to which it is
subject;
(g) This Agreement has been duly authorized, executed, and
delivered by LAF and constitutes a valid and binding agreement of LAF and all
governmental and other approvals required for LAF to carry out the transactions
contemplated hereunder have been or on or prior to the Closing Date (as herein
defined) will have been obtained;
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(h) On the Closing Date, LAF will own its assets free and clear of
all liens, claims, charges, options and encumbrances and, except for the
Management and Investment Advisory Agreement, Transfer Agent Agreement and
Administrative Services Agreement with IMG, the Underwriting Agreement with IMG
Financial Services, Inc., and the Custodial Agreement with AMCORE Investment
Group, N.A., there will be no material contracts or agreements, other than this
Agreement, outstanding to which LAF is a party or to which it is subject;
(i) On the Closing Date, LAF will have full right, power and
authority to sell, assign and deliver the assets to be sold, assigned,
transferred and delivered to the IMG Funds hereunder, and upon delivery and
payment for such assets, the IMG Funds will acquire good and marketable title
thereto free and clear of all liens, claims, charges, options and encumbrances;
(j) LAF will declare to shareholders of record on or prior to the
Closing Date a dividend or dividends which, together with all previous such
dividends, shall have the effect of distributing to the shareholders all of its
investment company taxable income, computed with regard to any deduction for
dividends paid, and all of its net realized capital gains, if any, as of the
Closing Date; and
(k) LAF will, from time to time, as and when requested by the IMG
Funds, execute and deliver or cause to be executed and delivered, all such
assignments and other instruments, and will take and cause to be taken such
further action, as the IMG Funds may deem necessary or desirable in order to
vest in and confirm to the IMG Funds, title to and possession of all the assets
of LAF to be sold, assigned, transferred and delivered hereunder and otherwise
to carry out the intent and purpose of this Agreement.
3. Based on the respective representations and warranties,
subject to the terms and conditions contained herein, LAF agrees to transfer to
the IMG Funds and the IMG Funds agrees to acquire from LAF, all the assets of
LAF on the Closing Date and to assume from LAF all of the liabilities of LAF in
exchange for the issuance of the number and class of shares of the Liquid Assets
Fund provided in Section 4 which will be subsequently distributed pro rata to
the shareholders of LAF in complete liquidation and termination of LAF and in
exchange for all of LAF's outstanding shares as provided in Section 6. LAF shall
not issue, sell or transfer any of its shares after the Closing Date, and only
redemption requests received by LAF in proper form prior to the Closing Date
shall be fulfilled by LAF. Redemption requests received by LAF thereafter shall
be treated as requests for redemption of those shares of the Liquid Assets Fund
allocable to the shareholder in question as provided in Section 6 of this
Agreement.
4. On the Closing Date, the IMG Funds will issue to LAF that
number of full and fractional shares of the Class A, Class B, Class C and Class
D shares of the Liquid Assets Fund as follows:
(a) the IMG Funds will issue that number of Class A shares of the
Liquid Assets Fund, taken at their net asset value on the Closing Date, having
an aggregate net asset value equal to the aggregate value of the net assets of
LAF that are allocable to the Class A shares of LAF;
(b) the IMG Funds will issue that number of Class B shares of the
Liquid Assets Fund, taken at their net asset value on the Closing Date, having
an aggregate net asset value equal to the aggregate value of the net assets of
LAF that are allocable to the Class B shares of LAF;
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<PAGE>
(c) the IMG Funds will issue that number of Class C shares of the
Liquid Assets Fund, taken at their net asset value on the Closing Date, having
an aggregate net asset value equal to the aggregate value of the net assets of
LAF that are allocable to the Class C shares of LAF; and
(d) the IMG Funds will issue that number of Class D shares of the
Liquid Assets Fund, taken at their net asset value on the Closing Date, having
an aggregate net asset value equal to the aggregate value of the net assets of
LAF that are allocable to the Class D shares of LAF.
The aggregate value of the net assets of LAF allocable to the Class A,
Class B, Class C and Class D shares of LAF, and the net asset value of the Class
A, Class B, Class C and Class D shares of the Liquid Assets Fund shall be
determined in accordance with the then current prospectuses for Class A, Class
B, Class C and Class D shares of the Liquid Assets Fund as of 3:00 p.m. on the
Closing Date.
5. The closing of the transaction contemplated in this Agreement
(the "Closing") shall be held at the offices of IMG, 2203 Grand Avenue, Des
Moines, Iowa 50312-5338, or at such other place as the parties hereto may agree,
at 3:00 p.m. Central Standard Time on December 31, 1997 or on such earlier or
later date as the parties hereto may mutually agree. The date on which the
Closing is to be held as provided in this Agreement shall be known as the
"Closing Date".
In the event that on the Closing Date (a) the New York Stock Exchange
is closed for other than customary week-end and holiday closings or (b) trading
on said Exchange is restricted or (c) as emergency exists as a result of which
it is not reasonably practicable for the IMG Funds or LAF to fairly determine
the value of its assets, the Closing Date shall be postponed until the first
business day after the day on which trading shall have been fully resumed.
6. As soon as practicable after the Closing Date, LAF shall
distribute on a pro rata basis to (a) the Class A shareholders of record of LAF
at the close of business on the Closing Date the Class A shares of the Liquid
Assets Fund received by LAF at the Closing in exchange for all of the
outstanding Class A shares of LAF; (b) the Class B shareholders of record of LAF
at the close of business on the Closing Date the Class B shares of the Liquid
Assets Fund received by LAF at the Closing in exchange for all of the
outstanding Class B shares of LAF, (c) the Class C shareholders of record of LAF
at the close of business on the Closing Date the Class C shares of the Liquid
Assets Fund received by LAF at the Closing in exchange for all of the
outstanding Class C shares of LAF; and (d) the Class D shareholders of record of
LAF at the close of business on the Closing Date the Class D shares of the
Liquid Assets Fund received by LAF at the Closing in exchange for all of the
outstanding Class D shares of LAF. As soon as practicable thereafter, LAF shall
be liquidated and dissolved in accordance with applicable law and its Articles
of Incorporation.
For purposes of the distribution of shares of the Liquid Assets Fund to
shareholders of LAF, the IMG Funds shall credit on the books of the IMG Funds an
appropriate number of shares of the appropriate class of the Liquid Assets Fund
to the account of each shareholder of LAF whose shares are (a) not represented
by certificates, upon the distribution of such shares by LAF and (b) represented
by certificates, only upon surrender of such certificates. No certificates will
be issued for shares, whether full or fractional, of any class of the Liquid
Assets Fund. After the Closing Date, represented shares of LAF shall be deemed
for all purposes of the IMG Funds' charter and By-Laws to evidence the
appropriate number of shares of the appropriate class of the Liquid Assets Fund
to be credited on the books of the IMG Funds in respect of such shares of LAF as
provided above.
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7. Subsequent to the execution of this Agreement and prior to the
Closing Date, LAF shall deliver to the IMG Funds a list setting forth the assets
to be assigned, delivered and transferred to the IMG Funds, including the
securities then owned by LAF and the respective federal income tax basis (on an
identified cost basis) thereof, and the liabilities to be assumed by the IMG
Funds pursuant to this Agreement.
8. All of LAF's portfolio securities shall be delivered by LAF's
custodian on the Closing Date to the IMG Funds or its custodian, either endorsed
in proper form for transfer in such condition as to constitute good delivery
thereof in accordance with the practice of brokers or, if such securities are
held in a securities depository within the meaning of Rule 17f-4 under the 1940
Act, transferred to an account in the name of the IMG Funds or its custodian
with said depository. All cash to be delivered pursuant to this Agreement shall
be wire transferred from LAF's account at its custodian to the IMG Funds'
account at its custodian. If on the Closing Date LAF is unable to make good
delivery pursuant to this Section 8 to the IMG Funds' custodian of any of LAF's
portfolio securities because such securities have not yet been delivered to
LAF's custodian by its broker or by the transfer agent for such securities, then
the delivery requirement of this Section 8 with respect to such securities shall
be waived, and LAF shall deliver to the IMG Funds' custodian on or by said
Closing Date with respect to said undelivered securities executed copies of an
agreement of assignment in a form satisfactory to the IMG Funds, and a due bill
or due bills in form and substance satisfactory to the custodian, together with
such other documents including brokers' confirmations, as may be reasonably
required by the IMG Funds.
9. The obligations of the IMG Funds under this Agreement shall be
subject to receipt by the IMG Funds on or prior to the Closing Date of:
(a) Copies of the resolutions adopted by the Board of Directors of
LAF and its shareholders authorizing the execution of this Agreement by LAF and
the transactions contemplated hereunder, certified by the Secretary or Assistant
Secretary of LAF;
(b) A certificate of the Secretary or Assistant Secretary of LAF
as to the signatures and incumbency of its officers who executed this Agreement
on behalf of LAF and any other documents delivered in connection with the
transactions contemplated thereby on behalf of LAF;
(c) A certificate of an appropriate officer of LAF as to the
fulfillment of all agreements and conditions on its part to be fulfilled
hereunder at or prior to the Closing Date and to the effect that the
representations and warranties of LAF are true and correct in all material
respects at and as of the Closing Date as if made at and as of such date; and
(d) Such other documents, including an opinion of counsel, as IMG
Funds may reasonably request to show fulfillment of the purposes and conditions
of this Agreement.
10. The obligations of LAF under this Agreement shall be subject
to receipt by LAF on or prior to the Closing Date of:
(a) Copies of the resolutions adopted by the Board of Directors of
the IMG Funds authorizing the execution of this Agreement and the transactions
contemplated hereunder, certified by the Secretary or Assistant Secretary of the
IMG Funds;
(b) A certificate of the Secretary or Assistant Secretary of the
IMG Funds as to the signatures and incumbency of its officers who executed this
28
<PAGE>
Agreement on behalf of the IMG Funds and any other documents delivered in
connection with the transactions contemplated thereby on behalf of the IMG
Funds;
(c) A certificate of an appropriate officer of the IMG Funds as to
the fulfillment of all agreements and conditions on its part to be fulfilled
hereunder at or prior to the Closing Date and to the effect that the
representations and warranties of the IMG Funds are true and correct in all
material respects at and as of the Closing Date as if made at and as of such
date; and
(d) Such other documents, including an opinion of counsel, as LAF
may reasonably request to show fulfillment of the purposes and conditions of
this Agreement.
11. The obligations of the parties under this Agreement shall be
subject to:
(a) Any required approval, at a meeting duly called for the
purpose, of the holders of the outstanding shares of LAF, of this Agreement and
the transactions contemplated hereunder; and
(b) The right to abandon and terminate this Agreement, if either
party to this Agreement believes that the consummation of the transactions
contemplated hereunder would not be in the best interests of its shareholders.
12. Except as expressly provided otherwise in this Agreement, IMG
will pay or cause to be paid all out-of-pocket fees and expenses incurred by LAF
or the IMG Funds in connection with the transactions contemplated under this
Agreement, including, but not limited to, accountants' fees, legal fees,
registration fees, printing expenses, transfer taxes (if any) and the fees of
banks and transfer agents. This obligation shall survive the termination or
expiration of this Agreement regardless of the consummation of the transactions
contemplated hereunder.
13. This Agreement may be amended by an instrument executed by both
the duly authorized officers of LAF and the IMG Funds at anytime, except that
after approval by the shareholders of LAF no amendment may be made with respect
to the Agreement which in the opinion of the Board of Directors of LAF
materially adversely affects the interests of the shareholders of LAF. At any
time either party hereto may by written instrument signed by it (i) waive any
inaccuracies in the representations and warranties made to it contained herein
and (ii) waive compliance with any of the covenants or conditions made for its
benefit contained herein.
14. In addition to the right to terminate this Agreement described
in Section 11, this Agreement may be terminated and the plan described in the
Agreement abandoned at any time prior to the Closing Date, whether before or
after action thereon by the shareholders of LAF and notwithstanding favorable
action by such shareholders, by mutual consent of the Board of Directors of the
IMG Funds and the Board of Directors of LAF. This Agreement may also be
terminated by action of the Board of Directors of the IMG Funds or the Board of
Directors of LAF, if:
(a) The plan described in the Agreement shall not have become
effective by April 1, 1998 (hereinafter called the "Final Date") unless such
Final Date shall have been changed by mutual agreement; or
(b) Either LAF or the IMG Funds shall, at the Final Date, have
failed to comply with any of its agreements contained herein; or
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(c) Prior to the Final Date any one or more of the conditions to
the obligations of the IMG Funds or LAF contained in this Agreement shall not be
fulfilled to the reasonable satisfaction of the IMG Funds and its counsel or LAF
and its counsel or it shall become evident to the IMG Funds or LAF that any of
such conditions are incapable of being fulfilled.
15. This Agreement shall bind and inure to the benefit of the
parties hereto and is not intended to confer upon any other person any rights or
remedies hereunder.
16. The parties hereto represent and warrant that they have not
employed any broker, finder or intermediary in connection with this transaction
who might be entitled to a finder's fee or other similar fee or commission.
17. All prior or contemporaneous agreements and representations
are hereby merged into this Agreement, which constitutes the entire contract
between the parties hereto.
18. This Agreement shall be governed by and construed in
accordance with the laws of the State of Iowa.
19. This Agreement may be executed in one or more counterparts,
all of which shall be considered one and the same agreement, and shall become
effective when one or more of the counterparts has been signed by all parties
hereto.
20. IMG shall indemnify, defend and hold harmless the IMG Funds,
its officers, directors, employees and agents against all losses, claims,
demands, liabilities and expenses, including reasonable legal and other expenses
incurred in defending claims or liabilities, whether or not resulting in any
liability to the IMG Funds, its officers, directors, employees or agents,
arising out of (1) breach by LAF of any warranty made by LAF herein or (2) any
untrue statement or alleged untrue statement of a material fact contained in any
prospectus or registration statement for LAF, as filed with the Securities and
Exchange Commission or any state, or any amendment or supplement thereto, or any
application prepared by or on behalf of LAF and filed with any state regulatory
agency in order to register or qualify shares of LAF under the securities laws
thereof, or in any information provided by LAF included in any registration
statement filed by the IMG Funds with the Securities and Exchange Commission or
any state or any amendment or supplement thereto; or which shall arise out of or
be based upon any omission or alleged omission to state therein a material fact
required to be stated in any such prospectus, registration statement or
application necessary to make the statements therein not misleading. This
indemnity provision shall survive the termination of this Agreement.
21. The IMG Funds shall indemnify, defend and hold harmless LAF,
its officers, trustees, employees and agents against all losses, claims,
demands, liabilities and expenses, including reasonable legal and other expenses
incurred in defending claims or liabilities, whether or not resulting in any
liability to LAF, its officers, trustees, employees or agents, arising out of
any untrue statement or alleged untrue statement of a material fact contained in
any prospectus or registration statement for the IMG Funds, as filed with the
Securities and Exchange Commission or any state, or any amendment or supplement
thereto, or any application prepared by or on behalf of the IMG Funds and filed
with any state regulatory agency in order to register or qualify shares of the
IMG Funds under the securities laws thereof; or which shall arise out of or be
based upon any omission or alleged omission to state therein a material fact
required to be stated in any such prospectus, registration statement or
application necessary to make the statements therein not misleading; provided,
however, the IMG Funds shall not be required to indemnify LAF, its officers,
directors, employees and agents against any loss, claim, demand, liability or
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<PAGE>
expense arising out of any information provided by LAF included in any
registration statement filed by the IMG Funds with the Securities and Exchange
Commission or any state, or any amendment or supplement thereto. This indemnity
provision shall survive the termination of this Agreement.
22. The execution of this Agreement has been authorized by the
Board of Directors of the IMG Funds and by the Board of Directors of LAF.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and attested by their officers thereunto duly authorized, as of the
date first written above.
IMG MUTUAL FUNDS, INC.
Attest
By:_____________________ By:________________________
Title:______________________ Title:______________________
LIQUID ASSETS FUND, INC.
Attest
By:________________________ By:________________________
Title:______________________ Title:______________________
INVESTORS MANAGEMENT
GROUP
Attest
By:________________________ By:_________________________
Title:______________________ Title:_______________________
31
<PAGE>
EXHIBIT B
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT made as of the 30th day of October 1997, is made by and
among the IMG Mutual Funds, Inc., a Maryland corporation (the "IMG Funds"),
Municipal Assets Fund, Inc., an Iowa corporation ("MAF"), and Investors
Management Group, an Iowa corporation ("IMG").
WITNESSETH:
WHEREAS the Board of Directors of the IMG Funds, and the Board of
Directors of MAF, each an open-end management investment company, deem it
advisable that the IMG Funds acquire all of the assets of MAF in exchange for
the assumption by the IMG Funds of all of the liabilities of MAF and shares
issued by the IMG Funds which are thereafter to be distributed by MAF pro rata
to its shareholders in complete liquidation and termination of MAF and in
exchange for all of MAF's outstanding shares with the intent that the
transactions described herein shall qualify as a tax-free reorganization under
Section 368(a)(1)(C) of the Internal Revenue Code of 1986;
NOW THEREFORE, in consideration of the mutual promises herein
contained, each of the parties hereto represents and warrants to, and agrees
with each of the other parties as follows:
1. The IMG Funds hereby represents and warrants to MAF that:
(a) The IMG Funds is a corporation with transferable shares duly
organized and validly existing under the laws of Maryland and has full
power to own its properties and assets and to carry on its business as
such business is now being conducted.
(b) The IMG Funds' statement of assets and liabilities as of April 30,
1997, and the related statements of operations and changes in net
assets for the fiscal year ended April 30, 1997, all as audited by KPMG
Peat Marwick LLP, have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis. Such
statement of assets and liabilities fairly presents the financial
position and net assets of the IMG Funds as of such date and such
statements of operations and changes in net assets fairly present the
results of it operations for the period covered thereby;
(c) There are no claims, actions, suits or proceedings pending or, to
its knowledge, threatened against or affecting the IMG Funds or its
properties or business or its right to issue and sell shares, or which
would prevent or hinder consummation of the transactions contemplated
hereby, and it is not charged with or, to the IMG Funds' knowledge,
threatened with any charge or investigation of, any violation of any
provision of any federal, state or local law or any administrative
ruling or regulation relating to any aspect of its business or the
issuance or sale of its shares;
(d) The IMG Funds is not a party to or subject to any judgment or
decree or order entered in any suit or proceeding brought by any
governmental agency or by any other person enjoining it in respect of,
or the effect of which is to prohibit, any business practice or the
acquisition of any property or the conduct of business by it or the
issuance or sale of its shares in any area;
(e) The IMG Funds has filed all tax returns required to be filed, has
no liability for any unpaid taxes and has made a proper election to be
treated as a regulated investment company under Subchapter M of the
Internal Revenue Code of 1986 (the "Code") for each of its taxable
years. The IMG Funds has not committed any action or failed to perform
any necessary action that would render invalid its election to be
treated as a regulated investment company for any of its taxable years;
(f) The authorization, execution and delivery of this Agreement on
behalf of the IMG Funds does not, and the consummation of the
transactions contemplated hereby will not violate, or conflict with any
provision of the IMG Funds' Charter or By-Laws, or any provision of, or
result in the acceleration of any obligation under, any mortgage, lien,
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<PAGE>
lease, agreement, instrument, order, arbitration award, judgment or
decree to which it is party or by which it or any of its assets is
bound, or violate or conflict with any other material contractual or
statutory restriction of any kind or character to which it is subject;
(g) This Agreement has been duly authorized, executed, and delivered by
the IMG Funds and constitutes a valid and binding agreement of the IMG
Funds and all governmental and other approvals required for the IMG
Funds to carry out the transactions contemplated hereunder have been or
on or prior to the Closing Date (as herein defined) will have been
obtained;
(h) The IMG Funds is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end, diversified
management investment company. The IMG Funds is currently in compliance
with the 1940 Act and the rules of the Securities and Exchange
Commission (the "Commission") promulgated thereunder. Neither the IMG
Funds nor its affiliates has violated Section 9 of the 1940 Act, is
currently subject to an exemptive order of the Securities and Exchange
Commission pursuant to Section 9(c) of the 1940 Act, or is currently
subject to any current or threatened investigation or enforcement
action by the Securities and Exchange Commission or any other federal
or state authority which could result in a violation of Section 9(a) of
the 1940 Act;
(i) On the Closing Date, The IMG Funds will own its assets free and
clear of all liens, claims, charges, options and encumbrances;
(j) On the Closing Date, the IMG Funds will have registered shares of a
new series named the Municipal Assets Fund series of the IMG Funds (or
some other name) (the "Municipal Assets Fund"), and will have
registered three classes of shares of such Municipal Assets Fund, the
three classes of shares to be named the Class A shares, the Class B
shares, and the Class C shares (or, with respect to each class, some
other name), and shares of the Class A, Class B, and Class C shares of
the Municipal Assets Fund will represent interests in a portfolio of
securities managed under investment objectives, policies and
restrictions substantially identical to the Class A, Class B, and Class
C shares of MAF;
(k) On the Closing Date, the shares of the Municipal Assets Fund to be
delivered to MAF hereunder shall have been registered under the
Securities Act of 1933, as amended (the "1933 Act") and duly
authorized, and, when issued and delivered pursuant to this Agreement,
will be validly issued, fully paid and nonassessable; and the IMG Funds
will comply with all applicable laws in connection with the issuance of
such shares and shall not be subject to a stop-order of the Commission
in connection therewith; and
(l) On the Closing Date, the shares of the Municipal Assets Fund to be
delivered to MAF hereunder shall have been registered with the
securities administrator of each state under whose securities law such
registration is required.
2. MAF hereby represents and warrants to the IMG Funds that:
(a) MAF is a corporation with transferable shares duly organized and
validly existing under the laws of Iowa and has full power to own its
properties and assets and to carry on its business as such business is
now being conducted.
(b) MAF's statement of assets and liabilities as of June 30, 1997, and
the related statements of operations and changes in net assets for the
fiscal year ended June 30, 1997, all as audited by KPMG Peat Marwick
LLP, have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis. Such statement of
assets and liabilities fairly presents the financial position and net
assets of MAF as of such date and such statements of operations and
changes in net assets fairly present the results of it operations for
the period covered thereby;
(c) There are no claims, actions, suits or proceedings pending or, to
its knowledge, threatened against or affecting MAF or its properties or
business or its right to issue and sell shares, or which would prevent
or hinder consummation of the transactions contemplated hereby, and it
is not charged with or, to MAF's knowledge, threatened with any charge
33
<PAGE>
or investigation of, any violation of any provision of any federal,
state or local law or any administrative ruling or regulation relating
to any aspect of its business or the issuance or sale of its shares;
(d) MAF is not a party to or subject to any judgment or decree or order
entered in any suit or proceeding brought by any governmental agency or
by any other person enjoining it in respect of, or the effect of which
is to prohibit, any business practice or the acquisition of any
property or the conduct of business by it or the issuance or sale of
its shares in any area;
(e) MAF has filed all tax returns required to be filed, has no
liability for any unpaid taxes and has made a proper election to be
treated as a regulated investment company under Subchapter M of the
Internal Revenue Code of 1986 (the "Code") for each of its taxable
years. MAF has not committed any action or failed to perform any
necessary action that would render invalid its election to be treated
as a regulated investment company for any of its taxable years;
(f) The authorization, execution and delivery of this Agreement on
behalf of MAF does not, and the consummation of the transactions
contemplated hereby will not violate, or conflict with any provision of
MAF's Articles of Incorporation or By-Laws, or any provision of, or
result in the acceleration of any obligation under, any mortgage, lien,
lease, agreement, instrument, order, arbitration award, judgment or
decree to which it is party or by which it or any of its assets is
bound, or violate or conflict with any other material contractual or
statutory restriction of any kind or character to which it is subject;
(g) This Agreement has been duly authorized, executed, and delivered by
MAF and constitutes a valid and binding agreement of MAF and all
governmental and other approvals required for MAF to carry out the
transactions contemplated hereunder have been or on or prior to the
Closing Date (as herein defined) will have been obtained;
(h) On the Closing Date, MAF will own its assets free and clear of all
liens, claims, charges, options and encumbrances and, except for the
Management and Investment Advisory Agreement, Transfer Agent Agreement
and Administrative Services Agreement with IMG, the Underwriting
Agreement with IMG Financial Services, Inc., and the Custodial
Agreement with AMCORE Investment Group, N.A., there will be no material
contracts or agreements, other than this Agreement, outstanding to
which MAF is a party or to which it is subject;
(i) On the Closing Date, MAF will have full right, power and authority
to sell, assign and deliver the assets to be sold, assigned,
transferred and delivered to the IMG Funds hereunder, and upon delivery
and payment for such assets, the IMG Funds will acquire good and
marketable title thereto free and clear of all liens, claims, charges,
options and encumbrances;
(j) MAF will declare to shareholders of record on or prior to the
Closing Date a dividend or dividends which, together with all previous
such dividends, shall have the effect of distributing to the
shareholders all of its investment company taxable income, computed
with regard to any deduction for dividends paid, and all of its net
realized capital gains, if any, as of the Closing Date; and
(k) MAF will, from time to time, as and when requested by the IMG
Funds, execute and deliver or cause to be executed and delivered, all
such assignments and other instruments, and will take and cause to be
taken such further action, as the IMG Funds may deem necessary or
desirable in order to vest in and confirm to the IMG Funds, title to
and possession of all the assets of MAF to be sold, assigned,
transferred and delivered hereunder and otherwise to carry out the
intent and purpose of this Agreement.
3. Based on the respective representations and warranties, subject to
the terms and conditions contained herein, MAF agrees to transfer to the IMG
Funds and the IMG Funds agrees to acquire from MAF, all the assets of MAF on the
Closing Date and to assume from MAF all of the liabilities of MAF in exchange
for the issuance of the number and class of shares of the Municipal Assets Fund
provided in Section 4 which will be subsequently distributed pro rata to the
shareholders of MAF in complete liquidation and termination of MAF and in
exchange for all of MAF's outstanding shares as provided in Section 6. MAF shall
not issue, sell or transfer any of its shares after the Closing Date, and only
redemption requests received by MAF in proper form prior to the Closing Date
shall be fulfilled by MAF. Redemption requests received by MAF thereafter shall
34
<PAGE>
be treated as requests for redemption of those shares of the Municipal Assets
Fund allocable to the shareholder in question as provided in Section 6 of this
Agreement.
4. On the Closing Date, the IMG Funds will issue to MAF that number of
full and fractional shares of the Class A, Class B, and Class C shares of the
Municipal Assets Fund as follows:
(a) the IMG Funds will issue that number of Class A shares of the
Municipal Assets Fund, taken at their net asset value on the Closing
Date, having an aggregate net asset value equal to the aggregate value
of the net assets of MAF that are allocable to the Class A shares of
MAF;
(b) the IMG Funds will issue that number of Class B shares of the
Municipal Assets Fund, taken at their net asset value on the Closing
Date, having an aggregate net asset value equal to the aggregate value
of the net assets of MAF that are allocable to the Class B shares of
MAF; and
(c) the IMG Funds will issue that number of Class C shares of the
Municipal Assets Fund, taken at their net asset value on the Closing
Date, having an aggregate net asset value equal to the aggregate value
of the net assets of MAF that are allocable to the Class C shares of
MAF.
The aggregate value of the net assets of MAF allocable to the Class A,
Class B, and Class C of MAF, and the net asset value of the Class A, Class B,
and Class C shares of the Municipal Assets Fund shall be determined in
accordance with the then current prospectuses for Class A, Class B, and Class C
shares of the Municipal Assets Fund as of 3:00 p.m.
on the Closing Date.
5. The closing of the transaction contemplated in this Agreement (the
"Closing") shall be held at the offices of IMG, 2203 Grand Avenue, Des Moines,
Iowa 50312-5338, or at such other place as the parties hereto may agree, at 3:00
p.m. Central Standard Time on December 31, 1997 or on such earlier or later date
as the parties hereto may mutually agree. The date on which the Closing is to be
held as provided in this Agreement shall be known as the "Closing Date".
In the event that on the Closing Date (a) the New York Stock Exchange
is closed for other than customary week-end and holiday closings or (b) trading
on said Exchange is restricted or (c) as emergency exists as a result of which
it is not reasonably practicable for the IMG Funds or MAF to fairly determine
the value of its assets, the Closing Date shall be postponed until the first
business day after the day on which trading shall have been fully resumed.
6. As soon as practicable after the Closing Date, MAF shall distribute
on a pro rata basis to (a) the Class A shareholders of record of MAF at the
close of business on the Closing Date the Class A shares of the Municipal Assets
Fund received by MAF at the Closing in exchange for all of the outstanding Class
A shares of MAF; (b) the Class B shareholders of record of MAF at the close of
business on the Closing Date the Class B shares of the Municipal Assets Fund
received by MAF at the Closing in exchange for all of the outstanding Class B
shares of MAF, and (c) the Class C shareholders of record of MAF at the close of
business on the Closing Date the Class C shares of the Municipal Assets Fund
received by MAF at the Closing in exchange for all of the outstanding Class C
shares of MAF. As soon as practicable thereafter, MAF shall be liquidated and
dissolved in accordance with applicable law and its Articles of Incorporation.
For purposes of the distribution of shares of the Municipal Assets Fund
to shareholders of MAF, the IMG Funds shall credit on the books of the IMG Funds
an appropriate number of shares of the appropriate class of the Municipal Assets
Fund to the account of each shareholder of MAF whose shares are (a) not
represented by certificates, upon the distribution of such shares by MAF and (b)
represented by certificates, only upon surrender of such certificates. No
certificates will be issued for shares, whether full or fractional, of any class
of the Municipal Assets Fund. After the Closing Date, represented shares of MAF
shall be deemed for all purposes of the IMG Funds' charter and By-Laws to
evidence the appropriate number of shares of the appropriate class of the
Municipal Assets Fund to be credited on the books of the IMG Funds in respect of
such shares of MAF as provided above.
7. Subsequent to the execution of this Agreement and prior to the
Closing Date, MAF shall deliver to the IMG Funds a list setting forth the assets
to be assigned, delivered and transferred to the IMG Funds, including the
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<PAGE>
securities then owned by MAF and the respective federal income tax basis (on an
identified cost basis) thereof, and the liabilities to be assumed by the IMG
Funds pursuant to this Agreement.
8. All of MAF's portfolio securities shall be delivered by MAF's
custodian on the Closing Date to the IMG Funds or its custodian, either endorsed
in proper form for transfer in such condition as to constitute good delivery
thereof in accordance with the practice of brokers or, if such securities are
held in a securities depository within the meaning of Rule 17f-4 under the 1940
Act, transferred to an account in the name of the IMG Funds or its custodian
with said depository. All cash to be delivered pursuant to this Agreement shall
be wire transferred from MAF's account at its custodian to the IMG Funds'
account at its custodian. If on the Closing Date MAF is unable to make good
delivery pursuant to this Section 8 to the IMG Funds' custodian of any of MAF's
portfolio securities because such securities have not yet been delivered to
MAF's custodian by its broker or by the transfer agent for such securities, then
the delivery requirement of this Section 8 with respect to such securities shall
be waived, and MAF shall deliver to the IMG Funds' custodian on or by said
Closing Date with respect to said undelivered securities executed copies of an
agreement of assignment in a form satisfactory to the IMG Funds, and a due bill
or due bills in form and substance satisfactory to the custodian, together with
such other documents including brokers' confirmations, as may be reasonably
required by the IMG Funds.
9. The obligations of the IMG Funds under this Agreement shall be
subject to receipt by the IMG Funds on or prior to the Closing Date of:
(a) Copies of the resolutions adopted by the Board of Directors of MAF
and its shareholders authorizing the execution of this Agreement by MAF
and the transactions contemplated hereunder, certified by the Secretary
or Assistant Secretary of MAF;
(b) A certificate of the Secretary or Assistant Secretary of MAF as to
the signatures and incumbency of its officers who executed this
Agreement on behalf of MAF and any other documents delivered in
connection with the transactions contemplated thereby on behalf of MAF;
(c) A certificate of an appropriate officer of MAF as to the
fulfillment of all agreements and conditions on its part to be
fulfilled hereunder at or prior to the Closing Date and to the effect
that the representations and warranties of MAF are true and correct in
all material respects at and as of the Closing Date as if made at and
as of such date; and
(d) Such other documents, including an opinion of counsel, as IMG Funds
may reasonably request to show fulfillment of the purposes and
conditions of this Agreement.
10. The obligations of MAF under this Agreement shall be subject to
receipt by MAF on or prior to the Closing Date of:
(a) Copies of the resolutions adopted by the Board of Directors of the
IMG Funds authorizing the execution of this Agreement and the
transactions contemplated hereunder, certified by the Secretary or
Assistant Secretary of the IMG Funds;
(b) A certificate of the Secretary or Assistant Secretary of the IMG
Funds as to the signatures and incumbency of its officers who executed
this Agreement on behalf of the IMG Funds and any other documents
delivered in connection with the transactions contemplated thereby on
behalf of the IMG Funds;
(c) A certificate of an appropriate officer of the IMG Funds as to the
fulfillment of all agreements and conditions on its part to be
fulfilled hereunder at or prior to the Closing Date and to the effect
that the representations and warranties of the IMG Funds are true and
correct in all material respects at and as of the Closing Date as if
made at and as of such date; and
(d) Such other documents, including an opinion of counsel, as MAF may
reasonably request to show fulfillment of the purposes and conditions
of this Agreement.
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<PAGE>
11. The obligations of the parties under this Agreement shall be
subject to:
(a) Any required approval, at a meeting duly called for the purpose, of
the holders of the outstanding shares of MAF, of this Agreement and the
transactions contemplated hereunder; and
(b) The right to abandon and terminate this Agreement, if either party
to this Agreement believes that the consummation of the transactions
contemplated hereunder would not be in the best interests of its
shareholders.
12. Except as expressly provided otherwise in this Agreement, IMG will
pay or cause to be paid all out-of-pocket fees and expenses incurred by MAF or
the IMG Funds in connection with the transactions contemplated under this
Agreement, including, but not limited to, accountants' fees, legal fees,
registration fees, printing expenses, transfer taxes (if any) and the fees of
banks and transfer agents. This obligation shall survive the termination or
expiration of this Agreement regardless of the consummation of the transactions
contemplated hereunder.
13. This Agreement may be amended by an instrument executed by both the
duly authorized officers of MAF and the IMG Funds at anytime, except that after
approval by the shareholders of MAF no amendment may be made with respect to the
Agreement which in the opinion of the Board of Directors of MAF materially
adversely affects the interests of the shareholders of MAF. At any time either
party hereto may by written instrument signed by it (i) waive any inaccuracies
in the representations and warranties made to it contained herein and (ii) waive
compliance with any of the covenants or conditions made for its benefit
contained herein.
14. In addition to the right to terminate this Agreement described in
Section 11, this Agreement may be terminated and the plan described in the
Agreement abandoned at any time prior to the Closing Date, whether before or
after action thereon by the shareholders of MAF and notwithstanding favorable
action by such shareholders, by mutual consent of the Board of Directors of the
IMG Funds and the Board of Directors of MAF. This Agreement may also be
terminated by action of the Board of Directors of the IMG Funds or the Board of
Directors of MAF, if:
(a) The plan described in the Agreement shall not have become effective
by April 1, 1998 (hereinafter called the "Final Date") unless such
Final Date shall have been changed by mutual agreement; or
(b) Either MAF or the IMG Funds shall, at the Final Date, have failed
to comply with any of its agreements contained herein; or
(c) Prior to the Final Date any one or more of the conditions to the
obligations of the IMG Funds or MAF contained in this Agreement shall
not be fulfilled to the reasonable satisfaction of the IMG Funds and
its counsel or MAF and its counsel or it shall become evident to the
IMG Funds or MAF that any of such conditions are incapable of being
fulfilled.
15. This Agreement shall bind and inure to the benefit of the parties
hereto and is not intended to confer upon any other person any rights or
remedies hereunder.
16. The parties hereto represent and warrant that they have not
employed any broker, finder or intermediary in connection with this transaction
who might be entitled to a finder's fee or other similar fee or commission.
17. All prior or contemporaneous agreements and representations are
hereby merged into this Agreement, which constitutes the entire contract between
the parties hereto.
18. This Agreement shall be governed by and construed in accordance
with the laws of the State of Iowa.
19. This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement, and shall become effective
when one or more of the counterparts has been signed by all parties hereto.
20. IMG shall indemnify, defend and hold harmless the IMG Funds, its
officers, directors, employees and agents against all losses, claims, demands,
liabilities and expenses, including reasonable legal and other expenses incurred
in defending claims or liabilities, whether or not resulting in any liability to
the IMG Funds, its officers, directors, employees or agents, arising out of (1)
37
<PAGE>
breach by MAF of any warranty made by MAF herein or (2) any untrue statement or
alleged untrue statement of a material fact contained in any prospectus or
registration statement for MAF, as filed with the Securities and Exchange
Commission or any state, or any amendment or supplement thereto, or any
application prepared by or on behalf of MAF and filed with any state regulatory
agency in order to register or qualify shares of MAF under the securities laws
thereof, or in any information provided by MAF included in any registration
statement filed by the IMG Funds with the Securities and Exchange Commission or
any state or any amendment or supplement thereto; or which shall arise out of or
be based upon any omission or alleged omission to state therein a material fact
required to be stated in any such prospectus, registration statement or
application necessary to make the statements therein not misleading. This
indemnity provision shall survive the termination of this Agreement.
21. The IMG Funds shall indemnify, defend and hold harmless MAF, its
officers, trustees, employees and agents against all losses, claims, demands,
liabilities and expenses, including reasonable legal and other expenses incurred
in defending claims or liabilities, whether or not resulting in any liability to
MAF, its officers, trustees, employees or agents, arising out of any untrue
statement or alleged untrue statement of a material fact contained in any
prospectus or registration statement for the IMG Funds, as filed with the
Securities and Exchange Commission or any state, or any amendment or supplement
thereto, or any application prepared by or on behalf of the IMG Funds and filed
with any state regulatory agency in order to register or qualify shares of the
IMG Funds under the securities laws thereof; or which shall arise out of or be
based upon any omission or alleged omission to state therein a material fact
required to be stated in any such prospectus, registration statement or
application necessary to make the statements therein not misleading; provided,
however, the IMG Funds shall not be required to indemnify MAF, its officers,
directors, employees and agents against any loss, claim, demand, liability or
expense arising out of any information provided by MAF included in any
registration statement filed by the IMG Funds with the Securities and Exchange
Commission or any state, or any amendment or supplement thereto. This indemnity
provision shall survive the termination of this Agreement.
22. The execution of this Agreement has been authorized by the Board of
Directors of the IMG Funds and by the Board of Directors of MAF.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and attested by their officers thereunto duly authorized, as of the
date first written above.
IMG MUTUAL FUNDS, INC.
Attest
By:_____________________ By:________________________
Title:______________________ Title:______________________
MUNICIPAL ASSETS FUND, INC.
Attest
By:________________________ By:________________________
Title:______________________ Title:______________________
INVESTORS MANAGEMENT GROUP
Attest
By:________________________ By:_________________________
Title:______________________ Title:_______________________
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EXHIBIT C
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT made as of December ___, 1997, between the IMG Mutual
Funds, Inc., a Maryland Corporation (herein called the "Company"), and Investors
Management Group, a federally registered investment advisor having its principal
place of business in Des Moines, Iowa (herein called the "Investment Advisor").
WHEREAS, the Company is registered as an open-end, diversified,
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Company desires to retain the Investment Advisor to
furnish investment advisory and administrative services to the ten existing
investment portfolios of the Company and may retain the Investment Advisor to
serve in such capacity to certain additional investment portfolios of the
Company, all as now or hereafter may be identified in Schedule A hereto (such
initial investment portfolio and any such additional investment portfolios
together called the "Funds") and the Investment Advisor represents that it is
willing and possess legal authority to so furnish such services without
violation of applicable laws (including the Glass-Steagall Act) and regulations:
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Company hereby appoints the Investment Advisor to act
as investment adviser to the Funds for the period and on the terms set
forth in this Agreement. The Investment Advisor accepts such
appointment and agrees to furnish the services herein set forth for the
compensation herein provided. Additional investment portfolios may from
time to time be added to those covered by this Agreement by the parties
executing a new Schedule A which shall become effective upon its
execution and shall supersede any Schedule A having an earlier date.
2. DELIVERY OF DOCUMENTS. The Company has furnished the Investment Advisor
with copies properly certified or authenticated of each of the
following:
(a) The Company's Articles of Incorporation, dated November 15,
1994, and filed with the Secretary of State of Maryland on
November 16, 1994, and any and all amendments thereto or
restatements thereof (such Articles, as presently in effect
and as it shall from time to time be amended or restates, is
herein called the "Articles of Incorporation");
(b) The Company's By Laws and any amendments thereto:
(c) Resolutions of the Company's Board of Directors authorizing
the appointment of the Investment Advisor and approving this
Agreement;
(d) The Company's Notification of Registration on Form N-8A under
the 1940 Act as filed with the Securities and Exchange
Commission on December 13, 1994, and all amendments thereto;
(e) The Company's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended (the "1933 Act"), and under
the 1940 Act as filed with the Securities and Exchange
Commission and all amendment thereto; and
(f) The most recent Prospectus and Statement of Additional
Information of each of the Funds (such Prospectus and
Statement of Additional Information, as presently in effect,
and all amendments and supplements thereto, are herein
collectively called the "Prospectus").
39
<PAGE>
The Company will furnish the Investment Advisor from time to time with
copies of all amendments of or supplements to the foregoing.
3. MANAGEMENT. Subject to the supervision of the Company's Board of
Directors, the Investment Advisor will provide a continuous investment
program for the Funds, including investment research and management
with respect to all securities and investments and cash equivalents in
the Funds. The Investment Advisor will determine from time to time what
securities and other investments will be purchased, retained or sold by
the Company with respect to the funds. The Investment Advisor will
provide the services under this Agreement in accordance with each of
the Fund's investment objectives, policies, and restrictions as stated
in the Prospectus and resolutions of the Company's Board of Directors.
The Investment Advisor further agrees that it:
(a) Will use the same skill and care in providing such services as
it uses in providing services to fiduciary accounts for which
it has investment responsibilities;
(b) Will conform with all applicable Rules and Regulations of the
Securities and Exchange Commission under the 1940 Act and in
addition will conduct its activities under this Agreement in
accordance with any applicable regulations of any governmental
authority pertaining to the investment advisory activities of
the Investment Advisor;
(c) Will not make loans to any person to purchase or carry units
of beneficial interest ("shares") in the Company or make loans
to the Company;
(d) Will place or cause to be placed orders for the funds either
directly with the issuer or with any broker or dealer. In
placing orders with brokers and dealers, the Investment
Advisor will attempt to obtain prompt execution of orders in
an effective manner at the most favorable price. The
Investment Advisor may cause a Fund to pay a broker which
provides brokerage and research services to the Investment
Advisor a commission for effecting a securities transaction in
excess of the amount another broker might have charged. Such
higher commissions may not be paid unless the Investment
Advisor determines in good faith that the amount paid is
reasonable in relation to the services received in terms of
the particular transaction or the Investment Advisor's overall
responsibilities to the Company and any other of the
Investment Advisor's clients. In no instance will portfolio
securities by purchase from or sold to the Investment Advisor,
or any affiliated person of the Company or the Investment
Advisor;
(e) Will maintain all books and records with respect to the
securities transactions of the Funds and will furnish the
Company's Board of Directors with such periodic and special
reports as the Board may request;
(f) Will treat confidentially and as proprietary information of
the Company all records and other information relative to the
Company and the funds and prior, present, or potential
shareholders, and will not use such records and information
for any purpose other than performance of its responsibilities
and duties hereunder, except after prior notification to and
approval in writing by the Company, which approval shall not
be unreasonably withheld and may not be withheld where the
Investment Advisor may be exposed to civil or criminal
contempt proceedings for failure to comply, when requested to
divulge such information by duly constituted authorities, or
when so requested by the Company, and;
(g) Will maintain its policy and practice of conducting its
fiduciary functions independently. In making investment
recommendations for the Funds, the Investment Advisor's
personnel will not inquire or take into consideration whether
the issuers of securities proposed for purchase or sale for
the Company's account are customers of the Investment Advisor
or of its parent or its subsidiaries or affiliates. In dealing
with such customers, the Investment Advisor and its parent,
subsidiaries, and affiliates will not inquire or take into
consideration whether securities of those customers are held
by the Company.
4. SERVICES NOT EXCLUSIVE. The investment management services furnished by
the Investment Advisor hereunder are not to be deemed exclusive, and
the Investment Advisor shall be free to furnish similar services to
others so long as its services under this Agreement are not impaired
thereby.
40
<PAGE>
5. BOOKS AND RECORDS. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Investment Advisor hereby agrees that all
records which it maintains for the funds are the property of the
Company and further agrees to surrender promptly to the Company any of
such records upon the Company's request. The Investment Advisor further
agrees to preserve for the periods prescribed by Rule 31a-2 under the
1940 Act the records required to be maintained by Rule 31a-1 under the
1940 Act.
6. EXPENSES. During the term of this Agreement, the Investment Advisor
will pay all expenses incurred by it in connection with its activities
under this Agreement other than the cost of securities (including
brokerage commissions, if any) purchased for the Funds.
7. COMPENSATION. For the services provided and the expenses assumed
pursuant to this Agreement, each of the funds will pay the Investment
Advisor and the Investment Advisor will accept as full compensation
therefor a fee equal to the fee set forth on Schedule A hereto. The
obligations of the funds to pay the above described fee to the
Investment Advisor will begin as of the respective dates of the initial
public sale of shares in the Funds.
If in any fiscal year the aggregate expenses of any of the Funds (as
defined under the securities regulations of any state having
jurisdiction over the Company) exceed the expense limitations of any
such state, the Investment Advisor will reimburse the Fund for a
portion of such excess expenses equal to such excess times the ratio of
the fees otherwise payable by the Fund to the Investment Advisor
hereunder and to IMG under the Management and Administration Agreement
between IMG and the Company. The obligation of the Investment Advisor
to reimburse the Funds hereunder is limited in any fiscal year to the
amount of its fee hereunder for such fiscal year, provided however,
that notwithstanding the foregoing, the Investment Adviser shall
reimburse the Funds for such proportion of such excess expenses
regardless of the amount paid to it during such fiscal year to the
extent that the securities regulations of any state having jurisdiction
over the Company so require. Such expense reimbursement, if any will be
estimated daily and reconciled and paid on a monthly basis.
8. LIMITATION OF LIABILITY. The Investment Advisor shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the
Funds in connection with the performance of this Agreement, except a
loss resulting from a breach of fiduciary duty with respect to the
receipt of compensation for services or a loss resulting from willful
misfeasance, bad faith, or gross negligence on the part of the
Investment Advisor in the performance of its duties or from reckless
disregard by it of its obligations and duties under this Agreement.
9. DURATION AND TERMINATION. This Agreement will become effective as of
the date first written above (of, if a particular fund is not in
existence on that date, on the date a registration statement relating
to that Fund becomes effective with the Securities and Exchange
Commission), provided that it shall have been approved by vote of a
majority of the outstanding voting securities of such Fund, in
accordance with the requirements under the 1940 Act, and, unless sooner
terminated as provided herein, shall continue in effect until December
31, 1999.
Thereafter, if not terminated, this Agreement shall continue in effect
as to a particular Fund for successive annual periods, provided such
continuance is specifically approved at least annually (a) by the vote
of a majority of those members of the Company's Board of Directors who
are not parties to this Agreement or interested persons of any party to
this Agreement, cast in person at a meeting called for the purpose of
voting on such approval, and (b) by the vote of a majority of the
Company's Board of Directors or by vote of a majority of all votes
attributable to the outstanding shares of such Fund. Notwithstanding
the foregoing, this Agreement may be terminated as to a particular Fund
at any time on sixty days' written notice, without the payment of any
penalty, by the Company (by vote of the Company's Board of Directors or
by vote of a majority of the outstanding voting securities of such
Fund) or by the Investment Advisor. This Agreement will immediately
terminate in the event of its assignment. (As used in this Agreement,
the terms "majority of the outstanding voting securities", "interested
persons" and "assignment" shall have the same meanings as ascribed to
such terms in the 1940 Act.)
10. INVESTMENT ADVISOR'S REPRESENTATIONS. The Investment Advisor hereby
represents and warrants that it is willing and possess all requisite
legal authority to provide the services contemplated by this Agreement
without violation of applicable law and regulations, including but not
limited to the Glass-Steagall Act and the regulations promulgated
thereunder.
41
<PAGE>
11. AMENDMENT TO THIS AGREEMENT. No provision of this Agreement may be
changed, waived, discharges or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of
the change, waiver, discharge or termination is sought.
12. MISCELLANEOUS. The names "IMG Mutual Funds, Inc." and Directors of the
IMG Mutual Funds, Inc." refer respectively to the Company created and
the Directors, as directors but not individually or personally. The
obligations of the Company entered into in the name or on behalf
thereof by any of the Directors, representatives or agents are made not
individually, but in such capacities, and are not binding upon any of
the Directors, Shareholders or representatives of the Company
personally, but bind only the assets of the Company, and all persons
dealing with any series of shares of the Company must look solely to
the assets of the Company belonging to such series for the enforcement
of any claims against the Company.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
IMG Mutual Funds, Inc.
__________________________________
By: ______________________________
Title: ___________________________
Investors Management Group
__________________________________
By: ______________________________
Title: ___________________________
42
<PAGE>
Schedule A to the
Investment Advisory Agreement
Between the IMG Mutual Funds, Inc. and
Investors Management Group
Name of Fund Compensation
------------ ------------
Vintage Equity Fund Annual rate of seventy-five
one-hundredths of one percent
(0.75%) of the average daily
net assets of such Fund.
Vintage Aggressive Growth Fund Annual rate of ninety-five
one-hundredths of one percent
(0.95%) of the average daily
net assets of such Fund.
Vintage Balanced Fund Annual rate of seventy-five
one-hundredths of one percent
(0.75%) of the average daily
net assets of such Fund.
Vintage Municipal Bond Fund Annual rate of sixty
one-hundredths of one percent
(0.60%) of the average daily
net assets of such Fund.
Vintage Bond Fund Annual rate of fifty-five
one-hundredths of one percent
(0.55%) of the average daily
net assets of such Fund
Vintage Income Fund Annual rate of sixty
one-hundredths of one percent
(0.60%) of the average daily
net assets of such Fund.
Vintage Limited Term Bond Fund Annual rate of sixty
one-hundredths of one percent
(060%) of the average daily
net assets of such Fund.
Liquid Assets Fund Annual rate of thirty-five
one-hundredths of one percent
(0.35%) of the average daily
net assets of such Fund.
Government Assets Fund Annual rate of forty
one-hundredths of one percent
(0.40%) of the average daily
net assets of such Fund.
Municipal Assets Fund Annual rate of thirty-five
one-hundredths of one percent
(0.35%) of the average daily
net assets of such Fund.
* All fees are computed daily and paid monthly.
43
<PAGE>
TABLE OF CONTENTS
Page
----
SYNOPSIS............................................................. 4
RISK FACTORS......................................................... 5
PROPOSAL 1: AGREEMENT AND PLAN OF
REORGANIZATION....................................................... 5
IMG MUTUAL FUNDS, INC................................................ 13
LIQUID ASSETS FUND AND
MUNICIPAL ASSETS FUND................................................ 15
PROPOSAL 2: APPROVAL OF INVESTMENT
ADVISORY AGREEMENT................................................... 17
INFORMATION RELATING TO VOTING MATTERS............................... 20
INFORMATION FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.................................................. 21
OTHER BUSINESS....................................................... 21
LEGAL MATTERS........................................................ 22
SHAREHOLDER INQUIRIES................................................ 22
EXHIBIT A--AGREEMENT AND
PLAN OF REORGANIZATION............................................... 23
EXHIBIT B--AGREEMENT AND
PLAN OF REORGANIZATION............................................... 32
EXHIBIT C--INVESTMENT ADVISORY
AGREEMENT............................................................ 39
44
<PAGE>
LIQUID ASSETS FUND
MUNICIPAL ASSETS FUND
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information contains or incorporates
information which may be of interest to investors but which is not included in
the combined Proxy Statement/Prospectus (the "Prospectus") of the New Liquid
Assets and New Municipal Assets dated January 16, 1998, relating to the transfer
of assets from Liquid Assets Fund and Municipal Assets Fund (the "Funds)" to
corresponding portfolios of the New Funds. The Statement of Additional
Information for the Funds dated September 30, 1997 and the Statement of
Additional Information for the New Funds dated January 16, 1998, have been filed
with the Securities and Exchange Commission and are incorporated herein by
reference. This Statement is not a Prospectus and is authorized for distribution
only when it accompanies or follows delivery of the Prospectus. This Statement
of Additional Information should be read in conjunction with the Prospectus. A
copy of the January 16, 1998 Prospectus may be obtained, without charge, by
writing IMG Mutual Funds, Inc., 2203 Grand Avenue, Des Moines, Iowa 50312-5338
or by calling 800-298-1819.
The date of this Statement of Additional Information is January 16, 1998.
1
<PAGE>
LIQUID ASSETS FUND
PROXY FOR A SPECIAL MEETING OF
SHAREHOLDERS, FEBRUARY 13, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE DIRECTORS OF THE FUND
The undersigned hereby appoints David W. Miles and Richard Miller, and each of
them separately, proxies, with power of substitution, and hereby authorizes them
to represent and to vote, as designated below, at the Special Meeting of
Shareholders of Liquid Assets Fund on February 13, 1998, at 10:00 a.m., Central
Standard Time, and at any adjournments thereof, all of the shares of the Fund
which the undersigned would be entitled to vote if personally present.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSAL 1 AND FOR PROPOSAL 2. IN THEIR DISCRETION, THE PROXIES ARE
AUTHORIZED TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE
MEETING. THE DIRECTORS RECOMMEND A VOTE FOR THE PROPOSALS ON THE REVERSE SIDE.
PLEASE VOTE AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN ENCLOSED ENVELOPE.
NOTE: Please sign exactly as name appears on this card. All joint owners should
sign. When signing as executor, administrator, attorney, trustee or guardian or
as custodian for a minor, please give full title as such; if a corporation,
please sign in full corporate name and indicate the signer's office. If a
partner, sign in the partnership name.
CHANGE OF ADDRESS NOTIFICATION. Please use this form to inform us of any change
in address or telephone number. Detach this form from the Proxy Ballot and
return it with your executed Proxy in the enclosed envelope.
Has your address changed?
<PAGE>
1. Approval of the Agreement and Plan of Reorganization by and
between the Fund and IMG Mutual Funds, Inc. providing for the
transfer of all of the assets of the Fund to New Liquid Assets
in exchange for shares of New Liquid Assets and the assumption
by New Liquid Assets of all of the liabilities of the Fund,
followed by the dissolution and liquidation of the Fund and
the distribution of shares of New Liquid Assets to the
shareholders of the Fund.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. Approval of the New Investment Advisory Agreement between the
Fund and Investors Management Group, Ltd. ("IMG") following a
change of ownership of IMG.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Please be sure to sign and date this Proxy:
------------------------------------
Shareholder sign here
----------------------------------
Co-owner sign here
Dated: _____________________, 1998.
<PAGE>
MUNICIPAL ASSETS FUND
PROXY FOR A SPECIAL MEETING OF
SHAREHOLDERS, FEBRUARY 13, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE DIRECTORS OF THE FUND
The undersigned hereby appoints David W. Miles and Richard Miller, and each of
them separately, proxies, with power of substitution, and hereby authorizes them
to represent and to vote, as designated below, at the Special Meeting of
Shareholders of Municipal Assets Fund on February 13, 1998, at 10:00 a.m.,
Central Standard Time, and at any adjournments thereof, all of the shares of the
Fund which the undersigned would be entitled to vote if personally present.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSAL 1 AND FOR PROPOSAL 2. IN THEIR DISCRETION, THE PROXIES ARE
AUTHORIZED TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE
MEETING. THE DIRECTORS RECOMMEND A VOTE FOR THE PROPOSALS ON THE REVERSE SIDE.
PLEASE VOTE AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN ENCLOSED ENVELOPE.
NOTE: Pleas sign exactly as name appears on this card. All joint owners should
sign. When signing as executor, administrator, attorney, trustee or guardian or
as custodian for a minor, please give full title as such; if a corporation,
please sign in full corporate name and indicate the signer's office. If a
partner, sign in the partnership name.
CHANGE OF ADDRESS NOTIFICATION. Please use this form to inform us of any change
in address or telephone number. Detach this form from the Proxy Ballot and
return it with your executed Proxy in the enclosed envelope.
Has your address changed?
<PAGE>
1. Approval of the Agreement and Plan of Reorganization by and
between the Fund and IMG Mutual Funds, Inc. providing for the
transfer of all of the assets of the Fund to New Municipal
Assets in exchange for shares of New Municipal Assets and the
assumption by New Municipal Assets of all of the liabilities
of the Fund, followed by the dissolution and liquidation of
the Fund and the distribution of shares of New Municipal
Assets to the shareholders of the Fund.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. Approval of the New Investment Advisory Agreement between the
Fund and Investors Management Group, Ltd. ("IMG") following a
change of ownership of IMG.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Please be sure to sign and date this Proxy:
------------------------------------
Shareholder sign here
----------------------------------
Co-owner sign here
Dated: _____________________, 1998.
