As filed with the Securities and Exchange Commission on January 29, 1996
1933 Act Registration No.33-89078
1940 Act Registration No.811-8968
_______________________________________________________________________________
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. ____ . . . . . . . . . . . . . . . . . . . . .
Post-Effective Amendment No. 3. . . . . . . . . . . . . . . . . X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940. . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . .
Amendment No. 5. . . . . . . . . . . . . . . . . . . . . . . . X
THE VINTAGE FUNDS
(Exact Name of Registrant as Specified in Charter)
429 North Pennsylvania Street
Indianapolis, Indiana 46204
(Address of Principal Executive Offices)
(800) 862-7283
(Registrant's Telephone Number)
Timothy L. Ashburn
Vintage Advisers, Inc.
429 North Pennsylvania Street
Indianapolis, Indiana 46204
(Name and Address of Agent for Service)
____________
Copies to:
J. Jeffrey Brown, Esq.
Baker & Daniels
300 North Meridian Street
Suite 2700
Indianapolis, Indiana 46204
It is proposed that this filing will become effective (check appropriate box):
X Immediately upon filing pursuant to paragraph (b)
on (date) pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(1)
on (date) pursuant to paragraph (a)(1)
75 days after filing pursuant to paragraph (a)(2)
on (date) pursuant to paragraph (a)(2) of rule 485
If appropriate, check the following box:
this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Pursuant to the provisions of Rule 24f-2 under the Investment Company
Act of 1940, the Registrant has registered an indefinite number of shares of
each series of its shares. The Registrant filed a Form 24f-2 with respect to
each series for its last fiscal year on November 29, 1995.
<PAGE>
CROSS-REFERENCE SHEET
Explanatory Note: The Registrant is a "series" company. This Registration
Statement relates to all eight series of the Registrant's shares: The Starwood
Strategic Fund, The Aggressive Growth Fund, The Fiduciary Value Fund, The
Asset Allocation Fund, The Taxable Fixed Income Fund, The Municipal Fixed
Income Fund, The Taxable Money Market Fund and The Tax-Free
Money Market Fund. All of the Funds' shares are offered pursuant to a
combined Prospectus (the "Combined Prospectus") and a combined Statement
of Additional Information. In addition, the shares of The Taxable Money
Market Fund and The Tax-Free Money Market Fund are offered pursuant to a
separate Prospectus for those Funds only (the "Money Market Fund
Prospectus"). Both the Combined Prospectus and the Money Market Fund
Prospectus are included in Part A of this Post-Effective Amendment. The
Prospectus headings below refer to the headings in the Combined Prospectus;
the Prospectus headings in the Money Market Fund Prospectus are substantially
identical.
PART A. INFORMATION REQUIRED IN THE PROSPECTUS.
Item in Form N-1A Prospectus Heading
Item 1. Cover Page . . . . . . . . . . . . . Cover Page
Item 2. Synopsis . . . . . . . . .. . . . . Summary of Fund Expenses;
Highlights; Certain Risk
Factors
Item 3. Condensed Financial Information . . Financial Highlights;
Performance Information
Item 4. General Description of Registrant . Highlights; Investment
Objectives and Policies;
Certain Investments and
Investment Techniques;
General Information
Item 5. Management of the Fund . . . . . . . The Trust and Its
Management; Expenses
Item 5A. Management's Discussion of Fund . . .Not Applicable
Performance
Item 6. Capital Stock and Other Securities . General Information;
Dividends and Distributions;
Taxes
Item 7. Purchase of Securities Being. . . . How to Buy Shares;
Offered Shareholder Services; Net
Asset Value; The Trust and
its Management
Item 8. Redemption or Repurchase . . . . . . How to Redeem Shares;
Exchange Privilege
Item 9. Pending Legal Proceedings . . . . . .Not Applicable
PART B. INFORMATION REQUIRED IN THE STATEMENT OF ADDITIONAL INFORMATION.
Item in Form N-1A Statement Heading
Item 10. Cover Page . . . . . . . . . . . . . . . . Cover Page
Item 11. Table of Contents . . . . . . . . . . . . . .Table of Contents
Item 12. General Information and History . . . . . . .Information About the
Trust
Item 13. Investment Objectives and Policies . . . . . Investment Objectives
and Policies; Types of
Investments and
Investment Techniques;
Investment Limitations
Item 14. Management of the Fund . . . . . . . . . . . Management of the Trust
Item 15. Control Persons and Principal Holders
of Securities . . . . . . . . .. . . . . . . . . . . Management of the Trust
Item 16. Investment Advisory and Other Services . . . Investment Advisory
Arrangements;
Distribution
Arrangements;
Administrative
Services Arrangements;
Custodian, Transfer
Agent, Fund Accounting
Agent, Counsel and
Independent Accountants
Item 17. Brokerage Allocation and Other Practices . . Brokerage
Transactions
Item 18. Capital Stock and Other Securities . . . . . Information About the
Trust
Item 19. Purchase, Redemption and Pricing of
Securities Being Offered . . . . . . . . . . .Purchase and
Redemption;
Determination of Net
Asset Value
Item 20. Tax Status . . . . . . . . . . . . . . . . . Tax Status
Item 21. Underwriters . . . . . . . . . . . . . . . Not Applicable
Item 22. Calculation of Performance Data . . . . . . .Performance
Information
Item 23. Financial Statements . . . . . . . . . . . Financial Statements
PART C. OTHER INFORMATION
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C of this Registration Statement.
<PAGE>
PART A. PROSPECTUS
Explanatory Note: All of the Funds' shares are offered pursuant to a
combined Prospectus (the "Combined Prospectus"). In addition, the shares of
The Taxable Money Market Fund and The Tax-Free Money Market Fund are
offered pursuant to a separate Prospectus for those Funds only (the "Money
Market Fund Prospectus"). Both the Combined Prospectus and the
Money Market Fund Prospectus are included in this Part A. The Combined
Prospectus appears first.
<PAGE>
THE VINTAGE FUNDS
PROSPECTUS Prospectus dated January 29, 1996
The Vintage Funds (the "Trust") is an open-end, management investment
company (a mutual fund) having eight separate portfolios (the "Funds"), each of
which has its own separate investment objective and policies.
The Starwood Strategic Fund seeks growth of capital by investing
principally in a diversified portfolio of equity securities of seasoned,
financially strong growth companies.
The Aggressive Growth Fund seeks growth of capital by investing primarily
in a diversified portfolio of other no-load mutual funds that invest
principally in large capitalization stocks, and secondarily in other no-load
mutual funds that invest principally in small capitalization and emerging
growth company securities.
The Fiduciary Value Fund seeks growth of capital, current income and
growth of income by investing principally in a diversified portfolio of common
stocks, preferred stocks and securities convertible into common stock of
companies that offer the prospect for growth of earnings while paying current
dividends.
The Asset Allocation Fund seeks preservation of capital, capital
appreciation and income through a flexible policy of investing principally in
a diversified portfolio of other no-load index mutual funds, including
domestic and international stock and bond index funds, as well as money
market funds.
The Taxable Fixed Income Fund seeks a high level current income consistent
with the preservation of capital by investing principally in a diversified
portfolio of U.S. government securities and investment grade corporate debt
obligations and asset-backed securities.
The Municipal Fixed Income Fund seeks a high level of current income that
is exempt from federal regular income tax consistent with the preservation of
capital by investing principally in a diversified portfolio of investment grade
municipal securities.
The Taxable Money Market Fund seeks a high level of current income
consistent with the preservation of capital and maintenance of liquidity by
investing principally in a diversified portfolio of short-term money market
instruments. The Fund intends to maintain a constant net
asset value of $1.00 per share, although there is no assurance that it will
be able to do so.
The Tax-Free Money Market Fund seeks a high level of current income that
is exempt from federal income tax consistent with the preservation of capital
and maintenance of liquidity by investing principally in a diversified
portfolio of high quality, short-term municipal securities. The Fund intends
to maintain a constant net asset value of $1.00 per share, although there is
no assurance that it will be able to do so.
The shares offered hereby are not deposits or obligations of any financial
institution and are not insured by the Federal Deposit Insurance Corporation,
the Federal Reserve Board or any other government agency. Investment in the
shares involves investment risks including the possible loss of principal.
There can be no assurance that the money market Funds will be able to maintain
a stable net asset value of $1.00 per share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
This Prospectus contains information that you should know before
investing in any of the Funds and it should be retained for future reference.
A Statement of Additional Information, dated January 29, 1996 has been filed
with the Securities and Exchange Commission and is incorporated herein by
reference. The Statement of Additional Information is available upon request
and without charge by calling 1-800-408-4682 (1-800-40-VINTAGE).
[END OF COVER PAGE]
<PAGE>
TABLE OF CONTENTS
SUMMARY OF FUND EXPENSES
FINANCIAL HIGHLIGHTS
HIGHLIGHTS
CERTAIN RISK FACTORS
INVESTMENT OBJECTIVES AND POLICIES
The Starwood Strategic Fund
The Aggressive Growth Fund
The Fiduciary Value Fund
The Asset Allocation Fund
The Taxable Fixed Income Fund
The Municipal Fixed Income Fund
The Taxable Money Market Fund
The Tax-Free Money Market Fund
Investments in Other Mutual Funds
Fundamental Investment Limitations
CERTAIN INVESTMENTS AND
INVESTMENT TECHNIQUES
NET ASSET VALUE
HOW TO BUY SHARES
Minimum Investment
Opening an Account
By Mail
By Wire
Subsequent Investments
By Automated Clearing House (ACH)
By Telephone Order
DIVIDENDS AND DISTRIBUTIONS
Timing of Certain Money Market Fund Transactions
EXCHANGE PRIVILEGE
By Telephone
By Mail or Telecopy
HOW TO REDEEM SHARES
By Mail
Signatures
By Telephone
Receiving Payment
Check Writing (Money Market Funds Only)
Minimum Account Balance
SHAREHOLDER SERVICES
THE TRUST AND ITS MANAGEMENT
Investment Advisory Arrangements
Investment Adviser
Sub-Advisers
Portfolio Managers' Backgrounds
Advisory Fees
Distribution Services
Distributor
Distribution Plan
Administration of the Trust
Administrator
Shareholder Services Plan
Other Arrangements
Transfer Agent, Fund Accounting Agent
and Custodian
Portfolio Transactions
Expenses
THE "VOICE" PROGRAM
TAXES
The Municipal and Tax-Free Funds
Backup Withholding
PERFORMANCE INFORMATION
GENERAL INFORMATION
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus and in the Fund's
official sales literature in connection with the offer of the Fund's shares,
and, if given or made, such other information or representation must not be
relied upon as having been authorized by the Fund. This Prospectus does
not constitute an offer in any State in which, or to any person to whom, such
offering may not lawfully be made.
SUMMARY OF FUND EXPENSES
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price). . . . . . . . . . . . . . . . . . . None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price) . . . . . . . . . . . . . . . . . . None
Deferred Sales Load (as a percentage of original
purchase price or redemption proceeds, as applicable) . . . . . . . . . None
Redemption Fee (as a percentage of amount redeemed, if applicable) . . . None
Exchange Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None
Annual Fund Operating Expenses *
(As a percentage of projected average net assets)
Management 12b-1 Servicing Other(1) Total (2)
Fund Name Fees Fees Fees Expenses Expenses
Starwood Strategic 0.75% 0.10% 0.15% 0.50% 1.50%
Fiduciary Value 0.75% 0.10% 0.15% 0.50% 1.50%
Asset Allocation 0.75% 0.10% 0.15% 0.50% 1.50%
Aggressive Growth 0.75% 0.10% 0.15% 0.50% 1.50%
Taxable Fixed 0.50% 0.10% 0.15% 0.50% 1.25%
Income
Municipal Fixed 0.50% 0.10% 0.15% 0.50% 1.25%
Income
Taxable Money 0.50% 0.10% 0.15% 0.25% 1.00%
Market
Tax-Free Money 0.50% 0.10% 0.15% 0.25% 1.00%
Market
(1) The Adviser has voluntarily agreed to waive its management fees to
the extent necessary to cause the Other Expenses of each Fund to be as
indicated. Although the Adviser has no current intention to abandon this
voluntary arrangement, the Adviser may terminate the arrangement at any time
at its sole discretion. Absent the voluntary fee waiver arrangement, Other
Expenses are not expected to exceed 0.75% for the non-money market Funds and
0.50% for the money market Funds.
(2) Absent the voluntary fee waiver arrangement, Total Expenses are not
expected to exceed 1.75% for the non-money market Funds and 1.25% for the
money market Funds.
* The Funds commenced operations on June 2, 1995 and only the Taxable
Money Market Fund had investment operations during the period ended
September 30, 1995. Thus, the expenses in the table are estimated based
on average expenses expected to be incurred during the year ending
September 30, 1996. During the course of this period, expenses may be
more or less than the average amounts shown.
Initial investments of less than the required minimum by persons exempt
from the minimum investment requirement are subject to a one-time $4.50
administrative charge. See "How to Buy Shares." Wire-transferred
redemptions are subject to a $15.00 charge and certain checking transactions
may be subject to additional charges. See "How to Redeem Shares."
The purpose of this table is to assist the investor in understanding the
various costs and expenses that a shareholder of a Fund will bear, either
directly or indirectly. Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales charge permitted under the rules of
the National Association of Securities Dealers, Inc. For a further
description of the various costs and expenses incurred by the Funds, see
"The Trust and its Management."
Example:
An investor would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of each time
period:
Fund Name 1 Year 3 Years
Starwood Strategic Fund $15.00 $46.56
Aggressive Growth Fund 15.00 46.56
Fiduciary Value Fund 15.00 46.56
Asset Allocation Fund 15.00 46.56
Taxable Fixed Income Fund 12.50 38.91
Municipal Fixed Income Fund 12.50 38.91
Taxable Money Market Fund 10.00 31.19
Tax-Free Money Market Fund 10.00 31.19
The amounts listed in the example should not be considered as
representative of future expenses and actual expenses may be greater or less
than those indicated. Moreover, while the example assumes a 5% annual
return, a Fund's performance will vary and may result in an actual return
greater or less than 5%.
The Aggressive Growth Fund and the Asset Allocation Fund intend to invest
principally in other mutual funds, and the other Funds may invest
incidentally in other mutual funds. To the extent that a Fund invests in other
mutual funds, the Fund will indirectly bear its proportionate share of any
fees and expenses paid by such other funds, in addition to the fees and
expenses payable directly by the Fund. Therefore, to the extent that the
Fund invests in other mutual funds, the Fund will incur higher expenses, many
of which may be duplicative. These expenses will be borne by the Fund, and
are not included in the expenses reflected in the table or example above.
See "Investment Objectives and Policies -- Investments in Other Mutual Funds."
FINANCIAL HIGHLIGHTS
The following schedule of per share data and ratios for the period from
June 2, 1995 through September 30, 1995 has been audited by Price
Waterhouse LLP, independent accountants, whose report thereon is included in
the 1995 Annual Report to Shareholders which is incorporated by reference in
the Statement of Additional Information. During this period, only the Taxable
Money Market Fund had investment operations. Therefore, the schedules for
the other Funds are not meaningful and have been omitted. This schedule
should be read in conjunction with the other financial statements and notes
thereto included in the Annual Report, which is available without charge by
calling the Funds at 1-800-408-4682.
FINANCIAL HIGHLIGHTS
Period June 2, 1995 through September 30, 1995
Taxable Money
Market Fund
Per Share Operating Performance
Net asset value,
beginning of period $1.00
Income From
Investment Operations:
Net investment income 0.002
Total from investment income 0.002
Less Distributions:
Dividends from
net investment income (0.002)
Total from distributions (0.002)
Net asset value, end of period $1.00
Total Return 0.20%
Ratios/Supplemental Data
Net assets, end of period $1,230,385
Ratio of expenses (after
reimbursement) to
to average net assets 0.47%
Ratio of net investment income
to average net assets 0.65%
HIGHLIGHTS
Investment Objectives and Investment Risks
The Vintage Funds (the "Trust") is a family of mutual funds with eight
separate portfolios (the "Funds"), each having its own investment objective and
policies. An investment in the Funds involves investment risks including the
possible loss of principal. See "Certain Risk Factors," "Investment Objectives
and Policies" and "Certain Investments and Investment Techniques."
Liquidity
Each Fund continuously offers and redeems its shares at the Fund's
prevailing net asset value per share. See "How to Buy Shares," "How to
Redeem Shares" and "Net Asset Value." The Taxable Money Market Fund and the
Tax-Free Money Market Fund each intends to maintain a constant net asset
value of $1.00 per share, although there is no assurance that it will be able
to do so.
No Sales or Redemption Charges
There are no commissions, fees or charges by the Trust for the purchase
or redemption of shares. Inital investments below the stated minimum,
wire-transferred redemptions and certain checking transactions may be subject
to additional charges. See "Summary of Fund Expenses," "How to Buy Shares"
and "How to Redeem Shares."
Minimum Investment
A minimum investment of $1,000 is required to open an account, except
an IRA account for which the minimum is $500. Former shareholders of the
Unified family of funds, or the Quest funds which acquired the Unified family
of funds, may open an account with less than the required minimum. However,
they are subject to a one-time $4.50 administrative charge to establish the
account. Subsequent investments must be at least $100, or $50 for an IRA.
See "How to Buy Shares."
Investment Advisers
Vintage Advisers, Inc. is the Funds' investment adviser (the "Adviser").
The Adviser has engaged Starwood Corporation to serve as sub-adviser to the
Starwood Strategic Fund, and Fiduciary Counsel, Inc. to serve as sub-adviser to
the Fiduciary Value Fund, the Taxable Fixed Income Fund, the Municipal Fixed
Income Fund, the Taxable Money Market Fund and the Tax-Free Money
Market Fund. The sub-advisers manage the investment portfolios of
the applicable Funds, subject to the Adviser's overall management. The Adviser
itself manages the investment portfolios of the Asset Allocation Fund and the
Aggressive Growth Fund. See "The Trust and its Management."
Retirement Plans and Other Shareholder Services
The Trust offers retirement plans including a prototype Profit Sharing
Plan, Money Purchase Pension Plan, Salary Savings Plan - 401(k) and IRA
accounts, as well as a number of special shareholder services. For
information regarding these plans or services, call the Transfer Agent at
1-800-408-4682. See "Shareholder Services."
V.O.I.C.E. (Vision for Ongoing Investment in Charity and Education)
The Adviser administers The Vintage Funds University and Philanthropic
Program pursuant to which the Adviser will make contributions to the general
scholarship funds or endowments of certain accredited colleges and universities
designated by qualified shareholders of any of the Funds. For information
regarding this Program, call the Adviser at 1-800-408-4682.
Also see "The V.O.IC.E. Program" below.
CERTAIN RISK FACTORS
An investment in the Funds involves investment risks including the
possible loss of principal. Certain of these risks are described below, and
others are described under "Investment Objectives and Policies" and "Certain
Investments and Investment Techniques" and in the Statement of Additional
Information.
General
The risks of each Fund depend upon many factors. For the Funds that
invest principally in equity securities, these factors include, among others,
the Fund's investment objective, the types of equity securities held and the
financial position of the issuers of these securities. For the Funds that
invest principally in debt securities, these factors include, among others,
the Fund's investment objective, the average duration of the Fund's
portfolio, credit quality of the securities held and interest rate movements.
There is no assurance that any Fund will achieve its investment objective,
and there is no assurance that the money market Funds will be able to
maintain a stable net asset value of $1.00 per share.
Borrowing and Short Selling
All of the Funds may borrow money up to one-third of the value of total
assets (including the amount borrowed) for temporary or emergency purposes,
and the Starwood Strategic Fund may borrow money to that extent for the
purpose of investment. The Starwood Strategic Fund also may sell securities
short to the extent of 25% of the value of its total assets. Borrowing money
for investment purposes is a speculative technique and borrowing and short
selling may increase investment risk. See "Investment Objectives and
Policies -- The Starwood Strategic Fund" and "Certain Investments and
Investment Techniques -- Selling Securities Short."
Foreign Securities
Each of the Funds may invest up to 25% of its total assets in foreign
securities (35% in the case of the Starwood Strategic Fund). Investments in
foreign securities involve special risks that differ from those associated with
investments in domestic securities. See "Certain Investments and Investment
Techniques -- Foreign Securities."
Investments in Other Mutual Funds
Each of the Aggressive Growth Fund and the Asset Allocation Fund
intends to invest principally in other mutual funds. Each Fund will invest
only in other mutual funds that have an investment objective similar to the
Fund's, or that otherwise is a permitted investment under the Fund's
investment policies described herein. In addition, each Fund will invest
only in other funds that have fundamental investment restrictions that are
substantially no less restrictive than its own. Nevertheless, the other
funds purchased by the Funds likely will have certain investment policies,
and use certain investment practices that are different from those of the
Funds and not described herein. These other policies and practices may
subject the other funds' assets to varying or greater degrees of risk. See
"Investment Objectives and Policies -- Investments in Other Mutual Funds."
Derivative Securities
Although there is no uniform definition of "derivative securities,"
certain instruments in which the Funds may invest may be considered derivative
because the value of the instrument fluctuates depending on the value of
another security, index, reference interest rate or currency. These
instruments may principally include options, futures, forward foreign currency
exchange contracts and mortgage-backed securities. These instruments and
related risks are described below under "Certain Investments and Investment
Techniques" and in the Statement of Additional Information.
Short Operating History
The Adviser was organized in December 1994 and the Funds
commenced operations in June 1995. The Adviser has no prior operating
history and does not act as the investment adviser to any other investment
companies. See "The Trust and its Management -- Investment
Advisory Arrangements."
INVESTMENT OBJECTIVES AND POLICIES
The Trust offers eight separate Funds, each with its own investment
objective and policies. The Funds' investment objectives cannot be changed
without shareholder approval. While there is no assurance that any Fund will
achieve its investment objective, it endeavors to do so by following the
investment policies described in this Prospectus. Unless otherwise
indicated, the Funds' investment policies may be changed by the Trust's Board
of Trustees without shareholder approval. Shareholders will be notified
before any material change in investment policies becomes effective.
The following sections are concise descriptions of the Funds and their
investment objectives and policies. More information about certain types of
investments and investment techniques is provided below under "Certain
Investments and Investment Techniques" and in the Statement of Additional
Information.
The Starwood Strategic Fund
The Starwood Strategic Fund seeks growth of capital. The Fund pursues
this objective by investing principally in a diversified portfolio of equity
securities of seasoned, financially strong growth companies. Although current
income is an incidental consideration, many of the Fund's investments should
provide regular dividends which may grow over time.
Under normal circumstances, at least 65% of the Fund's assets will
consist of common stocks, preferred stocks, and preferred stocks or corporate
debt securities convertible into common stocks, that are issued by companies
which, in the opinion of the Fund's sub-adviser, have the following
characteristics:
Above-average growth rates over an extended period with prospects for
maintaining greater than average rates of growth in earnings, cash
flow or assets in the future;
A strong financial position with high credit standings and
profitability;
Important business franchises, leading products or dominant marketing
and distribution systems;
At least five years' operating history, annual revenues of at least
$200 million and market capitalization of at least $300 million; and
Attractive share prices relative to potential growth in earnings,
cash flow or assets.
The Fund's investments are selected by its sub-adviser, Starwood
Corporation, which uses a combination of research techniques to identify
companies having these characteristics. Fundamental research is used to
evaluate various aspects of corporate performance, with a particular emphasis
on consistency of results, long-term growth prospects and financial
strength. Quantitative valuation methods are used to determine which growth
companies offer superior values at a given point in time. When assessing
growth rates, Starwood generally considers a company to be "above average" if
its growth in earnings, cash flow or assets exceed the average growth rates of
companies included in the S&P 500 index, as published by Standard &
Poor's Corporation ("Standard & Poor's"). When assessing financial quality,
Starwood evaluates five criteria: the strength of the company's balance
sheet; the volatility of the company's earnings over time; the company's
accounting practices; ranking (if any, at the time of purchase) given the
company's common stock by Standard & Poor's; and the vulnerability of
earnings to changes in external factors, such as the general economy, the
competitive environment, governmental action and technological change.
The Fund may also invest to a lesser extent in equity securities that do
not meet the criteria listed above, as well as in investment grade corporate
debt obligations. The types of equity securities in which the Fund may
invest are described below under "Certain Investments and Investment
Techniques -- Corporate Equity Securities." The corporate debt obligations
in which the Fund may invest are described below under "The Taxable Fixed
Income Fund" and "Certain Investments and Investment Techniques -- Corporate
Debt Securities." Also, the Fund may invest temporarily in money market
instruments of the types described below under "The Taxable Money Market
Fund." It is expected that the Fund will invest principally in securities of
U.S. companies. However, the Fund's investment policies permit the Fund to
invest up to 35% of its net assets in foreign securities under normal
circumstances.
The Fund allocates its investments among different industries and
companies, and changes its portfolio securities based on long-term investment
considerations as opposed to short-term trading. However, the Fund may take
advantage of opportunities for short-term profits as they arise.
The Fund is permitted to borrow money up to one-third of the value of total
assets (including the amount borrowed), and pledge up to 15% of the value of
those assets to secure such borrowings, for the purpose of investment.
Borrowing for the purpose of investment is a speculative technique that
increases both investment opportunity and Starwood's ability to achieve greater
diversification of the Fund's portfolio. However, it also increases investment
risk. Because the Fund's investments will fluctuate in value, whereas the
interest obligations on borrowed funds may be fixed, during times of borrowing,
the Fund's net asset value may tend to increase more when its investments
increase in value, and decrease more when its investments decrease in value.
In addition, interest costs on borrowings may fluctuate with changing
market interest rates and may partially offset or exceed the return earned on
the borrowed funds. Also, during times of borrowing under adverse market
conditions, the Fund might have to sell portfolio securities to meet interest
or principal payments at a time when fundamental investment considerations
would not favor such sales.
The Aggressive Growth Fund
The Aggressive Growth Fund seeks growth of capital. The Fund pursues
this objective by investing primarily in a diversified portfolio of other
no-load mutual funds that invest principally in large capitalization stocks,
and secondarily in other no-load mutual funds that invest principally in small
capitalization and emerging growth company equity securities.
The Fund's investment policies define "large capitalization" stocks as
equity securities of companies that rank in the top one-third of the equity
securities listed on the New York Stock Exchange ("NYSE"), based upon their
equity capitalization. "Small capitalization" stocks are the equity
securities of companies that rank in the middle one-third of the equity
securities listed on the NYSE, based upon their equity capitalization.
Small capitalization stocks typically would rank near or slightly below the
average capitalization of all equity securities listed on the NYSE.
"Emerging growth company securities" are defined as the equity securities of
little-known companies. These equity securities may consist of securities of
the types described below under "Certain Investments and Investment
Techniques -- Corporate Equity Securities."
Under normal circumstances, the Fund invests at least 65% of its assets
in no-load mutual funds that invest principally in large capitalization
stocks. However, depending on market circumstances, at times, the Fund may
invest more heavily in no-load mutual funds emphasizing small capitalization
stocks and emerging growth company securities. Additionally, at times, the
Fund may invest in sector funds (which concentrate their investments in a
particular industry) or international funds. However, at no time will the
Fund invest more than 25% of its assets in any mutual fund concentrated in
any one industry, or more than 25% of its assets in international funds. In
addition, from time to time the Fund may invest in individual equity
securities of the types described below under "Certain Investments and
Investment Techniques -- Corporate Equity Securities."
Small capitalization stocks and emerging growth company securities
involve a higher degree of risk because most are not as broadly traded as large
capitalization stocks and their prices may fluctuate more widely and abruptly.
These securities are also less researched and often overlooked in the market,
and may have less market liquidity than large capitalization stocks.
To the extent that the Fund invests in other mutual funds, the Fund will
indirectly bear its proportionate share of any fees and expenses paid by such
funds in addition to the fees and expenses payable directly by the Fund.
Therefore, to the extent that the Fund invests in other mutual funds, the Fund
will incur higher expenses, many of which may be duplicative. For a
description of these and other factors related to the Fund's investment in
other mutual funds, see "Investments in Other Mutual Funds" below.
The Fiduciary Value Fund
The Fiduciary Value Fund seeks growth of capital, current income and
growth of income. The Fund pursues this objective by investing principally in
a diversified portfolio of common stocks, preferred stocks and preferred stocks
or corporate debt securities convertible into common stocks of companies
which offer the prospect of growth of earnings while paying current dividends.
The Fund may also purchase securities that do not pay current dividends but
which offer prospects for growth of capital and future income. Over time,
continued growth of earnings should tend to lead to higher dividends and
enhancement of capital value.
The Fund's portfolio is managed by its sub-adviser, Fiduciary Counsel,
Inc. In evaluating investments for the Fund, Fiduciary Counsel seeks to
identify companies that have demonstrated their ability to grow and whose
markets, profit margins and rates of return on investments indicate the
likelihood of future growth, in addition to a likelihood for future dividend
growth. The Fund allocates its investments among different industries and
companies, and changes its portfolio securities based on long-term investment
considerations and not for short-term trading purposes. However, the Fund
may take advantage of opportunities for short-term profits as they arise.
Under normal circumstances, at least 65% of the Fund's assets will
consist of equity securities of the types described below under "Certain
Investments and Investment Techniques -- Corporate Equity Securities."
However, the Fund also may invest to a lesser extent in investment grade
corporate debt obligations of the types described below under "The Taxable
Fixed Income Fund." Also, the Fund may invest temporarily in money market
instruments of the types described below under "The Taxable Money Market
Fund."
The Asset Allocation Fund
The Asset Allocation Fund seeks preservation of capital, capital
appreciation and current income. There is no priority among these objectives.
Rather, the Fund pursues its objectives through a flexible policy of investing
principally in a diversified portfolio of other no-load index mutual funds,
including domestic and international stock and investment grade bond index
funds, as well as money market funds. The Fund may invest directly in equity
securities (of the types described below under "Certain Investments and
Investment Techniques -- Corporate Equity Securities"), investment grade
corporate and municipal debt obligations, U.S. government securities and
money market instruments, but under normal circumstances at least 65% of
its assets will be invested in other no-load index funds.
The types of stock index funds in which the Fund invests may include
domestic and international stock index funds, large cap, small cap and mid cap
stock index funds, and certain sector stock index funds. Bond index funds may
include domestic and international corporate bond index funds, and municipal
and U.S. government bond index funds. The Fund also may invest in no-load
money market funds. However, at no time will the Fund invest more than
25% of its assets in index funds concentrated in any one industry, or more than
25% of its assets in foreign securities index funds.
Under normal circumstances, the Fund's assets will be invested in both
stock and bond index funds. The Adviser will purchase stock index funds
which, in its opinion, have the greatest potential for capital appreciation.
However, the Fund may not invest more than 75% of its assets in common stock
index funds (or individual equity securities). The Fund may from time to
time invest up to 100% of its assets in bond index funds or money market
funds if, in the judgment of the Adviser, the Fund has the opportunity of
seeking a high level of capital appreciation or current income without undue
risk to principal. The Adviser will monitor and adjust its weighing of
investments to adapt to changing market and economic conditions.
Distributable income will fluctuate as the Fund shifts assets among various
types of investments.
To the extent that the Fund invests in other mutual funds, the Fund will
indirectly bear its proportionate share of any fees and expenses paid by such
funds in addition to the fees and expenses payable directly by the Fund.
Therefore, to the extent that the Fund invests in other mutual funds, the Fund
will incur higher expenses, many of which may be duplicative. For a
description of these and other factors related to the Fund's investment in
other mutual funds, see "Investments in Other Mutual Funds" below.
The Taxable Fixed Income Fund
The Taxable Fixed Income Fund seeks a high level current income consistent
with the preservation of capital. The Fund pursues this objective by investing
principally in a diversified portfolio of U.S. government securities and
investment grade corporate debt obligations.
The Fund's investments are selected by its sub-adviser, Fiduciary Counsel,
Inc. Under normal circumstances, at least 65% of the Fund's assets will be
invested in one or more of the following types of investments:
domestic and foreign issues of corporate debt obligations having fixed
rates of interest and rated in one of the three highest categories
by a nationally recognized statistical rating organization (e.g.,
rated Aaa, Aa or A by Moody's Investors Service, Inc. ("Moody's") or
AAA, AA or A by Standard & Poor's, Fitch Investors Service, Inc.
("Fitch"), Duff & Phelps, Inc. ("Duff") or Thompson BankWatch
("BankWatch")), or which are of comparable quality in the judgment of
Fiduciary Counsel;
rated commercial paper which matures in 270 days or less so long as at
least two ratings are high quality ratings by nationally recognized
statistical rating organizations (e.g., rated Prime-1 or Prime-2 by
Moody's, A-1 or A-2 by Standard & Poor's, or F-1 or F-2 by Fitch), or
which are of comparable quality in the judgment of Fiduciary Counsel;
time deposits (including savings deposits and certificates of deposit),
deposit notes and bankers acceptances in commercial banks or savings
associations whose accounts are insured by the Federal Deposit Insurance
Corporation ("FDIC"), including certificates of deposit issued by and
other time deposits in foreign branches of FDIC insured financial
institutions or who have at least $100 million in capital;
direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes and bonds;
notes, bonds, and discount notes of U.S. government agencies or
instrumentalities, such as Federal Home Loan Banks, Federal National
Mortgage Association, Government National Mortgage Association, Federal
Farm Credit Banks, Tennessee Valley Authority, Export-Import Bank of the
United States, Commodity Credit Corporation, Federal Financing Bank,
Student Loan Marketing Association, Federal Home Loan Mortgage
Corporation, or National Credit Union Administration;
asset-backed securities rated in one of the three highest categories
by a nationally recognized statistical rating organization, or which
are of comparable quality in the judgment of the adviser; and
repurchase agreements collateralized by eligible investments.
The Fund may also invest to a lesser extent in corporate debt obligations
that are lower rated, but nevertheless investment grade. The Fund will not
invest in corporate debt obligations having a rating of less than Baa by
Moody's or BBB or better by Standard & Poor's, Fitch, Duff or Bankwatch.
Fiduciary Counsel also may choose bonds that are unrated if it determines
that such bonds are of comparable quality or have similar characteristics to
investment grade bonds. Bonds rated Baa or BBB may have speculative
characteristics. Changes in economic conditions or other circumstances are
more likely to lead to weakened capacity to make principal and interest
payments than higher rated bonds. If the Fund purchases a rated security and
the rating is subsequently downgraded, Fiduciary Counsel will determine
whether or not the security continues to be an acceptable investment. If
not, the security will be sold. A description of the rating categories is
contained in the Appendix to the Statement of Additional Information.
Also, from time to time during periods of other than normal market
conditions, the Fund may invest in short-term temporary investments of the
types described below under "The Taxable Money Market Fund."
The net asset value of the Fund is expected to fluctuate with changes in
interest rates and bond market conditions. Fiduciary Counsel will attempt to
minimize principal fluctuation through, among other things, diversification,
credit analysis and security selection, and adjustments of the duration of the
dollar-weighted average maturity of the Fund's portfolio. Under normal
circumstances, the Fund will limit the duration of the dollar-weighted
average maturity of its portfolio to not less than three years or more than ten
years. In periods of rising interest rates and falling bond prices, Fiduciary
Counsel may shorten the Fund's average duration to minimize the effect of
declining bond values on the Fund's net asset value. Conversely, during times
of falling interest rates and rising prices a longer average duration of up
to ten years may be sought. The Fund may hold individual securities of any
maturity.
The Municipal Fixed Income Fund
The Municipal Fixed Income Fund seeks a high level of current income that
is exempt from federal regular income tax consistent with the preservation of
capital. The Fund pursues this objective by investing principally in a
diversified portfolio of investment grade municipal securities.
Municipal securities are debt obligations issued by or on behalf of
states, territories and possessions of the United States, including the
District of Columbia, and their political subdivisions, agencies and
instrumentalities, the interest from which is exempt from federal regular
income tax. They are described in more detail below under "Certain
Investments and Investment Techniques -- Municipal Securities" and in the
Statement of Additional Information. The Fund may invest up to 25% of its
assets in securities of issuers located in the same state.
As a matter of investment policy, which may not be changed without
shareholder approval, under normal circumstances, the Fund will be invested so
that at least 80% of the income from investments will be exempt from federal
regular income tax or that at least 80% of its net assets are invested in
obligations, the interest from which is exempt from federal regular income tax.
Interest income that is exempt from federal regular income tax retains its
federal tax-free status when distributed to the Fund's shareholders. As
described below under "Taxes," income from certain types of municipal
securities may be subject to the federal alternative minimum tax. To the
extent that the Fund invests in these securities, a shareholder, depending on
the shareholder's own tax status, may be subject to alternative minimum tax
on that part of the Fund's distributions derived from these securities.
The municipal securities in which the Fund invests are rated, at the time
of purchase, Baa or better by Moody's or BBB or better by S&P, Fitch, Duff or
Bankwatch. In certain cases the Fund's sub-adviser, Fiduciary Counsel, Inc.,
may choose securities that are unrated if it determines that they are of
comparable quality. If the Fund purchases a rated security and the rating is
subsequently downgraded, the Fund is not required to drop the security from
the portfolio, but will consider whether such action is appropriate.
The municipal securities in which the Fund invests may carry fixed or
floating rates of interest. While fixed-rate securities bear interest at the
same rate from issuance until maturity, the interest rate on floating rate
securities is subject to adjustment based upon changes in market interest
rates or indices, such as a bank's prime rate or a published market index.
The interest rate for most floating rate securities varies directly with
changes in the index rate, so that the market value of the security will
approximate its stated value at the time of each adjustment.
The net asset value of the Fund is expected to fluctuate with changes in
interest rates and bond market conditions. Under normal circumstances, the
Fund will seek to limit the duration of the dollar-weighted average maturity of
its portfolio to not less than three years or more than 15 years. The Fund may
hold individual securities of any maturity.
From time to time, during periods of other than normal market conditions,
the Fund may invest in short-term temporary investments which may or may not
be exempt from federal income tax. Although the Fund is permitted to make
taxable, temporary investments, there is no current intention of generating
income subject to federal regular income tax.
The Taxable Money Market Fund
The Taxable Money Market Fund seeks a high level of current income
consistent with the preservation of capital and maintenance of liquidity. The
Fund pursues this objective by investing principally in a diversified
portfolio of high quality, short-term money market instruments. The Fund
intends to maintain a constant net asset value of $1.00 per share, although
there is no assurance that it will be able to do so.
The Fund's investments are selected by its sub-adviser, Fiduciary Counsel,
Inc. These investments principally include:
direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes and bonds;
notes, bonds, and discount notes of U.S. government agencies or
instrumentalities;
short-term corporate debt instruments (including commercial paper and
variable rate demand notes) which mature in 270 days or less;
domestic and foreign issues of corporate debt obligations having
floating or fixed rates of interest and having remaining maturities
of less than 13 months;
time deposits (including savings deposits and certificates of
deposit) and bankers acceptances in commercial banks or savings
associations whose accounts are insured by the FDIC, including
certificates of deposit issued by and other time deposits in foreign
branches of FDIC insured financial institutions or who have at least
$100 million in capital (collectively, "domestic bank instruments");
other short-term investments of a type which the adviser determines
presents minimal credit risks and which are of "high quality" as
determined by a nationally recognized statistical rating
organization, or, in the case of an instrument that is not rated, of
comparable quality in the judgment of the adviser; and
repurchase agreements collateralized by eligible investments.
The Fund may invest only in securities that, at the time of purchase, have
a remaining maturity of less than 13 months and that are "eligible
securities" as defined by regulations of the Securities and Exchange
Commission. "Eligible securities" generally include securities rated in one
of the two highest categories by at least two nationally recognized
statistical rating organizations (or by one such rating agency if only one
has issued a rating) or, if unrated, are determined to be of comparable
quality by Fiduciary Counsel pursuant to policies approved by the Board of
Trustees. If the Fund purchases an eligible security and its rating is
subsequently downgraded so that the security is no longer of high quality,
the Fund will consider and take appropriate action, which may include
divesting the security. The Fund will maintain a dollar-weighted average
portfolio maturity of 90 days or less.
The Tax-Free Money Market Fund
The Tax-Free Money Market Fund seeks a high level of current income that
is exempt from federal income tax consistent with the preservation of capital
and maintenance of liquidity. The Fund pursues this objective by investing
principally in a diversified portfolio of high quality, short-term municipal
securities. The Fund intends to maintain a constant net asset value of $1.00
per share, although there is no assurance that it will be able to do so.
The Fund invests principally in high quality, short-term municipal
securities, the interest from which is exempt from federal income tax.
Municipal securities are described generally under "The Municipal Fixed
Income Fund" above, and are described in more detail below under "Certain
Investments and Investment Techniques -- Municipal Securities" and in the
Statement of Additional Information. The Fund may invest up to 25% of its
assets in securities of issuers located in the same state.
As a matter of investment policy, which may not be changed without
shareholder approval, under normal circumstances, the Fund will be invested so
that at least 80% of the income from investments will be exempt from federal
income tax or that at least 80% of its net assets are invested in
obligations, the interest from which is exempt from federal income tax.
Interest income that is exempt from federal income tax retains its federal
tax-free status when distributed to the Fund's shareholders. As described
below under "Taxes," income from certain types of municipal securities may be
subject to the federal alternative minimum tax. To the extent that the Fund
invests in these securities, a shareholder, depending on the shareholder's
own tax status, may be subject to alternative minimum tax on that part of the
Fund's distributions derived from these securities. However, the Fund will
limit its investments in these securities so that no more than 20% of its
income will be subject to the alternative minimum tax.
From time to time, during periods of other than normal market conditions,
the Fund may invest in instruments that may or may not be exempt from federal
income tax. Although the Fund is permitted to make taxable, temporary
investments, there is no current intention of generating income subject to
federal regular income tax.
The Fund may invest only in securities that, at the time of purchase, have
a remaining maturity of less than 13 months and that are "eligible
securities" as defined by regulations of the Securities and Exchange
Commission. "Eligible securities" generally include securities rated in one
of the two highest rating categories by at least two nationally recognized
statistical rating organizations (or by one such rating agency if only one
has issued a rating) or, if unrated, determined to be of comparable quality
by the Fund's sub-adviser, Fiduciary Counsel, Inc., pursuant to policies
approved by the Board of Trustees. If the Fund purchases an eligible
security and its rating is subsequently downgraded so that the security is
no longer of high quality, the Fund will consider and take appropriate
action, which may include divesting the security. The Fund will maintain a
dollar-weighted average portfolio maturity of 90 days or less.
Temporary Investments
All of the Funds may invest temporarily in cash or short-term money market
instruments during times of unusual market conditions for defensive purposes,
without limitation. These temporary investments may include the instruments
described above under "The Taxable Money Market Fund". The Funds may
also invest in these instruments temporarily to maintain liquidity in
anticipation of favorable investment opportunities. Under normal market
conditions, the Funds (other than the money market Funds) will limit their
temporary investments for liquidity purposes to no more than 20% of the value
of their total assets.
Investments in Other Mutual Funds
All of the Funds may invest to some extent in the securities of other
open-end registered investment companies ("mutual funds"). Each of the
Aggressive Growth Fund and the Asset Allocation Fund intends to invest
principally in other mutual funds, and may invest up to 25% of its assets in
any one mutual fund, and up to 100% of its assets in other mutual funds in
general. Each of the other Funds intends to invest incidentally in other
mutual funds and may not invest more than 5% of its total assets in any one
mutual fund, or more than 10% of its total assets in mutual funds in general.
The Funds, considered together, may not invest in more than 3% of the total
outstanding voting securities of any one mutual fund. The foregoing
limitations are not applicable to investment company securities acquired as
part of a merger, consolidation, reorganization or other acquisition.
The Trust believes that investing in other mutual funds will provide the
Funds with opportunities to achieve greater diversification of portfolio
securities and investment techniques than the Funds could achieve by investing
in individual securities. The Funds will invest only in other mutual funds
that do not impose up-front sales loads or deferred sales loads or redemption
fees. However, the Fund may invest in Funds that have 12b-1 plans or
shareholder services plans which permit the funds to pay certain distribution
and other expenses from fund assets. To the extent that a Fund invests in
other mutual funds, the Fund will indirectly bear its proportionate share of
any fees and expenses paid by such funds in addition to the fees and expenses
payable directly by the Fund. Therefore, to the extent that a Fund invests in
other mutual funds, the Fund will incur higher expenses, many of which may be
duplicative. (For example, each of the Aggressive Growth Fund and the Asset
Allocation Fund pays the Adviser a fee of 0.75% of its average net assets to
manage its investment portfolio of other mutual funds, each of which pays its
own investment adviser a similar fee to manage its own portfolio
securities.) In addition, to the extent that a Fund invests in other mutual
funds, the Fund's shareholders may receive capital gains distributions to a
greater extent that if the shareholder owned the underlying mutual funds
directly.
Each Fund will invest only in other mutual funds that have an investment
objective similar to the Fund's, or that otherwise is a permitted investment
under the Fund's investment policies described herein. In addition, each of
the Aggressive Growth Fund and the Asset Allocation Fund will invest only in
other funds that have fundamental investment restrictions that are
substantially no less restrictive than its own. Nevertheless, the mutual funds
purchased by the Funds likely will have certain investment policies, and use
certain investment practices that are different from those of the Funds and not
described herein. These other policies and practices may subject the
other funds' assets to varying or greater degrees of risk. The Funds are
independent from any of the other mutual funds in which they invest and have
little voice in or control over the investment practices, policies or
decisions of those funds. If a Fund disagrees with those practices, policies
or decisions, it may have no choice other than to liquidate its investment in
that fund, which can entail further losses. However, a mutual fund is not
required to redeem any of its shares owned by another mutual fund in an
amount exceeding 1% of the underlying fund's shares during any period of less
than 30 days. As a result, to the extent that a Fund owns more than 1% of
another mutual fund's shares, the Fund may not be able to liquidate those
shares in the event of adverse market conditions or other considerations.
Also, the investment advisers of the mutual funds in which a Fund invests
may simultaneously pursue inconsistent or contradictory courses of action. For
example, one fund may be purchasing securities of the same issuer whose
securities are being sold by another fund, with the result that the Fund would
incur an indirect expense without any corresponding investment or economic
benefit.
When a Fund invests in another mutual fund, the Fund will have the right to
vote on matters submitted to a vote of the other fund's shareholders. As
required by the Investment Company Act of 1940, on all matters submitted to a
vote of the other fund's shareholders, the Fund will vote all of its shares
in that fund in the same proportion as the vote of all other shareholders of
that fund.
Fundamental Investment Limitations
The following investment limitations cannot be changed without shareholder
approval. These limitations are considered at the time of purchase; a sale of
securities is not required in the event of a subsequent change in circumstances.
None of the Funds will:
borrow money or pledge securities except that, for temporary or emergency
purposes, each Fund may borrow up to one-third of the value of total assets
(including the amount borrowed) and pledge up to 15% of the value of those
assets to secure such borrowings, and except that the Starwood Strategic
Fund may borrow money and pledge securities for the purpose of investment
subject to the foregoing asset value limitations;
lend any of its assets, except portfolio securities up to one-third of the
value of its total assets. This shall not prevent a Fund from purchasing
or holding U.S. government obligations, money market instruments, variable
rate demand notes, bonds, debentures, notes, certificates of indebtedness,
or other debt securities, entering into repurchase agreements, or
engaging in other transactions where permitted by the Fund's investment
objective, policies and limitations.
with respect 75% of the value of its total assets (100% in the case of the
Taxable Money Market Fund), invest more than 5% of the value of its total
assets in the securities (other than securities issued or guaranteed by the
government of the United States or its agencies or instrumentalities,
repurchase agreements collateralized by U.S. government securities and
securities of other investment companies) of any one issuer or acquire
more than 10% of the outstanding voting securities of any one issuer;
invest 25% or more of the value of its total assets in any one industry or
in government securities of any one foreign country, except that (i) each
Fund may invest without limitation in securities issued or guaranteed by
the U.S. government, its agencies or instrumentalities, (ii) each of the
Aggressive Growth Fund and the Asset Allocation Fund may invest without
limitation in other investment companies and (iii) each of the Taxable
Money Market Fund and the Tax-Free Money Market Fund may invest without
limitation in domestic bank instruments.
write or purchase options, except that each Fund (other the Taxable Money
Market Fund and the Tax-Free Money Market Fund) may write covered call
options and secured put options on up to 25% of its net assets and may
purchase put and call options, provided that no more than 5% of the fair
market value of its net assets may be invested in premiums on such options;
invest in more than 3% of the total outstanding voting securities of any one
investment company or invest more than 5% of its total assets in any one
investment company, or invest more than 10% of its total assets in
investment companies in general, except that each of the Aggressive Growth
Fund and the Asset Allocation Fund may invest of up to 25% of its total
assets in any one investment company and up to 100% of their total assets
in investment companies in general, subject to the other limitations
described herein. The foregoing limitations are not applicable to
investment company securities acquired as part of a merger, consolidation,
reorganization or other acquisition.
CERTAIN INVESTMENTS AND INVESTMENT TECHNIQUES
This section describes certain types of investments, investment techniques
and investment policies and limitations of the Funds. For further information,
see the Statement of Additional Information.
Corporate Equity Securities
The Starwood Strategic Fund, the Aggressive Growth Fund, the Fiduciary
Value Fund and the Asset Allocation Fund may invest in equity securities,
including common stocks, preferred stocks, convertible securities, warrants and
rights issued by corporations in any industry (industrial, financial or
utility) which may be denominated in U.S. dollars or in foreign currencies.
Equity securities fluctuate in value, often based on factors unrelated to the
performance of the issuer of the securities and fluctuations can be
pronounced. Small capitalization issues and emerging growth company
securities, in particular, may be subject to wider price fluctuations than
the stock market as measured by popular indices.
Preferred Stocks. Preferred stock, unlike common stock, offers a stated
dividend rate payable from the issuer's earnings. Preferred stock dividends
may be cumulative or non-cumulative, participating, or auction rate. If
interest rates rise, the fixed dividend on preferred stocks may be less
attractive, causing the price of preferred stocks to decline. Preferred
stock may have mandatory sinking fund provisions, as well as call/redemption
provisions prior to maturity, a negative feature when interest rates decline.
Convertible Securities. A convertible security is a bond, debenture, note,
preferred stock or other security that may be converted into or exchanged for a
prescribed amount of common stock of the same or a different issuer within a
particular period of time at a specified price or formula. A convertible
security entitles the holder to receive interest generally paid or accrued on
debt or the dividend paid on preferred stock until the convertible security
matures or is redeemed, converted or exchanged. Convertible securities have
several unique investment characteristics, such as (a) higher yields than
common stocks, but lower yields than comparable nonconvertible securities,
(b) a lesser degree of fluctuation in value than the underlying stock since
they have fixed income characteristics, and (c) the potential for capital
appreciation if the market price of the underlying common stock increases. A
convertible security might be subject to redemption at the option of the
issuer at a price established in the convertible security's governing
instrument. If a convertible security held by the Fund is called for
redemption, the Fund may be required to permit the issuer to redeem the
security, convert it into the underlying common stock or sell it to a third
party.
Warrants and Rights. Each Fund named above may invest up to 5% of its
total assets in warrants and rights, including but not limited to warrants or
rights (i) acquired as part of a unit or attached to other securities
purchased by the Fund, or (ii) acquired as part of a distribution from the
issuer.
Fixed Rate Corporate Debt Obligations
All of the Funds may invest to varying extents in fixed rate corporate debt
obligations. Also, all of the Funds may invest in short-term fixed rate
corporate debt obligations that qualify as money market instruments. Fixed
rate securities tend to exhibit more price volatility during times of rising
or falling interest rates than securities with floating rates of interest.
This is because floating rate securities, as described below, behave like
short-term instruments in that the rate of interest they pay is subject to
periodic adjustments based on a designated interest rate index. Fixed rate
securities pay a fixed rate of interest and are more sensitive to fluctuating
interest rates. In periods of rising interest rates the value of a fixed
rate security is likely to fall. Fixed rate securities with short-term
characteristics are not subject to the same price volatility as fixed rate
securities without such characteristics. Therefore, they behave more like
floating rate securities with respect to price volatility.
Many corporate debt obligations permit the issuers to call the security and
thereby redeem their obligations earlier than the stated maturity dates.
Issuers are more likely to call bonds during periods of declining interest
rates. In these cases, if a Fund owns a bond which is called, the Fund will
receive its return of principal earlier than expected and would likely be
required to reinvest the proceeds at lower interest rates, thus reducing
income to the Fund.
Certain fixed-income obligations may involve equity characteristics. The
Asset Allocation Fund and the Taxable Fixed Income Fund may, for example,
invest in unit offerings that combine fixed-income securities and common stock
equivalents such as warrants, rights and options. It is anticipated that the
majority of the value attributable to the unit will relate to its
fixed-income component. These Funds have no current intention of converting
any convertible securities it may own into equity securities or holding them as
an equity investment upon conversion.
Other Corporate Debt Obligations
The Funds may also invest to varying extents in other corporate debt
obligations, including those described below. Also, all of the Funds may
invest in short-term corporate debt obligations that qualify as money market
instruments.
Floating Rate Obligations. Floating rate securities are generally
offered at an initial interest rate which is at or above prevailing market
rates. The interest rate paid on these securities is then reset periodically
(commonly every 90 days) to an increment over some predetermined interest
rate index. Commonly utilized indices include the three-month Treasury bill
rate, the 180-day Treasury bill rate, the one-month or three-month London
Interbank Offered Rate (LIBOR), the prime rate of a bank, the commercial
paper rates, or the longer-term rates on U.S. Treasury securities.
Variable Rate Demand Notes. Variable rate demand notes are long-term
corporate debt instruments that have variable or floating interest rates and
provide the Fund with the right to tender the security for repurchase at its
stated principal amount plus accrued interest. Such securities typically bear
interest at a rate that is intended to cause the securities to trade at par.
The interest rate may float or be adjusted at regular intervals (ranging from
daily to annually), and is normally based on an interest index or a stated
percentage of a prime rate or another published rate. Many variable rate
demand notes allow the Fund to demand the repurchase of the security on not
more than seven days prior notice. Other notes only permit the Fund to
tender the security at the time of each interest rate adjustment or at other
fixed intervals.
Zero Coupon Securities. Corporate zero coupon securities are:
(i) notes or debentures which do not pay current interest and are issued at
substantial discounts from par value, or (ii) notes or debentures that pay no
current interest until a stated date one or more years into the future, after
which the issuer is obligated to pay interest until maturity, usually at a
higher rate than if interest were payable from the date of issuance.
Corporate Debt Ratings
The Funds will not invest in corporate debt obligations having a rating
of less than Baa by Moody's or BBB or better by Standard & Poor's, Fitch,
Duff or Bankwatch. (The money market Funds have higher rating requirements, as
described above.) In certain cases a Fund's investment adviser may choose
bonds which are unrated if it determines that such bonds are of
comparable quality or have similar characteristics to investment grade bonds.
Bonds rated Baa or BBB may have speculative characteristics. Changes in
economic conditions or other circumstances are more likely to lead to
weakened capacity to make principal and interest payments than higher rated
bonds. Downgraded securities will be evaluated on a case-by-case basis by the
Fund's sub-adviser. The sub-adviser will determine whether or not the security
continues to be an acceptable investment. If not, the security will be sold.
A description of the rating categories is contained in the Appendix to the
Statement of Additional Information.
Asset-Backed Securities
The money market Funds may invest in mortgage-related asset-backed
securities that are considered U.S. government securities. The other Funds may
invest in these and, to varying extents, in other asset-backed securities.
Asset-backed securities are created by the grouping of certain governmental,
government related and private loans, receivables and other lender assets into
pools. Interests in these pools are sold as individual securities. Payments
from the asset pools may be divided into several different tranches of debt
securities, with some tranches entitled to receive regular installments of
principal and interest, other tranches entitled to receive regular
installments of interest, with principal payable at maturity or upon
specified call dates, and other tranches only entitled to receive payments of
principal and accrued interest at maturity or upon specified call dates.
Different tranches of securities will bear different interest rates, which
may be fixed or floating.
Because the loans held in the asset pool often may be prepaid without
penalty or premium, asset-backed securities can be subject to higher
prepayment risks than most other types of debt instruments. Prepayments may
result in a capital loss to the Fund to the extent that the prepaid mortgage
securities were purchased at a market premium over their stated amount.
Conversely, the prepayment of mortgage securities purchased at a market
discount from their stated principal amount will accelerate the recognition
of interest income by the Fund, which would be taxed as ordinary income when
distributed to the shareholders.
The credit characteristics of asset-backed securities also differ in a
number of respects from those of traditional debt securities. The credit
quality of most asset-backed securities depends primarily upon the credit
quality of the assets underlying such securities, how well the entity issuing
the securities is insulated from the credit risk of the originator or any
other affiliated entities, and the amount and quality of any credit
enhancement to such securities.
Foreign Securities
Each Fund may invest in foreign securities, including foreign securities
not publicly traded in the United States. The Starwood Strategic Fund may
invest up to 35% of its total assets in foreign securities. Each of the other
Funds may invest up to 25% of its total assets in foreign securities. The
percentage of a Fund's assets that will be allocated to foreign securities will
vary depending on the relative yields of foreign and U.S. securities, the
economies of foreign countries, the condition of such countries' financial
markets, the interest rate climate of such countries and the relationship of
such countries' currency to the U.S. dollar. These factors are judged on the
basis of fundamental economic criteria (e.g., relative inflation levels and
trends, growth rate forecasts, balance of payments status, and economic
policies) as well as technical and political data.
Investments in foreign securities involve special risks that differ from
those associated with investments in domestic securities. The risks
associated with investments in foreign securities apply to securities issued
by foreign corporations and sovereign governments. These risks relate to
political and economic developments abroad, as well as those that result from
the differences between the regulation of domestic securities and issuers and
foreign securities and issuers. These risks may include, but are not limited
to, expropriation and nationalization, confiscatory taxation, reduced levels of
government regulation of securities markets, currency fluctuations
and restrictions on, and costs associated with, the exchange of currencies,
withholding taxes on interest, limitations on the use or transfer of assets,
political or social instability and adverse diplomatic developments. It may
also be more difficult to enforce contractual obligations or obtain court
judgments abroad than would be the case in the United States because of
differences in the legal systems. If the issuer of the debt or the
governmental authorities that control the repayment of the debt may be unable
or unwilling to repay principal or interest when due in accordance with the
terms of such debt, the Fund may have limited legal recourse in the event of
a default. Moreover, individual foreign economies may differ favorably or
unfavorably from the domestic economy in such respects as growth of gross
national product, the rate of inflation, capital reinvestment, resource self-
sufficiency and balance of payments position.
Additional differences exist between investing in foreign and domestic
securities. Examples of such differences include: less publicly available
information about foreign issuers; credit risks associated with certain foreign
governments; the lack of uniform financial accounting standards applicable to
foreign issuers; less readily available market quotations on foreign issues;
the likelihood that securities of foreign issuers may be less liquid or more
volatile; generally higher foreign brokerage commissions; and unreliable mail
service between countries.
To the extent that debt securities purchased by a Fund are denominated in
currencies other than the U.S. dollar, changes in foreign currency exchange
rates will affect the Fund's net asset value; the value of interest earned;
gains and losses realized on the sale of securities; and net investment
income and capital gain, if any, to be distributed to shareholders by the
Fund. If the value of a foreign currency rises against the U.S. dollar, the
value of the Fund's assets denominated in that currency will increase;
correspondingly, if the value of a foreign currency declines against the U.S.
dollar, the value of the Fund's assets denominated in the currency will
decrease.
Foreign Currency Transactions. The Funds may enter into foreign currency
transactions to obtain the necessary currencies to settle securities
transactions. Currency transactions may be conducted either on a spot or
cash basis at prevailing rates or through forward foreign currency exchange
contracts.
The Funds may also enter into foreign currency transactions to protect Fund
assets against adverse changes in foreign currency exchange rates or exchange
control regulations. Such changes could unfavorably affect the value of Fund
assets which are denominated in foreign currencies, such as foreign
securities or funds deposited in foreign banks, as measured in U.S. dollars.
Although foreign currency transactions may be used by the Fund to protect
against a decline in the value of one or more currencies, such efforts may
also limit any potential gain that might result from a relative increase in
the value of such currencies and might, in certain cases, result in losses to
the Fund.
Municipal Securities
The Municipal Fixed Income Fund may invest in municipal securities. The
Tax-Free Money Market Fund may invest in short-term municipal securities
that qualify as money market instruments.
Municipal securities are generally issued to finance public works, such as
airports, bridges, highways, housing, hospitals, mass transportation projects,
schools, streets, and water and sewer works. They are also issued to repay
outstanding obligations, to raise funds for general operating expenses, and to
make loans to other public institutions and facilities.
The two principal classifications of municipal securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the payment
of principal and interest. Interest on and principal of revenue bonds,
however, are payable only from the revenue generated by the facility financed
by the bond or other specified sources of revenue. Revenue bonds do not
represent a pledge of credit or create any debt of or charge against the
general revenues of a municipality or public authority.
Municipal securities may carry fixed or floating rates of interest. Most
municipal securities pay interest in arrears on a semiannual or more frequent
basis. However, certain securities, typically known as capital appreciation
bonds or zero coupon bonds, do not provide for any interest payments prior to
maturity. Such securities are normally sold at a discount from their stated
value, or provide for periodic increases in their stated value to reflect a
compounded interest rate. The market value of these securities is also more
sensitive to changes in market interest rates than securities that provide for
current interest payments.
Participation Interests. The Funds may purchase participation interests
from financial institutions such as commercial banks, savings and loan
associations and insurance companies. These participation interests give the
Fund an undivided interest in one or more underlying municipal securities.
The financial institutions from which the Fund purchases participation
interests frequently provide or obtain irrevocable letters of credit or
guarantees to attempt to assure that the participation interests are of high
quality. These typically give the Fund the right to demand payment of the
principal amounts of the participation interests plus accrued interest on
short notice (usually within seven days).
Municipal Leases. Municipal leases are obligations issued by state and
local governments or authorities to finance the acquisition of equipment and
facilities. They may take the form of a lease, an installment purchase
contract, a conditional sales contract or a participation certificate of any
of the above.
Industrial Development Bonds. Industrial development bonds are issued by
or on behalf of public authorities to provide financing aid to acquire sites or
construct and equip facilities for privately or publicly owned corporations.
The availability of this financing encourages these corporations to locate
within the sponsoring communities and thereby increases local employment.
Industrial development bonds do not represent a pledge of credit or create
any debt of municipality or a public authority, and no taxes may be levied
for payment of principal or interest on these bonds. The principal and
interest is payable solely out of monies generated by the entities using or
purchasing the sites or facilities. These bonds will be considered municipal
securities if the interest paid on them, in the opinion of bond counsel, is
exempt from federal regular income tax.
Municipal Notes. Municipal securities in the form of notes generally are
used to provide for short-term capital needs, in anticipation of an issuer's
receipt of other revenues or financing, and typically have maturities of up
to three years. Such instruments may include Tax Anticipation Notes, Revenue
Anticipation Notes, Bond Anticipation Notes, Tax and Revenue Anticipation
Notes and Construction Loan Notes. The obligations of an issuer of municipal
notes are generally secured by the anticipated revenues from taxes, grants or
bond financing. An investment in such instruments, however, presents a risk
that the anticipated revenues will not be received or that such revenues will
be insufficient to satisfy the issuer's payment obligations under the notes or
that refinancing will be otherwise unavailable.
Tax-Exempt Commercial Paper. Issues of commercial paper typically
represent short-term, unsecured, negotiable promissory notes. These
obligations are issued by state and local governments and their agencies to
finance working capital needs of municipalities or to provide interim
construction financing and are paid from general revenues of municipalities or
are refinanced with long-term debt. In most cases, tax-exempt commercial
paper is backed by letters of credit, lending agreements, note repurchase
agreements or other credit facility agreements offered by banks or other
institutions.
Zero Coupon and Capital Appreciation Bonds. Zero coupon and capital
appreciation bonds are debt securities issued or sold at a discount from their
face value and which do not entitle the holder to any periodic payment of
interest prior to maturity or a specified redemption date (or cash payment
date). The amount of the discount varies depending on the time remaining until
maturity or cash payment date, prevailing interest rates, the liquidity of the
security and the perceived credit quality of the issuer. These securities
also may take the form of debt securities that have been stripped of their
unmatured interest coupons, the coupons themselves or receipts or
certificates representing interest in such stripped debt obligations or
coupons. Discount with respect to stripped tax-exempt securities or their
coupons may be taxable. The market prices of capital appreciation bonds
generally are more volatile than the market prices of interest bearing
securities and are likely to respond to a greater degree to changes in
interest rates than interest bearing securities having similar maturities and
credit quality.
U.S. Government Securities
All of the Funds may invest in U.S. government securities. These
securities are either issued or guaranteed by the U.S. government, its
agencies or instrumentalities. The government securities in which the Fund
may invest are backed in a variety of ways by the U.S. government or its
agencies or instrumentalities. Some of these securities, such as Government
National Mortgage Association ("GNMA") mortgage-backed securities, are
backed by the full faith and credit of the U.S. government. Other securities,
such as obligations of the Federal National Mortgage Association ("FNMA") or
Federal Home Loan Mortgage Corporation ("FHLMC"), are backed by the credit of
the agency or instrumentality issuing the obligations but not the full faith
and credit of the U.S. government. No assurances can be given that the U.S.
government will provide financial support to these other agencies or
instrumentalities, because it is not obligated to do so.
Bank Instruments
All of the Funds may invest in bank instruments of the types described
under "The Taxable Money Market Fund". These instruments may include
Eurodollar Certificates of Deposit ("ECDs"), Yankee Certificates of Deposit
("Yankee CDs") and Eurodollar Time Deposits ("ETDs"). The banks issuing
these instruments are not necessarily subject to the same regulatory
requirements that apply to domestic banks, such as reserve requirements, loan
requirements, loan limitations, examinations, accounting, auditing, and
record keeping and the public availability of information.
Credit Facilities
All of the Funds may invest in demand notes and revolving credit facilities
that qualify as money market instruments. Demand notes are borrowing
arrangements between a corporation and an institutional lender (such as the
Fund) payable upon demand by either party. The notice period for demand
typically ranges from one to seven days, and the party may demand full
or partial payment. Revolving credit facilities are borrowing arrangements in
which the lender agrees to make loans up to a maximum amount upon demand
by the borrower during a specified term. As the borrower repays the loan, an
amount equal to the repayment may be borrowed again during the term of the
facility. The Fund generally acquires a participation interest in a
revolving credit facility from a bank or other financial institution. The
terms of the participation require the Fund to make a pro rata share of all
loans extended to the borrower and entitles the Fund to a pro rata share of
all payments made by the borrower. Demand notes and revolving facilities
usually provide for floating or variable rates of interest. These
instruments are subject to the considerations described above with regard to
foreign securities.
Repurchase Agreements
All of the Funds may invest in repurchase agreements related to eligible
securities. Repurchase agreements are arrangements in which banks,
broker/dealers, and other recognized financial institutions sell U.S.
government securities or other securities to the Fund and agree at the time
of sale to repurchase them at a mutually agreed upon time and price. Under
the Investment Company Act of 1940, a repurchase agreement is deemed to be
a loan collateralized by the underlying securities. To the extent that the
original seller does not repurchase the securities from the Fund, the Fund
could receive less than the repurchase price on any sale of such securities.
Reverse Repurchase Agreements
The Funds may also enter into reverse repurchase agreements. A reverse
repurchase transaction is similar to borrowing cash. In a reverse repurchase
agreement a Fund transfers possession of a portfolio instrument to another
person, such as a financial institution, broker, or dealer, in return for a
percentage of the instrument's market value in cash, and agrees that on
a stipulated date in the future, the Fund will repurchase the portfolio
instrument by remitting the original consideration plus interest at an agreed
upon rate. The use of reverse repurchase agreements may enable the Fund to
avoid selling portfolio instruments at a time when a sale may be deemed to be
disadvantageous, but the ability to enter into reverse repurchase agreements
does not ensure that the Fund will be able to avoid selling portfolio
instruments at a disadvantageous time.
Lending of Portfolio Securities
In order to generate additional income, each Fund may lend portfolio
securities on a short-term or a long-term basis up to one-third of the value
of its total assets to broker/dealers, banks, or other institutional
borrowers of securities. A Fund will only enter into loan arrangements with
broker/dealers, banks, or other institutions which its investment adviser has
determined are creditworthy under guidelines established by the Board of
Trustees. In these loan arrangements, the Fund will receive collateral in
the form of cash or U.S. government securities equal to at least 100% of the
value of the securities loaned. The Fund continues to be entitled to
payments in amounts equal to the interest, dividends and other distributions
on the loaned security and receives interest on the amount of the loan.
Selling Securities Short
The Starwood Strategic Fund may sell securities short. The Fund will
effect short sales when it is believed that the price of a particular
security will decline. A short sale involves the sale of a security which
the Fund does not own in the hope of purchasing the same security at a later
date at a lower price. To make delivery to the buyer, the Fund must borrow
the security, and the Fund is obligated to return the security to the lender,
which is accomplished by a later purchase of the security by the Fund.
When the Fund makes a short sale, it must deposit with the lender or
maintain in a segregated account cash or government securities to collateralize
its obligation to replace the borrowed securities which have been sold. The
Fund may sell securities short only to the extent that would cause the amounts
on deposit or segregated to equal 25% of the value of its total assets.
The Fund will incur a loss as a result of a short sale if the price of the
security increases between the date of the short sale and the date on which the
Fund purchases the security to replace the borrowed security. The Fund will
realize a gain if the security declines in price between those dates. The
amount of any gain will be decreased and the amount of any loss increased by
any premium or interest the Fund may be required to pay in connection with a
short sale.
When-Issued and Delayed Delivery Transactions
The Funds may purchase securities on a when-issued or delayed delivery
basis. These transactions are arrangements in which a Fund purchases
securities with payment and delivery scheduled for a future time. Prior to
such delivery, no income on the securities accrues to the Fund. In when-
issued and delayed delivery transactions, the Fund relies on the seller to
complete the transaction. The seller's failure to complete the transaction
may cause the Fund to miss a price or yield considered to be advantageous.
Demand Features
The Funds that invest in debt securities may acquire securities that are
subject to puts and standby commitments ("demand features") to purchase the
securities at their principal amount (usually with accrued interest) within a
fixed period following a demand by the Fund. The demand feature may be
issued by the issuer of the underlying securities, a dealer in the securities
or by another third party, and may not be transferred separately from the
underlying security. The Fund uses these arrangements to provide the Fund
with liquidity and not to protect against changes in the market value of the
underlying securities. The bankruptcy, receivership or default by the issuer
of the demand feature, or a default on the underlying security or other event
that terminates the demand feature before its exercise, will adversely affect
the liquidity of the underlying security. Demand features that are
exercisable even after a payment default on the underlying security are
treated as a form of credit enhancement.
Options Transactions
Each of the Funds (except the Taxable Money Market Fund and the
Tax-Free Money Market Fund) may attempt to hedge all or a portion of its
portfolio by buying put options on portfolio securities. These Funds also may
also write covered call options on portfolio securities to attempt to increase
current income. Each Fund may write covered call options and secured
put options on up to 25% of its net assets and may purchase put and call
options provided that no more than 5% of the fair market value of its net
assets may be invested in premiums on such options.
A call option gives the purchaser the right to buy, and the writer the
obligation to sell, the underlying currency, security or other asset at the
exercise price during the option period. A put option gives the purchaser
the right to sell, and the writer the obligation to buy, the underlying
currency, security or other asset at the exercise price during the option
period. The writer of a covered call owns assets that are acceptable for
escrow and the writer of a secured put invests an amount not less than the
exercise price in eligible assets to the extent that it is obligated as a
writer. If a call written by a Fund is exercised, the Fund forgoes any
possible profit from an increase in the market price of the underlying asset
over the exercise price plus the premium received. In writing puts, there is
a risk that the Fund may be required to take delivery of the underlying asset
at a disadvantageous price.
Over-the-counter options ("OTC options") differ from exchange traded
options in several respects. They are transacted directly with dealers and not
with a clearing corporation, and there is a risk of nonperformance by the
dealer as a result of the insolvency of such dealer or otherwise, in which
event the fund may experience material losses. However, in writing options
the premium is paid in advance by the dealer, OTC options, which may not be
continuously liquid, are available for a greater variety of assets, and a
wider range of expiration dates and exercise prices, than are exchange traded
options. The Fund intends to treat OTC options as illiquid securities.
Restricted and Illiquid Securities
The Funds may invest in restricted securities. Restricted securities are
any securities in which a Fund may otherwise invest pursuant to its investment
objective and policies, but which are subject to restriction on resale under
federal securities law. Each Fund will limit investments in illiquid
securities, including certain restricted securities not determined by the
Board of Trustees to be liquid, non-negotiable time deposits, and repurchase
agreements providing for settlement in more than seven days after notice, to
15% of the value of its net assets (10% in the case of the money market Funds).
Portfolio Turnover
Each Fund may trade or dispose of portfolio securities as considered
necessary to meet its investment objective. Each of the Funds intends to make
investments based on long-term investment considerations as opposed to
short-term trading. However, each Fund may take advantage of opportunities
for short-term profits as they arise. Higher portfolio turnover results in
increased Fund expenses, including brokerage commissions, dealer mark-ups
and other transaction costs on the sale of securities and on the reinvestment
in other securities, and results in the acceleration of realization of capital
gains or losses for tax purposes. The Funds cannot accurately predict their
portfolio turnover rates, but it is anticipated that each Fund's annual
turnover rate generally will not exceed 100% (excluding the money market
Funds, which must invest in short-term instruments). Each Fund intends to
comply with the short-term trading restrictions of Subchapter M of the
Internal Revenue Code of 1986, as amended, which could inhibit a rapid change
in a Fund's investments.
NET ASSET VALUE
Net asset value per share (the price at which shares are purchased and
redeemed) is determined as of the close of regular trading on the New York
Stock Exchange (currently 4:00 p.m., Eastern time), on each business day the
Exchange is open for business. Each Fund's net asset value per share is
determined by dividing the sum of the market value of all securities and all
other assets of the applicable Fund, less liabilities of the Fund, by the
number of the Fund's shares outstanding.
The net asset value per share will fluctuate for each Fund other than the
Taxable Money Market Fund and the Tax-Free Money Market Fund. The
portfolio securities of the two money market Funds are valued utilizing the
amortized cost method of valuation, which normally approximates market
value, and which is intended to result in a constant net asset value of $1.00
per share. Although every effort is made to maintain the net asset value of
the money market Funds at $1.00 per share, there can be no assurance that this
constant net asset value will be maintained at all times. For example, in the
event of rapid and sharp increases in current interest rates, a national
credit crisis, or a default by one or more of the issuers of a money market
Fund's portfolio securities, then it is possible that a money market Fund's
net asset value could decline below $1.00 per share.
HOW TO BUY SHARES
Shares of the Funds are sold each day the New York Stock Exchange is open
at the applicable Fund's net asset value per share next calculated after
receipt of the purchase order in proper form. The Trust reserves the right
to reject any purchase request.
Minimum Investment
The minimum initial investment in each Fund is $l,000, except an IRA
for which the minimum initial investment is $500. Former shareholders of the
Unified family of funds, or the Quest funds which acquired the Unified family
of funds, may open an account with less than the required minimum. However,
they are subject to a one-time $4.50 administrative charge to establish the
account. Subsequent investments may be made in amounts of at least $100,
except for an IRA, which must be in amounts of at least $50. Minimum
investments for certain other types of retirement accounts may be different.
See "Shareholder Services."
Opening An Account
An account may be opened by mail or bank wire, as follows:
By Mail. To open a new account by mail:
Complete and sign the account application. (Be sure to specify the
name of the Fund(s) in which an investment is made.)
Enclose a check payable to each Fund specified in the application.
Mail the application and the check to the Transfer Agent at the
following address: The Vintage Funds, c/o Unified Advisers, Inc.,
P.O. Box 6110, Indianapolis, Indiana 46206-6110.
By Wire. To open a new account (or to open an additional account in a
different Fund) by wire, call the Transfer Agent at 1-800-408-4682. A
representative will assist you to obtain an account application by telecopy (or
mail), which must be completed, signed and telecopied (or mailed) to the
Transfer Agent before payment by wire may be made. Then, request your
financial institution to wire immediately available funds to:
Star Bank, N.A.
ABA # 04-20000-13
Attention: Name of Fund (see below)
Number of Fund (see below)
Credit Account # ________ (see below)
The applicable Fund and account numbers are as follows:
Fund Name Fund Number Account Number
Starwood Strategic Fund 20 483616744
Aggressive Growth Fund 21 483616751
Fiduciary Value Fund 23 483616769
Asset Allocation Fund 24 483616777
Taxable Fixed Income Fund 25 483616785
Municipal Fixed Income Fund 26 483616793
Taxable Money Market Fund 30 483616819
Tax-Free Money Market Fund 31 483616827
The order is considered received when Star Bank, N.A., the Trust's
custodian, receives payment by wire. However, the completed account
application must be mailed to the Transfer Agent on the same day the wire
payment is made. See "Opening an Account -- By Mail" above. The Trust will
not permit redemptions until the Transfer Agent receives the application in
proper form. Financial institutions may charge a fee for wire transfers.
Subsequent Investments
Once an account is open, additional purchases of Fund shares may be made
at any time in minimum amounts of $100, except for an IRA, which must be in
amounts of at least $50. Additional purchases may be made:
By sending a check, made payable to the applicable Fund, to The
Vintage Funds, [Name of Fund], P.O. Box 640689, Cincinnati, Ohio
45264-0689. The Trust will charge a $15 fee against a shareholder's
account for any check returned for insufficient funds. The
shareholder also will be responsible for any losses suffered by the
Trust as a result.
By wire to the applicable Fund account as described above under
"Opening an Account -- By Wire". Shareholders should call the
Transfer Agent at 1-800-408-4682 before wiring funds.
By electronic funds transfer from a financial institution through the
Automated Clearing House ("ACH"), as described below.
By telephone order, as described below.
By Automated Clearing House (ACH). Once an account is open, shares
may be purchased or redeemed through ACH in minimum amounts of $100.
ACH is the electronic transfer of funds directly between an account with a
financial institution and the applicable Fund. In order to use the ACH
service, the ACH Authorization section of the account application must be
completed. For existing accounts, an ACH Authorization Form may be obtained
by calling the Transfer Agent at 1-800-408-4682. Allow at least two weeks for
preparation before using ACH. To order a purchase or redemption by ACH,
call the Transfer Agent at 1-800-408-4682. There are no charges for ACH
transactions imposed by the Fund or the Transfer Agent. ACH transactions are
completed approximately two business days following the placement of
the transfer order.
ACH may be used to make direct deposits into a Fund account of part or all
of recurring payments made to a shareholder by his or her employer (corporate,
federal, military, or other) or by the Social Security Administration.
By Telephone Order. Once an account is open, shares may be purchased at a
certain day's price by calling the Transfer Agent at 1-800-408-4682, before the
close of regular trading on the New York Stock Exchange (currently 4:00 p.m.,
Eastern time) on that day. Orders must be for $1,000 or more and may not be
for an amount greater that twice the value of the existing account at the time
the order is placed. Payment by check or wire must be received within
three business days after the order is placed, or the order will be cancelled
and the shareholder will be responsible for any resulting loss to the Fund.
Payment of telephone orders by check may not be mailed to the Transfer
Agent's P.O. Box address herein, but must be mailed to the Transfer Agent at
Unified Advisers, Inc., 429 North Pennsylvania Street, Indianapolis, Indiana
46204. Payment must be accompanied by the order number given at the time the
order is placed. A written confirmation with complete purchase information
will be sent to the shareholder of record shortly after payment is received.
DIVIDENDS AND DISTRIBUTIONS
The Starwood Strategic Fund, the Aggressive Growth Fund, the Asset
Allocation Fund and the Fiduciary Value Fund declare and pay dividends on a
quarterly basis.
The Taxable Fixed Income Fund and the Municipal Fixed Income Fund
declare and pay dividends on a monthly basis.
The Taxable Money Market Fund and The Tax-Free Money Market Fund
declare and pay dividends on a daily basis.
The Funds make distributions of any net realized long-term capital gains at
least once every twelve months. Dividends and distributions are automatically
reinvested in additional shares on payment dates at the ex-dividend net asset
value, unless cash payments are requested on the account application or in
writing to the Transfer Agent. If cash payments are requested with respect to
either of the money market Funds, daily dividends will accumulate and be paid
at the end of each month, as requested in writing. All shareholders on the
record date are entitled to the dividend.
If an order for shares is received on a business day prior to receipt of
wire payment, shares purchased by wire begin earning dividends on the
business day wire payment is received by the Transfer Agent. If the order
for shares and payment by wire are received on the same day, shares begin
earning dividends on the next business day. Shares purchased by check begin
earning dividends on the business day after the check is converted into
federal funds. Shares earn dividends through the business day that proper
written redemption instructions are received by the Transfer Agent. Certain
transactions in the money market Funds are treated differently, as described
below.
Timing of Certain Money Market Fund Transactions
The money market Funds have two transaction times each day, at 12:00
noon (Eastern time) and the close of regular trading on the New York Stock
Exchange (currently 4:00 p.m., Eastern time). New investments represented by
federal funds or bank wires received by the Custodian prior to 12:00 noon are
paid the full dividend for that day; such investments received after 12:00 noon
do not begin to receive daily dividends until the next day. Redemption
orders received prior to 12:00 noon are effected at 12:00 noon, and the
redemption proceeds are normally available that day. Redemption orders
received after 12:00 noon are effected at the close of regular trading on the
New York Stock Exchange, and the redemption proceeds are normally remitted
the next business day. Redemption orders received at any time during a day
do not earn that day's dividend.
EXCHANGE PRIVILEGE
Shares of any Fund may be exchanged for shares of any other Fund at net
asset value, without any additional charges. The shares exchanges must have
been registered in the shareholder's name for at least five days prior to the
exchange request, and must have a net asset value which at least meets the
minimum investment required for the Fund into which the exchange is being
made.
Exchange requests may be made by telephone or in writing. Exchanges will
be effected at the respective net asset values per share of the Funds involved,
next determined after the exchange request is received in proper form. If an
exchange request is received by the Transfer Agent in proper form on a Trust
business day before the close of regular trading on the New York Stock
Exchange (currently 4:00 p.m., Eastern time), the exchange will be effected
that day. An exchange of shares purchased by check will be delayed until the
check has been converted into federal funds and redemption proceeds are
available for purchase of the newly acquired shares, which could take up to
15 days.
By Telephone. Exchange requests may be made by telephone by calling the
Transfer Agent at 1-800-408-4682. Exchange requests made by telephone will
be effected only if (1) the shareholder's existing account has authorized
telephone redemption privileges (see "How to Redeem Shares -- By Telephone"
below) and (2) no account information will change as a result of the exchange.
The Transfer Agent requires personal identification before accepting
any exchange request by telephone, and telephone exchange requests may be
recorded.
By Mail or Telecopy. Exchange requests made in writing should be sent
to The Vintage Funds c/o Unified Advisers, Inc., P.O. Box 6110, Indianapolis,
Indiana 46206-6110. A written request to exchange shares having a net asset
value of less than $5,000 may be sent by telecopy, by first calling the
Transfer Agent at 1-800-408-4682. Regardless of whether the request is sent
by mail or by telecopy, the request must be signed exactly as the
shareholder's name appears on the Trust's account records. If the shares to
be exchanged have a net asset value of $5,000 or more, the request must be
mailed, and all signatures must be properly guaranteed as described below
under "How to Redeem Shares -- Signatures." If shares are to be exchanged
into a new account registered in a different name, or if any account
information will change as a result of the exchange, a separate account
application must be received by the Transfer Agent by mail before the
exchange may be effected.
The exchange privilege is designed to accommodate changes in shareholder
investment objectives. It is not designed for frequent trading in response to
short-term market fluctuations. Accordingly, the Trust reserves the right to
limit a shareholder's use of the exchange privilege. The exchange privilege
may be modified or terminated at any time.
Any exchange involves a redemption of shares of one Fund and an
investment of the redemption proceeds in shares of another Fund. Before
requesting an exchange, a shareholder should read carefully the parts of this
Prospectus describing the Fund into which the exchange will be made. Also, an
exchange is treated for federal income tax purposes as a sale of the shares
given in exchange, and the shareholder may realize a taxable gain or loss on
the exchange.
HOW TO REDEEM SHARES
Shares of each Fund may be redeemed on any day on which the Fund
computes it net asset value. Shares are redeemed at their net asset value next
determined after the Transfer Agent receives the redemption request in proper
form. Redemption requests may be may by mail or by telephone.
By Mail. A shareholder may redeem shares by mailing a written request to
The Vintage Funds, c/o Unified Advisers, Inc., P.O. Box 6110, Indianapolis,
Indiana 46206-6110. Written requests must state the shareholder's name, the
name of the Fund, the account number and the shares or dollar amount to be
redeemed and be signed exactly as the shares are registered.
Signatures. Shareholders requesting a redemption of $5,000 or more,
or a redemption of any amount payable to a person other than the shareholder
of record or to be sent to an address other than that on record with the
Trust, must have all signatures on written redemption requests guaranteed.
The Transfer Agent will accept signatures guaranteed by a financial
institution whose deposits are insured by the FDIC; a member of the New York,
American, Boston, Midwest, or Pacific Stock Exchange; or any other
"eligible guarantor institution," as defined in the Securities Exchange Act of
1934. The Transfer Agent will not accept signatures guaranteed by a notary
public. The Transfer Agent has adopted standards for accepting signature
guarantees from the above institutions. The Trust may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Trust and its Transfer Agent reserve the
right to amend these standards at any time without notice.
Redemption requests by corporate and fiduciary shareholders must be
accompanied by appropriate documentation establishing the authority of the
person seeking to act on behalf of the account. Forms of resolutions and other
documentation to assist in compliance with the Transfer Agent's procedures
may be obtained by calling the Transfer Agent.
By Telephone. You may also redeem shares by telephone by calling the
Transfer Agent at 1-800-408-4682. In order to make redemption requests by
telephone, the Telephone Privileges section of the account application must be
completed. For existing accounts, a Telephone Privileges form may be obtained
by calling the Transfer Agent at 1-800-408-4682.
Telephone redemptions may be requested only if the proceeds are to be
issued to the shareholder of record and mailed to the address on record with
the Fund. Upon request, proceeds of $100 or more may be transferred by ACH,
and proceeds of $1,000 or more may be transferred by wire, in either case to
the account stated on the account application. Shareholders will be charged
for outgoing wires.
Telephone privileges and account designations may be changed by sending
the Transfer Agent a written request with all signatures guaranteed as
described above.
The Transfer Agent requires personal identification before accepting any
redemption request by telephone, and telephone redemption instructions may be
recorded. If reasonable procedures are not followed by the Trust, it may be
liable for losses due to unauthorized or fraudulent telephone instructions.
In the event of drastic economic or market changes, a shareholder may
experience difficulty in redeeming by telephone. If such a case should
occur, redemption by mail should be considered.
Receiving Payment
The Trust normally will make payment for all shares redeemed within
three business days after receipt by the Transfer Agent of a redemption request
in proper form, except as provided by the rules of the Securities and Exchange
Commission. A requested wire of redemption proceeds normally will be
effected the following business day, but in no event more than three business
days, after receipt of the redemption request in proper form. However, when
shares are purchased by check or through ACH, the proceeds from the
redemption of those shares are not available, and the shares may not be
exchanged, until the purchase check or ACH transfer has been converted to
federal funds, which could take up to 15 days.
Check Writing (Money Market Funds Only)
Under the Funds' check writing service, shareholders of the Taxable Money
Market Fund or the Tax-Free Money Market Fund may write checks payable to
any payee in any amount of $250 or more. There is no check writing privilege
for the non-money market Funds. A shareholder with check writing privileges
may present for payment three checks per month free of charge; additional
checks will result in a charge of $0.30 per check. Daily dividends will
continue to accrue on the shares redeemed by check until the day the check is
presented for payment.
The Check Writing Privileges section of the account application must be
completed in order to initiate check writing privileges. For existing
accounts, check writing privileges may be initiated by sending a written
request to the Transfer Agent with all signatures guaranteed. A book of
checks will be sent to the shareholder of record upon the Transfer Agent's
receipt of the request.
A check should not be used to close out an account with the Fund because
the balance of the account will continue to increase by the amount of daily
dividends until the check is presented for payment. The Transfer Agent may
impose a charge for checks returned unpaid for insufficient funds or for
effecting stop-payment instructions.
Minimum Account Balance
Due to the high cost of maintaining accounts with low balances, the Trust
may involuntarily redeem Shares in any account, and pay the proceeds to the
shareholder, if the account balance falls below a required minimum value of
$1,000 ($500 for an IRA) due to shareholder redemptions. This requirement
does not apply, however, if the balance falls below the minimum because of
changes in a Fund's net asset value. Before shares are redeemed to close an
account, the shareholder is notified in writing and allowed 30 days to purchase
additional Shares to meet the minimum requirement.
SHAREHOLDER SERVICES
Each time shares are purchased or redeemed, a statement will be mailed
showing the details of the transaction and the number and value of shares
owned after the transaction. Share certificates are not issued. Financial
reports showing investments, income and expenses of the Funds are mailed to
shareholders semi-annually. After the end of each year, shareholders receive a
statement of all their transactions for the year.
The Trust provides a number of plans and services to meet the special needs
of certain investors, including (1) an automatic investment plan, (2) a payroll
deduction plan, (3) a systematic withdrawal plan to provide monthly payments,
(4) retirement plans such as IRA and 403(b), and (5) corporate pension and
profit sharing plans, including a 401(k) plan. Brochures describing these
plans and related charges and account applications are available from the
Transfer Agent by calling 1-800-408-4682.
THE TRUST AND ITS MANAGEMENT
The Trust is an Indiana business trust authorized to offer separate
classes and sub-classes of shares of beneficial interest. At the date of
this Prospectus, the Trust has established each of the eight Funds described
herein as a separate class of its shares. The Trust's offices are at 429
North Pennsylvania Street, Indianapolis, Indiana 46204. The business affairs
of the Trust are under the direction of its Board of Trustees.
Investment Advisory Arrangements
Investment Adviser. Vintage Advisers, Inc., 429 North Pennsylvania
Street, Indianapolis, Indiana 46204, serves as the Trust's investment adviser
(the "Adviser"). The Adviser supervises and assists in the management of the
Funds under an Investment Advisory Agreement between the Adviser and the
Trust, subject to the overall authority of the Board of Trustees. The Adviser
also is responsible for monitoring and evaluating the performance of
each Sub-Adviser, as described below.
The Adviser was organized in December 1994 and is a registered investment
adviser. It has no prior operating history and does not act as the investment
adviser to any other investment companies. The Adviser is controlled by
Timothy L. Ashburn and Jack R. Orben, each of whom owns of record 25% of
its voting securities. The remainder of the Adviser's voting securities are
owned of record by a management retention plan for the benefit of Messrs.
Ashburn and Orben and certain other individuals. Messrs. Ashburn and Orben
control the voting of the shares owned by that plan. They, together with the
other directors and officers of the Adviser, have substantial experience in the
investment counsel and mutual fund industries. Each of the portfolio
managers named below under "Portfolio Managers' Backgrounds" is a director
or officer of the Adviser. Messrs. Ashburn and Orben are members of the
Trust's Board of Trustees.
The Adviser has notified the Trust that, in the event of an initial public
offering of the Adviser's voting securities, the Adviser may offer the first
opportunity to purchase such securities to persons who are then shareholders of
the Funds. The Adviser has also notified the Trust, however, that it has no
current intention of offering its voting securities to the public in the
foreseeable future, and that there can be no assurance that the Adviser will
ever offer its voting securities to the public.
Sub-Advisers. The Adviser has entered into Sub-Advisory Agreements with
Starwood Corporation and Fiduciary Counsel, Inc. (the "Sub-Advisers") to
manage the investment portfolios of certain of the Funds. The Sub-Advisers
are located at 40 Wall Street, New York, New York. They are wholly owned
subsidiaries of Associated Family Services, Inc. ("AFS"). Jack R. Orben owns
33% of the outstanding voting securities of AFS.
Starwood Corporation is the sub-adviser of the Starwood Strategic Fund.
Originated in 1932, Starwood Corporation is a registered investment adviser
that manages approximately $30 million in assets. It does not act as the
investment adviser to any other investment companies.
Fiduciary Counsel, Inc. is the sub-adviser to each of the Fiduciary Value
Fund, the Taxable Fixed Income Fund, the Municipal Fixed Income Fund, the
Taxable Money Market Fund and the Tax-Free Money Market Fund. Formed
in 1931, Fiduciary Counsel is a registered investment adviser that manages
approximately $350 million in assets. It does not act as the investment
adviser to any other investment companies.
Portfolio Managers' Backgrounds
Starwood Strategic Fund. Andrew E. Beer is the Fund's portfolio manager.
Mr. Beer has been the President and Director of Starwood Corporation since
1984.
Aggressive Growth Fund and The Asset Allocation Fund. Timothy L.
Ashburn and Lynn E. Wood are the Funds' portfolio managers. Mr. Ashburn is
the Chairman of the Board and President of the Adviser. Also, since December
1989, he has been the Chairman of the Board of the Distributor and the
Transfer Agent. From July 1991 to April 1994, he also was the Trust Division
Manager and Senior Trust Officer of Vine Street Trust Company, Lexington,
Kentucky. Mr. Wood is the Executive Vice President and Chief Operating
Officer and a Director of the Adviser. Since July 1993, he has been the
President and Chief Operating Officer of the Distributor and the Transfer
Agent. Prior to then, he was Vice President and Managing Director of the
Distributor.
Fiduciary Value Fund, Taxable Fixed Income Fund, Municipal Fixed Income
Fund, Taxable Money Market Fund and Tax-Free Money Market Fund. Ralph
E. Rosamilia is the Funds' portfolio manager. Mr. Rosamilia has been the
President and Chief Executive Officer of Fiduciary Counsel since January 1995.
Prior to then, he was a Managing Director of Fiduciary Counsel since 1986.
Since 1986, Mr. Rosamilia has been Chairman of Fiduciary
Counsel's Investment Policy Committee and a member of its Executive
Committee. Mr. Rosamilia graduated from the University of Pennsylvania's
Wharton School of Business in 1966, and has nearly 30 years of investment
experience.
Advisory Fees
Each Fund pays the Adviser an annual advisory fee, payable monthly,
based on its average daily net assets. The fee is equal to 0.75% of the Fund's
average daily net assets for all of the Funds that may invest principally in
equity securities (i.e., the Starwood Strategic Fund, the Aggressive Growth
Fund, the Fiduciary Value Fund and the Asset Allocation Fund). The fee is
equal to 0.50% of the Fund's average daily net assets for all of the Funds
that may invest principally in debt securities (i.e., the Taxable Fixed
Income Fund, the Municipal Fixed Income Fund, the Taxable Money Market Fund
and the Tax-Free Money Market Fund). These fees are similar to those for other
mutual funds with similar investment objectives, but may be higher than fees
paid by other mutual funds with different investment objectives. The Adviser
has agreed to voluntarily waive some or all of its fees, but may terminate this
voluntary waiver with respect to any Fund at any time at its sole discretion.
The Adviser has also undertaken to reimburse each Fund for operating expenses
in excess of limitations established by certain states. During the period
June 2, 1995 (commencement of operations) to September 30, 1995, only the
Taxable Money Market Fund had investment operations. During that period,
the Adviser waived its entire advisory fee.
The Adviser pays each Sub-Adviser an annual fee for its services in
managing the portfolios of certain of the Funds. These fees are paid
directly by the Adviser from its own assets and are not an expense of the
Funds. The Funds themselves pay no fees to the Sub-Advisers. The sub-
advisory fees are payable monthly, with respect to the applicable Fund's
average daily net assets. For the Starwood Strategic Fund and the Fiduciary
Value Fund, the sub-advisory fee is equal to 0.35% of the Fund's net assets
up to $250 million; 0.30% of the next $250 million of net assets; and 0.25%
of net assets in excess of $500 million. For the Taxable Fixed Income Fund
and the Municipal Fixed Income Fund, the sub-advisory fee is equal to 0.30%
of the Fund's net assets up to $500 million; and 0.25% of net assets in
excess of $500 million. For the Taxable Money Market Fund and the Tax-Free
Money Market Fund, the sub-advisory fee is equal to 0.07% of the Fund's net
assets up to $1 billion; and 0.05% of net assets in excess of $1 billion.
Distribution Services
Distributor. Unified Management Corporation (the "Distributor"), 429
North Pennsylvania Street, Indianapolis, Indiana 46024, acts as each Fund's
distributor pursuant to a Distribution Agreement with the Trust. The
distributor is a subsidiary of Unified Holdings, Inc.
Distribution Plan. Under a Distribution Plan adopted with respect to each
Fund pursuant to Rule 12b-1 under the Investment Company Act of 1940, the
Trust pays the Distributor an annual fee, payable monthly, of up to 0.10% of
each Fund's average daily net assets. The Distributor is entitled to retain
all of this distribution fee to reimburse the Distributor for payments made
or expenses incurred for distribution of Fund shares, including those
incurred in connection with preparing and distributing sales literature and
advertising, preparing, printing and distributing prospectuses and statements
of additional information used for other than regulatory purposes or
distribution to existing shareholders, implementing and operating the
Distribution Plan, and compensating third parties for their distribution
services. The Distributor may select financial institutions such as banks,
custodians, investment advisers and broker/dealers to provide sales support
services as agents for their clients or customers.
The Distribution Plan is a compensation-type plan. Therefore, the amounts
payable to the Distributor during any year may be more or less than actual
expenses incurred by the Distributor during such year. No amount payable or
credit due pursuant to the Distribution Plan for any fiscal year may be carried
over for payment or utilized as a credit, as the case may be, beyond the end of
the year, unless authorized by the Trust's Board of Trustees. However, the
Distributor may be able to recover such amounts or may earn a profit from
future payments made by the Trust under the Distribution Plan.
Administration of the Trust
Administrator. Unified Advisers, Inc., 429 North Pennsylvania St.,
Indianapolis, Indiana 46204, serves as the Trust's administrator (the
"Administrator"). Pursuant to a Mutual Fund Services Agreement with the
Trust, the Administrator provides certain administrative personnel and services
(including administration, transfer agency and fund accounting services)
necessary to operate the Funds. For its services, the Administrator receives
an annual fee, payable monthly, from each Fund based on its average daily net
assets. The fee is equal to 0.435% of the Fund's average daily net assets
for all of the Funds, other than the Taxable Money Market Fund and the Tax-Free
Money Market Fund for which the fee is equal to 0.185% of the Fund's average
daily net assets.
Shareholder Services Plan. The Trust has adopted a Shareholder Services
Plan (the "Service Plan") with respect to each Fund, which is administered by
the Administrator. Under the Service Plan, financial institutions, including
brokers, may enter into shareholder service agreements with the Trust to
provide administrative support services to their clients or customers who from
time to time may be owners of record or beneficial owners of the shares of one
or more of the Funds. In return for providing these support services, a
financial institution may receive payments from the Fund at a rate not
exceeding 0.15% of the average daily net assets of the shares beneficially
owned by the financial institution's clients or customers for whom it is
holder of record or with whom it has a servicing relationship. These
administrative services may include, but are not limited to, the provision of
personal services and maintenance of shareholder accounts.
The Glass-Steagall Act limits the ability of a depository institution
(such as a commercial bank or a savings and loan association) to become an
underwriter or distributor of securities. In the event the Glass-Steagall
Act is deemed to prohibit depository institutions from acting in the
capacities described above or should Congress relax current restrictions on
depository institutions, the Board of Trustees will consider appropriate
changes in the services. State securities laws governing the ability of
depository institutions to act as underwriters or distributors of securities
may differ from interpretations given to the Glass-Steagall Act and,
therefore, banks and financial institutions may be required to register as
dealers pursuant to state law.
Other Arrangements. The Adviser, the Distributor or the Administrator may,
from their respective fees, also pay brokers or financial institutions a fee
based upon the net asset value of the Fund shares beneficially owned by the
broker's or financial institution's clients or customers. This fee is in
addition to amounts paid under the Distribution Plan or the Services Plan.
These payments will be made directly by the Adviser, the Distributor or the
Administrator from their own assets, will not be made from the assets of the
Funds and are not an additional expense of the Funds.
From time to time the Distributor will purchase Fund shares on behalf of
its clients and will be entitled to receive 12b-1 fees, shareholder servicing
fees and other administrative fees described herein to the same extent as any
other broker or financial institution.
Transfer Agent, Fund Accounting Agent and Custodian
Unified Advisers, Inc., P.O. Box 6110, Indianapolis, Indiana 46206-6110,
acts as the Trust's transfer agent (the "Transfer Agent") and fund accounting
agent.
Star Bank, N.A., 425 Walnut Street, Cincinnati, Ohio 45201, acts as the
Trust's custodian. General correspondence to the custodian should be
addressed to Star Bank, N.A., P.O. Box 1038, Location 6118, Cincinnati, Ohio
45201. Share purchase orders mailed directly to the custodian (See "How to
Buy Shares -- Subsequent Investments") should be addressed to The Vintage
Funds, [Name of Applicable Fund], P.O. Box 640689, Cincinnati, Ohio
45264-0689.
Portfolio Transactions
The Adviser and Sub-Advisers select the firms that effect brokerage
transactions for their respective Funds, subject to the overall direction and
review of Adviser and the Board of Trustees. The initial criterion that must
be met by the Adviser and Sub-Advisers in selecting brokers and dealers is
whether the firm can obtain the most favorable combination of price and
execution for the transaction. This does not mean that the execution
decision must be based solely on whether the lowest possible commission costs
may be obtained. In seeking the best combination of price and execution, the
Adviser and Sub-Advisers evaluate the execution capability of the firms and
the services they provide, including their general execution capability,
reliability and integrity, willingness to take positions in securities, and
general operational and financial condition.
Subject to this primary objective, the Advisers and Sub-Advisers may select
for brokerage transactions those firms which furnish brokerage and research
services to the Funds, the Adviser or the Sub-Advisers. The Adviser and
Sub-Advisers may also give consideration to firms that have sold Fund shares.
The Board of Trustees has authorized the Funds to pay brokerage commissions
to firms that are affiliated with the Adviser or the Sub-Advisers, subject to
the foregoing criteria.
Expenses
Each Fund pays, except to the extent specifically assumed by others, all
expenses incurred in its operations, and a portion of the Trust's general
administrative expenses are allocated to the Funds either on the basis of their
relative net assets, on the basis of special needs of any Fund, or equally as
is deemed appropriate. The expenses borne by a Fund include: organizational
costs, taxes, interest, brokerage fees and commissions, fees of Trustees,
Securities and Exchange Commission fees, state Blue Sky qualification fees,
advisory and administrative fees, distribution and shareholder servicing fees,
charges of custodians, transfer and dividend disbursing agent's fees, certain
insurance premiums, industry association fees, auditing and legal expenses,
costs attributable to investor services (including, without limitation,
telephone and personnel expenses), costs of calculating the net asset value
of the Fund's shares, costs of shareholders' reports and meetings, costs of
preparing and printing prospectuses and statements of additional information
for regulatory purposes and for distribution to existing shareholders, and any
extraordinary expenses.
"VOICE"
(VISION FOR ON-GOING INVESTMENTS IN CHARITY AND
EDUCATION)
The Adviser has established The Vintage Funds University and Philanthropic
Program (the "Program"), entitled "VOICE" (Vision for On-going Investments
in Charity and Education) pursuant to which the Adviser will make donations
from its own income to certain accredited college or university endowments or
general scholarship funds ("Eligible Institutions") designated by qualified
shareholders. Philanthropic institutions outside of the area of education may
be proposed by qualifying shareholders and may, at the sole discretion of the
Adviser, be accepted for inclusion as an Eligible Institution.
All Vintage Funds shareholders maintaining an average annualized aggregate
net asset value of $25,000 or more over the period of an entire calendar
quarter ("Qualified Shareholders") will be qualified to designate one or more
Eligible Institutions to receive a donation under the Program with respect to
that period. A shareholder making an initial investment of $25,000 or more
in Fund shares may designate one Eligible Institution on the VOICE Program
Application. A shareholder making an initial investment of $1,000,000 or
more (or maintaining that amount for an entire quarterly period) may
designate one additional Eligible Institution for each $l,000,000 invested
(or maintained for such period).
The Adviser will donate, on a quarterly basis, from its own income an
amount equal to 0.25% of the average annualized aggregate net asset value of
the shares owned by the Qualified Shareholder for the preceding quarterly
period, for so long as the average annualized aggregate net asset value of the
shares owned by the Qualified Shareholder remain above $25,000 for such
period. Donations will be made by the Adviser in the name of the Qualified
Shareholder to the Eligible Institution(s) designated by the Qualified
Shareholder. However, while the donation will be made in the Qualified
Shareholder's name, the Qualified Shareholder will not be entitled to any tax
deductions for such donation.
All Qualified Shareholders desiring to change their designated Eligible
Institution(s) may do so twice a year, in January and July. If a Qualified
Shareholder was entitled to designate, and did designate, more than one
Eligible Institution, the amount donated will be allocated according to the
percentages designated on the VOICE Program Application.
Donations will be made by the Adviser from its own income and, therefore,
will have no impact on the expenses or yield of the Funds. There can be no
assurances that the Adviser will have income from which to make donations.
The preceding information is only a summary of the VOICE Program and is
qualified in its entirety by the more complete information available from the
Adviser.
Information about the VOICE Program, including applications to participate
in the Program, may be obtained from the Adviser by calling 1-800-408-4682
(1-800-40-VINTAGE).
TAXES
It is intended that each Fund will qualify as a "regulated investment
company" under the Internal Revenue Code of 1986, as amended (the "Code"),
as long as such qualification is in the best interest of the Fund's
shareholders. Such qualification relieves each Fund of liability for federal
income tax to the extent its earnings are distributed in accordance with the
Code.
A shareholder receiving a distribution of ordinary income and/or an
excess of net short-term capital gain over net long-term capital loss
ordinarily would treat it as a receipt of ordinary income in the computation
of the shareholder's gross income, whether such distribution is received in
cash or reinvested in additional shares. Any distribution of the excess of
net long-term capital gain over net short-term capital loss ordinarily is
taxable to shareholders as long-term capital gain regardless of how long the
shareholder has held shares. Dividends and distributions also may be subject
to state and local taxes.
Shareholders will receive statements as to the tax status of dividends and
distributions annually, as well as periodic account summaries that will include
information as to any dividends and distributions from securities gains paid
during the year. Shareholders should consult their own tax advisers with
questions regarding federal, state or local taxes.
The Municipal and Tax-Free Funds
Shareholders of the Municipal Fixed Income Fund or the Tax-Free Money
Market Fund are not required to pay federal regular income tax on any
dividends received from the Fund that represent net interest on tax-exempt
municipal bonds. However, under the Tax Reform Act of 1986, dividends
representing net interest earned on some municipal bonds may be included
in calculating the federal individual alternative minimum tax or the federal
alternative minimum tax for corporations. The alternative minimum tax,
imposed at a maximum rate of 28% of alternative minimum taxable income for
individuals and other non-corporate taxpayers, and 20% for corporations,
applies when it exceeds the regular tax for the taxable year. Alternative
minimum taxable income is equal to the regular taxable income of the taxpayer
increased by certain "tax preference" items not included in regular taxable
income and reduced by only a portion of the deductions allowed in the
calculation of the regular tax.
The Tax Reform Act of 1986 treats interest on certain "private activity"
bonds issued after August 7, 1986, as a tax preference item for both
individuals and corporations. Unlike traditional governmental purpose
municipal bonds, which finance roads, schools, libraries, prisons and other
public facilities, private activity bonds provide benefits to private
parties. The Municipal Fixed Income Fund and the Tax-Free Money Market Fund
may purchase all types of municipal bonds, including private activity bonds.
Thus, should a Fund purchase any such bonds, a portion of the Fund's
dividends may be treated as a tax preference item.
In addition, in the case of a corporate shareholder, dividends of these
Funds which represent interest on municipal bonds may be subject to the 20%
corporate alternative minimum tax because the dividends are included in a
corporation's "adjusted current earnings." The corporate alternate minimum tax
treats 75% of the excess of a taxpayer's pre-tax "adjusted current earnings"
over the taxpayer's alternative minimum taxable income as a tax preference
item. "Adjusted current earnings" is based upon the concept of a corporation's
"earnings and profits." Since "earnings and profits" generally includes the
full amount of any Fund dividend, and alternative minimum taxable income does
not include the portion of the Fund's dividend attributable to municipal
bonds which are not private activity bonds, the difference will be included
in the calculations of the corporation's alternative minimum tax.
Dividends of the Municipal Fixed Income Fund and the Tax-Free Money
Market Fund representing net interest income earned on some temporary
investments and any realized net short-term gains are taxed as ordinary income.
Backup Withholding
The Trust may be required to withhold federal income tax at a rate of 31%
from dividends and redemption proceeds paid to non-corporate shareholders.
This tax may be withheld from dividends if a shareholder fails to furnish the
Trust with the shareholder's correct taxpayer identification number, the
Internal Revenue Service (the "IRS") notifies the Trust that the shareholder
has failed to report certain income to the IRS, or the shareholder fails to
certify that he or she is not subject to backup withholding when required to
do so. Backup withholding is not an additional tax and the shareholder may
credit any amounts withheld against the shareholder's federal income tax
liability.
PERFORMANCE INFORMATION
From time to time the Trust may publish performance information relative to
the Funds, and may include such information in advertisements, sales literature
or shareholder reports. This information will be based on historical
performance and is not intended to indicate future performance. Additional
information about the performance of the Funds will be contained in the Trust's
annual reports to shareholders which may be obtained without charge by calling
the Trust.
Total return quotations for the Funds (other than the money market Funds)
are expressed in terms of average annual compounded rates of return for the
periods quoted, and will assume that all dividends and distributions were
reinvested in additional shares.
Yield quotations for the Funds (other than the money market Funds) are
based upon a 30-day period ended on a specific date, computed by dividing the
Fund's net investment income per share earned during the period by the Fund's
price per share on the last day of the period. This number is then annualized
using semi-annual compounding.
The Taxable Money Market Fund and the Tax-Free Money Market Fund
may quote their current yields and effective yields. The "yield" of a money
market Fund refers to the income generated by an investment in the Fund over a
seven-day period. This income is then annualized. The amount of income
generated by investments during the week is assumed to be generated each week
over a 52-week period and is shown as a percentage of the investment. The
"effective yield" is calculated similarly but, when annualized, the income
earned by an investment in the Fund is assumed to be reinvested. The
effective yield will be slightly higher than the yield because of the
compounding effect of this assumed reinvestment.
The Municipal Fixed Income Fund and the Tax-Free Money Market Fund
may also quote their "tax-equivalent yield", which is calculated similarly to
the yield, but is adjusted to reflect the taxable yield that the Fund's
shares would have had to earn to equal the actual yield, assuming a specific
tax rate. A Fund's tax-equivalent yield will always be higher than its
taxable yield.
Comparative performance information may be used from time to time in
advertising or marketing information relative to the Funds, including certain
indices or data from Lipper Analytical Services, Inc., Morningstar Mutual Fund
Report and other publications.
GENERAL INFORMATION
The Trust was organized on February 1, 1995 as an Indiana business trust.
The Trust's Declaration of Trust permits the Trust to offer and sell an
unlimited number of full and fractional shares of beneficial interest in each
of the Funds and to create additional Funds. Each Fund of the Trust issues
its own class of shares of beneficial interest. The shares of each Fund
represent an interest only in that Fund's assets (and income) and in the
event of liquidation, each share of a particular Fund would have the same
rights to distributions and assets as every other share of that Fund. Shares
have no preemptive or conversion rights, nor do they have cumulative voting
rights. Each full or fractional share of each Fund has a proportionate vote
on each matter submitted to shareholders of that Fund. All shares of each
Fund have equal voting rights except that in matters affecting only a
particular Fund, only shares of that Fund are entitled to vote.
Under Indiana law, the Trust is not required to hold annual meetings of
shareholders. The Trust will not hold annual meetings except for extraordinary
items requiring shareholder approval under the Investment Company Act of
1940.
Trustees may be removed by the Board of Trustees or by the shareholders at
a special meeting. A special meeting of shareholders shall be called by the
Board of Trustees upon the request of shareholders owning at least 10% of the
outstanding shares of all Funds entitled to vote.
Shareholder inquiries may be made by writing to The Vintage Funds, c/o
Unified Advisers, Inc., P.O. Box 6110, Indianapolis, Indiana 46206-6110, or by
calling 1-800-408-4682 (1-800-40-VINTAGE).
[Begin Back Cover Page]
THE VINTAGE FUNDS
The Starwood Strategic Fund
The Agressive Growth Fund
The Fiduciary Value Fund
The Asset Allocation Fund
The Taxable Fixed Income Fund
The Municipal Fixed Income Fund
The Taxable Money Market Fund
The Tax-Free Money Market Fund
PROSPECTUS
January 29, 1996
TRANSFER AGENT
Unified Advisers, Inc.
429 N. Pennsylvania Street
Indianapolis, Indiana 46204
CUSTODIAN
Star Bank, N.A.
425 Walnut Street
Cincinnati, Ohio 45201
INVESTMENT ADVISER
Vintage Advisers, Inc.
429 N. Pennsylvania Street
Indianapolis, Indiana 46204
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
300 North Meridian, Suite 1700
Indianapolis, Indiana 46204
LEGAL COUNSEL
Baker & Daniels
300 North Meridian, Suite 2700
Indianapolis, Indiana 46204
THE VINTAGE FUNDS
P.O. Box 6110
Indianapolis, Indiana 46206-6110
1-800-40-VINTAGE (1-800-408-4682
<PAGE>
THE VINTAGE FUNDS
PROSPECTUS Prospectus dated January 29, 1996
The Vintage Funds (the "Trust") is an open-end, management investment
company (a mutual fund) having eight separate portfolios, each of which has its
own separate investment objective and policies. Two of the portfolios offered
by the Trust are money markets, The Taxable Money Market Fund and The
Tax-Free Money Market Fund (the "Funds").
The Taxable Money Market Fund seeks a high level of current income
consistent with the preservation of capital and maintenance of liquidity by
investing principally in a diversified portfolio of short-term money market
instruments. The Fund intends to maintain a constant net asset value of $1.00
per share, although there is no assurance that it will be able to do so.
The Tax-Free Money Market Fund seeks a high level of current income that
is exempt from federal income tax consistent with the preservation of capital
and maintenance of liquidity by investing principally in a diversified
portfolio of high quality, short-term municipal securities. The Fund intends
to maintain a constant net asset value of $1.00 per share, although there is
no assurance that it will be able to do so.
The shares offered hereby are not deposits or obligations of any financial
institution and are not insured by the Federal Deposit Insurance Corporation,
the Federal Reserve Board or any other government agency. Investment in the
shares involves investment risks including the possible loss of principal.
There can be no assurance that the Funds will be able to maintain a stable
net asset value of $1.00 per share.
This Prospectus contains information that you should know before
investing in either of the Funds and it should be retained for future
reference. A Statement of Additional Information, dated January 29, 1996 has
been filed with the Securities and Exchange Commission and is incorporated
herein by reference. The Statement of Additional Information is available
upon request and without charge by calling 1-800-408-4682 (1-800-40-VINTAGE).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
SUMMARY OF FUND EXPENSES 3
FINANCIAL HIGHLIGHTS 4
HIGHLIGHTS 6
INVESTMENT OBJECTIVES AND
INVESTMENT RISKS 6
The Taxable Money Market Fund 7
The Tax-Free Money Market Fund 8
Fundamental Investment Limitations 9
CERTAIN INVESTMENTS AND
INVESTMENT TECHNIQUES 10
NET ASSET VALUE 17
HOW TO BUY SHARES 18
Minimum Investment 18
Opening an Account 18
By Mail 18
By Wire 18
Subsequent Investments 19
By Automated Clearing House (ACH) 19
DIVIDENDS AND DISTRIBUTIONS 20
EXCHANGE PRIVILEGE 20
By Telephone 20
By Mail or Telecopy 21
HOW TO REDEEM SHARES 21
By Mail 21
Signatures 21
By Telephone 22
Receiving Payment 22
Check Writing 22
Minimum Account Balance 23
SHAREHOLDER SERVICES 23
THE TRUST AND ITS MANAGEMENT 24
Investment Advisory Arrangements 24
Investment Adviser 24
Sub-Adviser 24
Portfolio Manager's Background 24
Advisory Fees 24
Distribution Services 25
Distributor 25
Distribution Plan 25
Administration of the Trust 25
Administrator 25
Shareholder Services Plan 25
Other Arrangements 26
Transfer Agent, Fund Accounting Agent
and Custodian 26
Portfolio Transactions 26
Expenses 27
THE "V.O.I.C.E. " PROGRAM 27
TAXES 28
The Tax-Free Fund 29
Backup Withholding 29
PERFORMANCE INFORMATION 29
GENERAL INFORMATION 30
<PAGE>
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus and in the Funds'
official sales literature in connection with the offer of the Funds' shares,
and, if given or made, such other information or representation must not be
relied upon as having been authorized by the Funds. This Prospectus does not
constitute an offer in any State in which, or to any person to whom, such
offering may not lawfully be made.
SUMMARY OF FUND EXPENSES
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price). . . . . . . . . . . . . . . . . . . None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price). . . . . . . . . . . . . . . . . . . None
Deferred Sales Load (as a percentage of original purchase price or
redemption proceeds, as applicable). . . . . . . . . . . . . . . . . . . None
Redemption Fee (as a percentage of amount redeemed, if applicable) . . . None
Exchange Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None
Annual Fund Operating Expenses *
(As a percentage of projected average net assets)
Management 12b-1 Servicing Other (1) Total (2)
Fund Name Fees Fees Fees Expenses Expenses
Taxable Money 0.50% 0.10% 0.15% 0.25% 1.00%
Market
Tax-Free Money 0.50% 0.10% 0.15% 0.25% 1.00%
Market
(1) The Adviser has voluntarily agreed to waive its management fees
to the extent necessary to cause the Other Expenses of each Fund to be as
indicated. Although the Adviser has no current intention to abandon this
voluntary arrangement, the Adviser may terminate the arrangement at any time
at its sole discretion. Absent the voluntary fee waiver arrangement, Other
Expenses are not expected to exceed 0.50%.
(2) Absent the voluntary fee waiver arrangement, Total Expenses are not
expected to exceed 1.25%.
* The Funds commenced operations on June 2, 1995 and only the Taxable
Money Market Fund had investment operations during the period ended
September 30, 1995. Thus, the expenses in the table are estimated based
on average expenses expected to be incurred during the year ending
September 30, 1996. During the course of this period, expenses may be
more or less than the average amounts shown.
Initial investments of less than the required minimum by persons exempt
from the minimum investment requirement are subject to a one-time $4.50
administrative charge. See "How to Buy Shares." Wire-transferred
redemptions are subject to a $15.00 charge and certain checking transactions
may be subject to additional charges. See "How to Redeem Shares".
The purpose of this table is to assist the investor in understanding the
various costs and expenses that a shareholder of a Fund will bear, either
directly or indirectly. Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales charge permitted under the rules of
the National Association of Securities Dealers, Inc. For a further
description of the various costs and expenses incurred by the Funds, see "The
Trust and its Management."
Example:
An investor would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of each time
period:
Fund Name 1 Year 3 Years
Taxable Money Market Fund 10.00 31.19
Tax-Free Money Market Fund 10.00 31.19
The amounts listed in the example should not be considered as
representative of future expenses and actual expenses may be greater or less
than those indicated. Moreover, while the example assumes a 5% annual
return, a Fund's performance will vary and may result in an actual return
greater or less than 5%.
The Funds may invest incidentally in other mutual funds. To the extent
that a Fund invests in other mutual funds, the Fund will indirectly bear its
proportionate share of any fees and expenses paid by such other funds, in
addition to the fees and expenses payable directly by the Fund. Therefore, to
the extent that the Fund invests in other mutual funds, the Fund will incur
higher expenses, many of which may be duplicative. These expenses will be
borne by the Fund, and are not included in the expenses reflected in the
table or example above. See " Certain Investments and Investment Techniques --
Investments in Other Mutual Funds."
FINANCIAL HIGHLIGHTS
The following schedule of per share data and ratios for the period
from June 2, 1995 through September 30, 1995 has been audited by Price
Waterhouse LLP, independent accountants, whose report thereon is included in
the 1995 Annual Report to Shareholders which is incorporated by reference in
the Statement of Additional Information. During this period, only the Taxable
Money market fund had investment operations. Therefore, the schedules for
the Tax-Free Money Market Fund is not meaningful and has been omitted. This
schedule should be read in conjunction with the other financial statements
and notes thereto included in the Annual Report, which is available without
charge by calling the Funds at 1-800-408-4682.
FINANCIAL HIGHLIGHTS
Period June 2, 1995 through September 30, 1995
Taxable Money
Market Fund
Per Share Operating Performance
Net Asset Value, $1.00
Beginning of Period
Income From
Investment Operations:
Net Investment income 0.002
Total from investment income 0.002
Less Distributions:
Dividends from
net investment income (0.002)
Total from distributions (0.002)
Net Asset Value, End of Period $1.00
Total Return 0.20%
Ratios/Supplemental Data
Net assets, end of period $1,230,385
Ratio of net expenses (after
reimbursement) to average net assets 0.47%
Ratio of net investment income
to average net assets 0.65%
HIGHLIGHTS
Investment Objectives and Investment Risks
An investment in the Funds involves investment risks including the
possible loss of principal. These risks depend upon many factors including,
among others, the Fund's investment objective, the credit quality of the
securities held and interest rate movements. There is no assurance that either
Fund will be able to maintain a stable net asset value of $1.00 per share. See
"Investment Objectives and Policies" and "Certain Investments and
Investment Techniques."
Liquidity
Each Fund continuously offers and redeems its shares at a constant net
asset value of $1.00 per share. See "How to Buy Shares," "How to Redeem
Shares" and "Net Asset Value."
No Sales or Redemption Charges
There are no commissions, fees or charges by the Trust for the purchase
or redemption of shares. Initial investments below the stated minimum,
wire-transferred redemptions and certain checking transactions may be subject
to additional charges. See "Summary of Fund Expenses," "How to Buy Shares"
and "How to Redeem Shares."
Minimum Investment
A minimum investment of $1,000 is required to open an account, except
an IRA account for which the minimum is $500. Former shareholders of the
Unified family of funds, or the Quest funds which acquired the Unified family
of funds, may open an account with less than the required minimum. However,
they are subject to a one-time $4.50 administrative charge to establish the
account. Subsequent investments must be at least $100, or $50 for an IRA.
See "How to Buy Shares."
Investment Advisers
Vintage Advisers, Inc. is the Funds' investment adviser (the "Adviser").
The Adviser has engaged Fiduciary Counsel, Inc. to serve as sub-adviser. The
sub-adviser manages the investment portfolios of the Funds, subject to the
Adviser's overall management. See "The Trust and its Management."
Retirement Plans and Other Shareholder Services
The Trust offers retirement plans including a prototype Profit Sharing
Plan, Money Purchase Pension Plan, Salary Savings Plan - 401(k) and IRA
accounts, as well as a number of special shareholder services. For
information regarding these plans or services, call the Transfer Agent at
1-800-408-4682. See "Shareholder Services."
The "V.O.I.C.E. " Program
(Vision For On-Going Investments In Charity and Education)
The Adviser administers The Vintage Funds University and Philanthropic
Program pursuant to which the Adviser will make contributions to the general
scholarship funds or endowments of certain accredited colleges and universities
designated by qualified shareholders of any of the Funds. For information
regarding this Program, call the Adviser at 1-800-408-4682. Also see "The
V.O.I.C.E. Program" below.
INVESTMENT OBJECTIVES AND POLICIES
The Funds' investment objectives cannot be changed without shareholder
approval. While there is no assurance that either Fund will achieve its
investment objective, it endeavors to do so by following the investment
policies described in this Prospectus. Unless otherwise indicated, the
Funds' investment policies may be changed by the Trust's Board of Trustees
without shareholder approval. Shareholders will be notified before any
material change in investment policies becomes effective.
The following sections are concise descriptions of the Funds and their
investment objectives and policies. More information about certain types of
investments and investment techniques is provided below under "Certain
Investments and Investment Techniques" and in the Statement of Additional
Information.
The Taxable Money Market Fund
The Taxable Money Market Fund seeks a high level of current income
consistent with the preservation of capital and maintenance of liquidity. The
Fund pursues this objective by investing principally in a diversified
portfolio of high quality, short-term money market instruments.
The Fund's investments are selected by its sub-adviser, Fiduciary Counsel,
Inc. These investments principally include:
direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes and bonds;
notes, bonds, and discount notes of U.S. government agencies or
instrumentalities;
short-term corporate debt instruments (including commercial paper and
variable rate demand notes) which mature in 270 days or less;
domestic and foreign issues of corporate debt obligations having
floating or fixed rates of interest and having remaining maturities of
less than 13 months;
time deposits (including savings deposits and certificates of deposit)
and bankers acceptances in commercial banks or savings associations
whose accounts are insured by the Federal Deposit Insurance
Corporation (the "FDIC"), including certificates of deposit issued by
and other time deposits in foreign branches of FDIC insured financial
institutions or who have at least $100 million in capital
(collectively, "domestic bank instruments");
other short-term investments of a type which the adviser determines
presents minimal credit risks and which are of "high quality" as
determined by a nationally recognized statistical rating organization,
or, in the case of an instrument that is not rated, of comparable
quality in the judgment of the adviser; and
repurchase agreements collateralized by eligible investments.
The Fund may invest only in securities that, at the time of purchase, have
a remaining maturity of less than 13 months and that are "eligible
securities" as defined by regulations of the Securities and Exchange
Commission. "Eligible securities" generally include securities rated in one
of the two highest categories by at least two nationally recognized
statistical rating organizations (or by one such rating agency if only one
has issued a rating) or, if unrated, are determined to be of comparable
quality by Fiduciary Counsel pursuant to policies approved by the Board of
Trustees. If the Fund purchases an eligible security and its rating is
subsequently downgraded so that the security is no longer of high quality,
the Fund will consider and take appropriate action, which may include
divesting the security. The Fund will maintain a dollar-weighted average
portfolio maturity of 90 days or less.
The Tax-Free Money Market Fund
The Tax-Free Money Market Fund seeks a high level of current income that
is exempt from federal income tax consistent with the preservation of capital
and maintenance of liquidity. The Fund pursues this objective by investing
principally in a diversified portfolio of high quality, short-term municipal
securities
The Fund invests principally in high quality, short-term municipal
securities, the interest from which is exempt from federal income tax.
Municipal securities are debt obligations issued by or on behalf of states,
territories and possessions of the United States, including the District
of Columbia, and their political subdivisions, agencies and
instrumentalities, the interest from which is exempt from federal regular
income tax. They are described in more detail below under "Certain
Investments and Investment Techniques" and in the Statement of Additional
Information. The Fund may invest up to 25% of its assets in securities of
issuers located in the same state.
As a matter of investment policy, which may not be changed without
shareholder approval, under normal circumstances, the Fund will be invested so
that at least 80% of the income from investments will be exempt from federal
income tax or that at least 80% of its net assets are invested in
obligations, the interest from which is exempt from federal income tax.
Interest income that is exempt from federal income tax retains its federal
tax-free status when distributed to the Fund's shareholders. As described
below under "Taxes," income from certain types of municipal securities may be
subject to the federal alternative minimum tax. To the extent that the Fund
invests in these securities, a shareholder, depending on the shareholder's
own tax status, may be subject to alternative minimum tax on that part of the
Fund's distributions derived from these securities. However, the Fund will
limit its investments in these securities so that no more than 20% of its
income will be subject to the alternative minimum tax.
From time to time, during periods of other than normal market conditions,
the Fund may invest in instruments that may or may not be exempt from federal
income tax. Although the Fund is permitted to make taxable, temporary
investments, there is no current intention of generating income subject to
federal regular income tax.
The Fund may invest only in securities that, at the time of purchase, have
a remaining maturity of less than 13 months and that are "eligible
securities" as defined by regulations of the Securities and Exchange
Commission. "Eligible securities" generally include securities rated in one
of the two highest rating categories by at least two nationally recognized
statistical rating organizations (or by one such rating agency if only one
has issued a rating) or, if unrated, determined to be of comparable quality
by the Fund's sub-adviser, Fiduciary Counsel, Inc., pursuant to policies
approved by the Board of Trustees. If the Fund purchases an eligible
security and its rating is subsequently downgraded so that the security is no
longer of high quality, the Fund will consider and take appropriate action,
which may include divesting the security. The Fund will maintain a dollar-
weighted average portfolio maturity of 90 days or less.
Fundamental Investment Limitations
The following investment limitations cannot be changed without shareholder
approval. These limitations are considered at the time of purchase; a sale of
securities is not required in the event of a subsequent change in circumstances.
None of the Funds will:
borrow money or pledge securities except that, for temporary or emergency
purposes, each Fund may borrow up to one-third of the value of total assets
(including the amount borrowed) and pledge up to 15% of the value of those
assets to secure such borrowings;
lend any of its assets, except portfolio securities up to one-third of
the value of its total assets. This shall not prevent a Fund from
purchasing or holding U.S. government obligations, money market
instruments, variable rate demand notes, bonds, debentures, notes,
certificates of indebtedness, or other debt securities, entering into
repurchase agreements, or engaging in other transactions where permitted
by the Fund's investment objective, policies and limitations;
with respect 75% of the value of its total assets (100% in the case of the
Taxable Money Market Fund), invest more than 5% of the value of its total
assets in the securities (other than securities issued or guaranteed by the
government of the United States or its agencies or instrumentalities,
repurchase agreements collateralized by U.S. government securities and
securities of other investment companies) of any one issuer or acquire
more than 10% of the outstanding voting securities of any one issuer;
invest 25% or more of the value of its total assets in any one industry
or in government securities of any one foreign country, except that each
Fund may invest without limitation in securities issued or guaranteed by
the U.S. government, its agencies or instrumentalities or in domestic
bank instruments;
invest in more than 3% of the total outstanding voting securities of any
one investment company or invest more than 5% of its total assets in any
one investment company, or invest more than 10% of its total assets in
investment companies in general. The foregoing limitations are not
applicable to investment company securities acquired as part of a merger,
consolidation, reorganization and other acquisition.
CERTAIN INVESTMENTS AND INVESTMENT TECHNIQUES
This Section describes certain types of investments, investment techniques
and investment policies and limitations of the Funds. For further information,
see the Statement of Additional Information.
Fixed Rate Corporate Debt Obligations
Both of the Funds may invest in fixed rate corporate debt obligations.
Fixed rate securities tend to exhibit more price volatility during times of
rising or falling interest rates than securities with floating rates of
interest. This is because floating rate securities, as described below,
behave like short-term instruments in that the rate of interest they pay is
subject to periodic adjustments based on a designated interest rate index.
Fixed rate securities pay a fixed rate of interest and are more sensitive to
fluctuating interest rates. In periods of rising interest rates the value of
a fixed rate security is likely to fall. Fixed rate securities with short-
term characteristics are not subject to the same price volatility as fixed
rate securities without such characteristics. Therefore, they behave more
like floating rate securities with respect to price volatility.
Many corporate debt obligations permit the issuers to call the security and
thereby redeem their obligations earlier than the stated maturity dates.
Issuers are more likely to call bonds during periods of declining interest
rates. In these cases, if a Fund owns a bond which is called, the Fund will
receive its return of principal earlier than expected and would likely be
required to reinvest the proceeds at lower interest rates, thus reducing
income to the Fund.
Other Corporate Debt Obligations
The Funds may also invest in other corporate debt obligations, including
those described below.
Floating Rate Obligations. Floating rate securities are generally
offered at an initial interest rate which is at or above prevailing market
rates. The interest rate paid on these securities is then reset periodically
(commonly every 90 days) to an increment over some predetermined interest
rate index. Commonly utilized indices include the three-month Treasury bill
rate, the 180-day Treasury bill rate, the one-month or three-month London
Interbank Offered Rate (LIBOR), the prime rate of a bank, the commercial
paper rates, or the longer-term rates on U.S. Treasury securities.
Variable Rate Demand Notes. Variable rate demand notes are long-term
corporate debt instruments that have variable or floating interest rates and
provide the Fund with the right to tender the security for repurchase at its
stated principal amount plus accrued interest. Such securities typically bear
interest at a rate that is intended to cause the securities to trade at par.
The interest rate may float or be adjusted at regular intervals (ranging from
daily to annually), and is normally based on an interest index or a stated
percentage of a prime rate or another published rate. Many variable rate
demand notes allow the Fund to demand the repurchase of the security on not
more than seven days prior notice. Other notes only permit the Fund to
tender the security at the time of each interest rate adjustment or at other
fixed intervals.
Zero Coupon Securities. Corporate zero coupon securities are:
(i) notes or debentures which do not pay current interest and are issued at
substantial discounts from par value, or (ii) notes or debentures that pay no
current interest until a stated date one or more years into the future, after
which the issuer is obligated to pay interest until maturity, usually at a
higher rate than if interest were payable from the date of issuance.
Asset-Backed Securities
The Funds may invest in mortgage-related asset-backed securities that are
considered U.S. government securities. Asset-backed securities are created by
the grouping of certain governmental, government related and private loans,
receivables and other lender assets into pools. Interests in these pools are
sold as individual securities. Payments from the asset pools may be divided
into several different tranches of debt securities, with some tranches
entitled to receive regular installments of principal and interest, other
tranches entitled to receive regular installments of interest, with principal
payable at maturity or upon specified call dates, and other tranches only
entitled to receive payments of principal and accrued interest at maturity or
upon specified call dates. Different tranches of securities will bear
different interest rates, which may be fixed or floating.
Because the loans held in the asset pool often may be prepaid without
penalty or premium, asset-backed securities can be subject to higher
prepayment risks than most other types of debt instruments. Prepayments may
result in a capital loss to the Fund to the extent that the prepaid mortgage
securities were purchased at a market premium over their stated amount.
Conversely, the prepayment of mortgage securities purchased at a market
discount from their stated principal amount will accelerate the recognition
of interest income by the Fund, which would be taxed as ordinary income when
distributed to the shareholders.
The credit characteristics of asset-backed securities also differ in a
number of respects from those of traditional debt securities. The credit
quality of most asset-backed securities depends primarily upon the credit
quality of the assets underlying such securities, how well the entity issuing
the securities is insulated from the credit risk of the originator or any
other affiliated entities, and the amount and quality of any credit
enhancement to such securities.
Foreign Securities
Each Fund may invest in foreign securities, including foreign securities
not publicly traded in the United States. Each of the Funds may invest up
to 25% of its total assets in foreign securities. The percentage of a Fund's
assets that will be allocated to foreign securities will vary depending on the
relative yields of foreign and U.S. securities, the economies of foreign
countries, the condition of such countries' financial markets, the interest
rate climate of such countries and the relationship of such countries'
currency to the U.S. dollar. These factors are judged on the basis of
fundamental economic criteria (e.g., relative inflation levels and trends,
growth rate forecasts, balance of payments status, and economic policies) as
well as technical and political data.
Investments in foreign securities involve special risks that differ from
those associated with investments in domestic securities. The risks
associated with investments in foreign securities apply to securities issued
by foreign corporations and sovereign governments. These risks relate to
political and economic developments abroad, as well as those that result from
the differences between the regulation of domestic securities and issuers and
foreign securities and issuers. These risks may include, but are not limited
to, expropriation and nationalization, confiscatory taxation, reduced levels of
government regulation of securities markets, currency fluctuations
and restrictions on, and costs associated with, the exchange of currencies,
withholding taxes on interest, limitations on the use or transfer of assets,
political or social instability and adverse diplomatic developments. It may
also be more difficult to enforce contractual obligations or obtain court
judgments abroad than would be the case in the United States because of
differences in the legal systems. If the issuer of the debt or the
governmental authorities that control the repayment of the debt may be unable
or unwilling to repay principal or interest when due in accordance with the
terms of such debt, the Fund may have limited legal recourse in the event of
a default. Moreover, individual foreign economies may differ favorably or
unfavorably from the domestic economy in such respects as growth of gross
national product, the rate of inflation, capital reinvestment, resource self-
sufficiency and balance of payments position.
Additional differences exist between investing in foreign and domestic
securities. Examples of such differences include: less publicly available
information about foreign issuers; credit risks associated with certain foreign
governments; the lack of uniform financial accounting standards applicable to
foreign issuers; less readily available market quotations on foreign issues;
the likelihood that securities of foreign issuers may be less liquid or more
volatile; generally higher foreign brokerage commissions; and unreliable mail
service between countries.
To the extent that debt securities purchased by a Fund are denominated in
currencies other than the U.S. dollar, changes in foreign currency exchange
rates will affect the Fund's net asset value; the value of interest earned;
gains and losses realized on the sale of securities; and net investment
income and capital gain, if any, to be distributed to shareholders by the
Fund. If the value of a foreign currency rises against the U.S. dollar, the
value of the Fund's assets denominated in that currency will increase;
correspondingly, if the value of a foreign currency declines against the U.S.
dollar, the value of the Fund's assets denominated in the currency will
decrease.
Foreign Currency Transactions. The Funds may enter into foreign currency
transactions to obtain the necessary currencies to settle securities
transactions. Currency transactions may be conducted either on a spot or
cash basis at prevailing rates or through forward foreign currency exchange
contracts.
The Funds may also enter into foreign currency transactions to protect Fund
assets against adverse changes in foreign currency exchange rates or exchange
control regulations. Such changes could unfavorably affect the value of Fund
assets which are denominated in foreign currencies, such as foreign
securities or funds deposited in foreign banks, as measured in U.S. dollars.
Although foreign currency transactions may be used by the Fund to protect
against a decline in the value of one or more currencies, such efforts may
also limit any potential gain that might result from a relative increase in
the value of such currencies and might, in certain cases, result in losses to
the Fund.
Municipal Securities
The Tax-Free Money Market Fund may invest in short-term municipal
securities that qualify as money market instruments.
Municipal securities are generally issued to finance public works, such as
airports, bridges, highways, housing, hospitals, mass transportation projects,
schools, streets, and water and sewer works. They are also issued to repay
outstanding obligations, to raise funds for general operating expenses, and to
make loans to other public institutions and facilities.
The two principal classifications of municipal securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the payment
of principal and interest. Interest on and principal of revenue bonds,
however, are payable only from the revenue generated by the facility financed
by the bond or other specified sources of revenue. Revenue bonds do not
represent a pledge of credit or create any debt of or charge against the
general revenues of a municipality or public authority.
Municipal securities may carry fixed or floating rates of interest. Most
municipal securities pay interest in arrears on a semiannual or more frequent
basis. However, certain securities, typically known as capital appreciation
bonds or zero coupon bonds, do not provide for any interest payments prior to
maturity. Such securities are normally sold at a discount from their stated
value, or provide for periodic increases in their stated value to reflect a
compounded interest rate. The market value of these securities is also more
sensitive to changes in market interest rates than securities that provide for
current interest payments.
Participation Interests. The Funds may purchase participation interests
from financial institutions such as commercial banks, savings and loan
associations and insurance companies. These participation interests give the
Fund an undivided interest in one or more underlying municipal securities.
The financial institutions from which the Fund purchases participation
interests frequently provide or obtain irrevocable letters of credit or
guarantees to attempt to assure that the participation interests are of high
quality. These typically give the Fund the right to demand payment of the
principal amounts of the participation interests plus accrued interest on
short notice (usually within seven days).
Municipal Leases. Municipal leases are obligations issued by state and
local governments or authorities to finance the acquisition of equipment and
facilities. They may take the form of a lease, an installment purchase
contract, a conditional sales contract or a participation certificate of any
of the above.
Industrial Development Bonds. Industrial development bonds are issued by
or on behalf of public authorities to provide financing aid to acquire sites or
construct and equip facilities for privately or publicly owned corporations.
The availability of this financing encourages these corporations to locate
within the sponsoring communities and thereby increases local employment.
Industrial development bonds do not represent a pledge of credit or create
any debt of municipality or a public authority, and no taxes may be levied
for payment of principal or interest on these bonds. The principal and
interest is payable solely out of monies generated by the entities using or
purchasing the sites or facilities. These bonds will be considered municipal
securities if the interest paid on them, in the opinion of bond counsel, is
exempt from federal regular income tax.
Municipal Notes. Municipal securities in the form of notes generally are
used to provide for short-term capital needs, in anticipation of an issuer's
receipt of other revenues or financing, and typically have maturities of up
to three years. Such instruments may include Tax Anticipation Notes, Revenue
Anticipation Notes, Bond Anticipation Notes, Tax and Revenue Anticipation
Notes and Construction Loan Notes. The obligations of an issuer of municipal
notes are generally secured by the anticipated revenues from taxes, grants or
bond financing. An investment in such instruments, however, presents a risk
that the anticipated revenues will not be received or that such revenues will
be insufficient to satisfy the issuer's payment obligations under the notes or
that refinancing will be otherwise unavailable.
Tax-Exempt Commercial Paper. Issues of commercial paper typically
represent short-term, unsecured, negotiable promissory notes. These
obligations are issued by state and local governments and their agencies to
finance working capital needs of municipalities or to provide interim
construction financing and are paid from general revenues of municipalities
or are refinanced with long-term debt. In most cases, tax-exempt commercial
paper is backed by letters of credit, lending agreements, note repurchase
agreements or other credit facility agreements offered by banks or other
institutions.
Zero Coupon and Capital Appreciation Bonds. Zero coupon and capital
appreciation bonds are debt securities issued or sold at a discount from their
face value and which do not entitle the holder to any periodic payment of
interest prior to maturity or a specified redemption date (or cash payment
date). The amount of the discount varies depending on the time remaining
until maturity or cash payment date, prevailing interest rates, the liquidity
of the security and the perceived credit quality of the issuer. These
securities also may take the form of debt securities that have been stripped
of their unmatured interest coupons, the coupons themselves or receipts or
certificates representing interest in such stripped debt obligations or
coupons. Discount with respect to stripped tax-exempt securities or their
coupons may be taxable. The market prices of capital appreciation bonds
generally are more volatile than the market prices of interest bearing
securities and are likely to respond to a greater degree to changes in
interest rates than interest bearing securities having similar maturities and
credit quality.
U.S. Government Securities
Each of the Funds may invest in U.S. government securities. These
securities are either issued or guaranteed by the U.S. government, its
agencies or instrumentalities. The government securities in which the Fund
may invest are backed in a variety of ways by the U.S. government or its
agencies or instrumentalities. Some of these securities, such as Government
National Mortgage Association ("GNMA") mortgage-backed securities, are
backed by the full faith and credit of the U.S. government. Other securities,
such as obligations of the Federal National Mortgage Association ("FNMA") or
Federal Home Loan Mortgage Corporation ("FHLMC"), are backed by the
credit of the agency or instrumentality issuing the obligations but not the
full faith and credit of the U.S. government. No assurances can be given
that the U.S. government will provide financial support to these other
agencies or instrumentalities, because it is not obligated to do so.
Bank Instruments
Each of the Funds may invest in bank instruments of the types described
under "The Taxable Money Market Fund". These instruments may include
Eurodollar Certificates of Deposit ("ECDs"), Yankee Certificates of Deposit
("Yankee CDs") and Eurodollar Time Deposits ("ETDs"). The banks issuing
these instruments are not necessarily subject to the same regulatory
requirements that apply to domestic banks, such as reserve requirements,
loan requirements, loan limitations, examinations, accounting, auditing, and
record keeping and the public availability of information.
Investments in Other Mutual Funds
Each of the Funds may invest to some extent in the securities of other
open-end registered investment companies ("mutual funds"). Each of the
Funds intends to invest incidentally in other mutual funds and may not invest
more than 5% of its total assets in any one mutual fund, or more than 10% of
its total assets in mutual funds in general. The Funds, considered together
with the other funds of the trust, may not invest in more than 3% of the total
outstanding voting securities of any one mutual fund. The foregoing
limitations are not applicable to investment company securities acquired as
part of a merger, consolidation, reorganization or other acquisition.
The Funds will invest only in other mutual funds that do not impose up-
front sales loads or deferred sales loads or redemption fees. However, the
Funds may invest in funds that have 12b-1 plans or shareholder services plans
which permit the funds to pay certain distribution and other expenses from
fund assets. To the extent that a Fund invests in other mutual funds, the
Fund will indirectly bear its proportionate share of any fees and expenses
paid by such funds in addition to the fees and expenses payable directly by
the Fund. Therefore, to the extent that a Fund invests in other mutual
funds, the Fund will incur higher expenses, many of which may be duplicative.
In addition, to the extent that a Fund invests in other mutual funds, the
Fund's shareholders may receive capital gains distributions to a greater
extent that if the shareholder owned the underlying mutual funds directly.
Furthermore, although each Fund will invest only in other mutual funds that
have an investment objective similar to the Fund's, or that otherwise is a
permitted investment under the Fund's investment policies described herein, the
mutual funds purchased by the Funds likely will have certain investment
policies, and use certain investment practices that are different from those
of the Funds and not described herein. These other policies and practices
may subject the other funds' assets to varying or greater degrees of risk.
The Funds are independent from any of the other mutual funds in which they
invest and have little voice in or control over the investment practices,
policies or decisions of those funds. If a Fund disagrees with those
practices, policies or decisions, it may have no choice other than to
liquidate its investment in that fund, which can entail further losses.
However, a mutual fund is not required to redeem any of its shares owned by
another mutual fund in an amount exceeding 1% of the underlying fund's shares
during any period of less than 30 days. As a result, to the extent that a
Fund owns more than 1% of another mutual fund's shares, the Fund may not be
able to liquidate those shares in the event of adverse market conditions or
other considerations.
Also, the investment advisers of the mutual funds in which a Fund invests
may simultaneously pursue inconsistent or contradictory courses of action. For
example, one fund may be purchasing securities of the same issuer whose
securities are being sold by another fund, with the result that the Fund would
incur an indirect expense without any corresponding investment or
economic benefit.
When a Fund invests in another mutual fund, the Fund will have the right to
vote on matters submitted to a vote of the other fund's shareholders. As
required by the Investment Company Act of 1940, on all matters submitted to a
vote of the other fund's shareholders, the Fund will vote all of its shares
in that fund in the same proportion as the vote of all other shareholders of
that fund.
Credit Facilities
Each of the Funds may invest in demand notes and revolving credit
facilities that qualify as money market instruments. Demand notes are
borrowing arrangements between a corporation and an institutional lender
(such as the Fund) payable upon demand by either party. The notice period
for demand typically ranges from one to seven days, and the party may demand
full or partial payment. Revolving credit facilities are borrowing
arrangements in which the lender agrees to make loans up to a maximum amount
upon demand by the borrower during a specified term. As the borrower repays
the loan, an amount equal to the repayment may be borrowed again during the
term of the facility. The Fund generally acquires a participation interest in
a revolving credit facility from a bank or other financial institution. The
terms of the participation require the Fund to make a pro rata share of all
loans extended to the borrower and entitles the Fund to a pro rata share of
all payments made by the borrower. Demand notes and revolving facilities
usually provide for floating or variable rates of interest. These
instruments are subject to the considerations described above with regard to
foreign securities.
Repurchase Agreements
Each of the Funds may invest in repurchase agreements related to eligible
securities. Repurchase agreements are arrangements in which banks,
broker/dealers, and other recognized financial institutions sell U.S.
government securities or other securities to the Fund and agree at the time
of sale to repurchase them at a mutually agreed upon time and price. Under
the Investment Company Act of 1940, a repurchase agreement is deemed to be
a loan collateralized by the underlying securities. To the extent that the
original seller does not repurchase the securities from the Fund, the Fund
could receive less than the repurchase price on any sale of such securities.
Reverse Repurchase Agreements
The Funds may also enter into reverse repurchase agreements. A reverse
repurchase transaction is similar to borrowing cash. In a reverse repurchase
agreement a Fund transfers possession of a portfolio instrument to another
person, such as a financial institution, broker, or dealer, in return for a
percentage of the instrument's market value in cash, and agrees that on a
stipulated date in the future, the Fund will repurchase the portfolio
instrument by remitting the original consideration plus interest at an agreed
upon rate. The use of reverse repurchase agreements may enable the Fund to
avoid selling portfolio instruments at a time when a sale may be deemed to be
disadvantageous, but the ability to enter into reverse repurchase agreements
does not ensure that the Fund will be able to avoid selling portfolio
instruments at a disadvantageous time.
Lending of Portfolio Securities
In order to generate additional income, each Fund may lend portfolio
securities on a short-term or a long-term basis up to one-third of the value
of its total assets to broker/dealers, banks, or other institutional
borrowers of securities. A Fund will only enter into loan arrangements with
broker/dealers, banks, or other institutions which its investment adviser has
determined are creditworthy under guidelines established by the Board of
Trustees. In these loan arrangements, the Fund will receive collateral in
the form of cash or U.S. government securities equal to at least 100% of the
value of the securities loaned. The Fund continues to be entitled to
payments in amounts equal to the interest, dividends and other distributions
on the loaned security and receives interest on the amount of the loan.
When-Issued and Delayed Delivery Transactions
The Funds may purchase securities on a when-issued or delayed delivery
basis. These transactions are arrangements in which a Fund purchases
securities with payment and delivery scheduled for a future time. Prior to
such delivery, no income on the securities accrues to the Fund. In when-
issued and delayed delivery transactions, the Fund relies on the seller to
complete the transaction. The seller's failure to complete the transaction
may cause the Fund to miss a price or yield considered to be advantageous.
Demand Features
The Funds may acquire securities that are subject to puts and standby
commitments ("demand features") to purchase the securities at their principal
amount (usually with accrued interest) within a fixed period following a demand
by the Fund. The demand feature may be issued by the issuer of the underlying
securities, a dealer in the securities or by another third party, and may not
be transferred separately from the underlying security. The Fund uses these
arrangements to provide the Fund with liquidity and not to protect against
changes in the market value of the underlying securities. The bankruptcy,
receivership or default by the issuer of the demand feature, or a default on
the underlying security or other event that terminates the demand feature
before its exercise, will adversely affect the liquidity of the underlying
security. Demand features that are exercisable even after a payment default
on the underlying security are treated as a form of credit enhancement.
Restricted and Illiquid Securities
The Funds may invest in restricted securities. Restricted securities are
any securities in which a Fund may otherwise invest pursuant to its investment
objective and policies, but which are subject to restriction on resale under
federal securities law. Each Fund will limit investments in illiquid
securities, including certain restricted securities not determined by the
Board of Trustees to be liquid, non-negotiable time deposits, and repurchase
agreements providing for settlement in more than seven days after notice, to
10% of the value of its net assets.
NET ASSET VALUE
Net asset value per share (the price at which shares are purchased and
redeemed) is determined as of the close of regular trading on the New York
Stock Exchange (currently 4:00 p.m., Eastern time), on each business day the
Exchange is open for business. Each fund's portfolio securities are valued
utilizing the amortized cost method of valuation, which normally approximates
market value, and which is intended to result in a constant net asset value of
$1.00 per share. Although every effort is made to maintain the net asset value
of the Funds at $1.00 per share, there can be no assurance that this constant
net asset value will be maintained at all times. For example, in the event
of rapid and sharp increases in current interest rates, a national credit
crisis, or a default by one or more of the issuers of a Fund's portfolio
securities, then it is possible that a Fund's net asset value could decline
below $1.00 per share.
HOW TO BUY SHARES
Shares of the Funds are sold each day the New York Stock Exchange is open
at the applicable Fund's net asset value per share next calculated after
receipt of the purchase order in proper form. The Trust reserves the right
to reject any purchase request.
Minimum Investment
The minimum initial investment in each Fund is $l,000, except an IRA
for which the minimum initial investment is $500. Former shareholders of the
Unified family of funds, or the Quest funds which acquired the Unified family
of funds, may open an account with less than the required minimum. However,
they are subject to a one-time $4.50 administrative charge to establish the
account. Subsequent investments may be made in amounts of at least $100,
except for an IRA, which must be in amounts of at least $50. Minimum
investments for certain other types of retirement accounts may be different.
See "Shareholder Services."
Opening An Account
An account may be opened by mail or bank wire, as follows:
By Mail. To open a new account by mail:
Complete and sign the account application. (Be sure to specify the name
of the Fund(s) in which an investment is made.)
Enclose a check payable to each Fund specified in the application.
Mail the application and the check to the Transfer Agent at the
following address: The Vintage Funds, c/o Unified Advisers, Inc.,
P.O. Box 6110, Indianapolis, Indiana 46206-6110.
By Wire. To open a new account (or to open an additional account in a
different Fund) by wire, call the Transfer Agent at 1-800-408-4682. A
representative will assist you to obtain an account application by telecopy (or
mail), which must be completed, signed and telecopied (or mailed) to the
Transfer Agent before payment by wire may be made. Then, request your
financial institution to wire immediately available funds to:
Star Bank, N.A.
ABA # 04-20000-13
Attention: Name of Fund (see below)
Number of Fund (see below)
Credit Account # ________ (see below)
The applicable Fund and account numbers are listed below:
Fund Name Fund Number Account Number
Taxable Money Market Fund 30 483616819
Tax-Free Money Market Fund 31 483616827
The order is considered received when Star Bank, N.A., the Trust's
custodian, receives payment by wire. However, the completed account
application must be mailed to the Transfer Agent on the same day the wire
payment is made. See "Opening an Account -- By Mail" above. The Trust will
not permit redemptions until the Transfer Agent receives the application in
proper form. Financial institutions may charge a fee for wire transfers.
Subsequent Investments
Once an account is open, additional purchases of Fund shares may be made
at any time in minimum amounts of $100, except for an IRA, which must be in
amounts of at least $50. Additional purchases may be made:
By sending a check, made payable to the applicable Fund, to The Vintage
Funds, [Name of Fund], P.O. Box 640689, Cincinnati, Ohio 45264-0689. The
Trust will charge a $15 fee against a shareholder's account for any check
returned for insufficient funds. The shareholder also will be responsible
for any losses suffered by the Trust as a result.
By wire to the applicable Fund account as described above under "Opening an
Account -- By Wire". Shareholders should call the Transfer Agent at
1-800-408-4682 before wiring funds.
By electronic funds transfer from a financial institution through the
Automated Clearing House ("ACH"), as described below.
By Automated Clearing House (ACH). Once an account is open, shares
may be purchased or redeemed through ACH in minimum amounts of $100.
ACH is the electronic transfer of funds directly between an account with a
financial institution and the applicable Fund. In order to use the ACH
service, the ACH Authorization section of the account application must be
completed. For existing accounts, an ACH Authorization Form may be obtained
by calling the Transfer Agent at 1-800-408-4682. Allow at least two weeks for
preparation before using ACH. To order a purchase or redemption by ACH,
call the Transfer Agent at 1-800-408-4682. There are no charges for ACH
transactions imposed by the Fund or the Transfer Agent. ACH transactions are
completed approximately two business days following the placement of the
transfer order.
ACH may be used to make direct deposits into a Fund account of part or all
of recurring payments made to a shareholder by his or her employer (corporate,
federal, military, or other) or by the Social Security Administration.
DIVIDENDS AND DISTRIBUTIONS
The Funds declare and pay dividends on a daily basis.
If cash payments are requested, daily dividends will accumulate and be paid
at the end of each month, as requested in writing.
The Funds have two transaction times each day, at 12:00 noon (Eastern
time) and the close of regular trading on the New York Stock Exchange
(currently 4:00 p.m., Eastern time). New investments represented by federal
funds or bank wires received by the Custodian prior to 12:00 noon are paid the
full dividend for that day; such investments received after 12:00 noon do not
begin to receive daily dividends until the next day. Shares purchased by check
begin earning dividends on the business day after the check is converted into
federal funds. Redemption orders received prior to 12:00 noon are effected at
12:00 noon, and the redemption proceeds are normally available for wire
transfer that day. Redemption orders received after 12:00 noon are effected at
the close of regular trading on the New York Stock Exchange, and the
redemption proceeds are normally remitted the next business day. Redemption
orders received at any time during a day do not earn that day's dividend.
EXCHANGE PRIVILEGE
Shares of any Fund may be exchanged for shares of any other fund of the
Trust at net asset value, without any additional charges. The shares exchanges
must have been registered in the shareholder's name for at least five days
prior to the exchange request, and must have a net asset value which at least
meets the minimum investment required for the fund into which the exchange is
being made.
Exchange requests may be made by telephone or in writing. Exchanges will
be effected at the respective net asset values per share of the Funds involved,
next determined after the exchange request is received in proper form. If an
exchange request is received by the Transfer Agent in proper form on a Trust
business day before the close of regular trading on the New York
Stock Exchange (currently 4:00 p.m., Eastern time), the exchange will be
effected that day. An exchange of shares purchased by check will be delayed
until the check has been converted into federal funds and redemption proceeds
are available for purchase of the newly acquired shares, which could take up to
15 days.
By Telephone. Exchange requests may be made by telephone by calling the
Transfer Agent at 1-800-408-4682. Exchange requests made by telephone will
be effected only if (1) the shareholder's existing account has authorized
telephone redemption privileges (see "How to Redeem Shares -- By Telephone"
below) and (2) no account information will change as a result of the exchange.
The Transfer Agent requires personal identification before accepting
any exchange request by telephone, and telephone exchange requests may be
recorded.
By Mail or Telecopy. Exchange requests made in writing should be sent to
The Vintage Funds c/o Unified Advisers, Inc., P.O. Box 6110, Indianapolis,
Indiana 46206-6110. A written request to exchange shares having a net asset
value of less than $5,000 may be sent by telecopy, by first calling the
Transfer Agent at 1-800-408-4682. Regardless of whether the request is sent
by mail or by telecopy, the request must be signed exactly as the
shareholder's name appears on the Trust's account records. If the shares to
be exchanged have a net asset value of $5,000 or more, the request must be
mailed, and all signatures must be properly guaranteed as described below
under "How to Redeem Shares -- Signatures." If shares are to be exchanged
into a new account registered in a different name, or if any account
information will change as a result of the exchange, a separate account
application must be received by the Transfer Agent by mail before the
exchange may be effected.
The exchange privilege is designed to accommodate changes in shareholder
investment objectives. It is not designed for frequent trading in response to
short-term market fluctuations. Accordingly, the Trust reserves the right to
limit a shareholder's use of the exchange privilege. The exchange privilege
may be modified or terminated at any time.
Any exchange involves a redemption of shares of one fund and an investment
of the redemption proceeds in shares of another. Before requesting an
exchange, a shareholder must request and should read carefully the Prospectus
describing the fund into which the exchange will be made. Also, an exchange is
treated for federal income tax purposes as a sale of the shares given
in exchange, and the shareholder may realize a taxable gain or loss on the
exchange.
HOW TO REDEEM SHARES
Shares of each Fund may be redeemed on any day on which the Fund
computes it net asset value. Shares are redeemed at their net asset value next
determined after the Transfer Agent receives the redemption request in proper
form. Redemption requests may be may by mail or by telephone.
By Mail. A shareholder may redeem shares by mailing a written request
to The Vintage Funds, c/o Unified Advisers, Inc., P.O. Box 6110, Indianapolis,
Indiana 46206-6110. Written requests must state the shareholder's name, the
name of the Fund, the account number and the shares or dollar amount to be
redeemed and be signed exactly as the shares are registered.
Signatures. Shareholders requesting a redemption of $5,000 or more,
or a redemption of any amount payable to a person other than the shareholder
of record or to be sent to an address other than that on record with the Trust,
must have all signatures on written redemption requests guaranteed. The
Transfer Agent will accept signatures guaranteed by a financial institution
whose deposits are insured by the FDIC; a member of the New York,
American, Boston, Midwest, or Pacific Stock Exchange; or any other "eligible
guarantor institution," as defined in the Securities Exchange Act of 1934. The
Transfer Agent will not accept signatures guaranteed by a notary public. The
Transfer Agent has adopted standards for accepting signature guarantees from
the above institutions. The Trust may elect in the future to limit eligible
signature guarantors to institutions that are members of a signature guarantee
program. The Trust and its Transfer Agent reserve the right to amend these
standards at any time without notice.
Redemption requests by corporate and fiduciary shareholders must be
accompanied by appropriate documentation establishing the authority of the
person seeking to act on behalf of the account. Forms of resolutions and other
documentation to assist in compliance with the Transfer Agent's procedures
may be obtained by calling the Transfer Agent.
By Telephone. You may also redeem shares by telephone by calling the
Transfer Agent at 1-800-408-4682. In order to make redemption requests by
telephone, the Telephone Privileges section of the account application must be
completed. For existing accounts, a Telephone Privileges form may be obtained
by calling the Transfer Agent at 1-800-408-4682.
Telephone redemptions may be requested only if the proceeds are to be
issued to the shareholder of record and mailed to the address on record with
the Fund. Upon request, proceeds of $100 or more may be transferred by ACH,
and proceeds of $1,000 or more may be transferred by wire, in either case to
the account stated on the account application. Shareholders will be charged
for outgoing wires.
Telephone privileges and account designations may be changed by sending
the Transfer Agent a written request with all signatures guaranteed as
described above.
The Transfer Agent requires personal identification before accepting any
redemption request by telephone, and telephone redemption instructions may be
recorded. If reasonable procedures are not followed by the Trust, it may be
liable for losses due to unauthorized or fraudulent telephone instructions.
In the event of drastic economic or market changes, a shareholder may
experience difficulty in redeeming by telephone. If such a case should occur,
redemption by mail should be considered.
Receiving Payment
The Trust normally will make payment for all shares redeemed within
three business days after receipt by the Transfer Agent of a redemption request
in proper form, except as provided by the rules of the Securities and Exchange
Commission. A requested wire of redemption proceeds normally will be
effected the following business day, but in no event more than three
business days, after receipt of the redemption request in proper form.
However, when shares are purchased by check or through ACH, the proceeds
from the redemption of those shares are not available, and the shares may not
be exchanged, until the purchase check or ACH transfer has been converted to
federal funds, which could take up to 15 days.
Check Writing
Under the Funds' check writing service, shareholders may write checks
payable to any payee in any amount of $250 or more. A shareholder with check
writing privileges may present for payment three checks per month free of
charge; additional checks will result in a charge of $0.30 per check. Daily
dividends will continue to accrue on the shares redeemed by check until the
day the check is presented for payment.
The Check Writing Privileges section of the account application must be
completed in order to initiate check writing privileges. For existing
accounts, check writing privileges may be initiated by sending a written
request to the Transfer Agent with all signatures guaranteed. A book of
checks will be sent to the shareholder of record upon the Transfer Agent's
receipt of the request.
A check should not be used to close out an account with the Fund because
the balance of the account will continue to increase by the amount of daily
dividends until the check is presented for payment. The Transfer Agent may
impose a charge for checks returned unpaid for insufficient funds or for
effecting stop-payment instructions.
Minimum Account Balance
Due to the high cost of maintaining accounts with low balances, the Trust
may involuntarily redeem shares in any account, and pay the proceeds to the
shareholder, if the account balance falls below a required minimum value of
$1,000 ($500 for an IRA) due to shareholder redemptions. This requirement
does not apply, however, if the balance falls below the minimum because
of changes in a Fund's net asset value. Before shares are redeemed to close an
account, the shareholder is notified in writing and allowed 30 days to purchase
additional shares to meet the minimum requirement.
SHAREHOLDER SERVICES
Each time shares are purchased or redeemed, a statement will be mailed
showing the details of the transaction and the number and value of shares
owned after the transaction. Share certificates are not issued. Financial
reports showing investments, income and expenses of the Funds are mailed to
shareholders semi-annually. After the end of each year, shareholders receive
a statement of all their transactions for the year.
The Trust provides a number of plans and services to meet the special needs
of certain investors, including (1) an automatic investment plan, (2) a payroll
deduction plan, (3) a systematic withdrawal plan to provide monthly payments,
(4) retirement plans such as IRA and 403(b), and (5) corporate pension and
profit sharing plans, including a 401(k) plan. Brochures describing these
plans and related charges and account applications are available from the
Transfer Agent by calling 1-800-408-4682.
THE TRUST AND ITS MANAGEMENT
The Trust is an Indiana business trust authorized to offer separate
classes and sub-classes of shares of beneficial interest. At the date of
this Prospectus, the Trust has established eight funds, including the Funds
described herein, each as a separate class of its shares. The Trust's
offices are at 429 North Pennsylvania Street, Indianapolis, Indiana 46204.
The business affairs of the Trust are under the direction of its Board of
Trustees.
Investment Advisory Arrangements
Investment Adviser. Vintage Advisers, Inc., 429 North Pennsylvania Street,
Indianapolis, Indiana 46204, serves as the Trust's investment adviser (the
"Adviser"). The Adviser supervises and assists in the management of the Funds
under an Investment Advisory Agreement between the Adviser and the Trust,
subject to the overall authority of the Board of Trustees. The Adviser also is
responsible for monitoring and evaluating the performance of each
Sub-Adviser, as described below.
The Adviser was organized in December 1994 and is a registered investment
adviser. It has no prior operating history and does not act as the investment
adviser to any other investment companies. The Adviser is controlled by
Timothy L. Ashburn and Jack R. Orben, each of whom owns of record 25% of
its voting securities. The remainder of the Adviser's voting securities are
owned of record by a management retention plan for the benefit of Messrs.
Ashburn and Orben and certain other individuals. Messrs. Ashburn and Orben
control the voting of the shares owned by that plan. They, together with the
other directors and officers of the Adviser, have substantial experience in the
investment counsel and mutual fund industries. Messrs. Ashburn and Orben
are members of the Trust's Board of Trustees.
The Adviser has notified the Trust that, in the event of an initial public
offering of the Adviser's voting securities, the Adviser may offer the first
opportunity to purchase such securities to persons who are then shareholders of
the Trust. The Adviser has also notified the Trust, however, that it has no
current intention of offering its voting securities to the public in the
foreseeable future, and that there can be no assurance that the Adviser will
ever offer its voting securities to the public.
Sub-Adviser. The Adviser has entered into a Sub-Advisory Agreement with
Fiduciary Counsel, Inc. (the "Sub-Adviser") to manage the investment
portfolios of the Funds. The Sub-Adviser is located at 40 Wall Street, New
York, New York. Formed in 1931, Fiduciary Counsel is a registered investment
adviser that manages approximately $350 million in assets. It does not act as
the investment adviser to any other investment companies. It is a wholly
owned subsidiary of Associated Family Services, Inc. ("AFS"). Jack R. Orben
owns 33% of the outstanding voting securities of AFS.
Portfolio Manager's Background
Ralph E. Rosamilia is the Funds' portfolio manager. Mr. Rosamilia has been
the President and Chief Executive Officer of Fiduciary Counsel since January
1995. Prior to then, he was a Managing Director of Fiduciary Counsel since
1986. Since 1986, Mr. Rosamilia has been Chairman of Fiduciary Counsel's
Investment Policy Committee and a member of its Executive Committee. He is
also a Director of the Adviser. Mr. Rosamilia graduated from the University
of Pennsylvania's Wharton School of Business in 1966, and has nearly 30 years
of investment experience.
Advisory Fees
Each Fund pays the Adviser an annual advisory fee, payable monthly,
equal to 0.50% of the Fund's average daily net assets. The Adviser has agreed
to voluntarily waive some or all of its fees, but may terminate this voluntary
waiver with respect to either Fund at any time at its sole discretion. The
Adviser has also undertaken to reimburse each Fund for operating expenses
in excess of limitations established by certain states. During the period
June 2, 1995 (commencement of operations) to September 30, 1995, only the
Taxable Money market fund had investment operations. During that period, the
Adviser waived its entire advisory fee.
The Adviser pays the Sub-Adviser an annual fee for its services in managing
the portfolios of the Funds. These fees are paid directly by the Adviser
from its own assets and are not an expense of the Funds. The Funds
themselves pay no fees to the Sub-Adviser. The sub-advisory fees are payable
monthly, in an amount equal to 0.07% of the Fund's average daily net assets
up to $1 billion; and 0.05% of net assets in excess of $1 billion.
Distribution Services
Distributor. Unified Management Corporation (the "Distributor"), 429
North Pennsylvania Street, Indianapolis, Indiana 46204, acts as each Fund's
distributor pursuant to a Distribution Agreement with the Trust. The
distributor is a subsidiary of Unified Holdings, Inc.
Distribution Plan. Under a Distribution Plan adopted with respect to each
Fund pursuant to Rule 12b-1 under the Investment Company Act of 1940, the
Trust pays the Distributor an annual fee, payable monthly, of up to 0.10% of
each Fund's average daily net assets. The Distributor is entitled to retain
all of this distribution fee to reimburse the Distributor for payments made
or expenses incurred for distribution of Fund shares, including those
incurred in connection with preparingand distributing sales literature and
advertising, preparing, printing and distributing prospectuses and statements
of additional information used for other than regulatory purposes or
distribution to existing shareholders, implementing and operating the
Distribution Plan, and compensating third parties for their distribution
services. The Distributor may select financial institutions such as banks,
custodians, investment advisers and broker/dealers to provide sales support
services as agents for their clients or customers.
The Distribution Plan is a compensation-type plan. Therefore, the amounts
payable to the Distributor during any year may be more or less than actual
expenses incurred by the Distributor during such year. No amount payable or
credit due pursuant to the Distribution Plan for any fiscal year may be carried
over for payment or utilized as a credit, as the case may be, beyond the end of
the year, unless authorized by the Trust's Board of Trustees. However, the
Distributor may be able to recover such amounts or may earn a profit from
future payments made by the Trust under the Distribution Plan.
Administration of the Trust
Administrator. Unified Advisers, Inc., 429 North Pennsylvania St.,
Indianapolis, Indiana 46204, serves as the Trust's administrator (the
"Administrator"). Pursuant to a Mutual Fund Service Agreement with the
Trust, the Administrator provides certain administrative personnel and services
(including administration, transfer agency and fund accounting services)
necessary to operate the Funds. For its services, the Administrator receives
an annual fee, payable monthly, equal to 0.185% of each Fund's average daily
net assets.
Shareholder Services Plan. The Trust has adopted a Shareholder Services
Plan (the "Service Plan") with respect to each Fund, which is administered by
the Administrator. Under the Service Plan, financial institutions, including
brokers, may enter into shareholder service agreements with the Trust to
provide administrative support services to their clients or customers who from
time to time may be owners of record or beneficial owners of the shares of one
or more of the Funds. In return for providing these support services, a
financial institution may receive payments from the Fund at a rate not
exceeding 0.15% of the average daily net assets of the shares beneficially
owned by the financial institution's clients or customers for whom it is
holder of record or with whom it has a servicing relationship. These
administrative services may include, but are not limited to, the provision of
personal services and maintenance of shareholder accounts.
The Glass-Steagall Act limits the ability of a depository institution
(such as a commercial bank or a savings and loan association) to become an
underwriter or distributor of securities. In the event the Glass-Steagall
Act is deemed to prohibit depository institutions from acting in the
capacities described above or should Congress relax current restrictions on
depository institutions, the Board of Trustees will consider appropriate
changes in the services. State securities laws governing the ability of
depository institutions to act as underwriters or distributors of securities
may differ from interpretations given to the Glass-Steagall Act and,
therefore, banks and financial institutions may be required to register as
dealers pursuant to state law.
Other Arrangements. The Adviser, the Distributor or the Administrator may,
from their respective fees, also pay brokers or financial institutions a fee
based upon the net asset value of the Fund shares beneficially owned by the
broker's or financial institution's clients or customers. This fee is in
addition to amounts paid under the Distribution Plan or the Services Plan.
These payments will be made directly by the Adviser, the Distributor or the
Administrator from their own assets, will not be made from the assets of the
Funds and are not an additional expense of the Funds.
From time to time the Distributor will purchase Fund shares on behalf of
its clients and will be entitled to receive 12b-1 fees, shareholder servicing
fees and other administrative fees described herein to the same extent as any
other broker or financial institution.
Transfer Agent, Fund Accounting Agent and Custodian
Unified Advisers, Inc., P.O. Box 6110, Indianapolis, Indiana 46206-6110,
acts as the Trust's transfer agent (the "Transfer Agent") and fund accounting
agent.
Star Bank, N.A., 425 Walnut Street, Cincinnati, Ohio 45201, acts as the
Trust's custodian. General correspondence to the custodian should be
addressed to Star Bank, N.A., P.O. Box 1038, Location 6118, Cincinnati, Ohio
45201. Share purchase orders mailed directly to the custodian (See "How to
Buy Shares -- Subsequent Investments") should be addressed to The Vintage
Funds, [Name of Applicable Fund], P.O. Box 640689, Cincinnati,
Ohio 45264-0689.
Portfolio Transactions
The Adviser and Sub-Adviser select the firms that effect brokerage
transactions for their respective Funds, subject to the overall direction and
review of Adviser and the Board of Trustees. The initial criterion that must
be met by the Adviser and Sub-Advisers in selecting brokers and dealers is
whether the firm can obtain the most favorable combination of price and
execution for the transaction. This does not mean that the execution
decision must be based solely on whether the lowest possible commission costs
may be obtained. In seeking the best combination of price and execution, the
Adviser and Sub-Adviser evaluate the execution capability of the firms and
the services they provide, including their general execution capability,
reliability and integrity, willingness to take positions in securities, and
general operational and financial condition.
Subject to this primary objective, the Adviser and Sub-Adviser may select
for brokerage transactions those firms which furnish brokerage and research
services to the Funds, the Adviser or the Sub-Adviser. The Adviser and
Sub-Adviser may also give consideration to firms that have sold Fund shares.
The Board of Trustees has authorized the Funds to pay brokerage commissions
to firms that are affiliated with the Adviser or the Sub-Adviser, subject to
the foregoing criteria.
Expenses
Each Fund pays, except to the extent specifically assumed by others, all
expenses incurred in its operations, and a portion of the Trust's general
administrative expenses are allocated to the Funds either on the basis of their
relative net assets, on the basis of special needs of any Fund, or equally as
is deemed appropriate. The expenses borne by a Fund include: organizational
costs, taxes, interest, brokerage fees and commissions, fees of Trustees,
Securities and Exchange Commission fees, state Blue Sky qualification fees,
advisory and administrative fees, distribution and shareholder servicing fees,
charges of custodians, transfer and dividend disbursing agent's fees, certain
insurance premiums, industry association fees, auditing and legal expenses,
costs attributable to investor services (including, without limitation,
telephone and personnel expenses), costs of calculating the net asset value
of the Fund's shares, costs of shareholders' reports and meetings, costs of
preparing and printing prospectuses and statements of additional information
for regulatory purposes and for distribution to existing shareholders, and any
extraordinary expenses.
THE "V.O.I.C.E. " PROGRAM
(Vision For On-Going Investments In Charity and Education)
The Adviser has established The Vintage Funds University and Philanthropic
Program (the "Program"), entitled "V.O.I.C.E. " (Vision for On-going
Investments in Charity and Education) pursuant to which the Adviser will make
donations from its own revenue to certain accredited college or university
endowments or general scholarship funds ("Eligible Institutions") designated by
qualified shareholders. Philanthropic institutions outside of the area of
education may be proposed by qualifying shareholders and may, at the sole
discretion of the Adviser, be accepted for inclusion as an Eligible Institution.
All Vintage Funds shareholders maintaining an average annualized aggregate
net asset value of $25,000 or more over the period of an entire calendar
quarter ("Qualified Shareholders") will be qualified to designate one or more
Eligible Institutions to receive a donation under the Program with respect to
that period. A shareholder making an initial investment of $25,000 or more in
Fund shares may designate one Eligible Institution on the V.O.I.C.E. Program
Application. A shareholder making an initial investment of $1,000,000 or
more (or maintaining that amount for an entire quarterly period) may
designate one additional Eligible Institution for each $l,000,000 invested
(or maintained for such period).
The Adviser will donate, on a quarterly basis, from its own revenue an
amount equal to 0.25% of the average annualized aggregate net asset value of
the shares owned by the Qualified Shareholder for the preceding quarterly
period, for so long as the average annualized aggregate net asset value of the
shares owned by the Qualified Shareholder remains above $25,000 for such
period. Donations will be made by the Adviser in the name of the Qualified
Shareholder to the Eligible Institution(s) designated by the Qualified
Shareholder. However, while the donation will be made in the Qualified
Shareholder's name, the Qualified Shareholder will not be entitled to any tax
deductions for such donation.
All Qualified Shareholders desiring to change their designated Eligible
Institution(s) may do so twice a year, in January and July. If a Qualified
Shareholder was entitled to designate, and did designate, more than one
Eligible Institution, the amount donated will be allocated according to the
percentages designated on the V.O.I.C.E. Program Application.
Donations will be made by the Adviser from its own revenue and, therefore,
will have no impact on the expenses or yield of the Funds. There can be no
assurance that the Adviser will have revenue from which to make donations.
The preceding information is only a summary of the V.O.I.C.E. Program
and is qualified in its entirety by the more complete information available
from the Adviser.
Information about the V.O.I.C.E. Program, including applications to
participate in the Program, may be obtained from the Adviser by calling
1-800-408-4682 (1-800-40-VINTAGE).
TAXES
It is intended that each Fund will qualify as a "regulated investment
company" under the Internal Revenue Code of 1986, as amended (the "Code"),
as long as such qualification is in the best interest of the Fund's
shareholders. Such qualification relieves each Fund of liability for federal
income tax to the extent its earnings are distributed in accordance with the
Code.
A shareholder receiving a distribution of ordinary income and/or an
excess of net short-term capital gain over net long-term capital loss
ordinarily would treat it as a receipt of ordinary income in the computation
of the shareholder's gross income, whether such distribution is received in
cash or reinvested in additional shares. Any distribution of the excess of
net long-term capital gain over net short-term capital loss ordinarily is
taxable to shareholders as long-term capital gain regardless of how long the
shareholder has held shares. Dividends and distributions also may be subject
to state and local taxes.
Shareholders will receive statements as to the tax status of dividends and
distributions annually, as well as periodic account summaries that will include
information as to any dividends and distributions from securities gains paid
during the year. Shareholders should consult their own tax advisers with
questions regarding federal, state or local taxes.
The Tax-Free Fund
Shareholders of the Tax-Free Money Market Fund are not required to pay
federal regular income tax on any dividends received from the Fund that
represent net interest on tax-exempt municipal bonds. However, under the Tax
Reform Act of 1986, dividends representing net interest earned on some
municipal bonds may be included in calculating the federal individual
alternative minimum tax or the federal alternative minimum tax for
corporations. The alternative minimum tax, imposed at a maximum rate of 28%
of alternative minimum taxable income for individuals and other non-corporate
taxpayers, and 20% for corporations, applies when it exceeds the regular tax
for the taxable year. Alternative minimum taxable income is equal to the
regular taxable income of the taxpayer increased by certain "tax preference"
items not included in regular taxable income and reduced by only a portion of
the deductions allowed in the calculation of the regular tax.
The Tax Reform Act of 1986 treats interest on certain "private activity"
bonds issued after August 7, 1986, as a tax preference item for both
individuals and corporations. Unlike traditional governmental purpose
municipal bonds, which finance roads, schools, libraries, prisons and other
public facilities, private activity bonds provide benefits to private
parties. The Tax-Free Money Market Fund may purchase all types of municipal
bonds, including private activity bonds. Thus, should a Fund purchase any
such bonds, a portion of the Fund's dividends may be treated as a tax
preference item.
In addition, in the case of a corporate shareholder, dividends of the
Tax-Free Money Market Fund which represent interest on municipal bonds may be
subject to the 20% corporate alternative minimum tax because the dividends are
included in a corporation's "adjusted current earnings." The corporate
alternate minimum tax treats 75% of the excess of a taxpayer's pre-tax
"adjusted current earnings" over the taxpayer's alternative minimum taxable
income as a tax preference item. "Adjusted current earnings" is based upon
the concept of a corporation's "earnings and profits." Since "earnings and
profits" generally includes the full amount of any Fund dividend, and
alternative minimum taxable income does not include the portion of the Fund's
dividend attributable to municipal bonds which are not private activity
bonds, the difference will be included in the calculations of the
corporation's alternative minimum tax.
Dividends of the Tax-Free Money Market Fund representing net interest
income earned on some temporary investments and any realized net short-term
gains are taxed as ordinary income.
Backup Withholding
The Trust may be required to withhold federal income tax at a rate of 31%
from dividends and redemption proceeds paid to non-corporate shareholders.
This tax may be withheld from dividends if a shareholder fails to furnish the
Trust with the shareholder's correct taxpayer identification number, the
Internal Revenue Service (the "IRS") notifies the Trust that the shareholder
has failed to report certain income to the IRS, or the shareholder fails to
certify that he or she is not subject to backup withholding when required to
do so. Backup withholding is not an additional tax and the shareholder may
credit any amounts withheld against the shareholder's federal income tax
liability.
PERFORMANCE INFORMATION
From time to time the Trust may publish performance information relative to
the Funds, and may include such information in advertisements, sales literature
or shareholder reports. This information will be based on historical
performance and is not intended to indicate future performance. Additional
information about the performance of the Funds will be contained in the Trust's
annual reports to shareholders which may be obtained without charge by calling
the Trust.
The Funds may quote their current yields and effective yields. The
"yield" of a money market Fund refers to the income generated by an
investment in the Fund over a seven-day period. This income is then
annualized. The amount of income generated by investments during the week is
assumed to be generated each week over a 52-week period and is shown as a
percentage of the investment. The "effective yield" is calculated similarly
but, when annualized, the income earned by an investment in the Fund is
assumed to be reinvested. The effective yield will be slightly higher than
the yield because of the compounding effect of this assumed reinvestment.
The Tax-Free Money Market Fund may also quote its "tax-equivalent yield",
which is calculated similarly to the yield, but is adjusted to reflect the
taxable yield that the Fund's shares would have had to earn to equal the
actual yield, assuming a specific tax rate. A Fund's tax-equivalent yield
will always be higher than its taxable yield.
Comparative performance information may be used from time to time in
advertising or marketing information relative to the Funds, including certain
indices or data from Lipper Analytical Services, Inc., Morningstar Mutual Fund
Report and other publications.
GENERAL INFORMATION
The Trust was organized on February 1, 1995 as an Indiana business trust.
The Trust's Declaration of Trust permits the Trust to offer and sell an
unlimited number of full and fractional shares of beneficial interest in each
of the Funds and to create additional Funds. Each Fund of the Trust issues
its own class of shares of beneficial interest. The shares of each Fund
represent an interest only in that Fund's assets (and income) and in the
event of liquidation, each share of a particular Fund would have the same
rights to distributions and assets as every other share of that Fund. Shares
have no preemptive or conversion rights, nor do they have cumulative voting
rights. Each full or fractional share of each Fund has a proportionate vote
on each matter submitted to shareholders of that Fund. All shares of each
fund of the Trust have equal voting rights except that in matters affecting
only a particular Fund, only shares of that Fund are entitled to vote.
Under Indiana law, the Trust is not required to hold annual meetings of
shareholders. The Trust will not hold annual meetings except for extraordinary
items requiring shareholder approval under the Investment Company Act of
1940.
Trustees may be removed by the Board of Trustees or by the shareholders at
a special meeting. A special meeting of shareholders shall be called by the
Board of Trustees upon the request of shareholders owning at least 10% of the
outstanding shares of all Funds entitled to vote.
Shareholder inquiries may be made by writing to The Vintage Funds, c/o
Unified Advisers, Inc., P.O. Box 6110, Indianapolis, Indiana 46206-6110, or by
calling 1-800-408-4682 (1-800-40-VINTAGE).
<PAGE>
PART B. STATEMENT OF ADDITIONAL INFORMATION
THE VINTAGE FUNDS
STATEMENT OF ADDITIONAL INFORMATION
January 29, 1996
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of
The Vintage Funds (the "Trust"), dated January 29, 1996, as may be revised
from time to time. To obtain a copy of the Trust's Prospectus, please write to
The Vintage Funds at P.O. Box 6110, Indianapolis, Indiana 46206-6110, or call
1-800-408-4682 (1-800-40-VINTAGE).
TABLE OF CONTENTS
Page
Investment Objectives and Policies . . . . . . . . . . . . . . . 2
Types of Investments and Investment Techniques . . . . . . . . . . 3
Investment Limitations . . . . . . . . . . . . . . . . . . . . . . 23
Management of the Trust. . . . . . . . . . . . . . . . . . . . . . 27
Investment Advisory Arrangements . . . . . . . . . . . . . . . . . 29
Distribution Arrangements. . . . . . . . . . . . . . . . . . . . . 30
Administrative Services Arrangements . . . . . . . . . . . . . . . 31
Brokerage Transactions . . . . . . . . . . . . . . . . . . . . . . 31
Purchase and Redemption . . . . . . . . . . . . . . . . . . . . . 32
Determination of Net Asset Value . . . . . . . . . . . . . . . . . 32
Tax Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Performance Information . . . . . . . . . . . . . . . . . . . . . 35
Information About the Trust. . . . . . . . . . . . . . . . . . . . 37
Custodian, Transfer Agent, Fund Accounting Agent,
Counsel and Independent Accountants . . . . . . . . . . . . . . 37
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 38
Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
INVESTMENT OBJECTIVES AND POLICIES
The Trust offers eight separate Funds, each with its own investment
objective and policies. The Funds' investment objectives cannot be changed
without shareholder approval. While there is no assurance that any Fund will
achieve its investment objective, it endeavors to do so by following the
investment policies described in the Prospectus and this Statement of
Additional Information. Unless otherwise indicated, the Funds' investment
policies may be changed by the Trust's Board of Trustees without shareholder
approval. Shareholders will be notified before any material change in
investment policies becomes effective.
The Starwood Strategic Fund seeks growth of capital. The Fund pursues
this objective by investing principally in a diversified portfolio of equity
securities of seasoned, financially strong growth companies.
The Aggressive Growth Fund seeks growth of capital. The Fund pursues this
objective by investing primarily in a diversified portfolio of other no-load
mutual funds that invest principally in large capitalization stocks, and
secondarily in other no-load mutual funds that invest principally in small
capitalization and emerging growth company equity securities.
The Fiduciary Value Fund seeks growth of capital, current income and
growth of income. The Fund pursues this objective by investing principally in
a diversified portfolio of common stocks, preferred stocks and securities
convertible into common stocks of companies which offer the prospect of
growth of earnings while paying current dividends. The Fund may also
purchase securities that do not pay current dividends but which offer prospects
for growth of capital and future income.
The Asset Allocation Fund seeks preservation of capital, capital
appreciation and current income. The Fund pursues this objective through a
flexible policy of investing principally in a diversified portfolio of other
no-load index mutual funds, including domestic and international stock and
investment grade bond index funds, as well as money market funds. The Fund may
invest directly in equity securities, investment grade corporate and municipal
debt obligations, U.S. government securities and money market instruments,
but under normal circumstances at least 65% of its assets will be invested in
other no-load index funds.
The Taxable Fixed Income Fund seeks a high level current income consistent
with the preservation of capital. The Fund pursues this objective by investing
principally in a diversified portfolio of U.S. government securities and
investment grade corporate debt obligations.
The Municipal Fixed Income Fund seeks a high level of current income that
is exempt from federal regular income tax consistent with the preservation of
capital. The Fund pursues this objective by investing principally in a
diversified portfolio of investment grade municipal securities.
The Taxable Money Market Fund seeks a high level of current income
consistent with the preservation of capital and maintenance of liquidity. The
Fund pursues this objective by investing principally in a diversified
portfolio of high quality, short-term money market instruments. The Fund
intends to maintain a constant net asset value of $1.00 per share, although
there is no assurance that it will be able to do so.
The Tax-Free Money Market Fund seeks a high level of current income that
is exempt from Federal income tax consistent with the preservation of capital
and maintenance of liquidity. The Fund pursues this objective by investing
principally in a diversified portfolio of high quality, short-term municipal
securities. The Fund intends to maintain a constant net asset value of $1.00
per share, although there is no assurance that it will be able to do so.
The Funds' investment policies are described in the Prospectus. Certain
policies also are described below under "Types of Investments and Investment
Techniques."
TYPES OF INVESTMENTS AND INVESTMENT TECHNIQUES
Convertible Securities
The Funds may invest in convertible securities. Convertible securities are
fixed income securities that may be exchanged or converted into a
predetermined number of shares of the issuer's underlying common stock at the
option of the holder during a specified period. Convertible securities may take
the form of convertible preferred stock, convertible bonds or debentures, units
consisting of "usable" bonds and warrants or a combination of the features
of several of these securities. The investment characteristics of each
convertible security vary widely, which allows convertible securities to be
employed for a variety of investment strategies.
The Funds will exchange or convert convertible securities into shares of
underlying common stock when, in the opinion of the investment adviser, the
investment characteristics of the underlying common shares will assist the Fund
in achieving its investment objective. The Funds may also elect to hold or
trade convertible shares. In selecting convertible securities, a Fund's
investment adviser evaluates the investment characteristics of the
convertible security as a fixed income instrument, and the investment
potential of the underlying equity security for capital appreciation. In
evaluating these matters with respect to a particular convertible security,
the investment adviser considers numerous factors, including the economic and
political outlook, the value of the security relative to other investment
alternatives, trends in the determinants of the issuer's profits, and the
issuer's management capability and practices.
Warrants
The Funds (other than the money market Funds) may invest in warrants.
Warrants are basically options to purchase common stock at a specific price
(usually at a premium above the market value of the optioned common stock at
issuance) valid for a specific period of time. Warrants may have a life
ranging from less than one year to twenty years, or they may be perpetual.
However, most warrants have expiration dates after which they are worthless.
In addition, a warrant is worthless if the market price of the common stock
does not exceed the warrant's exercise price during the life of the warrant.
Warrants have no voting rights, pay no dividends, and have no rights with
respect to the assets of the corporation issuing them. The percentage
increase or decrease in the market price of the warrant may tend to be
greater than the percentage increase or decrease in the market price of the
optioned common stock. No Fund will invest more than 5% of the value of its
total assets in warrants. Warrants acquired in units or attached to
securities may be deemed to be without value for purposes of this policy.
Corporate Debt Obligations
The Funds may invest in corporate debt obligations, including corporate
bonds, notes, medium term notes, and debentures, which may have floating or
fixed rates of interest.
Ratings. The Funds will not invest in corporate debt obligations having a
rating of less than Baa by Moody's Investors Service, Inc. ("Moody's") or BBB
or better by Standard & Poor's Corporation ("S&P"), Fitch Investors Service
("Fitch"), Duff & Phelps, Inc. ("Duff") or Thompson Bankwatch
("Bankwatch"). (The money market Funds have higher rating
requirements, as described in the Prospectus.) In certain cases a Fund's
investment adviser may choose bonds which are unrated if it determines that
such bonds are of comparable quality or have similar characteristics to
investment grade bonds. Bonds rated Baa or BBB may have
speculative characteristics. Changes in economic conditions or other
circumstances are more likely to lead to weakened capacity to make principal
and interest payments than higher rated bonds. Downgraded securities will be
evaluated on a case-by-case basis by the Fund's investment adviser. The
adviser will determine whether or not the security continues to be an
acceptable investment. If not, the security will be sold. A description of
the rating categories is contained in the Appendix to this Statement of
Additional Information.
Floating Rate Corporate Debt Obligations. The Funds expect to invest in
floating rate corporate debt obligations, including increasing rate
securities. Floating rate securities are generally offered at an initial
interest rate which is at or above prevailing market rates. The interest
rate paid on these securities is then reset periodically (commonly every 90
days) to an increment over some predetermined interest rate index. Commonly
utilized indices include the three-month Treasury bill rate, the six-month
Treasury bill rate, the one-month or three-month London Interbank Offered Rate
(LIBOR), the prime rate of a bank, the commercial paper rates, or the longer-
term rates on U.S. Treasury securities.
Some of these floating rate corporate debt obligations include floating
rate corporate debt securities issued by savings and loans and collateralized
by adjustable rate mortgage loans, also known as collateralized thrift notes.
Many of these collateralized thrift notes have received AAA ratings from
nationally recognized statistical rating organizations. Collateralized
thrift notes differ from traditional "pass through" certificates in which
payments made are linked to monthly payments made by individual borrowers net
of any fees paid to the issuer or guarantor of such securities.
Collateralized thrift notes pay a floating interest rate which is tied to a
pre-determined index, such as the six-month Treasury bill rate. Floating
rate corporate debt obligations also include securities issued to fund
commercial real estate construction.
Increasing rate securities, which currently do not make up a significant
share of the market in corporate debt securities, are generally offered at an
initial interest rate which is at or above prevailing market rates. Interest
rates are reset periodically (most commonly every 90 days) at different
levels on a predetermined scale. These levels of interest are ordinarily set
at progressively higher increments over time. Some increasing rate
securities may, by agreement, revert to a fixed rate status. These
securities may also contain features which allow the issuer the option to
convert the increasing rate of interest to a fixed rate under such terms,
conditions, and limitations as are described in each issue's prospectus.
Medium Term Notes and Deposit Notes. Medium term notes ("MTNs") and
Deposit Notes are similar to Variable Rate Demand Notes as described in the
Prospectus. MTNs and Deposit Notes trade like commercial paper, but may
have maturities from 9 months to ten years.
Section 4(2) Commercial Paper. Section 4(2) commercial paper is
commercial paper issued in reliance on the exemption from registration afforded
by Section 4(2) of the Securities Act of 1933. Section 4(2) commercial paper
is restricted as to disposition under federal securities law and is generally
sold to institutional investors, such as the Funds, who agree that they are
purchasing the paper for investment purposes and not with a view to public
distribution. Any resale by the purchaser must be in an exempt transaction.
Section 4(2) commercial paper is normally resold to other institutional
investors like the Funds through or with the assistance of the issuer or
investment dealers who make a market in Section 4(2) commercial paper, thus
providing liquidity. The Trust believes that Section 4(2) commercial paper
and possibly certain other restricted securities which meet the criteria for
liquidity established by the Board of Trustees are quite liquid. The Funds
intend, therefore, to treat the restricted securities which meet the criteria
for liquidity established by the Trustees, including Section 4(2) commercial
paper, as determined by the Funds' investment advisers, as liquid and not
subject to the investment limitation applicable to illiquid securities. In
addition, because Section 4(2) commercial paper is liquid, the Trust intends
to not subject such paper to the limitation applicable to restricted securities.
Asset-Backed Securities
The money market Funds may invest in mortgage-related asset-backed
securities that are considered U.S. government securities. The other Funds may
invest in these and, to varying extents as described in the Prospectus, in
other asset-backed securities.
Asset-backed securities are created by the grouping of certain
governmental, government related and private loans, receivables and other
lender assets into pools. Interests in these pools are sold as individual
securities. Payments from the asset pools may be divided into several
different tranches of debt securities, with some tranches entitled to receive
regular installments of principal and interest, other tranches entitled to
receive regular installments of interest, with principal payable at maturity
or upon specified call dates, and other tranches only entitled to receive
payments of principal and accrued interest at maturity or upon specified call
dates. Different tranches of securities will bear different interest rates,
which may be fixed or floating.
Because the loans held in the asset pool often may be prepaid without
penalty or premium, asset-backed securities are generally subject to higher
prepayment risks than most other types of debt instruments. Prepayment risks
on mortgage securities tend to increase during periods of declining mortgage
interest rates, because many borrowers refinance their mortgages to take
advantage of the more favorable rates. Depending upon market conditions, the
yield that a Fund receives from the reinvestment of such prepayments, or any
scheduled principal payments, may be lower than the yield on the original
mortgage security. As a consequence, mortgage securities may be a less
effective means of "locking in" interest rates than other types of debt
securities having the same stated maturity and may also have less potential
for capital appreciation. For certain types of asset pools, such as
collateralized mortgage obligations, prepayments may be allocated to one
tranche of securities ahead of other tranches, in order to reduce the risk of
prepayment for the other tranches.
Prepayments may result in a capital loss to the Fund to the extent that the
prepaid mortgage securities were purchased at a market premium over their
stated amount. Conversely, the prepayment of mortgage securities purchased
at a market discount from their stated principal amount will accelerate the
recognition of interest income by the Fund, which would be taxed as ordinary
income when distributed to the shareholders.
The credit characteristics of asset-backed securities also differ in a
number of respects from those of traditional debt securities. The credit
quality of most asset-backed securities depends primarily upon the credit
quality of the assets underlying such securities, how well the entity issuing
the securities is insulated from the credit risk of the originator or any
other affiliated entities, and the amount and quality of any credit
enhancement to such securities.
Non-Mortgage Related Asset-Backed Securities. The Funds may invest in
non-mortgage related asset-backed securities including, but not limited to,
interests in pools of receivables, such as credit card and accounts
receivable and motor vehicle and other installment purchase obligations and
leases. These securities may be in the form of pass-through instruments or
asset-backed obligations. The securities, all of which are issued by
non-governmental entities and carry no direct or indirect government
guarantee, are structurally similar to collateralized mortgage obligations
and mortgage pass-through securities, which are described below.
Non-mortgage related asset-backed securities present certain risks that
are not presented by mortgage-backed securities. Primarily, these securities
do not have the benefit of the same security interest in the related
collateral. Credit card receivables are generally unsecured and the debtors
are entitled to the protection of a number of state and federal consumer
credit laws, many of which give such debtors the right to set off certain
amounts owed on the credit cards, thereby reducing the balance due. Most
issuers of asset-backed securities backed by motor vehicle installment
purchase obligations permit the servicer of such receivables to retain
possession of the underlying obligations. If the servicer sells these
obligations to another party, there is a risk that the purchaser would
acquire an interest superior to that of the holders of the related asset-
backed securities. Further, if a vehicle is registered in one state and is
then registered because the owner and the obligor move to another state, such
re-registration could defeat the original security interest in the vehicle in
certain cases. In addition, because of the large number of vehicles involved
in a typical issuance and technical requirements under state laws, the
trustee with the holders of asset-backed securities backed by automobile
receivables may not have a proper security interest in all of the obligations
backing such receivables. Therefore, there is a possibility that recoveries
on repossessed collateral may not, in some cases, be available to support
payments on these securities.
Mortgage-Related Asset-Backed Securities. The Funds may also invest in
various mortgage-related asset-backed securities. These types of investments
may include adjustable rate mortgage securities, collateralized mortgage
obligations, real estate mortgage investment conduits, or other securities
collateralized by or representing an interest in real estate
mortgages (collectively, "mortgage securities"). Many mortgage securities are
issued or guaranteed by government agencies.
Adjustable Rate Mortgage Securities ("ARMS"). ARMS are
pass-through mortgage securities representing interests in adjustable rather
than fixed interest rate mortgages. The ARMS in which the Funds invest are
issued by the Government National Mortgage Association ("GNMA"), the Federal
National Mortgage Association ("FNMA"), and the Federal Home Loan
Mortgage Corporation ("FHLMC") and are actively traded. The underlying
mortgages which collateralize ARMS issued by GNMA are fully guaranteed by
the Federal Housing Administration ("FHA") or Veterans Administration
("VA"), while those collateralizing ARMS issued by FHLMC or FNMA are
typically conventional residential mortgages conforming to strict underwriting
size and maturity constraints.
Collateralized Mortgage Obligations ("CMOS"). CMOs are bonds issued
by single-purpose, stand-alone finance subsidiaries or trusts of financial
institutions, government agencies, investment bankers, or companies related to
the construction industry. CMOs purchased by the Funds may be:
collateralized by pools of mortgages in which each mortgage is
guaranteed as to payment of principal and interest by an agency or
instrumentality of the U.S. government;
collateralized by pools of mortgages in which payment of principal and
interest is guaranteed by the issuer and such guarantee is
collateralized by U.S. government securities; or
securities in which the proceeds of the issuance are invested in
mortgage securities and payment of the principal and interest is
supported by the credit of an agency or instrumentality of the U.S.
government.
All CMOs purchased by the Funds are investment grade, as rated by a
nationally recognized statistical rating organization.
Real Estate Mortgage Investment Conduits ("REMICS"). REMICs are
offerings of multiple class real estate mortgage-backed securities which
qualify and elect treatment as such under provisions of the Internal Revenue
Code. Issuers of REMICs may take several forms, such as trusts, partnerships,
corporations, associations, or segregated pools of mortgages. Once REMIC
status is elected and obtained, the entity is not subject to federal income
taxation. Instead, income is passed through the entity and is taxed to the
person or persons who hold interests in the REMIC. A REMIC interest must
consist of one or more classes of "regular interests," some of which may offer
adjustable rates of interest, and a single class of "residual interests." To
qualify as a REMIC, substantially all the assets of the entity must be in
assets directly or indirectly secured principally by real property.
Resets of Interest. The interest rates paid on the ARMS, CMOs, and
REMICs in which the Funds invest generally are readjusted at intervals of one
year or less to an increment over some predetermined interest rate index.
There are two main categories of indices: those based on U.S. Treasury
securities and those derived from a calculated measure, such as a cost of
funds index or a moving average of mortgage rates. Commonly utilized indices
include the one-year and five-year constant maturity Treasury Note rates, the
three-month Treasury Bill rate, the 180-day Treasury Bill rate, rates on
longer-term Treasury securities, the National Median Cost of Funds, the one-
month or three-month London Interbank Offered Rate (LIBOR), the prime rate of
a specific bank, or commercial paper rates. Some indices, such as the one-
year constant maturity Treasury Note rate, closely mirror changes in market
interest rate levels.
To the extent that the adjusted interest rate on the mortgage security
reflects current market rates, the market value of an adjustable rate
mortgage security will tend to be less sensitive to interest rate changes
than a fixed rate debt security of the same stated maturity. Hence, ARMs
which use indices that lag changes in market rates should experience greater
price volatility than adjustable rate mortgage securities that closely mirror
the market.
Caps and Floors. The underlying mortgages which collateralize the ARMS,
CMOs, and REMICs in which the Funds invest will frequently have caps and
floors which limit the maximum amount by which the loan rate to the residential
borrower may change up or down: (1) per reset or adjustment interval, and (2)
over the life of the loan. Some residential mortgage loans restrict periodic
adjustments by limiting changes in the borrower's monthly principal and
interest payments rather than limiting interest rate changes. These payment
caps may result in negative amortization.
The value of mortgage securities in which the Funds invest may be
affected if market interest rates rise or fall faster and farther than the
allowable caps or floors on the underlying residential mortgage loans.
Additionally, even though the interest rates on the underlying residential
mortgages are adjustable, amortization and prepayments may occur, thereby
causing the effective maturities of the mortgage securities in which the
Funds invest to be shorter than the maturities stated in the underlying
mortgages.
Municipal Securities
The Municipal Fixed Income Fund and the Tax-Free Money Market Fund
will invest in municipal securities.
Ratings. The municipal securities in which the Municipal Fixed Income Fund
invests are rated, at the time of purchase, Baa or better by Moody's or BBB or
better by S&P, Fitch, Duff or Bankwatch. (The Tax-Free Money Market Fund
has higher rating requirements, as described in the Prospectus.) In certain
cases the Fund's investment adviser may choose bonds which are unrated if it
determines that such bonds are of comparable quality or have similar
characteristics to investment grade bonds. Bonds rated Baa or BBB have
speculative characteristics. Changes in economic conditions or other
circumstances are more likely to lead to weakened capacity to make principal
and interest payments than higher rated bonds. If the Fund purchases
an investment grade bond, and the rating of such bond is subsequently
downgraded so that the bond is no longer classified as investment grade, the
Fund is not required to drop the bond from the portfolio, but will consider
whether such action is appropriate. A description of the rating categories is
contained in the Appendix to this Statement of Additional Information.
Investment Risks. Yields on municipal securities depend on a variety of
factors, including: the general conditions of the municipal note market and of
the municipal bond market; the size of the particular offering; the maturity of
the obligations; and the rating of the issue. The ability of a Fund to
achieve its investment objective also depends on the continuing ability of
the issuers of municipal securities and participation interests, or the
guarantors of either, to meet their obligations for the payment of interest
and principal when due. Since the Municipal Fixed Income
Fund will invest primarily in municipal securities bearing fixed rates of
interest, the net asset value of its shares will generally vary inversely
with changes in prevailing interest rates.
Concentration. The Municipal Fixed Income Fund will not invest more than
25% of its total assets in any one industry. Governmental issuers of municipal
securities are not considered part of any "industry." However, municipal
securities backed only by the assets and revenues of nongovernmental users
may, for this purpose, be deemed to be related to the industry in which such
nongovernmental users engage, and the 25% limitation would apply to such
obligations. It is nonetheless possible that the Fund may invest more than 25%
of its assets in a broader segment of the municipal securities market, such as
industrial development bonds and revenue obligations of hospitals and other
health care facilities, housing agency revenue obligations, or airport
revenue obligations. This would be the case only if the Fund determines that
the yields available from obligations in a particular segment of the market
justified the additional risks associated with a large investment in such
segment. Although such obligations could be supported by the credit of
governmental users or by the credit of nongovernmental users engaged in a
number of industries, economic, business, political and other developments
generally affecting the revenues of such users (for example, proposed
legislation or pending court decisions affecting the financing of such
projects and market factors affecting the demand for their services or
products) may have a general adverse effect on all municipal securities in
such a market segment.
Participation Interests. The Funds may purchase participation interests
from financial institutions such as commercial banks, savings and loan
associations and insurance companies. These participation interests give the
Fund an undivided interest in one or more underlying municipal securities.
The financial institutions from which the Fund purchases participation
interests frequently provide or obtain irrevocable letters of credit or
guarantees to attempt to assure that the participation interests are of high
quality. These typically give the Fund the right to demand payment of the
principal amounts of the participation interests plus accrued interest on
short notice (usually within seven days).
Municipal Leases. Municipal leases are obligations issued by state and
local governments or authorities to finance the acquisition of equipment and
facilities. They may take the form of a lease, an installment purchase
contract, a conditional sales contract or a participation certificate of any
of the above.
Also included within the general category of municipal securities are
certain lease obligations or installment purchase contract obligations and
participations therein (hereinafter collectively called "lease obligations")
of municipal authorities or entities. Although lease obligations do not
constitute general obligations of the municipality for which the municipality's
taxing power is pledged, a lease obligation is ordinarily backed by the
municipality's covenant to budget for, appropriate and make the payments due
under the lease obligation. Interest on lease obligations is tax-exempt to the
same extent as if the municipality had issued debt obligations to finance the
underlying project or purchase. However, certain lease obligations
contain "non-appropriation" clauses which provide that the municipality has no
obligation to make lease or installment purchase payments in future years
unless money is appropriated for such purpose on a yearly basis. If the
entity does not appropriate funds for the future lease payments, the entity
cannot be compelled to make such payments. Furthermore, a lease may provide
that the certificate trustee cannot accelerate lease obligations upon
default. The trustee would only be able to enforce lease payments as they
became due. In the event of a default or failure of appropriation, it is
unlikely that the trustee would be able to obtain an acceptable substitute
source of payment. The Fund does not intend to invest more than 10% of its
total assets in non-puttable lease obligations that contain "non-
appropriation" clauses.
In addition to the "non-appropriation" risk, these securities represent a
relatively new type of financing that has not yet developed the depth of
marketability associated with more conventional bonds and some lease
obligations may be illiquid. Although "non-appropriation" lease obligations
are generally secured by the leased property, disposition of the property in
the event of foreclosure might prove difficult. In addition, the tax
treatment of such obligations in the event of non-appropriation is unclear.
Some municipal leases may be considered to be illiquid. However, some
municipal leases may contain put provisions which grant the Fund the right to
sell the securities to the issuer at a predetermined price and date. Such
provisions improve the marketability and enhance the liquidity of the security.
In determining the liquidity of municipal lease securities, the Fund's
investment adviser will base its determination on the following factors:
whether the lease can be terminated by the lessee;
the potential recovery, if any, from a sale of the leased property upon
termination of the lease;
the lessee's general credit strength (e.g., its debt,
administrative, economic and financial characteristics and prospects);
the likelihood that the lessee will discontinue appropriating
funding for the leased property because the property is no longer
deemed essential to its operations (e.g., the potential for an
"event of non-appropriation," which the Fund's investment adviser
will continually monitor); and
any credit enhancement or legal recourse provided upon an event of
non-appropriation or other termination of the lease.
Industrial Development Bonds. Industrial development bonds are generally
issued to provide financing aid to acquire sites or construct and equip
facilities for use by privately or publicly owned corporations. Most state
and local governments have the power to permit the issuance of industrial
development bonds to provide financing for such corporations in order to
encourage the corporations to locate within their communities. Industrial
development bonds do not represent a pledge of credit or create any debt of
municipality or a public authority, and no taxes may be levied for payment of
principal or interest on these bonds. The principal and interest is payable
solely out of monies generated by the entities using or purchasing the sites
or facilities. These bonds will be considered municipal securities if the
interest paid on them, in the opinion of bond counsel, is exempt from federal
regular income tax.
Municipal Notes. Municipal securities in the form of notes generally are
used to provide for short-term capital needs, in anticipation of an issuer's
receipt of other revenues or financing, and typically have maturities of up
to three years. Such instruments may include Tax Anticipation Notes, Revenue
Anticipation Notes, Bond Anticipation Notes, Tax and Revenue Anticipation
Notes and Construction Loan Notes. Tax Anticipation Notes are issued to
finance the working capital needs of governments. Generally, they are issued
in anticipation of various tax revenues, such as income, sales, property, use
and business taxes, and are payable from these specific future taxes. Revenue
Anticipation Notes are issued in expectation of receipt of other kinds of
revenue, such as federal revenues available under Federal Revenue Sharing
programs. Bond Anticipation Notes are issued to provide interim financing
until long-term bond financing can be arranged. In most cases, the long-term
bonds then provide the funds needed for repayment of the notes. Tax and
Revenue Anticipation Notes combine the funding sources of both Tax
Anticipation Notes and Revenue Anticipation Notes. Construction Loan Notes
are sold to provide construction financing. These notes are secured by
mortgage notes insured by the Federal Housing Authority; however, the
proceeds from the issuance may be less than the economic equivalent of the
payment of principal and interest on the mortgage note if there has been a
default. The obligations of an issuer of municipal notes are generally
secured by the anticipated revenues from taxes, grants or bond financing. An
investment in such instruments, however, presents a risk that the anticipated
revenues will not be received or that such revenues will be insufficient to
satisfy the issuer's payment obligations under the notes or that refinancing
will be otherwise unavailable.
Pre-Refunded Municipal Securities. The Fund may invest in pre-refunded
municipal securities. The principal of and interest on pre-refunded
municipal securities are no longer paid from the original revenue source for
the municipal securities. Instead, the source of such payments is typically
an escrow fund consisting of obligations issued or guaranteed by the U.S.
Government. The assets in the escrow fund are derived from the proceeds of
refunding bonds issued by the same issuer as the pre-refunded municipal
securities, but usually on more favorable terms. Issuers of municipal
securities use this advance refunding technique to obtain more favorable
terms with respect to municipal securities that are not yet subject to call
or redemption by the issuer. For example, advance refunding enables an
issuer to refinance debt at lower market interest rates, restructure debt to
improve cash flow or eliminate restrictive covenants in the indenture or
other governing instrument for the pre-refunded municipal securities.
However, except for a change in the revenue source from which principal and
interest payments are made, the pre-refunded municipal securities remain
outstanding on their original terms until they mature or are redeemed by the
issuer. The effective maturity of pre-refunded municipal securities will be
the redemption date if the issuer has assumed an obligation or indicated its
intention to redeem such securities on the redemption date. Pre-refunded
municipal securities are usually purchased at a price which represents a
premium over their face value.
Variable and Floating Rate Securities. The interest rates payable on
certain securities in which the Funds may invest are not fixed and may
fluctuate based upon changes in market rates. A variable rate obligation has
an interest rate which is adjusted at predesignated periods. Interest on a
floating rate obligation is adjusted whenever there is a change in the market
rate of interest on which the interest rate payable is based. Variable or
floating rate obligations generally permit the holders of such obligations to
demand payment of principal from the issuer or a third party at any time or
at stated intervals. Variable and floating rate obligations are less
effective than fixed rate instruments at locking in a particular yield.
Nevertheless, such obligations may fluctuate in value in response to interest
rate changes if there is a delay between changes in market interest rates and
the interest reset date for an obligation. The Funds will take demand
features into consideration in determining the average portfolio duration of
the Fund and the effective maturity of individual municipal securities. In
addition, the absence of an unconditional demand feature exercisable within
seven days will, and the failure of the issuer or a third party to honor its
obligations under a demand feature might, require a variable or floating rate
obligation to be treated as illiquid for purposes of a Fund's 15% limitation
on illiquid investments.
Zero Coupon and Capital Appreciation Bonds. Zero coupon and capital
appreciation securities carry the risk that, unlike securities that
periodically pay interest to maturity, the Fund will realize no cash until a
specified future payment date unless a portion of such securities is sold
and, if the issuer of such securities defaults, the Fund may obtain no return
at all on its investment. In addition, even though such securities do not
pay current interest in cash, the Fund is nonetheless required to accrue
income on such investments and may be required to distribute such amounts at
least annually. Because no cash is received at the time of the accrual, the
Fund may be required to liquidate other portfolio securities to satisfy the
Fund's distribution obligations.
Insurance. The Funds may invest in "insured" municipal securities.
Insured municipal securities are those for which scheduled payments of
interest and principal are guaranteed by a private (nongovernmental)
insurance company. The insurance only entitles the Fund to receive the face
or par value of the securities held by the Fund. The insurance does not
guarantee the market value of the municipal securities or the value of the
shares of the Fund.
The Funds may utilize new issue or secondary market insurance. A new
issue insurance policy is purchased by a bond issuer who wishes to increase the
credit rating of a security. By paying a premium and meeting the insurer's
underwriting standards, the bond issuer is able to obtain a high credit rating
(usually, Aaa from Moody's or AAA from Standard & Poor's) for the issued
security. Such insurance is likely to increase the purchase price and resale
value of the security. New issue insurance policies are non-cancellable and
continue in force as long as the bonds are outstanding. A secondary market
insurance policy is purchased by an investor (such as the Fund) subsequent to
a bond's original issuance and generally insures a particular bond for the
remainder of its term. The Funds may purchase bonds which have already been
insured under a secondary market insurance policy by a prior investor, or the
Fund may itself purchase such a policy from insurers for bonds which are
currently uninsured.
An insured municipal security acquired by a Fund will typically be
covered by only one of the above types of policies. All of the insurance
policies used by the Funds will be obtained only from insurance companies
rated, at the time of purchase, Aaa by Moody's or AAA by Standard & Poor's.
Foreign Securities
Each Fund may invest in foreign securities, including foreign securities
not publicly traded in the United States. The Starwood Strategic Fund may
invest without limitation in foreign securities. Each of the other Funds may
invest up to 25% of its total assets in foreign securities. As described in
the Prospectus, investments in foreign securities involve special risks that
differ from those associated with investments in domestic securities.
Emerging and Developing Countries. The risks described in the
Prospectus often are heightened for investments in emerging or developing
countries. Compared to the United States and other developed countries,
emerging or developing countries may have relatively unstable governments,
economies based on only a few industries, and securities markets that trade a
small number of securities. Prices on these exchanges tend to be volatile
and, in the past, securities in these countries have offered a greater
potential for gain (as well as loss) than securities of companies located in
developed countries. Further, investment by foreign investors are subject to
a variety of restrictions in many emerging or developing countries. These
restrictions may take the form of prior governmental approval, limits on the
amount or type of securities held by foreigners, and limits on the type of
companies in which foreigners may invest. Additional restrictions may be
imposed at any time by these and other countries in which a Fund invests. In
addition, the repatriation of both investment income and capital from several
foreign countries is restricted and controlled under certain regulations,
including in some cases the need for certain government consents.
Currency Risks. Foreign securities are denominated in foreign currencies.
Therefore, the value in U.S. dollars of a Fund's assets and income may be
affected by changes in exchange rates and regulations. Although each Fund
values its assets daily in U.S. dollars, it will not convert its holdings of
foreign currencies to U.S. dollars daily. When a Fund converts its holdings
to another currency, it may incur conversion costs. Foreign exchange dealers
realize a profit on the difference between the prices at which they buy and
sell currencies.
A Fund may engage in foreign currency exchange transactions in connection
with its investments in foreign securities. The Fund will conduct its foreign
currency exchange transactions either on a spot (i.e., cash) basis at the
spot rate prevailing in the foreign currency exchange market or through forward
contracts to purchase or sell foreign currencies.
Forward Foreign Currency Exchange Contracts. A forward foreign currency
exchange contract involves an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days from the
date of the contract agreed upon by the parties, at a price set at the time
of the contract. These contracts are traded directly between currency traders
(usually large commercial banks) and their customers. When a Fund enters
into a contract for the purchase or sale of a security denominated in a
foreign currency, it may want to establish the U.S. dollar cost or proceeds,
as the case may be. By entering into a forward contract in U.S. dollars for
the purchase or sale of the amount of foreign currency involved in an
underlying security transaction, the Fund is able to protect itself against a
possible loss between trade and settlement dates resulting from an adverse
change in the relationship between the U.S. dollar and such foreign currency.
However, this tends to limit potential gains which might result from a
positive change in such currency relationships.
A Fund will not enter into forward foreign currency exchange contracts or
maintain a net exposure in such contracts where the Fund would be obligated to
deliver an amount of foreign currency in excess of the value of the Fund's
securities or other assets denominated in that currency or denominated in a
currency or currencies that the adviser believes will reflect a high degree of
correlation with the currency with regard to price movements. The Fund
generally will not enter into forward foreign currency exchange contracts with
a term longer than one year.
Foreign Currency Options. A foreign currency option provides the option
buyer with the right to buy or sell a stated amount of foreign currency at the
exercise price on a specified date or during the option period. The owner of a
call option has the right, but not the obligation, to buy the currency.
Conversely, the owner of a put option has the right, but not the obligation, to
sell the currency. When the option is exercised, the seller (i.e., writer)
of the option is obligated to fulfill the terms of the sold option. However,
either the seller or the buyer may, in the secondary market, close its
position during the option period at any time prior to expiration.
A call option on foreign currency generally rises in value if the
underlying currency appreciates in value, and a put option on foreign
currency generally falls in value if the underlying currency depreciates in
value. Although purchasing a foreign currency option can protect a Fund
against an adverse movement in the value of a foreign currency, the option
will not limit the movement in the value of such currency. For example, if
the Fund was holding securities denominated in a foreign currency that was
appreciating and had purchased a foreign currency put to hedge against a
decline in the value of the currency, the Fund would not have to exercise
their put option. Likewise, if the Fund were to enter into a contract to
purchase a security denominated in foreign currency and, in conjunction with
that purchase, were to purchase a foreign currency call option to hedge
against a rise in value of the currency, and if the value of the currency
instead depreciated between the date of purchase and the settlement date, the
Fund would not have to exercise its call. Instead, the Fund could acquire in
the spot market the amount of foreign currency needed for settlement.
Buyers and sellers of foreign currency options are subject to the same
risks that apply to options generally. In addition, there are certain
additional risks associated with foreign currency options. The markets in
foreign currency options are relatively new, and a Fund's ability to
establish and close out positions on such options is subject to the
maintenance of a liquid secondary market. Although a Fund will not purchase
or write such options unless and until, in the opinion of the Fund's
investment adviser, the market for them has developed sufficiently to ensure
that the risks in connection with such options are not greater than the risks
in connection with the underlying currency, there can be no assurance that a
liquid secondary market will exist for a particular option at any specific
time. In addition, options on foreign currencies are affected by all of
those factors that influence foreign exchange rates and investments
generally. Foreign currency options that are considered to be illiquid are
subject to each Fund's 15% limitation on illiquid securities.
The value of a foreign currency option depends upon the value of the
underlying currency relative to the U.S. dollar. As a result, the price of the
option position may vary with changes in the value of either or both currencies
and may have no relationship to the investment merits of a foreign security.
Because foreign currency transactions occurring in the interbank market involve
substantially larger amounts than those that may be involved in the use of
foreign currency options, investors may be disadvantaged by having to deal in
an odd lot market (generally consisting of transactions of less than $1
million) for the underlying foreign currencies at prices that are less
favorable than for round lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis.
Available quotation information is generally representative of very large
transactions in the interbank market and thus may not reflect relatively
smaller transactions (i.e., less than $1 million) where rates may be less
favorable. The interbank market in foreign currencies is a global, around-
the-clock market. To the extent that the U.S. option markets are closed
while the markets for the underlying currencies remain open, significant
price and rate movements may take place in the underlying markets that cannot
be reflected in the options markets until they reopen.
Foreign Bank Instruments
Each Fund may invest in foreign bank instruments, including Eurodollar
Certificates of Deposit ("ECDs"), Eurodollar Time Deposits ("ETDs"), Yankee
Certificates of Deposit ("Yankee CDs"), and Europaper. These instruments are
subject to somewhat different risks than domestic obligations of domestic
issuers. Examples of these risks include international, economic and political
developments, foreign governmental restrictions that may adversely affect the
payment of principal or interest, foreign withholdings or other taxes on
interest income, difficulties in obtaining or enforcing a judgment against
the issuing bank, and the possible impact of interruptions of the flow of
international currency transactions. Different risks may also exist for
ECDs, ETDs, and Yankee CDs because the banks issuing these instruments, or
their domestic or foreign branches, are not necessarily subject to the same
regulatory requirements that apply to domestic banks, such as reserve
requirements, loan requirements, loan limitations, examinations, accounting,
auditing, and recording keeping and the public availability of information.
These factors will be carefully considered by a Fund's adviser in selecting
investments for the Fund.
U.S. Government Securities
Each Fund may invest in obligations issued or guaranteed by the U.S.
government and its agencies, authorities or instrumentalities. Some U.S.
government securities, such as Treasury bills, notes and bonds, which differ
only in their interest rates, maturities and times of issuance, are supported
bythe full faith and credit of the United States of America. Others, such
as obligations issued or guaranteed by U.S. government agencies, authorities or
instrumentalities, are supported either by (a) the full faith and credit of
the U.S. government (such as securities of the Small Business
Administration), (b) the right of the issuer to borrow from the Treasury
(such as securities of Federal Home Loan Banks), (c) the discretionary
authority of the U.S. government to purchase the agency's obligations (such
as securities of the Federal National Mortgage Association), or (d) only the
credit of the issuer (such as securities of the Financing Corporation). The
U.S. government is under no legal obligation to purchase the obligations of
its agencies, authorities and instrumentalities. Securities guaranteed as to
principal and interest by the U.S. government and its agencies, authorities
or instrumentalities are deemed to include (i) securities for which the
payment of principal and interest is based by a guaranty of the U.S.
government or its agencies, authorities or instrumentalities, and (ii)
participations in loans made to foreign governments or their agencies that
are so guaranteed. The secondary market for certain of these participations
is limited. Such participations may therefore be regarded as illiquid.
Options
Each Fund (other than the money market Funds) may attempt to hedge all or
a portion of its portfolio by buying put options on portfolio securities.
These Funds may also write covered call options on portfolio securities to
attempt to increase their current income. Each Fund currently does not
intend to invest more than 5% of its net assets in premiums on options
transactions.
Purchasing Put Options on Portfolio Securities. A Fund may purchase put
options on portfolio securities to protect against price movements in
particular securities in its portfolio. A put option gives the Fund, in
return for a premium, the right to sell the underlying security to the writer
(seller) at a specified price during the term of the option.
Writing Covered Call Options on Portfolio Securities. A Fund may also
write covered call options to generate income. As writer of a call option, the
Fund has the obligation upon exercise of the option during the option period to
deliver the underlying security upon payment of the exercise price. The Fund
may only sell call options either on securities held in its portfolio or on
securities which it has the right to obtain without payment of further
consideration (or has segregated cash in the amount of any additional
consideration).
Purchasing and Writing Over-The-Counter Options. A Fund may purchase
and write over-the-counter options on portfolio securities in negotiated
transactions with the buyers or writers of the options for those options on
portfolio securities held by the Fund and not traded on an exchange.
Over-the-counter options are two party contracts with price and terms
negotiated between buyer and seller. In contrast, exchange-traded options are
third party contracts with standardized strike prices and expiration dates
and are purchased from a clearing corporation. Exchange-traded options have a
continuous liquid market while over-the-counter options may not.
Financial Futures and Options on Financial Futures
Each Fund (other than the money market Funds) may purchase and sell
financial futures contracts to hedge all or a portion of its portfolio against
changes in interest rates. However, none of the Funds intends to do so during
the current fiscal year. Financial futures contracts call for the delivery of
particular debt instruments at a certain time in the future. The seller of
the contract agrees to make delivery of the type of instrument called for in
the contract and the buyer agrees to take delivery of the instrument at the
specified future time.
Each Fund (other than the money market Funds) may also write call options
and purchase put options on financial futures contracts as a hedge to attempt
to protect securities in its portfolio against decreases in value. However,
none of the Funds intends to do so during the current fiscal year. When a
Fund writes a call option on a futures contract, it is undertaking the
obligation of selling a futures contract at a fixed price at any time during
a specified period if the option is exercised. Conversely, as purchaser of a
put option on a futures contract, the Fund is entitled (but not obligated) to
sell a futures contract at the fixed price during the life of the option.
No Fund may purchase or sell futures contracts or related options if
immediately thereafter the sum of the amount of margin deposits on the Fund's
existing futures positions and premiums paid for related options would exceed
5% of the market value of the Fund's total assets. When a Fund purchases a
futures contract, an amount of cash and cash equivalents, equal to the
underlying commodity value of the futures contract (less any related margin
deposits), will be deposited in a segregated account with the Fund's custodian
(or the broker, if legally permitted) to collateralize the position and thereby
insure that the use of such futures contract is unleveraged.
Risks. When a Fund uses financial futures and options on financial
futures as hedging devices, there is a risk that the prices of the securities
subject to the futures contracts may not correlate perfectly with the prices
of the securities in the Fund's portfolio. This may cause the futures
contracts and any related options to react differently than the portfolio
securities to market changes. In addition, the Fund's investment adviser
could be incorrect in its expectations about the direction or extent of
market factors such as interest rate movements. In these events, the Fund
may lose money on the futures contracts or options. It is not certain that a
secondary market for positions in futures contracts or for options will exist
at all times. Although the investment adviser will consider liquidity before
entering into options transactions, there is no assurance that a liquid
secondary market on an exchange or otherwise will exist for any particular
futures contract or option at any particular time. The Fund's ability to
establish and close out futures and options positions depends on this secondary
market.
Weighted Average Portfolio Duration
The Taxable Fixed Income Fund and the Municipal Fixed Income Fund will
seek to limit, to the extent consistent with the Fund's investment objective of
current income, the magnitude of fluctuations in the Fund's net asset value by
limiting the dollar-weighted average duration of the Fund's portfolio as set
forth in the Prospectus. Duration is a commonly used measure of the potential
volatility of the price of a debt security, or the aggregate market value of a
portfolio of debt securities, prior to maturity. Securities with shorter
durations generally have less volatile prices than securities of comparable
quality with longer durations. A Fund should be expected to maintain a
higher average duration during periods of lower expected market volatility,
and a lower average duration during periods of higher expected market
volatility.
Duration measures the magnitude of the change in the price of a debt
security relative to a given change in the market rate of interest. The
duration of a debt security depends upon three primary variables: the
security's coupon rate, maturity date and the level of market interest rates
for similar debt securities. Generally, debt securities with lower coupons
or longer maturities will have a longer duration than securities with higher
coupons or shorter maturities.
Duration is calculated by dividing the sum of the time-weighted values of
cash flows of a security or portfolio of securities, including principal and
interest payments, by the sum of the present values of the cash flows.
Certain debt securities, such as asset-backed securities, may be subject to
prepayment at irregular intervals. The duration of these instruments will be
calculated based upon assumptions established by the investment adviser as to
the probable amount and sequence of principal prepayments.
Credit Enhancement
Certain of the Funds' investments may have been credit enhanced by a
guaranty, letter of credit or insurance. The Funds typically evaluate the
credit quality and ratings of credit enhanced securities based upon the
financial condition and ratings of the party providing the credit enhancement
(the "credit enhancer"), rather than the issuer. Generally, a Fund will not
treat credit enhanced securities as having been issued by the credit enhancer
for diversification purposes. However, under certain circumstances applicable
regulations may require the Fund to treat the securities as having been
issued by both the issuer and the credit enhancer. The bankruptcy,
receivership or default of the credit enhancer will adversely affect the
quality and marketability of the underlying security.
Demand Features
The Funds may acquire securities that are subject to puts and standby
commitments ("demand features") to purchase the securities at their principal
amount (usually with accrued interest) within a fixed period following a demand
by the Fund. The demand feature may be issued by the issuer of the underlying
securities, a dealer in the securities or by another third party, and may not
be transferred separately from the underlying security. A Fund uses these
arrangements to provide the Fund with liquidity and not to protect against
changes in the market value of the underlying securities. The bankruptcy,
receivership or default by the issuer of the demand feature, or a default on
the underlying security or other event that terminates the demand feature
before its exercise, will adversely affect the liquidity of the underlying
security. Demand features that are exercisable even after a payment default
on the underlying security are treated as a form of credit enhancement.
When-Issued and Delayed Delivery Transactions
These transactions are arrangements in which a Fund purchases securities
with payment and delivery scheduled for a future time. The Fund engages in
when-issued and delayed delivery transactions only for the purpose of acquiring
portfolio securities consistent with the Fund's investment objective and
policies, and not for investment leverage.
These transactions are made to secure what is considered to be an
advantageous price and yield for the Fund. Settlement dates may be a month or
more after entering into these transactions, and the market values of the
securities purchased may vary from the purchase prices.
No fees or other expenses, other than normal transaction costs, are
incurred. However, liquid assets of the Fund sufficient to make payment for
the securities to be purchased are segregated at the trade date. These
securities are marked to market daily and are maintained until the
transaction is settled. Each Fund may engage in these transactions to an
extent that would cause the segregation of an amount up to 25% of the value
of its net assets.
Lending of Portfolio Securities
The collateral received when a Fund lends portfolio securities must be
valued daily and, should the market value of the loaned securities increase,
the borrower must furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any dividends or
interest paid on such securities. Loans are subject to termination at the
option of the Fund or the borrower. The Fund may pay reasonable
administrative and custodial fees in connection with a loan and may pay a
negotiated portion of the interest earned on the cash or equivalent
collateral to the borrower or placing broker.
Selling Securities Short
The Starwood Strategic Fund may sell securities short. When the Fund
makes a short sale, it must leave the proceeds from the short sale with the
broker and it must also deposit with the broker a certain amount of cash or
government securities to collateralize its obligation to replace the borrowed
securities which have been sold. In addition, the Fund must put in a
segregated account (not with the broker) an amount of cash or U.S.
government securities equal to the difference between the market value of the
securities sold short at the time they were sold short and any cash or
government securities deposited as collateral with the broker in connection
with the short sale (not including the proceeds from the short sale). In
addition, until the Fund replaces the borrowed security, it will daily
maintain the segregated account at a level so that the amount deposited in
the account plus the amount deposited with the broker (not including the
proceeds from the short sale) will equal the greater of (a) the current
market value of the securities sold short and (b) the market value of the
securities at the time they were sold short. As a result of these
requirements, the Fund will not gain any leverage merely by selling short,
except to the extent that it earns interest on the immobilized cash or
government securities while also being subject to the possibility of gain or
loss from the securities sold short. The Fund may sell securities short to
the extent that would cause the amounts on deposits or segregated to equal
25% of the value of its net assets.
Restricted and Illiquid Securities
The ability of the Trustees to determine the liquidity of certain
restricted securities is permitted under the Securities and Exchange
Commission ("SEC") Staff position set forth in the adopting release for Rule
144A under the Securities Act of 1933 (the "Rule"). The Rule is a non-
exclusive safe harbor for certain secondary market transactions involving
securities subject to restrictions on resale under federal securities laws.
The Rule provides an exemption from registration for resales of otherwise
restricted securities to qualified institutional buyers. The Rule was
expected to further enhance the liquidity of the secondary market for
securities eligible for resale under Rule 144A. The Trust believes that the
Staff of the SEC has left the question of determining the liquidity of all
restricted securities eligible for resale under Rule 144A to the Trustees.
The Trustees consider the following criteria in determining the liquidity of
certain restricted securities:
the frequency of trades and quotes for the security;
the number of dealers willing to purchase or sell the security and
the number of other potential buyers;
dealer undertakings to make a market in the security; and
the nature of the security and the nature of the marketplace trades.
Repurchase Agreements
The Funds require the Custodian to take possession of the securities
subject to repurchase agreements, and these securities are marked to market
daily. To the extent that the original seller does not repurchase the
securities from a Fund, the Fund could receive less than the repurchase price
on any sale of such securities. In the event that a defaulting seller files
for bankruptcy or becomes insolvent, disposition of securities by the Fund
might be delayed pending court action. The Funds believe that under the
regular procedures normally in effect for custody of the Funds' portfolio
securities subject to repurchase agreements, a court of competent
jurisdiction would rule in favor of the Fund and allow retention or
disposition of such securities. A Fund will only enter into repurchase
agreements with banks and other recognized financial institutions such as
broker/dealers which are deemed by the Fund's adviser to be creditworthy
pursuant to guidelines established by the Directors.
Reverse Repurchase Agreements
When effecting reverse repurchase agreements, liquid assets of the Fund,
in a dollar amount sufficient to make payment for the obligations to be
purchased, are segregated at the trade date. These securities are marked to
market daily and are maintained until the transaction is settled.
Portfolio Turnover
The Funds will not attempt to set or meet a portfolio turnover rate since
any turnover would be incidental to transactions undertaken in an attempt to
achieve a Fund's investment objective, without regard to the length of time a
particular security may have been held. The Adviser does not anticipate that
portfolio turnover will result in adverse tax consequences.
INVESTMENT LIMITATIONS
Except with respect to borrowing money, if a percentage limitation set
forth in the following investment limitations is adhered to at the time of the
investment, a later increase or decrease in percentage resulting from any
change in value or net assets will not result in a violation of such
limitation.
Selling Short and Buying on Margin
The Funds will not sell securities short or purchase securities on margin,
except that (a) the Starwood Strategic Fund may sell securities short to the
extent that would cause amounts on deposits or segregated as a result thereof
to equal 25% of the value of its net assets, (b) the Funds (other than the
Taxable Money Market Fund and the Tax-Free Money Market Fund may
purchase securities on margin in connection with the purchase and sale of
options, financial futures and options on financial futures, and (c) all
Funds may obtain such short-term credits as are necessary for clearance of
transactions.
Issuing Senior Securities and Borrowing Money
The Funds will not issue senior securities except as required by forward
commitments to purchase securities or currencies and except that each Fund
may borrow money and engage in reverse repurchase agreements in amounts up
to one-third of the value of its total assets, including the amounts borrowed.
The Funds (other than the Starwood Strategic Fund) will not borrow money or
engage in reverse repurchase agreements for investment leverage, but rather as
a temporary, extraordinary, or emergency measure or to facilitate management
of the portfolio by enabling the Fund to meet redemption requests when the
liquidation of portfolio securities is deemed to be inconvenient or
disadvantageous. Each Fund (other than the Starwood Strategic Fund) will not
purchase any securities while borrowings in excess of 5% of its total assets
are outstanding. During the period any reverse repurchase agreements are
outstanding, but only to the extent necessary to assure completion of the
reverse repurchase agreements, the Funds will restrict the purchase of
portfolio instruments to money market instruments maturing on or before the
expiration date of the reverse repurchase agreements.
Pledging Assets
The Funds will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings. In those cases, a Fund may pledge assets having
a market value not exceeding the lesser of the dollar amounts borrowed or 15%
of the value of total assets at the time of the borrowing. Margin deposits for
the purchase and sale of options, financial futures contracts and related
options are not deemed to be a pledge.
Diversification of Investments
With respect to securities comprising 75% of the value of its total assets
(100% in the case of the Taxable Money Market Fund), each Fund will not
purchase securities of any one issuer (other than cash, cash items, securities
issued or guaranteed by the government of the United States or its agencies or
instrumentalities and repurchase agreements collateralized by U.S. government
securities, and securities of other investment companies) if as a result more
than 5% of the value of its total assets would be invested in the securities
of that issuer or the Fund would own more than 10% of the outstanding voting
securities of that issuer.
Investing in Real Estate
The Funds will not buy or sell real estate, including limited partnership
interests in real estate, although it may invest in securities of companies
whose business involves the purchase or sale of real estate or in securities
which are secured by real estate or interests in real estate.
Investing in Commodities
The Funds will not purchase or sell commodities, except that the Funds
(other than the Taxable Money Market Fund and the Tax-Free Money Market
Fund) may purchase and sell financial futures contracts and related options.
Further, the Funds may engage in transactions in foreign currencies and may
purchase and sell options on foreign currencies and indices for hedging
purposes.
Underwriting
The Funds will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in connection
with the sale of restricted securities which a Fund may purchase pursuant to
its investment objective, policies, and limitations.
Lending Cash or Securities
Each Fund will not lend any of its assets, except portfolio securities up
to one-third of the value of its total assets. This shall not prevent a Fund
from purchasing or holding U.S. government obligations, money market
instruments, variable rate demand notes, bonds, debentures, notes,
certificates of indebtedness, or other debt securities, entering into
repurchase agreements, or engaging in other transactions where permitted by
the Fund's investment objective, policies and limitations.
Concentration of Investments
Each Fund will not invest 25% or more of the value of its total assets in
any one industry or in government securities of any one foreign country,
except that (i) each Fund may invest without limitation in securities issued
or guaranteed by the U.S. government, its agencies or instrumentalities, (ii)
each of the Aggressive Growth Fund and the Asset Allocation Fund may invest
without limitation in other investment companies and (iii) each of the Taxable
Money Market Fund and the Tax-Free Money Market Fund may invest without
limitation in domestic bank instruments. Governmental issuers of municipal
securities are not considered part of any "industry." Each of the Municipal
Fixed Income Fund and the Tax-Free Money Market Fund may invest more
than 25% of the value of its total assets in a broader segment of the
municipal securities market, such as revenue obligations of hospitals and other
health care facilities, housing agency revenue obligations, or airport revenue
obligations.
The foregoing investment limitations cannot be changed without shareholder
approval. The following limitations, however, may be changed by the Board of
Trustees without shareholder approval. Shareholders will be notified before
any material change in these limitations becomes effective.
Investing in Restricted Securities
Each Fund will not invest more than 10% of the value of its total assets in
securities subject to restrictions on resale under the Securities Act of 1933,
except for commercial paper issued under Section 4(2) of the Securities Act of
1933 and certain other restricted securities which meet the criteria for
liquidity as established by the Trustees.
Investing in Illiquid Securities
Each Fund will not invest more than 15% of the value of its net assets (10%
in the case of the money market Funds) in illiquid securities, including
repurchase agreements providing for settlement in more than seven days after
notice, over-the-counter options, certain foreign currency options, and certain
securities not determined by the Trustees to be liquid.
Investing in New Issuers
Each Fund will not invest more than 5% of the value of its total assets in
securities of companies, including their predecessors, that have been in
operation for less than three years. With respect to asset-backed
securities, the Funds will treat the originator of the asset pool as the
company issuing the security for purposes of determining compliance with this
limitation. Each of the Municipal Fixed Income Fund and the Tax-Free Money
Market Fund will not invest more than 5% of the value of its total assets in
industrial development bonds where the principal and interest are the
responsibility of companies (or guarantors, where applicable) with less than
three years of continuous operations, including the operations of any
predecessor.
Investing in Issuers whose Securities are Owned by Officers and
Trustees
Each Fund will not purchase or retain the securities of any issuer if the
officers and Trustees of the Trust or its investment adviser owning
individually more than 1/2 of 1% of the issuer's securities together own more
than 5% of the issuer's securities.
Investing in Minerals
The Funds will not purchase or sell oil, gas, or other mineral
exploration or development programs or leases, although they may purchase the
securities of issuers which invest in or sponsor such programs.
Investing in Warrants
Each Fund (other than the Taxable Money Market Fund and the Tax-Free
Money Fund) may invest up to 5% of its total assets in warrants, including
those acquired in units or attached to other securities. To comply with
certain state restrictions, each Fund will limit its investments in such
warrants not listed on the New York or American Stock Exchanges to 2% of its
net assets. (If state restrictions change, this latter restriction may be
revised without notice to shareholder.) For purposes of this investment
restriction, warrants will be valued at the lower of cost or market, except
that warrants acquired by a Fund in units with or attached to securities may
be deemed to be without value.
Investing in Securities of Other Investment Companies
Each Fund will limit its investments in other investment companies to no
more than 3% of the total outstanding voting securities of any one investment
company, will invest no more than 5% of its total assets in any one investment
company, and will invest no more than 10% of its total assets in investment
companies in general, except that each of the Aggressive Growth Fund and the
Asset Allocation Fund may invest of up to 25% of its total assets in any one
investment company and up to 100% of its total assets in investment companies
in general, subject to the other limitations described herein. The foregoing
limitations are not applicable to investment company securities acquired as
part of a merger, consolidation, reorganization or other acquisition.
Dealing in Puts and Calls
Each Fund (other the Taxable Money Market Fund and the Tax-Free Money
Market Fund) may write covered call options and secured put options on up to
25% of its net assets and may purchase put and call options, provided that no
more than 5% of the fair market value of its net assets may be invested in
premiums on such options.
MANAGEMENT OF THE TRUST
Trustees and Officers of the Trust
Trustees and officers of the Trust, together with information as to their
principal business occupations during at least the last five years, are shown
below. Each Trustee who is an "interested person" of the Trust, as defined in
the Investment Company Act of 1940, is indicated by an asterisk.
Positions with the Trust
Name, Address and Age and Principal Occupation
* Timothy L. Ashburn (44) Trustee (Chairman of the Board) and
429 N. Pennsylvania St. President of the Trust; Chairman
Indianapolis, IN 46204 of the Board and President, Vintage
Advisers, Inc.(December 1994 to present);
Chairman of the Board, Unified
Corporation, Unified Management
Corporation and Unified Advisers, Inc.
(December 1989 to present); Trust Division
Manager and Senior Trust Officer, Vine
Street Trust Company (July 1991 to April
1994).
Charles H. Binger (38) Trustee of the Trust; Partner, Thompson &
One Merchantile Center Mitchell (1987 to present).
Suite 3300
St. Louis, MO 63101
Daniel J. Condon (44) Trustee of the Trust; Vice President and
101 Carley Court Officer, International Crankshaft Inc.
Georgetown, KY 40324 (1990 to present); General Manager, Van
Leer Containers, Inc. (1988 through 1990).
Philip L. Conover (48) Trustee of the Trust; Adjunct Professor of
888 Blvd. of the Arts #1606 Finance, University of South Florida
Sarasota, FL 34236 (August 1994 to present); Managing
Director and Chief Operating Officer,
Federal Housing Finance Board (November
1990 through April 1994); President and
CEO, Trustcorp Bank (February 1989 through
November 1990).
* Jack R. Orben (56) Trustee of the Trust; Chairman and CEO,
40 Wall St. Associated Family Services (January 1980
New York, NY 10005 to present); Chairman and CEO, Starwood
Corporation (March 1984 to present);
Chairman, Fiduciary Counsel, Inc. (April
1979 to present); Chairman, Estate
Management Company (January 1978 present).
Thomas G. Napurano Treasurer of the Trust; Chief Financial
429 N. Pennsylvania St. Officer, Vintage Advisers, Inc. (January
Indianapolis, IN 46204 1995 to present; Senior Vice President and
Chief Financial Officer of Unified
Corporation, Unified Management
Corporation and Unified Advisers, Inc.
Lynn. E. Wood Secretary of the Trust; Chief Operating
429 N. Pennsylvania St. Officer, Vintage Advisers, Inc. (January
Indianapolis, IN 46204 1995 to present): President and Chief
Operating Officer, Unified Corporation,
Unified Management Corporation and Unified
Advisers, Inc. (July 1993 to present);
Vice President and Managing Director,
Unified Management Corporation (January
1990 to July 1993).
The Board of Trustees has appointed an Executive Committee composed of
Trustees Ashburn, Conover and Orben. The Executive Committee has all of
the authority of the Board of Trustees except that, without further
authorization by resolution of the Board of Trustees, the Executive Committee
does not have the authority to (i) authorize dividends or other
distributions, (ii) approve or propose to shareholders any action required to
be approved by shareholders under the Trust's Declaration of Trust, By-Laws or
applicable law, (iii) fill vacancies on the Board of Trustees or on any of its
committees, (iv) amend the Trust's Declaration of Trust or By-Laws,
(v) approve any plan of merger involving, or any sale of substantially all the
assets of, any fund of the Trust, whether or not requiring shareholder approval
or (vi) authorize or approve the issuance or sale or a contract for sale of
shares of the Trust.
The Trust pays each Trustee who is not an "interested person" of the Trust
a fee of $2,000 for each meeting of the Board of Trustees attended. In
addition, the Trust reimburses these Trustees for reasonable expenses
incurred in connection with attendance at such meetings.
No executive officer of the Trust receives annual aggregate
compensation from the Trust in excess of $60,000, and no Trustee or executive
officer of the Trust receives any pension or retirement benefits from the
Trust. The table sets forth the estimated total compensation payable by the
Trust during the fiscal year ending September 30, 1996, to each of its
Trustees, all of which consists of the meeting fees referred to above.
Compensation Table
Name of Trustee Total Compensation
Timothy L. Ashburn $8,000
Charles H. Binger 8,000
Daniel J. Condon 8,000
Philip L. Conover 8,000
Jack R. Orben 8,000
Fund Ownership
At September 30, 1995, the Adviser owned more than 25% of outstanding
shares of each of the Aggressive Growth Fund, the Asset Allocation Fund, the
Taxable Fixed Income Fund, the Municipal Fixed Income Fund and the Tax-Free
Money Market Fund. At that date, no other person was known to the Trust to
own of record five percent or more of the outstanding shares of any of the
Funds. The Trust's Trustees and officers as a group own less that 1% of the
outstanding shares of each Fund.
INVESTMENT ADVISORY ARRANGEMENTS
Investment Adviser
The Trust's investment adviser is Vintage Advisers, Inc. (the "Adviser").
Timothy L. Ashburn, Chairman of the Board and President of the Trust, is the
Chairman of the Board and President of the Adviser, and owns 25% of the
Adviser's outstanding voting securities. Jack R. Orben, Trustee of the
Trust, is a director and Secretary of the Adviser and owns 25% of the Adviser's
outstanding voting securities. Thomas G. Napurano, Treasurer of the Trust, is
the Executive Vice President and Chief Financial Officer of the Adviser. Lynn
E. Wood, Secretary of the Trust, is a director and Executive Vice President and
Chief Operating Officer of the Adviser.
Sub-Advisers
Fiduciary Counsel, Inc. ("Fiduciary Counsel") is the sub-adviser to each of
the Fiduciary Value Fund, the Taxable Fixed Income Fund, the Municipal Fixed
Income Fund, the Taxable Money Market Fund, and the Tax-Free Money
Market Fund. Starwood Corporation, a wholly owned subsidiary of Fiduciary
Counsel, is the sub-adviser of the Starwood Strategic Fund. Each of Fiduciary
Counsel and Starwood Corporation (the "Sub-Advisers") is a wholly
owned subsidiary of Associated Family Services, Inc. ("AFS"). Jack R. Orben,
Trustee of the Trust, is Chairman and CEO of each of Fiduciary Counsel,
Starwood Corporation and AFS. Mr. Orben owns 33% of the outstanding
voting securities of AFS.
Advisory Fees
For their advisory services, the Adviser and each Sub-Adviser receives
an annual investment advisory fee as described in the Prospectus. During the
period from June 2, 1995 (commencement of operations) through September
30, 1995, the Adviser waived its entire investment advisory fee with respect to
each Fund. The Sub-Advisers were not paid any sub-advisory fees during that
period.
The Adviser has undertaken to comply with the expense limitation
established by certain states for investment companies whose shares are
registered for sale in those states. If a Fund's operating expenses exceed
this expense limitation, the investment advisory fee will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be waived by the Adviser will be
limited, in any single fiscal year, by the amount of the investment advisory
fee.
DISTRIBUTION ARRANGEMENTS
Rule 12b-1 under the Investment Company Act of 1940 describes the
circumstances under which an investment company such as the Trust may,
directly or indirectly, bear the expenses of distributing its shares. The Rule
defines such distribution expenses to include the cost of any activity which is
primarily intended to result in the sale of Trust shares.
The Trust has adopted a Distribution Plan with respect to each of the eight
Funds. Pursuant to this Plan, the Funds are authorized to incur distribution
expenses including those incurred in connection with preparing and distributing
sales literature and advertising, preparing, printing and distributing
prospectuses and statements of additional information used for other than
regulatory purposes or distribution to existing shareholders, implementing
and operating the Plan, and compensating third parties for their distribution
services. Distribution expenses attributable to a particular Fund are borne
by that Fund. Distribution expenses which are not readily identifiable as
attributable to a particular Fund are allocated among the Funds based on the
relative size of their average net assets.
Each Fund may expend annually up to 0.10% of the Fund's average daily net
assets pursuant to the Plan. A report of the amounts so expended by each Fund
and the purpose of the expenditures must be made to and reviewed by the
Board of Trustees at least quarterly. In addition, the Plan may not be amended
to increase materially the costs which any Fund may bear for distribution
pursuant to the Plan without approval of the amendment by the shareholders
of the affected Fund.
The Board of Trustees expects that the adoption of the Plan will
result in the sale of a sufficient number of shares so as to allow the Funds
to achieve economic viability. It is also anticipated that an increase in
the size of each Fund will facilitate more efficient portfolio management and
assist the Fund in seeking to achieve its investment objective.
During the period from June 2, 1995 to September 30, 1995, no
amounts were expended under the Distribution Plan by any Fund, except that
the Taxable Money Market Fund expended $100 for compensation to dealers.
ADMINISTRATIVE SERVICES ARRANGEMENTS
The Trust has adopted a Shareholders Services Plan (the "Services
Plan") with respect to each Fund. Pursuant to the Services Plan, the Funds are
authorized to incur annual expenses of up to 0.15% of their average daily net
assets for administrative support services provided their shareholders. Such
expenses may include costs and expense incurred by third parties
for administrative services to the Funds' shareholders, including answering
shareholder inquiries, maintenance of shareholder accounts, performing sub
accounting, obtaining taxpayer identification number certificates from
shareholders, personnel whose time is attributable to servicing the
shareholders of the Funds, and the provision of personal services to
shareholders. During the period from June 2, 1995 to September 30, 1995, no
amounts were expended under the Services Plan by any Fund.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, a Fund's investment adviser looks for prompt execution
of the order at a favorable price. In working with dealers, the adviser will
generally use those who are recognized dealers in specific portfolio
instruments, except when a better price and execution of the order can be
obtained elsewhere. The Adviser and the respective Sub-Advisers make
decisions on portfolio transactions and selects brokers and dealers subject
to review by the Board of Trustees.
The Adviser and Sub-Advisers may select brokers and dealers who offer
brokerage and research services. These services may be furnished directly to
the Fund or to the Adviser and Sub-Advisers and may include advice as to the
advisability of investing in securities, security analysis and reports,
economic studies, industry studies, receipt of quotations for portfolio
evaluations and similar services.
Research services provided by brokers may be used by the Adviser and
Sub-Advisers in advising the Fund's and other clients. To the extent that
receipt of these services may supplant services for which the Adviser or the
Sub-Advisers might otherwise have paid, it would tend to reduce their
expenses. During the period from June 2, 1995 to September 30, 1995, the
Adviser did not direct any brokerage transactions to brokers because of
research services provided.
During the period from June 2, 1995 to September 30, 1995, no Fund
paid any brokerage commissions to the Distributor.
PURCHASE AND REDEMPTION
Terms of Purchase
The Trust reserves the right to reject any purchase order and to change the
amount of the minimum initial and subsequent investments in the Funds upon
notice.
Reopening an Account
A shareholder may reopen a closed account with a minimum investment of
$1,000 without filing a new account application, during the calendar year the
account is closed or during the following calendar year, provided that the
information on the existing account application remains correct.
Redemption in Kind
The Trust has committed to pay in cash all redemption requests by a
shareholder of record, limited in amount during any 90-day period up to the
lesser of $250,000 or 1% of the value of the particular Fund's net assets at
the beginning of such period. Such commitment is irrevocable without the prior
approval of the Securities and Exchange Commission. In the case of
requests for redemption in excess of such amount, the Board of Trustees
reserves the right to make payments in whole or in part in securities or other
assets of the particular Fund. In this event, the securities would be valued
in the same manner as the particular Fund's net asset value is determined.
If the recipient sold such securities, brokerage charges would be incurred.
Suspension of Redemptions
The right of redemption may be suspended or the date of payment postponed
(a) during any period when the New York Stock Exchange is closed, (b) when
trading in the markets the particular Fund normally uses is restricted, or when
an emergency exists as determined by the Securities and Exchange Commission
so that disposal of the particular Fund's investments or determination of its
net asset value is not reasonably practicable, or (c) for such other periods
as the Securities and Exchange Commission by order may permit to protect the
particular Fund's shareholders.
DETERMINATION OF NET ASSET VALUE
The methods and days on which net asset value is calculated by each Fund
are described in the Prospectus.
Valuation of Portfolio Securities
Portfolio securities owned by a Fund and listed or traded on any national
securities exchange are valued on the basis of the last sale on such exchange
each day the exchange is open for business. Securities not listed on an
exchange or national securities market, or securities in which there were no
transactions, are valued at the average of the most recently reported bid
and asked prices. Bid price is used when no asked price is available. Options
are valued at the last sales price on an exchange. Options for which there
were no transactions are valued at the average of the most recently reported
bid and asked prices. Money market instruments (certificates of deposit,
commercial paper, etc.) are valued at amortized cost if not materially
different from market value. Portfolio securities for which market
quotations are not readily available are to be valued in good faith as
determined by the Board of Trustees. Other assets, which include cash,
prepaid and accrued items and amounts receivable as income on investment and
from the sale of portfolio securities, are carried at book value, as are all
liabilities.
TAX STATUS
Status of the Funds
The Funds intend to pay no federal income tax because they expect to
meet the requirements of Subchapter M of the Internal Revenue Code
applicable to regulated investment companies and to receive the special tax
treatment afforded to such companies. To qualify for this treatment, a Fund
must, among other requirements:
derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;
derive less than 30% of its gross income from the sale of securities
held less than three months;
invest in securities within certain statutory limits; and
distribute to its shareholders at least 90% of its net income earned
during the year.
For the tax year ended September 30, 1995, the Taxable Money Market
Fund did not qualify to be taxed as a regulated investment company for
federal income tax purposes and was subject to taxation as a regular
corporation. Accordingly, a provision for federal and state income taxes of
$500 was recorded. The Adviser has agreed to reimburse the Taxable Money
Market Fund for the taxes owned. As a result, the Taxable Money Market
Fund's shareholders will not be negatively affected.
Shareholders' Tax Status
The Taxable Funds. Shareholders are subject to federal income tax on
dividends and capital gains received as cash or additional shares. Depending
on the composition of a Fund's income, a portion of the dividends from net
investment income may qualify for the dividends received deduction allowable
to certain U.S. corporations. In general, dividend income of a Fund
distributed to certain U.S. corporate shareholders will be eligible for the
corporate dividends received deduction only to the extent that (i) the Fund's
income consists of dividends paid by certain U.S. corporations and (ii) the
Fund would have been entitled to the dividends received deduction with
respect to such dividend income if the Fund were not a regulated investment
company.
The Tax Free Funds. Shareholders are not required to pay the federal
regular income tax on any dividends received from the Fund that represent net
interest on tax-exempt municipal bonds. However, under the Tax Reform Act
of 1986, dividends representing net interest earned on some municipal bonds
may be included in calculating the federal individual alternative minimum tax
or the federal alternative minimum tax for corporations. In addition, the
Tax Reform Act of 1986 treats interest on certain "private activity" bonds
issued after August 7, 1986, as a tax preference item for both individuals and
corporations. Thus, should the Fund purchase any such bonds, a portion of the
Fund's dividends may be treated as a tax preference item.
Dividends of the Fund representing net interest income earned on some
temporary investments and any realized net short-term gains are taxed as
ordinary income.
All Funds. The foregoing tax consequences apply whether dividends are
received in cash or as additional shares. No portion of any income dividend
paid by any Fund is eligible for the dividends received deduction available to
corporations.
Capital Gains
Shareholders will pay federal tax at capital gains rates on long-term
capital gains distributed to them regardless of how long they have held the
Fund shares.
Foreign Taxes
Dividend and interest income received by a Fund from sources outside the
U.S. may be subject to withholding and other taxes imposed by such foreign
jurisdictions. Tax conventions between certain countries and the U.S. may
reduce or eliminate these foreign taxes, however, and foreign countries
generally do not impose taxes on capital gains respecting investments by
foreign investors.
PERFORMANCE INFORMATION
Quotations of a Fund's performance are based on historical earnings, show
the performance of a hypothetical investment, and are not intended to indicate
future performance of a Fund. An investor's shares when redeemed may be
worth more or less than their original cost. Performance of a Fund will vary
based on changes in market conditions and the level of the Fund's expenses.
Total Return
Cumulative total return of a Fund's shares reflects the applicable Fund's
total performance over a specific period of time. No Fund other than the
Taxable Money Market Fund (which does not advertise its total return) had
investment operations during the period from June 2, 1995 to September 30,
1995
Yield
The yield of a Fund's shares (other than the money market Funds) is
determined each day by dividing the net investment income per share (as
defined by the Securities and Exchange Commission) earned by the Fund over a
thirty-day period by the net asset value per share of the Fund on the last
day of the period. This value is annualized using semi-annual compounding.
This means that the amount of income generated during the thirty-day period is
assumed to be generated each month over a 12-month period and is reinvested
every six months.
The "yield" of a money market Fund refers to the income generated by an
investment in the Fund over a seven-day period. This income is then
annualized. The amount of income generated by investments during the week is
assumed to be generated each week over a 52-week period and is shown as a
percentage of the investment. The "effective yield" is calculated similarly
but, when annualized, the income earned by an investment in the Fund is
assumed to be reinvested. The effective yield will be slightly higher than
the yield because of the compounding effect of this assumed reinvestment.
The yield of does not necessarily reflect income actually earned by the
applicable shares because of certain adjustments required by the Securities and
Exchange Commission and, therefore, may not correlate to the dividends or
other distributions paid to shareholders. To the extent that financial
institutions and broker/dealers charge fees in connection with services
provided in conjunction with an investment in the Fund, performance will be
reduced for those shareholders paying those fees.
The annualized yields of the Taxable Money Market Fund for the
seven-day period ended September 30, 1995 was 2.72%. The effective yield of
the Taxable Money Market Fund for that seven-day period was 2.76%.
Tax-Equivalent Yield
The tax-equivalent yield of the Municipal Fixed Income Fund and Tax-Free
Money Market Fund is calculated similarly to the yield, but is adjusted to
reflect the taxable yield that the applicable shares would have to earn to
equal their actual yield, assuming tax rates of 15%, 28%, 31% and 36%, and
assuming that income is 100% tax-exempt.
Performance Comparisons
A comparison of the quoted non-standard performance of various
investments is valid only if performance is calculated in the same manner.
Because there are different methods of calculating performance, investors
should consider the effect of the methods used to calculate performance when
comparing performance of a particular Fund with the performance quoted with
respect to other investment companies or types of investments.
From time to time, in advertising and marketing literature, a Fund's
performance may be compared to the performance of broad groups of mutual
funds with similar investment goals, as tracked by independent organizations
such as Investment Company Data, Inc. ("ICD"), Lipper Analytical Services,
Inc. ("Lipper"), CDA Investment Technologies, Inc. ("CDA"),
Morningstar, Inc. and other independent organizations. When these
organizations' tracking results are used, a Fund will be compared to the
appropriate fund category, that is, by fund objective and portfolio holdings or
the appropriate volatility grouping, where volatility is a measure of a
fund's risk. Rankings may be listed among one or more of the asset-size
classes as determined by the independent ranking organization. Footnotes in
advertisements and other marketing literature will include the organization
issuing the ranking, time period, and asset-size class, as applicable, for the
ranking in question.
In addition, a particular Fund's performance may be compared to unmanaged
indices of securities that are comparable in their terms and intent to those in
which the Fund invests such as the Dow Jones Industrial Average ("DJIA"),
Standard & Poor's 500 Stock Index ("S&P 500"), the Lehman Brothers
Government/ Corporate Bond Index and the Consumer Price Index ("CPI").
The DJIA and S&P 500 are unmanaged indices widely regarded as
representative of the equity market in general. The CPI is a commonly used
measured of inflation.
Marketing and other literature for the Funds may include a description of
the potential risks and rewards associated with an investment in a particular
Fund. The description may include a comparison of a particular Fund to broad
categories of comparable funds in terms of potential risks and returns. The
description may also compare a particular Fund to bank products, such
as certificates of deposit. Unlike mutual funds, certificates of deposit are
insured up to $100,000 by the U.S. government and offer a fixed rate of
return. Because bank products guarantee the principal value of an investment
and money market funds seek stability of principal, these investments are
considered to be less risky than investments in either bond or equity funds,
which may involve loss of principal.
The risks and rewards associated with an investment in bond or equity funds
depend upon many factors. For fixed income funds these factors include, but
are not limited to a fund's overall investment objective, the average portfolio
maturity, credit quality of the securities held, and interest rate movements.
For equity funds, factors include a fund's overall investment objective, the
types of equity securities held and the financial position of the issuers of
the securities. The risks and rewards associated with an investment in
international bond or equity funds will also depend upon currency exchange
rate fluctuation. Shorter-term bond funds generally are considered less
risky and offer the potential for less return than longer-term fixed income
funds. The same is true of domestic bond funds relative to international
fixed income funds, and fixed income funds that purchase higher quality
securities relative to bond funds that purchase lower quality securities.
Growth and income equity funds are generally considered to be less risky and
offer the potential for less return than growth funds. In addition,
international equity funds usually are considered more risky than domestic
equity fund but generally offer the potential for greater return.
INFORMATION ABOUT THE TRUST
The Trust was organized on February 1, 1995 as an Indiana business trust.
The By-Laws of the Trust provide that the Trustees shall promptly call a
special meeting of shareholders for the purpose of voting upon the question of
removal of any Trustee or Trustees upon the written request of shareholders
of the Trust holding at least 10% of all votes entitled to be cast at an
election of Trustees.
CUSTODIAN, TRANSFER AGENT, FUND ACCOUNTING AGENT,
COUNSEL AND INDEPENDENT ACCOUNTANTS
Star Bank, N.A., 425 Walnut Street, Cincinnati, Ohio 45201 ("Custodian")
serves as the custodian for each of the Funds. General correspondence to the
Custodian, such as for IRA information, etc., should be addressed to: Star
Bank, P.O. Box 1038 Location 6118, Cincinnati, Ohio 45201. When Fund
purchases or deposits require delivery directly to the Custodian,
those correspondences should be addressed to: The Vintage Funds, [name of
specific Fund in which you are purchasing shares], P.O. Box 640689,
Cincinnati, Ohio, 45264-0689.
Unified Advisers, Inc., P.O. Box 6110, Indianapolis, Indiana 46206-6110,
acts as the transfer agent, fund accounting agent and administrator for the
Trust.
Neither the Custodian nor Unified Advisers, Inc., has any part in
determining the investment policies of the Trust or any of the Funds or which
securities are to be purchased or sold by the Funds, and neither can provide
protection to shareholders against possible depreciation of assets.
Baker & Daniels, 300 North Meridian, Suite 2700, Indianapolis, Indiana
46204-1782, serves as counsel for the Trust.
Price Waterhouse LLP, 300 North Meridian, Suite 1700, Indianapolis,
Indiana, 46204, independent accountants, have been selected as the Trust's
auditors.
FINANCIAL STATEMENTS
The financial statements required to be included in this Statement of
Additional Information are incorporated herein by reference to the Trust's
Annual Report to Shareholders for the year ended September 30, 1995. The
Trust will provide the Annual Report without charge upon request by calling
the Trust at 1-800-408-4682.
APPENDIX
Standard & Poor's Corporation
Earnings and Dividend Rankings for Common Stock
Standard & Poor's Corporation ("Standard & Poor's") believes that earnings
and dividend performance is the end result of an interplay of various factors -
such as product and industry position, corporate resources and financial
policy - and that, over, the long run, the record of this performance has a
considerable bearing on relative quality. The rankings, however, do not
pretend to reflect all of the factors, tangible or intangible, that bear on
stock quality.
Growth and stability of earnings and dividends are considered key elements
in establishing earnings and dividend rankings for common stocks, which are
designed to capsulize the nature of this record in a single symbol. It
should be noted, however, that the process also takes into consideration
certain adjustments and modifications considered desirable in establishing
such rankings.
The point of departure in arriving at these rankings is a computerized
scoring system based on per-share earnings and dividend records of the most
recent ten years - a period deemed long enough to measure significant time
segments of secular growth, to capture indications of basic change in trend
as they develop, and to encompass the full peak-to-peak range of the business
cycle. Basic scores are computed for earnings and dividends, then adjusted
as indicated by a set of predetermined modifiers for growth, stability within
long-term trend, and cyclicality. Adjusted scores for earnings and dividends
are then combined to yield a final score.
Further, the ranking system makes allowance for the fact that, in general,
corporate size imparts certain recognized advantages from an investment
standpoint. Conversely, minimum size limits (in terms of corporate sale
volume) are set for various rankings, but the system provides for making
exceptions where the score reflects an outstanding earnings-dividend record.
The final score for each stock is measured against a scoring matrix
determined by analysis of the scores of a large and representative sample of
stocks. The range of scores that may be assigned as follows: A+ (Highest); A
(High); A- (Above Average); B+ (Average); B (Below Average); B- (Lower);
C (Lowest); D (In Reorganization); and NR (No Ranking).
A ranking is not a forecast of future market price performance, but is
basically an appraisal of past performance of earnings and dividends, and
relative current standing. These rankings must not be used as market
recommendations; a high-score stock may at times be so overpriced as to justify
its sale, while a low-score stock may be attractively priced for purchase.
Rankings based upon earnings and dividend records are no substitute for
a complete analysis. They cannot take into account potential effects of
management changes, internal company policies not yet fully reflected in the
earnings and dividend record, public relations standing, recent competitive
shifts, and a host of other factors that may be relevant to investment status
and decision.
Moody's Investors Services, Inc. Corporate Bond Ratings
Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or fluctuation
of protective elements may be of greater amplitude or there may be other
elements present which make the long term risks appear somewhat larger than
in Aaa securities.
Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Standard & Poor's Corporation Corporate Bond Ratings
Bonds rated AAA have the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong. Bonds rated
AA have a very strong capacity to pay interest and repay principal and in a
majority of instances differ from AAA issues only in small degree.
Bonds rated A are regarded as upper medium grade. They have a strong
capacity to pay interest and repay principal although they are somewhat more
susceptible to the adverse effects of changes in circumstances and economic
conditions than bonds in higher rated categories. Bonds rated BBB are
regarded as having an adequate capacity to pay interest and repay principal.
Whereas they normally exhibit adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for debt in this category
than in higher rated categories.
Fitch Investor Services, Inc. Long-Term Bond Ratings
The ratings represent Fitch Investor Services, Inc.'s ("Fitch")
assessment of the issuer's ability to meet the obligations of a specific debt
issue or class of debt. The ratings take into consideration special features
of the issuer, the current financial condition and operative performance of
the issuer and of any guarantor, as well as the political and economic
environment that might affect the issuer's future financial strength and
credit quality.
Bonds rated AAA are considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by reasonably
foreseeable events. Bonds rated AA are considered to be investment grade and
of very high credit quality. The obligor's ability to pay interest and repay
principal is very strong, although not quite as strong as bonds rated AAA.
Bonds rated BBB are considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these
bonds, and therefore, impair timely payment. Plus (+) and minus (-) signs
are used with a rating symbol to indicate the relative position of a credit
within the rating category.
Duff & Phelps, Inc. Bond Ratings
Bonds rated AAA by Duff & Phelps, Inc. ("Duff") are considered highest
credit quality. The risk factors are negligible, being only slightly more
than for risk-free U.S. Treasury debt. Bonds rated AA are considered high
credit quality. Protection factors for AA rated bonds are strong and risk is
modest, but may vary slightly from time to time because of economic
conditions. Plus (+) and minus (-) signs are used with a rating symbol
(except AAA) to indicate the relative position of a credit within the category.
Thompson Bankwatch Bond Ratings
Thompson BankWatch's ("BankWatch") highest category is AAA. A rating
of AAA indicates that the ability to repay principal and interest on a timely
basis is very high. The second highest rating category is AA. A rating of AA
indicates a superior ability to repay principal and interest on a timely
basis with limited incremental risk versus issues rated in the highest
category. Ratings may include a plus (+) or minus (-) designation which
indicates where within the respective category the issue is placed.
Standard and Poor's Corporation Municipal Bond Ratings
Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong. Debt rated
AA has a very strong capacity to pay interest and repay principal and differs
from the higher rated issues only in small degree. Debt rated A has a
strong capacity to pay interest and repay principal although it is somewhat
more susceptible to the adverse effects of changes in circumstances and
economic conditions than debt in higher rated categories. Debt rated BBB is
regarded as having an adequate capacity to pay interest and repay principal.
Whereas it normally exhibits adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for debt in this category than
in higher rated categories.
Moody's Investors Service, Inc. Municipal Bond Ratings
Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge". Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or fluctuation
of protective elements may be of greater amplitude or there may be other
elements present which make the long term risks appear somewhat larger than
in AAA securities.
Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Standard and Poor's Corporation Municipal Note Ratings
SP-1--Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be given
a (+) designation.
SP-2--Satisfactory capacity to pay principal and interest.
Moody's Investors Service, Inc. Short-Term Loan Ratings
MIG1/VMIG1--This designation denotes best quality. There is a present
strong protection by established cash flows, superior liquidity support or
demonstrated broadbased access to the market for refinancing.
MIG2/VMIG2--This designation denotes high quality. Margins of protection
are ample although not so large as in the preceding group.
Commercial Paper Ratings
Commercial paper assigned a rating of A-l by Standard & Poor's indicates
that the degree of safety regarding timely payment is either overwhelming or
very strong. Those issues determined to possess overwhelming safety
characteristics are denoted with a plus (+) sign designation. A rating of
A-2 by Standard & Poor's indicates that the capacity for timely payment on
issues is strong. However, the relative degree of safety is not as high as
for issues designated "A-l".
The rating PRIME-l ("P-l") is the highest commercial paper rating assigned
by Moody's. Issuers rated P-l (for related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. P-l
repayment capacity will normally be evidenced by the following characteristics:
Conservative capitalization structure with moderate reliance on debt and ample
asset protection; Broad margins in earnings coverage of fixed financial charges
and high internal cash generation; Well established access to a range of
financial markets and assured sources of alternative liquidity. Issuers
rated PRIME-2 ("P-2") (for related supporting institutions have a strong
capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the aforementioned characteristics but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be
more subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternative
liquidity is maintained.
Commercial paper assigned a rating of FITCH-l ("F-l") by Fitch is regarded
as having the strongest degree of assurance for timely payment. Commercial
paper assigned a rating of
FITCH-2 ("F-2") reflect an assurance of timely payment only slightly less in
degree than the strongest issues.
The rating Duff-l is the highest commercial paper rating assigned by Duff.
Paper rated Duff-l is regarded as having very high certainty of timely payment
with excellent liquidity factors which are supported by ample asset
protection. Risk factors are minor.
The highest rating category for commercial paper given by BankWatch is
TBW-l. This rating indicates a very high degree of likelihood that principal
and interest will be paid on a timely basis.
<PAGE>
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements:
(1) The following financial statements of the Taxable Money Market
Fund are included in the Prospectus constituting Part A of
this Post-Effective Amendment:
Financial Highlights
(2) The following financial statements of each Fund are
incorporated into the Statement of Additional Information
constituting Part B of this Post-Effective Amendment by
reference to the Registrant's Annual Report to Shareholders
for the fiscal year ended September 30, 1995:
Report of Independent Accountants
Statements of Assets and Liabilities
Statements of Operations
Statements of Changes in Net Assets
Investments -- The Taxable Money Market Fund
Financial Highlights
Notes to Financial Statements
All other financial statements, schedules and historical financial
information have been omitted as the subject matter is not required, not
present or not present in amounts sufficient to require submission.
(b) Exhibits:
Exhibit
Number Description
* 1. Declaration of Trust.
* 2. By-Laws.
3. Not applicable.
* 4. Form of certificate for Registrant's shares of beneficial
interest.
* 5.(a) Investment Advisory Agreement between the Registrant and Vintage
Advisers, Inc.
* (b) Investment Sub-Advisory Agreement between Vintage Advisers, Inc.
and Starwood corporation.
* (c) Investment Sub-Advisory Agreement between Vintage Advisers, Inc.
and Fiduciary Counsel, Inc.
* 6. Distribution Agreement between the Registrant and Unified
Management Corporation.
7. Not applicable.
* 8. Custody Agreement between the Registrant and Star Bank, N.A.
** 9.(a) Mutual Fund Services Agreement (Fund Administration Services,
Fund Accounting Services, Transfer Agency Services) between the
Registrant and Unified Advisers, Inc.
* (b) Shareholder Services Plan.
* (c) Form of Shareholder Services Agreement pursuant to Shareholder
Services Plan.
* (d) Letter Agreement between the Registrant and Vintage Advisers,
Inc. with respect to The Vintage Funds University and
Philanthropic Program.
** 10. Opinion and consent of counsel as to the legality of the securities
being registered.
*** 11. Consent of independent public accountants.
12. Not applicable.
** 13. Subscription Agreement between the Registrant and Vintage Advisers,
Inc.
** 14.(a) IRA Questions and Answers and Custodial Agreement.
** (b) Prototype Cash or Deferred Profit-Sharing Plan and Trust/
Custodial Account.
* 15.(a) Distribution Plan.
* (b) Form of Distribution Agreement pursuant to Distribution Plan.
*** 16. Schedule for computation of performance data.
* 17. Powers of Attorney.
_________________________
* Filed with original Registration Statement.
** Filed with Pre-Effective Amendment No. 2 to the Registration Statement.
*** Filed herewith.
Item 25. Persons Controlled by or Under Common Control with Registrant.
No person owns beneficially, either directly or through one or more
controlled companies, more than 25% of the outstanding shares of any Fund,
except that Vintage Advisers, Inc., the investment adviser to the Registrant
(the "Adviser"), owns more than 25% of the outstanding shares of each of the
Aggressive Growth Fund, the Asset Allocation Fund, the Taxable Fixed Income
Fund and the Municipal Fixed Income Fund .
Item 26. Number of Holders of Securities.
Number of Record Holders
Title of Class at December 31, 1995
Shares of beneficial interest,
without par value of the:
Starwood Strategic Fund 10
Aggressive Growth Fund 22
Fiduciary Value Fund 7
Asset Allocation Fund 5
Taxable Fixed Income Fund 1
Municipal Fixed Income Fund 4
Taxable Money Market Fund 4149
Tax-Free Money Market Fund 320
Item 27. Indemnification.
Reference is hereby made to Article X of the Registrant's Declaration of
Trust (filed as Exhibit 1 to this Registration Statement), which contains
provisions regarding the indemnification by the Registrant of its Trustees,
officers, employees and agents under certain circumstances.
The Distribution Agreement (Exhibit 6) provides for indemnification of
Unified Management Corporation by the Registrant for certain civil liabilities,
including certain liabilities under the Securities Act of 1933. In addition,
the Mutual Fund Services Agreement (Exhibit 9(a)) provides for the
indemnification of Unified Advisers, Inc. by the Registrant under certain
circumstances.
The foregoing indemnification arrangements are subject to the provisions of
Sections 17(h) and (i) of the Investment Company Act of 1940.
Insofar as indemnification by the Registrant for liabilities arising
under the Securities Act of 1933 may be permitted to Trustees, officers and
controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a Trustee,
officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted against the Registrant by such
Trustee, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
The Registrant maintains an insurance policy which insures its Trustees and
officers against certain civil liabilities.
Item 28. Business and Other Connections of Investment Adviser.
Incorporated herein by reference is the information under the captions "The
Trust and its Management -- Investment Advisory Arrangements" and "--
Portfolio Managers' Backgrounds" in the Combined Prospectus, and under the
captions "Management of the Trust" and "Investment Advisory Arrangements"
in the Statement of Additional Information, incorporated by reference into
Parts A and B, respectively, of this Registration Statement.
Incorporated herein by reference are (a) the descriptions of the
businesses of Unified Advisers, Inc., Starwood Corporation and Fiduciary
Counsel, Inc. under the caption "The Trust and its Management" in the
Combined Prospectus incorporated by reference into Part A of this
Registration Statement and (b) the biographical information pertaining to
Timothy L. Ashburn, Thomas G. Napurano, Lynn E. Wood, Andrew E. Beer, Jack R.
Orben and Ralph E. Rosamilia under the captions "Management of the Trust --
Portfolio Managers' Backgrounds" in the Combined Prospectus, and under the
captions"Management of the Trust" and "Investment Advisory Arrangements" in the
Statement of Additional Information, incorporated by reference into Parts A
and B, respectively, of this Registration Statement.
For information concerning the business, vocation or employment of a
substantial nature of the directors and officers of Vintage Advisers, Inc.,
reference is hereby made to the Form ADV filed by it under the Investment
Advisers Act of 1940 (file no. 801-48493).
For information concerning the business, vocation or employment of a
substantial nature of the directors and officers of Starwood Corporation,
reference is hereby made to the Form ADV filed by it under the Investment
Advisers Act of 1940 (file no. 801-2277).
For information concerning the business, vocation or employment of a
substantial nature of the directors and officers of Fiduciary Counsel, Inc.,
reference is hereby made to the Form ADV filed by it under the Investment
Advisers Act of 1940 (file no. 801-850).
Item 29. Principal Underwriters.
(a) Unified Management Corporation, the Registrant's distributor, does
not act as distributor for any other investment company.
(b) Information with respect to each director and officer of Unified
Management Corporation is incorporated by reference to Schedule A of
Form BD filed by it under the Securities Exchange Act of 1934 (File
No. 8-23508).
(c) Not applicable.
Item 30. Location of Accounts and Records.
The Registrant's custodian, Star Bank, N.A., 425 Walnut Street, Cincinnati,
Ohio 45201, has possession of and maintains the accounts, books and other
documents relating to its function as custodian. The Registrant's counsel,
Baker & Daniels, 300 North Meridian Street, Suite 2700, Indianapolis, Indiana
46204, has possession of and maintains certain corporate minute books and
other corporate records of the Registrant. All other accounts, books and
other documents of the Registrant required to be maintained by Section 31(a)
of the Investment Company Act of 1940 and Rules 31a-1 to 31a-3 thereunder are
in the possession of Vintage Advisers, Inc. or Unified Advisers, Inc., each
of which is located at 429 North Pennsylvania Street, Indianapolis, Indiana
46204.
Item 3l. Management Services.
Not Applicable.
Item 32. Undertakings.
(a) Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of
Trustees and the calling of special shareholder meetings by
shareholders.
(b) Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all
of the requirements for effectiveness of this Amendment to the Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has
duly caused this amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Indianapolis, and State of Indiana, on the 29th day of January, 1996.
THE VINTAGE FUNDS
By /s/ Lynn E. Wood
Lynn E. Wood
Secretary
Pursuant to the requirements of the Securities Act of 1933, this
amendment to the Registration Statement has been signed below by the
following persons in the capacities indicated on January 29, 1996.
Signature Title
* Trustee, Chairman of the Board
Timothy L. Ashburn and President
(principal executive officer)
* Treasurer
Thomas G. Napurano (principal financial officer
and principal accounting officer)
Trustee
Charles H. Binger
* Trustee
Daniel J. Condon
* Trustee
Philip L. Conover
* Trustee
Jack R. Orben
* By /s/ Lynn E. Wood
Lynn E. Wood
Attorney-in-Fact
EXHIBIT INDEX
Exhibit Description
11 Consent of independent public accountants
16 Schedule for computation of performance data
EXHIBIT 11
Consent of Independent Accountants
To the Shareholders and
Board of Directors of
The Vintage Funds
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 3 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated November 28, 1995, relating to the financial
statements and financial highlights appearing in the September 30, 1995 Annual
Report to Shareholders of The Vintage Funds, which is also incorporated by
reference into the Registration Statement. We also consent to the reference
to us under the heading "Financial Highlights" in the Prospectus and under the
heading "Custodian, Transfer Agent, Fund Accounting Agent, Counsel, and
Independent Accountants" in the Statement of Additional Information.
Price Waterhouse, LLP
Indianapolis, Indiana
January 29, 1996
EXHIBIT 16
SCHEDULE FOR COMPUTATION
OF PERFORMANCE DATA
DIVIDEND
FACTOR
SEPTEMBER 24 0.00005044
SEPTEMBER 25 0.00005044
SEPTEMBER 26 0.00005044
SEPTEMBER 27 0.00009293
SEPTEMBER 28 0.00007680
SEPTEMBER 29 0.00010013
SEPTEMBER 30 0.00010014
7 DAY TOTAL 0.00052131
7 DAY YIELD (7 DAY TOTAL)*365/7 2.72%
EFFECTIVE YIELD
[((7 DAY TOTAL)+1) TO 365/7 POWER] -1 2.76%
