Filed On 11/27/96 ˇ SEC Files 33-36324, 811-06153 ˇ Accession Number 950131-96-6108
As Of Filer Filing On/For/As Docs:Pgs Issuer Agent
11/27/96 Integrity Managed Portfolios 485BPOS 11/27/96 7:113 950131
Document/Exhibit Description Pages Size
1: 485BPOS Post-Effective Amendment No. 30 67 357K
2: EX-11 Consent of Independent Auditors 2 7K
3: EX-27 Financial Data Schedule 2 8K
4: EX-99.1 Calculations 2 10K
5: EX-99.8 Form of Custodial Agreement 18 69K
6: EX-99.9A Accounting & Administrative Services Agreement 3 12K
7: EX-99.9B Agency Agreement 19 62K
1933 Act Registration No. 33-36324
1940 Act Registration No. 811-6153
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. 30 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY /__ /
ACT OF 1940
Amendment No. 32 / X /
Ranson Managed Portfolios
(Exact Name of Registrant as Specified in Charter)
1 North Main, Minot, North Dakota 58703
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (701) 852-5292
Robert E. Walstad
Ranson Managed Portfolios
1 North Main
Minot, North Dakota 58703
(Name and Address of Agent for Service)
It is proposed that this filing will be 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)
/__ / on (date) pursuant to paragraph (a), of Rule 485
Declaration Pursuant to Rule 24f-2
Pursuant to the provisions of Rule 24f-2 under the Investment Company Act of
1940, Registrant has elected to register an indefinite number of shares and
filed its Rule 24f-2 Notice for the fiscal year ended July 31, 1996, with the
Commission on or about January 31, 1997.
RANSON MANAGED PORTFOLIOS
The Kansas Insured Intermediate Fund
Cross Reference Sheet
Pursuant to Rule 495(a) under the Securities Act of 1933
ˇ Enlarge/Download Table
Form N-1A, Part A, Item Number Heading in Prospectus
------------------------------ ---------------------
1 Cover Page Cover
2 Synopsis Highlights of the Fund and Prospectus Summary;
Fee and Expense Table
3 Condensed Financial Information Condensed Financial Information; Calculation
of Fund Performance Data
4 General Description of Registrant The Fund; Investment Objective and Policies
5 Management of the Fund The Fund; Dividends and Taxes; Fund Management
6 Capital Stock and Other Securities Description of Shares and Rights
7 Purchase of Securities Being Offered Special Programs; Purchase of Shares
8 Redemption or Repurchase Redemption of Shares
9 Pending Legal Proceedings *
Form N-1A, Part B, Item Number Heading in Statement of Additional Information
------------------------------ ----------------------------------------------
10 Cover Page Cover
11 Table of Contents Table of Contents
12 General Information and History The Fund and Its Shares
13 Investment Objectives and Policies Investment Objective, Policies and Restrictions
14 Management of the Fund Officers and Trustees
15 Control Persons and Principal Holders The Fund and Its Shares
of Securities
16 Investment Advisory and Other Services Management and Investment Advisory Agreement
17 Brokerage Allocation and Other Practices Portfolio Transactions
18 Capital Stock and Other Securities Additional Information Regarding Shares and Rights
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ˇ Enlarge/Download Table
Form N-1A, Part B, Item Number Heading in Statement of Additional Information
------------------------------ ----------------------------------------------
19 Purchase, Redemption and Pricing Net Asset Value, in Prospectus;
of Shares Being Offered Purchase of Shares, in Prospectus;
Redemption of Shares, in Prospectus
20 Tax Status Dividends and Taxes, in Prospectus
21 Underwriters Purchase of Shares, in Prospectus;
The Distributor, in Prospectus
22 Calculations of Performance Data Performance Data
23 Financial Statements Financial Statements
Form N-1A, Part C, Item Number Heading in Other Information
------------------------------ ----------------------------
24 Financial Statements and Exhibits Financial Statements and Exhibits
25 Persons Controlled by or Under Persons Controlled by or Under
Common Control with Registrant Common Control with Registrant
26 Number of Holders of Securities Number of Holders of Securities
27 Indemnification Indemnification
28 Business and Other Connections of Business and Other Connections of
Investment Adviser Investment Advisor
29 Principal Underwriters Principal Underwriters
30 Location of Accounts and Records Location of Accounts and Records
31 Management Services Management Services
32 Undertakings Undertakings
_____________________
*Not applicable.
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LOGO
Ranson Managed Portfolios
THE KANSAS INSURED INTERMEDIATE FUND
1 North Main Minot, North Dakota 58703 (701) 857-0230 (800) 601-5593
Prospectus November 27, 1996
The Kansas Insured Intermediate Fund is an investment portfolio of Ranson
Managed Portfolios which is an unincorporated business trust organized under the
laws of Massachusetts on August 10, 1990. Ranson Managed Portfolios is an open-
end series non-diversified management company, known as a mutual fund. The term
"the Fund" as used herein refers to either Ranson Managed Portfolios or The
Kansas Insured Intermediate Fund Series of Ranson Managed Portfolios, as the
context may require. The investment objective of the Fund is to provide its
shareholders with as high a level of current income that is exempt from both
federal income tax and Kansas income tax as is consistent with preservation of
capital. In pursuit of this objective, the Fund invests at least 95% of its
total assets in Kansas Municipal Securities (as defined herein) which are either
covered by insurance guaranteeing the timely payment of principal and interest
thereon or backed by an escrow or trust account containing sufficient U.S.
Government or U.S. Government agency securities to ensure timely payment of
principal and interest. Kansas Municipal Securities backed by an escrow or trust
account will not constitute more than 15% of the Fund's total assets. A
substantial portion of the income produced by the Fund may be includable in the
calculation of alternative minimum taxable income. Shares of the Fund,
therefore, would not ordinarily be a suitable investment for investors who are
subject to the alternative minimum tax.
A maximum sales load of 2.75% will be imposed on purchases (2.83% of the
net amount invested). The minimum initial investment is $1,000. See "Purchase of
Shares."
Ranson Capital Corporation (the "Manager") is the Fund's manager. ND
Resources, Inc., (the "Transfer Agent"), serves as the Fund's transfer agent.
First Western Bank & Trust ("Custodian"), is the Fund's custodian. For more
information concerning the Transfer Agent and the Custodian, see "Shareholder
Services and Reports."
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
READ AND RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE. THE PROSPECTUS
CONCISELY SETS FORTH INFORMATION INVESTORS SHOULD KNOW BEFORE INVESTING IN THE
FUND.
A Statement of Additional Information dated November 27, 1996, regarding
the Fund (which is incorporated herein by reference) has been filed with the
Securities and Exchange Commission and is available upon request and without
charge by writing the Fund at the above mailing address or by telephoning the
Manager at either of the numbers set forth above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
FEE AND EXPENSE TABLE
The following table sets forth (i) the non-recurring shareholder
transaction expenses, (ii) the recurring annual Fund operating expenses and
(iii) the estimated expenses paid directly and indirectly by a shareholder with
a hypothetical $1,000 investment that is subject to the maximum sales load over
1, 3, 5 and 10-year periods.
The example should not be considered a representation of past or future
expenses. Actual expenses may be greater or lesser than those shown.
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases (as a percentage
of offering price) 2.75%
There is no sales charge on reinvested dividends, deferred sales charge,
redemption fee or exchange fee. The maximum sales load may be reduced or
eliminated as described in "Purchase of Shares" and "Special Programs."
ˇ Download Table
Annual Fund Operating Expenses
(as a percentage of average net assets) The Kansas Insured Intermediate Fund
Expenses After Reimbursements
Management Fees 0.50%
Other Expenses 0.25%
----
Total Fund Operating Expenses
(after reimbursements) 0.75%
Example
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Shareholders would pay the following expenses
after expense reimbursements
on a $1,000 investment, assuming a 5%
annual return: $35 $50 $68 $99
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. The calculation presumes expenses for the current year at the
projected rate of .75% for the Fund after reimbursement of certain expenses by
the Manager. Management Fees, Other Expenses and Total Fund Operating Expenses
for the Fund are estimated to be .50%, .50% and 1.00% before expense
reimbursements. These costs and expenses and the degree of expense
reimbursement and fee waiver, if any, may be greater or less in the future. See
"Purchase of Shares" for information relating to sales load discounts and "Fund
Management" for the level of management fees.
2
HIGHLIGHTS OF THE FUND AND PROSPECTUS SUMMARY
The highlights and summary information below should be read in conjunction
with the detailed information appearing elsewhere in this Prospectus.
THE INVESTMENT OBJECTIVE of the Fund is to provide its shareholders with as
high a level of current income that is exempt from both federal income tax and
Kansas income tax as is consistent with preservation of capital. There is no
assurance that the Fund's investment objective will be achieved. See "Investment
Objective and Policies - Investment Objective."
THE INVESTMENT POLICY of the Fund is to invest substantially all (at least
95%) of its total assets in Kansas Municipal Securities (as defined herein)
which are either covered by insurance guaranteeing the timely payment of
principal and interest thereon or backed by an escrow or trust account
containing sufficient U.S. Government or U.S. Government agency securities to
ensure timely payment of principal and interest. Kansas Municipal Securities
backed by an escrow or trust account will not constitute more than 15% of the
Fund's total assets. See "Investment Objective and Policies - Kansas Municipal
Securities" for a description of Kansas Municipal Securities. Under normal
market conditions, the Fund will maintain a dollar weighted average maturity of
no more than 10 years and no less than 3 years. In certain circumstances the
Fund may enter into when-issued or delayed delivery transactions and purchase
taxable securities. The Fund may, for hedging purposes, enter into financial
futures contracts, options on such futures, municipal bond index futures
contracts and options on securities. These investments entail certain risks. See
"Investment Objective and Policies - Future Contracts and Options." The interest
on certain Kansas Municipal Securities in the Fund's portfolio may constitute an
item of preference for determining the federal alternative minimum tax for
individuals and corporations. See "Dividends and Taxes."
THE FUND'S SHARES MAY BE PURCHASED through Ranson Capital Corporation and
selected dealers at the public offering price, which is equal to the net asset
value next determined, plus a sales charge of 2.75% of the public offering price
(2.83% of the net amount invested). See "Purchase of Shares."
THE MINIMUM INITIAL INVESTMENT is $1,000, and the minimum additional
investment is $50. See "Purchase of Shares." The initial and minimum investments
will be less under certain conditions described under "Purchase of Shares" and
"Special Programs."
AN OPEN ACCOUNT PROGRAM will be established for each investor unless the
investor elects not to participate in such program as is provided under
"Purchase of Shares - Open Account Program/Certificates."
SPECIAL PROGRAMS of the Fund include: a reinvestment program for those who
have invested in any Series of The Kansas Tax-Exempt Trust; a group program; a
systematic withdrawal program; a preauthorized investment program; a rights of
accumulation program; and a reinstatement privilege. See "Special Programs."
DISTRIBUTIONS for the Fund will be declared daily from net investment
income and will be paid monthly; net capital gains, if any, will be distributed
at least annually. See "Dividends and Taxes."
3
CONFIRMATION STATEMENTS will be sent to all investors who have had purchase
or redemption activity in their accounts.
REDEMPTIONS can be made at net asset value without charge. The Fund may
require redemption of shares if the value of an account is reduced to $1,000 or
less (for any reason other than fluctuations in the market value of the Fund's
portfolio securities). See "Redemption of Shares." Ranson Capital Corporation
will act as the Fund's Evaluator. See "Net Asset Value."
THE FUND'S MANAGER AND INVESTMENT ADVISER is Ranson Capital Corporation
(the "Manager") which receives a monthly management and investment advisory fee
equivalent on an annual basis to .50 of 1% of the Fund's average daily net
assets. Under the terms of the Management and Investment Advisory Agreement
between the Fund and the Manager, the Manager pays all expenses of the Fund,
including the Fund's management and investment advisory fee and the Fund's
dividend disbursing, administrative and accounting services fees (but excluding
taxes and brokerage fees and commissions, if any) that exceed .75% of the Fund's
average daily net assets on an annual basis. The Manager may assume additional
Fund expenses or waive portions of its fees in its discretion. See "Fund
Management." The procedures of the Evaluator and its valuations are reviewed by
the officers of the Fund under the general supervision of the Board of Trustees.
See "Net Asset Value."
RISK FACTORS: The Fund is subject to the risks of primarily concentrating
its investments in Kansas Municipal Securities and does not have the benefit of
geographical investment diversification (see "Investment Objective And
Policies"). Also, as a non-diversified investment company, the Fund has the
ability to concentrate investments in particular issuers which may be
advantageous when investing in Kansas Municipal Securities, but which involves
an increased risk of loss to the Fund should an issuer be unable to make
interest or principal payments or should the market value of such securities
decline. The Fund has the ability to purchase new issues of Kansas Municipal
Securities on a "when-issued" basis as well as outstanding issues on a delayed
delivery basis, both of which involve the potential risk of loss of principal.
In the event either that the value of such securities to be purchased declines
prior to the settlement date or if such securities should ultimately not be
issued or delivered and the price of comparable securities has increased, the
cost of substitute securities having comparable par amounts, ratings and yields
will be greater than was originally contracted for. A substantial portion of the
Kansas Municipal Securities in the Fund's portfolio may derive their payment
from mortgage loans or from hospitals and other health care facilities, both of
which entail certain risks (see "Investment Objective and Policies--Kansas
Municipal Securities"). The Fund may from time to time invest in participations
in municipal leases. Municipal leases are less liquid than many other municipal
securities and therefore will be subject to the risks of illiquidity referred to
in the next paragraph. Also, municipal leases are subject to the risk of "non-
appropriation" which allows the municipal lessee to terminate the lease and
eliminate its obligation to continue to make lease payments (see "Investment
Objective and Policies--Kansas Municipal Securities").
An investment in the Fund should be made with an understanding that the
value of the underlying portfolio may decline with increases in interest
rates. In recent years there have been wide fluctuations in interest rates and
thus in the value of fixed-rate, debt obligations generally. The Manager cannot
predict whether these fluctuations will continue in the future. The principal
trading market for the Kansas Municipal Securities will generally be in the
over-the-counter market. As a result, the existence of a liquid trading market
for the Kansas
4
Municipal Securities may depend on whether dealers will make a market in such
securities. There can be no assurance that a market will be made for any of the
Kansas Municipal Securities, that any market for the Kansas Municipal Securities
will be maintained or of the liquidity of the Kansas Municipal Securities in any
markets made. In addition, certain of the Kansas Municipal Securities may be
subject to extraordinary optional and/or mandatory redemptions at par if certain
events should occur. To the extent securities were purchased at a price in
excess of the par value thereof and are subsequently redeemed at par as a result
of an extraordinary redemption, the Fund would suffer a loss of principal.
The Fund may invest in financial futures contracts and related options
thereon for hedging purposes. A risk in employing futures contracts to protect
against the price volatility of portfolio securities is that the prices of
securities subject to futures contracts may not correlate perfectly with the
behavior of the cash prices of the Fund's portfolio securities. The risk of
imperfect correlation may be increased by the fact that the Fund may trade in
futures contracts on taxable securities, and there is no guarantee that the
prices of taxable securities will move in a manner similar to the prices of tax-
exempt securities. Another risk is that the Manager could be incorrect in its
expectations as to the direction or extent of various interest rate movements or
the time span within which the movements take place. For example, if the Fund
sold futures contracts in anticipation of an increase in interest rates, and
then interest rates went down, causing bond prices to rise, the Fund would lose
money and incur transaction costs on the sale.
INVESTORS MAY CALL (800) 601-5593 for daily yield and daily net asset
value quotations. For information on account balances, call (800) 601-5593.
5
CONDENSED FINANCIAL INFORMATION
SELECTED PER SHARE DATA AND RATIOS
(For a share outstanding throughout the period)
ˇ Enlarge/Download Table
For The Year For The Year For The Year For The Period Since
Ended Ended Ended Inception (Nov. 23,
July 31, 1996 July 31, 1995 July 31, 1994 1992) to July 31, 1993
----------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD..........................$ 12.04 $ 11.92 $ 12.24 $ 11.59
Income from Investment Operations: ----------------------------------------------------------------------
Net investment income....................................$ .53 $ .54 $ .52 $ .32
Net realized and unrealized gain (loss) on investments... .15 .12 (.30) .65
----------------------------------------------------------------------
Total From Investment Operations......................$ .68 $ .66 $ .22 $ .97
----------------------------------------------------------------------
Less Distributions:
Dividends from net investment income.....................$ (.53) $ (.54) $ (.52) $ (.32)
Distributions from net capital gains..................... .00 .00 (.02) .00
----------------------------------------------------------------------
Total Distributions...................................$ (.53) $ (.54) $ (.54) $ (.32)
----------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD................................$ 12.19 $ 12.04 $ 11.92 $ 12.24
======================================================================
Total Return.................................................. 5.75%(A) 5.72%(A) 1.81%(A) 13.50%(A)(B)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands).................$ 30,564 $ 30,678 $ 31,216 $ 22,110
Ratio of net expenses (after expense assumption)
to average net assets.................................... 0.69%(C) 0.62%(C) 0.51%(C) 0.33%(B)(C)
Ratio of net investment income to average net assets..... 4.37% 4.57% 4.26% 4.41%(B)
Portfolio turnover rate.................................. 19.96% 63.00% 56.00% 152.00%
(A) Excludes maximum sales charge of 2.75%.
(B) Ratio was annualized.
(C) During the periods indicated above, ND Holdings, Inc. or Ranson Capital
Corporation assumed expenses of $71,943, $112,745, $136,079, and $68,286,
respectively. If the expenses had not been assumed, the annualized ratios
of total expenses to average net assets would have been .92%, .98%, .99%,
and 1.24%, respectively.
6
THE FUND
Ranson Managed Portfolios is an unincorporated business trust organized
under the laws of Massachusetts on August 10, 1990. It is an open-end non-
diversified series management investment company or "mutual fund." The Kansas
Insured Intermediate Fund is one of four portfolios or series (the "Series")
available at this time. Like other mutual funds, the Fund sells its shares to
investors and uses the proceeds to invest in various securities as described in
this Prospectus. The Fund is subject to the overall direction and monitoring
function of the Board of Trustees (the "Trustees").
Information regarding the Fund is available by telephoning or writing the
Fund at the phone number or address shown on the front cover of this Prospectus.
INVESTMENT OBJECTIVE AND POLICIES
Investment Objective
The investment objective of the Fund is to provide its shareholders with as
high a level of current income that is exempt from both federal income tax and
Kansas income tax as is consistent with preservation of capital. The Fund seeks
to achieve its investment objective by investing at least 95% of its total
assets in Kansas Municipal Securities (as further described below) which are
either covered by insurance guaranteeing the timely payment of principal and
interest thereon or backed by an escrow or trust account containing sufficient
U.S. Government or U.S. Government agency securities to ensure timely payment of
principal and interest. Kansas Municipal Securities backed by an escrow or trust
account will not constitute more than 15% of the Fund's total assets. Kansas law
provides that to the extent dividends paid by the Fund are derived from Kansas
Municipal Securities, they shall be exempt from Kansas income tax.
A shareholder will receive taxable income in the event of capital gains
distributions by the Fund. In addition, the Fund has not established any limit
on the percentage of its portfolio that may be invested in Kansas Municipal
Securities subject to the alternative minimum tax provisions of federal tax law,
and a substantial portion of the income produced by the Fund may be includable
in the calculation of alternative minimum taxable income. Shares of the Fund
therefore would not ordinarily be a suitable investment for investors who are
subject to the alternative minimum tax. The suitability of shares of the Fund
for these investors will depend upon a comparison of the yield likely to be
provided from the Fund with the yield from comparable tax-exempt investments not
subject to the alternative minimum tax, and with the yield from comparable fully
taxable investments, in light of each such investor's tax position.
Under normal market conditions, the Fund will maintain a dollar weighted
average maturity of no more than 10 years and no less than 3 years.
Kansas Municipal Securities
As used in this Prospectus, the term "Kansas Municipal Securities" refers
to debt obligations the interest payable on which is, in the opinion of bond
counsel to the issuer, exempt from both federal income taxation and Kansas
income taxation. The Term "Kansas Municipal Securities" also includes
obligations of the Commonwealth of Puerto Rico, the Virgin Islands and Guam. The
Fund will not invest more than 15% of its
7
total assets in Kansas Municipal Securities which are obligations of the
Commonwealth of Puerto Rico, the Virgin Islands or Guam. Kansas Municipal
Securities include debt obligations of Kansas, its political subdivisions,
municipalities, agencies and authorities issued to obtain funds for various
public purposes, including the construction or improvement of a wide range of
public facilities such as airports, bridges, highways, hospitals, housing,
jails, mass transportation, nursing homes, parks, public buildings, recreational
facilities, school facilities, streets and water and sewer works. Other public
purposes for which Kansas Municipal Securities may be issued include the
refunding of outstanding obligations, the anticipation of taxes or state aids,
the payment of judgments, the funding of student loans, community redevelopment,
the purchase of street maintenance and firefighting equipment or any authorized
corporate purpose of the issuer except for the payment of current expenses. In
addition, certain types of industrial development and other revenue bonds may be
issued by or on behalf of public corporations to finance privately operated
housing facilities, air or water pollution control facilities and certain local
facilities for water supply, gas, electricity or sewage or solid waste disposal.
Other types of industrial development bonds, the proceeds of which are used for
the construction, equipping, repair or improvement of privately operated
industrial, commercial or office facilities, constitute Kansas Municipal
Securities, although current federal income tax laws place substantial
limitations on the size of such issues.
Since the Fund will invest substantially all of its assets in Kansas
Municipal Securities, the Fund is susceptible to political and economic factors
affecting issuers of Kansas Municipal Securities. As of 1994, 2,554,047 people
lived in Kansas. Based on these numbers, Kansas ranked thirty-first in the
nation in population size. Based on statistics provided by the Kansas Department
of Commerce, Kansas ranked twenty-first in the nation in terms of per capita
income. Historically, agriculture and mining constituted the principal
industries in Kansas. Since the 1950's, however, manufacturing, governmental
services and the services industry have steadily grown and as of 1994
approximately 24% of Kansas workers were in the trade (wholesale and retail)
sector, 24% in the services sector, 20% in the government sector, 16% in the
manufacturing sector, while financial and real estate, farming, mining,
transportation and public utilities and construction accounted for the remaining
16% of the work force. The August 1996 unemployment rate was 4%. By
constitutional mandate, Kansas must operate within a balanced budget and public
debt may only be incurred for extraordinary purposes and then only to a maximum
of $1 million. As of November 15, 1996, Kansas had no general obligation bonds
outstanding.
Over 25% of the Kansas Municipal Securities in the Fund's portfolio may be
health care revenue bonds. Ratings of bonds issued for health care facilities
are sometimes based on feasibility studies that contain projections of occupancy
levels, revenues and expenses. A facility's gross receipts and net income
available for debt service may be affected by future events and conditions
including among other things, demand for services, the ability of the facility
to provide the services required, physicians' confidence in the facility,
management capabilities, competition with other hospitals, efforts by insurers
and governmental agencies to limit rates, legislation establishing state rate-
setting agencies, expenses, government regulation, the cost and possible
unavailability of malpractice insurance and the termination of restriction of
governmental financial assistance, including that associated with Medicare,
Medicaid and other similar third party payor programs. Pursuant to recent
federal legislation, Medicare reimbursements are currently calculated on a
prospective basis utilizing a single nationwide schedule of rates. Prior to such
legislation Medicare reimbursements were based on the actual costs incurred by
the health facility. The current legislation may adversely affect reimbursements
to hospitals and other facilities for services provided under the Medicare
program.
8
Over 25% of the Kansas Municipal Securities in the Fund's portfolio may
derive their payment from mortgage loans. Certain of the Kansas Municipal
Securities in the Fund's portfolio may be single family mortgage revenue bonds,
which are issued for the purpose of acquiring from originating financial
institutions notes secured by mortgages on residences located within the
issuer's boundaries and owned by persons of low or moderate income. Mortgage
loans are generally partially or completely prepaid prior to their final
maturities as a result of events such as sale of the mortgaged premises,
default, condemnation or casualty loss. Because these bonds are subject to
extraordinary mandatory redemption in whole or in part from such prepayments of
mortgage loans, a substantial portion of such bonds will probably be redeemed
prior to their scheduled maturities or even prior to their ordinary call dates.
The redemption price of such issues may be more or less than the offering price
of such bonds. Extraordinary mandatory redemption without premium could also
result from the failure of the originating financial institutions to make
mortgage loans in sufficient amounts within a specified time period or, in some
cases, from the sale by the bond issuer of the mortgage loans. Failure of the
originating financial institutions to make mortgage loans would be due
principally to the interest rates on mortgage loans funded from other sources
becoming competitive with the interest rates on the mortgage loans funded with
the proceeds of the single family mortgage revenues available for the payment of
the principal of or interest on such mortgage revenue bonds. Single family
mortgage revenue bonds issued after December 31, 1980, were issued under Section
103A of the Internal Revenue Code, which Section contains certain ongoing
requirements relating to the use of the proceeds of such bonds in order for the
interest on such bonds to retain its tax-exempt status. In each case, the issuer
of the bonds has covenanted to comply with applicable ongoing requirements, and
bond counsel to such issuer has issued an opinion that the interest on the bonds
is exempt from federal income tax under existing laws and regulations. There can
be no assurances that the ongoing requirements will be met. The failure to meet
these requirements could cause the interest on the bonds to become taxable,
possibly retroactively from the date of issuance.
Certain of the Kansas Municipal Securities in the Fund's portfolio may be
obligations of issuers whose revenues are primarily derived from mortgage loans
to housing projects for low to moderate income families. The ability of such
issuers to make debt service payments will be affected by events and conditions
affecting financed projects, including, among other things, the achievement and
maintenance of sufficient occupancy levels and adequate rental income, increases
in taxes, employment and income conditions prevailing in local labor markets,
utility costs and other operating expenses, the managerial ability of project
managers, changes in laws and governmental regulations, the appropriation of
subsidies and social and economic trends affecting the localities in which the
projects are located. The occupancy of housing projects may be adversely
affected by high rent levels and income limitations imposed under federal and
state programs. Like single family mortgage revenue bonds, multi-family mortgage
revenue bonds are subject to redemption and call features, including
extraordinary mandatory redemption features, upon prepayment, sale or non-
origination of mortgage loans as well as upon the occurrence of other events.
Certain issuers of single or multi-family housing bonds have considered various
ways to redeem bonds they have issued prior to the stated first redemption dates
for such bonds. In one situation, the New York City Housing Development
Corporation, in reliance on its interpretation of certain language in the
indenture under which one of its bond issues was created, redeemed all of such
issue at par in spite of the fact that such indenture provided that the first
optional redemption was to include a premium over par and could not occur prior
to 1992.
The Kansas Municipal Securities in which the Fund invests include Kansas
tax-exempt bonds, notes, commercial paper and participation interests in
municipal leases. Kansas tax-exempt notes and commercial paper are generally
used to provide for short-term capital needs and ordinarily have a maturity of
up to one
9
year. These include notes issued in anticipation of tax revenue, revenue from
other government sources or revenue from bond offerings and short-term,
unsecured commercial paper, which is often used to finance seasonal working
capital needs or to provide interim construction financing. Kansas tax-exempt
leases are obligations of state and local government units incurred to lease or
purchase equipment or other property utilized by such governments. The Fund will
not originate leases as a lessor, but will instead purchase a participation
interest in the regular payment stream of the underlying lease from a bank,
equipment lessor or other third party. General obligation bonds are secured by
the issuer's pledge of its faith, credit and taxing power for the payment of
principal and interest. Revenue bonds are payable from the revenue derived from
a particular facility or class of facilities or, in some cases, from the
proceeds of a special excise or other specific revenue source, but not from the
general taxing power. Tax-exempt industrial development bonds are in most cases
revenue bonds and generally do not carry the pledge of the credit of the issuing
municipality. The revenues from which such bonds are paid generally constitute
an obligation of the corporate entity on whose behalf the bonds are issued.
Although the participations in municipal leases which the Fund may purchase
(hereinafter called "lease obligations") do not constitute general obligations
of the municipality for which the municipality's taxing power is pledged, a
lease obligation lease is ordinarily backed by the municipality's covenant to
budget for, appropriate and make the payments due under the lease obligation.
However, certain lease obligations contain "non-appropriation" clauses which
provide that the municipality has no obligation to make lease payments in future
years unless money is appropriated for such purpose on a yearly basis. 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. Although "non-
appropriation" lease obligations are secured by the leased property, disposition
of the property in the event of foreclosure might prove difficult. The Fund will
only purchase lease obligations which are rated in the top rating category by
either Standard & Poor's Corporation or Moody's Investor Service, Inc. The Fund
will not invest more than 10% of its net investment assets in lease obligations
(including, but not limited to those lease obligations which contain "non-
appropriation clauses") or any other illiquid securities.
The Fund will only purchase lease obligations which are covered by an
existing opinion of legal counsel experienced in municipal lease transactions
that, as of the date of issue or purchase of each participation interest in a
municipal lease, the interest payable on such obligation is exempt from both
federal income tax and Kansas income tax and that the underlying lease was the
valid and binding obligation of the governmental issuer.
Investment Policies
It is a fundamental policy of the Fund, which may not be changed without
the approval of the majority of the Fund's shares, that under normal
circumstances at least 95% of the Fund's total assets will be invested in Kansas
Municipal Securities which are either covered by insurance guaranteeing the
timely payment of principal and interest thereon or backed by an escrow or trust
account containing sufficient U.S. Government or U.S. Government agency
securities to ensure timely payment of principal and interest. Kansas Municipal
Securities backed by an escrow or trust account will not constitute more than
15% of the Fund's total assets. While the Fund attempts, under normal market
conditions, to invest all of its assets in Kansas Municipal Securities, the Fund
may temporarily invest up to 100% of its total assets in taxable fixed-income
securities or hold up to 100% of its total assets in cash during periods of
abnormal market conditions that dictate taking a
10
defensive posture by investing in such taxable obligations or cash. In addition,
pending the investment or reinvestment in Kansas Municipal Securities of
proceeds of sales of shares or sales of portfolio securities or in order to
avoid the necessity of liquidating portfolio investments to meet shareholders'
redemption requests, the Fund may invest up to 20% of its total assets in
taxable fixed income securities or cash.
Taxable obligations which the Fund may purchase for temporary liquidity
purposes, or for temporary defensive purposes, may include: obligations of the
U.S. Government, its agencies or instrumentalities; other debt securities of
issuers having, at the time of purchase, a rating within the highest grade of
Moody's or S & P; commercial paper rated P-1 or better by Moody's or A-1 or
better by S & P; certificates of deposit of domestic banks, including foreign
branches of domestic banks, which have capital, surplus and undivided profits of
over $100 million; time deposits; bankers' acceptances, repurchase agreements
and obligations of Kansas with respect to any of the foregoing investments.
Interest earned from taxable obligations will be taxable to investors, except
that interest earned from certain taxable Kansas obligations will be exempt from
Kansas income tax.
The Kansas Municipal Securities which the Fund may purchase include
floating and variable rate demand notes from municipal and nongovernmental
issuers. These notes normally have a stated maturity in excess of one year but
permit the holder to demand payment of principal plus accrued interest upon a
specified number of days' notice. Frequently, such obligations are secured by
letters of credit or other credit support arrangements provided by banks. Use of
letters of credit or other credit support arrangements will generally not
adversely affect the tax-exempt status of these obligations. The Manager will
rely upon the opinion of the issuer's bond counsel to determine whether such
notes are exempt from federal and Kansas income taxation. The issuer of floating
and variable rate demand notes normally has a corresponding right, after a given
period, to prepay in its discretion the outstanding principal amount of the note
plus accrued interest upon a specified number of days' notice to the
noteholders. The interest rate on a floating rate demand note is based on a
known lending rate, such as a bank's prime rate, and is adjusted automatically
each time such rate is adjusted. The interest rate on a variable rate demand
note is adjusted at specified intervals, based upon a known lending rate. The
Manager will monitor the creditworthiness of the issuers of floating and
variable rate demand notes. The Fund will not invest in derivative financial
instruments other than in connection with its hedging activities.
The yields on Kansas Municipal Securities are dependent on a variety of
factors, including general money market conditions, the financial condition of
the issuer, general conditions of the Kansas tax-exempt obligation market, the
size of a particular offering, the maturity of the obligation and the rating of
the issue or issuer. The ratings of Moody's and S&P represent their opinions as
to the quality of the Kansas Municipal Securities which they undertake to rate.
It should be emphasized, however, that ratings are general, and not absolute,
standards of quality. Consequently, Kansas Municipal Securities of the same
maturity, interest rate and rating may have different yields, while Kansas
Municipal Securities of the same maturity and interest rate with different
ratings may have the same yield. Subsequent to their purchase by the Fund,
particular Kansas Municipal Securities or other investments may cease to be
rated or their ratings may be reduced below the minimum rating required for
purchase by the Fund.
The Fund is a non-diversified investment company, but intends to comply
with Subchapter M of the Internal Revenue Code. Because of the relatively small
number of issuers of Kansas Municipal Securities in which the Fund may invest,
the Fund will probably use its ability as a non-diversified fund to concentrate
its assets in the securities of certain issuers which the Fund's Manager deems
to be attractive investments, rather than invest in securities of a large number
of issuers merely to satisfy diversification requirements. Although the Fund's
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Manager believes that the ability to concentrate the investments of the Fund in
particular issuers is advantageous when investing in Kansas Municipal
Securities, such concentration involves an increased risk of loss to the Fund
should the issuer be unable to make interest or principal payments or should the
market value of such securities decline. Investment in a non-diversified
investment company such as the Fund may therefore entail greater risks than
investment in a "diversified" fund.
Each insured Kansas Municipal Security held by the Fund will be covered by
an insurance policy applicable to the specific security, whether obtained by the
issuer of the security or a third party at the time of original issuance
("Original Issue Insurance") or by the Fund or a third party subsequent to the
time of original issuance ("Secondary Market Insurance"). In any event, the Fund
will only purchase Kansas Municipal Securities insured by insurers having total
admitted assets of at least $75 million, capital and surplus of at least $50
million and claims-paying ability ratings of "Aaa" by Moody's Investors Service,
Inc. ("Moody's"), "AAA" by Standard & Poor's Corporation ("S&P"), "AAA" by Fitch
Investors Service, Inc. ("Fitch") or "AAA" by Duff & Phelps ("D&P"). The Fund
currently intends to obtain insurance policies only from mono-line insurers
specializing in insuring municipal debt. Kansas Municipal Securities covered by
Original Issue Insurance or Secondary Market Insurance are themselves assigned a
rating of "Aaa" or "AAA", as the case may be, by virtue of the "Aaa" or "AAA"
claims-paying ability of the insurer and would generally be assigned a lower
rating if the rating were based primarily upon the credit characteristics of the
issuer without regard to the insurance feature.
The Fund's policy of investing in Kansas Municipal Securities insured by
insurers whose claims-paying ability is rated "Aaa" and "AAA" will apply only at
the time of the purchase of a security, and the Fund will not be required to
dispose of securities in the event Moody's, S&P, Fitch or D&P, as the case may
be, downgrades its assessment of the claims-paying ability of a particular
insurer or the credit characteristics of a particular issuer. In this
connection, it should be noted that in the event Moody's, S&P, Fitch or D&P or
all should downgrade their assessments of the claims-paying ability of a
particular insurer, such entity or entities could also be expected to downgrade
the ratings assigned to Kansas Municipal Securities insured under Original Issue
Insurance or Secondary Market Insurance issued by such insurer. Moody's, S&P,
Fitch and D&P continually assess the claims-paying ability of insurers and the
credit characteristics of issuers, and there can be no assurance that they will
not downgrade their assessments subsequent to the time the Fund purchases
securities. See "Bond Insurance" in the Fund's Statement of Additional
Information.
In addition to insured Kansas Municipal Securities, the Fund may invest up
to 15% of the Fund's total assets in Kansas Municipal Securities rated "Aaa" or
"AAA" that are entitled to the benefit of an escrow or trust account which
contains securities issued or guaranteed by the U.S. Government or U.S.
Government agencies and backed by the full faith and credit of the United States
sufficient in amount to ensure the payment of interest and principal on the
original interest payment and maturity dates ("collateralized obligations").
Such collateralized obligations generally will not be insured and will include,
but are not limited to, Kansas Municipal Securities that have been (1) advance
refunded where the proceeds of the refunding have been used to purchase U.S.
Government or U.S. Government agency securities that are placed in escrow and
whose interest or maturing principal payments, or both, are sufficient to cover
the remaining scheduled debt service on the Kansas Municipal Securities, or (2)
issued under state or local housing finance programs which use the issuance
proceeds to fund mortgages that are then exchanged for U.S. Government or U.S.
Government agency securities and deposited with a trustee as security for the
Kansas Municipal Securities. Such collateralized obligations are normally
regarded as having the credit characteristics of the underlying U.S. Government
or U.S. Government agency securities.
12
The Fund may invest up to 10% of its total assets in the securities of
other investment companies. Any investment by the Fund in securities issued by
other investment companies will result in the duplication of certain fees and
expenses.
Futures Contracts and Options
The Fund may invest in financial futures contracts ("futures contracts")
and related options thereon for hedging purposes. It is not the intent of the
Manager to speculate in futures contracts and related options as an aggressive
investment strategy, but rather as described below. The Fund may sell a futures
contract or a call option thereon or purchase a put option on such futures
contract, if the Manager anticipates that interest rates will rise, as a hedge
against a decrease in the value of the Fund's portfolio securities. If the
Manager anticipates that interest rates will decline, the Fund may purchase a
futures contract or a call option thereon or sell a put option on such futures
contract, to protect against an increase in the price of the securities the Fund
intends to purchase. These futures contracts and related options thereon will be
used only as a hedge against anticipated interest rate changes. A futures
contract sale creates an obligation by the Fund, as seller, to deliver the
specific type of instrument called for in the contract at a specified future
time for a specified price. Purchase of a futures contract creates an obligation
by the Fund, as purchaser, to take delivery of the specific type of financial
instrument at a specified future time at a specified price. A purchaser or
seller of a futures contract is required to make daily payments of cash to
reflect the change in the value of the underlying contract. The specific
securities delivered or taken, respectively, at settlement date would not be
determined until or near that date. The determination would be in accordance
with the rules of the exchange on which the futures contract sale or purchase
was effected.
Although the terms of futures contracts specify actual delivery or receipt
of securities, in most instances the contracts are closed out before the
settlement date without the making or taking of delivery of the securities.
Closing out of a futures contract is effected by entering into an offsetting
purchase or sale transaction prior to the expiration of the contract.
Unlike a futures contract, which requires the parties to buy and sell a
security on a set date unless offset, an option on a futures contract entitles
its purchaser to decide on or before a future date whether to enter into such a
contract (a long position in the case of a call option and a short position in
the case of a put option). If the purchaser decides not to enter into the
contract, the premium paid for the option on the contract is lost if it expires.
Since the cost of the option is fixed, there are no daily payments of cash by
the purchaser to reflect the change in the value of the underlying contract as
there are by a purchaser or seller of a futures contract. The seller of the
option, however, may be required to make daily maintenance margin payments to
reflect the change in value of the underlying contract. The value of the option
is reflected in the net asset value of the Fund.
A risk in employing futures contracts to protect against the price
volatility of portfolio securities is that the prices of securities subject to
futures contracts may not correlate perfectly with the behavior of the cash
prices of the Fund's portfolio securities. The risk of imperfect correlation may
be increased by the fact that the Fund may trade in futures contracts on taxable
securities, and there is no guarantee that the prices of taxable securities will
move in a manner similar to the prices of tax-exempt securities. The correlation
may be distorted in part by the fact that the futures market is influenced by
short-term traders seeking to profit from the difference between a contract or
security price objective and their cost of borrowed funds. Such distortions
generally are minor and should diminish as the contract approaches maturity.
13
Another risk is that the Manager could be incorrect in its expectations as
to the direction or extent of various interest rate movements or the time span
within which the movements take place. For example, if the Fund sold futures
contracts in anticipation of an increase in interest rates, and then interest
rates went down, causing bond prices to rise, the Fund would lose money,
including transaction costs, on the sale.
The Fund may not enter into futures contracts or purchase related options
thereon if immediately thereafter the amount committed to initial margin plus
the amount paid for premiums for unexpired options on futures contracts exceed
5% of the value of the Fund's total assets. Similarly, the Fund may not purchase
or sell futures contracts or related options thereon if, immediately thereafter,
more than one-third of its net assets would be hedged.
FORWARD COMMITMENTS
The Fund may purchase new issues of Kansas Municipal Securities and other
securities on a "when-issued" or delayed delivery basis, with delivery and
payment for the securities normally taking place within 45 days after the date
of the commitment to purchase. The payment obligation and the interest rate that
will be received on such securities are fixed at the time the buyer enters into
the commitment. The Fund may enter into such "forward commitments" if it holds,
and maintains until the settlement date in a segregated account with its
custodian, cash or high-grade, short-term obligations in an amount sufficient to
meet the purchase price. There is no percentage limitation on the Fund's total
assets which may be invested in forward commitments. Forward commitments involve
a risk of loss if the value of the Kansas Municipal Securities or other security
to be purchased declines prior to the settlement date, which risk is in addition
to the risk of decline in the value of the Fund's other assets. Although the
Fund will generally enter into forward commitments with the intention of
acquiring Kansas Municipal Securities or other securities for its portfolio, the
Fund may dispose of a commitment prior to settlement if the Manager deems it
appropriate to do so. The Fund may realize short-term profits or losses upon the
sale of forward commitments, which profits or losses may constitute capital
gains or ordinary income depending upon a number of factors, including the
number of sales of such commitments.
PORTFOLIO TURNOVER
Portfolio transactions will be undertaken principally to accomplish the
Fund's objective in relation to anticipated movements in the general level of
interest rates, but the Fund may also engage in short-term trading consistent
with its objective. Securities may be sold in anticipation of a market decline
(a rise in interest rates) or purchased in anticipation of a market rise (a
decline in interest rates) and later sold. In addition, a security may be sold
and another purchased at approximately the same time to take advantage of what
the Manager believes to be a temporary disparity in the normal yield
relationship between the two securities. Yield disparities may occur for reasons
not directly related to the investment quality of particular issues or the
general movement of interest rates, due to such factors as changes in the
overall demand for or supply of various types of Kansas Municipal Securities or
changes in the investment objectives of investors.
The Fund's investment policies may lead to frequent changes in investments,
particularly in periods of rapidly fluctuating interest rates. A change in
securities held by the Fund is known as "portfolio turnover" and may involve the
payment by the Fund of dealer mark-ups or underwriting commissions and other
transaction costs on the sale of securities, including Kansas Municipal
Securities, as well as on the reinvestment of the proceeds in other securities.
The Fund anticipates that its annual portfolio turnover rate will not exceed
75%. Portfolio turnover rate for a fiscal year is the ratio of the lesser of the
dollar amount of the purchases or sales of portfolio securities to the monthly
average of the value of portfolio securities--excluding securities whose
14
maturities at acquisition were one year or less. The Fund's portfolio turnover
rate will not be a limiting factor when the Fund deems it desirable to sell or
purchase securities. Frequent changes in the Fund's portfolio securities may
result in higher transaction costs for the Fund. In addition, in order to
qualify as a regulated investment company under the Internal Revenue Code, the
Fund must limit the portion of its gross income derived from the sale or other
disposition of stock or securities held for less than three months. If the Fund
were unable to satisfy this condition, among others, the Fund would be subject
to tax on its taxable income without deduction for distributions to
shareholders. See "Dividends and Taxes" in this Prospectus and "Portfolio
Transactions" in the Fund's Statement of Additional Information.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements with respect to not more than
10% of its total assets (taken at current value), except when investing for
temporary defensive purposes during times of adverse market conditions. A
repurchase agreement is a contract under which the Fund would acquire a security
for a relatively short period, and the seller would agree to repurchase such
security at the Fund's cost plus interest within a specified time (generally one
day). Under the Investment Company Act of 1940, repurchase agreements are
considered loans by the Fund. The Fund will not enter into any repurchase
agreement in an amount which would jeopardize the Fund's status as a regulated
investment company or its ability to distribute tax-exempt dividends. Although
the Fund may enter into repurchase agreements with respect to any securities
which it may acquire consistent with its investment policies and restrictions,
it is the Fund's present intention to enter into repurchase agreements only with
respect to obligations of the U.S. Government or its agencies or
instrumentalities and with respect to Kansas Municipal Securities. The Fund's
Custodian will hold the securities underlying any repurchase agreement in a
segregated account. In investing in repurchase agreements, the Fund's risk is
limited to the ability of the seller to pay the agreed-upon price at the
maturity of the repurchase agreement. In the opinion of the Manager, the risk is
not material, since in the event of default, barring extraordinary
circumstances, the Fund would be entitled to sell the underlying securities or
otherwise receive adequate protection under federal bankruptcy laws for its
interest in such securities. To the extent that proceeds from any sale upon a
default are less than the repurchase price, however, the Fund could suffer a
loss. In addition, the Fund may incur certain delays in obtaining direct
ownership of the collateral.
The Fund's Board of Trustees may change any of the foregoing policies that
are not fundamental without an affirmative vote of a "majority of the Fund's
outstanding voting shares," as defined in "Investment Objective, Policies and
Restrictions" in the Fund's Statement of Additional Information.
NET ASSET VALUE
The net asset value per share of the Fund is determined by calculating the
total value of the Fund's assets, deducting total liabilities, and dividing the
result by the number of shares outstanding. Fixed income securities for which
quotations are readily available are valued at the mean between the quoted bid
and asked price. Securities for which quotations are not readily available
(which will constitute a majority of the securities held by the Fund) are valued
at fair value as determined by Ranson Capital Corporation (the "Evaluator")
pursuant to procedures adopted by the Board of Trustees using methods which
include consideration of the following: yields or prices of municipal bonds of
comparable quality, type of issue, coupon, maturity and rating, indications as
to value from dealers and general market conditions. The Evaluator may employ
electronic data processing techniques and/or a matrix system to determine
valuations. The procedures utilized by the Evaluator and its valuations are
reviewed by the officers of the Fund under the general supervision of the Board
of Trustees and
15
are periodically reviewed by the Board of Trustees. Short-term securities with
remaining maturities of less than 60 days are valued at amortized cost. Other
assets are valued at fair value as determined in good faith by the Trustees of
the Fund. The net asset value of the Fund is computed once daily as of 3:00 p.m.
Central time on each day that the New York Stock Exchange is open for trading.
The public offering price based thereon becomes effective as of the time of such
computation. The New York Stock Exchange is closed on weekends and on the
following days: New Year's Day, Washington's Birthday, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The Fund
reserves the right to calculate the net asset value and to adjust the public
offering price based thereon more frequently than once each day if deemed
desirable.
PURCHASE OF SHARES
Shares may be purchased at the public offering price through any
securities dealer having a sales agreement with Ranson Capital Corporation (the
"Distributor"). Shares may also be purchased through banks and certain other
financial institutions that have agency agreements with the Distributor. These
financial institutions will receive transaction fees that are the same as
commissions to dealers and may charge their customers service fees relating to
investments in the Fund. Purchase requests should be addressed to the dealer or
agent from which this Prospectus was received which has a sales agreement with
the Distributor. Such dealer or agent may place a telephone order with the
Distributor for the purchase of Fund shares. It is a dealer's or broker's
responsibility to promptly forward payment and registration instructions (or
completed applications) to the Transfer Agent for shares being purchased in
order for investors to receive the next determined net asset value. Reference
should be made to the wire order to ensure proper settlement of the trade.
Payment must be received within seven days of the order or the trade may be
cancelled and the dealer or broker placing the trade will be liable for any
losses. The public offering price is the net asset value per share next
determined plus a sales charge that will be a percentage of the public offering
price and will vary as shown below. Current sales charge rates are:
ˇ Enlarge/Download Table
Sales Charge
------------
As a As a Dealer
Percentage of Percentage of Allowance
Offering Net Asset Value as Percentage of
Price Invested Offering Price
Amount of Purchase ------------- --------------- ----------------
------------------
Less than $50,000 2.75% 2.83% 2.50%
$50,000 but less than $100,000 2.25% 2.30% 2.00%
$100,000 but less than $250,000 1.75% 1.78% 1.50%
$250,000 but less than $500,000 1.25% 1.27% 1.10%
$500,000 but less than $1,000,000 0.75% 0.76% 0.65%
$1,000,000 or more 0.25% 0.25% 0.25%
The minimum initial investment is $1,000, and there is a $50 minimum on all
additional investments (excluding reinvestment of dividends and capital gains).
The Fund reserves the right to redeem Fund accounts that are reduced to a value
of less than $1,000 (for any reason other than fluctuation in the market value
of the Fund's portfolio securities). Should the Fund elect to exercise this
right, the investor will be notified before such redemption is processed that
the value of the investor's account is less than $1,000 and that the investor
will have sixty days to increase the account to at least the $1,000 minimum
amount before the account is redeemed.
16
Shares of the Fund may be sold at net asset value to the officers and
Trustees of the Fund, to any subsidiary companies of Ranson Capital Corporation
and to any employees of Ranson Capital Corporation or to members of their
immediate families. Immediate family members shall include spouses, children,
fathers, mothers, brothers or sisters. Shares of the Fund may also be sold at
their net asset value to broker-dealers having sales agreements with Ranson
Capital Corporation, and registered representatives and other employees of such
broker-dealers, including their spouses and children; to financial institutions
having sales agreements with Ranson Capital Corporation, and employees of such
financial institutions, including their spouses and children; and to any
broker-dealer, financial institution, or other qualified firm which receives no
commissions for selling shares to its clients.
Financial institutions may purchase shares of the Fund for their own
account or as a record owner on behalf of fiduciary or custody accounts may
purchase shares of the Fund with a sales charge equal to .75% of the public
offering price (.76% of the net amount invested), which includes a dealer
allowance of .70% of the public offering price. State securities laws may
require financial institutions purchasing for their customers to register as
dealers. Financial institutions which purchase shares of the Fund for accounts
of their customers may impose separate charges on these customers for account
services. Corporate payroll plans which qualify as Group Programs as described
below under "Special Programs" may also purchase shares of the Fund.
From time to time the Distributor may implement programs under which
dealers and their representatives may be eligible to participate in which such
firms may win nominal awards for certain sales efforts or under which the
Distributor will reallow additional concessions to any dealer that sponsors
sales contests or recognition programs conforming to criteria established by the
Distributor or participates in sales programs sponsored by the Distributor.
These programs will not change the price that an investor pays for shares or the
amount that the Fund will receive from such sale.
Letters of Intent
An investor may qualify for a reduced sales charge immediately by stating
his or her intention to invest in one or more series of the Fund, during a
13-month period, an amount that would qualify for a reduced sales charge and by
signing a nonbinding Letter of Intent, which may be signed at any time within
90 days after the first investment to be included under the Letter of Intent.
After signing the Letter of Intent, each investment made by an investor will be
entitled to the sales charge applicable to the total investment indicated in
the Letter of Intent. If an investor does not complete the purchases under the
Letter of Intent within the 13-month period, the sales charge will be adjusted
upward, corresponding to the amount actually purchased. When an investor signs
a Letter of Intent, shares of a series of the Fund with a value of up to 5% of
the amount specified in the Letter of Intent will be restricted. If the total
purchases made by an investor under the Letter of Intent, less redemptions,
equals or exceeds the amount specified in the Letter of Intent, the restriction
on the shares will be removed. In addition, if the total purchases exceed the
amount specified and qualify for a further quantity discount, the Distributor
will make a retroactive price adjustment and will apply the adjustment to
purchase additional shares at the then current applicable offering price. If an
investor does not complete purchases under a Letter of Intent, the sales charge
is adjusted upward, and if after written notice to the investor, he or she does
not pay the increased sales charge, sufficient restricted shares will be
redeemed at the current net asset value to pay such charge. In connection with
the determination of sales charges applicable to the purchase of shares of the
Fund, the Letter of Intent program will take into account investments in shares
of any other mutual fund carrying a sales load of which Ranson Capital
Corporation is the Distributor.
17
Concurrent Purchases
An investor who concurrently purchases shares of the Fund, shares of The
Kansas Municipal Fund and units of any unit investment trust sponsored by
Ranson Capital Corporation will be charged the sales charge on the respective
purchase at the level specified in the respective prospectus based on the
aggregate dollar value of the combined purchases.
An investor or his or her dealer or agent must notify the Transfer Agent
whenever a quantity discount is applicable to purchases. Upon such
notification, an investor will receive the lowest applicable sales charge.
Quantity discounts may be modified or terminated by the Distributor at any
time. For more information about quantity discounts, contact the dealer or
agent from which this Prospectus was obtained or the Distributor.
Open Account Program/Certificates
All investors in the Fund will be enrolled in an Open Account Program when
they make their first investment in the Fund, unless they elect otherwise.
Investors may then make additional purchases whenever they wish, but they are
not obligated to make any additional investments. Whenever investors make an
investment in the Fund, full and fractional shares will be purchased for
their account at the next determined public offering price applicable to their
purchase after the Fund receives their order.
If an investor elects not to be enrolled in the Open Account Program by
notifying the Transfer Agent in written form, he or she will be sent share
certificates representing the full shares of the Fund and will be required to
surrender the certificates to redeem such shares. Fund share certificates will
be mailed within 10 days of an investor's request. Certificates will not be sent
outside of the United States. Investors should promptly notify the Fund if
certificates are not received. The Fund will not file a mail loss claim later
than one year after the issuance of Fund share certificates. After one year,
investors requesting replacement certificates may be required to post an
insurance bond in the amount of 2% of the market value of the certificated
shares.
SPECIAL PROGRAMS
Unit Investment Trust Reinvestment
Investors in any Series of The Kansas Tax-Exempt Trust may reinvest
distributions of principal and interest from such trust in shares of the Fund
with no sales charge and no minimum investment. The Fund reserves the right to
modify or terminate this program at any time.
Redemptions From Other Funds
Shares of the Fund may be purchased at net asset value where the amount
invested is documented to the Fund to be proceeds from the redemption of shares
of an unrelated investment company which does not impose a contingent deferred
sales charge or redemption fee and where the investor paid an initial sales
charge. Purchases must be made within 60 days of the redemption date. The
Fund reserves the right to modify or terminate this privilege at any time.
Shares of the Fund may be purchased at net asset value where the amount
invested is documented to the Fund to be proceeds from the redemption of shares
of The Kansas Municipal Fund. Purchases must be made within 60 days of the
redemption date. The Fund reserves the right to modify or terminate this
privilege at any time.
18
Group Program
The Fund has a group investment and reinvestment program (the "Group
Program") which allows investors to purchase shares of a Series of the Fund with
a lower minimum initial investment and with a lower sales charge if the investor
and the Group Program of which he or she is a participant meet the cost saving
criteria set forth below.
Description of Group Program. If the investor's Group Program (such as an
employee investment program) meets the requirements described below, a series of
the Fund will modify the $1,000 initial investment requirement to such minimum
investment as may be determined by the Fund. The sales charge set forth under
"Purchase of Shares" for each purchase by a participant of a Group Program will
be based on (i) the combined current purchases of such group of shares together
with (ii) the combined net asset value of shares of such group at the time of
such investment. The dealer or agent, if any, through which the Group Program
was initiated will be entitled to a dealer concession or agency commission based
on the sales charges paid by participants of such Group Program. The sales
charge applicable to purchases by participants in corporate payroll plans which
qualify as "Group Programs" is set forth above under "Purchase of Shares."
Criteria for the Group Program. The cost savings criteria to the Fund that
must be met in order for a Group Program to qualify for the benefits set forth
above are:
(a) The administrator of an investor's investment program must have entered
into an agreement with the Distributor.
(b) Such agreement must provide that the administrator must submit a single
order and make payment with a single remittance for all investments during each
investment period (e.g., each pay period or distribution period) by all
investors who choose to invest through the Group Program.
(c) Such agreement must provide that the administrator will provide the
Transfer Agent with appropriate backup data for each participating investor in a
computerized format compatible with the Transfer Agent's processing system.
Additional Criteria for the Group Program. As further requirements for
obtaining these special benefits under the Group Program, the Fund requires that
investments be in the form of an Open Account (with no share certificates being
issued), that all dividends and other distributions be reinvested in additional
shares without any systematic withdrawal program described herein and that the
minimum new investment in shares of the Fund by each participant in an employee
investment program be at least $25 per month. The Fund reserves the right to
modify or terminate this program at any time.
Systematic Withdrawal Program
The owner of $5,000 or more of shares of the Fund (which may not be in
certificated form) may provide for the payment from his or her account of any
requested dollar amount to his or her designated payee monthly, quarterly or
annually. Sufficient shares will be redeemed from the investor's account for the
designated amount so that the payee will receive it approximately the first of
each month. Dividend distributions automatically will be reinvested under this
program. Depending upon the size of the payments requested, redemptions for the
purpose of making such payments may reduce or even exhaust the account. The
program may be terminated
19
at any time by the investor. If an investor desires to utilize this program, he
or she may so indicate on the Account Application included with this Prospectus.
It ordinarily will be disadvantageous to an investor to purchase shares
(except through reinvestment of distributions) while participating in a
systematic withdrawal program because he or she will be paying a sales charge to
purchase shares at the same time that shares are being redeemed upon which such
investor may already have paid a sales charge. Therefore, the Fund will not
knowingly permit an investor to make additional investments of less than $5,000
if an investor is at the same time making systematic withdrawals at a rate
greater than the dividend distributions being paid on such investor's shares.
The Fund reserves the right to amend or terminate the systematic withdrawal
program on thirty days' notice, and investors may withdraw from the program at
any time. The Fund reserves the right to modify or terminate this program at any
time.
Preauthorized Investment Program
An investor may establish an automat