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<PAGE> PAGE 2
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<PAGE> PAGE 4
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<PAGE> PAGE 6
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<PAGE> PAGE 7
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SIGNATURE TINA D. HOSKING
TITLE SECRETARY
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001016887
<NAME> PROFIT FUNDS INVESTMENT TRUST
<SERIES>
<NUMBER> 1
<NAME> PROFIT VALUE FUND
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<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> MAR-31-1999
<INVESTMENTS-AT-COST> 2,307,837
<INVESTMENTS-AT-VALUE> 3,535,123
<RECEIVABLES> 57,148
<ASSETS-OTHER> 77,803
<OTHER-ITEMS-ASSETS> 40,000
<TOTAL-ASSETS> 3,710,074
<PAYABLE-FOR-SECURITIES> 176,400
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 12,502
<TOTAL-LIABILITIES> 188,902
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,271,657
<SHARES-COMMON-STOCK> 187,904
<SHARES-COMMON-PRIOR> 159,211
<ACCUMULATED-NII-CURRENT> (10,173)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 32,402
<OVERDISTRIBUTION-GAINS> 0
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<DIVIDEND-INCOME> 15,005
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<EXPENSES-NET> 25,178
<NET-INVESTMENT-INCOME> (10,173)
<REALIZED-GAINS-CURRENT> 32,402
<APPREC-INCREASE-CURRENT> 959,514
<NET-CHANGE-FROM-OPS> 981,743
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 3,407
<DISTRIBUTIONS-OTHER> 0
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<GROSS-EXPENSE> 103,532
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<EXPENSE-RATIO> 1.94
</TABLE>
MANAGEMENT AGREEMENT
--------------------
THIS MANAGEMENT AGREEMENT is made this ____ day of _______, 1996, between
Profit Funds Investment Trust (the "Trust"), a business trust organized under
the laws of the Commonwealth of Massachusetts, and Investor Resources Group (the
"Manager"), a corporation organized under the laws of the State of Delaware.
WHEREAS, the Trust has been organized to operate as an open-end investment
company registered under the Investment Company Act of 1940, as amended (the
"Act");
WHEREAS, the Trust currently consists of two series, the Profit Lomax Value
Fund and the Profit Lomax Institutional Equity (the "Funds"), and the Trustees
have the power to create additional series; and
WHEREAS, each Fund has been created for the purpose of investing and
reinvesting its assets in securities pursuant to the investment objective and
policies as set forth in the Trust's registration statements under the Act and
the Securities Act of 1933 ("Registration Statements"), as heretofore amended
and supplemented; and the Trust desires to avail itself of the services,
information, advice, assistance and facilities of a manager and to have a
manager provide or perform for it various management, statistical, portfolio
adviser selection and other services for the Funds; and
WHEREAS, the Manager is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended;
NOW, THEREFORE, the Trust and Manager agree as follows:
<PAGE>
1. Employment of the Manager. The Trust hereby employs the Manager to
manage the investment and reinvestment of the assets of each Fund in the manner
set forth in subparagraph 2B of this Agreement, subject to the direction of the
Board of Trustees and the officers of the Trust, for the period, in the manner,
and on the terms hereinafter set forth. The Manager hereby accepts such
employment and agrees during such period to render the services and to assume
the obligations herein set forth. The Manager shall for all purposes herein be
deemed to be an independent contractor and shall, except as expressly provided
or authorized (whether herein or otherwise), have no authority to act for or
represent the Funds in any way or otherwise be deemed an agent of the Funds.
2. Obligation of and Services to be Provided by the Manager. The Manager
undertakes to provide the services hereinafter set forth and to assume the
following obligations:
A. Investment Management Services.
(a) The Manager shall have overall supervisory responsibility for the
general management and investment of the assets and portfolio
securities of each Fund subject to and in accordance with the
investment objective and policies of each Fund, and any
directions which the Trust's Board of Trustees may issue to the
Manager from time to time.
(b) The Manager shall provide overall investment programs and
strategies for each Fund, shall
- 2 -
<PAGE>
revise such programs as necessary and shall monitor and report
periodically to the Board of Trustees concerning the
implementation of the programs.
(c) The Manager, with the approval of the Board of Trustees of the
Trust as to particular appointments, intends to (i) appoint one
or more persons or companies (the "Adviser") and, subject to the
terms and conditions of this Agreement, the Adviser shall have
full investment discretion and shall make all determinations with
respect to the investment of each Fund's assets and the purchase
and sale of portfolio securities with those assets, and (ii) take
such steps as may be necessary to implement such appointments.
The Manager shall be solely responsible for paying the fees and
expenses of the Adviser for its services to the Funds. The
Manager shall not be responsible or liable for the investment
merits of any decision by the Adviser to purchase, hold or sell a
portfolio security for the Funds. (d) The Manager shall evaluate
advisers and shall recommend to the Board of Trustees the adviser
which the Manager believes is best suited to invest the assets of
each Fund; shall monitor and evaluate the investment performance
of the Adviser; shall recommend changes in the Adviser
- 3 -
<PAGE>
when appropriate; shall coordinate the investment activities of
the Adviser to ensure compliance with applicable restrictions and
limitations applicable to the Fund; and shall compensate the
Adviser.
(e) The Manager shall render regular reports to the Trust, at regular
meetings of the Board of Trustees, of, among other things, the
portfolio investments of the Funds and measurement and analysis
of the results achieved by the Funds.
(f) The Manager shall employ or provide and compensate the executive,
administrative, secretarial and clerical personnel necessary to
provide the services set forth in this subparagraph 2B, and shall
bear the expense thereof, except as may otherwise be provided in
Section 4 of this Agreement. The Manager shall also compensate
all officers and employees of the Trust who are officers or
employees of the Manager.
(g) The Manager shall pay all expenses incurred in connection with
the sale or distribution of a Fund's shares; however, with
respect to the Profit Lomax Value Fund, the Manager shall pay
such expenses only to the extent such expenses are not assumed by
the Profit Lomax Value Fund under the Trust's Plan of
Distribution.
- 4 -
<PAGE>
B. Provision of Information Necessary for Preparation of Securities
Registration Statements, Amendments and Other Materials.
The Manager will make available and provide financial, accounting and
statistical information required by the Trust in the preparation of
registration statements, reports and other documents required by
federal and state securities laws, and such information as the Trust
may reasonably request for use in the preparation of registration
statements, reports and other documents required by federal and state
securities laws.
C. Other Obligations and Services. The Manager shall make available its
officers and employees to the Board of Trustees and officers of the
Trust for consultation and discussions regarding the administration
and management of the Funds and their investment activities.
3. Execution and Allocation of Portfolio Brokerage Commissions. The
Adviser, subject to the limitations contained in this paragraph 3, shall place,
on behalf of each Fund, orders for the execution of portfolio transactions. The
Adviser is not authorized by the Funds to take any action, including the
purchase or sale of securities for either Fund's account, (a) in contravention
of (i) any investment restrictions set forth in the Act and the rules
thereunder, (ii) specific instructions adopted by the Board of Trustees and
communicated to the Adviser, (iii) the investment objective, policies and
restrictions of a Fund as
- 5 -
<PAGE>
set forth in the Trust's Registration Statement, or (iv) instructions from the
Manager communicated to the Adviser, or (b) which would have the effect of
causing a Fund to fail to qualify or to cease to qualify as a regulated
investment company under the Internal Revenue Code of 1986, as amended, or any
succeeding statute.
Subject to the foregoing, the Adviser shall determine the securities to be
purchased or sold by a Fund and will place orders pursuant to its determination
with or through such persons, brokers or dealers in conformity with the policy
with respect to brokerage as set forth in the Trust's Registration Statement or
as the Board of Trustees may direct from time to time. It is recognized that, in
providing the Funds with investment supervision of the placing of orders for
portfolio transactions, the Adviser will give primary consideration to securing
the best qualitative execution, taking into account such factors as price
(including the applicable brokerage commission or dealer spread), the execution
capability, financial responsibility and responsiveness of the broker or dealer
and the brokerage and research services provided by the broker or dealer.
Consistent with this policy, the Adviser may select brokers or dealers who also
provide brokerage and research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of 1934) to other funds and/or the other
accounts over which it exercises investment discretion. It is understood that
neither the Trust, the Manager nor the Adviser have adopted
- 6 -
<PAGE>
a formula for allocation of the Trust's investment transaction business. It is
also understood that it is desirable for the Trust that the Adviser have access
to supplemental investment and market research and security and economic
analyses provided by certain brokers who may execute brokerage transactions at a
higher commission to the Trust than may result when allocating brokerage to
other brokers on the basis of seeking the lowest commission. Therefore, the
Adviser is authorized to place orders for the purchase and sale of securities
for the Funds with such certain brokers, subject to review by the Trust's Board
of Trustees from time to time with respect to the extent and continuation of
this practice, provided that the Adviser determines in good faith that the
amount of the commission is reasonable in relation to the value of the brokerage
and research services provided by the executing broker or dealer. The
determination may be viewed in terms of either a particular transaction or the
Adviser's overall responsibilities with respect to the Funds and to other
accounts over which it exercises investment discretion. It is understood that
although the information may be useful to the Trust and the Adviser, it is not
possible to place a dollar value on such information. Consistent with the Rules
of Fair Practice of the National Association of Securities Dealers, Inc., and
subject to seeking best qualitative execution, the Adviser may give
consideration to sales of shares of the Funds as a factor in the selection of
brokers and dealers to execute portfolio transactions of the Funds.
- 7 -
<PAGE>
On occasions when the Adviser deems the purchase or sale of a security to
be in the best interest of the Funds as well as other clients, the Adviser, to
the extent permitted by applicable laws and regulations, may, but shall be under
no obligation to, aggregate the securities to be sold or purchased in order to
obtain the most favorable price or lower brokerage commissions and efficient
execution. In such event, allocation of the securities so purchased or sold, as
well as expenses incurred in the transaction, will be made by the Adviser in the
manner it considers to be the most equitable and consistent with its fiduciary
obligations to the Trust and to such other clients.
The Adviser will not execute any portfolio transactions for a Fund's
account with a broker or dealer which is an "affiliated person" (as defined in
the Act) of the Trust, the Manager or the Adviser without the prior written
approval of the Manager. The Manager agrees that it will provide the Adviser
with a list of brokers and dealers which are "affiliated persons" of the Trust,
the Manager or the Adviser.
The Adviser shall render regular reports to the Trust of the total
brokerage business placed by the Funds and the manner in which the allocation
has been accomplished.
4. Expenses of the Funds. It is understood that each Fund will pay, or that
the Trust will enter into arrangements that require third parties to pay, all
expenses of the Funds other than those expressly assumed by the Manager herein,
which expenses payable by the Funds shall include:
- 8 -
<PAGE>
A. Expenses of all audits by independent public accountants;
B. Expenses of transfer agent, dividend disbursing agent, accounting and
pricing agent and shareholder recordkeeping services;
C. Expenses of custodial services, including recordkeeping services
provided by the custodian;
D. Expenses of obtaining security valuation quotations for calculating
the value of each Fund's net assets;
E. Salaries and other compensation of any of its executive officers and
employees, if any, who are not officers, directors, stockholders or
employees of the Manager or the Adviser;
F. Taxes or governmental fees levied against the Funds; G. Brokerage fees
and commissions in connection with the purchase and sale of the Funds'
portfolio securities;
H. Costs, including the interest expense, of borrowing money;
I. Costs and/or fees incident to Board of Trustee and shareholder
meetings, the preparation and mailings of prospectuses, reports and
notices to the existing shareholders of the Funds, the filing of
reports with regulatory bodies, the maintenance of the Trust's
existence as a business trust, membership in investment company
organizations, and the registration of shares with federal and state
securities authorities;
- 9 -
<PAGE>
J. Legal fees, including the legal fees related to the registration and
continued qualification of each Fund's shares for sale and legal fees
arising from litigation to which the Trust may be a party and
indemnification of the Trust's officers and trustees with respect
thereto;
K. Costs of printing share certificates (in the event such certificates
are issued) representing shares of the Funds;
L. Trustees' fees and expenses of Trustees who are not directors,
officers, employees or stockholders of the Manager, the Adviser or any
of their affiliates; and
M. Each Fund's pro rata portion of the fidelity bond required by Section
17(g) of the Act and other insurance premiums.
5. Activities and Affiliates of the Manager.
A. The services of the Manager hereunder are not to be deemed exclusive,
and the Manager and any of its affiliates shall be free to render
similar services to others. The Manager shall use the same skill and
care in the management of the Funds' assets as it uses in the
administration of other accounts to which it provides asset
management, consulting and portfolio manager selection services, but
shall not be obligated to give the Funds more favorable or
preferential treatment vis-a-vis its other clients.
- 10 -
<PAGE>
B. Subject to and in accordance with the Agreement and Declaration of
Trust and Bylaws of the Trust and to Section 10(a) of the Act, it is
understood that Trustees, officers and agents of the Trust and
shareholders of the Funds are or may be interested in the Manager or
its affiliates as directors, officers, agents or stockholders of the
Manager or its affiliates; that directors, officers, agents and
stockholders of the Manager or its affiliates are or may be interested
in the Trust as Trustees, officers, agents, shareholders or otherwise;
that the Manager or its affiliates may be interested in the Trust as
shareholders or otherwise; and that the effect of any such interests
shall be governed by said Declaration of Trust, Bylaws and the Act.
6. Compensation of the Manager. For all of the services to be rendered and
payments made as provided in this Agreement, the Profit Lomax Value Fund will
pay the Manager a fee, computed and accrued daily and paid monthly, at the
annual rate of 1.25% of such Fund's average daily net assets and the Profit
Lomax Institutional Equity Fund will pay the Manager a fee, computed and accrued
daily and paid monthly, at the annual rate of .60% of such Fund's average daily
net assets.
The value of the daily net assets of each Fund shall be determined pursuant
to the applicable provisions of the Declaration of Trust and to resolutions of
the Board of Trustees
- 11 -
<PAGE>
of the Trust. If, pursuant to such provisions, the determination of net asset
value is suspended for any particular business day, then for the purposes of
this paragraph 6, the value of the net assets of a Fund as last determined shall
be deemed to be the value of its net assets as of the close of business on that
day, or as of such other time as the value of such Fund's net assets may
lawfully be determined on that day. If the determination of the net asset value
of a Fund's shares has been suspended for a period including such month, the
Manager's compensation payable for such month shall be computed on the basis of
the value of the net assets of such Fund as last determined (whether during or
prior to such month). The Manager agrees that its compensation with respect to a
Fund for any fiscal year shall be reduced by the amount, if any, by which the
expenses of such Fund for such fiscal year exceed the lowest applicable expense
limitation established pursuant to the statutes or regulations of any
jurisdiction in which the shares of such Fund are qualified for offer or sale.
The Manager shall refund to a Fund the amount of any reduction of the Manager's
compensation pursuant to this paragraph 6 as promptly as practicable after the
end of such fiscal year, provided that the Manager will not be required to pay
an amount greater than the fee paid to the Manager with respect to such Fund for
such year pursuant to this Agreement. As used in this paragraph 6, "expenses"
shall mean those expenses included in the applicable expense limitation having
the broadest specification thereof, and "expense limitation" means a limit on
- 12 -
<PAGE>
the maximum annual expenses which may be incurred by an investment company or
series of an investment company determined by multiplying a fixed percentage by
the average, or by multiplying more than one such percentage by different
specified amounts of the average, of the values of the investment company or
series' net assets for a fiscal year. The words "lowest applicable expense
limitation" shall be construed to result in the largest reduction of the
Manager's compensation for any fiscal year of the Funds.
7. Liabilities of the Manager.
A. Except as provided below in this paragraph 7, in the absence of
willful misfeasance, bad faith, gross negligence, or reckless
disregard of obligations or duties hereunder on the part of the
Manager ("disabling conduct"), the Manager shall not be subject to
liability to the Trust or to any shareholder of the Funds for any act
or omission in the course of, or connected with, rendering services
hereunder or for any losses that may be sustained in the purchase,
holding or sale of any security.
B. The Manager shall not be indemnified for any liability unless (i) a
final decision is made on the merits by a court or other body before
whom the proceeding was brought that the Manager was not liable by
reason of disabling conduct, or (ii) in the absence of such a
decision, a reasonable determination is made, based
- 13 -
<PAGE>
upon a review of the facts, that the Manager was not liable by reason
of disabling conduct, by (a) the vote of a majority of a quorum of the
Trustees who are not interested persons of the Trust or the Manager or
(b) an independent legal counsel in a written opinion. The Trust will
advance attorneys' fees or other expenses incurred by the Manager in
defending a proceeding, upon the undertaking by or on behalf of the
Manager to repay the advance unless it is ultimately determined that
the Manager is entitled to indemnification, so long as the Manager
meets at least one of the following as a condition to the advance: (i)
the Manager shall provide a security for its undertaking, (ii) the
Trust shall be insured against losses arising by reason of any lawful
advances, or (iii) a majority of a quorum of the Trustees who are not
interested persons of the Trust or the Manager, or an independent
legal counsel in a written opinion, shall determine, based on a review
of the readily available facts (as opposed to a full trial-type
inquiry), that there is reason to believe that the Manger ultimately
will be found entitled to indemnification. Any person employed by the
Manager who may also be or become an employee of the Trust shall be
deemed, when acting within the scope of his employment by the Trust,
to be acting in such employment solely for the Trust and not as the
Manager's employee or agent.
- 14 -
<PAGE>
C. No provision of this Agreement shall be construed to protect any
Trustee, director, officer or agent of the Trust or the Manager from
liability in violation of Sections 17(h) and (i) of the Act.
8. Renewal and Termination.
A. This Agreement shall become effective on the date first written above
and shall remain in full force and effect for two (2) years from the
date hereof and from year to year thereafter, but only so long as such
continuance is specifically approved at least annually by the vote of
a majority of the Trustees who are not interested persons of the
Trust, the Manager or the Adviser, cast in person at a meeting called
for the purpose of voting on such approval and by a vote of the Board
of Trustees or of a majority of the outstanding voting securities. The
aforesaid provision that this Agreement may be continued "annually"
shall be construed in a manner consistent with the Act and the rules
and regulations thereunder.
B. This Agreement:
(a) may at any time be terminated with respect to a Fund, without the
payment of any penalty, either by vote of the Board of Trustees
of the Trust or by vote of a majority of the outstanding voting
securities of such Fund, on sixty (60) days' written notice to
the Manager;
- 15 -
<PAGE>
(b) shall immediately terminate in the event of its assignment; and
(c) may be terminated by the Manager on sixty (60) days' written
notice to the Trust.
C. As used in this Section 8, the terms "assignment," "interested person"
and "vote of a majority of the outstanding voting securities" shall
have the meanings set forth in the Act and the rules and regulations
thereunder.
D. Any notice under this Agreement shall be given in writing addressed
and delivered or mailed postpaid, to the other party to this Agreement
at its principal place of business.
9. Severability. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
10. Limitation of Liability. It is expressly agreed that the obligations of
the Trust hereunder shall not be binding upon any of the Trustees, shareholders,
nominees, officers, agents or employees of the Trust, personally, but bind only
the trust property of the Trust, as provided in the Declaration of Trust of the
Trust. The execution and delivery of this Agreement have been authorized by the
Trustees and shareholders of the Trust and signed by the officers of the Trust,
acting as such, and neither such authorization by such Trustees and shareholders
nor such
- 16 -
<PAGE>
execution and delivery by such officers shall be deemed to have been made by any
of them individually or to impose any liability on any of them personally, but
shall bind only the trust property of the Trust as provided in its Declaration
of Trust.
11. Use of Name. The Manager may use the name "Profit Funds" or any
derivation thereof in connection with another business enterprise, including any
registered investment company with which the Manager is, or may become
associated, so long as such use is permitted under the Act and other applicable
law.
12. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, and no amendment of this
Agreement shall be effective until approved by vote of the holders of a majority
of the outstanding voting securities of the Fund(s) to which the amendment
relates and by the Board of Trustees, including a majority of the Trustees who
are not interested persons of the Manager or of the Trust, cast in person at a
meeting called for the purpose of voting on such approval.
13. Governing Law. To the extent that state law has not been preempted by
the provisions of any law of the United States heretofore or hereafter enacted,
as the same may be amended from time to time, this Agreement shall be
administered, construed and enforced according to the laws of the State of
Delaware.
- 17 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed, as of the day and year first written above.
PROFIT FUNDS INVESTMENT TRUST
ATTEST: By:
-----------------------------
- -------------------------- Title: President
INVESTOR RESOURCES GROUP
ATTEST: By:
-----------------------------
- -------------------------- Title: President
- 18 -
October 20, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders of
the Profit Value Fund (the "Fund"), a series of Profit Funds Investment Trust,
to be held on November 30, 1998 at 10:00 a.m., Eastern time, at the offices of
Countrywide Fund Services, Inc., 312 Walnut Street, 21st Floor, Cincinnati, Ohio
45202.
Due to the recent expansion of the Board of Trustees from four to five
trustees, you are being asked to elect the current slate of trustees. You are
also being asked to approve a new investment advisory agreement between the
Trust and its investment adviser, Investor Resources Group, LLC. If shareholders
approve the new investment advisory agreement, IRG will continue to provide
investment advisory services to the Fund, and there will be no change in the
rate of compensation paid by the Fund to IRG. Two additional proposals are also
presented for your consideration in the enclosed proxy statement: one asking
shareholders to approve or disapprove the elimination of a fundamental
investment restriction of the Fund which currently prohibits the Fund from
writing put and call options, and the other asking shareholders to ratify or
reject the selection of PricewaterhouseCoopers L.L.P. as the Fund's independent
public accountants for the current fiscal year.
The Board of Trustees has given full and careful consideration to each of
these matters and has concluded that the proposals are in the best interests of
the Fund and its shareholders. The Board of Trustees therefore recommends that
you vote "FOR" approval of each proposal.
Regardless of the number of shares you own, it is important that they are
represented and voted. If you cannot personally attend the special shareholders'
meeting, we would appreciate you promptly voting, signing and returning the
enclosed proxy in the postage paid envelope provided.
Very truly yours,
Eugene A. Profit
President
<PAGE>
PROFIT FUNDS INVESTMENT TRUST
SPECIAL MEETING OF SHAREHOLDERS
November 30, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
Profit Value Fund
The undersigned hereby appoints Eugene A. Profit and John F. Splain, and each of
them, as Proxies with power of substitution and hereby authorizes each of them
to represent and to vote as provided on the reverse side, all shares of
beneficial interest of the above Fund which the undersigned is entitled to vote
at the special meeting of shareholders to be held on November 30, 1998 or at any
adjournment thereof.
The undersigned acknowledges receipt of the Notice of Special Meeting and Proxy
Statement dated October 18, 1998.
Date: ________________________
NOTE: Please sign exactly as your
name appears on this proxy. If
signing for an estate, trust or
corporation, title or capacity
should be stated. If the shares are
held jointly, both signers should
sign, although the signature of one
will bind the other.
___________________________________
Signature(s) PLEASE SIGN ABOVE
<PAGE>
PLEASE INDICATE YOUR VOTE BY FILLING IN THE APPROPRIATE BOX
BELOW, AS SHOWN, USING BLUE OR BLACK INK OR DARK PENCIL. DO NOT
USE RED INK.
IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE PROPOSALS DESCRIBED
HEREIN.
1. Authority to vote for the election of all nominees for
trustee as listed below.
FOR WITHHOLD
[ ] [ ]
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY
INDIVIDUAL NOMINEE(S), WRITE THAT NOMINEE'S NAME ON THE LINE
BELOW.
Larry E. Jennings, Jr., Robert M. Milanicz, Deborah Owens,
Eugene A. Profit, Joseph A. Quash, M.D.
2. With respect to the approval or disapproval of a new investment
advisory agreement with Investor Resources Group, LLC.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. With respect to the approval or disapproval of the elimination of the
Fund's fundamental investment restriction that currently prohibits the
writing of put and call options.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. With respect to the ratification or rejection of the selection of
PricewaterhouseCoopers L.L.P. as the Fund's independent public
accountants for the current fiscal year.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
5. In their discretion, the Proxies are authorized to vote upon such other
matters as may properly come before the meeting.
PLEASE MARK YOUR PROXY, DATE AND SIGN IT ON THE REVERSE SIDE, AND RETURN IT
PROMPTLY IN THE ACCOMPANYING ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES.
<PAGE>
PROFIT FUNDS INVESTMENT TRUST
PROFIT VALUE FUND
- --------------------------------------------------------------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 30, 1998
- --------------------------------------------------------------------------------
NOTICE IS HEREBY GIVEN that a special meeting of shareholders of the Profit
Value Fund (the "Fund"), a series of Profit Funds Investment Trust, will be held
at the offices of Countrywide Fund Services, Inc., at 312 Walnut Street, 21st
Floor, Cincinnati, Ohio 45202, on November 30, 1998 at 10:00 a.m., Eastern time,
to consider and vote on the following matters:
1. To elect five trustees, each to serve until his or her successor is duly
elected and shall qualify;
2. To approve or disapprove a new investment advisory agreement with Investor
Resources Group, LLC ("IRG"), whereby IRG will continue to serve as
investment adviser to the Fund;
3. To approve or disapprove the elimination of a fundamental investment
restriction that currently prohibits the Fund from writing put and call
options;
4. To ratify or reject the selection of PricewaterhouseCoopers L.L.P. as the
Fund's independent public accountants for the current fiscal year; and
5. To transact any other business, not currently contemplated, that may
properly come before the meeting in the discretion of the proxies or their
substitutes.
Shareholders of record at the close of business on October 6, 1998 are entitled
to notice of and to vote at this meeting or any adjournment thereof.
By the order of the Board of Trustees
John F. Splain
Secretary
October 18, 1998
- --------------------------------------------------------------------------------
Please execute the enclosed proxy and return it promptly in the enclosed
envelope, thus avoiding unnecessary expense and delay. No postage is required if
mailed in the United States. The proxy is revocable and will not affect your
right to vote in person if you attend the meeting.
<PAGE>
PROFIT FUNDS INVESTMENT TRUST
SPECIAL MEETING OF THE SHAREHOLDERS OF
PROFIT VALUE FUND
To Be Held on November 30, 1998
- --------------------------------------------------------------------------------
PROXY STATEMENT
- --------------------------------------------------------------------------------
This proxy statement is furnished in connection with the solicitation by
the Board of Trustees of Profit Funds Investment Trust ("the Trust") of proxies
for use at the special meeting of shareholders or at any adjournment thereof.
This Proxy Statement and form of proxy were first mailed to shareholders on or
about October 20, 1998.
The special meeting of shareholders has been called for the purposes of
considering and voting on (1) the election of five individuals to the Board of
Trustees; (2) a new investment advisory agreement for the Fund, whereby Investor
Resources Group, LLC ("IRG") will continue to serve as investment adviser to the
Fund at the same rate of compensation as stated in the Fund's current investment
advisory agreement; (3) the elimination of the Fund's fundamental investment
restriction which currently prohibits the writing of put and call options; and
(4) the selection of PricewaterhouseCoopers L.L.P. as the Fund's independent
public accountants for the current fiscal year.
A proxy, if properly executed, duly returned and not revoked, will be voted
in accordance with the specifications thereon. A proxy which is properly
executed which has no voting instructions as to a proposal will be voted for
that proposal. A shareholder may revoke a proxy at any time prior to use by
filing with the Secretary of the Trust an instrument revoking the proxy, by
submitting a proxy bearing a later date, or by attending and voting at the
meeting.
In addition to solicitation through the mails, proxies may be solicited by
officers, employees and agents of the Trust without cost to the Fund. Such
solicitation may be by telephone, facsimile or otherwise. The Fund will
reimburse brokers, custodians, nominees and fiduciaries for the reasonable
expenses incurred by them in connection with forwarding solicitation material to
the beneficial owners of shares held of record by such persons.
THE FUND'S MOST RECENTLY PUBLISHED ANNUAL REPORT AND SEMIANNUAL REPORT ARE
AVAILABLE AT NO CHARGE BY WRITING TO THE TRUST AT P.O. BOX 5354, CINCINNATI,
OHIO 45201-5354, OR BY CALLING THE TRUST NATIONWIDE (TOLL-FREE) 888-744-2337.
THE
- 1 -
<PAGE>
FUND'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1998 WILL BE MAILED
TO SHAREHOLDERS ON OR BEFORE NOVEMBER 29, 1998.
OUTSTANDING SHARES AND VOTING REQUIREMENTS
The Board of Trustees has fixed the close of business on October 6, 1998 as
the record date for the determination of shareholders entitled to notice of and
to vote at the special meeting of shareholders or any adjournment thereof. As of
the record date there were 159,813.989 shares of beneficial interest, no par
value, of the Fund outstanding. All full shares of the Fund are entitled to one
vote, with proportionate voting for fractional shares.
On October 6, 1998, National Financial Services Corp., 200 Liberty Street,
1 World Financial Center, New York, New York 10281, owned of record 19.42% of
the Fund's outstanding shares; Independent Trust Corporation FBO Robert Simmons,
6407 Brookside Dr., Chevy Chase, Maryland 20815, owned of record 9.69% of the
Fund's outstanding shares; and Capital Cardiology Consultants Profit Sharing
Plan, 1160 Varnum Street, NE, Suite 100, Washington, D.C. 20017, owned of record
8.37% of the Fund's outstanding shares. According to information available to
the Trust, no other person owned of record or beneficially 5% or more of the
Fund's outstanding shares on the record date.
If a quorum (more than 50% of the outstanding shares of the Fund) is
represented at the meeting, the vote of a plurality of the outstanding shares of
the Fund is required for approval of the election of five individuals to the
Board of Trustees (Proposal I). If a quorum is represented at the meeting, the
vote of a majority of the outstanding shares of the Fund is required for
approval of the new investment advisory agreement with IRG (Proposal II) and the
elimination of the Fund's fundamental investment restriction regarding the
writing of put and call options (Proposal III). The vote of a majority of the
outstanding shares, for purposes of Proposals II and III means the vote of the
lesser of (1) 67% or more of the shares present or represented by proxy at the
meeting, if the holders of more than 50% of the Fund's outstanding shares are
present or represented by proxy, or (2) more than 50% of the Fund's outstanding
shares. If a quorum is present at the meeting but sufficient votes to approve
any matter are not received, the persons named as proxies may propose one or
more adjournments of the meeting to permit further solicitation of proxies. Any
such adjournment will require the affirmative vote of a majority of those shares
represented at the meeting in person or by proxy. A shareholder vote may be
taken on one or more of the proposals in this proxy statement prior to any such
adjournment if sufficient votes have been received and it is otherwise
appropriate. Abstentions and "broker non-votes" are counted for purposes of
determining whether a quorum is present but do not represent
- 2 -
<PAGE>
votes cast with respect to a proposal. "Broker non-votes" are shares held by a
broker or nominee for which an executed proxy is received by the Fund, but are
not voted as to one or more proposals because instructions have not been
received from the beneficial owners or persons entitled to vote and the broker
or nominee does not have discretionary voting power.
The Trustees of the Trust intend to vote all their shares in favor of the
proposal described herein. All Trustees and officers as a group owned of record
or beneficially 12.66% of the Fund's outstanding shares on the record date.
I. ELECTION OF TRUSTEES
Five nominees are to be elected, each to serve until his or her successor
is duly elected and shall qualify. The following table sets forth certain
information regarding each nominee for election as a trustee by shareholders.
<TABLE>
<CAPTION>
Name and Principal Amount of
Occupation During Beneficial Compensation
the Past Five Years Ownership During the
and Directorships of Trustee of Shares of Fiscal Year Ended
Public Companies Age Since the Trust(1) September 30, 1998
- -------------------- --- ------- ------------- ------------------
<S> <C> <C> <C> <C>
*EUGENE A. PROFIT 34 1996 None None
President and Chief
Executive Officer of
IRG (February, 1996
to Present); Investment
Executive, Legg Mason
Wood Walker (1994-
1996); Marketing
Director, Crossroads
Group, Parsippany,
New Jersey (1993-1994);
Owner, Cravings Bakery
(1991-1993); Player,
National Football League
(1986-1991).
*JOSEPH A. QUASH, M.D. 58 1996 19,315.31 None
Chairman of the Board, (Represents
of IRG (1996 to 12.09% of
Present); Cardiologist, the Fund's
Capital Cardiology outstanding
Group, Washington, D.C. shares)
(1976 to Present).
- 3 -
<PAGE>
Name and Principal Amount of
Occupation During Beneficial Compensation
the Past Five Years Ownership During the
and Directorships of Trustee of Shares of Fiscal Year Ended
Public Companies Age Since the Trust(1) September 30, 1998
- -------------------- --- ------- ------------- ------------------
LARRY E. JENNINGS, JR. 35 1996 664.566 None**
Managing Director
and Chief Executive
Officer, Carnegie
Morgan Energy Co.,
Baltimore, Maryland
(1994 to Present);
Managing Director,
Legg Mason Wood
Walker (1987 to
1994).
ROBERT M. MILANICZ 50 1996 251.634 None**
Comptroller, American
Psychiatric Association,
Washington, D.C.
(1978 to Present).
DEBORAH OWENS 39 1998 None None**
Host of Moneyworks,
a radio talk show
(February 1996 to
Present); Senior
Financial Representative
and Talk Show Host for
Fidelity Investments
(1994 to 1996).
</TABLE>
(1) Voting and investment power as of October 6, 1998.
* Eugene A. Profit and Joseph A. Quash, M.D., as affiliated persons of IRG,
the Trust's investment adviser, are "interested persons" of the Trust
within the meaning of Section 2(a)(19) of the 1940 Act. Mr. Profit and Dr.
Quash may directly or indirectly receive benefits from the advisory fees
paid to IRG as a result of such affiliation.
** Each Trustee that is not affiliated with the Trust or IRG is entitled to
receive a fee equal to $1,000 for each regularly scheduled and special
meeting of the Trust attended and reimbursement for all out-of-pocket
expenses incurred in attending such meetings. However, during the fiscal
year ended September 30, 1998, the Trustees decided to waive compensation
to reduce the operating expenses of the Fund.
- 4 -
<PAGE>
All nominees have consented to being named in this proxy statement and have
agreed to serve if elected.
The Trust has an Audit Committee, Pricing Committee and Nominating
Committee currently consisting of Mr. Jennings, Mr. Milanicz and Ms. Owens. The
Audit Committee makes recommendations to the Board of Trustees concerning the
selection of the Trust's independent public accountants, reviews with such
accountants the scope and results of the Trust's annual audit and considers any
comments which the accountants may have regarding the Trust's financial
statements or books of account. The Pricing Committee discusses valuation of
securities and approves methodology for valuing thinly traded stocks. The
Nominating Committee nominates candidates for the position of trustees.
During the fiscal year ended September 30, 1998, the Board of Trustees held
four meetings. The Audit Committee met twice during the fiscal year. The Pricing
Committee and Nominating Committee did not meet during the fiscal year. During
such fiscal year, each trustee attended at least 75% of the aggregate of (i) the
total number of meetings of the Board of Trustees (held during the period during
which he or she has been a trustee) and (ii) the total number of meetings held
by the committee of the Board of Trustees on which he or she served.
EXECUTIVE OFFICERS. The Trust's executive officers are set forth below. The
business address of Robert G. Dorsey, Mark J. Seger and John F. Splain is 312
Walnut Street, 21st Floor, Cincinnati, Ohio 45202.
Name and Principal Occupation Officer Position with
During the Past Five Years Age Since the Trust
- --------------------------------------------------------------------------------
EUGENE A. PROFIT 33 1996 President and
(see page 3) Chief Executive
Officer
ROBERT G. DORSEY 41 1998 Vice President
President and Treasurer and Assistant
of Countrywide Fund Services, Secretary
Inc. (a registered transfer
agent) and CW Fund
Distributors, Inc. (a
registered broker-dealer
and the Fund's principal
underwriter); Vice President
and Treasurer
of Countrywide Investments,
Inc. (a registered broker-
dealer and investment adviser)
and Countrywide Financial
Services, Inc. (a financial
- 5 -
<PAGE>
Name and Principal Occupation Officer Position with
During the Past Five Years Age Since the Trust
- --------------------------------------------------------------------------------
ROBERT G. DORSEY (...cont'd)
services company and parent
of Countrywide Fund Services,
Inc., Countrywide Investments,
Inc. and CW Fund Distributors,
Inc.). He is also Vice
President of Countrywide
Investment Trust, Countrywide
Strategic Trust, Countrywide
Tax-Free Trust, Atalanta/
Sosnoff Investment Trust,
Brundage, Story and Rose
Investment Trust, Markman
MultiFund Trust, Dean Family
of Funds, The New York State
Opportunity Funds, The Thermo
Opportunity Fund, Inc.,
Maplewood Investment Trust,
a series company, UC
Investment Trust and Wells
Family of Real Estate Funds
and Assistant Vice President
of Firsthand Funds, Schwartz
Investment Trust, The
Tuscarora Investment Trust,
Williamsburg Investment Trust,
The Gannett Welsh & Kotler
Funds, The James Advantage
Funds and The Westport Funds
(all of which are registered
investment companies).
MARK J. SEGER 36 1998 Treasurer
Vice President and Chief
Operating Officer of
Countrywide Fund Services,
Inc. and Vice President of
Countrywide Financial
Services, Inc. and CW Fund
Distributors, Inc. He is also
Treasurer of Countrywide
Investment Trust, Countrywide
Tax-Free Trust, Countrywide
Strategic Trust, Williamsburg
Investment Trust, Markman
MultiFund Trust,
- 6 -
<PAGE>
Name and Principal Occupation Officer Position with
During the Past Five Years Age Since the Trust
- --------------------------------------------------------------------------------
MARK J. SEGER (...cont'd)
Brundage, Story and Rose
Investment Trust, Maplewood
Investment Trust, a series
company, The Thermo
Opportunity Fund, Inc., The
New York State Opportunity
Funds, Dean Family of Funds,
Lake Shore Family of Funds,
Wells Family of Real Estate
Funds, Atalanta/Sosnoff
Investment Trust and UC
Investment Trust and Assistant
Treasurer of Schwartz
Investment Trust, The
Tuscarora Investment Trust,
The Gannett Welsh & Kotler
Funds, The James Advantage
Funds, Firsthand Funds and The
Westport Funds.
JOHN F. SPLAIN 42 1998 Vice
Vice President, Secretary President and
and General Counsel of Secretary
Countrywide Fund Services,
Inc., CW Fund Distributors,
Inc., Countrywide Investments,
Inc. and Countrywide Financial
Services, Inc. He is also
Secretary of Countrywide
Investment Trust, Countrywide
Tax-Free Trust, Countrywide
Strategic Trust,
Atalanta/Sosnoff Investment
Trust, Brundage, Story and
Rose Investment Trust,
Williamsburg Investment Trust,
Markman MultiFund Trust, The
Tuscarora Investment Trust,
Lake Shore Family of Funds
Maplewood Investment Trust, a
series company, The Thermo
Opportunity Fund, Inc., UC
Investment Trust, Wells Family
of Real Estate Funds and
The Westport Funds and
- 7 -
<PAGE>
Name and Principal Occupation Officer Position with
During the Past Five Years Age Since the Trust
- --------------------------------------------------------------------------------
JOHN F. SPLAIN (...cont'd)
Assistant Secretary of
Schwartz Investment Trust, The
Gannett Welsh & Kotler Funds,
Firsthand Funds, The New York
State Opportunity Funds, The
James Advantage Funds and the
Dean Family of Funds.
II. APPROVAL OR DISAPPROVAL OF NEW MANAGEMENT AGREEMENT
The Trust presently retains IRG to manage the Fund's investments pursuant
to a an investment advisory agreement between the Trust and IRG (the "Current
Management Agreement"). The Current Management Agreement was last approved by
the Board of Trustees, including a majority of the Trustees who are not
interested persons, as defined in the Investment Company Act of 1940 (the "1940
Act"), of IRG or of the Trust (the "Independent Trustees"), on August 13, 1998.
IRG approved the Current Management Agreement, as the sole shareholder of the
Fund, on October 15, 1996.
The Board of Trustees proposes that a new investment advisory agreement
between the Trust and IRG (the "New Management Agreement") be approved by
shareholders of the Fund. The New Management Agreement will be effective
immediately upon approval by shareholders.
The Current Management Agreement contemplates IRG's appointment of one or
more sub-advisers to assume responsibility for providing discretionary
investment advisory services to the Fund. The Current Management Agreement
authorizes IRG to select and to supervise such sub-adviser(s). Where no
sub-adviser(s) directly manages the Fund's assets, IRG provides discretionary
investment advisory services directly to the Fund. From the Fund's commencement
of operations on November 15, 1996 through October 31, 1997, a sub-adviser
selected and supervised by IRG provided investment advisory services to the
Fund. Effective October 31, 1997, following approval by the Board of Trustees,
the employment of the sub-adviser was terminated and IRG assumed all investment
advisory services to the Fund. IRG has been the sole investment adviser to the
Fund since that time. While the investment advisory services presently performed
by IRG under the Current Management Agreement and those to be performed by IRG
under the New Management Agreement are substantially identical, the New
Management Agreement does not assign any investment advisory responsibilities to
a sub-adviser since it is not contemplated that any sub-adviser(s) will be
appointed in the future. The terms and conditions of the New Management
Agreement
- 8 -
<PAGE>
are otherwise substantially the same as those of the Current Management
Agreement with the exception of the effective date and termination date and
certain other changes described below.
The employees of IRG who currently provide portfolio management services to
the Fund are expected to continue to provide such services and there will be no
change in their responsibilities with respect to the Fund under the New
Management Agreement. Furthermore, no changes in IRG's method of operation, or
the location where it conducts its business, are contemplated.
THE NEW MANAGEMENT AGREEMENT. Under the New Management Agreement, IRG will
select portfolio securities for investment by the Fund, purchase and sell
securities of the Fund, and upon making any purchase or sale decision, place
orders for the execution of such portfolio transactions, all in accordance with
the 1940 Act and any rules thereunder, applicable state securities laws, the
supervision and control of the Board of Trustees of the Trust and the investment
objectives, policies and restrictions of the Fund. Pursuant to the New
Management Agreement, IRG will also provide certain executive personnel for the
Trust and any necessary office space, facilities and equipment necessary for the
conduct of its advisory activities on behalf of the Fund. IRG will receive a fee
from the Fund, computed and accrued daily and paid monthly, at an annual rate of
1.25% of the average value of the daily net assets of the Fund. This is the same
fee that is payable to IRG under the Current Management Agreement. During the
fiscal year ended September 30, 1998, the Fund did not pay any fees to IRG
because of voluntary fee waivers by IRG in order to reduce the Fund's operating
expenses.
The New Management Agreement directs IRG to give primary consideration to
the best net price and the most favorable execution in the selection of brokers
and dealers to execute portfolio transactions for the Fund. Consistent with this
obligation, when IRG believes two or more brokers are comparable in price and
execution, IRG may prefer (i) brokers and dealers who provide the Fund with
research advice and other services, or who recommend or sell Fund shares, and
(ii) brokers who are affiliated persons of the Trust or IRG.
The New Management Agreement provides that it will remain in force for an
initial term of two years and from year to year thereafter, subject to annual
approval by (a) the Board of Trustees of the Trust or (b) a vote of a majority
(as defined in the 1940 Act) of the outstanding voting securities of the Fund;
provided that in either event continuance is also approved by a majority of the
Independent Trustees, by a vote cast in person at a meeting called for the
purpose of voting on such approval. The New Management Agreement may be
terminated at any time, on sixty
- 9 -
<PAGE>
days' written notice, without the payment of any penalty, by the Board of
Trustees, by a vote of a majority of the outstanding voting securities of the
Fund, or by IRG. The New Management Agreement automatically terminates in the
event of its assignment, as defined by the 1940 Act and the rules thereunder.
The New Management Agreement provides that IRG shall not be liable for any
error of judgment, mistake of law or any loss whatsoever suffered by the Trust
in connection with the performance of the New Management Agreement, except a
loss resulting from IRG's willful misfeasance, bad faith or gross negligence or
from reckless disregard by IRG of its obligations thereunder.
The New Management Agreement differs from the Current Management Agreement
in the following respects:
(1) The Current Management Agreement contains specific provisions
regarding the appointment of one or more sub-advisers to provide
investment advisory services to the Fund, and appoints IRG to select
and supervise such sub-adviser(s). The New Management Agreement
assigns the investment advisory responsibilities directly to IRG and
deletes any reference to sub-advisers or the selection and supervisory
responsibilities enumerated in the Current Management Agreement.
(2) The Current Management Agreement limits Fund expenses to the most
restrictive expense limitation imposed on the Fund by states in which
the Fund is qualified to sell shares. Recent federal legislation has
limited the states in the substantive regulation of mutual funds.
Accordingly, states are prohibited from applying any limitations to
the expenses of the Fund. Therefore, the New Management Agreement does
not make any reference to expense limitations which could previously
be imposed on the Fund by states in which the Fund is qualified to
sell shares.
The New Management Agreement is attached as Exhibit A. The description set
forth in this Proxy Statement of the New Management Agreement is qualified in
its entirety by reference to Exhibit A.
If the New Management Agreement is approved by the Fund's shareholders, it
will become effective immediately. In the event that shareholders of the Fund do
not approve the New Management Agreement, the Board of Trustees will consider
other available alternatives, including negotiating a new investment advisory
agreement with IRG or another advisory organization selected by the Board, in
either event subject to approval by the shareholders of the Fund.
- 10 -
<PAGE>
INFORMATION ON IRG. IRG was organized as a Delaware Limited Liability
Company in February, 1996. Eugene A. Profit and Joseph A. Quash, M.D. are the
controlling members of IRG. IRG is registered as an investment adviser with the
U.S. Securities and Exchange Commission. Its address is 8720 Georgia Ave, Suite
808, Silver Spring, Maryland 20910. The directors and the principal executive
officers of IRG are Eugene A. Profit, Joseph A. Quash, M.D., Linda M. Quash,
Michelle D. Quash and Dr. Thomas Pinder. Mr. Profit and Dr. Quash both also
serve as Trustees of the Trust.
Eugene A. Profit is primarily responsible for managing the portfolio of the
Fund and has acted in this capacity since October 31, 1997.
EVALUATION BY THE BOARD OF TRUSTEES. On August 13, 1998, the Board of
Trustees, including a majority of the Independent Trustees, by votes cast in
person, unanimously approved, subject to the required shareholder approval
described herein, the New Management Agreement.
In considering approval of the New Management Agreement, the Board of
Trustees carefully evaluated information it deemed necessary to enable it to
determine whether the New Management Agreement will be in the best interests of
the Fund and its shareholders. In making the recommendation to approve the New
Management Agreement, the Trustees evaluated the experience of IRG's key
personnel in providing investment advisory services to the Fund and in
institutional investing, the quality of services IRG is expected to provide the
Fund and the compensation proposed to be paid to IRG. The Trustees have given
careful consideration to all factors deemed to be relevant to the Fund,
including, but not limited to: (1) the fees and expense ratios of comparable
mutual funds; (2) the performance of the Fund as compared to similar mutual
funds; (3) the nature and the quality of the services expected to be rendered to
the Fund by IRG; (4) the distinct investment objective and policies of the Fund;
(5) that the compensation payable to IRG under the New Management Agreement will
be at the same rate as the compensation now payable under the Current Management
Agreement; (6) that the investment advisory services to be provided by IRG under
the New Management Agreement are substantially identical to the investment
advisory services currently provided by IRG to the Fund; (7) the history,
reputation, qualification and background of IRG, as well as the qualifications
of the key personnel of IRG; and (8) the financial condition of IRG.
OTHER INFORMATION. CW Fund Distributors, Inc. serves as the Fund's
principal underwriter. Countrywide Fund Services, Inc. serves as the Fund's
administrator, transfer and dividend disbursing agent, and accounting and
pricing agent. The address of CW Fund Distributors, Inc. and Countrywide Fund
Services, Inc.
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<PAGE>
is 312 Walnut Street, 21st Floor, Cincinnati, Ohio 45202. CW Fund Distributors,
Inc. and Countrywide Fund Services, Inc. are wholly-owned indirect subsidiaries
of Countrywide Credit Industries, Inc., a New York Stock Exchange listed company
principally engaged in the business of residential mortgage lending.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS APPROVE THE NEW MANAGEMENT
AGREEMENT.
III. APPROVAL OR DISAPPROVAL OF ELIMINATION OF FUNDAMENTAL INVESTMENT
RESTRICTION PROHIBITING THE FUND FROM WRITING PUT AND CALL OPTIONS.
The Board of Trustees has adopted certain fundamental investment
restrictions which are designed to reduce the risks of an investment in the
Fund. Fundamental restrictions may not be altered or eliminated except by the
vote of a majority of the outstanding shares of the Fund. One such restriction
adopted by the Trustees on behalf of the Fund is:
Short Sales. The Fund will not make short sales of securities, or maintain
a short position, other than short sales "against the box." IN ADDITION,
THE FUND WILL NOT WRITE PUT OR CALL OPTIONS.
The Board of Trustees, at the recommendation of IRG, has determined that it
is appropriate to provide the Fund with the flexibility to write covered put and
call options. The Trustees have therefore determined that, subject to
shareholder approval, the highlighted sentence within the foregoing investment
restriction should be eliminated. The Fund does not currently intend to commit
more than 5% of its net assets to options strategies; however, this will not be
a fundamental limitation and may be changed by the Board of Trustees without
shareholder approval.
IRG believes that writing covered options is a prudent investment technique
which involves relatively little risk. However, there is no assurance that a
closing transaction can be effected at a favorable price. The Fund intends to
write put and call options as a hedging device and not for speculative purposes.
These options are covered by the Fund because, in the case of call options, it
will own the underlying securities as long as the option is outstanding or
because, in the case of put options, it will maintain a segregated account of
cash, U.S. Government obligations or other liquid securities which can be
liquidated promptly to satisfy any obligation of the Fund to purchase the
underlying securities.
Call options written by the Fund give the holder the right to buy the
underlying securities from the Fund at a stated
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<PAGE>
exercise price; put options give the holder the right to sell the underlying
security to the Fund. The Fund will receive a premium from writing a put or call
option, which increases the Fund's return in the event the option expires
unexercised or is closed out at a profit. The amount of the premium will
reflect, among other things, the relationship of the market price of the
underlying security to the exercise price of the option and the remaining term
of the option. By writing a call option, the Fund limits its opportunity to
profit from any increase in the market value of the underlying security above
the exercise price of the option. By writing a put option, the Fund assumes the
risk that it may be required to purchase the underlying security for an exercise
price higher than its then current market value, resulting in a potential
capital loss unless the security subsequently appreciates in value.
On August 13, 1998, the Board of Trustees authorized, subject to
shareholder approval, the elimination of the fundamental investment restriction
prohibiting the Fund from writing put and call options. If shareholders approve
the elimination of this restriction, the Fund's prospectus and statement of
additional information will be revised in order to reflect the Fund's policies
regarding the writing of put and call options.
The elimination of the foregoing investment restriction is not expected to
have a significant impact upon future operations of the Fund and is intended to
provide IRG with greater flexibility in managing the Fund's assets.
THE BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE FOR THE ELIMINATION OF THE
FOREGOING INVESTMENT RESTRICTION.
IV. RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
PricewaterhouseCoopers L.L.P. has been selected as the Fund's independent
public accountants for the current fiscal year by the Board of Trustees,
including a majority of the Independent Trustees. The employment of
PricewaterhouseCoopers L.L.P. is conditional upon the right of the Fund, by a
vote of a majority of its outstanding shares, to terminate the employment
without any penalties.
PricewaterhouseCoopers L.L.P. has acted as the Fund's independent public
accountants, through one of its predecessors, Coopers & Lybrand, L.L.P., since
commencement of the Fund's operations. If the Fund's shareholders do not ratify
the selection of PricewaterhouseCoopers L.L.P., other certified public
accountants will be considered for selection by the Board of Trustees.
Representatives of PricewaterhouseCoopers L.L.P. are not
- 13 -
<PAGE>
expected to be present at the meeting although they will have an opportunity to
attend and to make a statement, if they desire to do so. If representatives of
PricewaterhouseCoopers L.L.P. are present, they will be available to respond to
appropriate questions from shareholders.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS RATIFY THE SELECTION OF
PRICEWATERHOUSECOOPERS L.L.P. AS INDEPENDENT PUBLIC ACCOUNTANTS.
V. OTHER BUSINESS
The proxy holders have no present intention of bringing any matter before
the meeting other than that specifically referred to above or matters in
connection with or for the purpose of effecting the same. Neither the proxy
holders nor the Board of Trustees are aware of any matters which may be
presented by others. If any other business shall properly come before the
meeting, the proxy holders intend to vote thereon in accordance with their best
judgment.
Any shareholder proposal intended to be presented at the next shareholder
meeting must be received by the Trust for inclusion in its proxy statement and
form of proxy relating to such meeting at a reasonable time before the
solicitation of proxies for the meeting is made.
By Order of the Board of Trustees
John F. Splain
Secretary
Date: October 18, 1998
- --------------------------------------------------------------------------------
Please complete, date and sign the enclosed Proxy and return it promptly in the
enclosed reply envelope. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
- 14 -
<PAGE>
EXHIBIT A
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT is made this __ day of ________, 1998, between
Profit Funds Investment Trust (the "Trust"), a business trust organized under
the laws of the Commonwealth of Massachusetts, and Investor Resources Group, LLC
(the "Manager"), a limited liability company organized under the laws of the
State of Delaware.
WHEREAS, the Trust has been organized to operate as an open-end investment
company registered under the Investment Company Act of 1940, as amended (the
"Act");
WHEREAS, the Trust currently issues shares of a single series, the Profit
Value Fund (the "Fund"), and the Trustees have the power to create additional
series; and
WHEREAS, the Fund has been created for the purpose of investing and
reinvesting its assets in securities pursuant to the investment objective and
policies as set forth in the Trust's registration statement under the Act and
the Securities Act of 1933 (the "Registration Statement"), as heretofore amended
and supplemented; and the Trust desires to avail itself of the services,
information, advice, assistance and facilities of a manager and to have a
manager provide or perform for it various management, statistical, portfolio
adviser selection and other services for the Fund; and
WHEREAS, the Manager is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended;
NOW, THEREFORE, the Trust and Manager agree as follows:
<PAGE>
1. Employment of the Manager. The Trust hereby employs the Manager to
manage the investment and reinvestment of the assets of the Fund in the manner
set forth in paragraph 2 of this Agreement, subject to the direction of the
Board of Trustees and the officers of the Trust, for the period, in the manner,
and on the terms hereinafter set forth. The Manager hereby accepts such
employment and agrees during such period to render the services and to assume
the obligations herein set forth. The Manager shall for all purposes herein be
deemed to be an independent contractor and shall, except as expressly provided
or authorized (whether herein or otherwise), have no authority to act for or
represent the Fund in any way or otherwise be deemed an agent of the Fund.
2. Obligation of and Services to be Provided by the Manager. The Manager
undertakes to provide the services hereinafter set forth and to assume the
following obligations:
A. Investment Management Services.
(a) The Manager shall have overall supervisory responsibility for the
general management and investment of the assets and portfolio
securities of the Fund subject to and in accordance with the
investment objective and policies of the Fund, and any directions
which the Trust's Board of Trustees may issue to the Manager from time
to time.
<PAGE>
(b) The Manager shall provide overall investment programs and strategies
for the Fund, shall revise such programs as necessary and shall
monitor and report periodically to the Board of Trustees concerning
the implementation of the programs.
(c) The Manager shall have full investment discretion and shall make all
determinations with respect to the investment of the Fund's assets and
the purchase and sale of portfolio securities with those assets.
(d) The Manager shall render regular reports to the Trust, at regular
meetings of the Board of Trustees, of, among other things, the
portfolio investments of the Fund and measurement and analysis of the
results achieved by the Fund.
(e) The Manager shall employ or provide and compensate the executive,
administrative, secretarial and clerical personnel necessary to
provide the services set forth in this paragraph 2, and shall bear the
expense thereof, except as may otherwise be provided in Section 4 of
this Agreement. The Manager shall also compensate all officers and
employees of the Trust who are officers or employees of the Manager.
- 18 -
<PAGE>
(f) The Manager shall pay all expenses incurred in connection with the
sale or distribution of the Fund's shares to the extent such expenses
are not assumed by the Fund under the Trust's Plan of Distribution.
B. Provision of Information Necessary for Preparation of Securities
Registration Statements, Amendments and Other Materials.
The Manager will make available and provide financial, accounting and
statistical information required by the Trust in the preparation of
registration statements, reports and other documents required by
federal and state securities laws, and such information as the Trust
may reasonably request for use in the preparation of registration
statements, reports and other documents required by federal and state
securities laws.
C. Other Obligations and Services. The Manager shall make available its
officers and employees to the Board of Trustees and officers of the
Trust for consultation and discussions regarding the administration
and management of the Fund and its investment activities.
3. Execution and Allocation of Portfolio Brokerage Commissions. The
Manager, subject to the limitations contained in this paragraph 3, shall place,
on behalf of the Fund, orders for the execution of portfolio transactions. The
Manager is not
<PAGE>
authorized by the Trust to take any action, including the purchase or sale of
securities for the Fund's account, (a) in contravention of (i) any investment
restrictions set forth in the Act and the rules thereunder, (ii) specific
instructions adopted by the Board of Trustees and communicated to the Manager,
or (iii) the investment objective, policies and restrictions of the Fund as set
forth in the Registration Statement, or (b) which would have the effect of
causing the Fund to fail to qualify or to cease to qualify as a regulated
investment company under the Internal Revenue Code of 1986, as amended, or any
succeeding statute.
Subject to the foregoing, the Manager shall determine the securities to be
purchased or sold by the Fund and will place orders pursuant to its
determination with or through such persons, brokers or dealers in conformity
with the policy with respect to brokerage as set forth in the Registration
Statement or as the Board of Trustees may direct from time to time. It is
recognized that, in providing the Fund with investment supervision of the
placing of orders for portfolio transactions, the Manager will give primary
consideration to securing the best qualitative execution, taking into account
such factors as price (including the applicable brokerage commission or dealer
spread), the execution capability, financial responsibility and responsiveness
of the broker or dealer and the brokerage and research services provided by the
broker or dealer. Consistent with this policy, the Manager may select brokers or
dealers who
<PAGE>
also provide brokerage and research services (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934) to other funds and/or the
other accounts over which it exercises investment discretion. It is understood
that neither the Trust nor the Manager have adopted a formula for allocation of
the Fund's investment transaction business. It is also understood that it is
desirable for the Fund that the Manager have access to supplemental investment
and market research and security and economic analyses provided by certain
brokers who may execute brokerage transactions at a higher commission to the
Fund than may result when allocating brokerage to other brokers on the basis of
seeking the lowest commission. Therefore, the Manager is authorized to place
orders for the purchase and sale of securities for the Fund with such certain
brokers, subject to review by the Trust's Board of Trustees from time to time
with respect to the extent and continuation of this practice, provided that the
Manager determines in good faith that the amount of the commission is reasonable
in relation to the value of the brokerage and research services provided by the
executing broker or dealer. The determination may be viewed in terms of either a
particular transaction or the Manager's overall responsibilities with respect to
the Fund and to other accounts over which it exercises investment discretion. It
is understood that although the information may be useful to the Trust and the
Manager, it is not possible to place a dollar value on such information.
Consistent with the Rules of Fair Practice of the National
- 21 -
<PAGE>
Association of Securities Dealers, Inc., and subject to seeking best qualitative
execution, the Manager may give consideration to sales of shares of the Fund as
a factor in the selection of brokers and dealers to execute portfolio
transactions of the Fund.
On occasions when the Manager deems the purchase or sale of a security to
be in the best interest of the Fund as well as other clients, the Manager, to
the extent permitted by applicable laws and regulations, may, but shall be under
no obligation to, aggregate the securities to be sold or purchased in order to
obtain the most favorable price or lower brokerage commissions and efficient
execution. In such event, allocation of the securities so purchased or sold, as
well as expenses incurred in the transaction, will be made by the Manager in the
manner it considers to be the most equitable and consistent with its fiduciary
obligations to the Trust and to such other clients.
The Manager will not execute any portfolio transactions for the Fund's
account with a broker or dealer which is an "affiliated person" (as defined in
the Act) of the Trust or the Manager without the prior approval of the Trust.
The Trust agrees that it will provide the Manager with a list of brokers and
dealers which are "affiliated persons" of the Trust or the Manager.
The Manager shall render regular reports to the Trust of the total
brokerage business placed by the Fund and the manner in which the allocation has
been accomplished.
<PAGE>
4. Expenses of the Fund. It is understood that the Fund will pay, or that
the Trust will enter into arrangements that require third parties to pay, all
expenses of the Fund other than those expressly assumed by the Manager herein,
which expenses payable by the Fund shall include:
A. Expenses of all audits by independent public accountants;
B. Expenses of transfer agent, dividend disbursing agent, accounting and
pricing agent and shareholder recordkeeping services;
C. Expenses of custodial services, including recordkeeping services
provided by the custodian;
D. Expenses of obtaining security valuation quotations for calculating
the value of the Fund's net assets;
E. Salaries and other compensation of any of its executive officers and
employees, if any, who are not officers, directors, stockholders or
employees of the Manager;
F. Taxes or governmental fees levied against the Fund; G. Brokerage fees
and commissions in connection with the purchase and sale of the Fund's
portfolio securities;
H. Costs, including the interest expense, of borrowing money;
I. Costs and/or fees incident to Board of Trustee and shareholder
meetings, the preparation and mailings of prospectuses, reports and
notices to the existing shareholders of the Fund, the filing of
reports with
<PAGE>
regulatory bodies, the maintenance of the Trust's existence as a
business trust, membership in investment company organizations, and
the registration of shares with federal and state securities
authorities;
J. Legal fees, including the legal fees related to the registration and
continued qualification of the Fund's shares for sale and legal fees
arising from litigation to which the Trust may be a party and
indemnification of the Trust's officers and trustees with respect
thereto;
K. Costs of printing share certificates (in the event such certificates
are issued) representing shares of the Fund;
L. Trustees' fees and expenses of Trustees who are not directors,
officers, employees or stockholders of the Manager or any of its
affiliates; and
M. The Fund's pro rata portion of the fidelity bond required by Section
17(g) of the Act and other insurance premiums.
5. Activities and Affiliates of the Manager.
A. The services of the Manager hereunder are not to be deemed exclusive,
and the Manager and any of its affiliates shall be free to render
similar services to others. The Manager shall use the same skill and
care in the management of the Fund's assets as it uses in the
administration of other accounts to which it provides asset
management, consulting and portfolio
<PAGE>
manager selection services, but shall not be obligated to give the
Fund more favorable or preferential treatment vis-a-vis its other
clients.
B. Subject to and in accordance with the Agreement and Declaration of
Trust and Bylaws of the Trust and to Section 10(a) of the Act, it is
understood that Trustees, officers and agents of the Trust and
shareholders of the Fund are or may be interested in the Manager or
its affiliates as directors, officers, agents or stockholders of the
Manager or its affiliates; that directors, officers, agents and
stockholders of the Manager or its affiliates are or may be interested
in the Trust as Trustees, officers, agents, shareholders or otherwise;
that the Manager or its affiliates may be interested in the Trust as
shareholders or otherwise; and that the effect of any such interests
shall be governed by said Declaration of Trust, Bylaws and the Act.
6. Compensation of the Manager. For all of the services to be rendered and
payments made as provided in this Agreement, the Fund will pay the Manager a
fee, computed and accrued daily and paid monthly, at the annual rate of 1.25% of
the Fund's average daily net assets.
The value of the daily net assets of the Fund shall be determined pursuant
to the applicable provisions of the Declaration of Trust and to resolutions of
the Board of Trustees
<PAGE>
of the Trust. If, pursuant to such provisions, the determination of net asset
value is suspended for any particular business day, then for the purposes of
this paragraph 6, the value of the net assets of the Fund as last determined
shall be deemed to be the value of its net assets as of the close of business on
that day, or as of such other time as the value of the Fund's net assets may
lawfully be determined on that day. If the determination of the net asset value
of the Fund's shares has been suspended for a period including such month, the
Manager's compensation payable for such month shall be computed on the basis of
the value of the net assets of the Fund as last determined (whether during or
prior to such month).
7. Liabilities of the Manager.
A. Except as provided below in this paragraph 7, in the absence of
willful misfeasance, bad faith, gross negligence, or reckless
disregard of obligations or duties hereunder on the part of the
Manager ("disabling conduct"), the Manager shall not be subject to
liability to the Trust or to any shareholder of the Fund for any act
or omission in the course of, or connected with, rendering services
hereunder or for any losses that may be sustained in the purchase,
holding or sale of any security.
B. The Manager shall not be indemnified for any liability unless (i) a
final decision is made on the merits by a court or other body before
whom the proceeding was
<PAGE>
brought that the Manager was not liable by reason of disabling
conduct, or (ii) in the absence of such a decision, a reasonable
determination is made, based upon a review of the facts, that the
Manager was not liable by reason of disabling conduct, by (a) the vote
of a majority of a quorum of the Trustees who are not interested
persons of the Trust or the Manager or (b) an independent legal
counsel in a written opinion. The Trust will advance attorneys' fees
or other expenses incurred by the Manager in defending a proceeding,
upon the undertaking by or on behalf of the Manager to repay the
advance unless it is ultimately determined that the Manager is
entitled to indemnification, so long as the Manager meets at least one
of the following as a condition to the advance: (i) the Manager shall
provide a security for its undertaking, (ii) the Trust shall be
insured against losses arising by reason of any lawful advances, or
(iii) a majority of a quorum of the Trustees who are not interested
persons of the Trust or the Manager, or an independent legal counsel
in a written opinion, shall determine, based on a review of the
readily available facts (as opposed to a full trial-type inquiry),
that there is reason to believe that the Manger ultimately will be
found entitled to indemnification. Any person employed by the Manager
who may also be or become an employee of the Trust
<PAGE>
shall be deemed, when acting within the scope of his employment by the
Trust, to be acting in such employment solely for the Trust and not as
the Manager's employee or agent.
C. No provision of this Agreement shall be construed to protect any
Trustee, director, officer or agent of the Trust or the Manager from
liability in violation of Sections 17(h) and (i) of the Act.
8. Renewal and Termination.
A. This Agreement shall become effective on the date first written above
and shall remain in full force and effect for two (2) years from the
date hereof and from year to year thereafter, but only so long as such
continuance is specifically approved at least annually by the vote of
a majority of the Trustees who are not interested persons of the Trust
or the Manager, cast in person at a meeting called for the purpose of
voting on such approval and by a vote of the Board of Trustees or of a
majority of the outstanding voting securities. The aforesaid provision
that this Agreement may be continued "annually" shall be construed in
a manner consistent with the Act and the rules and regulations
thereunder.
B. This Agreement:
(a) may at any time be terminated with respect to the Fund, without
the payment of any penalty, either by vote of the Board of
Trustees of the Trust or
<PAGE>
by vote of a majority of the outstanding voting securities of the
Fund, on sixty (60) days' written notice to the Manager;
(b) shall immediately terminate in the event of its assignment; and
(c) may be terminated by the Manager on sixty (60) days' written
notice to the Trust.
C. As used in this Section 8, the terms "assignment," "interested person"
and "vote of a majority of the outstanding voting securities" shall
have the meanings set forth in the Act and the rules and regulations
thereunder.
D. Any notice under this Agreement shall be given in writing addressed
and delivered or mailed postpaid, to the other party to this Agreement
at its principal place of business.
9. Severability. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
10. Limitation of Liability. It is expressly agreed that the obligations of
the Trust hereunder shall not be binding upon any of the Trustees, shareholders,
nominees, officers, agents or employees of the Trust, personally, but bind only
the trust property of the Trust, as provided in the Declaration of Trust of the
Trust. The execution and delivery of this Agreement have
<PAGE>
been authorized by the Trustees and shareholders of the Trust and signed by the
officers of the Trust, acting as such, and neither such authorization by such
Trustees and shareholders nor such execution and delivery by such officers shall
be deemed to have been made by any of them individually or to impose any
liability on any of them personally, but shall bind only the trust property of
the Trust as provided in its Declaration of Trust.
11. Use of Name. The Manager may use the name "Profit Funds" or any
derivation thereof in connection with another business enterprise, including any
registered investment company with which the Manager is, or may become
associated, so long as such use is permitted under the Act and other applicable
law.
12. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, and no amendment of this
Agreement shall be effective until approved by vote of the holders of a majority
of the outstanding voting securities of the Fund and by the Board of Trustees,
including a majority of the Trustees who are not interested persons of the
Manager or of the Trust, cast in person at a meeting called for the purpose of
voting on such approval.
13. Governing Law. To the extent that state law has not been preempted by
the provisions of any law of the United States heretofore or hereafter enacted,
as the same may be amended from time to time, this Agreement shall be
administered, construed and enforced according to the laws of the State of
Delaware.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed, as of the day and year first written above.
PROFIT FUNDS INVESTMENT TRUST
ATTEST: By:
-------------------------------
Title: President
INVESTOR RESOURCES GROUP, LLC
ATTEST: By:
-------------------------------
Title: President
