LABRADOR MUTUAL FUND
FORM N-1A CROSS REFERENCE SHEET
Pursuant to Rule 481(a)
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<TABLE>
<CAPTION>
Item in Part A of Form N-1A Location in Prospectus
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1. Cover Page Cover Page
2. Synopsis Summary of Fund
Expenses
3. Condensed Financial Information Not Applicable
4. General Description of Cover Page; General
Registrant Information
5. Management of the Fund Management Services
5A. Managers Discussion of Not Applicable
Fund Performance
6. Capital Stock and Other General Information
Securities
7. Purchase of Securities How to Buy Shares;
Being Offered Distribution and
Shareholder Servicing
Plan
8. Redemption or Repurchase How to Redeem Shares
9. Pending Legal Proceedings Not Applicable
Location In Statement
of
Item in Part B of Form N1-A Additional Information
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10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and General Information;
History General Information
(Prospectus)
13. Investment Objectives, Investment Objectives,
Policies and Risks Policies and Risks
14. Management of the Registrant Management
15. Control Persons and Principal Trustees and Officers
Holders of Securities (Prospectus)
16. Investment Advisory and Management
Other Services
17. Brokerage Allocation Portfolio Transactions;
Distribution and
Shareholder Servicing
Plan
18. Capital Stock and Other General Information;
Securities General Information
(Prospectus)
19. Purchase, Redemption and Redemption of Fund
Pricing of Securities Shares;
Being offered How to Buy Shares
(Prospectus); How to
Redeem Shares
(Prospectus) Valuation
20. Tax Status Dividends,
Distributions
and Taxes (Prospectus)
21. Underwriters Underwriters
22. Calculation of Performance Investment Performance
Data
23. Financial Statements Financial Statements
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PROSPECTUS
LABRADOR MUTUAL FUND
c/o Unified Fund Services, Inc.
431 N. Pennsylvania Street
Indianapolis, Indiana 46204
October 8, 1998
Labrador Mutual Fund, (the "Trust") which has a similarly named
portfolio called the Labrador Mutual Fund (the "Fund") is a mutual fund that
invests principally in securities of companies which, in the opinion of the
Fund's management, conduct their business in a socially responsible manner.
Capital growth and current income are the primary and secondary investment
objectives. Investment advisory and management services are provided to the
Fund by Labrador Investment Advisors, Inc., (the "Manager"). For a
description of the Fund's investment objectives and policies, including the
risk factors associated with an investment in the Fund, see "Investment
Objectives, Policies And Risks". There can be no assurance that the Fund's
investment objectives will be achieved.
This Prospectus sets forth concisely the information a prospective
investor should know about the Fund before investing. Please read it
carefully before you invest and keep it for future reference. Additional
information about the Fund, including a Statement of Additional Information,
has been filed with the Securities and Exchange Commission. The Statement of
Additional Information is available upon request and without charge by
calling or writing the Fund at the telephone number or the address set forth
above. The Statement of Additional Information is dated the same date as
this Prospectus and is incorporated herein by reference in its entirety.
SHARES IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY,
AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE LOSS OF PRINCIPAL.
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.
TABLE OF CONTENTS
SUMMARY OF FUND EXPENSES 4
INVESTMENT OBJECTIVES, POLICIES AND RISKS 5
SPECIAL CONSIDERATIONS: TYPES OF COMPANIES SOUGHT FOR INVESTMENT 5
MANAGEMENT SERVICES 9
HOW TO INVEST IN THE FUND 11
AUTOMATIC INVESTMENT PLAN 12
PURCHASES THROUGH PROCESSING ORGANIZATIONS 12
NET ASSET VALUE 13
TAX SHELTERED RETIREMENT PLANS 13
HOW TO REDEEM SHARES 13
DISTRIBUTION AND SHAREHOLDER SERVICING PLAN 15
DIVIDENDS, DISTRIBUTIONS AND TAXES 15
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES 16
GENERAL INFORMATION 18
SHAREHOLDER INQUIRIES 18
SUMMARY OF FUND EXPENSES
Shareholder Transaction Expenses
Sales Load Imposed on Purchases (as a percentage of offering price)None
Redemption Fee (as a percentage of the amount subject to charge) None***
ANNUAL OPERATING EXPENSES (as a percentage of average net assets)
LABRADOR MUTUAL FUND
Management Fee 1.50%
12b-1 Fee** 0.25%
Other Expenses (after reimbursement)* 0.65%
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Total Fund Operating Expenses (after reimbursement)* 2.40%
* Above Other Expenses for the Fund are estimated for the current fiscal
year. The Manager will reduce its fees and/or reimburse the Fund for certain
expenses to the extent necessary to limit total annual Fund operating
expenses to the amount indicated in the table for the Fund. The Fund is
required to reimburse the Manager for any fee waivers or reimbursements
during the three years following that reduction and only if such
reimbursement can be achieved within the foregoing expense limits. Absent
the waivers/reimbursements, actual total Fund operating expenses are
estimated to be 3.00% (1.25% other expenses). Any possible repayments for
fee waivers or reimbursements will be counted to the oldest
waivers/reimbursements first. The Manager may terminate these voluntary
reductions with 60 days written notice to the Fund, however it intends to
maintain the 2.4% expense limit for the current fiscal year. See "Management
Fees."
** Pursuant to the Rules of the National Association of Securities
Dealers, Inc., the aggregate annual distribution fees on shares of the Fund
may not exceed 7.25% of total gross sales, subject to certain exclusions.
The 7.25% limitation is imposed on the Fund rather than on a per shareholder
basis. Therefore, a long-term shareholder of the Fund may pay more in
distribution fees than the economic equivalent of 7.25% of such shareholder's
investment in such shares.
*** In addition to the expenses noted above, the Fund will charge $15.00
for each wire redemption. See "How to Redeem Shares." For a further
description of the various costs and expenses incurred in the Fund's
operation, as well as expense reimbursement or waiver arrangements, see
"Management Services."
EXAMPLE:
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period:
1 YEAR $24
3 YEARS $76
The purpose of the foregoing table is to assist you in understanding
the various costs and expenses that investors will bear, directly or
indirectly, the payment of which will reduce investors' return on an annual
basis. Other Expenses are based on estimated amounts for the current fiscal
year.
The amounts listed in the example should not be considered as
representative of future expenses and actual expenses may be greater or less
than those indicated. Moreover, while the example assumes a 5% annual
return, the fund's actual performance will vary and may result in an actual
return greater or less than 5%.
INVESTMENT OBJECTIVES, POLICIES AND RISKS
Investment Objectives
The Fund's primary and secondary investment objectives are to provide
capital growth and current income. The Fund seeks to adhere to its
objectives through the purchase and retention of shares of common stock of
companies that, in the opinion of the Fund's management conduct their
business in a socially responsible manner. There can be no assurances that
the Fund's investment objectives will be achieved.
Special Considerations: Types Of Companies Sought For Investment
To assess whether a company conducts its business in a socially
responsible manner, the Fund considers a company's record in the areas of (1)
consumer protection and product safety, (2) protection and improvement of the
environment and the proper use of natural resources, (3) equal employment
opportunity, and (4) occupational health and safety. For example, consistent
with its consumer protection screen, the Fund will not purchase shares in a
company which manufactures tobacco products, hard liquor, or pornography.
The consumer protection and product safety criteria include a company's
record with regard to safety of product, marketing practices, and commitment
to quality goods or services. There are few generally accepted measures of
achievement with regard to these special considerations. The development of
suitable measurement techniques, therefore, will be largely within the
discretion and judgment of the management of the Fund. Management does not
intend at present to evaluate in depth a company's activities not directly
connected with the conduct of its business (such as participation in
community improvement projects) or the secondary implications of corporate
activities (for example, in examining banks, the business activities of their
borrowers will not be evaluated).
The Fund's special considerations tend to limit the availability of
investment opportunities more than is customary with other investment
companies. Management believes, however, that there are sufficient
investment opportunities among companies that meet the Fund's special
considerations to permit full investment, if management believes it
desirable, in securities that meet the Fund's investment objectives of
capital growth and current income.
The Fund's objectives are fundamental and cannot be changed without
approval by the holders of a majority of the outstanding voting securities of
the Fund. As defined in the Investment Company Act of 1940 (the "Act"), the
"vote of a majority of the outstanding voting securities" means the lesser of
the vote of (a) 67% of the shares of the Fund at a meeting where more than
50% of the outstanding shares are present in person or by proxy or (b) more
than 50% of the outstanding shares of the Fund.
The Investment Selection Process
Potential investment portfolio selections, which, in the opinion of the
Manager reveal the potential of capital growth and current income (based on
traditional investment considerations, including an opinion of the
fundamental value of the security and other market factors) are selected by
the Manager The Manager then begins a process of searching publicly
available information about the company to determine its record in the areas
of special consideration to the Fund. The Manager uses commercially
available computer data bases, reviews and evaluations published or made
available by "watchdog" groups whose interests focus on one or more of the
special areas, such as the environment, as applicable. Additional data may
be obtained, where practical, from local, state and federal agencies which
maintain surveillance in certain areas of interest to the Fund and which
provide this data to the public.
If the initial evaluation reveals no negative pattern in the areas of
special consideration to the Fund, a company's securities are eligible for
purchase.
If it is determined at any stage that purchase or retention of a
portfolio security is not consistent with the Fund's special considerations,
the security will not be purchased.
If the security has already been purchased, the security will be sold
as expeditiously as possible, consistent with the best interests of the Fund.
While the Manager will disqualify a company evidencing a pattern of conduct
that is inconsistent with the Fund's special standards of social
responsibility, the Manager need not disqualify a company on the basis of
incidents that, in the Manager's judgment, does not reflect the company's
policies and overall current level of adherence to the areas of special
consideration of the Fund, as seen in Special Considerations: Types Of
Companies Sought For Investment.
Management Policies And Risks
Depending upon market conditions, the Fund attempts to be invested
fully in common stocks which meet both traditional investment standards and
the Fund's investment criteria described under "Types of Companies Sought for
Investment."
To earn additional income on its portfolio, the Fund may sell covered
call option contracts on securities it owns to the extent of 20% of the value
of its net assets at the time such option contracts are written. The Fund
may also sell cash covered put option contracts.
The Fund may allocate up to 5% of its assets for the purchase of
exchange listed, equity put and call options. Such options must be on
individual securities. A put option gives the Fund, in return for the
payment of a premium, the right to sell the underlying security to another
party at a fixed price. If the market value of the underlying security
declines, the value of the put option would be expected to rise. If the
market value of the underlying security remains the same or rises, however,
the put option could lose all of its value, resulting in a loss of the cost
of the put option premium to the Fund.
A call option gives the Fund, in return for the payment of a premium,
the right to purchase the underlying security from another party at a fixed
price. If the market value of the underlying security rises, the value of
the call option would also be expected to rise. If the market value of the
underlying security remains the same or declines, however, the call option
could lose all of its value, resulting in a loss of the call option premium
to the Fund.
During periods in which management believes adverse trends are
occurring in the financial markets or the economy, the Fund may adopt a
temporary defensive posture to preserve shareholders' capital by investing in
U.S. Government securities, time deposits, bank certificates of deposit and
other short-term bank obligations issued in this country as well as those
issued in dollar denominations by the foreign branches of U.S. banks, and
cash or cash equivalents, without limit as to amount, as long as such
investments are made in securities of eligible companies and domestic banks.
When the Fund has adopted a temporary defensive posture, the entire portfolio
can be so invested. During such periods, the Fund may not achieve its
investment objectives.
The Fund may invest in companies with substantial overseas activities,
but, at present, management will not examine corporate activities carried on
outside the United States.
The Fund does not intend to hold any illiquid securities. In the event
it does hold illiquid securities, at no time will that amount exceed 15% of
net assets.
A more detailed description of the securities in which the Fund may
invest can be found in the Statement of Additional Information.
Year 2000
The Fund's operations depend on the seamless functioning of computer
systems in the financial service industry in general, and specifically on the
systems used by the Advisor and Unified Fund Services. The Year 2000 issue
relates to computer programs that use two digits rather than four to define
calendar years. Computer programs may recognize a two-digit reference to the
year 2000 (00), as 1900 rather than 2000. This could result in system
failures or miscalculations, disrupting the processing of date-related
information. If the Fund, the Advisor, Unified Fund Services or their
respective computer services suppliers do not adequately address the Year
2000 issue, this issue could create problems in the handling of security
trades, pricing and account servicing for the Fund.
The Advisor has made compliance with the Year 2000 Issue a high
priority and is taking steps that it believes are reasonably designed to
address the Year 2000 Issue with respect to its computer systems. The Advisor
has also been informed that appropriate steps are being taken by Unified Fund
Services and the Fund's other major service providers. The Advisor believes
that the Year 2000 Issue will not have a material impact on its ability to
continue to fulfill its duties as Advisor to the Fund.
Certain Fundamental Policies
The Fund may (i) borrow money from banks to the extent permitted under
the Act, which currently limits borrowing to no more than 33 1/3% of the
value of the Fund's total assets; (ii) not invest more than 5% of the value
of its total assets in the securities of any one issuer (except securities of
the U.S. Government or any instrumentality thereof); and (iii) not invest 25%
or more of its total assets in any single industry. This paragraph describes
fundamental policies of the Fund which cannot be changed without approval by
the holders of a majority (as defined in the Act) of the Fund's outstanding
voting shares. See "Investment Objectives, Policies and Risks - Fundamental
Investment Policies and Restrictions" in the Fund's Statement of Additional
Information.
Certain Additional Non-Fundamental Policies
The Fund may pledge, hypothecate, mortgage or otherwise encumber its
assets, but only to secure permitted borrowings; See "Investment Objectives,
Policies and Risks - Fundamental Investment Policies and Restrictions" in the
Fund's Statement of Additional Information.
Investment Considerations
The Fund will not seek to realize profits by anticipating short-term
market movements. When market conditions permit, the Fund generally intends
to retain securities for at least the statutory long-term capital gain
period. The annual portfolio turnover rate indicates the rate of change in
the Fund's portfolio; for instance, a rate of 100% would result if all the
securities in the portfolio at the beginning of an annual period had been
replaced by the end of the period. While the rate of portfolio turnover will
not be a limiting factor when management deems changes appropriate, it is
anticipated that, in view of the Fund's investment objectives, its annual
portfolio turnover rate generally should not exceed 50%. When extraordinary
market conditions prevail, a higher turnover rate and increased brokerage
expenses may be expected.
Changes In Investment Policies
Unless otherwise noted, the foregoing investment policies are not
fundamental and the Fund's Board of Trustees may change such policies without
the vote of a majority of the Fund's outstanding voting securities. The
Board will not change the Fund's investment objectives of seeking to produce
capital growth and current income without such a vote. A more detailed
description of the Fund's investment policies, including a list of those
restrictions on the Fund's investment activities which cannot be changed
without such a vote, appears in the Statement of Additional Information.
MANAGEMENT SERVICES
The Manager
The Board of Trustees provides broad supervision over the affairs of
the Fund. Pursuant to a Management Agreement between the Fund and Labrador
Investment Advisors, Inc., (the "Manager") and subject to the authority of
the Board of Trustees, the Manager manages the investments of the Fund and is
responsible for the overall management of the business affairs of the Fund.
The address of the Manager is 2344 Corte De La Jara, Pleasanton, California
94566. The Manager has no previous experience in advising a mutual fund.
The Manager was founded in September 1997 by Peter Allen Schuh and
Allen John Schuh. Peter Allen Schuh, the Chairman of the Board, President,
Secretary and Treasurer of the Fund, is the Chairman of the Board and
President of the Manager. Peter Allen Schuh is a co-portfolio manager of the
Fund. Peter Allen Schuh holds a B.S. degree from California Polytechnic
State University, San Luis Obispo. He has co-authored several articles
dealing with decision theory. Peter Allen Schuh worked at Merrill Lynch
before starting Labrador Investment Advisors, Inc.
Allen John Schuh, the Vice-President of the Fund, is also the Vice-
President of the Manager and co-portfolio manager of the Fund. Allen John
Schuh is currently a professor in the Department of Management and Finance at
the California State University at Hayward. Allen John Schuh holds an A.B.
degree from San Diego State University, a M.A. degree from the University of
California, Berkeley, and a Ph.D. from The Ohio State University. Allen John
Schuh has authored several dozen articles and papers dealing with decision
theory, investing and related management issues. He has a management
textbook in its fourth edition. His previous experience was with the
accounting firm Ernst & Ernst, active duty with the United States Navy, and
Lecturer at Old Dominion University. He has had many consulting assignments
in his 30 year professional career. Professional memberships include; The
Academy of Management, The Institute for Operations Research and The
Management Sciences, The American Psychological Association, and The American
Psychological Society.
Peter Allen Schuh, the Chairman and President of the Fund, is also the
President of an Internet company named "Abridging, Inc." Abridging, Inc.,
will be paid by Labrador Investment Advisors, Inc., for Internet related
servicing, including, but not limited to: web site development, web site
maintenance, hosting, and advertising. Advertising may be purchased through
Abridging, Inc., or in connection with Abridging, Inc., and any outside
vendor in which Abridging, Inc., has an advertising contract. No fees will be
charged to the Fund from any such services.
Management Fees
Under the terms of the Management Agreement, the Fund has agreed to pay
the Manager a monthly management fee at the annual rate of 1.50% of the
Fund's average daily net assets.
Based on estimated expenses for the current fiscal year. The Manager
has undertaken, until such time as it gives investors 60 days notice to the
contrary, to waive its investment advisory fee to the extent Total Fund
Operating Expenses (other than interest, taxes, brokerage fees incurred by
purchasing and selling portfolio securities, and extraordinary items) exceed
2.40%.
Expenses
All expenses incurred in the operation of the Fund will be borne by the
Fund, except to the extent specifically assumed by the Manager. The expenses
to be borne by the Fund will include: organizational costs, taxes, interest,
brokerage fees and commissions, fees of trustees of the Fund, Securities and
Exchange Commission fees, state Blue Sky qualification fees, advisory,
administrative and fund accounting fees, charges of custodians, transfer and
dividend disbursing agents' fees, insurance premiums, industry association
fees, outside auditing and legal expenses, costs of maintaining the Fund's
existence, costs of independent pricing services, costs attributable to
investor services (including, without limitation, telephone and personnel
expenses), costs of shareholders' reports and meetings, costs of preparing
and printing prospectuses and statements of additional information, amounts
payable under the Fund's Distribution and Shareholder Servicing Plan (the
"Plan") and any extraordinary expenses.
Portfolio Transactions
The Management Agreement recognizes that in the purchase and sale of
portfolio securities, the Manager will seek the most favorable price and
execution, and, consistent with that policy, may give consideration to the
research, statistical and other services furnished by brokers or dealers to
the Manager. The use of brokers who provide investment and market research
and securities and economic analysis may result in higher brokerage charges
than the use of brokers selected on the basis of the most favorable brokerage
commission rates. Research and analysis received may be useful to the
Manager in connection with its services to the Fund.
In over-the-counter markets, orders are placed with responsible primary
market makers unless a more favorable execution or price is believed to be
obtainable.
Consistent with these considerations, the Manager may consider sales of
shares of the Fund as a factor in the selection of brokers or dealers to
execute portfolio transactions for the Fund.
Custodian And Transfer Agent
Star Bank, N.A., 425 Walnut Street, M.L. 6118, P.O. Box 1118,
Cincinnati, Ohio 45201-1118 is the Fund's custodian. Unified Fund Services,
Inc., 431 N. Pennsylvania Street, Indianapolis, IN 46204, is the Fund's
transfer agent and dividend disbursing agent (the "Transfer Agent").
HOW TO INVEST IN THE FUND
Shares of the Fund are sold on a continuous basis, and you may invest
any amount you choose, as often as you wish, subject to a minimum initial
investment of $2,500 ($1,500 for qualified retirement accounts and Automatic
Investment Plan) and minimum subsequent investments of $75. Management may
reduce the minimum account requirement for "special circumstances". "Special
circumstances" will be reviewed by the Manager. Investors choosing to
purchase or redeem their shares through a broker/dealer or other institution
may be charged a fee by that institution. Investors choosing to purchase or
redeem shares directly from the Fund will not incur charges on purchases or
redemption. To the extent investments of individual investors are aggregated
into an omnibus account established by an investment adviser, broker or other
intermediary, the account minimums apply to the omnibus account, not to the
account of the individual investor.
Purchase Of Fund Shares With Compatible Securities
At the discretion of the Manager, an investor may submit securities in
exchange for Labrador Mutual Fund shares, provided the stocks submitted meet
all of the criteria of the Fund's portfolio at that time. Prior approval of
such exchange is required.
Initial Purchase
By Mail
You may purchase shares of the Fund by completing and signing the
investment application form which accompanies this Prospectus and mailing it
together with a check (subject to the above minimum amounts) made payable to
the Labrador Mutual Fund, and sent to the P.O. Box listed below. If you
prefer overnight delivery, use the overnight address listed below:
U.S. Mail: Overnight:
Labrador Mutual Fund Labrador Mutual Fund
c/o Unified Fund Services, Inc., c/o Unified Fund Services, Inc.,
P.O. Box 6110 431 N. Pennsylvania Street
Indianapolis, Indiana 46204-6110 Indianapolis, Indiana 46204
Your purchase of shares of the Fund will be effected at the next share
price calculated after receipt of your investment.
By Wire
You may also purchase shares of the Fund by wiring federal funds from
your bank, which may charge you a fee for doing so. If money is to be wired,
you must call the Transfer Agent at 800-494-6882 to set up your account and
obtain an account number. You should be prepared at that time to provide the
information on the application by facsimile. Then, you should provide your
bank with the following information for purposes of wiring your investment:
Star Bank, N.A. Cinti/Trust
ABA # 0420-0001-3
Attn: Labrador Mutual Fund
D.D.A. #488919960
Account Name _________________________________ (write in shareholder name)
For the Account # _____________________________ (write in Labrador Mutual
Fund account number)
You are required to mail a signed application to the Custodian at the
above address in order to complete your initial wire purchase. Wire orders
will be accepted only on a day on which the Fund and the Custodian and
Transfer Agent are open for business. A wire purchase will not be considered
made until the wired money is received and the purchase is accepted by the
Fund. Any delays which may occur in wiring money, including delays which may
occur in processing by the banks, are not the responsibility of the Fund or
the Transfer Agent. There is presently no fee for the receipt of wired
funds, but the right to charge shareholders for this service is reserved by
the Fund.
Additional Investments
You may purchase additional shares of the Fund at any time (minimum
investment $75) by mail, wire, or automatic investment. Each additional mail
purchase request must contain your name, the name of your account(s), your
account number(s), and the name of the Fund. Checks should be made payable to
the Labrador Mutual Fund and should be sent to the address listed above. A
bank wire should be sent as outlined above.
Automatic Investment Plan
You may make regular investments in the Fund with an Automatic
Investment Plan by completing the appropriate section of the account
application and attaching a voided personal check. An initial investment of
$1,500 is required. Subsequent investments will be made monthly to allow
dollar-cost averaging by automatically deducting a minimum of $75 from your
bank checking account. You may change the amount of your monthly purchase at
any time.
Purchases Through Processing Organizations
Shares of the Fund may also be purchased through a "Processing
Organization," which is a broker-dealer, bank or other financial institution
that purchases shares for its customers. When shares are purchased this way,
the Processing Organization, rather than its customer, may be the shareholder
of record of the shares. Such shares may be transferred into the investor's
name following procedures established by the Processing Organization and the
Transfer Agent. The minimum initial and subsequent investments in the Fund
for shareholders who invest through a Processing Organization generally will
be set by the Processing Organization. Processing Organizations may also
impose other charges and restrictions in addition to or different from those
applicable to investors who remain the shareholder of record of their shares.
Certain Processing Organizations may receive compensation from the Manager
pursuant to the Fund's Distribution and Shareholder Servicing Plan. An
investor contemplating investing with the Fund through a Processing
Organization should read materials provided by the Processing Organization in
conjunction with this Prospectus.
Net Asset Value
Shares of the Fund are sold on a continuous basis. Net asset value per
share is determined as of the close of regular trading on the floor of the
New York Stock Exchange (currently 4:00 p.m., New York time) on each business
day. The Fund's investments are valued based on market value or, where market
quotations are not readily available, based on fair value as determined in
good faith by, or in accordance with procedures established by, the Fund's
Board of Trustees. The net asset value per share of the Fund is computed by
dividing the value of the Fund's net assets, (minus its liabilities), by the
total number of shares of the Fund outstanding. Purchases of Fund shares
will be made in full and fractional shares of the Fund calculated to three
decimal places.
Tax Sheltered Retirement Plans
Since the Fund is oriented to longer term investments, the Fund may be
a particularly appropriate investment medium for tax sheltered retirement
plans, including: individual retirement plans (IRAs); simplified employee
pensions (SEPs); 401(k) plans; qualified corporate pension and profit sharing
plans (for employees); tax deferred investment plans (for employees of public
school systems and certain types of charitable organizations); and other
qualified retirement plans. You should contact the Transfer Agent for the
procedure to open an IRA or SEP plan, as well as more specific information
regarding these retirement plan options. Consultation with an attorney or
tax adviser regarding these plans is advisable. Custodial fees for an IRA
will be paid by the shareholder by redemption of sufficient shares of the
Fund from the IRA unless the fees are paid directly to the IRA custodian.
The Manager may from time to time reimburse the shareholders for the yearly
custodial fee. You can obtain information about the IRA custodial fees from
the Transfer Agent.
Other Purchase Information
Dividends begin to accrue after you become a shareholder. The Fund does
not issue share certificates. All shares are held in non-certificate form
registered on the books of the Fund and the Fund's Transfer Agent for the
account of the shareholder. The rights to limit the amount of purchases and
to refuse to sell to any person are reserved by the Fund. If your check or
wire does not clear, you will be responsible for any loss incurred by the
Fund. If you are already a shareholder, the Fund can redeem shares from any
identically registered account in the Fund as reimbursement for any loss
incurred. You may be prohibited or restricted from making future purchases
in the Fund. The Fund will not be held accountable for any losses resulting
from such bad check writing. The Fund Manager will bear any loss that is not
covered by the responsible shareholder.
How To Redeem Shares
All redemptions will be made at the net asset value determined after
the redemption request has been received by the Transfer Agent in proper
order. Shareholders may receive redemption payments in the form of a check
or federal wire transfer. The proceeds of the redemption may be more or less
than the purchase price of your shares, depending on the market value of the
Fund's securities at the time of your redemption. There is a $15 charge for
wire redemptions. Any charges for wire redemptions will be deducted from the
shareholder's Fund account by redemption of shares. Investors choosing to
purchase or redeem their shares through a broker/dealer or other institution
may be charged a fee by that institution.
By Mail
You may redeem any part of your account in the Fund at no charge by
mail. Your request should be addressed to:
Labrador Mutual Fund
c/o Unified Fund Services, Inc.
431 N. Pennsylvania Street
Indianapolis, Indiana 46204
"Proper order" means your request for a redemption must include your
letter of instruction, including the Fund name, account number, account
name(s), the address and the dollar amount or number of shares you wish to
redeem. This request must be signed by all registered shareowner(s) in the
exact name(s) and any special capacity in which they are registered. For all
redemptions, the Fund requires that signatures be guaranteed by a bank or
member firm of a national securities exchange. Signature guarantees are for
the protection of shareholders. At the discretion of the Fund or the
Transfer Agent, a shareholder, prior to redemption, may be required to
furnish additional legal documents to insure proper authorization.
By Telephone
You may redeem any part of your account in the Fund by calling the
Transfer Agent at 800-494-6882. You must first complete the Optional
Telephone Redemption and Exchange section of the investment application to
institute this option. The Fund, the Transfer Agent and the Custodian are
not liable for following redemption or exchange instructions communicated by
telephone that they reasonably believe to be genuine. However, if they do
not employ reasonable procedures to confirm that telephone instructions are
genuine, they may be liable for any losses due to unauthorized or fraudulent
instructions. Procedures employed may include recording telephone
instructions and requiring a form of personal identification from the caller.
The telephone redemption and exchange procedures may be terminated at
any time by the Fund or the Transfer Agent. During periods of extreme market
activity it is possible that shareholders may encounter some difficulty in
telephoning the Fund, although neither the Fund nor the Transfer Agent has
ever experienced difficulties in receiving and in a timely fashion responding
to telephone requests for redemptions or exchanges. If you are unable to
reach the Fund by telephone, you may request a redemption or exchange by
mail.
Additional Information
If you are not certain of the requirements for a redemption please call
the Transfer Agent at 800-494-6882. Redemptions specifying a certain date or
share price cannot be accepted and will be returned. You will be mailed the
proceeds on or before the fifth business day following the redemption.
However, payment for redemption made against shares purchased by check will
be made only after the check has been collected, which normally may take up
to fifteen days. Also, when the New York Stock Exchange is closed (or when
trading is restricted) for any reason other than its customary weekend or
holiday closing or under any emergency circumstances, as determined by the
Securities and Exchange Commission, the Fund may suspend redemptions or
postpone payment dates.
Because the Fund incurs certain fixed costs in maintaining shareholder
accounts, the Fund reserves the right to require any shareholder to redeem
all of his or her shares in the Fund on 30 days' written notice if the value
of his or her shares in the Fund is less than $1000 due to redemption, or
such other minimum amount as the Fund may determine from time to time. An
involuntary redemption constitutes a sale. You should consult your tax
adviser concerning the tax consequences of involuntary redemptions. A
shareholder may increase the value of his or her shares in the Fund to the
minimum amount within the 30 day period. Each share of the Fund is subject to
redemption at any time if the Board of Trustees determines in its sole
discretion that failure to so redeem may have materially adverse consequences
to all or any of the shareholders of the Fund.
DISTRIBUTION AND SHAREHOLDER SERVICING PLAN
Under a plan adopted by the Fund's Board of Trustees pursuant to Rule 12b-1
under the 1940 Act (the "Plan"), the Fund pays Unified Management Corporation
a shareholder servicing and distribution fee at the annual rate of .25% of
the average daily net assets of the Fund. Such fee will be used in its
entirety by Unified Management Corporation to make payments for
administration, shareholder services and distribution assistance, including,
but not limited to (i) compensation to securities dealers and other
organizations (each, a "Service Organization" and collectively, the "Service
Organizations"), for providing distribution assistance with respect to assets
invested in the Fund, (ii) compensation to Service Organizations for
providing administration, accounting and other shareholder services with
respect to Fund shareholders, and (iii) otherwise promoting the sale of
shares of the Fund, including paying for the preparation of advertising and
sales literature and the printing and distribution of such promotional
materials to prospective investors. The fees paid to Unified Management
Corporation under the Plan are payable without regard to actual expenses
incurred. The Fund understands that third parties also may charge fees to
their clients who are beneficial owners of Fund shares in connection with
their client accounts. These fees would be in addition to any amounts which
may be received by them from Unified Management Corporation under the Plan.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund ordinarily pays dividends from its net investment income and
distributes net realized securities gains, if any, once a year, but it may
make distributions on a more frequent basis to comply with the distribution
requirements of the Code, in all events in a manner consistent with the
provisions of the 1940 Act. Dividends are automatically reinvested in
additional Fund shares at net asset value, unless the shareholder has elected
to receive payment in cash. All expenses are accrued daily and deducted
before declaration of dividends to investors.
Dividends derived from net investment income, together with
distributions from net realized short-term securities gains, paid by the Fund
will be taxable to U.S. shareholders as ordinary income for Federal income
tax purposes. Distributions from net realized long-term securities gains of
the Fund will be taxable to U.S. shareholders as long-term capital gains for
Federal income tax purposes. Dividends and distributions also may be subject
to state and local taxes. The Fund's distributions are taxable in the year
paid, regardless of whether they are received in cash or reinvested in
additional shares of the Fund, except that certain distributions declared in
the last three months of the year and paid in January are taxable as if paid
on December 31.
Notice as to the tax status of investors' dividends and distributions
will be mailed to them annually. Investors also will receive periodic
summaries of their accounts which will include information as to dividends
and distributions from securities gains, if any, paid during the year.
An investor's redemption of Fund shares may result in a taxable gain or
loss, depending upon whether the redemption proceeds payable to such investor
are more or less than his adjusted tax basis for his redeemed shares.
Federal regulations generally require the Fund to withhold ("backup
withholding") and remit to the U.S. Treasury 31% of dividends, distributions
from net realized securities gains and the proceeds of any redemption,
regardless of the extent to which gain or loss may be realized, paid to a
shareholder if such shareholder fails to certify either that the TIN
furnished in connection with opening an account is correct or that such
shareholder has not received notice from the IRS of being subject to backup
withholding as a result of a failure to properly report taxable dividend or
interest income on a Federal income tax return. Furthermore, the IRS may
notify the Fund to institute backup withholding if the IRS determines a
shareholder's TIN is incorrect or if a shareholder has failed to properly
report taxable dividend and interest income on a Federal income tax return.
A TIN is either the Social Security number or employer identification
number of the record owner of the account. Any tax withheld as a result of
backup withholding does not constitute an additional tax imposed on the
record owner of the account, and may be claimed as a credit on the record
owner's Federal income tax return.
The Fund intends to qualify as a "regulated investment company" under
the Code so long as such qualification is in the best interests of its
shareholders. Such qualification relieves the Fund of any liability for
Federal income tax to the extent its earnings are distributed in accordance
with applicable provisions of the Code. The Fund intends to make sufficient
distributions prior to the end of each calendar year to avoid liability for a
4% Federal excise tax on undistributed income.
All investors should consult their tax advisers regarding specific
questions as to Federal, state or local taxes.
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Fund is a Delaware Business Trust established under a Declaration
of Trust (as amended) dated February 22, 1998. Its authorized capital
consists of an unlimited number of shares of beneficial interest of $0.0001
par value, issued in separate series. Each share of each series represents
an equal proportionate interest in that series with each other share of that
series.
The assets of the Fund received for the issue or sale of the shares of
each fund and all income, earnings, profits and proceeds thereof, subject
only to the rights of creditors, are specifically allocated to such series
and constitute the underlying assets of such series. The underlying assets
of each series are segregated on the books of account, and are to be charged
with the liabilities in respect to such series and with such a share of the
general liabilities of the Fund. If a series was unable to meet its
obligations, the assets of only that series, and no other series, will be
available to creditors for that purpose. General liabilities, expenses,
costs, charges or reserves which are not readily identifiable as belonging to
any particular series shall be allocated and charged by the Trustees between
or among any one or more of the series in such manner as the Trustees deem
fair and equitable. In the event of the dissolution or liquidation of the
Fund or any series, the holders of the shares of any series are entitled to
ratably receive, as a class, the value of the underlying assets of such
shares available for distribution to shareholders. However, the payment to
the holders may be reduced by any fees, expenses or charges allocated to that
series.
Shares of the Fund entitle their holder to one vote per share; however,
separate votes are taken by each series on matters affecting an individual
series. For example, a change in investment policy for a series would be
voted upon only by shareholders of the series involved.
The Trustees of the Fund have the authority to designate additional
series and to designate the relative rights and preferences between the
different series. There is presently one series so designated. All shares
issued and outstanding will be fully paid and nonassessable by the Fund, and
redeemable as described in this Statement of Additional Information and in
the Prospectus.
The Trust Instrument provides that obligations of the Fund are not
binding upon the Trustees individually but only upon the property of the
Fund, that the Trustees and officers will not be liable for errors of
judgment or mistakes of fact or law, and that the Fund will indemnify its
Trustees and officers against liabilities and expenses incurred in connection
with litigation in which they may be involved because of their offices with
the Fund unless, as to liability to Fund or Fund shareholders, it is finally
adjudicated that they engaged in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in their offices, or
unless with respect to any other matter it is finally adjudicated that they
did not act in good faith in the reasonable belief that their actions were in
the best interests of the Fund. In the case of settlement, such
indemnification will be provided unless it has been determined by a court or
other body approving the settlement or other disposition, or by a reasonable
determination, based upon a review of readily available facts, by vote of a
majority of disinterested Trustees or in a written opinion of independent
counsel, that such officers or Trustees have engaged in willful misfeasance,
bad faith, gross negligence or reckless disregard of their duties.
The Trust Instrument contains an express disclaimer of shareholder
liability for acts or obligations of the Trust and provides for
indemnification and reimbursement of expenses out of Fund property for any
shareholder held personally liable for the obligations of a Fund solely by
reason of his being or having been a shareholder. The Trust Instrument also
provides for the maintenance, by or on behalf of the Trust and the Fund, of
appropriate insurance (for example, fidelity bond and errors and omissions
insurance) for the protection of the Trust and the Fund, their shareholders,
trustees, officers, employees and agents, covering possible tort and other
liabilities. Thus, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which
Delaware law did not apply, inadequate insurance existed and the Fund itself
was unable to meet its obligations.
GENERAL INFORMATION
In order to provide the initial capital for the Fund, Labrador
Investment Advisors, Inc., has purchased a total of 10,000 shares of the Fund
at $10.00 per share for an aggregate purchase price of $100,000. As long as
Labrador Investment Advisors, Inc., owns more than 25% of the Fund's shares,
it will be deemed to be in "control" of the Fund as that term is defined in
the 1940 Act.
No meetings of shareholders of the Fund will be held for the purpose of
electing Trustees unless and until such time as less than a majority of the
Trustees holding office have been elected by shareholders, at which time the
Trustees then in office will call a shareholders' meeting for the election of
Trustees.
Under the Fund's Declaration of Trust, the Trustees are required to
call a meeting of shareholders for the purpose of voting upon the question of
removal of any such Trustee when required in writing to do so by the
shareholders of record of not less than 10% of the Fund's outstanding shares.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be made by writing to the Transfer Agent at Unified
Fund Services, Inc., 431 N. Pennsylvania Street, Indianapolis, IN 46204, or
by calling 800-494-6882.
LABRADOR MUTUAL FUND
Not FDIC Insured.
Shareholder Services
800-494-6882
Additional Information may be found on the Internet at:
http://www.labradorfund.com
Investment Manager
Labrador Investment Advisors, Inc.
2344 Corte De La Jara
Pleasanton, California 94566
Transfer Agent
Unified Fund Services, Inc.
431 N. Pennsylvania Street
Indianapolis, IN 46204
Portfolio Securities Custodian
Star Bank, N.A.
P.O. Box 1118
Cincinnati, Ohio 45201-1118
Distributor
Unified Management Corporation
431 N. Pennsylvania Street
Indianapolis, IN 46204
Independent Accountant
Marie Jones, CPA
19437 Burgundy Way
Saratoga, California 95070
LABRADOR MUTUAL FUND
STATEMENT OF ADDITIONAL INFORMATION
October 8, 1998
This Statement of Additional Information, which is not a prospectus,
expands upon and supplements the information contained in the current
Prospectus of Labrador Mutual Fund (the "Trust") dated October 8, 1998. The
Trust is set up as a series trust under the Laws of the State of Delaware. The
similarly named Labrador Mutual Fund, (the "Fund") which is a series of the
Trust was created on November 13, 1997 as amended February 22, 1998. The
Statement of Additional Information should be read in conjunction with the
Prospectus, which may be obtained without charge by writing or calling the Fund
at the above address or telephone number. This Statement of Additional
Information is incorporated by reference into the Prospectus in its entirety.
Labrador Investment Advisors, Inc. (the "Manager") is the Fund's
investment manager.
TABLE OF CONTENTS
Subject Page
Investment Objectives, Policies and Risks
Certain Portfolio Securities
Trustees and Officers
Management
Distribution and Shareholder Servicing Plan
Redemption of Fund Shares
Valuation
General Information
INVESTMENT OBJECTIVES, POLICIES AND RISKS
The investment objectives, policies and risks of the Fund are
described in the Fund's Prospectus under the heading "Investment
Objective, Policies and Risks". In addition to its investment objectives
of seeking to produce capital growth and current income, the Fund has
adopted the following fundamental investment policies and restrictions.
These policies cannot be changed without approval by the holders of a
majority of the outstanding voting securities of the Fund. As defined in
the Investment Company Act of 1940 (the "Act"), the "vote of a majority of
the outstanding voting securities" means the lesser of the vote of (a) 67%
of the shares of the Fund at a meeting where more than 50% of the
outstanding shares are present in person or by proxy or (b) more than 50%
of the outstanding shares of the Fund.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
The Fund may not:
1. Purchase or retain any securities of an issuer if any of the
officers or Trustees of the Fund or its investment adviser owns
beneficially more than 1/2 of 1% of the securities of such issuer and
together own more than 5% of the securities of such issuer.
2. Invest in commodities.
3. Purchase, hold or deal in real estate, real estate limited
partnership interests, or oil, gas or other mineral leases or exploration
or development programs, but the Fund may purchase and sell securities
that are secured by real estate or issued by companies that invest or deal
in real estate or real estate investment trusts.
4. Borrow money from banks, except to the extent permitted under the
1940 Act. The 1940 Act permits an investment company to borrow an amount up to
33-1/3% of the value of such company's total assets. For purposes of this
Investment Restriction, the entry into options shall not constitute
borrowing.
5. Make loans to others.
6. Act as an underwriter of securities of other issuers, except
to the extent the Fund may be deemed an underwriter under the Securities
Act of 1933, as amended, by virtue of disposing of portfolio securities.
7. Issue any senior security (as such term is defined in Section
18(f) of the 1940 Act).
8. Purchase securities on margin, but the Fund may make margin
deposits in connection with transactions in options.
9. Invest 25% or more of the value of its total assets in any
one industry.
10. Invest in the securities of a company for the purpose of
exercising management or control, but the Fund will vote the securities it
owns in its portfolio as a shareholder in accordance with its views.
11. Pledge, mortgage or hypothecate its assets, except to the
extent necessary to secure permitted borrowings and to the extent related
to the deposit of assets in escrow in connection with writing covered put
and call options, and collateral and initial or variation margin
arrangements with respect to options.
12. Engage in short sales of securities.
13. Invest in securities of foreign issuers (whether directly or
through American Depository Receipts).
14. Purchase securities of other investment companies, except by
purchase in the open market where no commission or profit to a sponsor or
dealer results from the purchase other than the customary broker's
commission or except when the purchase is part of a plan of merger,
consolidation, reorganization or acquisition, and provided that any such
purchase is permitted under the 1940 Act.
If a percentage restriction is adhered to at the time of
investment, a later change in percentage resulting from a change in values
or assets will not constitute a violation of such restriction, except for
the borrowing policies.
The Fund may make commitments more restrictive than the
restrictions listed above so as to permit the sale of the Fund's shares in
certain states. Should the Fund determine that a commitment is no longer
in the best interest of the Fund and its shareholders, the Fund reserves
the right to revoke the commitment by terminating the sale of Fund shares
in the state involved.
CERTAIN PORTFOLIO SECURITIES
MONEY MARKET INSTRUMENTS
The Fund may invest, in the circumstances described under
"Investment Objectives, Policies and Risks," in the following types of
money market instruments.
U.S. GOVERNMENT SECURITIES - The Fund may purchase securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities,
which include U.S. Treasury securities that differ in their interest
rates, maturities and times of issuance. Treasury Bills have initial
maturities of one year or less; Treasury Notes have initial maturities of
one to ten years; and Treasury Bonds generally have initial maturities of
greater than ten years. Some obligations issued or guaranteed by U.S.
Government agencies and instrumentalities, for example, Government
National Mortgage Association pass-through certificates, are supported by
the full faith and credit of the U.S. Treasury; others, such as those of
the Federal Home Loan Banks, by the right of the issuer to borrower from
the U.S. Treasury; others, such as those issued by the Federal National
Mortgage Association, by discretionary authority of the U.S. Government to
purchase certain obligations of the agency or instrumentality; and others,
such as those issued by the Student Loan Marketing Association, only by
the credit of the agency or instrumentality. These securities bear fixed,
floating or variable rates of interest. Principal and interest may
fluctuate based on generally recognized reference rates or the
relationship of rates. While the U.S. Government provides financial
support to such U.S. Government-sponsored agencies or instrumentalities,
no assurance can be given that it will always do so, since it is not so
obligated by law.
BANK OBLIGATIONS - The Fund may invest in bank obligations, including
certificates of deposit, time deposits and other short-term obligations of
banks, savings and loan associations and other banking institutions.
Certificates of deposit are negotiable certificates evidencing
the obligation of a bank to repay funds deposited with it for a specified
period of time.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time at a stated interest rate.
Time deposits which may be held by the Fund will not benefit from
insurance from the Bank Insurance Fund or the Savings Association
Insurance Fund administered by the Federal Deposit Insurance Corporation.
TRUSTEES AND OFFICERS
Trustees and officers of the Fund, together with their ages and
information as to their principal business occupations during the past
five years, are shown below. Each Trustee who is an "interested person"
of the Fund, as defined in the 1940 Act, is indicated by an asterisk.
Daniel Thomas Burke (27) Trustee of the Fund; Chairman
834 Vallejo Street of Re-Think Technology, (a San
San Francisco, California 94133 Francisco based ergonomic and
occupational safety design and
manufacturing company). Marketing
Manager at International Micro-
Computer Software Incorporated.
Allen John Schuh* (56) Trustee, Vice-President of the
2344 Corte De La Jara Fund; Vice-President of Labrador
Pleasanton, California 94566 Investment Advisors, Inc.;
Professor in the Department of
Management and Finance at the
California State University at
Hayward.
Peter Allen Schuh* (25) Trustee, Chairman of the Board,
2344 Corte De La Jara President, and Secretary of the
Pleasanton, California 94566 Fund; Chairman, Labrador
Investment Advisors, Inc.;
President of Abridging, Inc.;
Previously at Merrill Lynch,
Pierce, Fenner & Smith.
Leandro Vera (26) Trustee of the Fund; Senior
5117 Glentree Drive Consultant with IBM Global
San Jose, California 95129 Services, previously with both
Coopers and Lybrand, L.L.P,;
and Deloitte and Touche Consulting
Group.
For so long as the Plan described in the section captioned
"Distribution and Shareholder Servicing Plan" remains in effect, the
Fund's Trustees who are not "interested persons" of the Fund, as defined
in the 1940 Act, will be selected and nominated by the Trustees who are
not "interested persons" of the Fund.
COMPENSATION TABLE
Currently the Fund complex only consists of the Fund itself.
Name of Person, Aggregate Total Compensation
Position Compensation From From Registrant and Fund
Registrant Complex Paid to Directors
Daniel T. 375 375*
Burke
Trustee
Allen J. 0 0
Schuh
Trustee,
Vice-
President
Peter A. 0 0
Schuh,
Trustee,
Chairman,
President,
Secretary
Leandro 375 375*
Vera
Trustee
* The Fund typically pays its Trustees an annual retainer fee and
reimburses them for their Board meeting expenses. The estimated aggregate
amount of compensation paid to each Director by the Fund for the fiscal
year ending December 31, 1998.
MANAGEMENT
The following information supplements, and should be read in
conjunction with, the section in the Fund's Prospectus entitled
"Management Services."
Under the Management Agreement dated July 31, 1998, subject to
the control of the Board of Trustees, Labrador Investment Advisors, Inc.,
(the "Manager"), manages the investment of the assets of the Fund,
including making purchases and sales of portfolio securities consistent
with the Fund's investment objectives and policies, and administers its
business and other affairs. The Fund provides the Manager with such
office space, administrative and other services and executive and other
personnel as are necessary for Fund operations.
Pursuant to an undertaking to a state securities administrator,
the Management Fee of the Manager will be reduced in the amount, if any,
by which total expenses, including the management fee, but excluding
interest, taxes, brokerage commissions, redemption fees, distribution fees
and certain extraordinary expenses, exceed 2-1/2% of the first $30,000,000
of average net assets, 2% of the next $70,000,000 and 1-1/2% thereafter.
After the first two years, the Management Agreement is subject to
annual approval by (i) the Fund's Board of Trustees or (ii) majority vote
of the outstanding voting securities (as defined in the 1940 Act): The
majority is the lesser of the vote of (a) 67% of the shares of the Fund at
a meeting where more than 50% of the outstanding shares are present in
person or by proxy or (b) more than 50% of the outstanding shares of the
Fund. In either event the continuance must be approved by a majority of
the Board of Trustees who are not "interested persons" (as defined in the
1940 Act) of the Fund or the Manager, by vote cast in person at a meeting
called for the purpose of voting on such approval. The Board of Trustees,
including a majority of the Trustees who are not "interested persons" of
any party to the Agreement, approved the Agreement at a meeting held on
July 31, 1998. The Agreement is terminable on 60 days' notice, by the
Fund's Board of Trustees or by vote of the holders of a majority of the
Fund's shares, or, on not less than 90 days' notice, by the Manager. As
to the Fund, the Agreement will terminate automatically in the event of
its assignment (as defined in the 1940 Act).
The Manager is a California corporation incorporated in 1997.
Peter Allen Schuh is the Chief Executive Officer of the Manager. Allen
John Schuh is the Vice-President of the Manager.
DISTRIBUTION AND SHAREHOLDER SERVICING PLAN
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Distribution and Shareholder Servicing Plan."
Rule 12b-1 (the "Rule") adopted by the Securities and Exchange
Commission under the 1940 Act provides, among other things, that an
investment company may bear expenses of distributing its shares only
pursuant to a plan adopted in accordance with the Rule. The Fund's
Trustees have adopted such a plan (the "Plan"). The Fund's Trustees
believe that there is a reasonable likelihood that the Plan will benefit
the Fund and its shareholders.
A quarterly report of the amounts expended under the Plan, and
the purposes for which such expenditures were incurred, must be made to
the Trustees for their review. In addition, the Plan provides that it may
not be amended to increase materially the costs which shareholders may
bear pursuant to the Plan without approval of such shareholders and that
other material amendments of the Plan must be approved by the Board of
Trustees, and by the Trustees who are neither "interested persons" (as
defined in the 1940 Act) of the Fund nor have any direct or indirect
financial interest in the operation of the Plan or in the related Plan
agreements, by vote cast in person at a meeting called for the purpose of
considering such amendments. The Plan and related agreements are subject
to annual approval by such vote cast in person at a meeting called for the
purpose of voting on the Plan. The Plan was approved by the Trustees and
by Labrador Investment Advisors, Inc., as sole shareholder of the Fund, on
October 7, 1998. The Plan is terminable at any time by vote of a majority
of the Trustees who are not "interested persons" and who have no direct or
indirect financial interest in the operation of the Plan or in the Plan
agreements or by vote of holders of a majority of the Fund's shares. A
Plan agreement is terminable, without penalty, at any time, by such vote
of the Trustees, upon not more than 60 days' written notice to the parties
to such agreement or by vote of the holders of a majority of the Fund's
shares. A Plan agreement will terminate automatically in the event of its
assignment (as defined in the 1940 Act).
REDEMPTION OF FUND SHARES
The procedures for redemption of Fund shares under ordinary
circumstances are set forth in the Prospectus. In unusual circumstances
payment may be postponed, or the right of redemption postponed for more
than seven days, if the orderly liquidation of portfolio securities is
prevented by the closing of, or restricted trading on the New York Stock
Exchange during periods of emergency, or such other periods as ordered by
the Securities and Exchange Commission. Payment may be made in
securities, subject to the review of some state securities commissions.
If payment is made in securities, a shareholder may incur brokerage
expenses in converting these securities into cash.
VALUATION
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to Buy
Shares."
Portfolio securities, including covered call and put options
written by the Fund, and call or put options purchased by the Fund, are
valued at the last sale price on the securities exchange or national
securities market on which such securities primarily are traded. Short-
term investments (i.e., with maturities of 60 days or less) are carried at
amortized cost, which approximates value. Any securities or other assets
for which recent market quotations are not readily available are valued at
fair value as determined in good faith by the Fund's Board of Trustees.
Expenses and fees, including the management fee and distribution and
service fees, are accrued daily and taken into account for the purpose of
determining the net asset value of the Fund's shares.
UNDERWRITERS
Unified Management Corporation, Inc. 431 North Pennsylvania Street,
Indianapolis, Indiana 46204 will serve as the Fund's Underwriter. The offering
will be continuous. Compensation will be paid by the Fund to Unified
Management Corporation in an amount not greater than .25% of Fund assets.
INVESTMENT PERFORMANCE
"Average annual total return," as defined by the Securities and
Exchange Commission, is computed by finding the average annual compounded rates
of return (over the one, five and ten year periods) that would equate the
initial amount invested to the ending redeemable value, according to the
following formula:
P(1+T)n=ERV
Where: P = a hypothetical $1,000 initial investment
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the
applicable period of the hypothetical $1,000
investment made at the beginning of the
applicable period.
The computation assumes that all dividends and distributions are reinvested at
the net asset value on the reinvestment dates, that the maximum sales load is
deducted from the initial $1,000 and that a complete redemption occurs at the
end of the applicable period. If the Fund has been in existence less than one,
five or ten years, the time period since the date of the initial public
offering of shares will be substituted for the periods stated.
From time to time the Fund advertises its "total return" and
"average annual total return". These figures are based on historical
earnings and are not intended to indicate future performance. The "total
return" shows what an investment in shares of the Fund would have earned
over a specified period of time (for example, one and five year periods or
since inception), and assuming that all distributions and dividends paid
by the Fund were reinvested on their investment dates during the period.
The "average annual total return" is the annual rate required for the
initial payment to grow to the amount which would be received at the end
of the specified period; i.e., the average annual compound rate of return.
From time to time, reference may be made in advertising or
promotional material to performance information, including mutual fund
rankings, prepared by Lipper Analytical Service, Inc. ("Lipper"), an
independent reporting service which monitors the performance of mutual
funds. In calculating the total return of the Fund's shares, the Lipper
analysis assumes investment of all dividends and distributions paid. The
Fund may also refer in advertisements or in other promotional material to
articles, comments, listings and columns in the financial press pertaining
to the Fund's performance.
FINANCIAL STATEMENTS
The following Statement of Assets and Liabilities dated July 29, 1998
was audited by Marie Jones, CPA.
To The Shareholders and Trustees
Labrador Mutual Fund:
I have audited the accompanying statement of assets and liabilities of
Labrador Mutual Fund as of July 29, 1998. This financial statement is
the responsibility of the Company's management. My responsibility is to
express an opinion on this financial statement based upon my audit.
I conducted the audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to
obtain reasonable assurance about whether the statement of assets and
liabilities is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the statement of assets and liabilities. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
presentation of the statement of assets and liabilities. These
procedures included confirmation of cash held by the custodian as of
July 29, 1998, by correspondence with the custodian. I believe that the
audit of the statement of assets and liabilities provides a reasonable
basis for my opinion.
In my opinion, the statement of assets and liabilities referred to above
presents fairly, in all material respects, the financial position of
Labrador Mutual Fund as of July 29, 1998, in conformity with generally
accepted accounting principles.
Marie Jones CPA
Saratoga, California
July 29, 1998
STATEMENT OF ASSETS AND LIABILITIES
July 29, 1998
LABRADOR MUTUAL FUND
ASSETS:
Cash in Bank $100,000
Total Assets $100,000
NET ASSETS $100,000
NET ASSETS CONSIST OF:
Capital Paid In $100,000
OUTSTANDING SHARES
Indefinite Number of Shares of
Beneficial Interest Authorized
With Par Value of $.0001 Per Share $10,000
NET ASSET VALUE PER SHARE $10
OFFERING PRICE PER SHARE $10
LABRADOR MUTUAL FUND
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
The Labrador Mutual Fund (the "Trust") was organized as a business trust under
the laws of the state of Delaware on November 13, 1997, as amended February 22,
1998. The Trust is authorized to issue an indefinite number of shares of
beneficial interest, par value $.0001 per share. Shares have non-cumulative
voting rights, do not have preemptive or subscription rights and are freely
transferable. The Labrador Mutual Fund is an open-end diversified portfolio of
the Trust.
The Trust uses an independent administrator, transfer agent, and dividend
paying agent. No transactions other than those relating to organizational
matters and the sale of 10,000 shares of Labrador Mutual Fund has taken place
to date.
2. RELATED PARTY TRANSACTIONS
In order to provide the initial capital for the Fund, Labrador Investment
Advisors, Inc. has purchased a total of 10,000 shares of the Fund at $10.00 per
share for an aggregate purchase price of $100,000. As long as Labrador
Investment Advisors, Inc., owns more than 25% of the Fund's shares, it will be
deemed to be in "control" of the Fund as that term is defined in the 1940 Act.
Pursuant to a Management Agreement between the Fund and Labrador Investment
Advisors, Inc., (the "Manager") and subject to the authority of the Board of
Trustees, the Manager manages the investments of the Fund and is responsible
for the overall management of the business affairs of the Fund.
Under the terms of the Management Agreement, the Fund has agreed to pay the
Manager a management fee at the annual rate of 1.50% of the Fund's
average daily net assets
All expenses incurred in the operation of the Fund will be borne by the Fund,
except to the extent specifically assumed by the Manager. The expenses to be
borne by the Fund will include: organizational costs, taxes, interest, brokerage
fees and commissions, fees of board members who are not officers, directors or
employees of the Manager or its affiliates, Securities and Exchange Commission
fees, state Blue Sky qualification fees, advisory, administrative and fund
accounting fees, charges of custodians, transfer and dividend disbursing agents'
fees, insurance premiums, industry association fees, outside auditing and legal
expenses, costs of maintaining the Fund's existence, costs of independent
pricing services, costs attributable to investor services (including, without
limitation, telephone and personnel expenses), cost of shareholders' reports and
meetings, costs of preparing and printing prospectuses and statements of
additional information, amounts payable under the Fund's Distribution and
Shareholder Servicing Plan (the "Plan") and any extraordinary expenses.
The Manager has undertaken, until such time as it gives investors 60 days'
notice to the contrary, to waive its Management Fee in the amount, if any, by
which the total expenses of the Fund for any fiscal year, including amortization
of organizational expenses and amounts paid by the Fund under the Plan, exceed
2.40% of average annual net assets of the Fund, except that the amount of such
fee waiver shall not exceed the amount of fees received by the Manager under the
Management Agreement for such fiscal year. The fee waiver, if any, will be on a
monthly basis, subject to year-end adjustment. Interest expenses, taxes,
brokerage fees and commissions, and extraordinary expenses are not included as
expenses for these purposes.
3. CAPITAL STOCK AND DISTRIBUTION
On July 31, 1998 an indefinite number of shares were authorized and paid-in
capital amounted to $100,000 for Labrador Mutual Fund. Transactions in capital
stock were as follows:
LABRADOR MUTUAL FUND
-------------
Shares sold................................................. 10,000
Shares redeemed..................................... -0-
-------------
Net increase........................................ 10,000
Shares outstanding:
Beginning of period............................... -0-
-------------
End of period..................................... 10,000
-------------
GENERAL INFORMATION
TRANSFER AGENT. Unified Fund Services, Inc., 431 N. Pennsylvania
Street, Indianapolis, IN 46204.
CUSTODIAN. Star Bank, N.A., 425 Walnut Street, M.L.6118, Sixth
Floor, Cincinnati, Ohio 45202 serves as custodian of the Fund.
DISTRIBUTOR. Unified Management Corporation, 431 N. Pennsylvania
Street, Indianapolis, IN 46204.
AUDITOR. Marie Jones, C.P.A., independent auditor, has been
selected as the auditor of the Fund. The business address is 19437
Burgundy Way, Saratoga, California 95070.
