U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]
Pre-Effective Amendment No. 1
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Post-Effective Amendment No.
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 1
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(Check appropriate box or boxes)
DUNHILL INVESTMENT TRUST
(Exact Name of Registrant as Specified in Charter)
7424 Jager Court
Cincinnati, OH 45230
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (513) 624-5900
Jasen M. Snelling
CityFund Advisory, Inc.
7424 Jager Court
Cincinnati, OH 45230
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable after this
Registration Statement becomes effective.
Registrant hereby declares its intention to register an indefinite number of
shares of beneficial interest pursuant to Rule 24f-2 under the Investment
Company Act of 1940.
The Registrant hereby amends this Registration Statement on such date of dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration State shall become effective on
such date as the Commission acting pursuant to said Section 8(a) may determine.
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DUNHILL INVESTMENT TRUST
Cross-Reference Sheet Pursuant to Rule 495(a)
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PART A PROSPECTUS
FORM ITEM CROSS-REFERENCE
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Item 1. Cover Page Cover Page
Item 2. Synopsis Prospectus Summary; Synopsis of Costs and
Expenses
Item 3. Condensed Financial Information Financial Highlights; Dividends,
Distributions, Taxes and Other Information
Item 4. General Description of Registrant Investment Objective, Investment Policies and
Risk Considerations; Management of the Fund
Item 5. Management of the Fund Management of the Fund
Item 5A. Management's Discussion of Fund Performance Not Applicable
Item 6. Capital Stock and Distributions, Other Dividends, Distributions, Taxes and Other
Securities Information
Item 7. Purchase of Securities Being Offered How to Purchase Shares
Item 8. Redemption or Repurchase of Securities Being How to Redeem Shares
offered
Item 9. Pending Legal Proceedings Not Applicable
PART B STATEMENT OF ADDITIONAL INFORMATION
FORM ITEM CROSS-REFERENCE
Item 10. Cover Page Cover Page
Item 11. Table of Contents Cover Page
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Item 12. General Information and History Description of the Trust
Item 13. Investment Objectives and Policies Investment Objective and Policies; Investment
Limitations; Appendix A-Description of Ratings
Item 14. Management of the Fund Trustees and Officers
Item 15. Control Persons and Principal Holders of Trustees and Officers
Securities
Item 16. Investment Advisory and Other Services Investment Manager; Investment Advisor;
Transfer Agent and Administrator
Item 17. Brokerage Allocation Brokerage
Item 18. Capital Stock and Other Securities Description of the Trust
Item 19. Purchase, Redemption and Pricing of Securities Additional Purchase and Redemption
Being Offered Information; How Share Price is Determined
Item 20. Tax Status Additional Tax Information
Item 21. Underwriters Distributor
Item 22. Calculation of Performance Data Calculation of Performance Data
Item 23. Financial Statements Financial Statements and Reports
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PROSPECTUS
__________, 1998
REGIONAL OPPORTUNITY FUND:
OHIO, INDIANA, KENTUCKY
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The investment objective of the REGIONAL OPPORTUNITY FUND: OHIO, INDIANA,
KENTUCKY is to provide long-term capital growth by investing primarily in common
stocks and other equity securities of publicly-traded companies headquartered in
Greater Cincinnati and the Cincinnati tri-state region, and those companies
having a significant presence in the region. While there is no assurance that
the Fund will achieve its investment objective, it endeavors to do so by
following the investment policies described in this Prospectus.
The Fund's shares are sold subject to a maximum 5% contingent deferred sales
charge and a 12b-1 distribution fee of up to 1% of average daily net assets.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY FINANCIAL INSTITUTION, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
INVESTMENT MANAGER
Dunhill Investment Advisors, Ltd.
700 W. Pete Rose Way
Longworth Hall, Ste. #127
Cincinnati, Ohio 45203
The Regional Opportunity Fund: Ohio, Indiana, Kentucky (the "Fund") is a
non-diversified, open-end series of Dunhill Investment Trust, a registered
management investment company.
Pursuant to an Agreement and Plan of Reorganization dated as of May 1, 1998, the
Fund, on or about June 29, 1998, will succeed to the assets and liabilities of
another mutual fund of the same name (the "Predecessor Fund"), which is an
investment series of Maplewood Investment Trust. The investment objective,
policies and restrictions of the Fund and the Predecessor Fund are substantially
identical and the financial data and information in this Prospectus relates to
the Predecessor Fund.
This Prospectus provides you with the basic information you should know before
investing. You should read it and keep it for future reference. A Statement of
Additional Information, dated ___________, 1998, containing additional
information about the Fund has been filed with the Securities and Exchange
Commission and is incorporated by reference in this Prospectus in its entirety.
The Fund's address is P.O. Box 54944, Cincinnati, Ohio 45254-0944. The Fund's
toll free telephone number is 1-877-624-6465. A copy of the Statement of
Additional Information may be obtained at no charge by calling or writing the
Fund.
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TABLE OF CONTENTS
PROSPECTUS SUMMARY........................................................
SYNOPSIS OF COSTS AND EXPENSES............................................
FINANCIAL HIGHLIGHTS......................................................
INVESTMENT OBJECTIVE, INVESTMENT POLICIES
AND RISK CONSIDERATIONS.................................................
HOW TO PURCHASE SHARES....................................................
HOW TO REDEEM SHARES......................................................
HOW SHARES ARE VALUED.....................................................
MANAGEMENT OF THE FUND....................................................
DISTRIBUTOR AND DISTRIBUTION PLAN.........................................
DIVIDENDS, DISTRIBUTIONS, TAXES AND OTHER INFORMATION.....................
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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.
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<PAGE>
PROSPECTUS SUMMARY
THE FUND. The Regional Opportunity Fund: Ohio, Indiana, Kentucky (the "Fund") is
a non-diversified, open-end management investment company commonly known as a
"mutual fund." The Fund's investment objective is to provide long-term capital
growth. While there is no assurance that the Fund will achieve its investment
objective, it endeavors to do so by following the investment policies described
in this Prospectus.
INVESTMENT APPROACH AND RISK FACTORS. In seeking to achieve the Fund's
investment objective, the Fund will invest primarily in common stocks and other
equity securities of publicly-traded companies headquartered in the Cincinnati
tri-state region, and those companies having a significant presence in the
tri-state region. Realization of current income is not a significant investment
consideration and any income realized will be incidental to the Fund's
objective.
The Fund's concentration in companies headquartered in or having a significant
presence in the Cincinnati tri-state region generally will tie the performance
of the Fund to the economic environment of Cincinnati and the surrounding area.
There is no assurance that the demographic and economic characteristics and
other factors that the Advisor believes favor companies in the Cincinnati
tri-state region will continue in the future. The Fund is a non-diversified fund
and therefore may invest more than 5% of its total assets in the securities of
one or more issuers. Because a relatively high percentage of the assets of the
Fund may be invested in a limited number of issuers concentrated in a small
geographic area, the value of shares of the Fund may be more sensitive to any
single economic, business, political or regulatory occurence than the value of
shares of a diversified investment company which does not invest primarily in a
single geographic area. (See "Investment Objective, Investment Policies and Risk
Considerations.")
INVESTMENT ADVISOR. CityFund Advisory, Inc. (the "Advisor"), under the
supervision of Dunhill Investment Advisors, Ltd. ( the "Manager"), serves as
investment advisor to the Fund. For its services, the Manager recieves
compensation of 1.20% of the average daily net assets of the Fund and
compensates the Advisor from its own resources. (See "Management of the Fund.")
PURCHASE OF SHARES. Shares of the Fund are offered at net asset value and are
subject to a maximum 5% contingent deferred sales charge and 12b-1 distribution
fees of up to 1% of average daily net assets. The contingent deferred sales
charge may be reduced or eliminated as described in this Prospectus. The minimum
initial investment is $1,000 ($250 for IRA accounts). (See "How to Purchase
Shares.")
REDEMPTION OF SHARES. Redemptions of shares of the Fund may be subject to a
contingent deferred sales charge as described in this Prospectus. Shares may be
redeemed at any time in which the Fund is open for business at the net asset
value next determined after receipt of a redemption request by the Fund, less
any applicable contingent deferred sales charge. A shareholder who submits
written authorization may redeem shares by telephone. (See "How to Redeem
Shares.")
DIVIDENDS AND DISTRIBUTIONS. Net investment income and net capital gains, if
any, are distributed annually. Shareholders may elect to receive dividends and
distributions in cash or the dividends and distributions may be reinvested in
additional Fund shares. (See "Dividends, Distributions, Taxes and Other
Information.")
MANAGEMENT. The Fund is a series of Dunhill Investment Trust (the "Trust"), the
Board of Trustees of which is responsible for overall management of the Trust
and the Fund. The Trust has also employed the Manager to provide administration
and transfer agent services. (See "Management of the Fund.")
DISTRIBUTOR. Alpha-Omega Capital Corp. (the "Distributor") serves as the
national distributor of shares of the Fund. For its services, the Distributor
receives commissions from the Manager for the sale of Fund shares. (See
"Distributor and Distribution Plan.")
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SYNOPSIS OF COSTS AND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Charge Imposed on Purchases
(As a percentage of offering price) ........................... None
Maximum Contingent Deferred Sales Charge
(As a percentage of original purchase price
or redemption proceeds, whichever is lower) ................... 5.00%
Sales Charge Imposed on Reinvested Dividends ....................... None
Redemption Fee....................................................... None
ANNUAL FUND OPERATING EXPENSES:
(As a percentage of average net assets)
Management Fees After Waivers(1) 0.00%
12b-1 Fees(2) 1.00%
Other Expenses After Reimbursements(3) 1.69%
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Total Operating Expenses After Waivers and Reimbursements(3) 2.69%
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(1) Absent waivers of management fees, such fees would be 1.20%.
(2) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales loads permitted by the National Association of
Securities Dealers.
(3) Absent waivers and expense reimbursements, other expenses would be 3.41% and
total operating expenses would be 5.61%.
EXAMPLE:
You would pay the following expenses on a $1,000 investment, assuming 5% annual
return and redemption at the end of the period:
1 Year $ 67
3 Years 104
5 Years 142
10 Years 302
You would pay the following expenses on $1,000 investment, assuming 5% annual
return and no redemption at the end of the period:
1 Year $ 27
3 Years 84
5 Years 142
10 Years 302
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The purpose of the foregoing table is to assist investors in the Fund in
understanding the various costs and expenses that they will bear directly or
indirectly. See "Management of the Fund" for more information about the fees and
costs of operating the Fund. The Annual Fund Operating Expenses shown above are
based upon expenses incurred by the Predecessor Fund during the most recent
fiscal year. The Manager intends to waive its investment advisory fees and
reimburse the Fund for expenses to the extent necessary to limit total operating
expenses to 2.70% of its average net assets. THE EXAMPLES SHOWN SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES IN THE
FUTURE MAY BE GREATER OR LESS THAN THOSE SHOWN.
FINANCIAL HIGHLIGHTS
The following audited financial information for the Predecessor Fund has been
audited by KPMG Peat Marwick LLP, independent auditors, and should be read in
conjunction with the financial statements. The annual financial statements as of
February 28, 1998 and the independent auditors' report thereon appear in the
Statement of Additional Information, a copy of which may be obtained at no
charge by calling the Fund. Prior to October 31, 1997, the Predecessor Fund
offered two classes of shares: Class A shares (sold subject to a front-end sales
load and a distribution fee of up to .25% of average daily net assets of the
class) and Class B shares (sold subject to a contingent deferred sales load if
redeemed with five years from the date of purchase and a distribution fee of up
to 1% of average daily net assets of the class). On October 31, 1997, all
outstanding Class A shares were redeemed pursuant to a mandatory redemption
program authorized by the Board of Trustees of the Predecessor Fund. The
information is presented below for both Class A and Class B shares, although the
Fund offers only Class B shares.
Class A
Selected Per Share Data and Ratios
for a Share Outstanding Throughout Each Period
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Period Year Year Period
Ended Ended Ended Ended
Oct. 31, 1997(A) Feb. 28, 1997 Feb. 29, 1996 Feb. 28, 1995(B)
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Net asset value at end of period $ 11.38 $ 11.11 $ 10.00 $ 10.00
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Income from investment operations:
Net investment income (loss) (0.06) (0.06) 0.10 0.01
Net realized and unrealized gains (losses)
on investments 2.19 0.76 1.74 (0.01)
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Total from investment operations 2.13 0.70 1.84 0.00
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Less distributions:
From net realized gains -- -- (0.64) --
In excess of net realized gains -- (0.41) -- --
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Total distributions -- (0.41) (0.64) --
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Net asset value at end of period $ 13.51 $ 11.40 $ 11.11 $ 10.00
========= ========= ========= =========
Total return (C) 18.72% 6.32% 18.41% 0.00%
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Net assets at end of period $ 573,769 $ 502,116 $ 759,366 $ 232,998
========= ========= ========= =========
Ratio of expenses to average net assets:
Before expense reimbursement and waived fees 6.30%(E) 11.50% 18.26% 80.88%(E)
After expense reimbursement and waived fees 1.94%(E) 2.02% 2.23% 2.05%(E)
Ratio of net investment income (loss) to average net (0.65)%(E) (0.37)% 0.96% 1.54%(E)
assets
Portfolio turnover rate 25%(E) 39% 108% 0%
Average commission rate per share (D) $ 0.0634 $ 0.0630 -- --
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(A) Represents the period from March 1, 1997 to the date of conversion to Class
B shares (October 31, 1997).
(B) Represents the period from the commencement of operations (January 3, 1995)
through February 28, 1995.
(C) The total returns shown do not include the effect of applicable sales loads.
(D) Beginning with the year ended February 28, 1997, the Fund is required to
disclose its average commission rate paid per share for purchases and sales
of investment securities.
(E) Annualized.
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Class B
FINANCIAL HIGHLIGHTS
Selected Per Share Data and Ratios
for a Share Outstanding Throughout Each Period
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Year Period
Ended Ended
Feb. 28, 1998 Feb. 28, 1997(A)
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Net asset value at beginning of period $ 11.33 $ 10.46
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Income from investment operations:
Net investment loss (0.13) (0.02)
Net realized and unrealized gains
on investments 4.21 1.30
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Total from investment operations 4.08 1.28
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Less distributions:
In excess of net realized gains -- (0.41)
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Total distributions -- (0.41)
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Net asset value at end of period $ 15.41 $ 11.33
========== =========
Total return (B) 36.01% 12.25%
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Net assets at end of period $4,965,434 $ 646,067
========== =========
Ratio of expenses to average net assets:
Before expense reimbursement and waived fees 5.81% 12.14%(C)
After expense reimbursement and waived fees 2.69% 2.66%(C)
Ratio of net investment loss to average net assets (1.69)% (1.04)%(C)
Portfolio turnover rate 21% 39%(C)
Average commission rate per share $ 0.0596 $ 0.0630
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(A) Represents the period from the first public offering to shareholders (July
24, 1996) through February 28, 1997. Class B shares were initially purchased
on April 10, 1995 by the Adviser, who subsequently redeemed the initial
shares on March 13, 1996.
(B) The total returns shown do not include the effect of applicable sales loads.
(C) Annualized.
Further information about the performance of the Predecessor Fund is contained
in the Annual Report of the Predecessor Fund, a copy of which can be obtained at
no charge by calling the Fund.
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<PAGE>
INVESTMENT OBJECTIVE, INVESTMENT POLICIES
AND RISK CONSIDERATIONS
The investment objective of the Fund is to provide long-term capital growth by
investing primarily in common stocks and other equity securities of
publicly-traded companies headquartered in Greater Cincinnati and the Cincinnati
tri-state region, and those companies having a significant presence in the
Cincinnati tri-state region ("Tri-State Regional Securities"). Realization of
current income will not be a significant investment consideration, and any such
income realized should be considered incidental to the Fund's objective. Any
investment involves risk, and there can be no assurance that the Fund will
achieve its investment objective. The investment objective and fundamental
investment limitations of the Fund may not be altered without the prior approval
of a majority, as defined by the Investment Company Act of 1940 (the "1940 Act")
of the Fund's shares.
The Advisor believes that the demographic and economic characteristics of
Greater Cincinnati and the Cincinnati tri-state region, including population,
employment, retail sales, personal income, bank loans, bank deposits and
residential construction are such that many companies headquartered in the
Cincinnati tri-state region, or having a significant presence in the region by
virtue of having a significant portion of their corporate earnings generated
from operations in the region, have a greater than average potential for capital
appreciation. For these purposes, the Advisor defines the Cincinnati tri-state
region to be Greater Cincinnati and its surrounding area, including all of Ohio,
Kentucky and Indiana. If a company is not headquartered in the Cincinnati
tri-state region, the Advisor will consider such company as having a
"significant presence" in the Cincinnati tri-state region if 50% or more of its
profits are generated from operations (including plants, offices or a sales
force) based in the region and/or the company employs 500 or more in its
operations within the region.
INVESTMENT SELECTION. Through fundamental analysis the Advisor will attempt to
identify securities and groups of securities with potential for capital
appreciation. Under normal market conditions, not less than 65% of the Fund's
total assets will be invested in Tri-State Regional Securities. The Advisor will
generally focus on common stocks and other equity securities of large companies
(i.e., listed on a national securities exchange) headquartered or having a
significant presence in the Cincinnati tri-state region that have exhibited a
history of ten years or more of increased earnings and/or dividend distribution
per share. The Fund will generally remain fully invested at all times. The
Advisor intends to limit portfolio turnover in the Fund, believing that a
long-term rather than a short-term selection of investments is preferable.
The equity securities in which the Fund may invest include common stocks,
convertible preferred stocks, straight preferred stocks and investment grade
convertible bonds. The Fund may also invest up to 5% of its net assets in
warrants or rights to acquire equity securities other than those acquired in
units or attached to other securities. (See "Investment Limitations.")
The Fund's concentration in companies headquartered in or having a significant
presence in the Cincinnati tri-state region generally will tie the performance
of the Fund to the economic environment of Cincinnati and the surrounding area.
There is no assurance that the demographic and economic
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<PAGE>
characteristics and other factors that the Advisor believes favor companies in
the Cincinnati tri-state region will continue in the future. Because a
relatively high percentage of assets of the Fund may be invested in a limited
number of issuers concentrated in a small geographic area, the value of shares
of the Fund may be more sensitive to any single economic, business, political or
regulatory occurrence than the value of shares of an investment company which
does not invest primarily in a single geographic area. Moreover, the Fund's
portfolio may include securities of companies which are traded over-the-counter
and companies that are not nationally recognized. The prices of stocks of such
companies generally are more volatile than those of larger or more mature
companies, their securities are generally less liquid, and they are more likely
to be negatively affected by adverse economic or market conditions. Moreover,
because of its concentration, the Fund's portfolio may be invested in a smaller
number of companies than a general equity mutual fund. This may result in
imbalances relative to diversification by industry sector. These limitations may
also restrict the Advisor from using certain traditional analytical measures
employed to select investments and also exclude some strategies that could offer
superior performance or reduce fluctuations in the values of such assets.
Under normal market conditions, at least 90% of the Fund's total assets will be
invested in equity securities (with at least 65% of the Fund's total assets
invested in Tri-State Regional Securities). Warrants and rights will be excluded
for purposes of this calculation. As a temporary defensive measure, however, the
Fund may invest up to 100% of its total assets in investment grade bonds, U.S.
Government Securities or money market instruments. When the Fund invests its
assets in investment grade bonds, U.S. Government Securities or money market
instruments as a temporary defensive measure, it is not pursuing its stated
investment objective.
U.S. GOVERNMENT SECURITIES. The Fund may invest a portion of its assets in U.S.
Government Securities. "U.S. Government Securities" include U.S. Treasury notes,
U.S. Treasury bonds, and U.S. Treasury bills, obligations guaranteed by the U.S.
Government such as Government National Mortgage Association as well as
obligations of U.S. Government authorities, agencies and instrumentalities such
as Federal National Mortgage Association, Federal Home Loan Mortgage
Corporation, Federal Farm Credit Bank, Federal Home Loan Bank, Resolution
Funding Corporation, Financing Corporation, Tennessee Valley Authority and
Student Loan Marketing Association. U.S. Government Securities may be acquired
subject to repurchase agreements. While obligations of some U.S. Government
sponsored entities are supported by the full faith and credit of the U.S.
Government, several are supported by the right of the issuer to borrow from the
U.S. Government, and still others are supported only by the credit of the issuer
itself. The guarantee of the U.S. Government does not extend to the yield or
value of the U.S. Government Securities held by the Fund or to the Fund's
shares.
MONEY MARKET INSTRUMENTS. Money market instruments may be purchased for
temporary defensive purposes when the Advisor believes that unusually volatile
or unstable economic and market conditions exist. When the Fund assumes a
temporary defensive posture, it may invest up to 100% of its net assets in money
market instruments. Under normal circumstances, money market instruments will
typically represent a portion of the Fund's portfolio, as funds awaiting
investment, to accumulate cash for anticipated purchases of portfolio securities
and to provide for shareholder redemptions and operational expenses of the Fund.
Money market instruments mature in thirteen months or less from the date of
purchase and include U.S. Government Securities (defined above) and corporate
debt securities (including those subject to repurchase agreements), bankers'
acceptances and certificates of deposit of domestic branches of U.S. banks, and
commercial paper (including variable amount demand master notes). At the time of
purchase, money market instruments will have a short-term rating in one of the
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<PAGE>
two highest categories by any nationally recognized statistical rating
organization ("NRSRO") or, if not rated, of equivalent quality in the Advisor's
opinion. See the Statement of Additional Information for a further description
of money market instruments.
REPURCHASE AGREEMENTS. The Fund may acquire U.S. Government Securities or other
high-grade debt securities subject to repurchase agreements. A repurchase
agreement transaction occurs when the Fund acquires a security and
simultaneously resells it to the vendor (normally a member bank of the Federal
Reserve or a registered Government Securities dealer) for delivery on an agreed
upon future date. The repurchase price exceeds the purchase price by an amount
which reflects an agreed upon market interest rate earned by the Fund effective
for the period of time during which the repurchase agreement is in effect.
Delivery pursuant to the resale typically will occur within one to five days of
the purchase. For purposes of the 1940 Act, a repurchase agreement is considered
to be a loan collateralized by the securities subject to the repurchase
agreement. The Fund will not enter into a repurchase agreement which will cause
more than 10% of its assets to be invested in repurchase agreements which extend
beyond seven days and other illiquid securities.
INVESTMENT COMPANIES. In order to achieve its investment objective, the Fund may
invest in the securities of open-end investment companies which are generally
authorized to invest in securities eligible for purchase by the Fund. To the
extent the Fund does so, Fund shareholders would indirectly pay a portion of the
operating costs of the underlying investment companies. These costs include
management, brokerage, shareholder servicing and other operational expenses.
Indirectly, then, shareholders may pay higher operational costs than if they
owned the underlying investment companies directly. The Fund will only invest in
other investment companies by purchase of such securities on the open market
where no commission or profit to a sponsor or dealer results from the purchase
other than the customary broker's commissions or when the purchase is part of a
plan of merger, consolidation, reorganization or acquisition. The Advisor will
waive its advisory fee for that portion of the Fund's assets invested in other
investment companies, except when such purchase is part of a plan of merger,
consolidation, reorganization or acquisition.
The Fund may invest up to 10% of its total assets in securities of other
investment companies. In addition, the Fund will not invest more than 5% of its
total assets in securities of any single investment company, nor will it
purchase more than 3% of the outstanding voting securities of any investment
company.
REAL ESTATE SECURITIES. The Fund may not invest in real estate (including
limited partnership interests), but may invest in readily marketable securities
secured by real estate or interests therein or issued by companies that invest
in real estate or interests therein. The Fund may also invest in readily
marketable interests in real estate investment trusts ("REITs"). REITs are
generally publicly traded on the national stock exchanges and in the
over-the-counter market and have varying degrees of liquidity. Although the Fund
is not limited in the amount of REITs it may acquire, the Fund does not
presently intend to invest more than 5% of its net assets in REITs.
OPTIONS ON PORTFOLIO SECURITIES. When the Advisor believes that individual
portfolio securities are approaching the top of the Advisor's growth and price
expectations, covered call options (calls) may be
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<PAGE>
written (sold) against such securities in a disciplined approach to selling
portfolio securities. The Fund writes options only for hedging purposes and not
for speculation. If the Advisor is incorrect in its expectations and the market
price of a stock subject to a call option rises above the exercise price of the
option, the Fund will lose the opportunity for further appreciation of that
security. Additional information on writing covered call options is contained in
the Statement of Additional Information.
FACTORS TO CONSIDER. The Fund is not intended to be a complete investment
program and there can be no assurance that the Fund will achieve its investment
objective. To the extent that a major portion of the Fund's portfolio consists
of common stocks and other equity securities, it may be expected that its net
asset value will be subject to greater fluctuation than a portfolio containing
mostly fixed-income securities. The Fund is a non-diversified fund and therefore
may invest more than 5% of its total assets in the securities of one or more
issuers. Because a relatively high percentage of the assets of the Fund may be
invested in the securities of a limited number of issuers, the value of shares
of the Fund may be more sensitive to any single economic, business, political or
regulatory occurrence than the value of shares of a diversified investment
company. The Fund may borrow only under certain limited conditions (including to
meet redemption requests), but not to purchase securities. Borrowing, if done,
would tend to exaggerate the effects of market fluctuations in the Fund's net
asset value until repaid. (See "Borrowing").
PORTFOLIO TURNOVER. The Fund sells portfolio securities without regard to the
length of time they have been held in order to take advantage of new investment
opportunities. The Fund's annual portfolio turnover generally is not expected to
exceed 100%. Market conditions may dictate, however, a higher rate of portfolio
turnover in a particular year. The degree of portfolio activity affects the
brokerage costs of the Fund and may have an impact on the amount of taxable
distributions to shareholders.
BORROWING. The Fund may borrow, temporarily, up to 5% of its total assets for
extraordinary purposes and may increase the limit to 15% of its total assets to
meet redemption requests which might otherwise require untimely disposition of
portfolio holdings. To the extent the Fund borrows for these purposes, the
effects of market price fluctuations on portfolio net asset value will be
exaggerated. If, while such borrowing is in effect, the value of the Fund's
assets declines, the Fund would be forced to liquidate portfolio securities when
it is disadvantageous to do so. The Fund would incur interest and other
transaction costs in connection with such borrowing. The Fund will not make any
additional investments while its outstanding borrowings exceed 5% of the current
value of its total assets.
ILLIQUID INVESTMENTS. The Fund may invest up to 10% of its net assets in
illiquid securities. Illiquid securities are those that may not be sold or
disposed of in the ordinary course of business within seven days at
approximately the price at which they are valued. Under the supervision of the
Board of Trustees, the Advisor determines the liquidity of the Fund's
investments. The absence of a trading market can make it difficult to ascertain
a market value for illiquid investments. Disposing of illiquid securities before
maturity may be time consuming and expensive, and it may be difficult or
impossible for the Fund to sell illiquid investments promptly at an acceptable
price. Included within the category of illiquid securities are restricted
securities, which cannot be resold to the public without registration under the
federal securities laws. Unless registered for sale, these securities can only
be sold in privately negotiated transactions or pursuant to an exemption from
registration.
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FORWARD COMMITMENTS AND WHEN-ISSUED SECURITIES. The Fund may purchase
when-issued securities and commit to purchase securities for a fixed price at a
future date beyond customary settlement time. The Fund is required to hold and
maintain in a segregated account until the settlement date, cash, U.S.
Government Securities or high-grade debt obligations in an amount sufficient to
meet the purchase price. Purchasing securities on a when-issued or forward
commitment basis involves a risk of loss if the value of the security to be
purchased declines prior to the settlement date, which risk is in addition to
the risk of decline in value of the Fund's other assets. In addition, no income
accrues to the purchaser of when-issued securities during the period prior to
issuance. Although the Fund would generally purchase securities on a when-issued
or forward commitment basis with the intention of acquiring securities for its
portfolio, the Fund may dispose of a when-issued security or forward commitment
prior to settlement if the Advisor deems it appropriate to do so. The Fund may
realize short-term gains or losses upon such sales.
INVESTMENT LIMITATIONS. For the purpose of limiting the Fund's exposure to risk,
the Fund has adopted certain investment limitations. The Fund will not: (1)
issue senior securities, borrow money or pledge its assets, except that it may
borrow from banks as a temporary measure (a) for extraordinary or emergency
purposes, in amounts not exceeding 5% of the Fund's total assets, or (b) in
order to meet redemption requests which might otherwise require untimely
disposition of portfolio securities in amounts not exceeding 15% of its total
assets (the Fund will not make any investment if borrowings exceed 5% of its
total assets); (2) make loans of money or securities, except that the Fund may
invest in repurchase agreements (but repurchase agreements having a maturity of
longer than seven days are subject to the limitation on investing in illiquid
securities); (3) invest more than 10% of its net assets in illiquid securities;
(4) invest in securities of issuers which have a record of less than three
years' continuous operation (including predecessors and, in the case of bonds,
guarantors), if more than 5% of its total assets would be invested in such
securities; (5) purchase foreign securities; (6) purchase or sell commodities,
commodities contracts, real estate (including limited partnership interests, but
excluding readily marketable securities secured by real estate or interests
therein, readily marketable interests in real estate investment trusts, or
readily marketable securities issued by companies that invest in real estate or
interests therein) or interests in oil, gas, or other mineral exploration or
development programs or leases (although it may invest in readily marketable
securities of issuers that invest in or sponsor such programs or leases); (7)
invest more than 10% of its total assets in the securities of other investment
companies; (8) invest more than 25% of its total assets in the securities of
issuers within a single industry; (9) write, purchase, or sell puts, calls,
straddles, spreads or combinations thereof, or futures contracts or related
options (but the Fund may write covered call options as described in this
Prospectus); and (10) invest more than 5% of its net assets in warrants.
Investment restrictions (1),(2),(5),(6),(7),(8) and (10) are deemed fundamental,
that is, they may not be changed without shareholder approval. See "Investment
Limitations" in the Fund's Statement of Additional Information for a complete
list of investment limitations.
If the Board of Trustees determines that the Fund's investment objective can
best be achieved by a substantive change in a nonfundamental investment
limitation, the Board can make such change without shareholder approval and will
disclose any such material changes in its Prospectus. Any limitation that is not
specified in the Fund's Prospectus or Statement of Additional Information as
being fundamental is non fundamental. If a percentage limitation is satisfied at
the time of investment, a later increase or
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decrease in such percentage resulting from a change in the value of the Fund's
portfolio securities will not constitute a violation of such limitation.
HOW TO PURCHASE SHARES
Assistance in opening accounts may be obtained from the Manager by calling
1-877-624-6465, or by writing to the Fund at the address shown below for regular
mail orders. Assistance is also available through any broker-dealer authorized
to sell shares of the Fund. Such broker-dealer may charge you a fee for its
services. Payment for shares purchased for your account may be made through the
broker-dealer processing your application and order to purchase. Your investment
will purchase shares at the net asset value next determined after your order is
received by the Fund in proper form as indicated herein. The minimum initial
investment in the Fund is $1,000 ($250 for IRAs). The Fund may, in the Manager's
sole discretion, accept certain accounts with less than the stated minimum
initial investment.
Payment must be made by check or money order drawn on a U.S. bank and payable in
U.S. dollars. All orders received by the Manager, whether by mail, bank wire or
facsimile order, prior to 4:00 p.m., Eastern time, will purchase shares at the
next determined public offering price on that business day. If your order is not
received by 4:00 p.m., Eastern time, your order will purchase shares at the
public offering price determined on the next business day. Broker-dealers are
responsible for transmitting properly completed orders so that they will be
received by 4:00 p.m., Eastern time.
Regular Mail Orders. Please complete and sign the Account Application form
accompanying this Prospectus and send it with your check, made payable to the
Regional Opportunity Fund, and mail it to:
Regional Opportunity Fund
c/o Shareholder Services
P.O. Box 54944
Cincinnati, Ohio 45254-0944
Bank Wire Orders. Investments can be made directly by bank wire. To establish a
new account or add to an existing account by wire, please call the Fund, AT
1-877-624-6465 before wiring funds, to advise the Fund of the investment, the
dollar amount and the account registration. This will ensure prompt and accurate
handling of your investment. Please have your bank use the following wiring
instructions to purchase by wire:
The Fifth Third Bank
ABA# 042000314
For Dunhill Investment Trust #__________
For the Regional Opportunity Fund
(Shareholder name and account number)
It is important that the wire contain all the information and that the Fund
receive prior telephone notification to ensure proper credit. Once your wire is
sent you should, as soon as possible thereafter,
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complete and mail your Account Application to the Fund as described under
"Regular Mail Orders," above. Investors should be aware that some banks may
impose a wire service fee.
ADDITIONAL INVESTMENTS. You may add to your account by mail or wire at any time
by purchasing shares at the then current net asset value or public offering
price as aforementioned. Before making additional investments by bank wire,
please call the Fund, at 1-877-624-6465 to alert the Fund that your wire is to
be sent. Follow the wire instructions above to send your wire. When calling for
any reason, please have your account number ready, if known. Mail orders should
include, when possible, the "Invest by Mail" stub which is attached to your Fund
confirmation statement. Otherwise, be sure to identify your account in your
letter.
AUTOMATIC INVESTMENT PLAN. The automatic investment plan enables shareholders to
make regular monthly or bimonthly investments in shares through automatic
charges to their checking account. With shareholder authorization and bank
approval, the Manager will automatically charge the checking account for the
amount specified ($50 minimum), which will be automatically invested in shares
at net asset value or the public offering price, whichever is applicable, on or
about the fifteenth day and/or the last business day of the month. Shareholders
may change the amount of the investment or discontinue the plan at any time by
writing to the Manager.
STOCK CERTIFICATES. Stock certificates will not be issued for your shares.
Evidence of ownership will be given by issuance of periodic account statements
which will show the number of shares owned.
CONTINGENT DEFERRED SALES CHARGE. Shares of the Fund are sold at net asset value
and are subject to a contingent deferred sales charge ("CDSC") at the rates set
forth in the chart below if they are redeemed within five years of their date of
purchase. Shares are sold without a front-end sales charge so that the Fund will
receive the full amount of the investor's purchase payment. Dealers, however,
will receive commissions from the Manager in connection with sales of Fund
shares. These commissions will be paid from the Manager's own funds.
The Manager currently expects to pay sales commissions to dealers at the time of
sale of up to 4.5% of the purchase price of the Class B shares sold by such
dealer. An additional 0.5% of the purchase price of such shares will be paid by
the Manager to the Distributor. The Manager will use its own funds or funds
facilitated by the Manager (which may be borrowed or otherwise financed) to pay
such sales commission.
Proceeds from the CDSC and the distribution fees payable under the Fund's
Distribution Plan (up to 1% of the Fund's average net assets) will be paid to
the Manager and are used in whole or in part by the Manager to defray the
expenses of dealers and sales personnel related to providing
distribution-related expenses to the Fund in connection with the sale of Fund
shares, such as the payment of commissions to dealers and sales personnel for
selling shares. The combination of the CDSC and the ongoing distribution fees
facilitates the ability of the Fund to sell Fund shares without a front-end
sales charge.
A CDSC applies if a redemption of Fund shares is made during the five years
since the purchase of such shares. The charge declines from 5% to zero over a
five year period. The CDSC will be deducted from the redemption proceeds and
will reduce the amount paid to the redeeming investor. A CDSC will be
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applied to the lesser of the original purchase price or the current value of the
shares being redeemed. Accordingly, no CDSC will be imposed on increases in net
asset value above the initial purchase price. In addition, no CDSC will be
imposed on shares issued through reinvested dividends or capital gains
distributions. The amount of the CDSC, if any, will vary depending on the number
of years from the time of initial purchase of Fund shares until the time the
shares are redeemed in accordance with the following schedule.
Contingent Deferred Sales
Years Since Purchase Charge as a Percentage
Payment Made of Dollar Amount
------------ ----------------
First 5.00%
Second 4.00
Third 3.00
Fourth 2.00
Fifth 1.00
Sixth and Thereafter NONE
In determining whether a CDSC is applicable to a redemption, the calculation
will be determined in the manner that results in the lowest applicable rate
being charged. Therefore, it will be assumed that the redemption is first of
shares held for over five years or shares acquired pursuant to reinvestment of
dividends or distributions and then of shares held longest during the five-year
period. The charge will not be applied to dollar amounts representing an
increase in net asset value since the time of purchase.
To provide an example, assume an investor purchased 100 shares at $10 per share
(at a cost of $1,000) and in the third year after purchase, the net asset value
per share is $12 and, during such time, the investor has acquired 10 additional
shares upon dividend reinvestment. If at such time the investor makes his first
redemption of 50 shares (proceeds of $600), 10 shares will not be subject to the
deferred sales charge because of dividend reinvestment. With respect to the
remaining 40 shares, the deferred sales charge is applied only to the original
cost of $10 per share and not to the increase in net asset value of $2 per
share. Therefore, $400 of the $600 redemption proceeds will be charged at a rate
of 3% (the applicable rate in the third year after purchase).
CONTINGENT DEFERRED SALES CHARGE WAIVERS. The Fund offers the following waiver
policies, which are designed to eliminate the CDSC when a shareholder's state of
affairs unexpectedly changes or under the other limited circumstances described
below. For the waiver to become effective, the shareholder or shareholder's
estate must meet all the conditions of the waiver policy. Please note that
additional documentation may be required depending on the policy requirements.
1. DEATH. The CDSC is waived when death occurs on an individual account if the
beneficiary redeems all or part of the investment within one year of death. A
letter of instruction to redeem from the estate administrator must accompany a
certified certificate of death and a copy of the instrument appointing the
administrator. Shares transferred to a beneficiary's account retain the same
CDSC status as the original account.
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Death of fewer than all shareholders in a joint account will not qualify a share
redemption for the waiver at any time during the period in which the CDSC
applies. The remaining shareholder(s) retain the same CDSC status had the death
not occurred.
2. DISABILITY. The CDSC is waived when an individual becomes disabled at any
age. Disability is defined using the definition contained in the Internal
Revenue Code. A person is generally considered disabled if he cannot do any
substantial gainful activity (comparable to what he engaged in prior his
disability) because of any physical or mental impairment. A physician must
determine that the impairment is expected to continue for a long and indefinite
period or to result in death. Qualifying shares must be redeemed within one year
of the initial disability. Subsequent disabling events may extend the one year
redemption period if the disability is separate and distinct from the initial
qualifying disability. The following documentation is required: A letter of
instruction to redeem must accompany a copy of Social Security Administration
Schedule R or a notarized letter from the shareholder's physician describing the
nature of the disability, the date of onset, and a statement that the disability
is semi-permanent or expected to result in death.
3. MINIMUM REQUIRED DISTRIBUTIONS. The CDSC is waived in connection with
distributions from IRA, 403(b)(7), and qualified employee benefit plan accounts
due to the shareholders reaching age 70 1/2.
4. INVOLUNTARY REDEMPTIONS. The CDSC is waived in connection with involuntary
redemptions of Fund shares in accounts with low balances as described in "How to
Redeem Shares" below.
OTHER PURCHASE INFORMATION. Under certain circumstances, the Advisor, in its
sole discretion, may allow payment in kind for Fund shares purchased by
accepting securities in lieu of cash. Any securities so accepted would be valued
on the date received and included in the calculation of the net asset value of
the Fund. See the Statement of Additional Information for more information on
purchases in kind.
Due to Internal Revenue Service ("IRS") regulations, the Fund is required to,
and will, withhold taxes on all distributions and redemption proceeds without
social security or tax identification numbers, if the number is not delivered to
the Fund within 60 days. If, however, you have already applied for a social
security or tax identification number at the time of completing your account
application, the application should so indicate.
Investors should be aware that the Fund's account application contains
provisions in favor of the Fund, the Manager and certain of their affiliates,
excluding such entities from certain liabilities (including, among others,
losses resulting from unauthorized shareholder transactions) relating to the
various services made available to investors.
Should an order to purchase shares be cancelled because your check does not
clear, you will be responsible for any resulting losses or fees incurred by the
Fund or the Manager in the transaction.
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<PAGE>
HOW TO REDEEM SHARES
Shares of the Fund may be redeemed on each day that the Fund is open for
business. The Fund is open for business on each day the New York Stock Exchange
(the "Exchange") is open for business. Any redemption may be for more or less
than the purchase price of your shares depending on the market value of the
Fund's portfolio securities. All redemption orders received in proper form, as
indicated herein, by the Manager prior to 4:00 p.m., Eastern time, will redeem
shares at the net asset value determined as of that business day's close of
trading, less any applicable contingent deferred sales charge. Otherwise, your
order will redeem shares on the next business day. There is no charge for
redemptions from the Fund other than the contingent deferred sales charge
imposed on certain redemptions of Fund shares. You may also redeem your shares
through a broker-dealer or other institution which may charge you a fee for its
services.
The Board of Trustees reserves the right to involuntarily redeem any account
having an account value of less than $1,000 (due to redemptions, exchanges or
transfers, but not due to market action) upon 30 days' written notice. If the
shareholder brings his account value up to $1,000 or more during the notice
period, the account will not be redeemed. Redemptions from retirement plans may
be subject to tax withholding.
If you are uncertain of the requirements for redemption, please contact the
Fund, at 1-877-624-6465 or write to the address shown below.
REGULAR MAIL REDEMPTIONS. Your request should be addressed to the Regional
Opportunity Fund, P.O. Box 54944 Cincinnati, Ohio 45254-0944. Your request for
redemption must include:
1) your letter of instruction specifying the account number and the number of
shares or dollar amount to be redeemed. This request must be signed by all
registered shareholders in the exact names in which they are registered;
2) any required signature guarantees (see "Signature Guarantees"); and
3) other supporting legal documents, if required in the case of estates,
trusts, guardianships, custodianships, corporations, partnerships, pension
or profit sharing plans, and other organizations.
Your redemption proceeds will be mailed to you within three business days after
receipt of your redemption request. However, the Fund may delay forwarding a
redemption check for recently purchased shares while it determines whether the
purchase payment will be honored. Such delay (which may take up to 15 days) may
be reduced or avoided if the purchase is made by wire transfer. In such cases,
the net asset value next determined after receipt of the request for redemption
will be used in processing the redemption and your redemption proceeds will be
mailed to you upon clearance of your check to purchase shares. The Fund may
suspend redemption privileges or postpone the date of payment (i) during any
period that the Exchange is closed, or trading on the Exchange is restricted as
determined by the Securities and Exchange Commission (the "Commission"), (ii)
during any period
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when an emergency exists as defined by the rules of the Commission as a result
of which it is not reasonably practicable for the Fund to dispose of securities
owned by it, or to fairly determine the value of its assets, and (iii) for such
other periods as the Commission may permit.
TELEPHONE AND BANK WIRE REDEMPTIONS. The Fund offers shareholders the option of
redeeming shares by telephone under certain limited conditions. You may redeem
shares, subject to the procedures outlined below, by calling the Fund at
1-877-624-6465. The Fund will redeem shares when requested by telephone if, and
only if, the shareholder confirms redemption instructions in writing. The Fund
may rely upon confirmation of redemption requests transmitted via facsimile (FAX
# 513-___-____). The confirmation instructions must include:
1) Shareholder name and account number;
2) Number of shares or dollar amount to be redeemed;
3) Instructions for transmittal of redemption funds to the shareholder;
4) Shareholder signature as it appears on the application then on file with
the Fund; and
5) Any required signature guarantees (see "Signature Guarantees").
In such cases, the net asset value used in processing the redemption will be the
net asset value next determined after the telephone request is received.
Proceeds from the redemption of Fund shares will be reduced by the amount of any
applicable contingent deferred sales charge imposed on such shares. Redemption
proceeds will not be remitted until written confirmation of the redemption
request is received. You can choose to have redemption proceeds mailed to you at
your address of record, your bank, or to any other authorized person, or you can
have the proceeds sent by bank wire to your bank ($1,000 minimum). Shares of the
Fund may not be redeemed by wire on days in which your bank is not open for
business. Redemption proceeds will only be sent to the bank account or person
named in your Account Application currently on file with the Fund. You can
change your redemption instructions anytime you wish by filing a letter with the
Fund including your new redemption instructions. (See "Signature Guarantees.")
The Fund reserves the right to restrict or cancel telephone redemption
privileges for any or all shareholders, without notice, if the Trustees believe
it to be in the best interest of the shareholders to do so. During drastic
economic and market changes, telephone redemption privileges may be difficult to
implement.
Neither the Trust, the Manager, nor their respective affiliates will be liable
for complying with telephone instructions they reasonably believe to be genuine
or for any loss, damage, cost or expense in acting on such telephone
instructions. The affected shareholders will bear the risk of any such loss. The
Trust or the Manager, or both, will employ reasonable procedures to determine
that telephone instructions are genuine. If the Trust and/or the Manager do not
employ such procedures, they may be liable for losses
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due to unauthorized or fraudulent instructions. These procedures may include,
among others, requiring forms of personal identification prior to acting upon
telephone instructions, providing written confirmation of the transactions
and/or tape recording telephone instructions.
There is currently no charge by the Manager for wire redemptions. However, the
Manager reserves the right, upon thirty days' written notice, to make reasonable
charges for wire redemptions. All charges will be deducted from your account by
redemption of shares in your account. Your bank or brokerage firm may also
impose a charge for processing the wire. In the event that wire transfer of
funds is impossible or impractical, the redemption proceeds will be sent by mail
to the designated account.
SYSTEMATIC WITHDRAWAL PLAN. A shareholder who owns shares of the Fund valued at
$5,000 or more at the current net asset value may establish a Systematic
Withdrawal Plan to receive a monthly or quarterly check in a stated amount of
not less than $50. Each month or quarter, as specified, the Fund will
automatically redeem sufficient shares from your account to meet the specified
withdrawal amount. The shareholder may establish this service whether dividends
and distributions are reinvested or paid in cash. Systematic withdrawals may be
deposited directly to the shareholder's bank account by completing the
applicable section on the Account Application form accompanying this Prospectus,
or by calling or writing the Fund. See the Statement of Additional Information
for further details.
The amount of regular periodic payments specified by shareholders pursuant to a
Systematic Withdrawal Plan will be reduced by any applicable contingent deferred
sales charge. Because of the effects of this deferred sales charge, the
maintenance of a Systematic Withdrawal Plan may be disadvantageous for
shareholders.
SIGNATURE GUARANTEES. To protect your account and the Fund from fraud, signature
guarantees are required to be sure that you are the person who has authorized a
change in registration, or standing instructions, for your account. Signature
guarantees are required for (1) change of registration requests, and (2)
requests to establish or change redemption services other than through your
initial account application, and (3) requests for redemptions in excess of
$25,000. Signature guarantees are acceptable from a member bank of the Federal
Reserve System, a savings and loan institution, credit union, registered
broker-dealer or a member firm of a U.S. Stock Exchange, and must appear on the
written request for redemption or change of registration.
HOW SHARES ARE VALUED
The net asset value of shares of the Fund is determined on each business day
that the Exchange is open for trading, as of the close of the Exchange
(currently 4:00 p.m., Eastern time). Net asset value per share is determined by
dividing the total value of all Fund securities (valued at market value) and
other assets, less liabilities, by the total number of shares then outstanding.
Net asset value includes interest on fixed-income securities, which is accrued
daily. The net asset value per share will be affected by the expenses accrued
and payable by the Fund. See the Statement of Additional Information for further
details.
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Securities which are traded over-the-counter are priced at the last sale price,
if available, otherwise, at the last quoted bid price. Securities traded on a
securities exchange are valued based upon the closing price on the valuation
date on the principal exchange where the security is traded. Securities that are
listed on an exchange and which are not traded on the valuation date are valued
at the bid price. Securities in which market quotations are not readily
available may be valued on the basis of prices provided by an independent
pricing service, when such prices are believed to reflect the fair market value
of such securities. Securities and other assets for which no quotations are
readily available will be valued in good faith at fair value using methods
determined by the Board of Trustees.
MANAGEMENT OF THE FUND
The Fund is a non-diversified series of Dunhill Investment Trust, a series
company (the "Trust"), an investment company organized as an Ohio business trust
on March 31, 1998. The Board of Trustees has overall responsibility for
management of the Fund under the laws of Ohio governing the responsibilities of
Trustees of business trusts. The Statement of Additional Information identifies
the Trustees and officers of the Trust and provides information about them.
MANAGER. The Trust retains Dunhill Investment Advisors, Ltd., 700 W. Pete Rose
Way, Cincinnati, Ohio 45203 (the "Manager"), to provide general investment
supervisory services to the Fund. The Manager is a newly organized company and
therefore has not previously provided services to registered investment
companies. The controlling shareholders of the Manager are Jasen M. Snelling,
Jerry A. Smith, Bryan E. Pifer and William C. Riffle. The Fund pays the Manager
a fee equal to the annual rate of 1.20% of the average value of its daily net
assets.
The Manager currently intends to waive its management fees and reimburse the
Fund for expenses to the extent necessary to limit total operating expenses
(exclusive of interest, taxes, brokerage commissions, sales charges and
extraordinary expenses) to 2.70% per annum of the Fund's average daily net
assets. However, there is no assurance that any voluntary fee waivers or expense
reimbursements will continue in the current or future fiscal years, and expenses
may therefore exceed 2.70% of the Fund's average daily net assets.
INVESTMENT ADVISOR. CityFund Advisory, Inc. (the "Advisor") has been retained by
the Manager to provide the Fund with a continuous program of supervision of the
Fund's assets, including the composition of its portfolio, and furnishes advice
and recommendations with respect to investments, investment policies and the
purchase and sale of securities, pursuant to an Investment Advisory Agreement
with the Trust. The Advisor is also responsible for the selection of
broker-dealers through which the Fund executes portfolio transactions, subject
to brokerage policies established by the Trustees. The Advisor's address is P.O.
Box 54944, Cincinnati, Ohio 45254-0944. The controlling shareholders of the
Advisor are Jasen M. Snelling and Jerry A. Smith. The Advisor is an affiliate of
the Manager. Jill H. Travis is primarily responsible for the day-to-day
management of the Fund's portfolio and has managed the Predecessor Fund since
November 1995. In addition to being employed by the Advisor, Ms. Travis is
President and Chief Executive Officer of Amelia Earhart Capital Management,
Inc., an
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investment advisory firm located in Southfield, Michigan. Ms. Travis formerly
served as portfolio manager of the Amelia Earhart: Eagle Equity Fund, another
investment company, from 1993 to 1998. Since 1991, Ms. Travis has been a
self-employed certified financial planner and business consultant.
Under the Investment Advisory Agreement with the Fund, the Advisor receives from
the Manager (not the Fund) a monthly management fee equal to an annual rate of
.35% of the average daily net assets of the Fund.
ADMINISTRATOR. The Fund has retained the Manager to serve as its transfer agent,
dividend paying agent and shareholder service agent.
In addition, the Manager has been retained to provide administrative services to
the Fund. In this capacity, the Manager supplies executive, administrative and
regulatory services, supervises the preparation of tax returns, and coordinates
the preparation of reports to shareholders and reports to and filings with the
Commission and state securities authorities. The Fund pays the Manager a fee for
these administrative services at the annual rate of .15% of the average value of
its daily net assets up to $50 million, .125% of the next $50 million of such
assets and .1% of such assets in excess of $100 million.
CUSTODIAN. The Custodian of the Fund's assets is The Fifth Third Bank. The
Custodian's mailing address is 38 Fountain Square Plaza, Cincinnati, Ohio 45263.
The Custodian acts as the depository for the Fund, safekeeps its portfolio
securities, collects all income, disperses monies at the Fund's request and
maintains records in connection with its duties.
The Custodian also provides accounting and pricing services to the Fund. The
Custodian receives a monthly fee of $2,000 for calculating daily net asset value
per share and maintaining such books and records as are necessary to enable it
to perform its duties. The Custodian also charges the Fund for certain costs
involved with the daily evaluation of investment securities.
OTHER EXPENSES. The Fund is responsible for the payment of all of its operating
expenses. These include the fees payable to the Manager, the fees and expenses
of the Custodian, the fees and expenses of Trustees, outside auditing and legal
expenses, all taxes and corporate fees payable by the Fund, registration fees,
state securities qualification fees, costs of preparing and printing
prospectuses for regulatory purposes and for distribution to shareholders, costs
of shareholder reports and shareholder meetings, and any extraordinary expenses.
The Fund also pays for brokerage commissions and transfer taxes (if any) in
connection with the purchase and sale of portfolio securities.
BROKERAGE. In selecting broker-dealers through which to execute brokerage
transactions for the Fund, the Advisor attempts to obtain the best execution for
all such transactions. If it is believed that more than one broker is able to
provide the best execution, the Advisor will consider the receipt of quotations
and other market services, receipt of research, statistical and other data and
the sale of shares of the Fund
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in selecting a broker. The Advisor may also utilize a brokerage firm affiliated
with the Trust or the Advisor if it believes it can obtain the best execution of
transactions from such broker. The Statement of Additional Information contains
more information about the management and brokerage practices of the Fund.
DISTRIBUTOR AND DISTRIBUTION PLAN
Alpha-Omega Capital Corp., 700 W. Pete Rose Way, Cincinnati, Ohio 45203 (the
"Distributor"), is the national distributor for the Fund under an Underwriting
Agreement with the Trust. The Distributor may sell Fund shares to or through
qualified securities dealers or others. The controlling shareholders of the
Distributor are Bryan E. Pifer and William C. Riffle. The Distributor is an
affiliate of the Manager and the Advisor.
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the 1940 Act. Under the Plan, the Fund may reimburse any expenditures to
finance any activity primarily intended to result in the sale of Fund shares or
the servicing of shareholder accounts, including, but not limited to the
following: (i) payments to the Manager, securities dealers and others for the
sale of Fund shares or the servicing of shareholder accounts, including payments
used to pay for or finance sales commissions and other fees payable to dealers
and others who may sell Fund shares or service accounts of shareholders; (ii)
payment of compensation to and expenses of personnel who engage in or support
distribution of shares or who render shareholder support services not otherwise
provided by the Manager or Custodian; and (iii) formulation and implementation
of marketing and promotional activities. Expenditures by the Fund pursuant to
the Plan are accrued based on average daily net assets and may not exceed 1% of
its average net assets for each year elapsed subsequent to the adoption of the
Plan. Such expenditures paid as service fees to any person who sells shares of
the Fund may not exceed .25% of the Fund's average daily net assets; such
expenditures paid as distribution fees for distribution-related activities as an
asset-based sales charge under the Plan may not exceed .75% of the Fund's
average daily net assets.
The distribution fees payable under the Plan are designed to permit an investor
to purchase Fund shares through dealers without the assessment of a front-end
sales charge and at the same time to permit the dealer to compensate its
personnel in connection with the sale of the shares. In this regard, the purpose
and function of the ongoing distribution fees and the deferred sales charge are
to provide for the financing of the distribution of Fund shares.
In addition to the payments by the Fund pursuant to the Plan for distribution
fees, dealers and other service organizations may charge their clients
additional fees for account services. Customers who are beneficial owners of
shares of the Fund should read this Prospectus in light of the terms and fees
governing their accounts with dealers or other service organizations.
The National Association of Securities Dealers, in its Rules of Fair Practice,
places certain limitations on asset-based sales charges of mutual funds. These
Rules require fund-level accounting in which all sales charges - front-end
charge, 12b-1 fees or contingent deferred charge - terminate when a percentage
of gross sales is reached. Expenditures paid as shareholder servicing fees under
the Plan which are limited
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to .25% of average daily net assets are not included in the limit. If in any
month the Distributor expends more monies than are immediately payable under the
Plan because of the percentage limitations described above (or, due to any
expense limitation imposed on the Fund, monies otherwise payable by the Fund to
the Distributor under the Plan are rendered uncollectible), the unpaid
expenditures may be "carried forward" from month to month until such time, if
ever, as they may be paid. In addition, payments to service organizations (which
may include the Distributor, the Manager, and their affiliates) are not tied
directly to the organizations' own out-of-pocket expenses and therefore may be
used as they elect (including, for example, to defray their overhead expenses).
Amounts accrued under the Plan in one year but which are not actually paid in
that year, may be paid in subsequent years. Amounts not accrued by each class
under the Plan during a year may not be carried forward to subsequent years. The
Plan may not be amended to increase materially the amount to be spent under the
Plan without shareholder approval. The continuation of the Plan must be approved
annually by the Board of Trustees. At least quarterly the Board of Trustees will
review a written report of amounts expended pursuant to the Plan and the
purposes for which such expenditures were made.
DIVIDENDS, DISTRIBUTIONS, TAXES
AND OTHER INFORMATION
The Statement of Additional Information contains additional information about
the federal income tax implications of an investment in the Fund in general and,
particularly, with respect to dividends and distributions and other matters. The
discussion herein of the federal income tax consequences of an investment in the
Fund is not exhaustive on the subject. Consequently, investors should seek
qualified tax advice.
The Fund intends to qualify as a "regulated investment company" under Subchapter
M of the Internal Revenue Code of 1986 (the "Code") and will distribute all of
its net income and realized capital gains to shareholders. Shareholders are
liable for taxes on distributions of net income and realized capital gains of
the Fund but, of course, shareholders who are not subject to tax on their income
will not be required to pay taxes on amounts distributed to them. The Fund
intends to declare dividends, if any, annually and will distribute any net
short-term or long-term capital gains derived from the sale of securities at the
end of its fiscal year. In addition, the Fund may make a supplemental
distribution of capital gains annually in December. The nature and amount of all
dividends and distributions will be identified separately when tax information
is distributed by the Fund at the end of each year. The Fund intends to withhold
30% on taxable dividends and any other payments that are subject to such
withholding and are made to persons who are neither citizens nor residents of
the U.S.
There is no fixed dividend rate, and there can be no assurance as to the payment
of any dividends or the realization of any gains. All dividends and capital
gains distributions are reinvested in additional shares of the Fund unless the
shareholder requests in writing to receive dividends and/or capital gains
distributions in cash. That request must be received by the Fund prior to the
record date to be effective as to the next dividend. Tax consequences to
shareholders of dividends and distributions are the same if received in cash or
if received in additional shares of the Fund.
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TAX STATUS OF THE FUND. If the Fund is qualified as a "regulated investment
company" under the Code, it will not be liable for federal income taxes on
amounts paid as dividends and distributions. The Code contains a number of
complex requirements which an investment company must meet in order to qualify.
For a more detailed discussion of the tax status of the Fund, see "Additional
Tax Information" in the Statement of Additional Information.
DESCRIPTION OF SHARES. The Trust was organized as an Ohio business trust on
March ___, 1998 under a Declaration of Trust. The Declaration of Trust permits
the Board of Trustees to issue an unlimited number of full and fractional shares
and to create an unlimited number of series of shares. The Board of Trustees may
also classify and reclassify any unissued shares into one or more classes of
shares.
When issued, the shares of each series of the Trust, including the Fund, will be
fully paid, nonassessable and redeemable. The Trust does not intend to hold
annual shareholder meetings; it may, however, hold special shareholder meetings
for purposes such as changing fundamental policies or electing Trustees. The
Board of Trustees shall promptly call a meeting for the purpose of electing or
removing Trustees when requested in writing to do so by the record holders of at
least 10% of the outstanding shares of the Trust. The term of office of each
Trustee is of unlimited duration. The holders of at least two-thirds of the
outstanding shares of the Trust may remove a Trustee from that position either
by declaration in writing filed with the Custodian or by votes cast in person or
by proxy at a meeting called for that purpose.
Shareholders of the Trust will vote in the aggregate and not by series (fund),
except as otherwise required by the 1940 Act or when the Board of Trustees
determines that the matter to be voted on affects only the interests of the
shareholders of a particular series. Matters affecting an individual series,
such as the Fund, include, but are not limited to, the investment objectives,
policies and restrictions of that series. Shares have no subscription,
preemptive or conversion rights. Share certificates will not be issued. Each
share is entitled to one vote (and fractional shares are entitled to
proportionate fractional votes) on all matters submitted for a vote, and shares
have equal voting rights except that only shares of a particular series are
entitled to vote on matters affecting only that series. Shares do not have
cumulative voting rights. Therefore, the holders of more than 50% of the
aggregate number of shares of the Trust may elect all the Trustees.
See "Description of the Trust" in the Statement of Additional Information for
further information about the Trust and its shares.
REPORTING TO SHAREHOLDERS. The Fund will send to its shareholders annual reports
which have been audited by the Trust's independent accountants and semiannual
reports which are unaudited. In addition, the Manager will send to each
shareholder having an account directly with the Fund a quarterly statement
showing transactions in the account, the total number of shares owned and any
dividends or distributions paid.
CALCULATION OF PERFORMANCE DATA. From time to time the Fund may advertise its
total return. The Fund may also advertise yield. Both yield and total return
figures are based on historical earnings and are not intended to indicate future
performance.
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The "total return" of the Fund refers to the average annual compounded rates of
return over 1, 5 and 10 year periods that would equate an initial amount
invested at the beginning of a stated period to the ending redeemable value of
the investment. The calculation of total return assumes the reinvestment of all
dividends and distributions, includes all recurring fees that are charged to all
shareholder accounts and deducts all nonrecurring charges at the end of each
period, including any contingent deferred sales charge that would be applicable
to a complete redemption of the investment at the end of the specified period.
The calculation further assumes the deduction of the current maximum sales load
from the initial investment. If the Fund has been operating less than 1, 5 or 10
years, the time period during which the Fund has been operating is substituted.
In addition, the Fund may advertise other total return performance data
("Nonstandardized Return"). Nonstandardized Return shows as a percentage rate of
return encompassing all elements of return (i.e., income and capital
appreciation or depreciation); it assumes reinvestment of all dividends and
capital gain distributions. Nonstandardized Return may be quoted for the same or
different periods as those for which standardized return is quoted.
Nonstandardized Return may consist of a cumulative rate of return, actual
year-by-year rates or any combination thereof. Cumulative total return
represents a cumulative change in value of an investment in the Fund for various
periods.
The "yield" of the Fund is computed by dividing the net investment income per
share earned during a thirty-day (or one month) period stated in the
advertisement by the maximum offering price per share on the last day of the
period (using the average number of shares entitled to receive dividends). The
yield formula assumes that net investment income is earned and reinvested at a
constant rate and annualized at the end of a six-month period. For the purpose
of determining net investment income, the calculation includes among expenses of
the Fund all recurring fees that are charged to all shareholder accounts and any
nonrecurring charges for the period stated.
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REGIONAL OPPORTUNITY FUND: OHIO, INDIANA, KENTUCKY
INVESTMENT MANAGER
Dunhill Investment Advisors, Ltd.
700 W. Pete Rose Way
Longworth Hall, Ste. #127
Cincinnati, OH 45203
INVESTMENT ADVISOR
CityFund Advisory, Inc.
P.O. Box 54944
Cincinnati, Ohio 45254-0944
DISTRIBUTOR
Alpha-Omega Capital Corp.
700 Pete Rose Way
Cincinnati, Ohio 45203
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
201 East Fifth Street
Cincinnati, Ohio 45202
CUSTODIAN
Fifth Third Bank
39 Fountain Square Plaza
Cincinnati, Ohio 45263
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offering contained in this Prospectus, and if given or made, such
information or representations must not be relied upon as being authorized by
the Fund. This Prospectus does not constitute an offer by the Fund to sell
shares in any State to any person to whom it is unlawful for the Fund to make
such offer in such State.
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<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
REGIONAL OPPORTUNITY FUND:
OHIO INDIANA KENTUCKY
__________ 1998
A Series of
DUNHILL INVESTMENT TRUST
P.O. Box 54944
Cincinnati, Ohio 45254-0944
Telephone: 1-877-624-6465
TABLE OF CONTENTS
-----------------
DESCRIPTION OF THE TRUST...................................................2
INVESTMENT OBJECTIVE AND POLICIES..........................................3
INVESTMENT LIMITATIONS.....................................................6
TRUSTEES AND OFFICERS......................................................9
INVESTMENT MANAGER........................................................10
INVESTMENT ADVISOR........................................................11
TRANSFER AGENT AND ADMINISTRATOR..........................................12
DISTRIBUTOR...............................................................13
OTHER SERVICES............................................................13
BROKERAGE.................................................................14
DISTRIBUTION PLANS UNDER RULE 12b-1.......................................16
SPECIAL SHAREHOLDER SERVICES..............................................18
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION............................20
HOW SHARE PRICE IS DETERMINED.............................................21
ADDITIONAL TAX INFORMATION................................................22
CALCULATION OF PERFORMANCE DATA...........................................24
APPENDIX A - DESCRIPTION OF RATINGS.......................................27
FINANCIAL STATEMENTS AND REPORTS..........................................32
This Statement of Additional Information ("SAI") is not a prospectus and should
be read in conjunction with the Prospectus dated _________, 1998 for the
Regional Opportunity Fund: Ohio Indiana Kentucky (the "Fund"). Copies of the
Fund's Prospectus may be obtained at no charge from the Fund, at the address and
phone number shown above.
<PAGE>
DESCRIPTION OF THE TRUST
The Trust is an unincorporated business trust organized under Ohio law on March
31, 1998. The Trust's Declaration of Trust authorizes the Board of Trustees to
divide shares into series, each series relating to a separate portfolio of
investments.
Pursuant to an Agreement and Plan of Reorganization dated as of May 1, 1998, the
Fund, on or about June 29, 1998, will succeed to the assets and liabilities of
another mutual fund of the same name (the "Predecessor Fund"), which is an
investment series of Maplewood Investment Trust. The investment objective,
policies and restrictions of the Fund and the Predecessor Fund are substantially
identical and the financial data and information in this Statement of Additional
Information relates to the Predecessor Fund.
In the event of a liquidation or dissolution of the Trust or an individual
series, such as the Fund, shareholders of a particular series would be entitled
to receive the assets available for distribution belonging to such series.
Shareholders of a series are entitled to participate equally in the net
distributable assets of the particular series involved on liquidation, based on
the number of shares of the series that are held by each shareholder. If any
assets, income, earnings, proceeds, funds or payments are not readily
identifiable as belonging to any particular series, the Trustees shall allocate
them among any one or more series as they, in their sole discretion, deem fair
and equitable.
Shares of the Fund, when issued, are fully paid and non-assessable. Shareholders
are entitled to one vote for each full share held and a fractional vote for each
fractional share held. Shareholders of all series of the Trust, including the
Fund, will vote together and not separately, except as otherwise required by law
or when the Board of Trustees determines that the matter to be voted upon
affects only the interests of the shareholders of a particular series or class.
Rule 18f-2 under the 1940 Act provides that any matter required to be submitted
to the holders of the outstanding voting securities of an investment company
such as the Trust shall not be deemed to have been effectively acted upon unless
approved by the holders of a majority of the outstanding shares of each series
affected by the matter. A series is affected by a matter unless it is clear that
the interests of each series in the matter are substantially identical or that
the matter does not affect any interest of the series. Under Rule 18f-2 of the
1940 Act, the approval of an investment advisory agreement, a material change to
a Rule 12b-1 Plan or any change in a fundamental investment policy would be
effectively acted upon with respect to a series only if approved by a majority
of the outstanding shares of such series. However, the Rule also provides that
the ratification of the appointment of independent accountants, the approval of
principal underwriting contracts and the election of Trustees may be effectively
acted upon by shareholders of the Trust voting together, without regard to a
particular series.
The Declaration of Trust provides that the Trustees of the Trust will not be
liable in any event in connection with the affairs of the Trust, except as such
liability may arise from his or her own bad faith, willful misfeasance, gross
negligence or reckless disregard of duties. It also provides that all third
parties shall look solely to the Trust property for satisfaction of claims
arising in connection with the affairs of the Trust. With the
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<PAGE>
exceptions stated, the Declaration of Trust provides that a Trustee or officer
is entitled to be indemnified against all liability in connection with the
affairs of the Trust.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective and policies of the Fund are described in the
Prospectus. Supplemental information about these policies is set forth below.
Certain capitalized terms used but not defined have the same meaning as in the
Prospectus. A description of the various ratings used by the nationally
recognized statistical rating organizations ("NRSROs") for securities in which
the Fund may invest is included in this SAI as Appendix A.
REPURCHASE AGREEMENTS. The Fund may acquire U.S. Government Securities or
corporate debt securities subject to repurchase agreements. A repurchase
transaction occurs when, at the time the Fund purchases a security (normally a
U.S. Treasury obligation), it also resells it to the vendor (normally a member
bank of the Federal Reserve System or a registered Government Securities dealer)
and must deliver the security (and/or securities substituted for them under the
repurchase agreement) to the vendor on an agreed upon date in the future. Such
securities, including any securities so substituted, are referred to as the
"Repurchase Securities." The repurchase price exceeds the purchase price by an
amount which reflects an agreed upon market interest rate effective for the
period of time during which the repurchase agreement is in effect.
The majority of these transactions run day to day and the delivery pursuant to
the resale typically will occur within one to five days of the purchase. The
Fund's risk is limited to the ability of the vendor to pay the agreed upon sum
upon the delivery date; in the event of bankruptcy or other default by the
vendor, there may be possible delays and expenses in liquidating the instrument
purchased, decline in its value and loss of interest. These risks are minimized
when the Fund holds a perfected security interest in the Repurchase Securities
and can therefore sell the instrument promptly. Under guidelines issued by the
Trustees, the Advisor will carefully consider the creditworthiness during the
term of the repurchase agreement. Repurchase agreements are considered as loans
collateralized by the Repurchase Securities, such agreements being defined as
"loans" under the Investment Company Act of 1940 (the "1940 Act"). The return on
such "collateral" may be more or less than that from the repurchase agreement.
The market value of the resold securities will be monitored so that the value of
the "collateral" is at all times as least equal to the value of the loan,
including the accrued interest earned thereon. All Repurchase Securities will be
held by the Fund's custodian either directly or through a securities depository.
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<PAGE>
DESCRIPTION OF MONEY MARKET INSTRUMENTS. Money market instruments may include
U.S. Government Securities or corporate debt securities (including those subject
to repurchase agreements) as described herein, provided that they mature in
thirteen months or less from the date of acquisition and are otherwise eligible
for purchase by the Fund. Money market instruments also may include Bankers'
Acceptances and Certificates of Deposit of domestic branches of U.S. banks,
Commercial Paper and Variable Amount Demand Master Notes ("Master Notes").
BANKERS' ACCEPTANCES are time drafts drawn on and "accepted" by a bank, are the
customary means of effecting payment for merchandise sold in import-export
transactions and are a source of financing used extensively in international
trade. When a bank "accepts" such a time draft, it assumes liability for its
payment. When the Fund acquires a Bankers' Acceptance, the bank which "accepted"
the time draft is liable for payment of interest and principal when due. The
Bankers' Acceptance, therefore, carries the full faith and credit of such bank.
A CERTIFICATE OF DEPOSIT ("CD") is an unsecured interest- bearing debt
obligation of a bank. COMMERCIAL PAPER is an unsecured, short term debt
obligation of a bank, corporation or other borrower. Commercial Paper maturity
generally ranges from two to 270 days and is usually sold on a discounted basis
rather than as an interest-bearing instrument. The Fund will invest in
Commercial Paper only if it is rated in one of the two highest rating categories
by any NRSRO or, if not rated, is of equivalent quality in the Advisor's
opinion. Commercial Paper may include Master Notes of the same quality. MASTER
NOTES are unsecured obligations which are redeemable upon demand of the holder
and which permit the investment of fluctuating amounts at varying rates of
interest. Master Notes are acquired by the Fund only through the Master Note
program of the Fund's custodian, acting as administrator thereof. The Advisor
will monitor, on a continuous basis, the earnings power, cash flow and other
liquidity ratios of the issuer of a Master Note held by the Fund.
ILLIQUID INVESTMENTS. The Fund may invest up to 10% of its net assets in
illiquid securities, which are investments that cannot be sold or disposed of in
the ordinary course of business within seven days at approximately the prices at
which they are valued. Under the supervision of the Board of Trustees, the
Advisor determines the liquidity of the Fund's investments and, through reports
from the Advisor, the Board monitors investments in illiquid instruments. In
determining the liquidity of the Fund's investments, the Advisor may consider
various factors including (1) the frequency of trades and quotations, (2) the
number of dealers and prospective purchasers in the marketplace, (3) dealer
undertakings to make a market, (4) the nature of the security (including any
demand or tender features) and (5) the nature of the marketplace for trades
(including the ability to assign or offset the Fund's rights and obligations
relating to the investment). Investments currently considered by the Fund to be
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<PAGE>
illiquid include repurchase agreements not entitling the holder to payment of
principal and interest within seven days and restricted securities. If through a
change in values, net assets or other circumstances, the Fund were in a position
where more than 10% of its net assets were invested in illiquid securities, it
would seek to take appropriate steps to protect liquidity.
RESTRICTED SECURITIES. Within its limitation on investments in illiquid
securities, the Fund may purchase restricted securities that generally can be
sold in privately negotiated transactions, pursuant to an exemption from
registration under the federal securities laws, or in a registered public
offering. Where registration is required, the Fund may be obligated to pay all
or part of the registration expense and a considerable period may elapse between
the time it decides to seek registration and the time the Fund may be permitted
to sell a security under an effective registration statement. If during such a
period, adverse market conditions were to develop, the Fund might obtain a less
favorable price than prevailed when it decided to seek registration of the
security.
REAL ESTATE SECURITIES. Although the Fund does not invest in real estate
directly, it may invest in readily marketable interests in real estate
investment trusts ("REITs"). A REIT is a pooled investment vehicle which invests
primarily in income producing real estate or real estate related loans or
interests. REITs are generally classified as equity REITs, mortgage REITs or
hybrid REITs. Investments in shares of REITs will subject the Fund to the risks
associated with the ownership of real estate. These risks include, among others:
possible declines in the value of real estate; risks related to general and
local economic conditions; possible lack of availability of mortgage funds;
overbuilding; extended vacancies of properties; increases in competition,
property taxes and operating expenses; changes in zoning laws; costs resulting
from the clean-up of and liability to third parties for damages resulting from,
environmental problems; casualty or condemnation losses; uninsured damages from
floods, earthquakes or other natural disasters; limitations on and variations in
rents; and changes in interest rates.
Investing in REITs involves certain risks in addition to those risks associated
with investing in the real estate industry in general. REITs are dependent upon
management skills, ofted have limited diversification, and are subject to the
risks of financing projects. REITs are subject to heavy cash flow dependency,
default by borrowers, self-liquidation, and the possibilities of failing to
maintain their exemptions from the Investment Company Act of 1940. Equity REITs
may be affected by changes in the value of the underlying property owned by the
REITs. Mortgage REITs may be affected by the quality of any credit extended and
interest rate risks. Hybrid REITs will be affected by risks inherent in both
equity and mortgage REITs.
Certain REITs have relatively small market capitalizations, which may result in
less market liquidity and greater price volatility of their securities.
Historically, however, the significant amount of dividend income provided by
REITs has tended to soften the impact of this volatility. When a shareholder
invests in real estate indirectly through the Fund, the shareholder's return
will be reduced not only by his or her proportionate share of the expenses of
the Fund, but also, indirectly, by similar expenses of the REITs in which the
Fund invests.
WRITING COVERED CALL OPTIONS. When the Advisor believes that individual
portfolio securities are approaching the top of the Advisor's growth and price
expectations, covered call options (calls) may be written (sold) against such
securities in a disciplined approach to selling portfolio securities. The Fund
writes options only for hedging purposes and not for speculation. When the Fund
writes a call, it receives a premium and agrees to sell the underlying
securities to a purchaser of a corresponding call at any time during the call
period (usually not more than 9 months) at a fixed exercise or "strike" price
(which may, and often does, differ from the market price of the underlying
securities at the time of writing the call). The strike price remains the same
throughout the option period, regardless of market price changes. To terminate
its obligation on a call the Fund has written, it may purchase a corresponding
call in a "closing purchase transaction." A profit or loss will be realized,
depending upon whether the price of the closing purchase transaction is more or
less than the premium (net of transaction costs) previously received on the call
written. The Fund may also realize a profit if the call it has written lapses
unexercised, in which case the Fund keeps the premium and retains the underlying
securities as well. If a call written by the Fund is exercised the Fund forgoes
any possible profit from an increase in the market price of the underlying
security over the exercise price plus the premium received.
Utilizing the facilities of the Options Clearing Corporation ("OCC"), the Fund's
Custodian or a securities depository acting for the Custodian will, as the
Fund's escrow agent, hold the securities underlying calls written by the Fund,
so that no margin will be required for such transactions. OCC
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will release the securities on the expiration of the calls or upon the Fund's
entering into a closing purchase transaction. Call writing affects the Fund's
portfolio turnover rate and the brokerage commissions it pays. Commissions for
options, which are normally higher than for general securities transactions, are
payable when writing calls and when purchasing closing purchase transactions.
The writing of call options by the Fund is subject to limitations established by
each of the exchanges governing the maximum number of options which may be
written or held by a single investor or group of investors acting in concert,
regardless of whether the options were written or purchased on the same or
different exchanges or are held in one or more accounts or through one or more
different exchanges or through one or more brokers. Therefore the number of
calls the Fund may write (or purchase in closing transactions) may be affected
by options written or held by other entities, including other clients of the
Advisor. An exchange may order the liquidation of positions found to be in
violation of these limits and may impose certain other sanctions.
Profits on closing purchase transactions and premiums on lapsed calls written
are considered capital gains for financial reporting purposes and are short-term
gains for federal income tax purposes. When short-term gains are distributed to
shareholders, they are taxed as ordinary income. If the Fund desires to enter
into a closing purchase transaction, but there is no market when it desires to
do so, it would have to hold the securities underlying the call until the call
lapses or until the call is exercised.
INVESTMENT LIMITATIONS
The Fund has adopted the following fundamental investment limitations, which
cannot be changed without approval of the holders of a majority of the
outstanding voting shares of the Fund. When used in the Prospectus or this SAI,
a "majority" of shareholders means the vote of the lesser of (1) 67% of the
shares of the Trust (or the Fund) present at a meeting if the holders of more
than 50% of the outstanding shares are present in person or by proxy, or (2)
more than 50% of the outstanding shares of the Trust (or the Fund). Unless
otherwise indicated, percentage limitations apply at the time of purchase.
As a matter of fundamental policy, the Fund MAY NOT:
(1) Issue senior securities, borrow money, or pledge its assets, except that it
may borrow from banks as a temporary measure (a) for extraordinary or
emergency purposes, in amounts not exceeding 5% of its total assets or (b)
in order to meet redemption requests in amounts not exceeding 15% of its
total assets. The Fund will not make any further investments if borrowing
exceeds 5% of its total assets until such time as total borrowing
represents less than 5% of Fund assets.
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<PAGE>
(2) Invest for the purpose of exercising control or management of another
issuer;
(3) Purchase or sell commodities or commodities contracts, real estate
(including limited partnership interests, but excluding readily marketable
securities secured by real estate or interests therein, readily marketable
interests in real estate investment trusts, or readily marketable
securities issued by companies that invest in real estate or interests
therein) or interests in oil, gas, or other mineral exploration or
development programs or leases (although it may invest in readily
marketable securities of issuers that invest in or sponsor such programs or
leases).
(4) Underwrite securities issued by others except to the extent that the
disposition of portfolio securities, either directly from an issuer or from
an underwriter for an issuer may be deemed to be an underwriter under the
federal securities laws.
(5) Invest in warrants, valued at the lower of cost or market, exceeding more
than 5% of the value of the Fund's net assets. Included within this amount,
but not to exceed 2% of the value of the Fund's net assets, may be warrants
which are not listed on the New York or American Stock Exchange; warrants
acquired by the Fund in units or attached to securities may be deemed to be
without value;
(6) Participate on a joint or joint and several basis in any trading account in
securities;
(7) Purchase foreign securities;
(8) Invest more than 10% of its total assets in the securities of one or more
investment companies;
(9) Invest more than 25% of its total assets in the securities of issuers
within a single industry; or
(10) Make loans of money or securities, except that the Fund may (i) invest in
repurchase agreements and commercial paper; (ii) purchase a portion of an
issue of publicly distributed bonds, debentures or other debt securities;
and (iii)acquire private issues of debt securities subject to the
limitations on investments in illiquid securities.
The following investment limitations are not fundamental, and may be
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<PAGE>
changed without shareholder approval. As a matter of non-fundamental policy, the
Fund may not:
(1) Invest in securities of issuers which have a record of less than three
years' continuous operation (including predecessors and, in the case of
bonds, guarantors) if more than 5% of its total assets would be invested in
such securities;
(2) Invest more than 10% of its net assets in illiquid securities. For this
purpose, illiquid securities includamong others (a) securities for which no
readily availablmarket exists or which have legal or contractual
restrictions on resale, (b) fixed time deposits that are subject to
withdrawal penalties and have maturities of more than seven days, and (c)
repurchase agreements not terminable within seven days;
(3) Invest in the securities of any issuer if those officers or Trustees of the
Trust and those officers and directors of the Advisor who individually own
more than 1/2 of 1% of the outstanding securities of such issuer together
own more than 5% of such issuer's securities;
(4) Write, purchase, or sell puts, calls, straddles, spreads, or combinations
thereof or futures contracts or related options (but the Fund may write
covered call options as described in its Prospectus);
(5) Make short sales of securities or maintain a short position, except short
sales "against the box" (a short sale is made by selling a security the
Fund does not own; a short sale is "against the box" to the extent that the
Fund contemporaneously owns or has the right to obtain at no additional
cost securities identical to those sold short);
(6) Purchase any securities on margin except in connection with such short-term
credits as may be necessary for the clearance of transactions.
Whenever any fundamental investment policy or investment restriction states a
maximum percentage of assets, it is intended that if the percentage limitation
is met at the time the investment is made, a later change in percentage
resulting from changing total or net asset values will not be considered a
violation of such policy. While the Fund has reserved the right to make short
sales "against the box," the Advisor has no present intention of engaging in
such transactions at this time or during the coming year.
- 8 -
<PAGE>
TRUSTEES AND OFFICERS
Following are the Trustees and executive officers of the Trust, their present
position with the Trust, age, principal occupations during the past 5 years and
their estimated annual compensation from the Trust:
<TABLE>
<CAPTION>
Name, Position, Principal Occupation(s) Compensation
Age and Address During Past 5 Years From the Trust
- ------------------ -------------------- --------------
<S> <C> <C>
*Jasen M. Snelling (age 34) President of Dunhill Investment None
Trustee and President Advisors, Ltd. and CityFund
7448 Indian Creek Road Advisory, Inc; previously,
Cincinnati, Ohio Registered Representative
of PNC Securities Corp.
and of Provident Securities
Investment Co., Cincinnati, Ohio
James L. Saner (age 47) President and Chief Executive None
105 S. Mullberry Street Officer of P.T.C. Bancorp
Batesville, Indiana
Christopher J. Smith (age 31) President and Chief Executive None
867 Thorntree Court Officer of Object Tiger Ltd.;
Bloomfield Hills, Michigan previously, Corporate Counsel
to Seligman & Associates and
Director of Amelia Earhart
Capital Management, Inc.,
Southfield, Michigan
</TABLE>
- ------------
* Indicates that Trustee is an "interested person" for purposes of the 1940
Act.
The officers of the Trust do not receive compensation from the Trust for
performing the duties of their office. All Trustees are reimbursed for any
out-of-pocket expenses incurred in connection with their attendance at Board
meetings.
PRINCIPAL HOLDERS OF VOTING SECURITIES. As of May 15, 1998, the Trustees and
officers of the Trust as a group owned beneficially (i.e., had voting and/or
investment power) less than 1% of the then outstanding shares of the Predecessor
Fund. On the same date, no person owned of record and, according to information
available to the Trust, no person owned beneficially, 5% or more of the then
outstanding shares of the Predecessor Fund.
- 9 -
<PAGE>
INVESTMENT MANAGER
Dunhill Investment Advisors, Ltd. ( the "Manager") performs management,
statistical, portfolio adviser selection and other services for the Fund. The
controlling shareholders of the Manager are Jasen M. Snelling, Jerry A. Smith,
William C. Riffle and Bryan E. Pifer.
Under the terms of the Management Agreement between the Trust and the Manager,
the Fund pays the Manager a fee computed and accrued daily and paid monthly at
an annual rate of 1.20% of its average daily net assets.
The Fund is responsible for the payment of all expenses incurred in connection
with the organization, registration of shares and operations of the Fund,
including such extraordinary or non-recurring expenses as may arise, such as
litigation to which the Trust may be a party. The Fund may have an obligation to
indemnify the Trust's officers and Trustees with respect to such litigation,
except in instances of willful misfeasance, bad faith, gross negligence or
reckless disregard by such officers and Trustees in connection with the
distribution of the Fund's shares to the extent that (see below). The
compensation and expenses of any officer, Trustee or employee of the Trust who
is an officer, director, employee or stockholder of the Manager are paid by the
Manager.
By its terms, the Fund's Management Agreement will remain in force until June
29, 2000 and from year to year thereafter, subject to annual approval by (a) the
Board of Trustees or (b) a vote of the majority of the fund's outstanding voting
securities; provided that in either event interested persons of the Trust, by a
vote cast in person at a meeting called for that purpose of voting such
approval. The Fund's Management Agreement may be terminated at any time, on
sixty days written notice, without the payment of any penalty, by the Board of
Trustees, by a vote of the majority of the Fund's outstanding voting securities,
of by the manager, The Management Agreement automatically terminates in the
event of assignment, as defined by the Investment company Act of 1940 and the
rules thereunder. Under the Management Agreement, the Manager is not responsible
for any error of judgement or mistake of law or for any loss suffered by the
Fund in connection with the performance of the Agreement, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of the Advisor in the performance of its
duties or from the reckless disregard of its duties and obligations under the
Agreement.
- 10 -
<PAGE>
INVESTMENT ADVISOR
CityFund Advisory, Inc. (the "Advisor") supervises the Fund's investments
pursuant to an Investment Advisory Agreement (the "Advisory Agreement")
described in the Prospectus. The Advisory Agreement will be renewed for one year
periods only so long as such renewal and continuance is specifically approved at
least annually by the Board of Trustees or by vote of a majority of the Fund's
outstanding voting securities, provided the continuance is also approved by a
majority of the Trustees who are not "interested persons" of the Trust or the
Advisor by vote cast in person at a meeting called for the purpose of voting on
such approval. The Advisory Agreement is terminable without penalty on sixty
days notice by the Board of Trustees of the Trust or by the Advisor. The
Advisory Agreement provides that it will terminate automatically in the event of
its assignment.
Compensation of the Advisor is at the annual rate of .35% of the Fund's average
daily net assets. For the fiscal year ended February 28, 1998, the Advisor
waived its entire advisory fee of $34,737 and reimbursed the Fund $52,011 of
expenses in order to voluntarily reduce the operating expenses of the Fund. For
the fiscal year ended February 28, 1997, the Advisor waived its entire advisory
fee of $11,179 and reimbursed the Fund $73,594 of expenses in order to
voluntarily reduce the operating expenses of the Fund. For the fiscal year ended
February 29, 1996, the Advisor waived its entire advisory fee of $6,850 and
reimbursed the Fund $80,044 of expenses in order to voluntarily reduce the
operating expenses of the Fund.
The Advisor is controlled by Jasen M. Snelling and Jerry A. Smith, and is an
affiliate of the Manager.
The Advisor provides a continuous investment program for the Fund, including
investment research and management with respect to all securities, investments,
cash and cash equivalents of the Fund. The Advisor determines what securities
and other investments will be purchased, retained or sold by the Fund, and does
so in accordance with the investment objective and policies of the Fund as
described herein and in the Prospectus. The Advisor places all securities orders
for the Fund, determining with which broker, dealer, or issuer to place the
orders. The Advisor also provides, at its own expense, certain Executive
Officers to the Trust.
The Advisor must adhere to the brokerage policies of the Fund in placing all
orders, the substance of which policies are that the Advisor attempts to obtain
the best execution for all securities brokerage transactions.
Under the Advisory Agreement, the Advisor is not responsible for any error of
judgment or mistake of law or for any loss suffered by the Fund in connection
with the performance of the Agreement, except a loss resulting
- 11 -
<PAGE>
from a breach of fiduciary duty with respect to the receipt of compensation for
services or a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of the Advisor in the performance of its duties or from
the reckless disregard of its duties and obligations under the Agreement.
TRANSFER AGENT AND ADMINISTRATOR
The Manager maintains the records of each shareholder's account, answers
shareholders' inquiries concerning their accounts, processes purchases and
redemption's of the Fund's shares, acts as dividend and distribution disbursing
agent and performs other shareholder service functions. The Manager receives for
its services as transfer agent a fee payable monthly at an annual rate of $17
per account, provided, however, that the minimum fee is $1,000 per month. In
addition, the Fund pays out-of-pocket expenses, including but not limited to,
postage, envelopes, checks, drafts, forms, reports, record storage and
communication lines.
In addition, the Manager has been retained to provide administrative services to
the Fund. In this capacity, the Manager supplies non-investment related
statistical and research data, internal regulatory compliance services and
executive and administrative services. The Manager supervises the preparation of
tax returns, reports to shareholders of the Fund, reports to and filings with
the Securities and Exchange Commission and state securities commissions, and
materials for meetings of the Board of Trustees. For the performance of these
administrative services, the Fund pays the Manager a fee at the annual rate of
.15% of the average value of its daily net assets up to $50,000,000, .125% of
such assets from $50,000,000 to $100,000,000 and .1% of such assets in excess of
$100,000,000.
Prior to June 29, 1998, the transfer agent and administrator to the Predecessor
Fund was Countrywide Fund Services, Inc., Cincinnati, Ohio. For the fiscal year
ended February 28, 1998, Countrywide Fund Services, Inc. received from the
Predecessor Fund transfer agent fees of $20,000, accounting and pricing fees of
$24,000, and administrative fees of $12,000. For the fiscal year ended February
28, 1997, Countrywide Fund Services, Inc. received from the Fund transfer agent
fees of $12,750, accounting and pricing fees of $15,000 and administrative fees
of $7,500. Prior to June 1, 1996, the administrator to the Predecessor Fund was
The Nottingham Company, Rocky Mount, North Carolina. For the fiscal years ended
February 28, 1997 and February 29, 1996, The Nottingham Company received from
the Predecessor Fund fees of $7,450 and $36,000, respectively.
- 12 -
<PAGE>
DISTRIBUTOR
Alpha-Omega Capital Corp. (the "Distributor") is the principal underwriter of
the Fund and, as such, the exclusive agent for distribution of shares of the
Fund. The Distributor is obligated to sell the shares on a best efforts basis
only against purchase orders for the shares. Shares of the Fund are offered to
the public on a continuous basis.
The Fund may compensate dealers, including the Distributor and its affiliates,
based on the average balance of all accounts in the Fund for which the dealer is
designated as the party responsible for the account. See "Distribution Plan
Under Rule 12b-1" below. The distributor is controlled by William C. Riffle and
Bryan E. Pifer and is an affiliate of the Manager and the Advisor.
OTHER SERVICES
AUDITORS. The firm of KPMG Peat Marwick LLP, 201 East Fifth Street, Cincinnati,
Ohio 45202, has been retained by the Board of Trustees to perform an independent
audit of the financial statements of the Fund.
CUSTODIAN. The Custodian of the Fund's assets is The Fifth Third Bank, 38
Fountain Square Plaza, Cincinnati, Ohio 45263. The Custodian holds all cash and
securities of the Fund (either in its possession or in its favor through "book
entry systems" authorized by the Trustees in accordance with the 1940 Act),
collects all income and effects all securities transactions on behalf of the
Fund. For its services as Custodian, the Custodian receives an annual fee from
the Fund based on the average net assets of the Fund held by the Custodian. The
Custodian also provides accounting and pricing services to the Fund. The
Custodian receives $2,000 per month from the Fund for calculating daily net
asset value per share and maintaining such books and records as are necessary
for the Custodian to perform its duties.
- 13 -
<PAGE>
BROKERAGE
It is the Fund's practice to seek to obtain the best overall terms available in
executing Fund transactions and selecting brokers or dealers. Subject to the
general supervision of the Board of Trustees, the Advisor is responsible for,
makes decisions with respect to, and places orders for all purchases and sales
of portfolio securities for the Fund.
In assessing the best overall terms available for any transaction, the Advisor
shall consider factors it deems relevant, including the breadth of the market in
the security, the price of the security, the financial condition and execution
capability of the broker or dealer, and the reasonableness of the commission, if
any, both for the specific transaction and on a continuing basis. In addition,
the Advisor may cause the Fund to pay a broker-dealer which furnishes brokerage
and research services a higher commission than that which might be charged by
another broker-dealer for effecting the same transaction, provided the Advisor
determines in good faith that such commission is reasonable in relation to the
value of the brokerage and research services provided by such broker-dealer,
viewed in terms of either the particular transaction or the overall
responsibilities of the Advisor to the Fund. Such brokerage and research
services may consist of reports and statistics relating to specific companies or
industries, general summaries of groups of stocks or bonds and their comparative
earnings and yields, or broad overviews of the economy and the stock, bond and
government securities markets.
Supplementary research information so received is in addition to, and not in
lieu of, services required to be performed by the Advisor and does not reduce
the advisory fees payable by the Fund. The Trustees will periodically review any
commissions paid by the Fund to consider whether the commissions paid over
representative periods of time appear to be reasonable in relation to the
benefits received by the Fund. It is possible that certain of the supplementary
research or other services received will primarily benefit one or more other
accounts for which investment discretion is exercised by the Advisor.
Conversely, the Fund may be the primary beneficiary of the research or other
services received as a result of securities transactions effected for such other
accounts.
The Advisor may also utilize a brokerage firm affiliated with the Trust or the
Advisor if it believes it can obtain the best execution from such firm. The Fund
will not execute portfolio transactions through, acquire securities issued by,
make savings deposits in or enter into repurchase agreements with the Advisor or
an affiliated person of the Advisor (as such term is defined in the 1940 Act)
acting as principal, except to the extent permitted by the Securities and
Exchange Commission ("SEC"). In addition, the Fund will not purchase securities
during the existence of any underwriting or selling group relating thereto of
which the Advisor or an
- 14 -
<PAGE>
affiliated person of the Advisor, is a member, except to the extent permitted by
the SEC. Under certain circumstances, the Fund may be at a disadvantage because
of these limitations in comparison with other investment companies that have
similar investment objectives but are not subject to such limitations.
The Fund purchases money market instruments from dealers, underwriters and
issuers. The Fund does not expect to incur any brokerage commissions on such
purchases because money market instruments are generally traded on a net basis
by a dealer acting as principal for its own account without a stated commission.
The price of the security, however, usually includes a profit to the dealer.
Securities purchased in underwritten offerings include a fixed amount of
compensation to the underwriter, generally referred to as the underwriter's
concession or discount. When securities are purchased directly from or sold
directly to an issuer, no commissions or discounts are paid.
Transactions on U.S. stock exchanges involve the payment of negotiated brokerage
commissions. On exchanges on which commissions are negotiated, the cost of
transactions may vary among different brokers. Transactions in the
over-the-counter market are generally on a net basis (i.e. without commission)
through dealers, or otherwise involve transactions directly with the issuer of
an instrument.
The Fund's fixed-income portfolio transactions will normally be principal
transactions executed in the over-the-counter market and will be executed on a
net basis, which may include a dealer markup. With respect to securities traded
only in the over-the-counter market, orders will be executed on a principal
basis with primary market makers in such securities except where better prices
or executions may be obtained on an agency basis or by dealing with other than a
primary market maker.
The Fund may participate, if and when practicable, in bidding for the purchase
of Fund securities directly from an issuer in order to take advantage of the
lower purchase price available to members of a bidding group. The Fund will
engage in this practice, however, only when the Advisor, in its sole discretion,
believes such practice to be otherwise in the Fund's interest.
Investment decisions for the Fund will be made independently from any other
accounts advised or managed by the Advisor. Such other accounts may also invest
in the same securities as the Fund. To the extent permitted by law, the Advisor
may aggregate the securities to be sold or purchased for the Fund with those to
be sold or purchased for other accounts in executing transactions. When a
purchase or sale of the same security is made at substantially the same time on
behalf of the Fund and other accounts, the transaction will be averaged as to
price and available investments
- 15 -
<PAGE>
allocated as to amount, in the manner which the Advisor believes to be equitable
to the Fund and such other accounts. In some instances, this investment
procedure may adversely affect the price paid or received by the Fund or the
size of the position obtained or sold by the Fund.
For the fiscal years ended February 28, 1998, 1997, and 1996, the total amount
of brokerage commissions paid by the Predecessor Fund were $5,117, $1,539, and
$5,587, respectively.
DISTRIBUTION PLAN UNDER RULE 12B-1
The Fund has adopted a Plan of Distribution (the "Plan") pursuant to Rule 12b-1
under the 1940 Act. The Plan permits the Fund to pay for expenses incurred in
the distribution and promotion of the Fund's shares.
Under the Plan, the Fund may expend in any fiscal year up to 1% of its average
daily net assets to finance any activity which is primarily intended to result
in the sale of its shares and the servicing of shareholder accounts, provided
the Board of Trustees has approved the category of expenses for which payment is
being made. Expenditures under the Plan as service fees to any person who sells
shares may not exceed an annual rate of .25% of the average net assets of such
shares. Expenditures under the Plan for distribution activities as an
asset-based sales charge may not exceed an annual rate of .75% of the Fund's
average net assets.
Dealers and other service organizations receive commissions from the Advisor for
selling Fund shares, which are paid at the time of sale. The expenditures
payable under the Plan for distribution activities (at an annual rate of .75% of
net assets) are intended to cover the expense to the Advisor of paying such
up-front commissions, and the contingent deferred sales charge is calculated to
charge the investor with any shortfall that would occur if shares are redeemed
prior to the expiration of the five year CDSC period. To provide funds for the
payment of up-front sales commissions, the Advisor has arranged a line of credit
with an unaffiliated third party lender, which provides funds for the payment of
commissions and other fees payable to dealers and other service organizations
which sell Fund shares. Under the terms of the financing, the Advisor may assign
to the lender the distribution fees that may be payable from time to time to the
Advisor under the Plan and the contingent deferred sales charges payable to the
Advisor.
During the fiscal years ended February 28, 1998 and 1997, the Fund incurred
$24,929 and $2,466, respectively, in distribution expenses for payments to
broker-dealers and others for the retention of assets.
- 16 -
<PAGE>
Jasen M. Snelling, a controlling shareholder of the Advisor, may be deemed to
have a financial interest in the operation of the Plan and the Implementation
Agreements.
Potential benefits to the Fund from the Plan include improved shareholder
servicing, savings in transfer agency costs, benefits to the investment process
from growth and stability of assets and maintenance of a financially healthy
management organization. Subject to its practice of seeking to obtain best
execution, the Fund may, from time to time, buy or sell portfolio securities
from or to firms which receive payments under the Plan.
The Plan, the Underwriting Agreement with the Distributor and the form of Dealer
Agreement with broker-dealers have all been approved by the Board of Trustees of
the Trust, including a majority of the Trustees who are not "interested persons"
(as defined in the 1940 Act) of the Trust and who have no direct or indirect
financial interest in the Plan or any related agreements, by vote cast in person
or at a meeting duly called for the purpose of voting on the Plan and such
Agreements. Continuation of the Plan, the Underwriting Agreement and the form of
Dealer Agreement must be approved annually by the Board of Trustees in the same
manner as specified above. Each year the Trustees must determine that
continuation of the Plan is in the best interests of shareholders of the Fund
and there is a reasonable likelihood that the Plan will benefit the Fund. The
Board of Trustees has made such a determination for the current year of
operations under the Plan. The Plan, the Underwriting Agreement and the Dealer
Agreements may be terminated at any time without penalty by a majority of those
trustees who are not "interested persons" or by a majority of the outstanding
shares of the Fund. Any amendment materially increasing the maximum percentage
payable under the Plan must likewise be approved by a majority of the
outstanding shares of the applicable class as well as a majority of the Trustees
who are not "interested persons" and have no direct or indirect financial
interest in the Plan (the "Independent Trustees"). In order for the Plan to
remain effective, the selection and nomination of those Trustees who are not
interested persons of the Trust must be effected by the Independent Trustees
during such period. All amounts spent by the Fund pursuant to the Plan must be
reported quarterly in a written report to the Trustees for their review.
- 17 -
<PAGE>
SPECIAL SHAREHOLDER SERVICES
As noted in the Prospectus, the Fund offers the following shareholder services:
REGULAR ACCOUNT. The regular account allows for voluntary investments to be made
at any time. Available to individuals, custodians, corporations, trusts,
estates, corporate retirement plans and others, investors are free to make
additions and withdrawals to or from their account as often as they wish. When
an investor makes an initial investment in the Fund, a shareholder account is
opened in accordance with the investor's registration instructions. Each time
there is a transaction in a shareholder account, such as an additional
investment or the reinvestment of a dividend or distribution, the shareholder
will receive a confirmation statement showing the current transaction and all
prior transactions in the shareholder account during the calendar year to date.
AUTOMATIC INVESTMENT PLAN. The automatic investment plan enables investors to
make regular monthly or bi-monthly investments in shares through automatic
charges to their checking account. With shareholder authorization and bank
approval, the Manager will automatically charge the checking account for the
amount specified ($50 minimum) which will be automatically invested in shares at
the public offering price on or about the fifteenth and/or the last business day
of the month. The shareholder may change the amount of the investment or
discontinue the plan at any time by writing to the Manager.
SYSTEMATIC WITHDRAWAL PLAN. Shareholders owning shares with a value of $5,000 or
more may establish a Systematic Withdrawal Plan. A shareholder may receive
monthly or quarterly payments, in amounts of not less than $50 per payment, by
authorizing the Fund to redeem the necessary number of shares periodically (each
month, or quarterly in the months of March, June, September and December).
Payments may be made directly to an investor's account with a commercial bank or
other depository institution via an Automated Clearing House ("ACH")
transaction. Instructions for establishing this service are included in the
Application contained in the Prospectus or are available by calling the Fund.
Payment may also be made by check made payable to the designated recipient and
mailed within 7 days of the valuation date. If the designated recipient is other
than the registered shareholder, the signature of each shareholder must be
guaranteed on the application (see "Signature Guarantees" in the Prospectus). A
corporation (or partnership) must also submit a "Corporate Resolution" (or
"Certification of Partnership") indicating the names,
- 18 -
<PAGE>
titles and required number of signatures authorized to act on its behalf. The
application must be signed by a duly authorized officer(s) and the corporate
seal affixed. No redemption fees are charged to shareholders under this plan
except for potential deferred sales charges. The Prospectus contains additional
information and limitations relating to the use of a Systematic Withdrawal Plan.
Costs in conjunction with the administration of the plan are borne by the Fund.
Investors should be aware that such systematic withdrawals may deplete or use up
entirely their initial investment and may result in realized long-term or
short-term capital gains or losses. The Systematic Withdrawal Plan may be
terminated at any time by the Fund upon sixty days' written notice or by an
investor upon written notice to the Fund. Applications and further details may
be obtained by calling the Fund at 1-877-624-6465, or by writing to:
Regional Opportunity Fund
Shareholder Services
P.O. Box 54944
Cincinnati, Ohio 45254-0944
PURCHASES IN KIND. The Fund may accept securities in lieu of cash in payment for
the purchase of shares of the Fund. The acceptance of such securities is at the
sole discretion of the Advisor based upon the suitability of the securities
accepted for inclusion as a long term investment of the Fund, the marketability
of such securities, and other factors which the Advisor may deem appropriate. If
accepted, the securities will be valued using the same criteria and methods as
described in "How Shares are Valued" in the Prospectus. Transactions involving
the issuance of shares in the Fund for securities in lieu of cash will be
limited to acquisitions of securities (except for municipal debt securities
issued by state political subdivisions or their agencies or instrumentalities)
which: (a) meet the investment objective and policies of the Fund; (b) are
acquired for investment and not for resale; (c) are liquid securities which are
not restricted as to transfer either by law or liquidity of market; and (d) have
a value which is readily ascertainable (and not established only by evaluation
procedures) as evidenced by a listing on the American Stock Exchange, the New
York Stock Exchange or NASDAQ.
REDEMPTION IN KIND. The Fund does not intend, under normal circumstances, to
redeem its securities by payment in kind. It is possible, however, that
conditions may arise in the future which would, in the opinion of the
- 19 -
<PAGE>
Trustees, make it undesirable for the Fund to pay for all redemptions in cash.
In such case, the Board of Trustees may authorize payment to be made in readily
marketable portfolio securities of the Fund. Securities delivered in payment of
redemptions would be valued at the same value assigned to them in computing the
net asset value per share. Shareholders receiving such securities would incur
brokerage costs when the securities are sold. An irrevocable election has been
filed under Rule 18f-1 of the 1940 Act, wherein the Fund is committed to pay
redemptions in cash, rather than in kind, to any shareholder of record of the
Fund who redeems during any ninety day period, the lesser of (a) $250,000 or (b)
one percent (1%) of the Fund's net assets at the beginning of such period.
TRANSFER OF REGISTRATION. To transfer shares to another owner, send a written
request to the Manager at the address shown herein. Your request should include
the following: (1) the Fund name and existing account registration; (2)
signature(s) of the registered owner(s) exactly as the signature(s) appear(s) on
the account registration; (3) the new account registration, address, social
security or taxpayer identification number and how dividends and capital gains
are to be distributed; (4) signature guarantees (see the Prospectus under the
heading "Signature Guarantees"); and (5) any additional documents which are
required for transfer by corporations, administrators, executors, trustees,
guardians, etc. If you have any questions about transferring shares, call or
write the Manager.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
PURCHASES. Shares of the Fund are offered and sold on a continuous basis and may
be purchased through authorized dealers or directly by contacting the
Distributor or the Manager. Selling dealers have the responsibility of
transmitting orders promptly to the Fund's Manager. Fund shares may be subject
to a contingent deferred sales charge upon redemption. The Advisor may
compensate dealers up-front from its own funds for distribution-related
activities in connection with the sale of Fund shares, for which the Advisor
will receive the contingent deferred sales charge and a distribution fee under
the Plan as described in "Distribution Plan Under Rule 12b-1." The current
schedule of sales charges is set forth in the Prospectus. See "How to Purchase
Shares" in the Prospectus.
REDEMPTIONS. Under the 1940 Act, the Fund may suspend the right of redemption or
postpone the date of payment for shares during any period when (a) trading on
the New York Stock Exchange is restricted by applicable rules and regulations of
the SEC; (b) the Exchange is closed for other than customary weekend and holiday
closings; (c) the SEC has by order permitted such suspension; or (d) an
emergency exists as determined by the SEC. The
- 20 -
<PAGE>
Fund may also suspend or postpone the recordation of the transfer of shares upon
the occurrence of any of the foregoing conditions.
In addition to the situations described in the Prospectus under "How to Redeem
Shares," the Fund may redeem shares involuntarily to reimburse the Fund for any
loss sustained by reason of the failure of an investor to make full payment for
shares purchased by the investor or to collect any charge relating to a
transaction effected for the benefit of an investor which is applicable to Fund
shares as provided in the Prospectus from time to time.
HOW SHARE PRICE IS DETERMINED
Under the 1940 Act, the Trustees are responsible for determining in good faith
the fair value of the securities and other assets of the Fund and they have
adopted procedures to do so as follows:
The net asset value of shares of the Fund is determined as of 4:00 p.m. Eastern
time, Monday through Friday, except on business holidays when the New York Stock
Exchange is closed. The New York Stock Exchange recognizes the following
holidays: New Year's Day, President's Day, Good Friday, Memorial Day, Fourth of
July, Labor Day, Thanksgiving Day and Christmas Day. Any other holiday
recognized by the New York Stock Exchange will be considered a business holiday
on which the Fund's share price will not be determined.
The net asset value per share of the Fund is calculated separately by adding the
value of the securities and other assets belonging to the Fund, subtracting the
liabilities charged to the Fund, and dividing the result by the number of
outstanding shares of the Fund. Assets belonging to the Fund consist of the
consideration received upon the issuance of shares of the Fund together with all
net investment income, realized gains/losses and proceeds derived from the
investment thereof, including any proceeds from the sale of such investments,
any funds or payments derived from any reinvestment of such proceeds, and any
general assets of the Fund.
- 21 -
<PAGE>
ADDITIONAL TAX INFORMATION
The following summarizes certain additional tax considerations generally
affecting the Fund and its shareholders that are not described in the
Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of the Fund or its shareholders, and the discussion here and in the
Prospectus is not intended as a substitute for careful tax planning and is based
on tax laws and regulations that are in effect on the date hereof; such laws and
regulations may be changed by legislative, judicial or administrative action.
Investors are advised to consult their tax advisors with specific reference to
their own tax situations.
The Fund intends to qualify or remain qualified as a regulated investment
company. In order to so qualify, the Fund must elect to be a regulated
investment company or have made such an election for a previous year and must
satisfy, in addition to the distribution requirement described in the
Prospectus, certain requirements with respect to the source of its income for a
taxable year. At least 90% of the gross income of the Fund must be derived from
dividends, interest, payments with respect to securities loans, gains from the
sale or other disposition of stocks, securities or foreign currencies, and other
income derived with respect to the Fund's business of investing in such stock,
securities or currencies. Any income derived by the Fund from a partnership or
trust is derived with respect to the Fund's business of investing in such stock,
securities or currencies only to the extent that such income is attributable to
items of income that would have been qualifying income if realized by the Fund
in the same manner as by the partnership or trust.
The Fund may not qualify as a regulated investment company for any taxable year
unless it satisfies certain requirements with respect to the diversification of
its investments at the close of each quarter of the taxable year. In general, at
least 50% of the value of its total assets must be represented by cash, cash
items, government securities, securities of other regulated investment companies
and other securities which, with respect to any one issuer, do not represent
more that 5% of the total assets of the investment company nor more than 10% of
the outstanding voting securities of such issuer. In addition, not more than 25%
of the value of the investment company's total assets may be invested in the
securities (other than government securities or the securities of other
regulated investment companies) of any one issuer. The Fund intends to satisfy
all requirements on an ongoing basis for continued qualification as a regulated
investment company.
The Fund will designate any distribution of long term capital gains as a
- 22 -
<PAGE>
capital gain dividend in a written notice mailed to shareholders within 60 days
after the close of the Fund's taxable year. Shareholders should note that, upon
the sale or exchange of shares, if the shareholder has not held such shares for
at least six months, any loss on the sale or exchange of those shares will be
treated as a long term capital loss to the extent of the capital gain dividends
with respect to the shares.
A 4% nondeductible excise tax is imposed on regulated investment companies that
fail to currently distribute an amount equal to specified percentages of their
ordinary taxable income and capital gain net income (excess of capital gains
over capital losses). The Fund intends to make sufficient distributions or
deemed distributions of its ordinary taxable income and any capital gain net
income prior to the end of each calendar year to avoid liability for this excise
tax.
If for any taxable year the Fund does not qualify for the special federal income
tax treatment afforded regulated investment companies, all of its taxable income
will be subject to federal income tax at regular corporate rates (without any
deduction for distributions to its shareholders). In such event, dividend
distributions (whether or not derived from interest on tax-exempt securities)
would be taxable as ordinary income to shareholders to the extent of the Fund's
current and accumulated earnings and profits, and would be eligible for the
dividends received deduction for corporations.
The Fund will be required in certain cases to withhold and remit to the U.S.
Treasury 31% of taxable dividends or 31% of gross proceeds realized upon sale
paid to shareholders who have failed to provide a correct tax identification
number in the manner required, or who are subject to withholding by the Internal
Revenue Service for failure to properly include on their tax return payments of
taxable interest or dividends, or who have failed to certify to the Fund that
they are not subject to backup withholding when required to do so or that they
are "exempt recipients."
Depending upon the extent of the Fund's activities in states and localities in
which its offices are maintained, in which its agents or independent contractors
are located or in which it is otherwise deemed to be conducting business, the
Fund may be subject to the tax laws of such states or localities. In addition,
in those states and localities that have income tax laws, the treatment of the
Fund and its shareholders under such laws may differ from their treatment under
federal income tax laws.
- 23 -
<PAGE>
CALCULATION OF PERFORMANCE DATA
As indicated in the Prospectus, the Fund may, from time to time, advertise
certain total return and yield information. The average annual total return of
the Fund for a period is computed by subtracting the net asset value per share
at the beginning of the period from the net asset value per share at the end of
the period (after adjusting for the reinvestment of any income dividends and
capital gain distributions), and dividing the result by the net asset value per
share at the beginning of the period. In particular, the average annual total
return of the Fund ("T") is computed by using the redeemable value at the end of
a specified period of time ("ERV") of a hypothetical initial investment of
$1,000 ("P") over a period of time ("n") according to the formula P(l+T)n=ERV.
The calculation of average annual total return assumes the reinvestment of all
dividends and distributions and the deduction of the current maximum sales load
from the initial $1,000 payment. The average annual total returns of the Fund
for the one year period ended February 28, 1998 and for the period since
inception (January 3, 1995) to February 28, 1998 are 32.01% and 29.20%,
respectively.
In addition, the Fund may advertise other total return performance data
("Nonstandardized Return"). Nonstandardized Return shows as a percentage rate of
return encompassing all elements of return (i.e., income and capital
appreciation or depreciation); it assumes reinvestment of all dividends and
capital gain distributions. This computation does not include the effect of the
applicable sales load which, if included, would reduce total return.
Nonstandardized Return may consist of a cumulative percentage of return, actual
year-by-year rates or any combination thereof. The cumulative total return of
the Fund (computed without the applicable sales load) for the period since
inception (January 3, 1995) to February 28, 1998 is 70.58%. The average annual
Nonstandardized Returns of the Fund (computed without the applicable sales load)
for the one year period ended February 28, 1998 and for the period since
inception (January 3, 1995) to February 28, 1998 are 36.01% and _______%,
respectively. A nonstandardized quotation of total return will always be
accompanied by the Fund's average annual total return as described above.
The Fund's total return performance data will combine the performance of the
Fund with the performance of the Predecessor Fund prior to the reorganizaiton of
the Predecessor Fund into the Fund on June 29, 1998. The investment objective,
policies and restrictions of the Predecessor Fund were substantially identical
to those of the Fund. The performance of the Predecessor Fund represents
performance of Class A shares from inception of the Predecessor Fund on January
3, 1995 until the commencement of the initial public offering of Class B shares
(July 24, 1996) and the performance of Class B shares from July 24, 1996 until
June 29, 1998.
From time to time, the Fund may advertise its yield. A yield quotation is based
on a 30-day (or one month) period and is computed by dividing the net investment
income per share earned during the period by the maximum offering price per
share on the last day of the period, according to the following formula:
- 24 -
<PAGE>
6
Yield = 2[(a-b/cd + 1) - 1]
Where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period that were
entitled to receive dividends
d = the maximum offering price per share on the last day of the period
Solely for the purpose of computing yield, dividend income is recognized by
accruing 1/360 of the stated dividend rate of the security each day that the
Fund owns the security. Generally, interest earned (for the purpose of "a"
above) on debt obligations is computed by reference to the yield to maturity of
each obligation held based on the market value of the obligation (including
actual accrued interest) at the close of business on the last business day prior
to the start of the 30-day (or one month) period for which yield is being
calculated, or, with respect to obligations purchased during the month, the
purchase price (plus actual accrued interest).
The Fund's performance may be compared in advertisements, sales literature,
shareholder reports, and other communications to the performance of other mutual
funds having similar objectives or to standardized indices or other measures of
investment performance. In particular, the Fund may compare its performance to
the S&P 500 Index, which is generally considered to be representative of the
performance of unmanaged common stocks that are publicly traded in the United
States securities markets. Comparative performance may also be expressed by
reference to a ranking prepared by a mutual fund monitoring service, such as
Lipper Analytical Services, Inc. or Morningstar, Inc. or by one or more
newspapers, newsletters or financial periodicals. The Fund may also occasionally
cite statistics to reflect its volatility and risk. The Fund may also compare
its performance to published reports of the performance of unmanaged companies
located in the Cincinnati tri-state area. The performance of such unmanaged
portfolios generally does not reflect the effects of dividends or dividend
reinvestment. Of course, there can be no assurance that the Fund will experience
the same results. Performance comparisons may be useful to investors who wish to
compare the Fund's past performance to that of other mutual funds and investment
products. Of course, past performance is not a guarantee of future results.
The Fund's performance fluctuates on a daily basis largely because net earnings
and net asset value per share fluctuate daily. Both net earnings
- 25 -
<PAGE>
and net asset value per share are factors in the computation of total return as
described above.
As indicated, from time to time, the Fund may advertise its performance compared
to similar funds or portfolios using certain indices, reporting services, and
financial publications. These may include the following:
o LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes
the reinvestment of all capital gains distributions and income dividends
and takes into account any change in net asset value over a specific period
of time.
o MORNINGSTAR, INC., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for
two weeks.
Investors may use such indices in addition to the Fund's Prospectus to obtain a
more complete view of the Fund's performance before investing. Of course, when
comparing the Fund's performance to any index, factors such as composition of
the index and prevailing market conditions should be considered in assessing the
significance of such comparisons. When comparing funds using reporting services,
or total return, investors should take into consideration any relevant
differences in funds such as permitted portfolio compositions and methods used
to value portfolio securities and compute offering price. Advertisements and
other sales literature for the Fund may quote total returns that are calculated
on nonstandardized base periods. The total returns represent the historic change
in the value of an investment in the Fund based on monthly reinvestment of
dividends over a specified period of time.
From time to time the Fund may include in advertisements and other
communications information, charts, and illustrations relating to inflation and
the effects of inflation on the dollar, including the purchasing power of the
dollar at various rates of inflation. The Fund may also disclose from time to
time information about its portfolio allocation and holdings at a particular
date (including ratings of securities assigned by independent rating services
such as S&P and Moody's). The Fund may also depict the historical performance of
the securities in which the Fund may invest over periods reflecting a variety of
market or economic conditions either alone or in comparison with alternative
investments, performance indices of those investments, or economic indicators.
The Fund may also
- 26 -
<PAGE>
include in advertisements and in materials furnished to present and prospective
shareholders statements or illustrations relating to the appropriateness of
types of securities and/or mutual funds that may be employed to meet specific
financial goals, such as saving for retirement, children's education, or other
future needs.
APPENDIX A
DESCRIPTION OF RATINGS
Under normal market conditions, at least 90% of the Fund's net assets will be
invested in equities. As a temporary defensive position, however, the Fund may
invest up to 100% of its assets in investment grade bonds, U.S. Government
Securities, repurchase agreements or money market instruments ("Investment-Grade
Debt Securities"). When the Fund invests in Investment-Grade Debt Securities as
a temporary defensive measure, it is not pursuing its investment objective.
Under normal circumstances, however, the Fund may invest in money market or
repurchase agreement instruments as described in the Prospectus.
The various ratings used by the NRSROs are described below. A rating by an NRSRO
represents the organization's opinion as to the credit quality of the security
being rated. However, the ratings are general and are not absolute standards of
quality or guarantees as to the creditworthiness of an issuer. Consequently, the
Advisor believes that the quality of fixed-income securities in which the Fund
may invest should be continuously reviewed and that individual analysts give
different weightings to the various factors involved in credit analysis. A
rating is not a recommendation to purchase, sell or hold a security because it
does not take into account market value or suitability for a particular
investor. When a security has received a rating from more than one NRSRO, each
rating is evaluated independently. Ratings are based on current information
furnished by the issuer or obtained by the NRSROs from other sources that they
consider reliable. Ratings may be changed, suspended or withdrawn as a result of
changes in or unavailability of such information, or for other reasons.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S RATINGS:
The following summarizes the four highest ratings used by Moody's Investors
Service, Inc. ("Moody's") for bonds which are deemed by the Advisor to be
Investment-Grade Debt Securities.
Aaa: Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as
- 27 -
<PAGE>
"gilt edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa: Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risks appear somewhat larger than in Aaa securities.
A: Bonds rated A possess many favorable investment attributes and are to be
considered upper medium grade obligations. Factors giving security to principal
and interest are considered adequate but elements may be present that suggest a
susceptibility to impairment sometime in the future.
Baa: Bonds rated Baa are considered as medium grade obligations, i.e., they
are neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Moody's applies numerical modifiers (1,2 and 3) with respect to bonds rated Aa,
A and Baa. The modifier 1 indicates that the bond being rated ranks in the
higher end of its generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the bond ranks in the lower end of
its generic rating category.
Bonds which are rated Ba, B, Caa, Ca or C by Moody's are not considered
Investment-Grade Debt Securities by the Advisor. Bonds rated Ba are judged to
have speculative elements because their future cannot be considered as well
assured. Uncertainty of position characterizes bonds in this class, because the
protection of interest and principal payments often may be very moderate and not
well safeguarded. Bonds which are rated B generally lack characteristics of a
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the security over any long period of time may be
small. Bonds which are rated Caa are of poor standing. Such securities may be in
default or there may be present elements of danger with respect to principal or
interest. Bonds which are
- 28 -
<PAGE>
rated Ca represent obligations which are speculative in a high degree. Such
issues are often in default or have other marked shortcomings. Bonds which are
rated C are the lowest rated class of bonds, and issues so rated can be regarded
as having extremely poor prospects of ever attaining any real investment
standing.
The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers rated Prime-1 (or related supporting institutions) are considered to
have superior capacity for repayment of short-term promissory obligations.
Issuers rated Prime-2 (or related supporting institutions) are considered to
have a strong capacity for repayment of short-term promissory obligations. This
will normally be evidenced by many of the characteristics of issuers rated
Prime-1 but to a lesser degree. Earnings trends and coverage ratios, while
sound, will be more subject to variation. Capitalization characteristics, while
still appropriated may be more affected by external conditions. Ample alternate
liquidity is maintained.
The following summarizes the highest rating used by Moody's for short-term notes
and variable rate demand obligations:
MIG-1; VMIG-1 - Obligations bearing these designations are of the best
quality, enjoying strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing.
DESCRIPTION OF STANDARD & POOR'S RATINGS GROUP'S RATINGS:
The following summarizes the four highest ratings used by Standard & Poor's
Ratings Group ("S&P") for bonds which are deemed by the Advisor to be
Investment-Grade Debt Securities.
AAA: This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay principal and interest.
AA: Bonds rated AA also qualify as high quality debt obligations. Capacity
to pay principal and interest is very strong, and in the majority of instances
they differ from AAA issues only in small degree.
A: Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
- 29 -
<PAGE>
BBB: Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in the A category.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
Bonds rated BB, B, CCC, CC and C are not considered by the Advisor to be
Investment-Grade Debt Securities and are regarded, on balance, as predominately
speculative with respect to the issuer's capacity to pay interest and principal
in accordance with the terms of the obligation. BB indicates the lowest degree
of speculation and C the highest degree of speculation. While such bonds may
have some quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
Commercial paper rated A-1 by S&P indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted A-1+. Capacity for timely payment on
commercial paper rated A-2 is satisfactory, but the relative degree of safety is
not as high as for issues designated A-1.
The rating SP-1 is the highest rating assigned by S&P to municipal notes and
indicates very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics are give a plus
(+) designation.
DESCRIPTION OF FITCH INVESTORS SERVICE INC.'S RATINGS:
The following summarizes the four highest ratings used by Fitch Investors
Service, Inc. ("Fitch") for bonds which are deemed by the Advisor to be
Investment-Grade Debt Securities.
AAA: Bonds are considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA: Bonds are considered to be investment grade and of very high
- 30 -
<PAGE>
credit quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated AAA. Because bonds
rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is generally
rated F-1+.
A: Bonds are considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB: Bonds are considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is considered
to be adequate. Adverse changes in economic conditions and circumstances,
however, are more likely to have adverse impact on these bonds, and therefore,
impair timely payment. The likelihood that the ratings of these bonds will fall
below investment grade is higher than for bonds with higher ratings.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within a rating category.
Bonds rated BB, B and CCC by Fitch are not considered Investment-Grade Debt
Securities and are regarded, on balance, as predominately speculative with
respect to the issuer's ability to pay interest and make principal payments in
accordance with the terms of the obligations. BB indicates the lowest degree of
speculation and CCC the highest degree of speculation.
The following summarizes the three highest ratings used by Fitch for short-term
notes, municipal notes, variable rate demand instruments and commercial paper.
F-1+ - Instruments assigned this rating are regarded as having the
strongest degree of assurance for timely payment.
F-1 - Instruments assigned this rating reflect an assurance of timely
payment only slightly less in degree than issues rated F-1+.
F-2 - Instruments assigned this rating have satisfactory degree of
assurance for timely payment, but the margin of safety is not as great as
for issues assigned F-1+ and F-1 ratings.
DESCRIPTION OF DUFF & PHELPS' CREDIT RATING CO.'S RATINGS:
The following summarizes the four highest ratings used by Duff & Phelps
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<PAGE>
Credit Rating Co. ("D&P") for bonds which are deemed by the Advisor to be
Investment-Grade Debt Securities.
AAA: This is the highest rating credit quality. The risk factors are
considered to be negligible, being only slightly more than for risk-free U.S.
Treasury debt.
AA: Bonds rated AA are considered to be of high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from time to time
because of economic conditions.
A: Bonds rated A have average but adequate protection factors. However risk
factors are more variable and greater in periods of economic stress.
BBB: Bonds rated BBB have below average protection factors, but are still
considered sufficient for prudent investment. There is considerable variability
in risk during economic cycles.
Bonds rated BB, B and CCC by D&P are not considered Investment-Grade Debt
Securities and are regarded, on balance, as predominately speculative with
respect to the issuer's ability to pay interest and make principal payments in
accordance with the terms of the obligations. BB indicates the lowest degree of
speculation and CCC the highest degree of speculation.
The rating Duff 1 is the highest rating assigned by D&P for short-term debt,
including commercial paper. D&P employs three designations, Duff 1+, Duff 1 and
Duff 1- within the highest rating category. Duff 1+ indicates highest certainty
of timely payment. Short-term liquidity, including internal operating factors
and/or access to alternative sources of funds, is judged to be outstanding, and
safety is just below risk-free U.S. Treasury short-term obligations. Duff 1
indicates very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are
considered to be minor. Duff 1- indicates high certainty of timely payment.
Liquidity factors are strong and supported by good fundamental protection
factors. Risk factors are very small.
FINANCIAL STATEMENTS AND REPORTS
The Financial Statements of the Fund will be audited at least once each year by
independent public accountants. Shareholders will receive annual audited and
semiannual (unaudited) reports when published, and will receive written
confirmation of all confirmable transactions in their account. A
- 32 -
<PAGE>
copy of the Annual Report will accompany the Statement of Additional Information
whenever the Statement of Additional Information is requested by a shareholder
or prospective investor. The Financial Statements of the Predecessor Fund as of
February 28, 1998, together with the report of the independent accountants
thereon, are included on the following pages.
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<PAGE>
REGIONAL OPPORTUNITY FUND:
--------------------------
Ohio, Indiana, Kentucky
-----------------------
Annual Report
February 28, 1998
Investment Adviser Administrator
------------------ -------------
CityFund Advisory, Inc. Countrywide Fund Services, Inc.
P.O. Box 54944 312 Walnut Street
Cincinnati, OH 45254-0944 P.O. Box 5354
1.513.624.5900 Cincinnati, OH 45202-5354
1.800.543.8721
Shareholder Services
--------------------
1.513.629.2273
<PAGE>
REGIONAL
OPPORTUNITY
fund
[LOGO]
- ------------------------------------------------------------------------------
series one: Ohio, Indiana, Kentucky
April 24, 1998
Fellow Shareholder:
It is once again my privilege to report to you on the annual progress of your
investment in the Regional Opportunity Fund: Ohio, Indiana, Kentucky. Over the
past year several changes were made to better enhance the performance and
shareholder services to the Fund. We continue to look for ways not only to
protect and grow your assets, but to be sure that you get the quality service
that, as a shareholder myself, I would expect from a fund company.
The stock market last year produced returns that overall were unmatched by any
other investment. The Standard & Poor's 500 Index (S&P 500) was up 35.01% for
the twelve months ended February 28, 1998. I am pleased to report that for the
Fund's fiscal year ended February 28, 1998, the Fund returned 36.01%, beating
the S&P 500.
So much emphasis and pressure is placed on funds and money managers to
outperform indices that I wanted to express that, although we monitor the many
different indices and benchmarks, we remain committed to our investment
philosophy.
In the past year, our research continued to generate buy and accumulate signals,
causing very little selling and more adding to positions. The Ohio, Indiana,
Kentucky region continues to give us investment opportunities and diversity. As
always, it is a pleasure to be of service. If you have any questions, please
feel free to contact me personally at 624-5901. Good fortune to all.
Very truly yours,
Jasen M. Snelling
President
Shareholder Services: Fund Advisor:
MGF Service Corp. CityFund Advisory, Inc.
P.O. Box 5354 P.O. Box 54944
Cincinnati, Ohio 45201-5354 Cincinnati, Ohio 45254-0944
888-289-6465
Shareholder Services, Fund Advisor and 24-hour NAV updates
<PAGE>
A Representation of the Graphic Material Contained in the Regional Opportunity
Fund Annual Report is set forth below:
Comparison of the Change in Value of a $10,000 Investment in the Regional
Opportunity Fund: Ohio, Indiana, Kentucky and the S&P 500 Index
S&P 500 INDEX: (w/ reinvested divds)
QTRLY
DATE RETURN BALANCE
01/03/95 10,000
03/31/95 9.74% 10,974
06/30/95 9.55% 12,021
09/30/95 7.95% 12,977
12/31/95 6.02% 13,758
03/31/96 5.37% 14,496
06/30/96 4.49% 15,147
09/30/96 3.09% 15,615
12/31/96 8.34% 16,917
03/31/97 2.68% 17,370
06/30/97 17.46% 20,403
09/30/97 7.49% 21,931
12/31/97 2.87% 22,561
02/28/98 8.40% 24,456
REGIONAL OPPORTUNITY FUND:
QTRLY
DATE RETURN BALANCE
01/03/95 10,000
03/31/95 2.83% 10,283
06/30/95 5.43% 10,841
09/30/95 3.15% 11,182
12/31/95 5.08% 11,750
03/31/96 4.08% 12,230
06/30/96 3.76% 12,690
09/30/96 0.67% 12,775
12/31/96 -2.69% 12,431
03/31/97 -4.10% 11,922
06/30/97 16.16% 13,848
09/30/97 12.31% 15,552
12/31/97 -1.35% 15,342
02/28/98 9.88% 16,858
Regional Opportunity Fund: Ohio, Indiana, Kentucky
Average Annual Total Returns
1 Year Since Inception*
Class B 32.01% 29.20%
Past performance is not predictive of future performance.
*The chart above represents performance of Class A shares from Fund inception
(January 3, 1995) to the commencement of the initial public offering of Class B
shares (July 24, 1996) and the performance of Class B shares subsequent to July
24, 1996 (Note 1).
<PAGE>
REGIONAL OPPORTUNITY FUND: Ohio, Indiana, Kentucky
STATEMENT OF ASSETS AND LIABILITIES
February 28, 1998
<TABLE>
ASSETS
<S> <C>
Investments in securities, at market value (Cost $3,632,065) (Note 1) $ 4,706,733
Investments in repurchase agreements (Note 1) 227,000
Cash 644
Receivable for capital shares sold 16,909
Dividends and interest receivable 2,388
Organization expenses, net (Note 1) 17,732
Other assets 3,665
-----------
TOTAL ASSETS 4,975,071
-----------
LIABILITIES
Payable for capital shares redeemed 1,967
Payable to Adviser (Note 3) 1,390
Other accrued expenses and liabilities 6,280
-----------
TOTAL LIABILITIES 9,637
-----------
NET ASSETS $ 4,965,434
===========
Net assets consist of:
Paid-in capital $ 3,962,467
Accumulated net realized losses from security transactions (71,701)
Net unrealized appreciation on investments 1,074,668
-----------
Net assets $ 4,965,434
===========
Shares of beneficial interest outstanding (unlimited number of shares
authorized, no par value) 322,214
===========
Net asset value and offering price per share (Note 1) $ 15.41
===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
REGIONAL OPPORTUNITY FUND: Ohio, Indiana, Kentucky
STATEMENT OF OPERATIONS
For the Year Ended February 28, 1998
INVESTMENT INCOME
Dividends $ 14,977
Interest 16,295
--------
TOTAL INVESTMENT INCOME 31,272
--------
EXPENSES
Investment advisory fees (Note 3) 34,737
Distribution expenses, Class A (Note 3) 919
Distribution expenses, Class B (Note 3) 24,010
Accounting services fees (Note 3) 24,000
Shareholder services and transfer agent fees (Note 3) 20,000
Administration fees (Note 3) 12,000
Amortization of organization expenses (Note 1) 9,672
Professional fees 9,550
Trustees' fees and expenses 7,269
Postage and supplies 3,747
Custodian fees 3,689
Printing of shareholder reports 3,506
Insurance expense 3,128
Registration fees 1,434
Pricing expense 1,080
--------
TOTAL EXPENSES 158,741
Fees waived and expenses reimbursed by the Adviser (Note 3) (86,748)
--------
NET EXPENSES 71,993
--------
NET INVESTMENT LOSS (40,721)
--------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized losses from security transactions (20,541)
Net change in unrealized appreciation on investments 946,951
--------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS 926,410
--------
NET INCREASE IN NET ASSETS FROM OPERATIONS $885,689
========
See accompanying notes to financial statements.
<PAGE>
REGIONAL OPPORTUNITY FUND: Ohio, Indiana, Kentucky
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended February 28, 1998 and 1997
<TABLE>
<CAPTION>
Year Year
Ended Ended
Feb. 28, 1998 Feb. 28, 1997
------------- -------------
FROM OPERATIONS:
<S> <C> <C>
Net investment loss $ (40,721) $ (4,197)
Net realized losses from security transactions (20,541) (31,644)
Net change in unrealized appreciation on investments 946,951 93,881
----------- -----------
Net increase in net assets from operations 885,689 58,040
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income, Class A -- (1,329)
From net investment income, Class B -- --
In excess of net realized gains, Class A -- (28,448)
In excess of net realized gains, Class B -- (5,508)
----------- -----------
Decrease in net assets from distributions to shareholders -- (35,285)
----------- -----------
FROM CAPITAL SHARE TRANSACTIONS (A):
CLASS A
Proceeds from shares sold 65,281 265,034
Net asset value of shares issued in reinvestment
of distributions to shareholders -- 29,310
Net asset value of shares converted to Class B (Note 4) (573,769) --
Payments for shares redeemed (81,615) (571,153)
----------- -----------
Net decrease in net assets from Class A share transactions (590,103) (276,809)
----------- -----------
CLASS B
Proceeds from shares sold 3,021,247 637,320
Net asset value of shares issued in reinvestment
of distributions to shareholders -- 5,508
Net asset value of shares converted from Class A (Note 4) 573,769 --
Payments for shares redeemed (73,351) (75)
----------- -----------
Net increase in net assets from Class B share transactions 3,521,665 642,753
----------- -----------
Net increase in net assets from capital shares transactions 2,931,562 365,944
----------- -----------
TOTAL INCREASE IN NET ASSETS 3,817,251 388,699
NET ASSETS:
Beginning of year 1,148,183 759,484
----------- -----------
End of year $ 4,965,434 $ 1,148,183
=========== ===========
(A) Summary of capital share activity:
Class A
Shares sold 4,966 22,449
Shares issued in reinvestment of distributions to shareholders) -- 2,617
Shares converted (Note 4) (42,470) --
Shares redeemed (6,607) (49,297)
----------- -----------
Net decrease in shares outstanding (44,111) (24,231)
Shares outstanding, beginning of year 44,111 68,342
----------- -----------
Shares outstanding, end of year -- 44,111
=========== ===========
Class B
Shares sold 227,382 56,543
Shares issued in reinvestment of distributions to shareholders) -- 494
Shares converted (Note 4) 42,915 --
Shares redeemed (5,124) (7)
----------- -----------
Net increase in shares outstanding 265,173 57,030
Shares outstanding, beginning of year 57,041 11
----------- -----------
Shares outstanding, end of year 322,214 57,041
=========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
REGIONAL OPPORTUNITY FUND: Ohio, Indiana, Kentucky
Class A
FINANCIAL HIGHLIGHTS
Selected Per Share Data and Ratios
for a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Period Year Year Period
Ended Ended Ended Ended
Oct. 31, 1997(A) Feb. 28, 1997 Feb. 29, 1996 Feb. 28, 1995(B)
---------------- ------------- ------------- ----------------
<S> <C> <C> <C> <C>
Net asset value at end of period $ 11.38 $ 11.11 $ 10.00 $ 10.00
--------- --------- --------- ---------
Income from investment operations:
Net investment income (loss) (0.06) (0.06) 0.10 0.01
Net realized and unrealized gains (losses)
on investments 2.19 0.76 1.74 (0.01)
--------- --------- --------- ---------
Total from investment operations 2.13 0.70 1.84 0.00
--------- --------- --------- ---------
Less distributions:
From net realized gains -- -- (0.64) --
In excess of net realized gains -- (0.41) -- --
--------- --------- --------- ---------
Total distributions -- (0.41) (0.64) --
--------- --------- --------- ---------
Net asset value at end of period $ 13.51 $ 11.40 $ 11.11 $ 10.00
========= ========= ========= =========
Total return (C) 18.72% 6.32% 18.41% 0.00%
========= ========= ========= =========
Net assets at end of period $ 573,769 $ 502,116 $ 759,366 $ 232,998
========= ========= ========= =========
Ratio of expenses to average net assets:
Before expense reimbursement and waived fees 6.30%(E) 11.50% 18.26% 80.88%(E)
After expense reimbursement and waived fees 1.94%(E) 2.02% 2.23% 2.05%(E)
Ratio of net investment income (loss) to average net (0.65)%(E) (0.37)% 0.96% 1.54%(E)
assets
Portfolio turnover rate 25%(E) 39% 108% 0%
Average commission rate per share (D) $ 0.0634 $ 0.0630 -- --
</TABLE>
(A) Represents the period from March 1, 1997 to the date of conversion to Class
B shares (October 31, 1997) (Note 4).
(B) Represents the period from the commencement of operations (January 3, 1995)
through February 28, 1995.
(C) The total returns shown do not include the effect of applicable sales loads.
(D) Beginning with the year ended February 28, 1997, the Fund is required to
disclose its average commission rate paid per share for purchases and sales
of investment securities.
(E) Annualized.
See accompanying notes to financial statements.
<PAGE>
REGIONAL OPPORTUNITY FUND: Ohio, Indiana, Kentucky
Class B
FINANCIAL HIGHLIGHTS
Selected Per Share Data and Ratios
for a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Year Period
Ended Ended
Feb. 28, 1998 Feb. 28, 1997(A)
------------- ----------------
<S> <C> <C>
Net asset value at beginning of period $ 11.33 $ 10.46
---------- ---------
Income from investment operations:
Net investment loss (0.13) (0.02)
Net realized and unrealized gains
on investments 4.21 1.30
---------- ---------
Total from investment operations 4.08 1.28
---------- ---------
Less distributions:
In excess of net realized gains -- (0.41)
---------- ---------
Total distributions -- (0.41)
---------- ---------
Net asset value at end of period $ 15.41 $ 11.33
========== =========
Total return (B) 36.01% 12.25%
========== =========
Net assets at end of period $4,965,434 $ 646,067
========== =========
Ratio of expenses to average net assets:
Before expense reimbursement and waived fees 5.81% 12.14%(C)
After expense reimbursement and waived fees 2.69% 2.66%(C)
Ratio of net investment loss to average net assets (1.69)% (1.04)%(C)
Portfolio turnover rate 21% 39%(C)
Average commission rate per share $ 0.0596 $ 0.0630
</TABLE>
(A) Represents the period from the first public offering to shareholders (July
24, 1996) through February 28, 1997. Class B shares were initially purchased
on April 10, 1995 by the Adviser, who subsequently redeemed the initial
shares on March 13, 1996.
(B) The total returns shown do not include the effect of applicable sales loads.
(C) Annualized.
See accompanying notes to financial statements.
<PAGE>
REGIONAL OPPORTUNITY FUND: Ohio, Indiana, Kentucky
PORTFOLIO OF INVESTMENTS
February 28, 1998
Market
Shares Value
------ -----
COMMON STOCKS - 94.8%
Airlines - 3.2%
3,855 Comair Holdings, Inc. $ 102,639
500 Delta Air Lines, Inc. 56,531
-----------
159,170
-----------
Automobile Parts - 1.6%
1,500 Dana Corp. 81,844
-----------
Building Materials - 0.7%
1,500 Thomas Industries, Inc. 35,438
-----------
Clothing and Fabrics - 0.6%
1,000 Fabric-Centers of America (a) 30,250
-----------
Communications - 3.0%
1,000 ADC Telecommunications, Inc. (a) 25,812
5,874 Brightpoint, Inc. (a) 120,417
-----------
146,229
-----------
Computers & Information - 13.3%
1,000 Computer Associates International, Inc. 47,125
6,500 Compaq Computer Corp. 208,406
2,000 Dell Computer Corp. (a) 279,750
2,000 EMC Corp. (a) 76,500
1,000 Sun Microsystems, Inc. (a) 47,625
-----------
659,406
-----------
Conglomerates - 2.3%
1,500 General Electric Co. 116,625
-----------
Consumer Services - 0.5%
500 Volt Information Sciences, Inc. (a) 26,281
-----------
Containers and Packaging - 1.5%
2,000 Owens Illinois, Inc. (a) 76,750
-----------
Cosmetics/Personal Care - 1.4%
1,000 Avon Products, Inc. 70,437
-----------
Electrical Components - 1.8%
1,750 Diebold, Inc. 89,906
-----------
<PAGE>
REGIONAL OPPORTUNITY FUND: Ohio, Indiana, Kentucky
PORTFOLIO OF INVESTMENTS
February 28, 1998
Market
Shares Value
------ -----
Food - 0.4%
600 Papa John's International, Inc. (a) $ 22,275
-----------
Food Retailers - 0.9%
1,000 Kroger Company (a) 42,250
-----------
Health Care Providers - 2.4%
3,500 Res-Care, Inc. (a) 117,250
-----------
Heavy Machinery - 2.5%
3,500 Chart Industries, Inc. 86,625
1,000 Robbins & Myers, Inc. 39,625
-----------
126,250
-----------
Household Products, Nondurable - 1.5%
860 The Procter & Gamble Co. 73,046
-----------
Industrial and Commercial Services - 1.7%
1,500 Cintas Corp. 63,750
600 Omnicare, Inc. 22,200
-----------
85,950
-----------
Insurance, Life - 2.0%
2,000 Conseco, Inc. 93,875
-----------
Media Publishing - 2.2%
1,500 Central Newspapers, Inc. - Class A 107,156
-----------
Medical Supplies - 10.1%
4,000 Biomet, Inc. (a) 119,250
4,300 Guidant Corp. 313,631
1,225 Hillenbrand Industries, Inc. 68,830
-----------
501,711
-----------
Pharmaceuticals - 11.1%
3,200 Eli Lilly & Co. 210,600
2,800 Johnson & Johnson 211,400
900 Jones Medical Industries, Inc. 33,413
1,100 Pfizer, Inc. 97,350
-----------
552,763
-----------
<PAGE>
REGIONAL OPPORTUNITY FUND: Ohio, Indiana, Kentucky
PORTFOLIO OF INVESTMENTS
February 28, 1998
Market
Shares Value
------ -----
Regional Banks - 5.6%
1,100 Banc One Corp. $ 62,150
1,250 Fifth Third Bancorp 98,750
1,955 Star Banc Corp. 115,101
-----------
276,001
-----------
Retailers, Apparel - 1.6%
1,000 Gap, Inc. 44,688
2,000 Rocky Shoes & Boots, Inc. (a) 37,000
-----------
81,688
-----------
Retailers, Drug-Based - 2.5%
1,500 Cardinal Health, Inc. 122,813
-----------
Retailers, Specialty - 0.7%
2,000 OfficeMax, Inc. (a) 33,375
-----------
Securities Broker - 0.5%
1,000 McDonald & Co. Investments 25,000
-----------
Semiconductor & Related - 4.8%
2,000 Intel Corp. 179,375
2,000 Photronics, Inc. (a) 58,750
-----------
238,125
-----------
Software & Processing - 13.1%
1,000 America Online, Inc. (a) 121,125
2,350 Cisco Systems, Inc. (a) 154,806
4,000 Compuware Corp. (a) 168,500
2,000 Microsoft Corp. (a) 169,500
1,500 Oracle Corp. (a) 36,938
-----------
650,869
-----------
Telephone Systems - 1.3%
2,000 Cincinnati Bell, Inc. 64,000
-----------
Total Common Stocks (Cost $3,632,065) $ 4,706,733
-----------
<PAGE>
REGIONAL OPPORTUNITY FUND: Ohio, Indiana, Kentucky
PORTFOLIO OF INVESTMENTS
February 28, 1998
Face Market
Amount Value
------ -----
REPURCHASE AGREEMENTS (b) - 4.6%
$227,000 Fifth Third Bank, 4.96%, dated 2/27/
due 3/2/1998, repurchase proceeds $227,094
(Cost $227,000) $ 227,000
-----------
Total Investments and Repurchase Agreements
at Value - 99.4% $ 4,933,733
Other Assets in Excess of Liabilities - 0.6% 31,701
-----------
Net Assets - 100.0% $ 4,965,434
===========
(a) Non-income producing security.
(b) Repurchase agreement is fully collateralized by $225,000 par value FHLMC
Pool #G10657, 7.50%, due 2/1/2012.
See accompanying notes to financial statements.
<PAGE>
REGIONAL OPPORTUNITY FUND: Ohio, Indiana, Kentucky
NOTES TO FINANCIAL STATEMENTS
February 28, 1998
1. SIGNIFICANT ACCOUNTING POLICIES
The Regional Opportunity Fund: Ohio, Indiana, Kentucky (the Fund) is a
non-diversified, open-end series of the Maplewood Investment Trust (the Trust),
a registered management investment company under the Investment Company Act of
1940 (the 1940 Act). The Trust was organized as a Massachusetts business trust
on August 12, 1992. The Fund began operations on January 3, 1995.
The Fund's investment objective is to provide long-term capital growth by
investing primarily in common stocks and other equity securities of
publicly-traded companies headquartered in Greater Cincinnati and the Cincinnati
tri-state region, and those companies having a significant presence in the
region.
The Fund currently offers only Class B shares sold subject to a contingent
deferred sales load if redeemed within five years from the date of purchase and
a distribution fee of up to 1% of average daily net assets.
The following is a summary of the Fund's significant accounting policies:
Securities valuation -- The Fund's portfolio securities are valued as of the
close of business of the regular session of the New York Stock Exchange
(currently 4:00 p.m., Eastern time). Securities which are traded
over-the-counter are valued at the last sales price, if available, otherwise, at
the last quoted bid price. Securities traded on a securities exchange are valued
based upon the closing price on the principal exchange where the security is
traded.
Repurchase agreements -- The Fund generally invests its cash reserves by
entering into repurchase agreements with its custodian bank. The repurchase
agreement, which is collateralized by U.S. Government obligations, is valued at
cost which, together with accrued interest, approximates market. At the time the
Fund enters into the repurchase agreement, the seller agrees that the value of
the underlying securities, including accrued interest, will at all times be
equal to or exceed the face amount of the repurchase agreement. In addition, the
Fund actively monitors and seeks additional collateral, as needed.
Share valuation -- The net asset value per share of the Fund is calculated daily
by dividing the total value of the Fund's assets, less liabilities, by the
number of shares outstanding. The offering price per share of the Fund is equal
to the net asset value per share. The redemption price per share is equal to the
net asset value per share, subject to a contingent deferred sales load if
redeemed within a five-year period from the date of initial purchase.
The charge declines from 5% to 0% over a five year period.
Investment income -- Interest income is accrued as earned. Dividend income is
recorded on the ex-dividend date.
Distributions to shareholders -- Dividends arising from net investment income,
if any, are declared and paid annually to shareholders of the Fund. Net realized
short-term capital gains, if any, may be distributed throughout the year and net
realized long-term capital gains, if any, are distributed at least once each
year. Income distributions and capital gain distributions are determined in
accordance with income tax regulations.
<PAGE>
REGIONAL OPPORTUNITY FUND: Ohio, Indiana, Kentucky
NOTES TO FINANCIAL STATEMENTS
February 28, 1998
Organization expenses -- Expenses of organization have been capitalized and are
being amortized on a straight-line basis over five years. In the event any of
the initial shares of the Fund are redeemed during the amortization period, the
redemption proceeds will be reduced by a pro rata portion of any unamortized
organization expenses in the same proportion as the number of initial shares
being redeemed bears to the number of initial shares of the Fund outstanding at
the time of the redemption.
Security transactions -- Security transactions are accounted for on trade date.
Securities sold are valued on a specific identification basis.
Allocation between classes -- During the period in which both Class A shares and
Class B shares were offered, investment income earned, realized capital gains
and losses and unrealized appreciation and depreciation were allocated daily to
each class of shares based upon its proportionate share of total net assets of
the Fund. Distribution expenses were charged directly to the class incurring the
expense. Common expenses which were not attributable to a specific class were
allocated daily to each class of shares based upon its proportionate share of
total net assets of the Fund.
Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of income and
expenses during the reporting period. Actual results could differ from those
estimates.
Federal income tax -- It is the Fund's policy to comply with the special
provisions of the Internal Revenue Code applicable to regulated investment
companies. As provided therein, in any fiscal year in which a Fund so qualifies
and distributes at least 90% of its taxable net income, the Fund (but not the
shareholders) will be relieved of federal income tax on the income distributed.
Accordingly, no provision for income taxes has been made.
In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also the Fund's intention to declare as dividends in
each calendar year at least 98% of its net investment income (earned during the
calendar year) and 98% of its net realized capital gains (earned during the
twelve months ended October 31) plus undistributed amounts from prior years.
The following information is based upon the federal income tax cost of portfolio
investments of $3,632,065 as of February 28, 1998:
Gross unrealized appreciation............................... $ 1,145,378
Gross unrealized depreciation............................... (70,710)
-----------
Net unrealized appreciation................................. $ 1,074,668
===========
As of February 28, 1998, the Fund had $61,821 of capital loss carryforwards for
federal income tax purposes, none of which expire prior to February 28, 2005. In
addition, the Fund elected to defer until its subsequent tax year $9,880 of
capital losses incurred after October 31, 1997. The Board of Trustees intends to
utilize these capital loss carryforwards and "post-October" losses in future
years to offset net realized capital gains prior to distribution to
shareholders.
<PAGE>
REGIONAL OPPORTUNITY FUND: Ohio, Indiana, Kentucky
NOTES TO FINANCIAL STATEMENTS
February 28, 1998
Reclassification of capital accounts -- For the year ended February 28, 1998,
the Fund had a net investment loss of $40,721 which was reclassified to paid-in
capital on the Statement of Assets and Liabilities. Such reclassification, the
result of permanent differences between financial statement and income tax
reporting requirements, has no effect on net assets or net asset value per
share.
2. INVESTMENT TRANSACTIONS
During the year ended February 28, 1998, purchases and proceeds from sales and
maturities of investment securities, other than short-term investments, amounted
to $3,393,696 and $515,122, respectively.
3. TRANSACTIONS WITH AFFILIATES
Certain officers of the Trust are also officers of CityFund Advisory, Inc. (the
Adviser) or Countrywide Fund Services, Inc. (CFS), the administrator, transfer
agent and accounting services agent for the Fund.
INVESTMENT ADVISORY AGREEMENT
The Fund's investments are managed by the Adviser under the terms of an
Investment Advisory Agreement. Under the Investment Advisory Agreement, the Fund
pays the Adviser a fee, which is computed and accrued daily and paid monthly at
an annual rate of 1.25% on its average daily net assets. The Adviser currently
intends to waive its advisory fees and reimburse expenses of the Fund to the
extent necessary to limit the total operating expenses of the Fund to 2.70% of
average daily net assets. For the year ended February 28, 1998, the Adviser
waived its entire advisory fee of $34,737 and reimbursed the Fund $52,011 for
other operating expenses.
ADMINISTRATION AGREEMENT
Under the terms of an Administration Agreement, CFS supplies non-investment
related administrative and compliance services for the Fund. CFS supervises the
preparation of tax returns, reports to shareholders, reports to and filings with
the Securities and Exchange Commission and state securities commissions, and
materials for meetings of the Board of Trustees. For these services, CFS
receives a monthly fee from the Fund at an annual rate of 0.15% on its average
daily net assets up to $50 million; 0.125% on the next $50 million of such net
assets; and 0.10% on such net assets in excess of $100 million, subject to a
$1,000 minimum monthly fee. For the year ended February 28, 1998, CFS earned
$12,000 of fees under the Agreement.
TRANSFER AGENT AND SHAREHOLDER SERVICING AGREEMENT
Under the terms of a Transfer Agent and Shareholder Servicing Agreement, CFS
maintains the records of each shareholder's account, answers shareholders'
inquiries concerning their accounts, processes purchases and redemptions of the
Fund's shares, acts as dividend and distribution disbursing agent and performs
other shareholder service functions. For these services, CFS receives a monthly
fee based on the number of shareholder accounts in the Fund, subject to a $1,000
minimum monthly fee for the Fund, or for each class of shares of the Fund, as
applicable. In addition, the Fund pays out-of-pocket expenses including, but not
limited to, postage and supplies. For the year ended February 28, 1998, CFS
earned $20,000 of fees under the Agreement.
<PAGE>
REGIONAL OPPORTUNITY FUND: Ohio, Indiana, Kentucky
NOTES TO FINANCIAL STATEMENTS
February 28, 1998
ACCOUNTING SERVICES AGREEMENT
Under the terms of an Accounting Services Agreement, CFS calculates the daily
net asset value per share and maintains the financial books and records of the
Fund. For these services, CFS receives a monthly fee of $2,000 from the Fund.
For the year ended February 28, 1998, CFS earned $24,000 of fees under the
Agreement.
DISTRIBUTION PLAN
The Trust has adopted a Distribution Plan (the Plan) for the Fund pursuant to
Rule 12b-1 under the 1940 Act. The Plan provides that the Fund may incur certain
costs related to the distribution of Fund shares, not to exceed 0.25% and 1.00%
of average daily net assets for Class A shares and Class B shares, respectively.
For the year ended February 28, 1998, the Fund incurred $919 and $24,010 of
distribution expenses for Class A shares and Class B shares, respectively, under
the Plan.
4. MANDATORY REDEMPTION OF CLASS A SHARES
Prior to October 31, 1997, the Fund offered two classes of shares: Class A
shares (sold subject to a maximum front-end sales load of 4% and a distribution
fee of up to 0.25% of average daily net assets of the class) and Class B shares
(sold subject to a contingent deferred sales load if redeemed within five years
from the date of purchase and a distribution fee of up to 1% of average daily
net assets of the class). On October 31, 1997, all outstanding Class A shares
were redeemed pursuant to a mandatory redemption program authorized by the Board
of Trustees.
<PAGE>
KPMG Peat Marwick LLP
1600 PNC Center
201 East Fifth Street
Cincinnati, OH 45202
Dayton, OH
Independent Auditors' Report
----------------------------
The Board of Trustees and Shareholders
The Maplewood Investment Trust:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of The Regional Opportunity Fund: Ohio, Indiana,
Kentucky (the "Fund"), a series of the Maplewood Investment Trust, as of
February 28, 1998, and the related statement of operations, statements of
changes in net assets, and the financial highlights for each of the periods
indicated herein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
February 28, 1998 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Regional Opportunity Fund: Ohio, Indiana, Kentucky as of February 28, 1998, and
the results of its operations, changes in its net assets and financial
highlights for the periods indicated herein, in conformity with generally
accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Cincinnati, Ohio
March 27, 1998
<PAGE>
DUNHILL INVESTMENT TRUST
------------------------
PART C. OTHER INFORMATION
-----------------
Item 24. Financial Statements and Exhibits
- ------- ---------------------------------
(a) (i) Financial Statements included in Part A:
Financial Highlights
(ii) Financial Statements included in Part B:
Annual Audited Financial Statements as of February 28, 1998
(b) Exhibits
(1) Agreement and Declaration of Trust*
(2) Bylaws*
(3) Inapplicable
(4) Inapplicable
(5) (i) Form of Management Agreement with Dunhill Investment
Advisors, Limited*
(ii) Form of Subadvisory Agreement with CityFund Advisory, Inc.*
(6) Inapplicable
(7) (i) Form of Underwriting Agreement with Alpha-Omega
Capital Corp.*
(ii) Form of Dealer Agreement
(8) Form of Custody Agreement*
<PAGE>
(9) (i) Form of Administrative Services Agreement with Dunhill
Investment Advisors, Limited*
(ii) Form of Transfer, Dividend Disbursing, Shareholder Service
and Plan Agency Agreement with Dunhill Investment Advisors,
Limited*
(iii)Form of Accounting Services Agreement with Fifth Third Bank
(10) (i) Share Opinion of Counsel
(ii) Tax Opinion of Counsel
(11) Consent of Independent Public Accountants
(12) Inapplicable
(13) Inapplicable
(14) Inapplicable
(15) Form of Plan of Distribution*
(16) Inapplicable
(17) Financial Data Schedule
(18) Inapplicable
- -------------------------------------
* Incorporated by reference to original Registration Statement on Form N-1A.
Item 25. Persons Controlled by or Under Common Control with Registrant.
- ------- --------------------------------------------------------------
After commencement of the public offering of the Registrant's shares,
the Registrant expects that no person will be directly or indirectly
controlled by or under common control with the Registrant.
Item 26. Number of Holders of Securities.
- -------- --------------------------------
As of May 1, 1998, there were no holders of the shares of beneficial
interest of the Registrant.
Item 27. Indemnification
- -------- ---------------
Article VI of the Registrant's Agreement and Declaration of Trust
provides for indemnification of officers and Trustees as follows:
<PAGE>
"Section 6.4 INDEMNIFICATION OF TRUSTEES, OFFICERS, ETC. Subject
to and except as otherwise provided in the Securities Act of
1933, as amended, and the 1940 Act, the Trust shall indemnify
each of its Trustees and Officers, including persons who serve at
the Trust's request as directors, officers or trustees of another
organization in which the Trust has any interest as a
shareholder, creditor or otherwise (hereinafter referred to as a
"Covered Person") against all liabilities, including but not
limited to amounts paid in satisfaction of judgments, in
compromise or as fines and penalties, and expenses, including
reasonable accountants' and counsel fees, incurred by any Covered
Person in connection with the defense or disposition of any
action, suit or other proceeding, whether civil or criminal,
before any court or administrative or legislative body, in which
such Covered Person my be or may have been involved as a party or
otherwise or with which such person may be or may have been
threatened, while in office or thereafter, by reason of being or
having been such a Trustee or officer, director or trustee, and
except that no Covered Person shall be indemnified against any
liability to the Trust or its Shareholders to which such Covered
Person would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of such Covered Person's
office.
Section 6.5 ADVANCES OF EXPENSES. The Trust shall advance
attorneys' fees or other expenses incurred by a Covered Person in
defending a proceeding to the full extent permitted by the
Securities Act of 1933, as amended, the 1940 Act, and Ohio
Revised Code Chapter 1707, as amended. In the event any of these
laws conflict with Ohio Revised Code Section 1701.13(e), as
amended, these law, and not Ohio Revised Code Section 1701.13(e),
shall govern.
Section 6.6 INDEMNIFICATION NOT EXCLUSIVE, ETC. The right of
indemnification provided by this Article VI shall not be
exclusive of or affect any other rights to which any such Covered
Person my be entitled. As used in this Article VI, "Covered
Person" shall include such person's heirs, executors and
administrators. Nothing contained in this article shall affect
any rights to indemnification to which personnel of the Trust,
other than Trustees and officers, and other persons may be
entitled by contract or otherwise under law, nor the power of the
Trust to purchase and maintain liability insurance on behalf of
any such person."
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to Trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the 1940 Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a Trustee, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such Trustee, officer or controlling person
in connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the 1940 Act and will be
governed by the final adjudication of such issue.
The Registrant expects to maintain a standard mutual fund and
investment advisory professional and directors and officers liability
policy. The policy will provide coverage to the Registrant, it
Trustees and officers. Coverage under the policy will include losses
by reason of any act, error, omission, misstatement, misleading
statement, neglect or breach of duty.
The Investment Management Agreement with Dunhill Investment Advisors,
Limited (the "Manager") and the Investment Advisory Agreement with
CityFund Advisory, Inc. (the "Advisor") provides that the Manager and
the Advisor shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Registrant in connection with
any investment policy or the purchase, sale, or retention of any
investment on the recommendation of the Manager or the Advisor;
provided, however, that nothing therein contained shall be construed
to protect the Manager and the Advisor against any liability to the
Registrant by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of reckless
disregard of its obligations and duties under the Agreements.
The Underwriting Agreement with Alpha-Omega Capital Corp. ( the
"Underwriter") provides that the Underwriter, its directors, officers,
employees, shareholders and control persons shall not be liable for
any error of judgment or mistake of law or for any loss suffered by
Registrant in connection with the matters to which the Agreement
relates, except a loss resulting from willful misfeasance, bad faith
or negligence on the part of any of such persons in the performance of
Underwriter's duties or from the reckless disregard by any of such
persons of Underwriter's obligations and duties under the Agreement.
Registrant will advance attorneys' fees or other expenses incurred by
any such person in defending a proceeding, upon the undertaking by or
on behalf of such person to repay the advance if it is ultimately
determined that such person is not entitled to indemnification.
Item 28. Business And Other Connections of the Investment Adviser
- -------- --------------------------------------------------------
(a) The Manager will provide investment supervisory services to
Registrant and serve as Registrant's transfer agent and
administrative services agent. The Advisor will provide
discretionary investment advisory services to Registrant.
(b) The directors and officers of the Manager and the Advisor and any
other business, profession, vocation or employment of a
substantial nature engaged in at any time during the past two
years:
(i) Jasen M. Snelling - President of the Manager and the Advisor
(ii) Jerry A. Smith - Secretary and Treasurer of the Manager and
the Advisor; registered representative with the Underwriter;
formerly a registered representative with Equitable Life
Assurance Society.
<PAGE>
Item 29. Principal Underwriters
- -------- ----------------------
(a) Inapplicable
(b) The following list sets forth the directors and officers of
Alpha-Omega Capital Corp., the Trust's underwriter.
Position with Position with
Name Underwriter Registrant
---- ----------- ----------
Bryan E. Pifer President and None
6318 Paxton Woods Director
Loveland, Ohio 45140
William C. Riffle Director None
700 W. Pete Rose Way
Cincinnati, OH 45203
Jerry Fedasch Vice President None
700 W. Pete Rose Way
Cincinnati, OH 45203
(c) None
Item 30. Location of Accounts and Records
- -------- --------------------------------
Accounts, books and other documents required to be maintained
by Section 31(a) of the Investment Company Act of 1940 and the
Rules promulgated thereunder will be maintained by the
Registrant at the principal executive offices of its
investment advisors. Certain records, including records
relating to the physical possession of Registrant's
securities, may be maintained at the offices of Registrant's
custodian.
Item 31. Management Services Not Discussed in Parts A or B
- -------- -------------------------------------------------
Inapplicable
Item 32. Undertakings
- -------- ------------
(a) Inapplicable
(b) Inapplicable
(c) The Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
report to shareholders, upon request and without charge.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed below on its behalf by the undersigned, thereunto duly
authorized, in the City of Cincinnati and State of Ohio, on the 2nd day of June,
1998.
DUNHILL INVESTMENT TRUST
By: /s/ Jasen M. Snelling
------------------------
Jasen M. Snelling
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Jasen M. Snelling Trustee and June 2, 1998
- --------------------- President
Jasen M. Snelling
/s/ Jerry A. Smith Secretary and June 2, 1998
- ------------------ Treasurer
Jerry A. Smith
<PAGE>
INDEX TO EXHIBITS
-----------------
(1) Agreement and Declaration of Trust*
(2) Bylaws*
(3) Inapplicable
(4) Inapplicable
(5) (i) Form of Management Agreement*
(ii) Form of Subadvisory Agreement*
(6) Inapplicable
(7) (i) Form of Underwriting Agreement*
(ii) Form of Dealer's Agreement
(8) Form of Custody Agreement*
(9) (i) Form of Administrative Services Agreement*
(ii) Form of Transfer, Dividend Disbursing, Shareholder Service
and Plan Agency Agreement*
(iii) Form of Accounting Services Agreement
(10) (i) Share Opinion of Counsel
(ii) Tax Opinion of Counsel
(11) Consent of Independent Public Accountant
(12) Inapplicable
(13) Inapplicable
(14) Inapplicable
(15) Form of Plan of Distribution*
(16) Inapplicable
(17) Financial Data Schedule
(18) Inapplicable
- -------------------------------------------------------
* Incorporated by reference to original Registration Statement on Form N-1A.
ALPHA-OMEGA CAPITAL CORP.
700 WEST PETE ROSE WAY, #127
CINCINNATI, OHIO 45203
Dealer's Agreement
Alpha-Omega Capital Corp. ("Underwriter") invites you, as a selected
dealer, to participate as principal in the distribution of shares (the "Shares")
of the mutual funds set forth on Schedule A to this Agreement (the "Funds"), of
which it is the exclusive underwriter. Underwriter agrees to sell to you,
subject to any limitations imposed by the Funds, Shares issued by the Funds and
to promptly confirm each sale to you. All sales will be made according to the
following terms:
1. All offerings of any of the Shares by you must be made at the public
offering prices, and shall be subject to the conditions of offering, set forth
in the then current Prospectus of the Funds and to the terms and conditions
herein set forth, and you agree to comply with all requirements applicable to
you of all applicable laws, including federal and state securities laws, the
rules and regulations of the Securities and Exchange Commission, and the Rules
of Fair Practice of the National Association of Securities Dealers, Inc. (the
"NASD"), including Section 24 of the Rules of Fair Practice of the NASD. You
will not offer the Shares for sale in any state or other jurisdiction where they
are not qualified for sale under the Blue Sky Laws and regulations of such state
or jurisdiction, or where you are not qualified to act as a dealer. Upon
application to Underwriter, Underwriter will inform you as to the states or
other jurisdictions in which Underwriter believes the Shares may legally be
sold.
2. (a) You will receive a discount from the public offering price
("concession") on all Shares purchased by you from Underwriter as indicated on
Schedule A, as it may be amended by Underwriter from time to time.
(b) In all transactions in open accounts in which you are designated
as Dealer of Record, you will receive the concessions as set forth on Schedule
A. You hereby authorize Underwriter to act as your agent in connection with all
transactions in open accounts in which you are designated as Dealer of Record.
All designations as Dealer of Record, and all authorizations of Underwriter to
act as your Agent pursuant thereto, shall cease upon the termination of this
Agreement or upon the investor's instructions to transfer his open account to
another Dealer of Record. No dealer concessions will be allowed on purchases
generating less than $1.00 in dealer concessions.
(c) As the exclusive underwriter of the Shares, Underwriter reserves
the privilege of revising the discounts specified on Schedule A at any time by
written notice.
3. Concessions will be paid to you at t he address of your principal
office, as indicated below in your acceptance of this Agreement.
4. Underwriter reserves the right to cancel this Agreement at any time
without notice if any Shares shall be offered for sale by you at less than the
then current public offering prices determined by, or for, the Funds.
5. All orders are subject to acceptance or rejection by Underwriter in its
sole discretion. The Underwriter reserves the right, in its discretion, without
notice, to suspend sales or withdraw the offering of Shares entirely.
6. Payment shall be made to the Funds and shall be received by its Transfer
Agent within three (3) business days after the acceptance of your order or such
shorter time as may be required by law. With respect to all Shares ordered by
you for which payment has not been received, you hereby assign and pledge to
Underwriter all of your right, title and interest in such Shares to secure
payment therefor. You appoint Underwriter as your agent to execute and deliver
all documents necessary to effectuate any of the transactions described in this
paragraph. If such payment is not received within the required time period,
Underwriter reserves the right, without notice, and at its option, forthwith (a)
to cancel the sale, (b) to sell the Shares ordered by you back to the Funds, or
(c) to assign your payment obligation, accompanied by all pledged Shares, to any
person. You agree that Underwriter may hold you responsible for any loss,
including loss of profit, suffered by the Funds, its Transfer Agent or
Underwriter, resulting from your failure to make payment within the required
time period.
<PAGE>
7. No person is authorized to make any representations concerning Shares of
the Funds except those contained in the current applicable Prospectus and
Statement of Additional Information and in sales literature issued and furnished
by Underwriter supplemental to such Prospectus. Underwriter will furnish
additional copies of the current Prospectus and Statement of Additional
Information and such sales literature and other releases and information issued
by Underwriter in reasonable quantities upon request.
8. Under this Agreement, you act as principal and are not employed by
Underwriter as broker, agent or employee. You are not authorized to act for
Underwriter nor to make any representation on its behalf; and in purchasing or
selling Shares hereunder, you rely only upon the current Prospectus and
Statement of Additional Information furnished to you by Underwriter from time to
time and upon such written representations as may hereafter be made by
Underwriter to you over its signature.
9. You appoint the transfer agent for the Funds as your agent to execute
the purchase transactions of Shares in accordance with the terms and provisions
of any account, program, plan or service established or used by your customers
and to confirm each purchase to your customers on your behalf, and you guarantee
the legal capacity of your customers purchasing such Shares and any co-owners of
such Shares.
10. You will (a) maintain all records required by law relating to
transactions in the Shares, and upon the request of Underwriter, or the request
of the Funds, promptly make such records available to Underwriter or to the
Funds as are requested, and (b) promptly notify Underwriter if you experience
any difficulty in maintaining the records required in the foregoing clause in an
accurate and complete manner. In addition, you will establish appropriate
procedures and reporting forms and schedules, approved by Underwriter and by the
Funds, to enable the parties hereto and the Funds to identify all accounts
opened and maintained by your customers.
11. Underwriter has adopted compliance standards as to when particular
classes of the Dual Pricing Funds may appropriately be sold to particular
investors. You agree that all persons associated with you will conform to such
standards when selling Shares.
12. Each party hereto represents that it is presently, and, at all times
during the term of this Agreement, will be, a member in good standing of the
NASD and agrees to abide by all its Rules of Fair Practice including, but not
limited to, the following provisions:
(a) You shall not withhold placing customers' orders for any Shares so
as to profit yourself as a result of such withholding. You shall not purchase
any Shares from Underwriter other than for investment, except for the purpose of
covering purchase orders already received.
(b) All conditional orders received by Underwriter must be at a
specified definite price.
(c) If any Shares purchased by you are repurchased by the Funds (or by
Underwriter for the account of the Funds) or are tendered for redemption within
seven business days after confirmation of the original sale of such Shares (1)
you agree to forthwith refund to Underwriter the full concession allowed to you
on the original sale, such refund to be paid by Underwriter to the Funds, and
(2) Underwriter shall forthwith pay to the Funds that part of the discount
retained by Underwriter on the original sale. Notice will be given to you of any
such repurchase or redemption within ten days of the date on which the
repurchase or redemption request is made.
(d) Neither Underwriter, as exclusive underwriter for the Funds, nor
you as principal, shall purchase any Shares from a record holder at a price
lower than the net asset value then quoted by, or for, the Funds. Nothing in
this subparagraph shall prevent you from selling Shares for the account of a
record holder to Underwriter or the Funds at the net asset value currently
quoted by, or for, the Funds and charging the investor a fair commission for
handling the transaction.
(e) You warrant on behalf of yourself and your registered
representatives and employees that any purchase of Shares at net asset value by
the same pursuant to the terms of the Prospectus of the applicable Fund is for
investment purposes only and not for purposes of resale. Shares so purchased may
be resold only to the Fund which issued them.
13. You agree that you will indemnify Underwriter, the Funds, the Funds'
transfer agent and the Funds' custodians and hold such persons harmless from any
claims or assertions relating to the lawfulness of your company's participation
in this Agreement and the transactions contemplated hereby or relating to any
activities of any persons or entities affiliated with your company which are
performed in connection with the discharge of your responsibilities under this
Agreement. If any such claims are asserted, the indemnified parties shall have
the right to engage in their own defense, including the selection and engagement
of legal counsel of their choosing, and all costs of such defense shall be borne
by you.
<PAGE>
14. This Agreement will automatically terminate in the event of its
assignment. Either party hereto may cancel this Agreement without penalty upon
ten days' written notice. This Agreement may also be terminated as to any Fund
at any time without penalty by the vote of a majority of the members of the
Board of Trustees of the terminating Fund who are not "interested persons" (as
such term is defined in the Investment Company Act of 1940) and who have no
direct or indirect financial interest in the applicable Fund's Distribution
Expense Plan pursuant to Rule 12b-1 under the Investment Company Act of 1940 or
any agreement relating to such Plan, including this Agreement, or by a vote of a
majority of the outstanding voting securities of the terminating Fund on ten
days' written notice.
15. All communications to Underwriter should be sent to Alpha-Omega Capital
Corp., 700 West Pete Rose Way, #127, Cincinnati, Ohio 45203, or at such other
address as Underwriter may designate in writing. Any notice to you shall be duly
given if mailed or telegraphed to you at the address of your principal office,
as indicated below in your acceptance of this Agreement.
16. This Agreement supersedes any other agreement with you relating to the
offer and sale of the Shares, and relating to any other matter discussed herein.
17. This Agreement shall be binding (i) upon placing your first order with
Underwriter for the purchase of Shares, or (ii) upon receipt by Underwriter in
Cincinnati, Ohio of a counterpart of this Agreement duly accepted and signed by
you, whichever shall occur first. This Agreement shall be construed in
accordance with the laws of the State of Ohio.
18. The undersigned, executing this Agreement on behalf of Dealer, hereby
warrants and represents that he is duly authorized to so execute this Agreement
on behalf of Dealer.
If the foregoing is in accordance with your understanding of our agreement,
please sign and return all copies of this Agreement to the Underwriter.
ACCEPTED BY DEALER ALPHA-OMEGA CAPITAL CORP.
By: By:
---------------------------------- ---------------------------------
Authorized Signature
DATE: APRIL 21, 1997
- ------------------------------------- -------------------------------
Type or Print Name, Position
- -------------------------------------
Dealer Name
- -------------------------------------
Address
- -------------------------------------
Address
- -------------------------------------
Phone
- -------------------------------------
Date
FUND ACCOUNTING AND SERVICES AGREEMENT
THIS AGREEMENT is made as of _______ , 1998, by and among _____________________,
("Administrator"), and THE FIFTH THIRD BANK, a banking company organized under
the laws of the State of Ohio ("Fifth Third"), and __________________ (the
"Fund").
W I T N E S S E T H
WHEREAS, the Fund is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "Investment Company
Act") with portfolios as listed in Schedule A (the "Portfolios");
WHEREAS, Administrator has been appointed manager of the Fund, including
each portfolio, and Administrator has accepted such appointments;
WHEREAS, Administrator and the Fund have entered into a management
agreement (the "Management Agreement") pursuant to which Administrator provides
management, administrative and other services to the Fund and certain of said
services are commonly referred to as those performed by an administrator;
WHEREAS, Fifth Third provides certain fund accounting, administrative and
other services to investment companies; and
WHEREAS, Administrator, with the consent of the Fund, desires to retain
Fifth Third to provide fund accounting and other services for the portfolios of
the Fund listed on Exhibit A, as may be amended from time to time (each a
Portfolio), and Fifth Third is willing to provide such services, all as more
fully set forth below;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, and intending to be legally bound hereby, the parties hereto
agree as follows:
(1) Definitions, As Used in This Agreement.
(a) Authorized Person means any officer of the Fund and any other
person duly authorized by the Fund's Board of Directors to give
Oral and Written Instructions on behalf of the Fund and listed on
the Authorized Persons Appendix attached hereto and made a part
hereof or any amendment thereto as may be received by Fifth
Third. An Authorized Person's scope of authority may be limited
by the Fund by setting forth such limitation in the Authorized
Persons Appendix.
(b) Oral Instructions mean instructions orally transmitted to and
accepted by Fifth Third because such instructions are: (i) given
by an Authorized Person or from a person reasonably believed by
Fifth Third to have been an Authorized Person, (ii) recorded and
kept among the records of Fifth Third made in the ordinary course
of business and (iii) orally confirmed by Fifth Third. The Fund
and Administrator shall cause all Oral Instructions to be
confirmed by Written Instructions. If such Written Instructions
confirming Oral Instructions are not received by Fifth Third
prior to a transaction, it shall in no way affect the validity of
the transaction or the authorization thereof by the Fund or
Administrator. If Oral Instructions vary from the Written
Instructions which purport to confirm them, Fifth Third shall
attempt to notify the Fund or Administrator of such variance but
such Oral Instructions will govern unless Fifth Third has not yet
acted.
(c) Written Instructions mean (i) written communications actually
received by Fifth Third and signed by one or more persons as the
Board of Directors shall have from time to time authorized, or
(ii) communications by fax or any other such system from a person
or persons reasonably believed by Fifth Third to be Authorized or
(iii) communications transmitted electronically through the
Institutional Delivery System (IDS), or any other similar
electronic instruction system acceptable to Fifth Third and
approved by resolutions of the Board of Directors, a copy of
which, certified by the Secretary, shall have been delivered to
Fifth Third.
(d) Shares mean the shares of beneficial interest of any series or
class of the Fund.
<PAGE>
2. Appointment. Administrator hereby appoints Fifth Third to provide fund
accounting and other specified services to each of the Portfolios set forth in
Exhibit A, as may be amended from time to time, in accordance with the terms set
forth in this Agreement. Fifth Third accepts such appointment and agrees to
furnish such specified services.
3. Delivery of Documents. Administrator has provided or, where applicable,
will provide Fifth Third with the following:
(a) certified or authenticated copies of the resolutions of the
Fund's Board of Directors, approving the appointment of Fifth
Third or its affiliates to provide services to each Portfolio and
approving this Agreement;
(b) a copy of the Fund's most recent effective registration
statement;
(c) a copy of the Fund's advisory agreement or agreements;
(d) a copy of any distribution agreement or similar agreement made
with respect to each class of Shares;
(e) a copy of the Management Agreement and any administration
agreements or similar agreements with respect to the Fund;
(f) a copy of any shareholder servicing agreement made in respect of
the Fund or the Fund; and
(g) copies (certified or authenticated, where applicable) of any and
all amendments or supplements to the foregoing.
4. Compliance with Rules and Regulations. Fifth Third undertakes to comply
with all applicable requirements of the Investment Company Act, and any laws,
rules and regulations of governmental authorities having jurisdiction with
respect to the duties to be performed by Fifth Third hereunder. Except as
specifically set forth herein, Fifth Third assumes no responsibility for such
compliance by Administrator, the Fund or any Portfolio.
5. Instructions. Fifth Third will provide fund accounting and such other
services as is agreed hereunder.
(a) With respect to other services Fifth Third shall act only upon
Oral or Written Instructions.
(b) Fifth Third shall be entitled to rely upon any Oral and Written
Instructions it receives from an Authorized Person (or from a
person reasonably believed by Fifth Third to be an Authorized
Person) pursuant to this Agreement. Fifth Third may assume that
any Oral or Written Instruction received hereunder is not in any
way inconsistent with the provisions of organizational documents
or this Agreement or of any vote, resolution or proceeding of the
Fund's Board of Directors or of the Fund's shareholders, unless
and until Fifth Third receives Written Instructions to the
contrary.
(c) Administrator agrees to forward, or to cause the Fund to forward
to Fifth Third, Written Instructions confirming Oral Instructions
so that Fifth Third receives the Written Instructions by the
close of business on the same day that such Oral Instructions are
received. The fact that such confirming Written Instructions are
not received by Fifth Third shall in no way invalidate the
transactions or enforceability of the transactions authorized by
the Oral Instructions. Where Oral or Written Instructions
reasonably appear to have been received from an Authorized
Person, Fifth Third shall incur no liability to Administrator or
the Fund in acting upon such Oral or Written Instructions.
6. Right to Receive Advice.
(a) Advice of the Fund. If Fifth Third is in doubt as to any action
it should or should not take, Fifth Third shall request
directions or advice, including Oral or Written Instructions,
from Administrator or the Fund.
<PAGE>
(b) Advice of Counsel. If Fifth Third shall be in doubt as to any
question of law pertaining to any action it should or should not
take, Fifth Third shall request advice from such counsel of its
own choosing and the Fund shall reimburse such reasonable cost.
(c) Conflicting Advice. In the event of a conflict between
directions, advice or Oral or Written Instructions Fifth Third
receives from Administrator or the Fund and the advice Fifth
Third receives from counsel, Fifth Third shall inform the Fund of
the conflict and seek resolution.
(d) Protection of Fifth Third. Fifth Third shall be protected in any
action it takes or does not take in reliance upon directions,
advice or Oral or Written Instructions it receives from
Administrator, the Fund or counsel and which Fifth Third
believes, in good faith, to be consistent with those directions,
advice or Oral or Written Instructions. Nothing in this section
shall be construed so as to impose an obligation upon Fifth Third
(i) to seek such directions, advice or Oral or Written
Instructions, or (ii) to act in accordance with such directions,
advice or Oral or Written Instructions unless, under the terms of
other provisions of this Agreement. Nothing in this subsection
shall excuse Fifth Third when an action or omission on the part
of Fifth Third constitutes willful misfeasance, lack of good
faith, or reckless disregard by Fifth Third of its duties,
obligation or responsibilities set forth in this Agreement.
7. Records; Visits.
(a) The books and records pertaining to the Fund and the Portfolios
which are in the possession or under the control of Fifth Third
shall be the property of the Fund. Such books and records shall
be prepared, maintained and preserved as required by the
Investment Company Act and other applicable Securities Laws,
rules and regulations. The Fund and Authorized Persons shall have
access to such books and records at all times during Fifth
Third's normal business hours. Upon the reasonable request of the
Fund, copies of any such books and records shall be provided by
Fifth Third to the Fund or to an Authorized Person, at the Fund's
expense.
(b) Fifth Third shall keep the following records:
(i) all books and records relating to the services it performs
hereunder with respect to a Portfolio's books of account;
(ii) records relating to the services it performs hereunder with
respect to a Portfolio's securities transactions; and
(iii)all other books and records as Fifth Third is required to
maintain pursuant to Rule 31a-1 of the Investment Company
Act in connection with the services provided hereunder.
8. Confidentiality. Fifth Third agrees to keep confidential all records of
the Fund and information relating to the Fund and its shareholders (past,
present and future), unless the release of such records of information is
otherwise consented to, in writing, by Administrator or the Fund. The
Administrator and the Fund agree that such consent shall not be unreasonably
withheld and may not be withheld where Fifth Third may be exposed to civil or
criminal contempt proceedings or when required to divulge such information or
records to duly constituted authorities.
9. Liaison with Accountants. Fifth Third shall act as liaison with the
Fund's independent public accountants and shall provide account analysis, fiscal
year summaries, and other audit-related schedules with respect to the services
provided to each Portfolio. Fifth Third shall take all reasonable action in the
performance of its duties under this Agreement to assure that the necessary
information in Fifth Third's control is made available to such accountants for
the expression of their opinion, as required by the Fund.
10. Disaster Recovery. Fifth Third shall maintain in effect a disaster
recovery plan, and enter into any agreement necessary with appropriate parties
making reasonable provisions for emergency use of electronic data processing
equipment customary in the industry. In the event of equipment failures, Fifth
Third shall, at no additional expense to the Fund, take reasonable steps to
minimize service interruptions. Fifth Third shall have no liability with respect
to the loss of data or service interruptions caused by equipment failure
provided such loss or interruption is not caused by Fifth Third's own willful
misfeasance or gross negligence.
<PAGE>
11. Compensation. As compensation for services rendered by Fifth Third
during the term of this Agreement, the Fund will pay to Fifth Third a fee or
fees set forth in Exhibit B, as may be amended from time to time. It is agreed
that fees set forth in Exhibit B may be increased with not less than ninety (90)
days written notice. In the event that Exhibit C is amended such that additional
services as requested by the Fund are required from Fifth Third on an ongoing
basis, with the approval of the Fund, additional fees may be charged as
applicable. The fee for the period from the day of the year this Agreement is
entered into until the end of that year shall be prorated according to the
proportion that such period bears to the full annual period.
12. Indemnification.
(a) The Fund and Administrator agree to indemnify and hold harmless
Fifth Third and its agents or subcontractor from all taxes,
charges, expenses, assessments, claims and liabilities
(including, without limitation, liabilities arising under the
Securities Laws and any state or foreign securities and blue sky
laws, and amendments thereto), and expenses, including (without
limitation) attorneys' fees and disbursements arising directly or
indirectly from any action or omission to act which Fifth Third
takes in reasonable reliance on Oral or Written Instructions from
Administrator or the Fund. Fifth Third, shall not be indemnified
against any liability (or any expenses incident to such
liability) arising out of Fifth Third's own willful misfeasance,
lack of good faith or reckless disregard of its duties and
obligations under this Agreement. For any legal proceedings
giving rise to this indemnification, the Fund shall be entitled
to defend or prosecute any claim in the name of Fifth Third at
the Fund's own expense through counsel of its own choosing if it
gives written notice to Fifth Third within ten (10) business days
of receiving notice of such claim.
(b) Fifth Third agrees to indemnify and hold harmless Administrator
and the Fund from all taxes, charges, expenses, assessments,
claims and liabilities (excluding, liabilities arising under the
Securities Laws and any state or foreign securities and blue sky
laws, and amendments thereto), and expenses, including (without
limitation) attorneys' fees and disbursements arising directly
from any action or omission of Fifth Third's own willful
misfeasance, bad faith, gross negligence or reckless disregard of
its duties and obligations under this Agreement. For any legal
proceedings giving rise to this indemnification, Fifth Third
shall be entitled to defend or prosecute any claim in the name of
Administrator or the Fund at Fifth Third's own expense through
counsel of its own choosing if it gives written notice to
Administrator or the Fund within ten (10) business days of
receiving notice of such claim.
13. Responsibilities of Fifth Third.
(a) Fifth Third shall be under no duty to take any action on behalf
of Administrator, the Fund or any Portfolio except as
specifically set forth herein or as may be specifically agreed to
by Fifth Third in writing. Fifth Third shall be obligated to
exercise commercially reasonable care and diligence in the
performance of its duties hereunder, to act in good faith and act
within reasonable limits, in performing services provided for
under this Agreement. Fifth Third shall only be liable for actual
damages arising out of Fifth Third's failure to perform its
duties under this Agreement to the extent such damages arise out
of Fifth Third's willful misfeasance, bad faith, gross negligence
or reckless disregard of such duties.
(b) In no event shall Bank be liable for any special, consequential,
extraordinary or punitive damages, arising from the performance
or non-performance of Bank under this Agreement, or Bank's
failure to comply with any of the terms of this Agreement. Bank's
cumulative liability within a calendar year shall be limited to
the Fund or any party claiming by, through or on behalf of the
Fund for the initial and all subsequent renewal terms of this
Agreement, to the lessor of (a) the actual damages sustained by
the Fund; or (b) one-half of the net fees paid to the Bank, but
not to exceed one half of the net fees paid to the bank within
the prior twelve calendar months as in accordance with Agreement.
(c) In the unlikely event of a Net Asset Value break on the Fund,
actual damages sustained by the Fund shall be calculated using
the industry standard penny per share or 1/2% of Net Asset Value
decision table. (See Exhibit D)
(d) Without limiting the generality of the foregoing or of any other
provision of this Agreement,
(i) Fifth Third shall not be liable for losses beyond its
reasonable control, provided that Fifth Third has acted in
accordance with the standard of care set forth above; and
(ii) Fifth Third shall not be liable for:
(A) the validity or invalidity or authority or lack thereof
of any Oral or Written Instruction, notice or other
instrument which conforms to the applicable
requirements of this Agreement, and which Fifth Third
reasonably believes to be genuine; or
(B) subject to Section 10, delays or errors or loss of data
occurring by reason of circumstances beyond Fifth
Third's control, including acts of civil or military
authority, national emergencies, non Fifth Third labor
difficulties, fire, flood, catastrophe, acts of God,
insurrection, war, riots or failure of the mails,
transportation, communication or power supply.
14. Description of Accounting Services on a Continuous Basis. Fifth Third
will perform accounting services as deemed industry standard and/or agreed upon
with Customer at the time of conversion. (See Exhibit C for Standard Services)
15. Description of Other Services on a Continuous Basis. Fifth Third will
perform other services at the request of the Customer, documented previous to
conversion.
16. Duration and Termination. This Agreement shall continue until
terminated by either Administrator, the Fund or Fifth Third on ninety (90) days'
prior written notice to the other party.
17. Notices. All notices and other communications, including Written
Instructions, shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. If notice is sent by confirming telegram, cable, telex
or facsimile sending device, it shall be deemed to have been given immediately.
If notice is sent by first class mail, it shall be deemed to have been given
three days after it has been mailed. If notice is sent by messenger, it shall be
deemed to have been given on the day it is delivered. Notices shall be addressed
(a) if to Fifth Third:
Fountain Square Plaza
Cincinnati, Ohio 45263
Attention: Fund Accounting Manager
(b) if to the Fund:
----------------------------
----------------------------
----------------------------
(c) if to Administrator:
----------------------------
----------------------------
----------------------------
(d) if to none of the foregoing, at such other address as shall have
been provided by like notice to the sender of any such notice or
other communication by the receiving party.
18. Amendments. This Agreement, or any term thereof, may be changed or
waived only by written amendment, signed by the party against whom enforcement
of such change or waiver is sought.
19. Delegation; Assignment. Fifth Third may assign its rights and delegate
its duties hereunder upon prior written consent of Administrator and the Fund to
any wholly-owned direct or indirect subsidiary of Fifth Third, provided that:
(a) Fifth Third gives Administrator and the Fund sixty (60) days' prior written
notice;
(b) the delegate (or assignee) agrees with Fifth Third, Administrator
and the Fund to comply with all relevant provisions of the
Securities Laws; and
(c) Fifth Third and such delegate (or assignee) promptly provide such
information as Administrator may request, and respond to such
questions as Administrator or the Fund may ask, relative to the
delegation (or assignment), including (without limitation) the
capabilities of the delegate (or assignee).
20. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
21. Further Actions. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
22. Miscellaneous.
(a) Entire Agreement. This Agreement embodies the entire agreement
and understanding among the parties and supersedes all prior
agreements and understandings relating to the subject matter
hereof, provided that Administrator and Fifth Third may embody in
one or more separate documents their agreement, if any, with
respect to delegated duties and Oral Instructions.
(b) Captions. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction
or effect.
(c) Governing Law. This Agreement will be governed and construed in
accordance with the laws of the State of New York without regard
to principles or conflicts of law. The parties agree that venue
for any action or proceeding brought pursuant to this Agreement
shall be in the state or federal courts located in the State of
New York.
(d) Partial Invalidity. 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.
(e) Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
(f) Facsimile Signatures. The facsimile signature of any party to
this Agreement shall constitute the valid and biding execution
hereof by such party.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
THE FIFTH THIRD BANK "Administrator"
By: By:
---------------------------------- ----------------------------------
Its: Its:
--------------------------------- ---------------------------------
"Fund"
By:
----------------------------------
Its:
---------------------------------
<PAGE>
EXHIBIT A
PORTFOLIOS OF FUNDS
THIS EXHIBIT A, dated as of ______________, _____, is Exhibit A to the Fund
Accounting and Services Agreement dated as of ________________ by and among the
Administrator, Fifth Third Bank and the Fund. This Exhibit A shall supersede all
previous forms of Exhibit A.
THE FIFTH THIRD BANK "Administrator"
By: By:
---------------------------------- ----------------------------------
Its: Its:
--------------------------------- ---------------------------------
"Fund"
By:
----------------------------------
Its:
---------------------------------
<PAGE>
EXHIBIT B
FEE SCHEDULE
THIS EXHIBIT B, dated as of ______________, _____, is Exhibit B to the Fund
Accounting and Services Agreement dated as of ________________ by and among the
Administrator, Fifth Third Bank and the Fund. This Exhibit B shall supersede all
previous forms of Exhibit B.
The Fund will pay Fifth Third an annual fund accounting and service fee (the
"Fee"), to be calculated daily and paid monthly. The annual Fee for each
Portfolio shall be an asset based fee, exclusive of out-of-pocket expenses, with
a minimum monthly payment as set forth below:
Asset Monthly Additional Other
Funds Based Fees Minimum Class Services
Monthly Monthly
The Fund will also reimburse Fifth Third for its out-of-pocket expenses incurred
in performing its services under this Agreement, including, but not limited to:
postage and mailing, telephone, telex, overnight courier services and outside
independent pricing service charges, and record retention/storage.
THE FIFTH THIRD BANK "Administrator"
By: By:
---------------------------------- ----------------------------------
Its: Its:
--------------------------------- ---------------------------------
"Fund"
By:
----------------------------------
Its:
---------------------------------
<PAGE>
EXHIBIT C
Fifth Third will perform the following accounting services with respect to each
Portfolio:
a) Journalize investment, capital share and income and expense activities;
b) Verify investment buy/sell trade tickets when received from the investment
adviser for a Portfolio (the "Money Manager") and transmit trades to the
Fund's custodian (the "Custodian") for proper settlement;
c) Maintain individual ledgers for investment securities;
d) Maintain historical tax lots for each security;
e) Reconcile cash and investment balances with the Custodian, and provide the
Money Manager with the beginning cash balance available for investment
purposes;
f) Update the cash availability daily;
g) Post to and prepare the Funds' Trial Balance;
h) Accrue Fund expenses on a daily basis according to budgets received from
the Money Manager or Funds' Administrator.
i) Control all disbursements and authorize such disbursements upon Written
Instructions;
j) Obtain security market quotes from independent pricing services, if
available, approved by the Money Manager, or if such quotes are
unavailable, then obtain such prices from the Money manager, and in either
case calculate the market value of each Portfolio's investments;
k) Transmit or mail a copy of the daily portfolio valuation to the Money
Manager;
l) Compute net asset value;
m) As appropriate, compute yields, total return, expense ratios, portfolio
turnover rate, and, if required, portfolio average dollar-weighted
maturity; and
n) Make available, on a monthly basis, various reports from the Fund
accounting system, including:
Schedule of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Cash Statement
Schedule of Capital Gains and Losses.
CHRISTOPHER J. SMITH
ATTORNEY AND COUNSELOR
867 THORNTREE COURT, SUITE 100
BLOOMFIELD HILLS, MICHIGAN 48304
(248) 594-3161 PHONE
(248) 594-3167 FAX
================================================================================
Thursday, May 28, 1998
Dunhill Investment Trust
7424 Jager Court
Cincinnati, Ohio 45230
Ladies and Gentlemen:
You have requested my opinion in connection with the registration by Dunhill
Investment Trust, an Ohio business trust (the "Trust"), of an indefinite number
of shares of beneficial interest of the Regional Opportunity Fund series of the
Trust (the "Shares") authorized by the Trust's Agreement and Declaration of
Trust, which has been filed with the Securities and Exchange Commission as an
exhibit to the Trust's registration statement on Form N-1A (File No. 333-
48753), as amended (the "Registration Statement"), under the Securities Act of
1933 and the Investment Company Act of 1940.
I have examined and relied upon originals or copies, certified or otherwise
identified to my satisfaction, of such records, agreements, documents and other
instruments and certificates or comparable documents of public officials and of
officers and representatives of the Trust, and I have made such inquiries of the
officers and representatives of the Trust, as I have deemed relevant and
necessary as the basis for the opinion hereinafter set forth.
In such examination, I have assumed, without independent verification, the
genuineness of all signatures (whether original or photostatic) and the
authenticity of all documents submitted to me as originals and the conformity to
authentic original documents of all documents submitted to me as certified or
photostatic copies. As to all questions of fact material to such opinion, I have
relied upon the certificates referred to hereinabove. I have assumed, without
independent verification, the accuracy of the relevant facts stated therein.
This letter expressed my opinion as to the provisions of the Trust's Agreement
and Declaration of Trust and the laws of the State of Ohio applying to business
trusts generally, but does not extend to Ohio Securities Act or to federal
securities or other laws.
Based on the foregoing, and subject to the qualifications set forth herein, I am
of the opinion that the Shares have been duly and validly authorized, and, when
issued and delivered as described in the Registration Statement, will be fully
paid and nonassessable by the Trust.
I hereby consent to the filing of this opinion as an exhibit to the Registration
Statement. In giving such consent, I do not thereby admit that I come within the
category of persons whose consent is required under Section 7 of the Securities
and Exchange Commission promulgated thereunder.
Very truly yours,
Christopher J. Smith /S/
Christopher J. Smith, Esq.
Board of Trustees
Page 1
May 29, 1998
May 29, 1998
Board of Trustees Board of Trustees
Maplewood Investment Trust Dunhill Investment Trust
312 Walnut Street 21st Floor 700 West Pete Rose Way
Cincinnati, Ohio 45202 Suite 217
Cincinnati, Ohio 45203
RE: TAX FREE REORGANIZATION OF THE REGIONAL OPPORTUNITY FUND: OHIO, INDIANA AND
KENTUCKY
Ladies and Gentlemen:
This tax opinion is being furnished to you in connection with the proposed
tax-free reorganization of the Regional Opportunity Fund: Ohio, Indiana,
Kentucky series, (hereinafter "THE FUND") a series Fund of Maplewood Investment
Trust, a Massachusetts Business Trust, (hereinafter "THE TRUST") into the
corresponding New Series Fund of Dunhill Investment Trust, (hereinafter
"DUNHILL") an Ohio Business Trust, pursuant to the Agreement and Plan of
Reorganization (hereinafter "THE PLAN") dated May 1, 1998 in accordance with
Section 368(a)(1)(F) of the Internal Revenue Code of 1986, (hereinafter the
CODE).
The Board of Trustees of Trust proposed to change the domicile of the
organization in order to internalize the transfer agency and administrative
functions for the Fund to provide prompt and more efficient service to
shareholders. Trust will continue to operate its other Funds and as such must
separate the Fund from the Trust.
To accomplish these purposes, the Board of Trustees of the Trust proposes
to transfer all of its assets held in the Fund to Dunhill in exchange for
Dunhill's assumption of all of the Fund's liabilities and for full and
fractional beneficial interests (shares) of Dunhill equal to the number of the
Fund shares then outstanding. Trust will distribute Dunhill shares pro rata to
its shareholders in liquidation of Fund's entire interest in the Fund.
This distribution will be accomplished by establishing for each shareholder
of the Fund an open account of the trust shares representing a number of shares
equal to the number of shares owned by the shareholders at the time of the
transfer of the Fund by Trust to Dunhill Investment Trust. Trust will then
dissolve the Fund under Massachusetts state law.
Respectfully yours,
/s/ Stephen L. Robison
Stephen L. Robison, Esq.
Attorney at Law
SLR/rd
1
<PAGE>
Board of Trustees
Page 2
May 29, 1998
1. REPRESENTATIONS. THE FOLLOWING REPRESENTATIONS ARE MADE BY THE MANAGEMENT OF
ALL PARTIES TO THE EXCHANGE IN CONNECTION WITH THE PROPOSED TAX FREE
REORGANIZATION PURSUANT TO 368(A)(1)(F).
a. Trust is a widely held non-diversified open-end investment management
company organized as a business trust series fund under the laws of the State of
Massachusetts on August 12, 1992 as the Amelia Earhart Eagle Investments, and
registered with the Securities and Exchange Commission (hereinafter "SEC") under
the Investment Company Act of 1940 in September 1992 with its registration
declared effective in March 1993. The Trust's SEC Central Key Index #891522 has
been continuously registered with the SEC since September 1992 through the date
of this opinion. The Trust was amended and restated as of November 1, 1994 and
changed its name on December 28, 1994 to Nottingham Investment Trust. The Trust
changed its name again to Maplewood Investment Trust, a series company on June
12, 1996. Trust is operated as a regulated investment company engaged in the
continuous offering of shares to the public pursuant to applicable Federal law.
b. Trust currently consists of three separate funds, including the Fund. In
accordance with the tax rules under Section 851 et seq. of the Code each fund is
treated as a separate taxable entity.
c. The Fund, fka the Greater Cincinnati Fund, was established on January 3,
1995, and filed its first tax return for the year ended February 28, 1995,
electing to be treated as a Registered Investment Company on its initial tax
return in accordance with Section 851(h) of the Internal Revenue Code of 1986.
It files its federal income tax return as a regulated investment company under
Section 851 of the Internal Revenue Code. As of February 28, 1998 Trust had 319
shareholders with 322,214 shares of non-par value shares outstanding.
d. According to Audited Financial Statements prepared by its auditors, the
Fund met the diversification requirements under Section 851(b)(3) and the income
distribution requirement under Section 851(b)(2) for the period through February
28, 1998. The Fund is administered by Countrywide Fund Services, Inc., its
investment advisor is CityFund Advisory, Inc., and its auditors are KPMG Peat
Marwick, LLP.
e. The Trust provides the following shareholder rights:
i. Shares shall mean the transferable units of interest into which the
beneficial interest in any Series or Class of the Trust shall be divided from
time to time and includes fractions of shares as well as whole shares.
2
<PAGE>
Board of Trustees
Page 3
May 29, 1998
ii. No shareholder shall be deemed to have a severable ownership in
any individual asset of the Trust or any right of partition or possession
thereof but each Shareholder shall have a proportionate considered beneficial
interest in the Trust.
iii. No shareholder of the Trust shall have any liability solely on
his being a Shareholder of the Trust.
iv. The Shareholders representing a majority of the shares entitled to
vote shall have the power to vote v. for the election or removal of Trustees;
(1) with respect to any investment advisor;
(2) with respect to the amendment or termination of the Trust;
(3) to the same extent as the shareholders of a Massachusetts
business corporation except that a Shareholder of a particular Series shall not
in any event be entitled to maintain a derivative or class action on behalf of
any other Series or the Shareholders thereof); and
(4) with respect to such additional matters relating to the Trust
as may be required by law, by this Declaration, or the By-Laws of the Trust or
any regulation of the Trust by the Commission or any State, or as the Trustees
may consider desirable.
vi. Shareholder meetings shall be held as specified in the By-Laws or
at such other place as the trustees may designate. Meetings of the Shareholders
may be called by the Trustees or by officers of the Trust given such authority
in the By-Laws and shall be called by the Trustees at a place designated by them
upon written request specifying the purpose of such meeting and submitted by
Shareholders of any Series or Class holding in the aggregate not less than 10%
of the outstanding shares of such Series or Class having voting rights.
f. The Trustees shall have the following powers.
i. The Trustees may authorize the division of Shares into two or more
Series, each Series relating to a separate portfolio of investments; and may
further authorize the division of the Shares of any Series into two or more
Classes.
ii. The ownership of the Trust Property and the right to conduct any
business hereinbefore described are vested exclusively in the Trustees, and the
shareholders shall have no interest therein other than the beneficial interest
conferred by their Shares with respect to a particular Series or Class, and they
shall have no right to call for any partition or division of any property,
profits, rights or interests of the Trust nor can they be called upon to share
or assume any losses of the Trust or suffer an assessment of any kind by virtue
of their ownership of Shares. The Shares shall be personal property giving only
the rights in this Declaration
3
<PAGE>
Board of Trustees
Page 4
May 29, 1998
specifically set forth. The Shares shall not entitle the holder to preference,
preemptive, appraisal, conversion or exchange rights.
iii. It is the intention of the Trustees to create only the
relationship of Trustee and beneficiary between the Trustees and each
Shareholder from time to time. It is not the intention of the Trustees to create
a general partnership, limited partnership, joint stock association,
corporation, limited liability company, bailment or any form of legal
relationship other than a business trust. Nothing in this Declaration shall be
construed to make the Shareholders, either by themselves or with the Trustees,
partners or members of a joint stock association.
iv. The Trustees may issue Shares with respect to any Series of Class
on such terms as the Trustees may deem best. In connection with any issuance of
Shares, the Trustees may issue fractional Shares.
v. All outstanding Shares of any Series of the Trust may be redeemed
at the option of the holders thereof, upon and subject to the terms and
conditions provided in this Trust.
vi. The net asset value of each outstanding Share of each Series and
Class of the Trust shall be determined at such time or times on such days as the
trustees may determine, in accordance with the 1940 Act, with respect to each
Series and Class.
vii.The Trustees shall have the power to conduct, operate and carry on
the business of an investment company, including any activity incidental to the
business of an investment company or conducive to or expedient for the benefit
or protection of the Trust or its Shareholders;
g. The Fund's investment objective is to provide long-term capital growth
by investing primarily in common stocks and other equity securities of
publicly-traded companies headquartered in Greater Cincinnati and the Cincinnati
tri-state region, and those companies having a significant presence in the
region. The Fund currently offers only Class B shares sold subject to a
contingent deferred sales load if redeemed within five years from the date of
purchase and a distribution fee of up to 1% of average daily net assets.
h. Share valuation -- The net asset value per share of the Fund is
calculated daily by dividing the total value of the Fund's assets, less
liabilities, by the number of shares outstanding. The offering price per share
of the Fund is equal to the net asset value per share. The redemption price per
share is equal to the net asset value per share, subject to a contingent
deferred sales load if redeemed within a five-year period from the date of
initial purchase. The charge declines from 5% to 0% over a five year period.
i. Distributions to shareholders -- Dividends arising from net investment
income, if any, are declared and paid annually to shareholders of the Fund. Net
realized short-term capital gains, if any, may be distributed
4
<PAGE>
Board of Trustees
Page 5
May 29, 1998
throughout the year and net realized long-term capital gains, if any are
distributed at least once each year. Income distributions and capital gain
distributions are determined in accordance with income tax regulations.
j. Dunhill was organized as a Business Trust Series Fund under the laws
of the state of Ohio on May 13, 1998, and will be registered with the
Securities and Exchange Commission under the Investment Company Act of 1940 on
or before the effective date of the Plan as a widely held non-diversified
open-end investment management company.
k. Dunhill provides the following shareholder rights:
i. Shares shall mean the transferable units of interest into which the
beneficial interest in any Series or Class of the Trust shall be divided from
time to time and includes fractions of shares as well as whole shares.
ii. No shareholder shall be deemed to have a severable ownership in
any individual asset of the Trust or any right of partition or possession
thereof but each Shareholder shall have a proportionate considered beneficial
interest in the Trust.
iii. No shareholder of the Trust shall have any liability solely on
his being a Shareholder of the Trust.
iv. The Shareholders representing a majority of the shares entitled to
vote shall have the power to vote v. for the election or removal of Trustees;
(1) with respect to any investment advisor;
(2) with respect to the amendment or termination of the Trust;
(3) to the same extent as the shareholders of an Ohio business
trust except that a Shareholder of a particular Series shall not in any event be
entitled to maintain a derivative or class action on behalf of any other Series
or the Shareholders thereof); and
(4) with respect to such additional matters relating to the Trust
as may be required by law, by this Declaration, or the By-Laws of the Trust or
any regulation of the Trust by the Commission or any State, or as the Trustees
may consider desirable.
vi. Shareholder meetings shall be held as specified in the By-Laws or
at such other place as the trustees may designate. Meetings of the Shareholders
may be called by the Trustees or by officers of the Trust given such authority
in the By-Laws and shall be called by the Trustees at a place designated by them
upon written request specifying the purpose of such meeting and submitted by
Shareholders of any Series or Class holding in the aggregate not less than 10%
of the outstanding shares of such Series or Class having voting rights.
5
<PAGE>
Board of Trustees
Page 6
May 29, 1998
l. The Trustees shall have the following powers.
i. The Trustees may authorize the division of Shares into two or more
Series, each Series relating to a separate portfolio of investments; and may
further authorize the division of the Shares of any Series into two or more
Classes.
ii. The ownership of the Trust Property and the right to conduct any
business hereinbefore described are vested exclusively in the Trustees, and the
shareholders shall have no interest therein other than the beneficial interest
conferred by their Shares with respect to a particular Series or Class, and they
shall have no right to call for any partition or division of any property,
profits, rights or interests of the Trust nor can they be called upon to share
or assume any losses of the Trust or suffer an assessment of any kind by virtue
of their ownership of Shares. The Shares shall be personal property giving only
the rights in this Declaration specifically set forth. The Shares shall not
entitle the holder to preference, preemptive, appraisal, conversion or exchange
rights.
iii. It is the intention of the Trustees to create only the
relationship of Trustee and beneficiary between the Trustees and each
Shareholder from time to time. It is not the intention of the Trustees to create
a general partnership, limited partnership, joint stock association,
corporation, limited liability company, bailment or any form of legal
relationship other than a business trust. Nothing in this Declaration shall be
construed to make the Shareholders, either by themselves or with the Trustees,
partners or members of a joint stock association.
iv. The Trustees may issue Shares with respect to any Series of Class
on such terms as the Trustees may deem best. In connection with any issuance of
Shares, the Trustees may issue fractional Shares.
v. (a) All outstanding Shares of any Series of the Trust may be
redeemed at the option of the holders thereof, upon and subject to the terms and
conditions provided in this Trust.
vi. The net asset value of each outstanding Share of each Series and
Class of the Trust shall be determined at such time or times on such days as the
trustees may determine, in accordance with the 1940 Act, with respect to each
Series and Class.
vii.The Trustees shall have the power to conduct, operate and carry on
the business of an investment company, including any activity incidental to the
business of an investment company or conducive to or expedient for the benefit
or protection of the Trust or its Shareholders;
6
<PAGE>
Board of Trustees
Page 7
May 29, 1998
m. The Fund's investment objective is to provide long-term capital growth
by investing primarily in common stocks and other equity securities of
publicly-traded companies headquartered in Greater Cincinnati and the Cincinnati
tri-state region, and those companies having a significant presence in the
region. The Fund currently offers only Class B shares sold subject to a
contingent deferred sales load if redeemed within five years from the date of
purchase and a distribution fee of up to 1% of average daily net assets.
n. Share valuation -- The net asset value per share of the Fund is
calculated daily by dividing the total value of the Fund's assets, less
liabilities, by the number of shares outstanding. The offering price per share
of the Fund is equal to the net asset value per share. The redemption price per
share is equal to the net asset value per share, subject to a contingent
deferred sales load if redeemed within a five-year period from the date of
initial purchase. The charge declines from 5% to 0% over a five year period.
o. Distributions to shareholders -- Dividends arising from net investment
income, if any, are declared and paid annually to shareholders of the Fund. Net
realized short-term capital gains, if any, may be distributed throughout the
year and net realized long-term capital gains, if any are distributed at least
once each year. Income distributions and capital gain distributions are
determined in accordance with income tax regulations.
p. Trust has and Dunhill will invest in or acquire assets in a manner and
in amounts consistent with the requirements for the qualification as a regulated
investment company within the meaning of Section 851 of the Internal Revenue
Code. Following the consummation of the proposed transaction, Dunhill will have
the same assets, liabilities, rights, number of shares, shareholders and
business Trust had and the only difference between Trust and Dunhill will be the
state of organization.
q. While Trust and Dunhill may have different classes of shares, currently
Trust and Dunhill have one class of shares. Trust and Dunhill shares currently
share in all the assets of each Trust, will have the same net asset value per
share, and will have identical voting and other rights. Each Trust shares are
redeemable at any time at their net asset value. Trust has qualified under the
special provisions of subchapter M of the Code applicable to regulated
investment companies. Upon consummation of the proposed transaction, Dunhill
will qualify as a regulated investment company.
r. The term of Dunhill shall be perpetual.
7
<PAGE>
Board of Trustees
Page 8
May 29, 1998
2. SUMMARY OF FACTS
a. The fair market value of Dunhill shares to be received by Fund
shareholders will be, in each instance, approximately equal to the fair market
value of Fund shares surrendered in exchange therefor.
b. The managements of Dunhill and Maplewood are aware of no plan or
intention of the shareholders of Fund (apart from investment decisions made in
the ordinary course of investing in so-called mutual funds such as Maplewood or
Dunhill) to dispose of any of the Dunhill shares to be received in the proposed
transaction or to dispose of any shares of Fund prior to the exchange. As
non-diversified open-end investment companies, both Trusts are and will be
obligated to redeem their outstanding shares upon the request of the
shareholder, at the then net asset value.
c. Dunhill and its affiliates will assume liabilities for all fees and
expenses in the proposed transaction (including fees and expenses incurred by
Fund as well as those incurred by Dunhill), including legal, accounting,
printing, filing, and proxy solicitation expenses and portfolio transfer taxes
(if any), incurred by the parties as the direct result of the proposed
transaction which Fund shall have incurred but not have paid as of the exchange
date. All such expenses incurred by Fund and assumed by Dunhill shall be solely
and directly related to the proposed transaction. Under no circumstances shall
the assumption of Dunhill's expenses by involve the payment of any money or
other property by Dunhill to Fund. Fund's shareholders will pay their own
expenses, if any, incurred in connection with the above transaction.
d. The liabilities of Fund to be assumed by Dunhill directly or to which
the assets of Fund are subject (and thus will be assumed by Dunhill indirectly
on the receipt of those assets) were incurred in the ordinary course of business
of Fund or will arise out of the proposed transaction.
e. Dunhill has no plan or intention to redeem or otherwise reacquire any of
its shares issued in the proposed transaction except as required by the
Investment Company Act of 1940.
f. Dunhill has no plan or intention to sell or otherwise dispose of any of
the assets of Fund to be acquired by it in the proposed transaction except
dispositions made in the ordinary course of business.
g. Following the proposed transaction, Dunhill will continue the business
of Fund in a substantially unchanged manner.
h. Immediately following the proposed transaction, Dunhill will possess the
same assets and liabilities (except for assets used to pay expenses incurred in
connection with the proposed transaction) as those possessed by Fund immediately
prior to the proposed transaction.
8
<PAGE>
Board of Trustees
Page 9
May 29, 1998
i. Immediately following the proposed transaction, the shareholders of Fund
will own all of the outstanding shares of Dunhill and will own such shares
solely by reason of their ownership of Fund immediately prior to the proposed
transaction.
j. Fund has no outstanding warrants, options, convertible securities, or
any other type of right pursuant to which any person could acquire stock in
Fund.
k. The adjusted basis and the fair market value of the assets of Fund to be
transferred to Dunhill in the proposed transaction will each exceed the sum of
the liabilities to be assumed by Dunhill plus the amount of liabilities to which
such assets are subject.
l. There is no indebtedness between Fund and Dunhill that was issued,
acquired, or will be settled at discount.
m. Fund does meet and Dunhill will meet the requirements for qualification
as a regulated investment company as defined in Section 851 of the Code.
n. Prior to the proposed transaction Dunhill will not have any assets.
Accordingly, no two parties to the proposed transaction will be an investment
company as defined in Section 368(a)(2)(F)(iii) of the Code immediately prior to
the proposed transaction.
o. Neither Fund nor Dunhill are under the jurisdiction of a court in a
Title 11 or similar case within the meaning of Section 368(a)(3)(A) of the Code.
3. TAX CONSEQUENCES:
Based solely on the information received and the representations as set forth in
this ruling letter, and provided that Dunhill shall elect to be classified as a
corporation taxable as an association within the meaning of Section 7701(a)(3)
of the Code and the regulations thereunder, that Dunhill qualifies as a
registered open end regulated investment company under Part I of Subchapter M of
the Code, and that any redemptions that ordinarily might occur are in fact
unrelated to the proposed transaction, it is held as follows:
a. Where the formation of Dunhill provides that share ownership shall be
freely transferable, that the duration of the trust shall be perpetual, that the
management of the Trust shall be centralized in the Board of Trustees and
liability of the organization debts shall be limited to the assets of the
organization shall result in Dunhill being eligible to elect to be treated as an
association within the meaning of Section 7701(a)(3) of the Code and the
regulations thereunder.
9
<PAGE>
Board of Trustees
Page 10
May 29, 1998
b. The formation of Dunhill by Fund followed by the transfer of Fund's
assets to Dunhill in exchange for Dunhill shares and the distribution by Fund of
Dunhill shares in cancellation of Fund shares will qualify as a reorganization
within the meaning of Section 368(a)(1)(F) of the Code (Rev. Rul. 67-376, 1967-2
C.B. 142). Fund and Dunhill each will be "a party to a reorganization" within
the meaning of Section 368(b).
c. No gain or loss will be recognized by Fund on the transfer of its assets
to and the assumption of its liabilities by Dunhill in the proposed transaction
(Sections 361(a) and Sections 357(a)).
d. No gain or loss will be recognized by Dunhill upon the acquisition of
Fund's assets in exchange for Dunhill shares (Section 1032(a)).
e. The basis of the assets of Fund acquired by Dunhill will be the same as
the basis of such assets when held by Fund immediately prior to the proposed
transaction (Section 362(b)).
f. The holding period of the assets of Fund when held by Dunhill will
include the period during which such assets were held by Fund (Section 1223(2)).
g. No gain or loss will be recognized by any shareholder of Fund upon the
exchange of his shares for Dunhill shares, including fractional shares (Section
354(a)(1)).
h. The basis of Dunhill shares received by former Fund shareholders will be
the same as the basis of the Fund shares surrendered in exchange therefor
(Section 358(a)(1)).
i. The holding period of Dunhill shares received by former Fund
shareholders will include, in each instance, the holding period of Fund shares
surrendered in exchange therefor, provided such shares was held as a capital
asset on the date of the exchange (Section 1223(1)).
j. The tax attributes of Fund enumerated in Section 381(c) will be taken
into account by Dunhill has if there had been no reorganization (Section
1.381(b)-1(a)(2) of the Income Tax Regulations). The taxable year of Fund will
not end on the date of the reorganization and the part of the taxable year of
Fund before the reorganization and the part of the taxable year of Dunhill after
the reorganization will constitute a single taxable year of Dunhill (Section
1.381(b)-1(a)(2) of the Regulations. Dividends paid by Dunhill after the
proposed transaction will, to the extent they would have qualified as dividends
paid by Fund after the close of its taxable year under Section 855 of the Code,
qualify as dividends paid by the Fund even though paid by Dunhill after the
proposed transaction, and designations and notices with respect to such
dividends made by Dunhill shall be treated as designations or notices made by
Fund.
k. The payment of a stock dividend will constitute payment of a dividend by
Dunhill under Section 852(a)(1) of the Code and Section 561 of the Code to the
same extent that a distribution of cash would have
10
<PAGE>
Board of Trustees
Page 11
May 29, 1998
constituted payment of such a dividend. Dunhill may designate all or a portion
of the dividend as a capital gain dividend under Section 852(a)(3)(C) of the
Code, to the same extent such designation would be permitted if the dividend
would have been paid in cash.
l. No opinion is expressed about the tax treatment of the transaction under
other provisions of the Code and regulations or about the tax treatment of any
condition existing at the time of, or effects resulting from, the transaction
that are not specifically covered by the above opinion. I have examined and
relied upon originals or copies, certified or otherwise identified to my
satisfaction, of such records, agreements, documents, and other instruments and
certificates or comparable documents of public officials and of officers and
representatives of the parties to this transaction, and I have made such
inquiries of the officers and representatives of the parties to this
transaction, as I have deemed relevant and necessary as the basis for the
opinion set forth herein.
m. In such examination, I have assumed, without independent verification,
the genuineness of all signatures, whether original or photostatic, and the
authenticity of all documents submitted to me as originals and the conformity to
authentic original documents of all documents submitted to me as certified or
photostatic copies. As to all questions of fact material to such opinion, I have
assumed, without independent verification, the accuracy of the relevant facts
herein.
11
Independent Auditors' Consent
-----------------------------
The Shareholders and Trustees
of the Maplewood Investment Trust and
the Trustees of the Dunhill Investment Trust:
We consent to the inclusion of our report included herein and to the references
to our firm under the headings "Financial Highlights" in the Prospectus and
"Other Services-Auditors" in the Statement of Additional Information.
KPMG Peat Marwick LLP
Cincinnati, Ohio
June 1, 1998
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