Veredus Funds
CROSS REFERENCE SHEET
FORM N-1A
VEREDUS GROWTH FUND
ITEM SECTION IN PROSPECTUS
1........................Cover Page
2........................Summary of Fund Expenses
3........................Performance Information
4........................The Fund, Investment Objective and Strategies and
Risk Considerations, Operation of the Fund,
General Information
5........................Operation of the Fund
5A.......................None
6........................Cover Page, Dividends and Distributions, Taxes,
General Information, How to Redeem Shares
7........................Cover Page, How to Invest in the Fund, Share Price
Calculation, Operation of the Fund, How to Redeem
Shares
8........................How to Redeem Shares
9........................None..
13........................Investment Objectives and Strategies and Risk
Considerations
15........................General Information
SECTION IN STATEMENT OF
ITEM ADDITIONAL INFORMATION
10........................Cover Page
11........................Table of Contents
12........................None
13........................Additional Information About Fund Investments and
Risk Considerations, Investment Limitations
14........................Trustees and Officers
15........................Description of the Trust
16........................The Investment Adviser, Custodian, Transfer Agent,
Accountants, Trustees and Officers
17........................Portfolio Transactions and Brokerage
18........................Description of the Trust
19........................Determination of Share Price
20........................None
21........................Distributor
22........................Investment Performance
23........................Financial Statements
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VEREDUS GROWTH FUND
PROSPECTUS June 24, 1998
6900 Bowling Blvd., Suite 250
Louisville, KY 40207
For Information, Shareholder Services and Requests:
(877)- VEREDUS (877-837-3387)
The Veredus Growth Fund (the "Fund") is a diversified, open-end mutual
fund whose investment objective is to provide capital appreciation. Veredus
Asset Management LLC, the Fund's investment adviser, seeks to achieve this
objective by investing primarily in equity securities of companies whose
earnings are growing at an accelerating rate.
This Prospectus provides the information a prospective investor ought
to know before investing and should be retained for future reference. A
Statement of Additional Information has been filed with the Securities and
Exchange Commission (the "SEC") dated June 24, 1998, which is incorporated
herein by reference and can be obtained without charge by calling the Fund at
the phone number listed above. The SEC maintains a Web Site (http://www.sec.gov)
that contains the Statement of Additional Information, material incorporated by
reference, and other information regarding registrants that file electronically
with the SEC.
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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SUMMARY OF FUND EXPENSES
The tables below are provided to assist an investor in understanding
the direct and indirect expenses that an investor may incur as a shareholder in
the Fund. The expense information is based on estimated amounts for the current
fiscal year. The expenses are expressed as a percentage of average net assets.
The Example should not be considered a representation of future Fund performance
or expenses, both of which may vary.
Shareholders should be aware that the Fund is a no-load fund and,
accordingly, a shareholder does not pay any sales charge or commission upon
purchase or redemption of shares of the Fund. In addition, the Fund does not
charge a 12b-1 fee. Unlike most other mutual funds, the Fund does not pay
directly for transfer agency, pricing, custodial, auditing or legal services,
nor does it pay directly any general administrative or other significant
operating expenses. The Adviser pays all of the operating expenses of the Fund
except brokerage, taxes, interest, fees and expenses of non-interested person
trustees and extraordinary expenses.
Shareholder Transaction Expenses(1)
Sales Load Imposed on Purchases .........................................NONE
Sales Load Imposed on Reinvested Dividends...............................NONE
Deferred Sales Load......................................................NONE
Redemption Fees..........................................................NONE
Exchange Fees............................................................NONE
Annual Fund Operating Expenses (as a percentage of average net assets)(2)
Management Fees (after expense reimbursements)..................1.46%
12b-1 Fees......................................................NONE
Other Expenses..................................................0.04%
Total Fund Operating Expenses............................................1.50%
(1) Processing organizations may impose transactional fees on shareholders.
(2) The Adviser's fee is equal to 1.50% of the Fund's average daily net assets
minus the amount by which the Fund's total expenses (including organizational
expenses, but excluding brokerage, taxes, interest and extraordinary expenses)
exceeds 1.50%. This means that the Fund's total operating expenses will be
1.50%. Because other expenses are estimated to be 0.04%, the management fee is
estimated to be 1.46%.
Example
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:
1 Year 3 Years
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$15 $47
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THE FUND
The Veredus Growth Fund (the "Fund") was organized as a series of
Veredus Funds, an Ohio business trust (the "Trust") on April 13, 1998. This
prospectus offers shares of the Fund and each share represents an undivided,
proportionate interest in the Fund. The investment adviser to the Fund is
Veredus Asset Management LLC (the "Adviser").
INVESTMENT OBJECTIVE AND STRATEGIES AND RISK CONSIDERATIONS
The investment objective of the Fund is to provide capital
appreciation. The Adviser seeks to achieve this objective by investing primarily
in equity securities of companies whose earnings are growing at an accelerating
rate. Typically, the companies that the Fund invests in will exhibit expanding
unit volume growth, new product development and expanding profit margins. Such
companies often experience increased earnings expectations from the investment
community. The Adviser will focus primarily on small capitalization (market
capitalization of $1 billion or less) and mid-size capitalization ($1 to $4
billion market capitalization) companies.
The Adviser generally plans to stay fully invested (subject to
liquidity requirements) in equity securities. The Fund may also invest in U.S.
government securities of any duration, and may engage in certain option
transactions and investment techniques described below. For temporary defensive
purposes under abnormal market or economic conditions, the Fund may hold all or
a portion of its assets in money market instruments, securities of no-load money
market funds or U.S. government repurchase agreements. The Fund may also invest
in such instruments at any time to maintain liquidity or pending selection of
investments in accordance with its policies. If the Fund acquires securities of
another investment company, the shareholders of the Fund will be subject to
additional management fees.
By investing primarily in small and mid-size capitalization companies,
the Fund will be subject to the risks associated with such companies. Smaller
capitalization companies may experience higher growth rates and higher failure
rates than do larger capitalization companies. Companies in which the Fund is
likely to invest may have limited product lines, markets or financial resources
and may lack management depth. The trading volume of securities of smaller
capitalization companies is normally less than that of larger capitalization
companies, and, therefore, may disproportionately affect their market price,
tending to make them rise more in response to buying demand and fall more in
response to selling pressure than is the case with larger capitalization
companies.
3
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Prior Performance of Similar Accounts
B. Anthony Weber, President of the Adviser, is primarily responsible
for the day-to-day management of the Fund. Prior to forming the Adviser in 1998,
Mr. Weber was President and Senior Portfolio Manager of SMC Capital, Inc. (from
its inception in 1993). Prior to that date, he was the portoflio manager
primarily responsible for management of certain accounts, including three common
tust funds, of Shelby County Trust Bank (from July 1, 1989). The performance
information presented below is the performance of a composite of those equity
accounts for which Mr. Weber was primarily responsible for the day-to-day
management (since July 1, 1989) which have investment objectives, policies and
strategies substantially similar to those of the Fund. The composite does not
include performance of The Shelby Fund, a mutual fund for which Mr. Weber was
co-manager. As of December 31, 1997, the assets in those accounts totaled
approximately $36 million.
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Managed Accounts S&P 500 Index Russell 2000 Index
---------------- ------------- ------------------
1998* 19.35% 15.10% 10.67%
1997 4.82 33.36 22.36
1996 14.44 22.96 16.50
1995 39.67 37.59 28.44
1994 2.46 1.32 -1.82
1993 14.70 10.08 18.91
1992 32.98 7.64 18.41
1991 42.80 30.48 46.05
1990 -1.04 -3.12 -19.51
1989** 11.67 12.99 1.47
Average Annual Returns***
- ----------------------
One Year 48.70 41.07 42.40
Five years 18.75 23.25 18.46
Since July 1, 1989 19.80 18.42 14.63
* 1998 percentages represent the rates of return for the four month
period ended April 30, 1998.
** 1989 percentages represent the rates of return for the six month
period ended December 31, 1989.
*** Average Annual Returns for the periods ended April 30, 1998, using
the AIMR calculation of performance (see below), which differs from the
standardized SEC calculation.
</TABLE>
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From July 1, 1989 through December 31, 1991, the performance
information is based on a quarterly, linked time-weighted rate of return
calculation method. Beginning January 1, 1992, the accounts within the composite
allowed participants to contribute on a monthly basis. Therefore, beginning
January 1, 1992, the performance information is based on a monthly, liked,
time-weighted rate of return calculation method. The composite rate of return is
market-weighted, reflecting the relative size of each eligible account, at the
beginning of the relevant period. Performance figures reflected are net of
management fees and net of all expenses, including transaction costs and
commissions. Results include the reinvestment of dividends and capital gains.
The presentation of the performance composite complies with the Performance
Presentation Standards of the Association for Investment Management and Research
(AIMR). The AIMR calculation of performance differs from the standardized SEC
calculation.
The S&P 500 Index is a widely recognized, unmanaged index of market
activity based upon the aggregate performance of a selected portfolio of
publicly traded common stocks, including monthly adjustments to reflect the
reinvestment of dividends and other distributions. The Russell 2000 Index is a
widely recognized index of market activity based on the aggregate performance of
small to mid-sized publicly traded common stocks. Each Index reflects the total
return of securities comprising the Index, including changes in market prices as
well as accrued investment income, which is presumed to be reinvested.
Performance figures for each Index do not reflect deduction of transaction costs
or expenses, including management fees.
The performance of the accounts managed by the Adviser does not
represent the historical performance of the Fund and should not be considered
indicative of future performance of the Fund. Results may differ because of,
among other things, differences in brokerage commissions, account expenses,
including management fees (the use of the Fund's expense structure would have
lowered the performance results), the size of positions taken in relation to
account size and diversification of securities, timing of purchases and sales,
and availability of cash for
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new investments. In addition, the managed accounts are not subject to certain
investment limitations, diversification requirements, and other restrictions
imposed by the Investment Company Act and the Internal Revenue Code which, if
applicable, may have adversely affected the performance results of the managed
accounts composite. The results for different periods may vary.
General
As all investment securities are subject to inherent risks and
fluctuations in value due to earnings, economic and political conditions and
other factors, the Fund cannot give any assurance that its investment objective
will be achieved. In addition, you should be aware that the Adviser is a
recently formed limited liability company with no prior experience in managing
investment companies (although Mr. Weber, the portfolio manager of the Fund, was
the primary portfolio manager of another investment company (The Shelby Fund)
for almost four years) and that the Fund has no operating history. Rates of
total return quoted by the Fund may be higher or lower than past quotations, and
there can be no assurance that any rate of total return will be maintained. See
"Investment Policies and Techniques and Risk Considerations" for a more detailed
discussion of the Fund's investment practices.
HOW TO INVEST IN THE FUND
Shares of the Fund are sold on a continuous basis, and you may invest
any amount you choose, as often as you wish, subject to a minimum initial
investment of $10,000 ($2,000 for qualified retirement accounts and medical
savings accounts) and minimum subsequent investments of $500. Investors choosing
to purchase or redeem their shares through a broker/dealer or other institution
may be charged a fee by that institution. Investors choosing to purchase or
redeem shares directly from the Fund will not incur charges on purchases or
redemptions. To the extent investments of individual investors are aggregated
into an omnibus account established by an investment adviser, broker or other
intermediary, the account minimums apply to the omnibus account, not to the
account of the individual investor. The Fund reserves the right to waive
minimums for any family member of a shareholder.
Initial Purchase
By Mail - You may purchase shares of the Fund by completing and signing
the investment application form which accompanies this Prospectus and mailing
it, in proper form, together with a check (subject to the above minimum amounts)
made payable to the Veredus Growth Fund, and sent to the P.O. Box listed below.
If you prefer overnight delivery, use the overnight address listed below:
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<S> <C> <C> <C>
U.S. Mail: Veredus Growth Fund Overnight: Veredus Growth Fund
c/o Unified Fund Services, Inc. c/o Unified Fund Services, Inc.
P.O. Box 6110 431 N. Pennsylvania St.
Indianapolis, Indiana 46204-6110 Indianapolis, Indiana 46204
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Your purchase of shares of the Fund will be effected at the next share price
calculated after receipt of your investment.
By Wire - You may also purchase shares of the Fund by wiring federal
funds from your bank, which may charge you a fee for doing so. If money is to be
wired, you must call the Transfer Agent at 877-837-3387 to set up your account
and obtain an account number. You should
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be prepared at that time to provide the information on the application by
facsimile. Then, you should provide your bank with the following information for
purposes of wiring your investment:
Star Bank, N.A.
ABA # 042000013
Attn: The Veredus Growth Fund
D.D.A. # 488920984
Account Name _________________ (write in shareholder name) For
the Account # ______________ (write in account number)
You are required to mail a signed application to the Custodian at the
above address in order to complete your initial wire purchase. Wire orders will
be accepted only on a day on which the Fund and the Custodian and Transfer Agent
are open for business. A wire purchase will not be considered made until the
wired money is received and the purchase is accepted by the Fund. Any delays
which may occur in wiring money, including delays which may occur in processing
by the banks, are not the responsibility of the Fund or the Transfer Agent.
There is presently no fee for the receipt of wired funds, but the right to
charge shareholders for this service is reserved by the Fund.
Additional Investments
You may purchase additional shares of the Fund at any time (subject to
minimum investment requirements) by mail, wire, or automatic investment. Each
additional mail purchase request must contain your name, the name of your
account(s), your account number(s), and the name of the Fund. Checks should be
made payable to the Veredus Growth Fund and should be sent to the address listed
above. A bank wire should be sent as outlined above.
Automatic Investment Plan
You may make regular investments in the Fund with an Automatic
Investment Plan by completing the appropriate section of the account application
and attaching a voided personal check. Investments may be made monthly to allow
dollar-cost averaging by automatically deducting $100 or more from your bank
checking account. You may change the amount of your monthly purchase at any
time.
Tax Sheltered Retirement Plans
Since the Fund is oriented to longer term investments, the Fund may be
a particularly appropriate investment medium for tax sheltered retirement plans,
including: individual retirement plans (IRAs); simplified employee pensions
(SEPs); 401(k) plans; qualified corporate pension and profit sharing plans (for
employees); tax deferred investment plans (for employees of public school
systems and certain types of charitable organizations); and other qualified
retirement plans. You should contact the Transfer Agent for the procedure to
open an IRA or SEP plan, as well as more specific information regarding these
retirement plan options. Consultation with an attorney or tax adviser regarding
these plans is advisable. Custodial fees for an IRA will be paid by the
shareholder by redemption of sufficient shares of the Fund from the IRA unless
the fees are paid directly to the IRA custodian. You can obtain information
about the IRA custodial fees from the Transfer Agent.
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Other Purchase Information
Dividends begin to accrue after you become a shareholder. The Fund does
not issue share certificates. All shares are held in non-certificate form
registered on the books of the Fund and the Fund's Transfer Agent for the
account of the shareholder. The rights to limit the amount of purchases and to
refuse to sell to any person are reserved by the Fund. If your check or wire
does not clear, you will be responsible for any loss incurred by the Fund. If
you are already a shareholder, the Fund can redeem shares from any identically
registered account in the Fund as reimbursement for any loss incurred. You may
be prohibited or restricted from making future purchases in the Fund.
HOW TO REDEEM SHARES
All redemptions will be made at the net asset value determined after
the redemption request has been received by the Transfer Agent in proper order.
Shareholders may receive redemption payments in the form of a check or federal
wire transfer. The proceeds of the redemption may be more or less than the
purchase price of your shares, depending on the market value of the Fund's
securities at the time of your redemption. There is no charge for wire
redemptions; however, the Fund reserves the right to charge for this service.
Any charges for wire redemptions will be deducted from the shareholder's Fund
account by redemption of shares. Investors choosing to purchase or redeem their
shares through a broker/dealer or other institution may be charged a fee by that
institution.
By Mail - You may redeem any part of your account in the Fund at no
charge by mail. Your request should be addressed to:
Veredus Growth Fund
c/o Unified Fund Services, Inc.
431 N. Pennsylvania St.
Indianapolis, Indiana 46204
"Proper order" means your request for a redemption must include your
letter of instruction, including the Fund name, account number, account name(s),
the address and the dollar amount or number of shares you wish to redeem. This
request must be signed by all registered share owner(s) in the exact name(s) and
any special capacity in which they are registered. For all redemptions, the Fund
requires that signatures be guaranteed by a bank or member firm of a national
securities exchange. Signature guarantees are for the protection of
shareholders. At the discretion of the Fund or the Transfer Agent, a
shareholder, prior to redemption, may be required to furnish additional legal
documents to insure proper authorization.
By Telephone - You may redeem any part of your account in the Fund by
calling the Transfer Agent at 877-837-3387. You must first complete the Optional
Telephone Redemption and Exchange section of the investment application to
institute this option. The Fund, the Transfer Agent and the Custodian are not
liable for following redemption or exchange instructions communicated by
telephone that they reasonably believe to be genuine. However, if they do not
employ reasonable procedures to confirm that telephone instructions are genuine,
they may be liable for any losses due to unauthorized or fraudulent
instructions. Procedures employed may
<PAGE>
include recording telephone instructions and requiring a form of personal
identification from the caller.
The telephone redemption and exchange procedures may be terminated at
any time by the Fund or the Transfer Agent. During periods of extreme market
activity it is possible that shareholders may encounter some difficulty in
telephoning the Fund, although neither the Fund nor the Transfer Agent has ever
experienced difficulties in receiving and in a timely fashion responding to
telephone requests for redemptions or exchanges. If you are unable to reach the
Fund by telephone, you may request a redemption or exchange by mail.
Additional Information - If you are not certain of the requirements for
a redemption please call the Transfer Agent at 880-837-3387. Redemptions
specifying a certain date or share price cannot be accepted and will be
returned. You will be mailed the proceeds on or before the fifth business day
following the redemption. However, payment for redemption made against shares
purchased by check will be made only after the check has cleared, which normally
may take up to fifteen calendar days. Also, when the New York Stock Exchange is
closed (or when trading is restricted) for any reason other than its customary
weekend or holiday closing or under any emergency circumstances, as determined
by the Securities and Exchange Commission, the Fund may suspend redemptions or
postpone payment dates.
Because the Fund incurs certain fixed costs in maintaining shareholder
accounts, the Fund reserves the right to require any shareholder to redeem all
of his or her shares in the Fund on 30 days' written notice if the value of his
or her shares in the Fund is less than $10,000 ($2,000 for qualified retirement
accounts and medical savings accounts) due to redemption, or such other minimum
amount as the Fund may determine from time to time. An involuntary redemption
constitutes a sale. You should consult your tax adviser concerning the tax
consequences of involuntary redemptions. A shareholder may increase the value of
his or her shares in the Fund to the minimum amount within the 30 day period.
Each share of the Fund is subject to redemption at any time if the Board of
Trustees determines in its sole discretion that failure to so redeem may have
materially adverse consequences to all or any of the shareholders of the Fund.
SHARE PRICE CALCULATION
The value of an individual share in the Fund (the net asset value) is
calculated by dividing the total value of the Fund's investments and other
assets (including accrued income), less any liabilities (including estimated
accrued expenses), by the number of shares outstanding, rounded to the nearest
cent. Net asset value per share is determined as of the close of the New York
Stock Exchange (4:00 p.m., Eastern time) on each day that the exchange is open
for business, and on any other day on which there is sufficient trading in the
Fund's securities to materially affect the net asset value. The net asset value
per share of the Fund will fluctuate.
Securities which are traded on any exchange or on the NASDAQ
over-the-counter market are valued at the last quoted sale price. Lacking a last
sale price, a security is valued at its last bid price except when, in the
Adviser's opinion, the last bid price does not accurately reflect the current
value of the security. All other securities for which over-the-counter market
quotations are readily available are valued at their last bid price. When market
quotations are not readily available, when the Adviser determines the last bid
price does not accurately reflect the current
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value or when restricted securities are being valued, such securities are valued
as determined in good faith by the Adviser, subject to review of the Board of
Trustees of the Trust.
Fixed income securities generally are valued by using market
quotations, but may be valued on the basis of prices furnished by a pricing
service when the Adviser believes such prices accurately reflect the fair market
value of such securities. A pricing service utilizes electronic data processing
techniques based on yield spreads relating to securities with similar
characteristics to determine prices for normal institutional-size trading units
of debt securities without regard to sale or bid prices. When prices are not
readily available from a pricing service, or when restricted or illiquid
securities are being valued, securities are valued at fair value as determined
in good faith by the Adviser, subject to review of the Board of Trustees. Short
term investments in fixed income securities with maturities of less than 60 days
when acquired, or which subsequently are within 60 days of maturity, are valued
by using the amortized cost method of valuation, which the Board has determined
will represent fair value.
DIVIDENDS AND DISTRIBUTIONS
The Fund intends to distribute substantially all of its net investment
income as dividends to its shareholders on an quarterly basis, and intends to
distribute its net long term capital gains and its net short term capital gains
at least once a year.
Income dividends and capital gain distributions are automatically
reinvested in additional shares at the net asset value per share on the
distribution date. An election to receive a cash payment of dividends and/or
capital gain distributions may be made in the application to purchase shares or
by separate written notice to the Transfer Agent. Shareholders will receive a
confirmation statement reflecting the payment and reinvestment of dividends and
summarizing all other transactions. If cash payment is requested, a check
normally will be mailed within five business days after the payable date. If you
withdraw your entire account, all dividends accrued to the time of withdrawal,
including the day of withdrawal, will be paid at that time. You may elect to
have distributions on shares held in IRAs and 403(b) plans paid in cash only if
you are 59 1/2 years old or permanently and totally disabled or if you otherwise
qualify under the applicable plan.
TAXES
The Fund intends to qualify each year as a "regulated investment
company" under the Internal Revenue Code of 1986, as amended. By so qualifying,
the Fund will not be subject to federal income taxes to the extent that it
distributes substantially all of its net investment income and any realized
capital gains.
For federal income tax purposes, dividends paid by the Fund from
ordinary income are taxable to shareholders as ordinary income, but may be
eligible in part for the dividends received deduction for corporations. Pursuant
to the Tax Reform Act of 1986 (the "Tax Reform Act"), all distributions of net
capital gains to individuals are taxed at the same rate as ordinary income. All
distributions of net capital gains to corporations are taxed at regular
corporate rates. Any distributions designated as being made from net realized
long term capital gains are taxable to shareholders as long term capital gains
regardless of the holding period of the shareholder.
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The Fund will mail to each shareholder after the close of the calendar
year a statement setting forth the federal income tax status of distributions
made during the year. Dividends and capital gains distributions may also be
subject to state and local taxes. Shareholders are urged to consult their own
tax advisers regarding specific questions as to federal, state or local taxes
and the tax effect of distributions and withdrawals from the Fund.
On the application or other appropriate form, the Fund will request the
shareholder's certified taxpayer identification number (social security number
for individuals) and a certification that the shareholder is not subject to
backup withholding. Unless the shareholder provides this information, the Fund
will be required to withhold and remit to the U.S. Treasury 31% of the
dividends, distributions and redemption proceeds payable to the shareholder.
Shareholders should be aware that, under regulations promulgated by the Internal
Revenue Service, the Fund may be fined $50 annually for each account for which a
certified taxpayer identification number is not provided. In the event that such
a fine is imposed with respect to a specific account in any year, the Fund may
make a corresponding charge against the account.
OPERATION OF THE FUND
The Fund is a diversified series of Veredus Funds, an open-end
management investment company organized as an Ohio business trust on April 13,
1998. The Board of Trustees supervises the business activities of the Fund. Like
other mutual funds, the Fund retains various organizations to perform
specialized services.
The Fund retains Veredus Asset Management LLC, 6900 Bowling Blvd.,
Suite 250, Louisville, KY 40207 (the "Adviser") to manage the Fund's
investments. B. Anthony Weber controls the Adviser and has served as President
of the Adviser since April, 1998. Prior to June, 1998, he was the President of
SMC Capital, Inc., another registered investment adviser. Mr. Weber is
responsible for the day-to-day management of the Fund's portfolio. He has
managed equity accounts at SMC Capital, Inc. from the time of its founding in
1993 to the present. The Fund is authorized to pay the Adviser a fee, on a
monthly basis, equal to an annual average rate of 1.50% of its average daily net
assets, minus the amount by which the Fund's total expenses (including
organizational expenses, but excluding brokerage, taxes, interest and
extraordinary expenses) exceeds 1.50%. The Adviser pays all of the operating
expenses of the Fund except brokerage, taxes, interest, fees and expenses on
non-interested person trustees and extraordinary expenses.
The Fund retains Unified Fund Services, Inc., 431 North Pennsylvania
Street, Indianapolis, Indiana 46204 (the "Administrator") to manage the Fund's
business affairs and provide the Fund with fund accounting and administrative
services, including all regulatory reporting and necessary office equipment,
personnel and facilities. The Fund also retains Unified Fund Services, Inc. (the
"Transfer Agent") to serve as transfer agent, dividend paying agent and
shareholder service agent. For its services as Administrator (including its fund
accounting services), Unified Fund Services, Inc. receives a monthly fee from
the Adviser equal to an annual average rate of 0.16% of the Fund's average daily
net assets. The Fund retains Unified Management Corporation, 431 North
Pennsylvania Street, Indianapolis, Indiana 46204 (the "Distributor") to act as
the principal distributor of the Fund's shares. The services of the
Administrator, Transfer Agent and Distributor are operating expenses paid by the
Adviser.
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Consistent with the Rules of Fair Practice of the National Association
of Securities Dealers, Inc., and subject to its obligation of seeking best
qualitative execution, the Adviser may give consideration to sales of shares of
the Fund as a factor in the selection of brokers and dealers to execute
portfolio transactions. The Adviser (not the Fund) may pay certain financial
institutions (which may include banks, brokers, dealers and other industry
professionals) a "servicing fee" for performing certain administrative functions
for the Fund shareholders to the extent these institutions are allowed to do so
by applicable statute, rule or regulation. In addition, the Adviser (not the
Fund) may compensate brokers and other intermediaries for directing assets to or
retaining assets in the Fund.
INVESTMENT POLICIES AND TECHNIQUES AND RISK CONSIDERATIONS
This section contains general information about various types of
securities and investment techniques that the Fund may purchase or employ.
Equity Securities. Equity securities consist of common stock, warrants,
rights, preferred stock and common stock equivalents (such as convertible
preferred stock and convertible debentures). Common stocks, the most familiar
type, represent an equity (ownership) interest in a corporation. Warrants are
options to purchase equity securities at a specified price for a specific time
period. Rights are similar to warrants, but normally have a short duration and
are distributed by the issuer to its shareholders. Although equity securities
have a history of long-term growth in value, their prices fluctuate based on
changes in a company's financial condition and on overall market and economic
conditions. The Fund will not invest more than 5% of its net assets in preferred
stock or common stock equivalents.
The Fund may invest up to 20% of its net assets in foreign equity
securities by purchasing American Depository Receipts ("ADRs") and European
Depository Receipts ("EDRs"). American Depository Receipts and EDRs are
dollar-denominated receipts that are generally issued in registered form by
domestic banks, and represent the deposit with the bank of a security of a
foreign issuer. To the extent that the Fund does invest in foreign securities,
such investments may be subject to special risks, such as changes in
restrictions on foreign currency transactions and rates of exchange, and changes
in the administrations or economic and monetary policies of foreign governments.
U.S. Government Obligations. U.S. government obligations may be backed
by the credit of the government as a whole or only by the issuing agency. U.S.
Treasury bonds, notes, and bills and some agency securities, such as those
issued by the Federal Housing Administration and the Government National
Mortgage Association (GNMA), are backed by the full faith and credit of the U.S.
government as to payment of principal and interest and are the highest quality
government securities. Other securities issued by U.S. government agencies or
instrumentalities, such as securities issued by the Federal Home Loan Banks and
the Federal Home Loan Mortgage Corporation, are supported only by the credit of
the agency that issued them, and not by the U.S. government. Securities issued
by the Federal Farm Credit System, the Federal Land Banks, and the Federal
National Mortgage Association (FNMA) are supported by the agency's right to
borrow money from the U.S. Treasury under certain circumstances, but are not
backed by the full faith and credit of the U.S. government.
<PAGE>
Repurchase Agreements. The Fund may invest in repurchase agreements
fully collateralized by U.S. Government obligations. A repurchase agreement is a
short-term investment in which the purchaser (i.e., the Fund) acquires ownership
of a U.S. Government obligation (which may be of any maturity) and the seller
agrees to repurchase the obligation at a future time at a set price, thereby
determining the yield during the purchaser's holding period (usually not more
than seven days from the date of purchase). Any repurchase transaction in which
the Fund engages will require full collateralization of the seller's obligation
during the entire term of the repurchase agreement. In the event of a bankruptcy
or other default of the seller, the Fund could experience both delays in
liquidating the underlying security and losses in value. However, the Fund
intends to enter into repurchase agreements only with banks with assets of $1
billion or more and registered securities dealers determined by the Adviser
(subject to review by the Board of Trustees) to be creditworthy. The Adviser
monitors the creditworthiness of the banks and securities dealers with which the
Fund engages in repurchase transactions.
Investment Techniques. The Fund may purchase put and call options, and
may write covered call options on individual securities and market indices,
provided the Fund's investment in options (including premiums and potential
settlement obligations) does not exceed 5% of its net assets The Fund may engage
in short sales, but the percentage of the Fund's net assets that may be used as
collateral or segregated for short sales is limited to 5%.
When Issued Securities and Forward Commitments - The Fund may buy and
sell securities on a when-issued or delayed delivery basis, with payment and
delivery taking place at a future date. The price and interest rate that will be
received on the securities are each fixed at the time the buyer enters into the
commitment. The Fund may enter into such forward commitments if they hold, and
maintain until the settlement date in a separate account at the Fund's
Custodian, cash or U.S. government securities in an amount sufficient to meet
the purchase price. Forward commitments involve a risk of loss if the value of
the security to be purchased declines prior to the settlement date. Any change
in value could increase fluctuations in the Fund's share price and yield.
Although the Fund will generally enter into forward commitments with the
intention of acquiring securities for its portfolio, the Fund may dispose of a
commitment prior to the settlement if the Adviser deems it appropriate to do so.
GENERAL INFORMATION
Fundamental Policies. The investment limitations set forth in the
Statement of Additional Information as fundamental policies may not be changed
without the affirmative vote of the majority of the outstanding shares of the
Fund. The investment objective of the Fund may be changed without the
affirmative vote of a majority of the outstanding shares of the Fund. Any such
change may result in the Fund having an investment objective different from the
objective which the shareholders considered appropriate at the time of
investment in the Fund.
Fund Turnover. The Fund does not intend to purchase or sell securities
for short term trading purposes. However, if the objective the Fund would be
better served, short-term profits or losses may be realized from time to time.
It is anticipated that portfolio turnover will not exceed 300%. The brokerage
commissions incurred by the Fund will generally be higher than those incurred by
a Fund with a lower portfolio turnover rate. The Fund does not anticipate any
adverse tax consequences as a result of its portfolio turnover rate, although
substantial net capital gains
<PAGE>
could be realized, and any distributions derived from such gains may be ordinary
income for federal tax purposes. Actual holding period will vary by type of
security and market conditions.
Shareholder Rights. Any Trustee of the Trust may be removed by vote of
the shareholders holding not less than two-thirds of the outstanding shares of
the Trust. The Trust does not hold an annual meeting of shareholders. When
matters are submitted to shareholders for a vote, each shareholder is entitled
to one vote for each whole share he owns and fractional votes for fractional
shares he owns. All shares of the Fund have equal voting rights and liquidation
rights. The Declaration of Trust can be amended by the Trustees, except that any
amendment that adversely effects the rights of shareholders must be approved by
the shareholders affected. Prior to the offering made by this Prospectus,
Veredus Asset Management LLC Profit Sharing Plan and Trust for the benefit of B.
Anthony Weber purchased for investment all of the outstanding shares of the Fund
and as a result may be deemed to control the Fund.
PERFORMANCE INFORMATION
The Fund may periodically advertise "average annual total return." The
"average annual total return" of the Fund refers to the average annual
compounded rate of return over the stated period 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 "average annual total return"
assumes the reinvestment of all dividends and distributions.
The Fund may also periodically advertise its total return over various
periods in addition to the value of a $10,000 investment (made on the date of
the initial public offering of the Fund's shares) as of the end of a specified
period. The "total return" for the Fund refers to the percentage change in the
value of an account between the beginning and end of the stated period, assuming
no activity in the account other than reinvestment of dividends and capital
gains distributions.
The Fund may also include in advertisements data comparing performance
with other mutual funds as reported in non-related investment media, published
editorial comments and performance rankings compiled by independent
organizations and publications that monitor the performance of mutual funds
(such as Lipper Analytical Services, Inc., Morningstar, Inc., Fortune or
Barron's). Performance information may be quoted numerically or may be presented
in a table, graph or other illustration. In addition, Fund performance may be
compared to well-known indices of market performance including the Standard &
Poor's (S&P) 500 Index, the Russell 2000 Index or the Dow Jones Industrial
Average.
The advertised performance data of the Fund is based on historical
performance and is not intended to indicate future performance. Rates of total
return quoted by the Fund may be higher or lower than past quotations, and there
can be no assurance that any rate of total return will be maintained. The
principal value of an investment in the Fund will fluctuate so that a
shareholder's shares, when redeemed, may be worth more or less than the
shareholder's original investment.
<PAGE>
Investment Adviser Transfer Agent and Administrator
Veredus Asset Management LLC Unified Fund Services, Inc.
6900 Bowling Blvd., Suite 250 431 North Pennsylvania Street
Louisville, KY 40207 Indianapolis, Indiana 46204
Custodian Auditors
Star Bank, N.A. Arthur Andersen LLP
425 Walnut Street., M.L. 6118 425 Walnut Street
Cincinnati, Ohio 45202 Cincinnati, OH 45202
Distributor
Unified Management Corporation
431 North Pennsylvania Street
Indianapolis, Indiana 46204
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 its
shares in any state to any person to whom it is unlawful to make such offer in
such state.
<PAGE>
TABLE OF CONTENTS PAGE
SUMMARY OF FUND EXPENSES
Shareholder Transaction Expenses
Annual Fund Operating Expenses
THE FUND
INVESTMENT OBJECTIVE AND STRATEGIES AND RISK CONSIDERATIONS
Prior Performance of Similar Accounts
General
HOW TO INVEST IN THE FUND
Initial Purchase
Additional Investments
Automatic Investment Plan
Tax Sheltered Retirement Plans
Other Purchase Information
HOW TO REDEEM SHARES
By Mail
By Telephone
Additional Information
SHARE PRICE CALCULATION
DIVIDENDS AND DISTRIBUTIONS
TAXES
OPERATION OF THE FUND
INVESTMENT POLICIES AND TECHNIQUES AND RISK CONSIDERATIONS
Equity Securities
U.S. Government Obligations
Repurchase Agreements
Investment Techniques
When Issued Securities and Forward Commitments
GENERAL INFORMATION
Fundamental Policies
Fund Turnover
Shareholder Rights
PERFORMANCE INFORMATION
<PAGE>
VEREDUS GROWTH FUND
STATEMENT OF ADDITIONAL INFORMATION
June 24, 1998
This Statement of Additional Information is not a prospectus. It should
be read in conjunction with the Prospectus of Veredus Growth Fund dated June 24,
1998. A copy of the Prospectus can be obtained by writing the Fund at 6900
Bowling Blvd., Suite 250, Louisville, KY 40207, or by calling 877-VEREDUS
(877-837-3387).
<PAGE>
<TABLE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
PAGE
<S> <C>
DESCRIPTION OF THE TRUST................................................................................................ 1
ADDITIONAL INFORMATION ABOUT FUND INVESTMENTS AND RISK
CONSIDERATIONS................................................................................................. 1
INVESTMENT LIMITATIONS.................................................................................................. 3
THE INVESTMENT ADVISER.................................................................................................. 5
TRUSTEES AND OFFICERS................................................................................................... 6
PORTFOLIO TRANSACTIONS AND BROKERAGE.................................................................................... 7
DETERMINATION OF SHARE PRICE............................................................................................ 8
INVESTMENT PERFORMANCE.................................................................................................. 9
CUSTODIAN............................................................................................................... 9
TRANSFER AGENT.......................................................................................................... 10
ACCOUNTANTS............................................................................................................. 10
DISTRIBUTOR............................................................................................................. 10
FINANCIAL STATEMENTS.................................................................................................... 11
</TABLE>
<PAGE>
DESCRIPTION OF THE TRUST
Veredus Growth Fund (the "Fund") was organized as a series of Veredus
Funds (the "Trust"). The Trust is an open-end investment company established
under the laws of Ohio by an Agreement and Declaration of Trust dated April 13,
1998 (the "Trust Agreement"). The Trust Agreement permits the Trustees to issue
an unlimited number of shares of beneficial interest of separate series without
par value. The Fund is the only series currently authorized by the Trustees.
Each share of a series represents an equal proportionate interest in
the assets and liabilities belonging to that series with each other share of
that series and is entitled to such dividends and distributions out of income
belonging to the series as are declared by the Trustees. The shares do not have
cumulative voting rights or any preemptive or conversion rights, and the
Trustees have the authority from time to time to divide or combine the shares of
any series into a greater or lesser number of shares of that series so long as
the proportionate beneficial interest in the assets belonging to that series and
the rights of shares of any other series are in no way affected. In case of any
liquidation of a series, the holders of shares of the series being liquidated
will be entitled to receive as a class a distribution out of the assets, net of
the liabilities, belonging to that series. Expenses attributable to any series
are borne by that series. Any general expenses of the Trust not readily
identifiable as belonging to a particular series are allocated by or under the
direction of the Trustees in such manner as the Trustees determine to be fair
and equitable. No shareholder is liable to further calls or to assessment by the
Trust without his or her express consent.
Upon sixty days prior written notice to shareholders, the Fund may make
redemption payments in whole or in part in securities or other property if the
Trustees determine that existing conditions make cash payments undesirable. For
other information concerning the purchase and redemption of shares of the Fund,
see "How to Invest in the Fund" and "How to Redeem Shares" in the Fund's
Prospectus. For a description of the methods used to determine the share price
and value of the Fund's assets, see "Share Price Calculation" in the Fund's
Prospectus.
ADDITIONAL INFORMATION ABOUT FUND INVESTMENTS AND RISK
CONSIDERATIONS
This section contains a more detailed discussion of some of the
investments the Fund may make and some of the techniques it may use, as
described in the Prospectus (see "Investment Objective and Strategies").
A. Preferred Stocks. Preferred stock, unlike common stock, offers a
stated dividend rate payable from the issuer's earnings. Preferred stock
dividends may be cumulative or non-cumulative, participating, or auction rate.
If interest rates rise, the fixed dividend on preferred stocks may be less
attractive, causing the price of preferred stocks to decline. Preferred stock
may have mandatory sinking fund provisions, as well as call/redemption
provisions prior to maturity, a negative feature when interest rates decline.
B. Convertible Securities. A convertible security (also known as a
common stock equivalent) is a bond, debenture, note, preferred stock or other
security that may be converted into or exchanged for a prescribed amount of
common stock of the same or a different issuer within a
1
<PAGE>
particular period of time at a specified price or formula. A convertible
security entitles the holder to receive interest generally paid or accrued on
debt or the dividend paid on preferred stock until the convertible security
matures or is redeemed, converted or exchanged. Convertible securities have
several unique investment characteristics, such as (a) higher yields than common
stocks, but lower yields than comparable nonconvertible securities, (b) a lesser
degree of fluctuation in value than the underlying stock since they have fixed
income characteristics, and (c) the potential for capital appreciation if the
market price of the underlying common stock increases. A convertible security
might be subject to redemption at the option of the issuer at a price
established in the convertible security's governing instrument. If a convertible
security held by the Fund is called for redemption, the Fund may be required to
permit the issuer to redeem the security, convert it into the underlying common
stock or sell it to a third party.
C. American Depository Receipts and European Depository Receipts.
American Depository Receipts ("ADRs") and European Depository Receipts ("EDRs")
are certificates evidencing ownership of shares of a foreign-based issuer held
in trust by a bank or similar financial institution. They are alternatives to
the direct purchase of the underlying securities in their national markets and
currencies. To the extent that the Fund invests in foreign securities, such
investments may be subject to special risks. For example, there may be less
information publicly available about a foreign company than about a U.S.
company, and foreign companies are not generally subject to accounting,
auditing, and financial reporting standards and practices comparable to those in
the U.S. Other risks associated with investments in foreign securities include
changes in restrictions on foreign currency transactions and rates of exchanges,
changes in the administrations or economic and monetary policies of foreign
governments, the imposition of exchange control regulations, the possibility of
expropriation decrees and other adverse foreign governmental action, the
imposition of foreign taxes, less liquid markets, less government supervision of
exchanges, brokers and issuers, difficulty in enforcing contractual obligations,
delays in settlement of securities transactions and greater price volatility. In
addition, investing in foreign securities will generally result in higher
commissions than investing in similar domestic securities.
D. Short Sales. The Fund may sell a security short in anticipation of a
decline in the market value of the security. When a Fund engages in a short
sale, it sells a security which it does not own. To complete the transaction,
the Fund must borrow the security in order to deliver it to the buyer. The Fund
must replace the borrowed security by purchasing it at the market price at the
time of replacement, which may be more or less than the price at which the Fund
sold the security. The Fund will incur a loss as a result of the short sale if
the price of the security increases between the date of the short sale and the
date on which the Fund replaces the borrowed security. The Fund will realize a
profit if the security declines in price between those dates.
In connection with its short sales, the Fund will be required to
maintain a segregated account with its Custodian of cash or high grade liquid
assets equal to the market value of the securities sold less any collateral
deposited with its broker. The Fund will limit its short sales so that no more
than 5% of its net assets (less all its liabilities other than obligations under
the short sales) will be deposited as collateral and allocated to the segregated
account. However, the segregated account and deposits will not necessarily limit
the Fund's potential loss on a short sale, which is unlimited.
2
<PAGE>
E. Options Transactions. The Fund may purchase put and call options,
and may write covered call options on individual securities and stock indices,
provided the Fund's investment in options (including premiums and potential
settlement obligations) does not exceed 5% of its net assets. To cover the
potential obligations involved in writing options, the Fund will either (a) own
the underlying security, or in the case of an option on a market index, will
hold a portfolio of stocks substantially replicating the movement of the index,
or (b) the Fund will segregate with the Custodian high grade liquid debt
obligations sufficient to purchase the underlying security or equal to the
market value of the stock index option, marked to market daily.
By purchasing a put option, the Fund obtains the right (but not the
obligation) to sell the option's underlying instrument at a fixed "strike"
price. In return for this right, the Fund pays the current market price for the
option (known as the option premium). Options have various types of underlying
instruments, including specific securities, indices of securities prices, and
futures contracts. The Fund may terminate its position in a put option it has
purchased by allowing it to expire or by exercising the option. If the option is
allowed to expire, the Fund will lose the entire premium it has paid. If the
Fund exercises the option, it completes the sale of the underlying instrument at
the "strike" price. The Fund also may terminate a put option position by closing
it out in the secondary market at its current price, if a liquid secondary
market exists.
The buyer of a typical put option can expect to realize a gain if
security prices fall substantially. However, if the underlying instrument's
price does not fall enough to offset the cost of purchasing the option, a put
buyer can expect to suffer a loss (limited to the amount of the premium paid,
plus related transaction costs).
The features of call options are essentially the same as those of put
options except that the purchaser of a call option obtains the right to
purchase, rather than sell, the underlying instrument at the option's "strike"
price. A call buyer typically attempts to participate in potential price
increases of the underlying instrument with risk limited to the cost of the
option if security prices fall. At the same time, the buyer can expect to suffer
a loss if the underlying prices do not rise sufficiently to offset the cost of
the option.
The Fund may write (sell) covered call options on individual stocks and
on stock indices and engage in related closing transactions. A covered call
option on a security is an agreement to sell a particular portfolio security if
the option is exercised at a specified price, or before a set date. An option on
a stock index gives the option holder the right to receive, upon exercising the
option, a cash settlement amount based on the difference between the exercise
price and the value of the underlying stock index. Risks associated with writing
covered options include the possible inability to effect closing transactions at
favorable prices and an appreciation limit on the securities set aside for
settlement. There is no assurance of liquidity in the secondary market for
purposes of closing out covered call option positions.
INVESTMENT LIMITATIONS
Fundamental. The investment limitations described below have been
adopted by the Trust with respect to the Fund and are fundamental
("Fundamental"), i.e., they may not be changed without the affirmative vote of a
majority of the outstanding shares of the Fund. As used in the Prospectus and
this Statement of Additional Information, the term "majority" of the outstanding
3
<PAGE>
shares of the Fund means the lesser of (1) 67% or more of the outstanding shares
of the Fund present at a meeting, if the holders of more than 50% of the
outstanding shares of the Fund are present or represented at such meeting; or
(2) more than 50% of the outstanding shares of the Fund. Other investment
practices which may be changed by the Board of Trustees without the approval of
shareholders to the extent permitted by applicable law, regulation or regulatory
policy are considered non-fundamental ("Non-Fundamental").
1. Borrowing Money. The Fund will not borrow money, except (a) from a
bank, provided that immediately after such borrowing there is an asset coverage
of 300% for all borrowings of the Fund; or (b) from a bank or other persons for
temporary purposes only, provided that such temporary borrowings are in an
amount not exceeding 5% of the Fund's total assets at the time when the
borrowing is made. This limitation does not preclude the Fund from entering into
reverse repurchase transactions, provided that the Fund has an asset coverage of
300% for all borrowings and repurchase commitments of the Fund pursuant to
reverse repurchase transactions.
2. Senior Securities. The Fund will not issue senior securities. This
limitation is not applicable to activities that may be deemed to involve the
issuance or sale of a senior security by the Fund, provided that the Fund's
engagement in such activities is consistent with or permitted by the Investment
Company Act of 1940, as amended, the rules and regulations promulgated
thereunder or interpretations of the Securities and Exchange Commission or its
staff.
3. Underwriting. The Fund will not act as underwriter of securities
issued by other persons. This limitation is not applicable to the extent that,
in connection with the disposition of portfolio securities (including restricted
securities), the Fund may be deemed an underwriter under certain federal
securities laws.
4. Real Estate. The Fund will not purchase or sell real estate. This
limitation is not applicable to investments in marketable securities which are
secured by or represent interests in real estate. This limitation does not
preclude the Fund from investing in mortgage-related securities or investing in
companies engaged in the real estate business or that have a significant portion
of their assets in real estate (including real estate investment trusts).
5. Commodities. The Fund will not purchase or sell commodities unless
acquired as a result of ownership of securities or other investments. This
limitation does not preclude the Fund from purchasing or selling options or
futures contracts, from investing in securities or other instruments backed by
commodities or from investing in companies which are engaged in a commodities
business or have a significant portion of their assets in commodities.
6. Loans. The Fund will not make loans to other persons, except (a) by
loaning portfolio securities, (b) by engaging in repurchase agreements, or (c)
by purchasing nonpublicly offered debt securities. For purposes of this
limitation, the term "loans" shall not include the purchase of a portion of an
issue of publicly distributed bonds, debentures or other securities.
7. Concentration. The Fund will not invest 25% or more of its total
assets in any particular industry. This limitation is not applicable to
investments in obligations issued or
4
<PAGE>
guaranteed by the U.S. government, its agencies and instrumentalities or
repurchase agreements with respect thereto.
With respect to the percentages adopted by the Trust as maximum
limitations on its investment policies and limitations, an excess above the
fixed percentage will not be a violation of the policy or limitation unless the
excess results immediately and directly from the acquisition of any security or
the action taken. This paragraph does not apply to the borrowing policy set
forth in paragraph 1 above.
Notwithstanding any of the foregoing limitations, any investment
company, whether organized as a trust, association or corporation, or a personal
holding company, may be merged or consolidated with or acquired by the Trust,
provided that if such merger, consolidation or acquisition results in an
investment in the securities of any issuer prohibited by said paragraphs, the
Trust shall, within ninety days after the consummation of such merger,
consolidation or acquisition, dispose of all of the securities of such issuer so
acquired or such portion thereof as shall bring the total investment therein
within the limitations imposed by said paragraphs above as of the date of
consummation.
Non-Fundamental. The following limitations have been adopted by the
Trust with respect to the Fund and are Non-Fundamental (see "Investment
Restrictions" above).
1. Pledging. The Fund will not mortgage, pledge, hypothecate or in any
manner transfer, as security for indebtedness, any assets of the Fund except as
may be necessary in connection with borrowings described in limitation (1)
above. Margin deposits, security interests, liens and collateral arrangements
with respect to transactions involving options, futures contracts, short sales
and other permitted investments and techniques are not deemed to be a mortgage,
pledge or hypothecation of assets for purposes of this limitation.
2. Borrowing. The Fund will not borrow money or enter into reverse
repurchase agreements.
3. Margin Purchases. The Fund will not purchase securities or evidences
of interest thereon on "margin." This limitation is not applicable to short term
credit obtained by the Fund for the clearance of purchases and sales or
redemption of securities, or to arrangements with respect to transactions
involving options, futures contracts, short sales and other permitted
investments and techniques.
4. Options. The Fund will not purchase or sell puts, calls, options or
straddles except as described in the Prospectus or Statement of Additional
Information.
5. Loans. The Fund will not loan its portfolio securities.
THE INVESTMENT ADVISER
The Fund's investment adviser is Veredus Asset Management LLC, 6900
Bowling Blvd., Suite 250, Louisville, KY 40207 (the "Adviser"). B. Anthony Weber
controls the Adviser and has served as President of the Adviser since April,
1998.
5
<PAGE>
Under the terms of the management agreement (the "Agreement"), the
Adviser manages the Fund's investments subject to approval of the Board of
Trustees and pays all of the expenses of the Fund except brokerage, taxes,
interest, fees and expenses of the non-interested person trustees and
extraordinary expenses. As compensation for its management services and
agreement to pay the Fund's expenses, the Fund is obligated to pay the Adviser a
fee computed and accrued daily and paid monthly at an annual rate of 1.50% of
the average daily net assets of the Fund, minus the amount by which the Fund's
total expenses (including organizational expenses, but excluding brokerage,
taxes, interest and extraordinary expenses) exceeds 1.50%. The Adviser may waive
all or part of its fee, at any time, and at its sole discretion, but such action
shall not obligate the Adviser to waive any fees in the future.
The Adviser retains the right to use the name "Veredus" in connection
with another investment company or business enterprise with which the Adviser is
or may become associated. The Trust's right to use the name "Veredus"
automatically ceases ninety days after termination of the Agreement and may be
withdrawn by the Adviser on ninety days written notice.
The Adviser may make payments to banks or other financial institutions
that provide shareholder services and administer shareholder accounts. The
Glass-Steagall Act prohibits banks from engaging in the business of
underwriting, selling or distributing securities. Although the scope of this
prohibition under the Glass-Steagall Act has not been clearly defined by the
courts or appropriate regulatory agencies, management of the Fund believes that
the Glass-Steagall Act should not preclude a bank from providing such services.
However, state securities laws on this issue may differ from the interpretations
of federal law expressed herein and banks and financial institutions may be
required to register as dealers pursuant to state law. If a bank were prohibited
from continuing to perform all or a part of such services, management of the
Fund believes that there would be no material impact on the Fund or its
shareholders. Banks may charge their customers fees for offering these services
to the extent permitted by applicable regulatory authorities, and the overall
return to those shareholders availing themselves of the bank services will be
lower than to those shareholders who do not. The Fund may from time to time
purchase securities issued by banks which provide such services; however, in
selecting investments for the Fund, no preference will be shown for such
securities.
TRUSTEES AND OFFICERS
The names of the Trustees and executive officers of the Trust are shown
below. Each Trustee who is an "interested person" of the Trust, as defined in
the Investment Company Act of 1940, is indicated by an asterisk. The officers of
the Trust listed below are affiliated persons of the Trust.
<TABLE>
Name, Age and Address Position Principal Occupations During Past 5 Years
- --------------------- -------- -----------------------------------------
<S> <C> <C>
B. Anthony Weber * Trustee, President President and Chief Investment Officer of Veredus Asset
Age: 39 and Treasurer Management LLC since 6/98; President and Director of SMC
6900 Bowling Blvd., Suite 250 Capital, Inc., an investment adviser, from 5/93 to 5/98.
Louisville, KY 40207
Charles P. McCurdy, Jr.* Trustee and Secretary Executive Vice President and Director of Research of
Age: 37 Veredus Asset Management LLC since 6/98; Director of
6900 Bowling Blvd., Suite 250 Research of SMC Capital, Inc., an investment adviser, from
Louisville, KY 40207 11/94 to 5/98; Manager of Investment Bonds of Stockyards
Bank & Trust from 10/92 to 11/94.
James R. Jenkins* Chief Financial Officer Vice President and Chief Operating Officer of Veredus Asset
Age: 34 Management LLC since 5/98; Trust Officer at Shelby
6900 Bowling Blvd., Suite 250 County Trust Bank from 6/93 to 5/98.
Louisville, KY 40207
Michael B. Mountjoy Trustee President of Carpenter, Mountjoy & Bressler, Certified
Age: 48 Public Accounts, since 1988; Secretary and Treasurer of
2300 Waterfront Plaza T-Shirts & More, Inc., an active wear distributor, since
Louisville, KY 40202 1991; Member of Security Storage Center, a self storage
facility,from 1993 to 1997; Director of Delta Dental
of Kentucky, a dental insurance company, since 1995.
Michael J. Kelley Trustee President and Chief Executive Officer of Richards
Age: 40 Industries, a contracting manufacturer, since 9/81.
3170 Wasson Road
Cincinnati, OH 45209
J. Sherman Henderson, III Trustee President and Chief Executive Officer of UniDial, Inc.,
Age: 55 a long distance telecommunications reseller, since 1993.
9931 Corporate Campus, Suite 3000
Louisville, KY 40223
</TABLE>
Trustee fees are Trust expenses. The following table estimates the
Trustees' compensation for the first fiscal year of the Trust ending May 31,
1999.
Total Compensation from Trust
Name (the Trust is not in a Fund Complex)
---- ------------------------------------
B. Anthony Weber 0
Charles P.McCurdy 0
Michael B. Mountjoy $2,000
Michael J. Kelley $2,000
J. Sherman Henderson, III $2,000
6
<PAGE>
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to policies established by the Board of Trustees of the Trust,
the Adviser is responsible for the Fund's portfolio decisions and the placing of
the Fund's portfolio transactions. In placing portfolio transactions, the
Adviser seeks the best qualitative execution for the Fund, taking into account
such factors as price (including the applicable brokerage commission or dealer
spread), the execution capability, financial responsibility and responsiveness
of the broker or dealer and the brokerage and research services provided by the
broker or dealer. The Adviser generally seeks favorable prices and commission
rates that are reasonable in relation to the benefits received.
The Adviser is specifically authorized to select brokers or dealers who
also provide brokerage and research services to the Fund and/or the other
accounts over which the Adviser exercises investment discretion and to pay such
brokers or dealers a commission in excess of the commission another broker or
dealer would charge if the Adviser determines in good faith that the commission
is reasonable in relation to the value of the brokerage and research services
provided. The determination may be viewed in terms of a particular transaction
or the Adviser's overall responsibilities with respect to the Trust and to other
accounts over which it exercises investment discretion.
Research services include supplemental research, securities and
economic analyses, statistical services and information with respect to the
availability of securities or purchasers or sellers of securities and analyses
of reports concerning performance of accounts. The research services and other
information furnished by brokers through whom the Fund effects securities
transactions may also be used by the Adviser in servicing all of its accounts.
Similarly, research and information provided by brokers or dealers serving other
clients may be useful to the Adviser in connection with its services to the
Fund. Although research services and other information are useful to the Fund
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and the Adviser, it is not possible to place a dollar value on the research and
other information received. It is the opinion of the Board of Trustees and the
Adviser that the review and study of the research and other information will not
reduce the overall cost to the Adviser of performing its duties to the Fund
under the Agreement.
Over-the-counter transactions will be placed either directly with
principal market makers or with broker-dealers, if the same or a better price,
including commissions and executions, is available. Fixed income securities are
normally purchased directly from the issuer, an underwriter or a market maker.
When the Fund and another of the Adviser's clients seek to purchase or
sell the same security at or about the same time, the Adviser may execute the
transaction on a combined ("blocked") basis. Blocked transactions can produce
better execution for the Fund because of the increased volume of the
transaction. If the entire blocked order is not filled, the Fund may not be able
to acquire as large a position in such security as it desires or it may have to
pay a higher price for the security. Similarly, the Fund may not be able to
obtain as large an execution of an order to sell or as high a price for any
particular portfolio security if the other client desires to sell the same
portfolio security at the same time. In the event that the entire blocked order
is not filled, the purchase or sale will normally be allocated on a pro rata
basis. The allocation may be adjusted by the Adviser, taking into account such
factors as the size of the individual orders and transaction costs, when the
Adviser believes adjustment is reasonable. Transactions of advisory clients
(including the Fund) may also be blocked with those of the Adviser.
DETERMINATION OF SHARE PRICE
The price (net asset value) of the shares of the Fund is determined as
of the close of The New York Stock Exchange (4:00 p.m., Eastern time) on each
day the Trust is open for business and on any other day on which there is
sufficient trading in the Fund's securities to materially affect the net asset
value. The Trust is open for business on every day except Saturdays, Sundays and
the following holidays: New Year's Day, Martin Luther King, Jr. Day, President's
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas. For a description of the methods used to determine the net asset
value (share price), see "Share Price Calculation" in the Prospectus.
The Fund's Prospectus, in the section "How to Invest in the Fund,"
describes certain types of investors for whom sales charges will be waived. The
Trustees have determined that the Fund incurs no appreciable distribution
expenses in connection with sales to these investors and that it is therefore
appropriate to waive sales charges for these investors.
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INVESTMENT PERFORMANCE
"Average annual total return," as defined by the Securities and
Exchange Commission, is computed by finding the average annual compounded rates
of return (over the one, five and ten year periods) that would equate the
initial amount invested to the ending redeemable value, according to the
following formula:
P(1+T)n=ERV
Where: P = a hypothetical $1,000 initial investment
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the
applicable period of the hypothetical $1,000
investment made at the beginning of the
applicable period.
The computation assumes that all dividends and distributions are reinvested at
the net asset value on the reinvestment dates, that the maximum sales load is
deducted from the initial $1,000 and that a complete redemption occurs at the
end of the applicable period. If the Fund has been in existence less than one,
five or ten years, the time period since the date of the initial public offering
of shares will be substituted for the periods stated.
The Fund may also advertise performance information (a
"non-standardized quotation") which is calculated differently from average
annual total return. A non-standardized quotation of total return may be a
cumulative return which measures the percentage change in the value of an
account between the beginning and end of a period, assuming no activity in the
account other than reinvestment of dividends and capital gains distributions. In
addition, a non-standardized quotation may be an indication of the value of a
$10,000 investment (made on the date of the initial public offering of the
Fund's shares) as of the end of a specified period. A non-standardized quotation
of total return will always be accompanied by the Fund's average annual total
return as described above.
From time to time, in advertisements, sales literature and information
furnished to present or to prospective shareholders, the performance of the Fund
may be compared to indices of broad groups of unmanaged securities considered to
be representative of or similar to the portfolio holdings of the Fund or
considered to be representative of the stock market in general. The Fund may use
the Standard & Poor's 500 Stock Index, the Russell 2000 Index or the Dow Jones
Industrial Average.
In addition, the performance of the Fund may be compared to other
groups of mutual funds tracked by any widely used independent research firm
which ranks mutual funds by overall performance, investment objectives and
assets, such as Lipper Analytical Services, Inc. or Morningstar, Inc. The
objectives, policies, limitations and expenses of other mutual funds in a group
may not be the same as those of the Fund. Performance rankings and ratings
reported periodically in national financial publications such as Barron's and
Fortune also may be used.
CUSTODIAN
Star Bank, N.A., 425 Walnut Street, M.L. 6118, Cincinnati, Ohio 45202,
is Custodian of the Fund's investments. The Custodian acts as the Fund's
depository, safekeeps its portfolio securities, collects all income and other
payments with respect thereto, disburses funds at the Fund's request and
maintains records in connection with its duties.
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TRANSFER AGENT
Unified Fund Services, Inc., 431 North Pennsylvania Street,
Indianapolis, Indiana 46204, acts as the Fund's transfer agent and, in such
capacity, 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 accounting and shareholder service functions. In
addition, Unified Fund Services, Inc., in its capacity as Fund Administrator,
provides the Fund with certain monthly reports, record-keeping and other
management-related services. For a description of the fees paid by the Adviser
on behalf of the Fund for these administrative services, see "Operation of the
Fund" in the Fund's Prospectus.
ACCOUNTANTS
The firm of Arthur Andersen LLP, 425 Walnut Street, Cincinnati, Ohio
45202, has been selected as independent public accountants for the Trust for the
fiscal year ending May 31, 1999. Arthur Andersen LLP performs an annual audit of
the Fund's financial statements and provides financial, tax and accounting
consulting services as requested.
DISTRIBUTOR
Unified Management Corporation, Inc., 431 North Pennsylvania Street,
Indianapolis, Indiana 46204, is the exclusive agent for distribution of shares
of the Fund. The Distributor is obligated to sell shares of the Fund 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.
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FINANCIAL STATEMENTS
VEREDUS FUNDS
VEREDUS GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES AS OF JUNE 18, 1998
TOGETHER WITH AUDITORS' REPORT
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Report of Independent Public Accountants
To the Trustees of the
Veredus Growth Fund of Veredus Funds:
We have audited the accompanying statement of assets and liabilities of the
Veredus Growth Fund of Veredus Funds as of June 18, 1998. This financial
statement is the responsibility of the Trust's management. Our responsibility is
to express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statements of assets and liabilities are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the statement of assets and
liabilities. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the statement of assets and liabilities referred to above
presents fairly, in all material respects, the financial position of the Veredus
Growth Fund of Veredus Funds as of June 18, 1998 in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Louisville, Kentucky
June 18, 1998
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Veredus Funds
Veredus Growth Fund
Statement of Assets and Liabilities
June 18, 1998
Assets
Cash $ 100,000
Organization costs (Note 2) 24,000
----------
Total assets 124,000
----------
Liabilities
Accrued expenses (Note 2) 24,000
----------
Total liabilities 24,000
----------
Net assets for shares of beneficial interest outstanding $ 100,000
==========
Shares outstanding 10,000
==========
Net asset value, offering price and redemption price per share $ 10.00
==========
The accompanying notes are an integral part of this statement.
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Veredus Funds
Veredus Growth Fund
Notes to Statement of Assets and Liabilities
As of June 18, 1998
(1) The Veredus Growth Fund (the Fund) is a diversified, open-end, mutual
fund of Veredus Funds. Veredus Funds was established as an Ohio
business trust under a Declaration of Trust dated April 13, 1998. On
June 18, 1998, 10,000 shares of the Fund were issued for cash at $10.00
per share. The Fund has had no operations except for the initial
issuance of shares.
(2) Expenses incurred in connection with the organization of the Fund and
the initial offering of shares are estimated to be $24,000. These
expenses will be paid by Veredus Asset Management LLC (the Adviser).
Upon commencement of the public offering of shares of the Fund, the
Fund will reimburse the Adviser for such expenses, with that amount
being capitalized and amortized on a straight-line basis over five
years. As of June 18, 1998, all outstanding shares of the Fund were
held by a principal of the Adviser, who purchased these initial shares
in order to provide the Fund with its required capital. In the event
the initial shares of the Fund are redeemed by any holder thereof at
any time prior to the complete amortization of organizational expenses,
the redemption proceeds payable with respect to such shares will be
reduced by the pro rata share (based upon the portion of the shares
redeemed in relation to the required capitalization) of the unamortized
deferred organizational expenses as of the date of such redemption.
In April 1998 a Statement of Position, "Reporting on the Costs of
Start-Up Activities", was issued which requires that organizational
cost be expensed as incurred unless shares are sold to independent
third parties (public offering) prior to June 30, 1998. Accordingly,
should a commencement of offering of shares to the public not occur
prior to June 30, 1998, a principal of the Adviser has agreed to
purchase an additional $24,000 in shares of the Fund.
(3) Reference is made to the Prospectus and this Statement of Additional
Information for a description of the Management Agreement with the
Adviser, tax aspects of the Funds and the calculation of the net asset
value of shares of the Fund.
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