FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. __1 [_]
Post-Effective Amendment No. ___ [_]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
[X]
Amendment No. ___ [_]
- ----------------------------------------------------------------
VALUE TREND FUNDS
(Exact name of registrant as specified in charter)
- ----------------------------------------------------------------
411 West Madison Avenue,
El Cajon, California 92020-3226
(Address of principal executive offices)
Registrant's Telephone Number: 619-588-9700
- ----------------------------------------------------------------
Ross C. Provence, 411 West Madison Avenue, El Cajon, CA
92020 (Name and address of agent for service)
- ----------------------------------------------------------------
Approximate date of proposed public offering: As soon as
practicable after the effective date of the Registration
Statement.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940,
Registrant has elected to register an indefinite number of shares
of beneficial interest. The amount of the registration fee
pursuant to Rule 24f-2 of the Investment Company Act of 1940 is
$500.
The Registrant hereby amends this registration statement on
such date or 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 statement shall become effective on such date as
the Commission, acting pursuant to said Section 8(a), may
determine.
<PAGE>
VALUE TREND FUNDS January 1, 1999
Value Trend Funds (the "Trust") is a registered open-end management investment
company with three separately managed non-diversified, no-load portfolios (each
a "Fund" and collectively, the "Funds"). The three separate Funds are the Large
Cap Fund, the Links Fund and the Worldwide Fund. Each Fund's investment
objective is long-term growth of capital. The Large Cap Fund seeks to achieve
its objective by investing substantially all of its assets in common stocks of
well-established, high-quality US Companies. The Links Fund seeks to achieve its
objective by investing primarily in common stocks of companies which are
associated with the golfing industry. The Worldwide Fund seeks to achieve its
objective primarily through investments in common stock of foreign and domestic
issuers. For further explanation on each Fund see THE FUNDS. There can be no
assurance that the Funds will achieve their investment objectives. Value Trend
Capital Management, LP ("Value Trend Capital Management, LP" or "Adviser") is
the investment adviser of the Funds. Each Fund's portfolio is managed by Value
Trend Capital Management, LP.
Each Fund currently offers one class of shares. This Prospectus
concisely describes the information that an investor should know
before investing in a Fund. Please read it carefully and keep it
for future reference. A Statement of Additional Information
dated January 1, 1999, is available free of charge. Write to Value
Trend Capital Management, LP, 411 West Madison Avenue, El Cajon,
Ca 92020 or call toll free 1-800-590-0898. The Statement of
Additional Information, which contains more detailed information
about the Funds, has been filed with the Securities and Exchange
Commission (the "SEC") and is incorporated by reference into this
Prospectus.
NO LOAD, NO SALES CHARGE, NO 12b-1 FEES
Minimum Initial Investment - $1,000 or $250 for IRAs
Minimum Subsequent Investments - $50
No Minimum Subsequent Investment for IRAs
(see "How to Purchase Shares")
For more information about establishing an account, or any other
information about the Funds, call 1-800-590-0898.
This prospectus contains information you should know before
investing. Please retain it for future reference. A Statement
of Additional Information regarding the Funds dated the date of
this prospectus has been filed with the Security and Exchange
Commission and (together with any supplement to it) is
incorporated by reference. That Statement may be obtained at no
charge by writing or telephoning the transfer agent at its
address or telephone number shown inside the back cover.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROSPECTUS 1
<PAGE>
The following information is provided to assist an investor in
understanding the various expenses that an investor in a Fund
will bear directly or indirectly. Since the Funds had not
commenced operations as of the date of the Prospectus, the
information about each Fund shown below is based on annualized
projected expenses for each class of shares for the 1999 fiscal
year. The information below should not be considered a
representation of past or future expenses, as actual expenses may
be greater or less than those shown. The examples show the
cumulative expenses attributable to a hypothetical $1,000
investment over specified periods, assuming the 5% annual return
required under federal regulations.
Large
Cap Links Worldwide
Fund Fund Fund
Shareholder Transaction Expenses
Maximum Sales Load none none none
Maximum Deferred Sales Load none none none
Redemption Fees none none none
Exchange Fees none none none
Annual Operating Expenses
(as a percentage of average net assets):
Management Fees 1.25% 1.35% 1.35%
12b-1 Fees none none none
Other Operating Expenses (after expense
reimbursements) none none none
Total Operating Expenses
(after expense reimbursements) 1.25% 1.35% 1.35%
Example(1):
An investor would pay the following
expenses on a $1,000 investment assuming a
5% annual return (with or without a
redemption at the end of each time period):
One Year $13 $14 $14
Three Year $40 $43 $43
(1) Under SEC rules, newly-organized funds, such as the Funds,
are required to show expenses for the one-year and three-year
periods only.
These examples should not be considered a representation of past
or future expenses or performances. Actual expenses may be greater
or less than those shown.
2 VALUE TREND FUNDS
<PAGE>
Value Trend Large Cap Fund
The Large Cap Fund's investment objective is long-term growth of
capital. The Fund is a no-load mutual fund which seeks to
achieve its objective by investing substantially all of its
assets in common stocks of well-established, high-quality US
Companies that have a market capitalization of $5 billion or
more. Some of these companies will have international exposure
through their international divisions. In selecting investments
for the Fund, the investment adviser will consider, among other
things, consistency of earnings, earnings growth rate, and return
on equity. The investment adviser will also consider its
expectations as to the relative performance of various sectors of
the economy and the relative growth prospects of different
companies within such sectors. Under normal market conditions,
the Fund will ordinarily be substantially fully invested in
common stocks of major US companies.
Value Trend Links Fund
The Links Fund's investment objective is long-term growth of capital. The Fund
is a no-load mutual fund which seeks to achieve its objective by investing
primarily in common stocks of companies which are associated with the golfing
industry. The minimum market capitalization of the stocks in the Fund is $50
million with no maximum market capitalization. Companies which are candidates
for this Fund may be, but are not limited to companies in the golfing industry,
sponsors of major golfing events, companies which produce products for the
golfing industry, and real estate investment trusts (REITs) which are involved
with golf properties, hotels, and housing.
Value Trend Worldwide Fund
The Worldwide Fund's investment objective is long-term growth of capital. The
Fund is a no-load mutual fund which seeks to achieve its objective primarily
through investments in common stock of foreign and domestic issuers. The Fund
has the flexibility to invest on a worldwide basis in companies and other
organizations of any size, regardless of country of organization or place of
principal business activity. The adviser under normal circumstances will invest
assets in at least three different countries and 65% of the common stock held
will be in companies located in foreign countries. As of January 1, 1999 the
Worldwide Fund has not commenced operations.
All Funds
Except for necessary reserves including but not limited to
reserves held to cover redemptions and unanticipated expenses, as
determined by management, all assets will be invested in
marketable securities composed primarily of common stocks and
securities convertible into common stocks. The reserves will be
held in cash or high-quality, short-term debt obligations readily
changeable into cash.
Management believes, however, that there may be times when the
shareholders interests are best served by investing in preferred
stocks, bonds or other defensive issues. It retains the freedom
to administer the portfolio of the Funds accordingly when, in the
judgment of the Adviser, economic and market conditions make such
a course desirable. Normally, however, the Funds will maintain
at least 65% of the portfolios in common stocks. These are not
restrictions or guidelines
PROSPECTUS 3
<PAGE>
regarding the investment of Funds assets in shares listed on an
exchange or traded over-the-counter. The Funds may also invest
in issues of the United States Treasury or a United States
government agency subject to repurchase agreements. The use of
repurchase agreements by the Funds involves certain risks. For a
discussion of the risks, see "Repurchase Agreements" below.
In addition to the investments described above, each Fund may
lend its portfolio securities and enter into repurchase
agreements. See "Risk Considerations" below.
INVESTMENT STRATEGIES
Value Trend Capital Management, LP, the investment adviser, as
its name implies follows a value investment strategy. Its
investment objective is to seek long-term growth of capital by
investing primarily in common and preferred stocks and warrants
or other rights and convertible securities.
The Adviser uses several approaches in analyzing economic value, but considers
the primary determinant of value to be a company's long-term ability to generate
profits for its shareholders. The Adviser also considers whether a stock is
trading at a price below which the investment adviser believes it should be
trading based on price relative to projected future earnings, price relative to
return on equity and price relative to the earnings growth rate. Once the
Adviser has identified a potential stock for a portfolio, the Adviser will
consider it for a Fund based on fundamental analysis.
RISK CONSIDERATIONS
It is important to understand the following risks inherent in a
Fund before you invest.
Common Stocks and
Other Equity Securities
Common stocks and similar equity securities are securities that
represent an ownership interest (or the right to acquire such an
interest) in a company and include securities convertible for or
convertible into common stocks (e.g. warrants). While offering
greater potential for long-term growth, common stocks and similar
equity securities are more volatile and more risky than some
other forms of investment. Therefore, the value of your
investment in a Fund may sometimes decrease instead of increase.
With exception of the Large Cap Fund, each Fund may invest in
equity securities of companies with relatively small market
capitalization. Securities of such companies may be more volatile
than the securities of larger, more established companies and the
broad equity market indices. See "Small Companies" below. The
Links Fund investments may include securities traded "over-the-
counter" as well as those traded on a securities exchange. Some
over-the-counter securities may be more difficult to sell under
some market conditions.
4 VALUE TREND FUNDS
<PAGE>
Convertible securities include other securities, such as
warrants, that provide an opportunity for equity participation.
Because convertible securities can be converted into equity
securities, their values will normally increase or decrease as
the values of the underlying equity securities increase or
decrease. The movements in the prices of convertible securities,
however, may be smaller than the movements in the value of the
underlying equity securities.
Small Companies
The Links Fund may invest in companies with relatively small
market capitalization. See "The Funds" above. Investments in
companies with relatively small capitalization may involve
greater risk than is usually associated with stocks of larger
companies. These companies often have sales and earnings growth
rates which exceed those of companies with larger capitalization.
Such growth rates may in turn be reflected in more rapid share
price appreciation. However, companies with smaller
capitalization often have limited product lines, markets or
financial resources and may be dependent upon a relatively small
management group. The securities may have limited marketability
and may be subject to more abrupt or erratic movements in price
than securities of companies with larger capitalization or market
averages in general. The net asset value per share of Funds that
invest in companies with smaller capitalization therefore may
fluctuate more widely than market averages.
Non-diversification Policy
The Funds are classified as non-diversified, which means that they may invest
substantial assets in a single issuer; however, to maintain their tax status
under Subchapter M of the Internal Revenue Code, the Funds may not invest more
than 25% of its total assets in any one issuer other than US government
securities and at the close of each quarter of the taxable year, at least 50% of
the value of each Fund must be represented by a) cash and cash items, including
US government securities and b) other securities of different issuers in which
each Fund has invested no more than 5% of its assets and with respect to which
it owns no more than 10% of the outstanding voting securities of the issuer.
Each Fund, therefore, may be more susceptible than a more widely diversified
fund to a single economic, political, or regulatory occurrence. Each Fund seeks
only diversification for adequate representation among what it considers to be
the best performing securities and to maintain its federal non-taxable status
under Sub-Chapter M of the Internal Revenue Code. Except for investment policies
that are identified as "fundamental," all of the investment policies of each
Fund may be changed without a vote of Fund shareholders.
Repurchase Agreements
Under a repurchase agreement, a Fund buys securities from a
seller, usually a bank or brokerage firm, with the understanding
that the seller will repurchase the securities at a higher price
at a later date. If the seller fails to repurchase the
securities, the Fund has rights to sell the securities to third
parties. Repurchase agreements can be regarded as loans by the
Fund to the seller, collateralized by the securities that are the
subject of the agreement. Repurchase agreements afford an
opportunity for the Fund to earn a return on available cash at
relatively low credit risk, although the Fund may be subject to
various delays and risks of loss if the seller fails to meet its
obligation to repurchase.
PROSPECTUS 5
<PAGE>
The staff of the SEC is currently of the view that repurchase
agreements maturing in more than seven days are illiquid
securities.
Loans of Securities
The Funds may lend their portfolio securities, provided that cash
or equivalent collateral equal to at least 100% of the market
value of the securities loaned is continuously maintained by the
borrower with the Funds. During the time securities are on loan,
the borrower will pay the Fund an amount equivalent to any
dividends or interest paid on such securities, and the Fund may
invest the cash collateral and earn additional income, or it may
receive an agreed upon amount of interest income from the
borrower who has delivered equivalent collateral. These loans are
subject to termination at the option of the Fund or the borrower.
A Fund may pay reasonable administrative and custodial fees in
connection with a loan and may pay a negotiated portion of the
interest earned on the cash or equivalent collateral to the
borrower or placing broker. It is not currently anticipated that
any Fund will have on loan at any given time securities totaling
more than one-fourth of its net assets. A Fund runs the risk
that the counterparty to a loan transaction will default on its
obligation and that the value of the collateral received may be
insufficient to cover the securities loaned as a result of an
increase in the value of the securities of decline in the value
of the collateral.
Options
The Funds may write (i.e. sell) covered call and put options and
purchase put and call options on securities that are traded on
United States listed markets. The value of the underlying
securities on which the options may be written at any one time
will not exceed 15% of the Fund's total assets. The Fund will
not purchase put of call options if the aggregate premium paid
for such options would exceed 5% of the Fund's total assets at
the time of purchase. The risks associated with options are that
the option does not follow the price movement of the underlying
security. Moreover, gains and losses depend on the investment
adviser's ability to predict correctly the direction of stock
prices, interest rates, and other economic factors.
Futures Contracts
The Funds may enter into financial futures contracts to hedge
cash positions. Futures are generally bought and sold on
commodity exchanges. The sale of a futures contract creates a
firm obligation by the Funds, as seller, to deliver to the buyer
the specific type of financial instrument called for in the
contract at a specified future time for a specified price (or the
net cash amount). The risk associated with using futures
contracts are: (i) imperfect correlation between the change in
market value of stocks held by the Funds and the prices of the
futures contracts; and (ii) possible lack of a liquid secondary
market for futures when desired.
Short Sales Against The Box
Each Fund may sell short securities the Fund owns or has the
right to acquire without further consideration, a technique
called selling short "against the box." Short sales against the
box may protect the Fund against the risk of losses in the value
of its portfolio securities because any unrealized losses with
6 VALUE TREND FUNDS
<PAGE>
respect to such securities should be wholly or partially offset
by a corresponding gain in the short position. However, any
potential gains in such securities should be wholly or partially
offset by a corresponding loss in the short position. Short
sales against the box may be used to lock in a profit on a
security when, for tax reasons or otherwise, the Adviser does not
want to sell the security. The Trust does not currently expect
that more than 20% of any Fund's total assets would be involved
in short sales against the box. For a more complete explanation,
please refer to the Statement of Additional Information.
Real Estate Investment Trusts
The Links Fund may invest up to 25% of assets in shares of real
estate investment trusts ("REITs"). REITs pool investors' funds
for investment primarily in income producing real estate or real
estate related loans or interests. Under the federal Internal
Revenue Code (the "Code"), a REIT is not taxed on income it
distributes to its shareholders if it complies with several
requirements relating to its organization, ownership, assets, and
income and a requirement that it generally distribute to its
shareholders at least 95% of its taxable income (other than net
capital gains) for each taxable year. REITs can generally be
classified as Equity REITs, Mortgage REITs, and Hybrid REITs.
Equity REITs, which invest the majority of their assets directly
in real property, derive their income primarily from rents.
Equity REITs can also realize capital gains by selling properties
that have appreciated in value. Mortgage REITs, which invest the
majority of their assets in real estate mortgages, derive their
income primarily from interest payments. Hybrid REITs combine the
characteristics of both Equity REITs and Mortgage REITs.
While the Links Fund will not invest in real estate directly, the
Fund may be subject to risks similar to those associated with the
direct ownership of real estate (in addition to securities
markets risks) because of its option to purchase securities of
companies in the real estate industry. These include declines in
the value of real estate, risks related to general and local
economic conditions, dependency on management skill, heavy cash
flow dependency, possible lack of availability of mortgage funds,
overbuilding, extended vacancies of properties, increased
competition, increases in property taxes and operating expenses,
changes in zoning laws, losses due to costs resulting from the
clean-up of environmental problems, liability to third parties
for damages resulting from environmental problems, casualty or
condemnation losses, limitations on rents, changes in
neighborhood values and in the appeal of properties to tenants
and changes in interest rates.
In addition to these risks, Equity REITs may be affected by
changes in the value of the underlying property owned by the
trusts, while Mortgage REITs may be affected by the quality of
any credit they extend. Further, Equity REITs and Mortgage REITs
are dependent upon management skills and generally may not be
diversified. Equity REITs and Mortgage REITs are also subject to
heavy cash flow dependency, defaults by borrowers and self-
liquidation. In addition, Equity REITs and Mortgage REITs could
possibly fail to qualify for tax free pass-through of income
under the Internal
PROSPECTUS 7
<PAGE>
Revenue Code or to maintain their exemptions from registration
under the 1940 Act. The above factors may also adversely affect a
borrower's or a lessee's ability to meet its obligations to the
REIT. In the event of a default by a borrower or lessee, the REIT
may experience delays in enforcing its rights as a mortgagee or
lessor and may incur substantial costs associated with protecting
its investments. In addition to the foregoing risks, certain
"special purpose" REITs in which the Links Fund invests may
invest their assets in specific real estate sectors, such as
hotel REITs, housing REITs, golf property REITs, etc., and are
therefore subject to the risks associated with adverse
developments in the respective sectors.
MANAGEMENT OF THE FUNDS
Value Trend Capital Management, LP is the investment adviser of
each Fund and has responsibility for the management of the Funds'
affairs, under the supervision of the Trust's Board of Trustees.
Each Fund's investment portfolio is managed on a day-to-day basis
by Value Trend Capital Management, LP under the general oversight
of the Board of Trustees.
Value Trend Capital Management, LP was organized in 1995 and has
been managing investment accounts and money since that time. The
Adviser serves as investment adviser to individuals, trusts,
retirement plans, and non-profit organizations, but has no prior
experience managing mutual funds. The address of Value Trend
Capital Management, LP is 411 West Madison Avenue, El Cajon, Ca
92020. The General Partners of Value Trend Capital Management,
LP are Ross C. Provence and Jeffrey R. Provence who also act as
Trustees to the Trust. Each owns 50% and therefore are regarded
to control Value Trend Capital Management, LP for purposes of the
1940 Act.
Pursuant to the investment advisory contract (the "Advisory
Agreement") Value Trend Capital Management, LP is responsible for
(i) continuous investment supervision and management to the Funds
(ii) office space, equipment and management personnel (iii)
administrative services which include, among other things, day-to-
day administration of matters related to the Fund's existence,
maintenance of its records, preparation of reports and
assistance in the preparation of the Trust's registration
statement under federal and state laws (iv) the compensation of
any of the Trust's trustees, officers and employees who are
directors, officers, employees or shareholders of the Investment
Adviser, (v) expenses of shareholders' and trustees' meetings and
(vi) expenses of preparing, printing and mailing prospectuses to
existing shareholders.
Value Trend Capital Management, LP has retained The Fifth Third
Bank to serve as the custodian for the Funds.
Value Trend Capital Management, LP has retained Mutual
Shareholder Services (the "Transfer Agent") to serve as the
Fund's transfer agent, dividend paying agent and shareholder
service agent, to provide accounting and pricing services to the
Funds, and to assist the Value Trend Capital Management, LP in
providing executive, administrative and regulatory services to
the Funds. Value Trend Capital Management, LP (not the
8 VALUE TREND FUNDS
<PAGE>
Fund) pays the transfer agent's fees for these services.
The Trust uses "Value Trend" in the names of the Funds by license
from the Value Trend Capital Management, LP and would be required
to stop using the name "Value Trend" if Value Trend Capital
Management, LP ceased to be the Adviser. Value Trend Capital
Management, LP has the right to use the name "Value Trend" for
another enterprise, including another investment company.
Advisory Fees
Under the investment advisory contract (the "Advisory Agreement")
each Fund pays Value Trend Capital Management, LP as compensation
for its services, a fee, accrued daily and payable monthly, at
the following annual percentage rates of the Fund's daily net
assets value:
Fund Fee Rate
Large Cap Fund 1.25%
Links Fund 1.35%
Worldwide Fund 1.35%
Value Trend Capital Management, LP (the Adviser) will reimburse the Funds to the
extent that annual expenses exceed the Funds' management fees established under
the advisory contracts, excluding taxes, interest, brokerage commissions,
independent accountants, legal counsel and extraordinary litigation expenses,
during any of the Funds' fiscal years.
Other Fund Expenses
In addition to the investment advisory fee, each Fund pays all
expenses not expressly assumed by Value Trend Capital Management,
LP, including taxes, interest, brokerage commissions,
extraordinary legal counsel, extraordinary independent
accountants and extraordinary litigation expenses.
PORTFOLIO TRANSACTIONS
In addition to selecting portfolio investments for the Fund(s) it
manages, Value Trend Capital Management, LP selects brokers or
dealers to execute securities purchases and sales for the Fund's
accounts. Value Trend Capital Management, LP selects only brokers
or dealers which it believes are financially responsible, will
provide efficient and effective services in executing, clearing
and settling an order and will charge commission rates which,
when combined with the quality of the foregoing services, will
produce best price and execution for the transaction. This does
not necessarily mean that the lowest available brokerage
commission will be paid. However, the commissions are believed
to be competitive with generally prevailing rates. Value Trend
Capital Management, LP will use its best efforts to obtain
information as to the general level of commission rates being
charged by the brokerage community from time to time and will
evaluate the overall reasonableness of brokerage commissions paid
on transactions by reference to such data. In making such
evaluation, all factors affecting liquidity and execution of the
order, as well as the amount of the capital commitment by the
broker in connection with the order, are taken into account. The
Funds will not pay a broker a commission at a higher rate than
otherwise available for the same transaction in recognition of
the value of research services provided by
PROSPECTUS 9
<PAGE>
the broker or in recognition of the value of any other services
provided by the broker which do not contribute to the best price
and execution of the transaction.
Portfolio Turnover
It is not possible to predict the Funds' portfolio turnover rates
with certainty. Value Trend Capital Management, LP has indicated,
however, that it does not expect that the annual portfolio
turnover rate of the Fund(s) it manages would normally exceed the
following rates: 50% for the Large Cap Fund; 75% for the Links
Fund; and 75% for the Worldwide Fund. Any Fund's portfolio
turnover rate in any year could be significantly higher or lower
than these estimates.
Higher levels of portfolio turnover may result in higher
transactions costs and higher levels of realized capital gains.
Tax Efficiency
Value Trend Capital Management, LP, will make a concentrated
effort to manage the Funds in a tax efficient manner. It is the
Adviser's intent to acquire stock in companies which can be held
on a long-term basis. The Adviser believes that so long as a
company continues to increase shareholder equity by a higher than
average return on equity and deploy the profits to enhance
shareholder interest, the stock should be held in the Fund's
portfolio. Other factors, however, such as total accumulated
gain, market conditions and future prospects may result in the
sale or holding of any security. There is no assurance that this
objective can be obtained. The information under Portfolio
Turnover may be affected by the Adviser's ability to execute this
policy.
HOW TO PURCHASE SHARES
Your initial investment in each of the Funds must be at least
$1,000 (or $250 for IRAs). Shares of the Funds are sold on a
continuous basis at the net asset value next determined after
receipt of a purchase order by each of the Funds. Purchase orders
received by dealers prior to 4:00 p.m., Eastern time, on any
business day and transmitted to the Transfer Agent by 5:00 p.m.,
Eastern time, that day are confirmed at the net asset value
determined as of the close of the regular session of trading on
the New York Stock Exchange on that day. It is the
responsibility of dealers to transmit properly completed orders
so that they will be received by the Transfer Agent by 5:00 p.m.,
Eastern time. Dealers may charge a fee for effecting purchase
orders. Direct purchase orders received by the Transfer Agent
after 4:00 p.m., Eastern time, are confirmed at the net asset
value next determined after receipt of such purchase orders.
This means that direct purchase orders received by the Transfer
Agent by 4:00 p.m., Eastern time, are confirmed at that day's net
asset value. Direct investments received by the Transfer Agent
after 4:00 p.m., Eastern time, and orders received from dealers
after 5:00 p.m., Eastern time, are confirmed at the net asset
value next determined on the following business day.
You may open an account and make an initial investment in the
Funds by sending a check and a completed account application form
to:
Value Trend Funds
1301 East Ninth Street, 36th Floor Cleveland, Ohio 44114
10 VALUE TREND FUNDS
<PAGE>
Checks should be made payable to the "Value Trend Funds". You
must provide the amount you wish to be invested in each Fund.
The Transfer Agent mails confirmations of all purchases or
redemptions of Fund shares. Certificates representing shares are
not issued. Each Fund reserves the rights to limit the amount of
investments and to refuse to sell to any person. Investors should
be aware that the Fund's account application contains provisions
in favor of the Funds and certain of its 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 canceled because your check
does not clear, you will be responsible for any resulting losses
or fees incurred by the Fund or the Transfer Agent in the
transaction.
You may also purchase shares of the Funds by wire. Please
telephone the Transfer Agent (nationwide call toll-free 1-800-590-
0898) for instructions. You should be prepared to give the name
in which the account is to be established, the address, telephone
number and taxpayer identification number for the account, and
the name of the bank, which will wire the money.
Your investment will be made at the next determined net asset
value after your wire is received together with the account
information indicated above. If the transfer agent does not
receive timely and complete account information, there may be a
delay in the investment of your money and any accrual of
dividends. To make your initial wire purchase, you are required
to mail a completed account application to the Transfer Agent.
Your bank may impose a charge for sending your wire. There is
presently no fee for receipt of wired funds, but the Funds
reserves the right to charge shareholders for this service upon
30-days' prior notice to shareholders.
You may purchase and add shares to your account ($50 minimum) by
mail or by bank wire. There is no additional minimum subsequent
investments for IRAs. Checks should be sent to Value Trend Funds,
1301 East Ninth Street, 36th Floor, Cleveland, Ohio 44114.
Checks should be made payable to the "Value Trend Funds" and
include the Fund(s) you wish to invest in. Bank wires should be
sent as outlined above. Each additional purchase request must
contain the name of your account and your account number to
permit proper crediting to your account.
HOW TO REDEEM SHARES
You may redeem shares of the Fund on each day that the Funds are
open for business by sending a written request to the Transfer
Agent. The request must state the number of shares or the dollar
amount to be redeemed from each Fund and your account number.
The request must be signed exactly as your name appears on the
Fund's account records. If the shares to be redeemed have a
value of $25,000 or more, your signature must be guaranteed by
any eligible guarantor institution, including banks, brokers and
dealers, municipal securities brokers and dealers, government
securities brokers
PROSPECTUS 11
<PAGE>
and dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings
associations. A notary public is not an acceptable guarantor.
Redemption requests may direct that the proceeds be wired
directly to your existing account in any commercial bank or
brokerage firm in the United States. There is currently a $15
charge for processing wire redemptions. The Adviser reserves the
right to waive 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.
You may also redeem shares by placing a wire redemption through a
securities broker or dealer. Unaffiliated broker-dealers may
impose a fee on the shareholder for this service. You will
receive the net asset value per share next determined after
receipt by the Fund or the Transfer Agent of your wire redemption
request. It is the responsibility of broker-dealers to properly
transmit wire redemption orders.
You will receive the net asset value per share next determined
after receipt by the Transfer Agent of your redemption request in
the form described above. Payment is made within seven business
days after tender in such form, provided that payment in
redemption of shares purchased by check will be effected only
after the check has been collected, which may take up to fifteen
days from the purchase date. To eliminate this delay, you may
purchase shares of the Funds by certified check or wire.
Because the net asset value of each Fund's shares will fluctuate,
the amount that a shareholder receives upon redemption may be
more or less than the amount paid for the shares.
At the discretion of the Trust or the Transfer Agent, corporate
investors and other associations may be required to furnish an
appropriate certification authorizing redemptions to ensure
proper authorization. The Trust reserves the right to require
you to close your account if at any time the value of your shares
is less than $1,000 (based on actual amounts invested,
unaffected by market fluctuations), or such other minimum amount
as the Trust may determine from time to time. After notification
to you of the Trust's intention to close your account, you will
be given 60-days to increase the value of your account to the
minimum amount.
The Trust reserves the right to suspend the right of redemption
or to postpone the date of payment for more than seven business
days under unusual circumstances as determined by the Securities
and Exchange Commission.
SHAREHOLDER SERVICES
The Funds offer the following share-holder services, which are
more fully described in the Statement of Additional Information.
Explanations and forms are available from the Value Trend Funds,
1301 East Ninth Street, Cleveland, Ohio
12 VALUE TREND FUNDS
<PAGE>
44114. Telephone redemption and exchange privileges will be
established automatically when an investor opens an account
unless an investor elects on the application to decline the
privileges. Other privileges must be specifically elected. A
signature guarantee will be required to establish a privilege
after an account is opened.
Free Exchange Privilege
Any Value Trend Fund may be exchanged for shares of any other
Value Trend Fund. Exchanges may be made by written
instructions or by telephone, unless an investor elected on the
application to decline telephone exchange privileges. The
exchange privilege should not be viewed as a means for taking
advantage of short-term swings in the market, and the Funds
reserve the right to terminate or limit the privilege of any
shareholder who makes more than four exchanges in any calendar
year. The Funds may terminate or change the terms of the exchange
privilege at any time, upon 60-days' notice to shareholders.
Contact the Transfer Agent (nationwide call toll-free 1-800-590-
0898) for additional information about the shareholder
services described above. An exchange transaction is a sale and
purchase of shares for federal income tax purposes and may result
in capital gain or loss.
SYSTEMATIC WITHDRAWAL PLAN
Shareholders who own shares of the Fund valued at $25,000 or more
may elect to receive a monthly or quarterly check (or
direct deposit to the shareholder's checking account) in a
stated amount (minimum amount is $100 per month or quarter).
Shares will be redeemed at net asset value as may be
necessary to meet the withdrawal payments. If withdrawal
payments exceed reinvested dividends and distributions, the
investor's shares will be reduced and eventually depleted. A
withdrawal plan may be terminated at any time by the shareholder
or the applicable Fund. Costs associated with a withdrawal plan
are borne by the Fund. Additional information regarding
systematic withdrawal plans may be obtained by calling Value
Trend Funds at 1-800-590-0898 or at (216) 687-1000.
TAX-DEFERRED
RETIREMENT PLANS
Shares of the Fund are available for purchase in connection with
the following tax-deferred retirement plans:
Individual retirement accounts (IRAs), Roth IRAs and Educational
IRAs for individuals and their non-employed spouses. There is an
$8 yearly fee for all IRAs.
DIRECT DEPOSIT PLANS
Shares of the each Fund may be purchased through direct deposit
plans offered by certain employees and government agencies.
These plans enable a shareholder to have all or a portion of his
or her payroll or Social Security checks transferred
automatically to purchase shares of the Funds.
AUTOMATIC INVESTMENT PLAN
You may make automatic monthly investments in the Funds from your
bank, savings and loan or other depository institu-
PROSPECTUS 13
<PAGE>
tion account. The minimum initial and subsequent investments
must be $50 under the plan. Your depository institution may
impose its own charge for debiting your account, which would
reduce your return from an investment in the Fund.
CALCULATION OF
PERFORMANCE INFORMATION
The Funds may include in advertising their "total return" for the
one-year, five-year and ten-year periods (or for the life of a
Fund, if shorter) through the most recent calendar quarter.
These total returns represent the average annual compounded rate
of return on a hypothetical investment of $1,000 in a Fund.
Total return may also be presented for other periods and on a
cumulative (in addition to average annual) basis.
DETERMINATION OF
NET ASSET VALUE
The net asset value of a share of each Fund is determined by the
Funds' transfer agent, Mutual Shareholder Services as of the
close on the New York Stock Exchange, currently 4:00 p.m. New
York City time, on any day on which the Exchange is open for
trading, by dividing the market value of each Fund's assets, less
its liabilities, by the number of shares outstanding, and
rounding down to the nearest full cent.
Portfolio securities are valued using current market valuations
based on last reported sales prices. Securities for which
quotations are not available and other assets are valued at a
fair value as determined by management and approved in good faith
by the Board of Trustees. Short-term obligations with maturities
of 60 days or less are valued at amortized costs as reflecting
fair value.
DIVIDENDS, CAPITAL GAIN
DISTRIBUTIONS AND TAXES
The Funds declare and pay their net investment income to
shareholders as dividends annually. Each Fund also distributes
all of its net capital gains realized from the sale of portfolio
securities. Any capital gain distributions are normally made
annually, but may, to the extent permitted by law, be made more
frequently as deemed advisable by the Trustees of the Trust. The
Trustees may change the frequency with which the Funds declare or
pay dividends.
Dividends and capital gain distributions will automatically be
reinvested in additional shares of the same Fund on the record
date unless an investor has elected to receive cash.
Each Fund intends to elect to be treated and to qualify each year
as a regulated investment company under Subchapter M of the
Internal Revenue Code of 1986. As a regulated investment company,
and provided that the Fund distributes substantially all its net
investment income to its shareholders, the Fund itself will not
pay any federal income tax on its distributed income and gains.
Income dividends and short-term capital gain distributions are
taxable as ordinary income whether distributed in cash or
additional shares. Long-term capital gain distributions from all
Funds are taxable as long-term capital gains whether dis-
14 VALUE TREND FUNDS
<PAGE>
tributed in cash or additional shares and regardless of how long
an investor has owned shares of a Fund. Pursuant to the Taxpayer
Relief Act of 1997, long-term capital gains generally are subject
to a maximum tax rate of 20% depending upon the holding period in
the portfolio investment generating the distributed gains.
Each Fund is required to withhold 31% of any redemption proceeds
(including the value or shares exchanged) and all income
dividends and capital gain distributions it pays to the investor
(1) if the investor does not provide a correct, certified
taxpayer identification number, (2) if the Fund is notified that
the investor has underreported income in the past, or (3) if an
investor fails to certify to the Fund that the investor is not
subject to such withholding.
Certain designated dividends from the Funds are expected to be
eligible for the dividends received deduction for corporate
shareholders (subject to a holding period requirement). However,
any distributions received by a Fund from REITs will not
qualify for the dividend deduction. A Fund's investment in
REIT securities may require such Fund to accrue and distribute
income not yet received. In order to generate sufficient cash to
make the requisite distributions, the Fund may be required to
sell securities in its portfolio that it otherwise would have
continued to hold (including when it is not advantageous to do
so). A Fund's investment in REIT securities also may result in
the Fund's receipt of cash in excess of the REITs earnings; if
the Fund distributes such amounts, such distribution could
constitute a return of capital to Fund shareholders for federal
income tax purposes.
The Transfer Agent will send each investor and the Internal
Revenue Service an annual statement detailing federal tax
information, including information about dividends and
distributions paid to the investor during the preceding year. Be
sure to keep this statement as a permanent record. A fee may be
charged for any duplicate information that an investor requests.
NOTE
The foregoing summarizes certain tax consequences of investing in
the Funds. Before investing, an investor should consult his or
her own tax adviser for more information concerning the federal,
state and local tax consequences of investing in, redeeming or
exchanging Fund shares.
THE TRUST
Each Fund is a series of the Trust. The trust was organized as a
Massachusetts business trust on September 14, 1998. The Trust
is authorized to issue an unlimited number of full and fractional
shares of beneficial interest in multiple series. Currently each
Fund has one class of shares. Each share in a Fund has one vote,
with fractional shares voting proportionally. Shares in each
Fund vote separately from shares of other Funds, except as
otherwise required by law. Shares are freely transferable, are
entitled to dividends as declared by the Trustees of the Trust,
and, if a Fund were liquidated, would receive the net assets of
the Fund. Each Fund may suspend the sale of shares at any time
and may refuse any
PROSPECTUS 15
<PAGE>
order to purchase shares. The Trust does not generally hold
regular shareholder meetings and will do so only when required by
law. Shareholders may remove the trustees of the Trust from
office by votes cast at a shareholder meeting or by written
consent.
TRUSTEES AND OFFICERS
The trustess and officers of the Trust and their principal
business acctivities during the past five years are:
Name, Position(s) with Trust Principal Occupations(s) during
and Age at January 1, 1999 Past Five Years
Ross C. Provence * (60) Portfolio Manager of the Funds.
411 West Madison Avenue General Partner
El Cajon, California 92020 and Portfolio Manager for Value Trend
Trustee of the Trust Capital Management, LP (1995-current).
President of the Trust Estate planning attorney (1963-current).
Bradley J. DeHaven* (32) Owner of De Haven Enterprises (1991-
5473 Hewlett Drive current). Computer consultant and CEO
San Diego, California 92115 for Tech-Solutions (1990-1996).
Trustee of the Trust
Vice President of the Trust
Jeffrey R. Provence* (29) Portfolio Manager of the Funds.
411 West Madison Avenue General Partner and Portfolio Manager
El Cajon, California 92020 for Value Trend Capital Management, LP
Trustee of the Trust, (1995-current). Computer consultant and
Treasurer and Secretary CFO for Tech-Solutions (1992-1995).
of the Trust. Partner of Investment Property Resources
(1989- 1992).
Thomas H. Addis III (53) Senior Vice President of Booth Creek
170 South Main Street Suite 1600 Golf (1998-current). Director of golf at
Salt Lake City, Utah 84101 Singing Hill Golf Resort (1967-1998).
Trustee of the Trust President of Professional Golfers
Association of America (1995-1996).
Honorary President of Professional
Golfers Association of America
1997-1998.
Stephen H. Burch (60) Consultant on Electrical Power
212 Beach Drive Generation (1979-1993). Investments and
Nashville, Indiana 47448 Professional Trustee (1993-current).
Trustee of the Trust
Trustees who are "interested persons" (as defined in the
Investment Company Act of 1940) of the Trust or of the Trust's
investment adviser are indicated by an asterisk (*).
16 VALUE TREND FUNDS
<PAGE>
OTHER INFORMATION
The following parties provide the Funds with administative and
other services.
Custodian
The Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263
Transfer Agent
Maxus Information Systetems, Inc.
DBA Mutual Shareholder Services
1301 East Ninth Street, 36th Floor
Cleveland, OH 44114
Distributor
Value Trend Capital Management, LP
411 West Madison Avenue
El Cajon, CA 92020
For More Information
1-800-590-0898
No dealer, salesman, or other person has been authorized to give any information
or to make any representations, other than those contained in this Prospectus,
and, if given or made, such other information or representations must not be
relied upon as having been authorized by the Funds or the Adviser. This
Prospectus does not constitute an offering in any state in which such offering
may not lawfully be made.
PROSPECTUS 17
<PAGE>
VALUE TREND FUNDS
1999 Prospectus
VALUE TREND FUNDS 1
SUMMARY OF EXPENSES 2
THE FUNDS 3
INVESTMENT STRATEGIES 4
RISK CONSIDERATIONS 4
MANAGEMENT OF THE FUNDS 8
PORTFOLIO TRANSACTIONS 9
HOW TO PURCHASE SHARES 10
HOW TO REDEEM SHARES 11
SHAREHOLDER SERVICES 12
SYSTEMATIC WITHDRAWL PLAN 13
TAX-DEFERRED RETIREMENT PLANS 13
DIRECT DEPOSIT PLANS 13
AUTOMATIC INVESTMENT PLAN 13
CALCULATION OF PERFORMANCE INFORMATION 14
DETERMINATION OF NET ASSET VALUE 14
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS
AND TAXES 14
THE TRUST 15
TRUSTEES AND OFFICERS 16
OTHER INFORMATION 17
FOR MORE INFORMATION:
Access our website at www.valuetrend.com or
call 1-800-590-0898
VALUE TREND LOGO
<PAGE>
VALUE TREND FUNDS
SUBJECT TO COMPLETION
PRELIMINARY STATEMENT OF ADDITIONAL INFORMATION
January 1, 1999
Information contained herein is subject to completion or
amendment. A registration statement relating to these securities
has been filed with the Securities and Exchange Commission. These
securities may not be sold nor may offers to buy be accepted
prior to the time the registration statement becomes effective.
This Statement of Additional Information shall not constitute an
offer to sell or the solicitation of an offer to buy nor shall
there be any sale of these securities in any state in which such
offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of such
state.
This Statement of Additional Information is not a
prospectus. This Statement of Additional Information relates to
the Value Trend Funds Prospectus dated January 1, 1999, and should
be read in conjunction therewith. A copy of the Prospectus may
be obtained from Value Trend Funds, 411 West Madison Avenue, El
Cajon, California 92020.
<PAGE>
TABLE OF CONTENTS
Caption Page Location in Prospectus
Investment Objectives, 1 The Funds,
Policies Investment
Restrictions
Management Of The Trust 2 Management of the Funds
Investment Advisory And 4 Management of the Funds
Other Services
Portfolio Transactions 6 Portfolio Transactions
And Brokerage
Description Of The Trust 6 The Trust
How To Buy Shares 9 How To Purchase Shares
Net Asset Value 10 Determination of Net
Asset Value
Shareholder Services 10 Sharehlder Services
Redemptions 12 How To Redeem Shares
Income Dividends, 13 Dividends, Capital Gain
Capitasl Gain Distributions And Tax Status
Distributions and Taxes
Calculation Of Total 15 Calculation of Performance
Return Informaition
Performance Comparisons 16 Calculation of Performance
Informaition
<PAGE>
- -----------------------------------------------------------------
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
- -----------------------------------------------------------------
The investment objective and policies of each series (each a
"Fund" and collectively, the "Funds") of Value Trend Funds (the
"Trust") are summarized in the Prospectus under "The Funds" and
"Investments Strategies and Risk Considerations." The investment
policies of each Fund set forth in the Prospectus and in this
Statement of Additional Information may be changed by the Funds'
adviser, subject to review and approval by the Trust's Board of
Trustees, without shareholder approval except that any Fund
policy explicitly identified as "fundamental" may not be changed
without the approval of the holders of a majority of the
outstanding shares of the relevant Fund (which in the Prospectus
and this Statement of Additional Information means the lesser of
(i) 67% of the shares of that Fund represented at a meeting at
which 50% of the outstanding shares are represented or (ii) more
than 50% of the outstanding shares).
The following investment restrictions are fundamental
policies of each Fund.
Each Fund will not:
1. Borrow money in excess of 25% of the value of its
total assets (not including the amount borrowed) at the time
the borrowing is made.
2. Underwrite securities issued by other persons except
to the extent that, in connection with the disposition of
its portfolio investments, it may be deemed to be an
underwriter under certain federal securities laws.
3. Purchase or sell real estate, although it may
purchase securities of issuers which deal in real estate,
securities which are secured by interests in real estate,
and securities which represent interests in real estate, and
it may acquire and dispose of real estate or interests in
real estate acquired through the exercise of its rights as a
holder of debt obligations secured by real estate or
interests therein.
4. Purchase or sell commodities or commodity contracts,
except that the Funds may purchase and sell financial
futures contracts and options, and may enter into swap
agreements, foreign exchange contracts and other financial
transactions not involving physical commodities.
5. Make loans, except by purchase of debt obligations
in which the Funds may invest consistent with its investment
policies, by entering into repurchase agreements, or by
lending its portfolio securities.
1
<PAGE>
6. Issue any class of securities which is senior to the
Fund's shares of beneficial interest, except for permitted
borrowings.
Although the Funds are permitted to borrow money to a
limited extent, no Fund currently intends to do so.
In addition to the foregoing fundamental investment
restrictions, it is contrary to each Fund's present policy, which
may be changed without shareholder approval, to:
Invest in (a) securities which at the time of such
investment are not readily marketable, (b) securities restricted
as to resale (excluding securities determined by the Trustees of
the Trust or the person designated by the Trustees to make such
determinations to be readily marketable), and (c) repurchase
agreements maturing in more than seven days, if, as a result,
more than 15% of the Fund's net assets (taken at current value)
would be invested in securities described in (a), (b) and (c)
above.
All percentage limitations on investments will apply at the
time of the making of an investment (except for the non-
fundamental restriction set forth in the immediately preceding
paragraph) and shall not be considered violated unless an excess
or deficiency occurs or exists immediately after and as a result
of such investment.
- -----------------------------------------------------------------
MANAGEMENT OF THE TRUST
- -----------------------------------------------------------------
The Trustees and officers of the Trust, business addresses
for each Trustee and their principal occupations during the past
five years are set forth below. Trustees who are "interested
persons" (as defined in the Investment Company Act of 1940) of
the Trust or of the Trust's investment adviser are indicated by
an asterisk (*)
Ross C. Provence*
411 West Madison Avenue
El Cajon, California 92020
(60)
Trustee of the Trust and
President of the Trust
Portfolio Manager of the Funds. General Partner and Portfolio
Manager for Value Trend Capital Management, LP (1995-current).
Estate planning attorney (1963-current).
2
<PAGE>
Bradley J. DeHaven*
5473 Hewlett Drive
San Diego, California 92115
(32)
Trustee of the Trust
Vice President of the Trust
Owner of De Haven Enterprises (1991-current). Computer consultant
and CEO for Tech-Solutions (1990-1996).
Jeffrey R. Provence*
411 West Madison Avenue
El Cajon, California 92020
(29)
Trustee of the Trust,
Treasurer and Secretary of the Trust.
Portfolio Manager of the Funds. General Partner and Portfolio
Manager for Value Trend Capital Management, LP (1995-current).
Computer consultant and CFO for Tech-Solutions (1992-1995).
Partner of Investment Property Resources (1989-1992).
Thomas H. Addis III
170 South Main Street Suite 1600
Salt Lake City, Utah 84101
(53)
Trustee of the Trust
Senior Vice President of Booth Creek Golf (1998-current).
Director of golf at Singing Hill Golf Resort (1967-1998).
President of Professional Golfers Association of America in 1995-
1996. Honorary President of Professional Golfers Association of
America 1997-1998.
Stephen H. Burch
212 Beach Drive
Nashville, Indiana 47448
(60)
Trustee of the Trust
Consultant on Electrical Power Generation (1979-1993).
Investments and Professional Trustee (1993-current).
3
<PAGE>
The address of each Trustee and officer of the Trust
affiliated with Value Trend Funds is 411 West Madison Avenue, El
Cajon, California 92020. The Trust pays no compensation to its
officers or to the Trustees listed above who are officers or
employees of Value Trend Funds. Each Trustee who is not an
officer or employee of Value Trend Funds is compensated at the
rate of $500.00 per annum.
- -----------------------------------------------------------------
INVESTMENT ADVISORY AND OTHER SERVICES
- -----------------------------------------------------------------
As described in the Prospectus, Value Trend Capital
Management, LP is the investment adviser of each Fund and has
responsibility for the management of the Funds' affairs, under
the supervision of the Trust's Board of Trustees. Each Fund's
investment portfolio is managed on a day-to-day basis by Value
Trend Capital Management, LP under the general oversight of the
Board of Trustees. See "Management of the Funds" in the
Prospectus.
The Trust pays the compensation of its Trustees who are not
officers or employees of Value Trend Funds; registration, filing
and other fees in connection with requirements of regulatory
authorities; all charges and expenses of its custodian and
transfer agent; the charges and expenses of its independent
accountants; all brokerage commissions and transfer taxes in
connection with portfolio transactions; all taxes and fees
payable to governmental agencies; the cost of any certificates
representing shares of the Funds; the expenses of meetings of the
shareholders and trustees of the Trust; the charges and expenses
of the Trust's legal counsel; interest on any borrowings by the
Funds; the cost of services, including services of counsel,
required in connection with the preparation of, and the cost of
printing, the Trust's registration statements and prospectuses,
including amendments and revisions thereto, annual, semiannual
and other periodic reports of the Trust, and notices and proxy
solicitation material furnished to shareholders or regulatory
authorities, to the extent that any such materials relate to the
Trust or its shareholders; and the Trust's expenses of
bookkeeping, accounting, auditing and financial reporting,
including related clerical expenses.
As described in the Prospectus, Value Trend Capital
Management, LP has agreed to certain additional, voluntary
arrangements to limit each Fund's expenses. These arrangements
may be modified or terminated by Value Trend Capital Management,
LP at any time.
The advisory agreement for all Funds provides that it will
continue in effect for two years from its date of execution and
thereafter from year to year if its continuance is approved at
least annually (i) by the Board of Trustees of the Trust or by
vote of a majority of the outstanding voting securities of the
relevant Fund and (ii) by vote of a majority of the Trustees who
are not "interested persons" of the Trust or Value Trend
4
<PAGE>
Capital Management LP, as that term is defined in the Investment
Company Act of 1940, cast in person at a meeting called for the
purpose of voting on such approval. Any amendment to an advisory
agreement must be approved by vote of a majority of the
outstanding voting securities of the relevant Fund and by vote of
a majority of the Trustees who are not such interested persons,
cast in person at a meeting called for the purpose of voting on
such approval.
The advisory agreement may be terminated without penalty by
vote of the Board of Trustees of the Trust or by vote of a
majority of the outstanding securities of the relevant Fund, upon
ninety days' written notice to the Trust. The advisory agreement
shall automatically terminate in the event of its assignment.
The advisory agreement provides that Value Trend Capital
Management, LP owns all rights to and control of the name "Value
Trend." The advisory agreement will automatically terminate if
the Trust or the Fund shall at any time be required by Value
Trend Capital Management, LP to eliminate all reference to the
words "Value Trend" in the name of the Trust or the Fund, unless
the continuance of the agreement after such change of name is
approved by a majority of the outstanding voting securities of
the relevant Fund and by a majority of the Trustees who are not
interested persons of the Trust or Value Trend Funds.
Each advisory agreement provides that Value Trend Capital
Management, LP shall not be subject to any liability in
connection with the performance of its services thereunder in the
absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations and duties.
Pursuant to an Administration Agreement, Value Trend
Capital Management, LP has entered into an agreement with Maxus
Information Systems, Inc. D.B.A. Mutual Shareholder Services, an
Ohio corporation ("MSS") to provide administrative services for
each Fund. Value Trend Funds has entered into an agreement with
Maxus Information Systems, Inc. D.B.A. Mutual Shareholder
Services, an Ohio corporation ("MSS") for the provision of
certain administrative services to the Funds at Value Trend
Capital Management, LP's expense. See "Management of the Funds"
in the Prospectus.
Pursuant to an Accounting Services Agreement, Value Trend
Capital Management, LP has entered into an agreement with Maxus
Information Systems, Inc. D.B.A. Mutual Shareholder Services, an
Ohio corporation ("MSS") to provide accounting services for each
Fund. Value Trend Funds has entered into an agreement with
Maxus Information Systems, Inc. D.B.A. Mutual Shareholder
Services, an Ohio corporation ("MSS") for the provision of
certain accounting services to the Funds at Value Trend Capital
Management, LP's expense. See "Management of the Funds" in the
Prospectus.
Custodial Arrangements. The Fifth Third Bank (the
"Custodian") is the Trust's custodian. The Custodian holds in
safekeeping certificated securities and cash belonging to the
Funds and, in such capacity, is the registered owner of
securities held in book entry
5
<PAGE>
form belonging to the Funds. Upon instruction, the Custodian
receives and delivers cash and securities of the Funds in
connection with Fund transactions and collects all dividends and
other distributions made with respect to Fund portfolio
securities. The Custodian also maintains certain accounts and
records of the Funds.
Independent Accountants. The Fund's independent accountants
are McCury & Associates CPA's, Inc. McCury & Associates CPA's,
Inc. conducts an annual audit of the Trust's financial
statements, assists in the preparation of the Funds' federal and
state income tax returns and consults with the Funds as to
matters of accounting and federal and state income taxation.
- -----------------------------------------------------------------
PORTFOLIO TRANSACTIONS AND BROKERAGE
- -----------------------------------------------------------------
In placing orders for the purchase and sale of portfolio
securities for each Fund, Value Trend Capital Management, LP
seeks the best price and execution. Value Trend Capital
Management, LP will not pay brokers or dealers commissions in
excess of commissions another broker or dealer would have charged
for effecting such transaction on the basis of receiving
brokerage and research products and/or services. Value Trend
Capital Management, LP does not currently intend to effect
transactions on such basis. Transactions in unlisted securities
are carried out through broker-dealers who make the primary
market for such securities unless, in the judgment Value Trend
Capital Management, LP, a more favorable price can be obtained by
carrying out such transactions through other brokers or dealers.
See "Portfolio Transactions" in the Prospectus.
- -----------------------------------------------------------------
DESCRIPTION OF THE TRUST
- -----------------------------------------------------------------
The Trust, registered with the Securities and Exchange
Commission as an open-end management investment company, is
organized as a Massachusetts business trust under the laws of
Massachusetts by an Agreement and Declaration of Trust (the
"Declaration of Trust") dated September 2, 1998.
The Declaration of Trust currently permits the Trustees to
issue an unlimited number of full and fractional shares of each
series. Each share of each Fund represents an equal proportionate
interest in such Fund with each other share of that Fund and is
entitled to a proportionate interest in the dividends and
distributions from that Fund. The shares of each Fund do not have
any preemptive rights. Upon termination of any Fund, whether
pursuant to liquidation of the Trust or otherwise, shareholders
of that Fund are entitled to share pro rata in the net assets of
that Fund available for distribution to
6
<PAGE>
shareholders. The Declaration of Trust also permits the Trustees
to charge shareholders directly for custodial, transfer agency
and servicing expenses.
The assets received by each Fund for the issue or sale of
its shares and all income, earnings, profits, losses and proceeds
therefrom, subject only to the rights of creditors, are allocated
to, and constitute the underlying assets of, that Fund. The
underlying assets are segregated and are charged with the
expenses with respect to that Fund and with a share of the
general expenses of the Trust. Any general expenses of the Trust
that are not readily identifiable as belonging to a particular
Fund are allocated by or under the direction of the Trustees in
such manner as the Trustees determine to be fair and equitable.
While the expenses of the Trust are allocated to the separate
books of account of each Fund, certain expenses may be legally
chargeable against the assets of all Funds.
The Declaration of Trust also permits the Trustees, without
shareholder approval, to subdivide any series of shares or Fund
into various sub-series of shares with such dividend preferences
and other rights as the Trustees may designate. While the
Trustees have no current intention to exercise this power, it is
intended to allow them to provide for an equitable allocation of
the impact of any future regulatory requirements which might
affect various classes of shareholders differently, or to permit
shares of a series to be distributed through more than one
distribution channel, with the costs of the particular means of
distribution (or costs of related services) to be borne by the
shareholders who purchase through that means of distribution. The
Trustees may also, without shareholder approval, establish one or
more additional separate portfolios for investments in the Trust.
Shareholders' investments in such an additional portfolio would
be evidenced by a separate series of shares (i.e., a new "Fund").
The Declaration of Trust provides for the perpetual
existence of the Trust. The Trust or any Fund, however, may be
terminated at any time by vote of at least two-thirds of the
outstanding shares of each Fund affected. The Declaration of
Trust further provides that the Trustees may also terminate the
Trust or any Fund upon written notice to the shareholders. As a
matter of policy, however, the Trustees will not terminate the
Trust or any Fund without submitting the matter to a vote of the
shareholders of the Trust or the relevant Fund.
Voting Rights
As summarized in the Prospectus, shareholders are entitled
to one vote for each full share held (with fractional votes for
each fractional share held) and may vote (to the extent provided
in the Declaration of Trust) on the election of Trustees and the
termination of the Trust and on other matters submitted to the
vote of shareholders.
The Declaration of Trust provides that on any matter
submitted to a vote of all Trust shareholders, all Trust shares
entitled to vote shall be voted together irrespective of
7
<PAGE>
series or sub-series unless the rights of a particular series or
sub-series would be adversely affected by the vote, in which case
a separate vote of that series or sub-series shall also be
required to decide the question. Also, a separate vote shall be
held whenever required by the Investment Company Act of 1940 or
any rule thereunder. Rule 18f-2 under the 1940 Act provides in
effect that a class shall be deemed to be affected by a matter
unless it is clear that the interests of each class in the matter
are substantially identical or that the matter does not affect
any interest of such class. On matters affecting an individual
series, only shareholders of that series are entitled to vote.
Consistent with the current position of the SEC, shareholders of
all series vote together, irrespective of series, on the election
of Trustees and the selection of the Trust's independent
accountants, but shareholders of each series vote separately on
other matters requiring shareholder approval, such as certain
changes in investment policies of that series or the approval of
the investment advisory agreement relating to that series.
There will normally be no meetings of shareholders for the
purpose of electing Trustees except that, in accordance with the
1940 Act, (i) the Trust will hold a shareholders' meeting for the
election of Trustees at such time as less than a majority of the
Trustees holding office have been elected by shareholders, and
(ii) if, as a result of a vacancy on the Board of Trustees, less
than two-thirds of the Trustees holding office have been elected
by the shareholders, that vacancy may be filled only by a vote of
the shareholders. In addition, Trustees may be removed from
office by a written consent signed by the holders of two-thirds
of the outstanding shares and filed with the Trust's custodian or
by a vote of the holders of two-thirds of the outstanding shares
at a meeting duly called for that purpose, which meeting shall be
held upon the written request of the holders of not less than 10%
of the outstanding shares.
Upon written request by ten holders of shares having an
aggregate net asset value constituting 1% of the outstanding
shares stating that such shareholders wish to communicate with
the other shareholders for the purpose of obtaining the
signatures necessary to demand a meeting to consider removal of a
Trustee, the Trust has undertaken to provide a list of
shareholders or to disseminate appropriate materials (at the
expense of the requesting shareholders).
Except as set forth above, the Trustees shall continue to
hold office and may appoint successor Trustees. Voting rights are
not cumulative.
No amendment may be made to the Declaration of Trust without
the affirmative vote of a majority of the outstanding shares of
the Trust, except (i) to change the Trust's name or to cure
technical problems in the Declaration of Trust and (ii) to
establish, change or eliminate the par value of any shares
(currently all shares have no par value).
8
<PAGE>
Shareholder and Trustee Liability
Under Massachusetts law shareholders could, under certain
circumstances, be held personally liable for the obligations of
the Fund of which they are shareholders. However, the Declaration
of Trust disclaims shareholder liability for acts or obligations
of each Fund and requires that notice of such disclaimer be given
in each agreement, obligation or instrument entered into or
executed by the Trust or the Trustees. The Declaration of Trust
provides for indemnification out of Fund property for all loss
and expense of any shareholder held personally liable for the
obligations of the Fund. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is
considered remote since it is limited to circumstances in which
the disclaimer is inoperative and the Fund
would be unable to meet its obligations.
The Declaration of Trust further provides that the Trustees
will not be liable for errors of judgment or mistakes of fact or
law. However, nothing in the Declaration of Trust protects a
Trustee against any liability to which the Trustee would
otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in
the conduct of his office. The By-Laws of the Trust provide for
indemnification by the Trust of the Trustees and officers of the
Trust except with respect to any matter as to which any such
person did not act in good faith in the reasonable belief that
such action was in the best interests of the Trust. No officer or
Trustee may be indemnified against any liability to the Trust or
the Trust's shareholders to which such 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 his or her office.
- -----------------------------------------------------------------
HOW TO BUY SHARES
- -----------------------------------------------------------------
Subject to minimum initial investment requirements and
certain other conditions, an investor may make an initial
purchase of shares of any Fund by submitting a completed
application form and payment to:
Value Trend Funds
1301 East Ninth Street, 36th Floor
Cleveland, Ohio 44114
The procedures for purchasing shares of the Funds are
summarized in "How to
Purchase Shares" in the Prospectus.
9
<PAGE>
- -----------------------------------------------------------------
NET ASSET VALUE
- -----------------------------------------------------------------
The net asset value of the shares of each Fund is determined
by dividing that Fund's total net assets (the excess of its
assets over its liabilities) by the total number of shares of the
Fund outstanding and rounding down to the nearest full cent. Such
determination is made as of the close of regular trading on the
New York Stock Exchange on each day on which that Exchange is
open for unrestricted trading, and no less frequently than once
daily on each day during which there is sufficient trading in a
Fund's portfolio securities that the value of that Fund's shares
might be materially affected. During the 12 months following the
date of this Statement of Additional Information, the New York
Stock Exchange is expected to be closed on the following
weekdays: New Year's Day, Presidents' Day, Martin Luther King,
Jr. Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. Equity securities listed on
an established securities exchange or on the NASDAQ National
Market System are normally valued at their last sale price on the
exchange where primarily traded or, if there is no reported sale
during the day, and in the case of over-the-counter securities
not so listed, at the last bid price. Other securities for which
current market quotations are not readily available (including
restricted securities, if any) and all other assets are taken at
fair value as determined in good faith by the Board of Trustees,
although the actual calculations may be made by persons acting
pursuant to the direction of the Board.
- -----------------------------------------------------------------
SHAREHOLDER SERVICES
- -----------------------------------------------------------------
Open Accounts
A shareholder's investment in any Fund is automatically
credited to an open account maintained for the shareholder by
Maxus Information Systems, Inc. D.B.A. Mutual Shareholder
Services. Certificates representing shares are not issued.
Following each transaction in the account, a shareholder will
receive a statement of the transaction. After the close of each
fiscal year Maxus Information Systems, Inc. D.B.A. Mutual
Shareholder Services will send each shareholder a statement
providing federal tax information on dividends and distributions
paid to the shareholder during the year. This should be retained
as a permanent record. Shareholders will be charged a fee for
duplicate information.
The open account system permits the purchase of full and
fractional shares and, by making the issuance and delivery of
certificates representing shares unnecessary, eliminates the
problems of handling and safekeeping certificates, and the cost
and inconvenience of replacing lost, stolen, mutilated or
destroyed certificates.
10
<PAGE>
The costs of maintaining the open account system are borne
by the Trust, and no direct charges are made to shareholders.
Although the Trust has no present intention of making such direct
charges to shareholders, it reserves the right to do so.
Shareholders will receive prior notice before any such charges
are made.
Systematic Withdrawal Plan
A Systematic Withdrawal Plan, referred to in the Prospectus
Under "Systematic Withdrawal Plan," provides for monthly or
quarterly, withdrawal payments of $100 or more from the account
of a shareholder provided that the account has a value of at
least $25,000 at the time the plan is established.
Since withdrawal payments represent proceeds from
liquidation of shares, the shareholder should recognize that
withdrawals may reduce and possibly exhaust the value of the
account, particularly in the event of a decline in the net asset
value. See "Redemptions" and "Income Dividends, Capital Gain
Distributions and Tax Status" below for certain information as to
federal income taxes.
Exchange Privilege
Shareholders may redeem their shares of any Fund and have
the proceeds applied on the same day to purchase shares of any
other Fund. The value of shares exchanged must be at least $1,000
and all exchanges are subject to the minimum investment
requirement of the Fund into which the exchange is being made.
This option is summarized in the Prospectus under "Shareholder
Services--Free Exchange Privilege."
Exchanges may be effected by (1) making a telephone request
by calling 1-800-590-0898, provided that an investor does not
decline the exchange privilege on the account application or (2)
sending a written exchange request to Maxus Information Systems,
Inc. D.B.A. Mutual Shareholder Services accompanied by an account
application for the appropriate Fund. The Trust reserves the
right to modify this exchange privilege without prior notice.
An exchange constitutes a sale of the shares for federal
income tax purposes on which the investor may realize a capital
gain or loss.
IRAs
Under "Tax-Deferred Retirement Plans" the Prospectus refers
to Individual Retirement Accounts (IRAs), Roth IRAs and
Educational IRAs established under a prototype plan made
available by the Distributor. These plans may be funded with
shares of any Fund. All income dividends and capital gain
distributions of plan
11
<PAGE>
participants must be reinvested. Plan documents and further
information can be obtained from the Distributor.
Check with your financial or tax adviser as to the
suitability of Fund shares for your retirement plan.
- -----------------------------------------------------------------
REDEMPTIONS
- -----------------------------------------------------------------
The procedures for redemption of Fund shares are summarized
in the Prospectus under "How to Redeem Shares."
Except as noted below, signatures on redemption requests
must be guaranteed by commercial banks, trust companies, savings
associations, credit unions or brokerage firms that are members
of domestic securities exchanges. Signature guarantees by
notaries public are not acceptable. However, as noted in the
Prospectus, a signature guarantee will not be required if the
proceeds of the redemption do not exceed $25,000 and the proceeds
check is made payable to the registered owner(s) and mailed to
the record address.
If a shareholder does not decline the telephone redemption
service on the application form, Fund shares may be redeemed by
making a telephone call directly to Maxus Information Systems,
Inc. D.B.A. Mutual Shareholder Services at 1-800-590-0898. There
is currently a $15 charge for processing wire redemptions.
Telephonic redemption requests must be received by 4:00 p.m.
prior to the close of regular trading on the New York Stock
Exchange on a day when the Exchange is open for business.
Requests made after that time or on a day when the New York Stock
Exchange is not open for business cannot be accepted by Maxus
Information Systems, Inc. D.B.A. Mutual Shareholder Services and
a new request will be necessary.
In order to redeem shares by telephone, a shareholder must
not select the DISTRIBUTION & TELEPHONE OPTIONS section which
states: I (we) DO NOT authorize The Transfer Agent to honor
telephone instructions for this account. Neither the Fund nor
the Transfer Agent will be liable for properly acting upon
telephone instructions believed to be genuine. I (we) understand
that redemtions authorized by telephone are paid by check and
mailed to me (us) or wire transferred to an account of the exact
same title. I (we) understand that a limit for telephone
redemptions is $25,000. The Trust, Value Trend Funds and Maxus
Information Systems, Inc. D.B.A. Mutual Shareholder Services are
not responsible for the authenticity of withdrawal instructions
received by telephone.
The redemption price will be the net asset value per share
next determined after the redemption request and any necessary
special documentation are received by Maxus
12
<PAGE>
Information Systems, Inc. D.B.A. Mutual Shareholder Services in
proper form. Proceeds resulting from a written redemption request
will normally be mailed to you within seven days after receipt of
your request in good order. Telephonic redemption proceeds will
normally be wired on the first business day following receipt of
a proper redemption request. In those cases where you have
recently purchased your shares by check and your check was
received less than fifteen days prior to the redemption request,
the Fund may withhold redemption proceeds until your check has
cleared.
Each Fund will normally redeem shares for cash; however,
each Fund reserves the right to pay the redemption price wholly
or partly in kind if the Board of Trustees of the Trust
determines it to be advisable in the interest of the remaining
shareholders. If portfolio securities are distributed in lieu of
cash, the shareholder will normally incur brokerage commissions
upon subsequent disposition of any such securities. However, the
Trust has elected to be governed by Rule 18f-1 under the 1940 Act
pursuant to which the Trust is obligated to redeem shares solely
in cash for any shareholder during any 90-day period up to the
lesser of $250,000 or 1% of the total net asset value of the
Trust at the beginning of such period.
A redemption constitutes a sale of the shares for federal
income tax purposes on which the investor may realize a long-term
or short-term capital gain or loss. See "Income Dividends,
Capital Gain Distributions and Tax Status."
- -----------------------------------------------------------------
INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS
- -----------------------------------------------------------------
As described in the Prospectus under "Dividends, Capital
Gain Distributions and Taxes" it is the policy of each Fund to
pay its shareholders, as dividends, substantially all net
investment income and to distribute annually all net realized
capital gains, if any, after offsetting any capital loss
carryovers.
Income dividends and capital gain distributions are payable
in full and fractional shares of the particular Fund based upon
the net asset value determined as of the close of regular trading
on the New York Stock Exchange on the record date for each
dividend or distribution. Shareholders, however, may elect to
receive their income dividends or capital gain distributions, or
both, in cash. The election may be made at any time by submitting
a written request directly to Value Trend Funds, 1301 East Ninth
Street, 36th Floor Cleveland, Ohio 44114 . In order for a change
to be in effect for any dividend or distribution, it must be
received by 10:00 a.m. on or before the record date for such
dividend or distribution.
As required by federal law, detailed federal tax information
will be furnished to each shareholder for each calendar year on
or before January 31 of the succeeding year.
13
<PAGE>
Each Fund intends to qualify each year as a regulated
investment company under Subchapter M of the Internal Revenue
Code and to qualify for the special tax treatment accorded
regulated investment companies and their shareholders. In order
so to qualify, the Fund must, among other things, (i) derive at
least 90% of its gross income from dividends, interest, payments
with respect to certain securities loans, gains from the sale of
stock, securities or foreign currencies, or other income
(including but not limited to gains from options, futures or
forward contracts) derived with respect to its business of
investing in such stock, securities or currencies; (ii)
distribute with respect to each taxable year at least 90% of the
sum of its taxable net investment income, its net tax-exempt
income (if any), and the excess, if any, of net short-term
capital gains over net long-term capital losses for such year;
and (iii) at the end of each fiscal quarter maintain at least 50%
of the value of its total assets in cash, cash items (including
receivables), government securities, securities of other
regulated investment companies, and other securities of issuers
which represent, with respect to each issuer, no more than 5% of
the value of the Fund's total assets and 10% of the outstanding
voting securities of such issuer, and with no more than 25% of
the value of its total assets invested in the securities (other
than those of the U.S. government or other regulated investment
companies) of any one issuer or of two or more issuers which the
Fund controls and which are engaged in the same, similar or
related trades and businesses. If it qualifies for treatment as a
regulated investment company, the Fund will not be subject to
federal income tax on income paid to its shareholders in the form
of dividends or capital gain distributions.
An excise tax at the rate of 4% will be imposed on the
excess, if any, of each Fund's "required distribution" over its
actual distributions in any calendar year. Generally, the
"required distribution" is 98% of the Fund's ordinary income for
the calendar year plus 98% of its capital gain net income
recognized during the one-year period ending on October 31 (or
December 31, if the Fund so elects) plus undistributed amounts
from prior years. Each Fund intends to make distributions
sufficient to avoid imposition of the excise tax. Distributions
declared by a Fund during October, November or December to
shareholders of record on a date in any such month and paid by
the Fund during the following January will be treated for federal
tax purposes as paid by the Fund and received by shareholders on
December 31 of the year in which declared.
Shareholders of each Fund will be subject to federal income
taxes on distributions made by the Fund whether received in cash
or additional shares of the Fund. Distributions by each Fund of
net income and short-term capital gains, if any, will be taxable
to shareholders as ordinary income. Distributions of long-term
capital gains, if any, will be taxable to shareholders as long-
term capital gains, without regard to how long a shareholder has
held shares of the Fund. Pursuant to the Taxpayer Relief Act of
1997 (the "1997 Act"), dividends of long-term capital gains
generally will be subject to a maximum tax rate of 20% based upon
the holding period in the portfolio investment generating the
distributed gains. A loss on the sale of shares held for 12
months or less will be treated as
14
<PAGE>
a long-term capital loss to the extent of any long-term capital
gain dividend paid to the shareholder with respect to such
shares.
Dividends and distributions on Fund shares received shortly
after their purchase, although in effect a return of capital, are
subject to federal income taxes.
Redemptions and exchanges of each Fund's shares are taxable
events and, accordingly, shareholders may realize gains and
losses on these transactions. If shares have been held for more
than one year, gain or loss realized will be long-term capital
gain or loss, provided the shareholder holds the shares as a
capital asset. Pursuant to the 1997 Act, long-term capital gains
generally will be subject to a maximum tax rate of 20% depending
upon the shareholder's holding period in Fund shares. However, if
a shareholder sells Fund shares at a loss within six months after
purchasing the shares, the loss will be treated as a long-term
capital loss to the extent of any long-term capital gain
distributions received by the shareholder. Furthermore, no loss
will be allowed on the sale of Fund shares to the extent the
shareholder acquired other shares of the same Fund within 30 days
prior to the sale of the loss shares or 30 days after such sale.
The foregoing is a general and abbreviated summary of the
applicable provisions of the Code and regulations currently in
effect. For the complete provisions, reference should be made to
the pertinent Internal Revenue Code sections and regulations. The
Code and regulations are subject to change by legislative or
administrative action.
Dividends and distributions also may be subject to state and
local taxes. Shareholders are urged to consult their tax advisers
regarding specific questions as to federal, state or local taxes.
The foregoing discussion relates solely to U.S. federal
income tax law. Non-U.S. investors should consult their tax
advisers concerning the tax consequences of ownership of shares
of the Fund, including the possibility that distributions may be
subject to a 30% U.S. withholding tax (or a reduced rate of
withholding provided by treaty).
- -----------------------------------------------------------------
CALCULATION OF TOTAL RETURN
- -----------------------------------------------------------------
Total Return with respect to a Fund is a measure of the
change in value of an investment in such Fund over the period
covered, and assumes any dividends or capital gains distributions
are reinvested immediately, rather than paid to the investor in
cash. The formula for calculating total return includes four
steps: (1) adding to the total number of shares purchased through
a hypothetical $1,000 investment in the Fund all additional
shares which would have been purchased if all dividends and
distributions paid or distributed during the period had been
immediately reinvested; (2) calculating the value of
15
<PAGE>
the hypothetical initial investment of $1,000 as of the end of
the period by multiplying the total number of shares owned at the
end of the period by the net asset value per share on the last
trading day of the period; (3) assuming redemption at the end of
the period; and (4) dividing the resulting account value by the
initial $1,000 investment.
- -----------------------------------------------------------------
PERFORMANCE COMPARISONS
- -----------------------------------------------------------------
Total Return. Each Fund may from time to time include its
total return information in advertisements or in information
furnished to present or prospective shareholders. Each Fund may
from time to time include in advertisements or information
furnished to present or prospective shareholders (i) the ranking
of performance figures relative to such figures for groups of
mutual funds categorized by Lipper Analytical Services, Inc. or
Micropal, Inc. as having similar investment objectives, (ii) the
rating assigned to the Fund by Morningstar, Inc. based on the
Fund's risk-adjusted performance relative to other mutual funds
in its broad investment class, and/or (iii) the ranking of
performance figures relative to such figures for mutual funds in
its general investment category as determined by
CDA/Weisenberger's Management Results.
Lipper Analytical Services, Inc. ("Lipper") distributes
mutual fund rankings monthly. The rankings are based on total
return performance calculated by Lipper, generally reflecting
changes in net asset value adjusted for reinvestment of capital
gains and income dividends. They do not reflect deduction of any
sales charges. Lipper rankings cover a variety of performance
periods, including year-to-date, 1-year, 5-year, and 10-year
performance. Lipper classifies mutual funds by investment
objective and asset category.
Micropal, Inc. ("Micropal") distributes mutual fund rankings
weekly and monthly. The rankings are based upon performance
calculated by Micropal, generally reflecting changes in net asset
value that can be adjusted for the reinvestment of capital gains
and dividends. If deemed appropriate by the user, performance can
also reflect deductions for sales charges. Micropal rankings
cover a variety of performance periods, including year-to-date, 1-
year, 5- year and 10-year performance. Micropal classifies mutual
funds by investment objective and asset category.
Morningstar, Inc. ("Morningstar") distributes mutual fund
ratings twice a month. The ratings are divided into five groups:
highest, above average, neutral, below average and lowest. They
represent a fund's historical risk/reward ratio relative to other
funds in its broad investment class as determined by Morningstar.
Morningstar ratings cover a variety of performance periods,
including year-to-date, 1-year, 3-year, 5-year, 10-year and
overall performance. The performance factor for the overall
rating is a weighted-average return performance (if available)
reflecting deduction of expenses and sales charges. Performance
16
<PAGE>
is adjusted using quantitative techniques to reflect the risk
profile of the fund. The ratings are derived from a purely
quantitative system that does not utilize the subjective criteria
customarily employed by rating agencies such as Standard & Poor's
and Moody's Investors Service, Inc.
CDA/Weisenberger's Management Results ("Weisenberger")
publishes mutual fund rankings and is distributed monthly. The
rankings are based entirely on total return calculated by
Weisenberger for periods such as year-to-date, 1-year, 3-year, 5-
year and 10-year. Mutual funds are ranked in general categories
(e.g., international bond, international equity, municipal bond,
and maximum capital gain). Weisenberger rankings do not reflect
deduction of sales charges or fees.
Performance information may also be used to compare the
performance of the Funds to certain widely acknowledged standards
or indices for stock market performance, such as those listed
below.
Consumer Price Index. The Consumer Price Index, published by
the U.S. Bureau of Labor Statistics, is a statistical measure of
changes, over time, in the prices of goods and services in major
expenditure groups.
Dow Jones Industrial Average. The Dow Jones Industrial
Average is a market value- weighted and unmanaged index of 30
large industrial stocks traded on the New York Stock Exchange.
MSCI-EAFE Index. The MSCI-EAFE Index contains over 1000
stocks from 20 different countries with Japan (approximately
50%), United Kingdom, France and Germany being the most heavily
weighted.
MSCI-EAFE ex-Japan Index. The MSCI-EAFE ex-Japan Index
consists of all stocks contained in the MSCI-EAFE Index, other
than stocks from Japan.
Russell 2000 Index. The Russell 2000 Index is comprised of
the 2000 smallest of the 3000 largest U.S.-domiciled
corporations, ranked by market capitalization.
Standard & Poor's/Barra Growth Index. The Standard &
Poor's/Barra Growth Index is constructed by ranking the
securities in the S&P 500 by price-to-book ratio and including
the securities with the highest price-to-book ratios that
represent approximately half of the market capitalization of the
S&P 500.
17
<PAGE>
Standard & Poor's/Barra Value Index. The Standard &
Poor's/Barra Value Index is constructed by ranking the securities
in the S&P 500 by price-to-book ratio and including the
securities with the lowest price-to-book ratios that represent
approximately half of the market capitalization of the S&P 500.
Standard & Poor's 500 Composite Stock Price Index (the "S&P
500"). The S&P 500 is a market value-weighted and unmanaged index
showing the changes in the aggregate market value of 500 stocks
relative to the base period 1941-43. The S&P 500 is composed
almost entirely of common stocks of companies listed on the New
York Stock Exchange, although the common stocks of a few
companies listed on the American Stock Exchange or traded over-
the-counter are included. The 500 companies represented include
400 industrial, 60 transportation and 40 financial services
concerns. The S&P 500 represents about 80% of the market value of
all issues traded on the New York Stock Exchange. The S&P 500 is
the most common index for the overall U.S. stock market.
From time to time, articles about the Funds regarding
performance, rankings and other characteristics of the Funds may
appear in publications. Publications may publish their own
rankings or performance reviews of mutual funds. References to or
reprints of such articles may be used in the Funds' promotional
literature. References to articles regarding personnel of Value
Trend Capital Management, LP who have portfolio management
responsibility may also be used in the Funds' promotional
literature.
18
<PAGE>
TABLE OF CONTENTS
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS 1
MANAGEMENT OF THE TRUST 2
INVESTMENT ADVISORY AND OTHER SERVICES 4
PORTFOLIO TRANSACTIONS AND BROKERAGE 6
DESCRIPTION OF THE TRUST 6
HOW TO BUY SHARES 9
NET ASSET VALUE 10
SHAREHOLDER SERVICES 10
REDEMPTIONS 12
INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS
AND TAX STATUS 13
CALCULATION OF TOTAL RETURN 15
PERFORMANCE COMPARISONS 16
<PAGE>
To The Shareholders and Trustees
Value Trend Funds:
We have audited the accompanying statement of assets and liabili-
ties of the Value Trend Funds (comprised of the Value Trend Large Cap Fund and
Value Trend Links Fund) as of December 24, 1998. This financial statement is the
responsibility of the Company'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 statement of assets and liabilities is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement of assets and
liabilities. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
statement of assets and liabilities presentation. Our procedures included
confirmation of cash held by the custodian as of December 24, 1998, by
correspondence with the custodian. 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 Value
Trend Large Cap Fund and Value Trend Links Fund as of December 24, 1998, in
conformity with generally accepted accounting principles.
/s/ McCurdy & Associates
McCurdy & Associates CPA's, Inc.
Westlake, Ohio
December 24, 1998
<PAGE>
VALUE TREND FUNDS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 24, 1998
Value Trend Value Trend
Large Cap Fund Links Fund
ASSETS:
Cash in Bank $50,000 $50,000
Total Assets $50,000 $50,000
LIABILITIES: $ 0 $ 0
Total Liabilities $ 0 $ 0
NET ASSETS $50,000 $50,000
NET ASSETS CONSIST OF:
Capital Paid In $50,000 $50,000
OUTSTANDING SHARES
Unlimited Number of Shares
Authorized Without Par Value 5,000 5,000
NET ASSET VALUE PER SHARE $10.00 $10.00
<PAGE>
VALUE TREND FUNDS
NOTES TO FINANCIAL STATEMENTS
December 24, 1998
1. ORGANIZATION
Value Trend Funds (the "Trust") is an open-end management investment company
organized as a business trust under the laws of the State of Massachusetts
by a Declaration of Trust dated September 14, 1998. The Declaration of Trust
provides for an unlimited number of authorized shares of beneficial interest
without par value, which may, without shareholder approval, be divided into
an unlimited number of series of such shares, and which presently consist of
two series of shares for the Value Trend Large Cap Fund and the Value Trend
Links Fund (the "Funds"). The investment objective of both Funds is to
provide long term growth of capital.
The Funds use an independent custodian and transfer agent. No transactions
other than those relating to organizational matters and the sale of 5,000
Shares of the Value Trend Large Cap Fund and 5,000 Shares of the Value Trend
Links Fund have taken place to date.
2. RELATED PARTY TRANSACTIONS
As of December 24, 1998, all of the outstanding shares of the Funds were
owned by the Peter K. Hellwig D.D.S., Inc. Profit Sharing Fund and God
Unlimited/University of Healing. A shareholder who beneficially owns,
directly or indirectly, more than 25% of the Funds' voting securities may be
deemed a "control person" (as defined in the 1940 Act) of the Fund.
Value Trend Capital Management, LP, the Fund's investment adviser, is
registered as an investment adviser under the Investment Advisers Act of
1940. Ross C. Provence and Jeffrey R. Provence are owners and officers of
Value Trend Capital Management, LP and trustees of the Fund.
The adviser receives from each Fund as compensation for its services to the
Funds, an annual fee of 1.25% of the Value Trend Large Cap Fund's net assets
and 1.35% of the Value Trend Links Fund's net assets. The fee is paid monthly
and calculated on the basis of that month's net assets.
The adviser pays all of the operating expenses of each Fund except brokerage,
taxes, interest, independent accountants, legal fees, and extraordinary
litigation expenses.
3. CAPITAL STOCK AND DISTRIBUTION
At December 24, 1998, an unlimited number of shares were authorized and paid
in capital amounted to $50,000 for each Fund. Transactions in capital stock
were as follows:
Shares Sold:
Value Trend Large Cap Fund 5,000
Value Trend Links Fund 5,000
<PAGE>
VALUE TREND FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
December 24, 1998
3. CAPITAL STOCK AND DISTRIBUTION (Cont'd)
Shares Redeemed:
Value Trend Large Cap Fund 0
Value Trend Links Fund 0
Net Increase:
Value Trend Large Cap Fund 5,000
Value Trend Links Fund 5,000
Shares Outstanding:
Value Trend Large Cap Fund 5,000
Value Trend Links Fund 5,000
<PAGE>
PART C
OTHER INFORMATION
Item 24..Financial Statements and Exhibits.
(a) Financial Statements:
The Financial Statements filed as part of this
Registration Statement are as follows:
Statement of Assets and Liabilities as of
December 24, 1998, together with Report of
Independent Certified Public Accountants dated
December 24, 1998.
(b) Exhibits:
Exhibit
Number Description
1 Registrant's Agreement and
Declaration of Trust dated
September 2, 1998.*
2 Registrant's By-Laws.*
3 None.
4 None.
5 Management Agreements.
7 None.
8 Custody Agreement.
9(a) Administration Agreement.
9(b) Accounting Services Agreement.
10 Opinion and consent.
11 Consent of Independent Auditors.
12 None.
13 Subscription Agreement between
the Trust and the Investors
C-1
<PAGE>
27 Finacial Data Schedule.
*Previously filed.
Item 25. Persons Controlled by or Under Common Control with
Registrant.
The Funds and the Adviser may be deemed to be under common control of
Ross C. Provence (President of the Funds) and Jeffrey R. Provence
(Secretary and Treasurer of the Funds), who are both General Partners
of the Adviser.
Item 26. Number of Holders of Securities.
As of the date of this Registration Statement, there were no record
holder of the Fund's Shares.
Item 27. Indemnification.
Reference is made to Article IV of the Registrant's Agreement and
Declaration of Trust filed as Exhibit 1. The application of these
provisions is limited by the following undertaking set forth in the
rules promulgated by the Securities and Exchange Commission:
Insofar as indemnification for liabilities 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 such Act and is, therefore, unenforce
able. 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 such Act and will be governed
by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser.
Reference is made to the section in the Prospectus entitled
"Management of the Funds".
C-2
<PAGE>
Item 29. Principal Underwriters.
Not applicable.
Item 30. Location of Accounts and Records.
All accounts, books and documents required to be maintained by the
Registrant pursuant to Section 31(a) of the Investment Company Act of
1940 and Rules 31a-1 through 31a-3 thereunder are maintained at the
office of the Registrant and the Transfer Agent at The Tower at
Erieview, 36th Floor, 1301 East Ninth Street, Cleveland, Ohio 44114,
except that all records relating to the activities of the Fund's
Custodian are maintained at the office of the Custodian, Fifth Third
Bank, 38 Fountain Square Plaza, Cincinnati, Ohio 45263.
Item 31. Management Services.
Not applicable.
Item 32. Undertakings.
The Registrant undertakes (1) to furnish a copy of the Registrant's
latest annual report, upon request and without charge, to every person
to whom a Prospectus is delivered, (2) to file a post-effective
amendment, using reasonably current financial statements which need
not be certified, within four to six months from the effective date of
Registrant's Registration Statement under the Securities Act of 1933,
and (3) to call a meeting of shareholders for the purpose of voting
upon the question of removal of a trustee or trustees when requesting
in writing to do so by the holders of at least 10% of the Registrant's
outstanding shares of beneficial interest and in connection with such
meeting to comply with the provisions of Section 16(c) of the
Investment Company Act of 1940 relating to shareholder communications.
C-3
<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 on its behalf by the undersigned, thereunto duly
authorized, in the City of El Cajon, State of California, on the 21st day of
December, 1998.
VALUE TREND FUNDS
By: /s/ Ross C. Provence
--------------------
Ross C. Provence, President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
Signature Title Date
/s/ Ross C. Provence 12/21/98
- -------------------------- President and
Ross C. Provence Trustee of the Funds
/s/ Bradley J. DeHaven 12/21/98
- -------------------------- Vice President and
Bradley J. DeHaven Trustee of the Funds
/s/ Jeffrey R. Provence 12/21/98
- ---------------------------
Jeffrey R. Provence Secretary, Tresurer and
Trustee of the Funds
/s/ Thomas H. Addis III 12/22/98
- ---------------------------
Thomas H. Addis III Trustee of the Funds
/s/ Stephen H. Burch 12/21/98
- ---------------------------
Stephen H. Burch Trustee of the Funds
C-4
<PAGE>
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 - VALUE
TREND FUNDS
C-5
<PAGE>
EXHIBIT NO. 5
FORM OF MANAGEMENT AGREEMENTS BETWEEN THE TRUST AND VALUE TREND
CAPITAL MANAGEMENT, LP, RELATING TO EACH SERIES OF THE TRUST
VALUE TREND FUNDS
MANAGEMENT AGREEMENT
This AGREEMENT is made and entered into this 21st day of December,
1998, by and between VALUE TREND FUNDS, a registered management company (the
"Trust"), and VALUE TREND CAPITAL MANAGEMENT, LP, a registered investment
adviser (the "Investment Adviser"), for management of the VALUE TREND LARGE CAP
FUND, (the "Fund").
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the partners hereby agree as follows:
1. The Investment Adviser shall regularly provide the Value Trend Large Cap Fund
with continuing investment advice and management for the Fund's portfolio
consistent with the Fund's investment objective, policies and restrictions as
provided for in the Fund's Prospectus and Statement of Additional Information,
determine what securities shall be purchased, held and sold for the portfolio of
the Fund, and what portion of the Fund's assets shall be purchased, held and
sold for the portfolio of the Fund, and what portion of the Fund's assets shall
be held univested subject always to the provision of the By-Laws of the Fund,
the 1940 Act, the Internal Revenue Code of 1986 and to the Fund's investment
objective, policies and restrictions, and subject further, to such policies and
instructions as the Board of Trustees of the Fund from time to time may
establish.
2. The Investment Adviser shall render administrative services (not otherwise
provided by third parties) necessary for the Fund's operations as an open-end
investment company including, but not limited to, preparing reports and notices
to the Board of Trustees and shareholders; supervising, negotiating contractual
arrangements with, and monitoring various third-party service providers to the
Fund (such as the Fund's transfer agent, pricing agents, custodian, accountants,
and others); preparing and making filings with the Security and Exchange
Commission (SEC) and other regulatory agencies; assisting in the preparation and
filing of the Fund's federal, state and local tax returns; preparing and filing
the Fund's federal excise tax returns; assisting with investors and public
relations matters; monitoring the valuation of securities and calculation of the
net asset value, monitoring the registration of shares of the Fund under
applicable federal and state securities laws; maintaining the Fund's books and
records to the extent not otherwise maintained by a third-party; assisting in
establishing accounting policies of the Fund; assisting in resolution of
accounting and legal issues; establishing and monitoring the Fund's operating
budget; processing the payment of the Fund's bills; assisting the Fund in, and
otherwise arranging for, the payment of distributions and dividends, and
otherwise assisting the Fund in the conduct of its business, subject to the
direction and control of the Board of Trustees.
3. The Investment Adviser shall receive from the Fund, as compensation for its
services, a fee, accrued daily and payable monthly, at an annual rate of 1.25%
of the Fund's net assets. On days for which the values of the Fund's net assets
are not determined, the fee is accrued on the most recently determined net
assets adjusted for subsequent daily income and expense accruals.
1
<PAGE>
The Investment Adviser will reimburse the Fund to the extent the Fund's total
annual expenses, excluding taxes, interest, brokerage commissions, and
extraordinary litigation expenses, during any of its fiscal years, exceed 1.25%
of its average daily net asset value in such year.
The Investment Adviser furnishes at its own expense office space to the Fund and
all necessary office facilities, equipment, and personnel for managing the
assets of the Fund. The Investment Adviser also pays for expenses of marketing
shares of the Funds, placement of securities orders (excluding brokerage
commissions) and related bookkeeping.
The Fund pays all expenses incident to its operations and business not
specifically assumed by the Investment Adviser, including expenses relating to
custodial services, fund pricing, legal services, brokerage commissions,
auditing charges, print and mailing reports and prospectuses to existing
shareholders, taxes and corporate fees, maintaining registration of the Fund
under the Investment Company Act of 1940 and registration of its shares under
the Securities Act of 1933, and qualifying and maintaining qualification of its
shares under securities laws of certain states.
4. The management agreement shall continue for a period of two years from the
date of the agreement and the Board of Trustees shall approve at least annually
or the shareholders shall vote a majority of the outstanding voting securities
of the Fund annually to continue the management agreement, provided that in
either event the continuance is also approved by a majority of the Board of
Trustees who are not "interested persons" (as defined in the 1940 Act) of the
Fund or the Investment Adviser by vote cast in person or by phone at a meeting
called for the purpose of voting on such approval.
5. The management agreement is terminable without penalty, on 60 days' notice,
by the Fund's Board of Trustees or by the holders of a majority of the Fund's
shares, or, on not less than 90 days' notice, by the Investment Adviser. This
management agreement will terminate automatically in the event of its assignment
(as defined in the 1940 Act).
6. The Fund may use the name Value Trend only so long as this management
agreement or any extension, renewal or amendment thereof remains in effect and
with permission of the Investment Adviser.
7. The Investment Adviser shall not be liable for any errors of judgment or
mistakes of law or for any loss suffered by the Fund in connection with matters
to which this management agreement relates, except a loss resulting form willful
misfeasance, bad faith or gross negligence on the part of the Investment Adviser
in performance of its obligation and duties under this management agreement.
2
<PAGE>
Value Trend Funds (the "Funds") - Board of Trustees
/s/ Ross C. Provence 12/21/98
- --------------------------- --------
Ross C. Provence Date
/s/ Bradley J. DeHaven 12/21/98
- --------------------------- --------
Bradley J. DeHaven Date
/s/ Jeffrey R. Provence 12/21/98
- --------------------------- --------
Jeffrey R. Provence Date
/s/ Thomas H. Addis III 12/22/98
- --------------------------- --------
Thomas H. Addis III Date
/s/ Stephen H. Burch 12/21/98
- --------------------------- --------
Stephen H. Burch Date
Value Trend Capital Management, LP - General Partners
/s/ Ross C. Provence 12/21/98
- --------------------------- --------
Ross C. Provence Date
/s/ Jeffrey R. Provence 12/21/98
- --------------------------- --------
Jeffrey R. Provence Date
NOTICE
A copy of the Agreement and Declaration of Trust establishing Value
Trend Funds (the "Fund") is on file with the Secretary of The Commonwealth of
Massachusetts, and notice is hereby given that this Agreement is executed with
respect to the Fund's (Value Trend Large Cap Fund) series (the "Series") on
behalf of the Fund by officers of the Fund as officers and not individually and
that the obligations of or arising out of this Agreement are not binding upon
any of the trustees, officers or shareholders individually but are binding only
upon the assets and property belonging to the Series.
3
<PAGE>
VALUE TREND FUNDS
MANAGEMENT AGREEMENT
This AGREEMENT is made and entered into this 21st day of December,
1998, by and between VALUE TREND FUNDS, a registered management company (the
"Trust"), and VALUE TREND CAPITAL MANAGEMENT, LP, a registered investment
adviser (the "Investment Adviser"), for management of the VALUE TREND LINKS
FUND, (the "Fund").
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the partners hereby agree as follows:
1. The Investment Adviser shall regularly provide the Value Trend Links Fund
with continuing investment advice and management for the Fund's portfolio
consistent with the Fund's investment objective, policies and restrictions as
provided for in the Fund's Prospectus and Statement of Additional Information,
determine what securities shall be purchased, held and sold for the portfolio of
the Fund, and what portion of the Fund's assets shall be purchased, held and
sold for the portfolio of the Fund, and what portion of the Fund's assets shall
be held univested subject always to the provision of the By-Laws of the Fund,
the 1940 Act, the Internal Revenue Code of 1986 and to the Fund's investment
objective, policies and restrictions, and subject further, to such policies and
instructions as the Board of Trustees of the Fund from time to time may
establish.
2. The Investment Adviser shall render administrative services (not otherwise
provided by third parties) necessary for the Fund's operations as an open-end
investment company including, but not limited to, preparing reports and notices
to the Board of Trustees and shareholders; supervising, negotiating contractual
arrangements with, and monitoring various third-party service providers to the
Fund (such as the Fund's transfer agent, pricing agents, custodian, accountants,
and others); preparing and making filings with the Security and Exchange
Commission (SEC) and other regulatory agencies; assisting in the preparation and
filing of the Fund's federal, state and local tax returns; preparing and filing
the Fund's federal excise tax returns; assisting with investors and public
relations matters; monitoring the valuation of securities and calculation of the
net asset value, monitoring the registration of shares of the Fund under
applicable federal and state securities laws; maintaining the Fund's books and
records to the extent not otherwise maintained by a third-party; assisting in
establishing accounting policies of the Fund; assisting in resolution of
accounting and legal issues; establishing and monitoring the Fund's operating
budget; processing the payment of the Fund's bills; assisting the Fund in, and
otherwise arranging for, the payment of distributions and dividends, and
otherwise assisting the Fund in the conduct of its business, subject to the
direction and control of the Board of Trustees.
3. The Investment Adviser shall receive from the Fund, as compensation for its
services, a fee, accrued daily and payable monthly, at an annual rate of 1.35%
of the Fund's net assets. On days for which the values of the Fund's net assets
are not determined, the fee is accrued on the most recently determined net
assets adjusted for subsequent daily income and expense accruals.
1
<PAGE>
The Investment Adviser will reimburse the Fund to the extent the Fund's total
annual expenses, excluding taxes, interest, brokerage commissions, and
extraordinary litigation expenses, during any of its fiscal years, exceed 1.35%
of its average daily net asset value in such year.
The Investment Adviser furnishes at its own expense office space to the Fund and
all necessary office facilities, equipment, and personnel for managing the
assets of the Fund. The Investment Adviser also pays for expenses of marketing
shares of the Funds, placement of securities orders (excluding brokerage
commissions) and related bookkeeping.
The Fund pays all expenses incident to its operations and business not
specifically assumed by the Investment Adviser, including expenses relating to
custodial services, fund pricing, legal services, brokerage commissions,
auditing charges, print and mailing reports and prospectuses to existing
shareholders, taxes and corporate fees, maintaining registration of the Fund
under the Investment Company Act of 1940 and registration of its shares under
the Securities Act of 1933, and qualifying and maintaining qualification of its
shares under securities laws of certain states.
4. The management agreement shall continue for a period of two years from the
date of the agreement and the Board of Trustees shall approve at least annually
or the shareholders shall vote a majority of the outstanding voting securities
of the Fund annually to continue the management agreement, provided that in
either event the continuance is also approved by a majority of the Board of
Trustees who are not "interested persons" (as defined in the 1940 Act) of the
Fund or the Investment Adviser by vote cast in person or by phone at a meeting
called for the purpose of voting on such approval.
5. The management agreement is terminable without penalty, on 60 days' notice,
by the Fund's Board of Trustees or by the holders of a majority of the Fund's
shares, or, on not less than 90 days' notice, by the Investment Adviser. This
management agreement will terminate automatically in the event of its assignment
(as defined in the 1940 Act).
6. The Fund may use the name Value Trend only so long as this management
agreement or any extension, renewal or amendment thereof remains in effect and
with permission of the Investment Adviser.
7. The Investment Adviser shall not be liable for any errors of judgment or
mistakes of law or for any loss suffered by the Fund in connection with matters
to which this management agreement relates, except a loss resulting form willful
misfeasance, bad faith or gross negligence on the part of the Investment Adviser
in performance of its obligation and duties under this management agreement.
2
<PAGE>
Value Trend Funds (the "Funds") - Board of Trustees
/s/ Ross C. Provence 12/21/98
- --------------------------- --------
Ross C. Provence Date
/s/ Bradley J. DeHaven 12/21/98
- --------------------------- --------
Bradley J. DeHaven Date
/s/ Jeffrey R. Provence 12/21/98
- --------------------------- --------
Jeffrey R. Provence Date
/s/ Thomas H. Addis III 12/22/98
- --------------------------- --------
Thomas H. Addis III Date
/s/ Stephen H. Burch 12/21/98
- --------------------------- --------
Stephen H. Burch Date
Value Trend Capital Management, LP - General Partners
/s/ Ross C. Provence 12/21/98
- --------------------------- --------
Ross C. Provence Date
/s/ Jeffrey R. Provence 12/21/98
- --------------------------- --------
Jeffrey R. Provence Date
NOTICE
A copy of the Agreement and Declaration of Trust establishing Value
Trend Funds (the "Fund") is on file with the Secretary of The Commonwealth of
Massachusetts, and notice is hereby given that this Agreement is executed with
respect to the Fund's (Value Trend Links Fund) series (the "Series") on behalf
of the Fund by officers of the Fund as officers and not individually and that
the obligations of or arising out of this Agreement are not binding upon any of
the trustees, officers or shareholders individually but are binding only upon
the assets and property belonging to the Series.
3
<PAGE>
VALUE TREND FUNDS
MANAGEMENT AGREEMENT
This AGREEMENT is made and entered into this 21st day of December,
1998, by and between VALUE TREND FUNDS, a registered management company (the
"Trust"), and VALUE TREND CAPITAL MANAGEMENT, LP, a registered investment
adviser (the "Investment Adviser"), for management of the VALUE TREND WORLDWIDE
FUND, (the "Fund").
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the partners hereby agree as follows:
1. The Investment Adviser shall regularly provide the Value Trend Worldwide Fund
with continuing investment advice and management for the Fund's portfolio
consistent with the Fund's investment objective, policies and restrictions as
provided for in the Fund's Prospectus and Statement of Additional Information,
determine what securities shall be purchased, held and sold for the portfolio of
the Fund, and what portion of the Fund's assets shall be purchased, held and
sold for the portfolio of the Fund, and what portion of the Fund's assets shall
be held univested subject always to the provision of the By-Laws of the Fund,
the 1940 Act, the Internal Revenue Code of 1986 and to the Fund's investment
objective, policies and restrictions, and subject further, to such policies and
instructions as the Board of Trustees of the Fund from time to time may
establish.
2. The Investment Adviser shall render administrative services (not otherwise
provided by third parties) necessary for the Fund's operations as an open-end
investment company including, but not limited to, preparing reports and notices
to the Board of Trustees and shareholders; supervising, negotiating contractual
arrangements with, and monitoring various third-party service providers to the
Fund (such as the Fund's transfer agent, pricing agents, custodian, accountants,
and others); preparing and making filings with the Security and Exchange
Commission (SEC) and other regulatory agencies; assisting in the preparation and
filing of the Fund's federal, state and local tax returns; preparing and filing
the Fund's federal excise tax returns; assisting with investors and public
relations matters; monitoring the valuation of securities and calculation of the
net asset value, monitoring the registration of shares of the Fund under
applicable federal and state securities laws; maintaining the Fund's books and
records to the extent not otherwise maintained by a third-party; assisting in
establishing accounting policies of the Fund; assisting in resolution of
accounting and legal issues; establishing and monitoring the Fund's operating
budget; processing the payment of the Fund's bills; assisting the Fund in, and
otherwise arranging for, the payment of distributions and dividends, and
otherwise assisting the Fund in the conduct of its business, subject to the
direction and control of the Board of Trustees.
3. The Investment Adviser shall receive from the Fund, as compensation for its
services, a fee, accrued daily and payable monthly, at an annual rate of 1.35%
of the Fund's net assets. On days for which the values of the Fund's net assets
are not determined, the fee is accrued on the most recently determined net
assets adjusted for subsequent daily income and expense accruals.
1
<PAGE>
The Investment Adviser will reimburse the Fund to the extent the Fund's total
annual expenses, excluding taxes, interest, brokerage commissions, and
extraordinary litigation expenses, during any of its fiscal years, exceed 1.35%
of its average daily net asset value in such year.
The Investment Adviser furnishes at its own expense office space to the Fund and
all necessary office facilities, equipment, and personnel for managing the
assets of the Fund. The Investment Adviser also pays for expenses of marketing
shares of the Funds, placement of securities orders (excluding brokerage
commissions) and related bookkeeping.
The Fund pays all expenses incident to its operations and business not
specifically assumed by the Investment Adviser, including expenses relating to
custodial services, fund pricing, legal services, brokerage commissions,
auditing charges, print and mailing reports and prospectuses to existing
shareholders, taxes and corporate fees, maintaining registration of the Fund
under the Investment Company Act of 1940 and registration of its shares under
the Securities Act of 1933, and qualifying and maintaining qualification of its
shares under securities laws of certain states.
4. The management agreement shall continue for a period of two years from the
date of the agreement and the Board of Trustees shall approve at least annually
or the shareholders shall vote a majority of the outstanding voting securities
of the Fund annually to continue the management agreement, provided that in
either event the continuance is also approved by a majority of the Board of
Trustees who are not "interested persons" (as defined in the 1940 Act) of the
Fund or the Investment Adviser by vote cast in person or by phone at a meeting
called for the purpose of voting on such approval.
5. The management agreement is terminable without penalty, on 60 days' notice,
by the Fund's Board of Trustees or by the holders of a majority of the Fund's
shares, or, on not less than 90 days' notice, by the Investment Adviser. This
management agreement will terminate automatically in the event of its assignment
(as defined in the 1940 Act).
6. The Fund may use the name Value Trend only so long as this management
agreement or any extension, renewal or amendment thereof remains in effect and
with permission of the Investment Adviser.
7. The Investment Adviser shall not be liable for any errors of judgment or
mistakes of law or for any loss suffered by the Fund in connection with matters
to which this management agreement relates, except a loss resulting form willful
misfeasance, bad faith or gross negligence on the part of the Investment Adviser
in performance of its obligation and duties under this management agreement.
2
<PAGE>
Value Trend Funds (the "Funds") - Board of Trustees
/s/ Ross C. Provence 12/21/98
- --------------------------- --------
Ross C. Provence Date
/s/ Bradley J. DeHaven 12/21/98
- --------------------------- --------
Bradley J. DeHaven Date
/s/ Jeffrey R. Provence 12/21/98
- --------------------------- --------
Jeffrey R. Provence Date
/s/ Thomas H. Addis III 12/22/98
- --------------------------- --------
Thomas H. Addis III Date
/s/ Stephen H. Burch 12/21/98
- --------------------------- --------
Stephen H. Burch Date
Value Trend Capital Management, LP - General Partners
/s/ Ross C. Provence 12/21/98
- --------------------------- --------
Ross C. Provence Date
/s/ Jeffrey R. Provence 12/21/98
- --------------------------- --------
Jeffrey R. Provence Date
NOTICE
A copy of the Agreement and Declaration of Trust establishing Value
Trend Funds (the "Fund") is on file with the Secretary of The Commonwealth of
Massachusetts, and notice is hereby given that this Agreement is executed with
respect to the Fund's (Value Worldwide Fund) series (the "Series") on behalf of
the Fund by officers of the Fund as officers and not individually and that the
obligations of or arising out of this Agreement are not binding upon any of the
trustees, officers or shareholders individually but are binding only upon the
assets and property belonging to the Series.
3
<PAGE>
EXHIBIT NO. 8
CUSTODY AGREEMENT
THIS AGREEMENT, is made as of December 21, 1998, by and between VALUE
TREND FUNDS, a business trust organized under the laws of the State of
Massachusetts (the "Trust"), and THE FIFTH THIRD BANK, a banking trust organized
under the laws of the State of Ohio (the "Custodian").
WITNESSETH:
WHEREAS, the Trust desires that the Securities and cash of each of the
investment portfolios identified in Exhibit A hereto (such investment portfolios
and individually referred to herein as a "Fund" and collectively as the
"Funds"), be held and administered by the Custodian pursuant to this Agreement;
and
WHEREAS, the Trust is an open-end management investment trust
registered under the Investment Trust Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Custodian represents that it is a bank having the
qualifications prescribed in Section 26(a)(i) of the 1940 Act;
NOW, THEREFORE, in consideration of the mutual agreements herein made,
the Trust and the Custodian hereby agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
1.1 "Authorized Person" means any Officer or other person duly
authorized by resolution of the Board of Trustees to give Oral Instructions and
Written Instructions on behalf of the Trust and named in Exhibit B hereto or in
such resolutions of the Board of Trustees, certified by an Officer, as may be
received by the Custodian from time to time.
1.2 "Board of Trustees" shall mean the Trustees from time to time
serving under the Trust's Agreement and Declaration of Trust, dated September
14, 1998, as from time to time amended.
1.3 "Book-Entry System" shall mean a federal book-entry system as
provided in Subpart O of Treasury Circular No. 300, 31 CFR 306, in Subpart B of
31 CFR Part 350, or in such book-entry regulations of federal agencies as are
substantially in the form of such Subpart O.
1.4 "Business Day" shall mean any day recognized as a settlement day by
The New York Stock Exchange, Inc. and any other day for which the Fund computes
the net asset value of the Fund.
1.5 "NASD" shall mean The National Association of Securities Dealers,
Inc.
1.6 "Officer" shall mean the President, any Vice President, the
Secretary, any Assistant Secretary, the Treasurer, or any Assistant Treasurer of
the Trust.
1.7 "Oral Instructions" shall mean instructions orally transmitted to
and accepted by the Custodian because such instructions are: (i) reasonably
believed by the Custodian to have been given by an Authorized Person, (ii)
recorded and kept among the records of the Custodian made in the ordinary course
of business and (iii) orally confirmed by the Custodian. The Trust shall cause
all Oral Instructions to be confirmed by Written
<PAGE>
Instructions. If such Written Instructions confirming Oral Instructions are not
received by the Custodian prior to a transaction, it shall in no way affect the
validity of the transaction or the authorization thereof by the Trust. If Oral
Instructions vary from the Written Instructions which purport to confirm them,
the Custodian shall notify the Trust of such variance but such Oral Instructions
will govern unless the Custodian has not yet acted.
1.8 "Custody Account" shall mean any account in the name of the Trust,
which is provided for in Section 3.2 below.
1.9 "Proper Instructions" shall mean Oral Instructions or Written
Instructions. Proper Instructions may be continuing Written Instructions when
deemed appropriate by both parties.
1.10 "Securities Depository" shall mean The Participants Trust Company
or The Depository Trust Company and (provided that Custodian shall have received
a copy of a resolution of the Board of Trustees, certified by an Officer,
specifically approving the use of such clearing agency as a depository for the
Trust) any other clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities and Exchange Act of 1934 (the
"1934 Act"), which acts as a system for the central handling of Securities where
all Securities of any particular class or series of an issuer deposited within
the system are treated as fungible and may be transferred or pledged by
bookkeeping entry without physical delivery of the Securities.
1.11 "Securities" shall include, without limitation, common and
preferred stocks, bonds, call options, put options, debentures, notes, bank
certificates of deposit, bankers' acceptances, mortgage-backed securities, other
money market instruments or other obligations, and any certificates, receipts,
warrants or other instruments or documents representing rights to receive,
purchase or subscribe for the same, or evidencing or representing any other
rights or interests therein, or any similar property or assets that the
Custodian has the facilities to clear and to service.
1.12 "Shares" shall mean the units of beneficial interest issued by the
Trust.
1.13 "Written Instructions" shall mean (i) written communications
actually received by the Custodian and signed by one or more persons as the
Board of Trustees shall have from time to time authorized, or (ii)
communications by telex or any other such system from a person or persons
reasonably believed by the Custodian to be Authorized, or (iii) communications
transmitted electronically through the Institutional Delivery System (IDS), or
any other similar electronic instruction system acceptable to Custodian and
approved by resolutions of the Board of Trustees, a copy of which, certified by
an Officer, shall have been delivered to the Custodian.
ARTICLE II
APPOINTMENT OF CUSTODIAN
2.1 Appointment. The Trust hereby constitutes and appoints the
Custodian as custodian of all Securities and cash owned by or in the possession
of the Trust at any time during the period of this Agreement, provided that such
Securities or cash at all times shall be and remain the property of the Trust.
2.2 Acceptance. The Custodian hereby accepts appointment as such
custodian and agrees to perform the duties thereof as hereinafter set forth and
in accordance with the 1940 Act as amended. Except as specifically set forth
herein, the Custodian shall have no liability and assumes no responsibly for any
non-compliance by the Trust or a Fund of any laws, rules or regulations.
2
<PAGE>
ARTICLE III
CUSTODY OF CASH AND SECURITIES
3.1 Segregation. All Securities and non-cash property held by the
Custodian for the account of the Fund, except Securities maintained in a
Securities Depository or Book-Entry System, shall be physically segregated from
other Securities and non-cash property in the possession of the Custodian and
shall be identified as subject to this Agreement.
3.2 Custody Account. The Custodian shall open and maintain in its trust
department a custody account in the name of each Fund, subject only to draft or
order of the Custodian, in which the Custodian shall enter and carry all
Securities, cash and other assets of the Fund which are delivered to it.
3.3 Appointment of Agents. In its discretion, the Custodian may
appoint, and at any time remove, any domestic bank or trust, which has been
approved by the Board of Trustees and is qualified to act as a custodian under
the 1940 Act, as sub-custodian to hold Securities and cash of the Funds and to
carry out such other provisions of this Agreement as it may determine, and may
also open and maintain one or more banking accounts with such a bank or trust
(any such accounts to be in the name of the Custodian and subject only to its
draft or order), provided, however, that the appointment of any such agent shall
not relieve the Custodian of any of its obligations or liabilities under this
Agreement.
3.4 Delivery of Assets to Custodian. The Fund shall deliver, or cause
to be delivered, to the Custodian all of the Fund's Securities, cash and other
assets, including (a) all payments of income, payments of principal and capital
distributions received by the Fund with respect to such Securities, cash or
other assets owned by the Fund at any time during the period of this Agreement,
and (b) all cash received by the Fund for the issuance, at any time during such
period, of Shares. The Custodian shall not be responsible for such Securities,
cash or other assets until actually received by it.
3.5 Securities Depositories and Book-Entry Systems. The Custodian may
deposit and/or maintain Securities of the Funds in a Securities Depository or in
a Book-Entry System, subject to the following provisions:
(a) Prior to a deposit of Securities of the Funds in any
Securities Depository or Book-Entry System, the Fund shall
deliver to the Custodian a resolution of the Board of
Trustees, certified by an Officer, authorizing and instructing
the Custodian on an on-going basis to deposit in such
Securities Depository or Book-Entry System all Securities
eligible for deposit therein and to make use of such
Securities Depository or Book-Entry System to the extent
possible and practical in connection with its performance
hereunder, including, without limitation, in connection with
settlements of purchases and sales of Securities, loans of
Securities, and deliveries and returns of collateral
consisting of Securities.
(b) Securities of the Fund kept in a Book-Entry System or
Securities Depository shall be kept in an account ("Depository
Account") of the Custodian in such Book-Entry System or
Securities Depository which includes only assets held by the
Custodian as a fiduciary, custodian or otherwise for
customers.
(c) The records of the Custodian and the Custodian's account on
the books of the Book-Entry System and Securities Depository
as the case may be, with respect to Securities of a Fund
maintained in a Book-Entry System or Securities Depository
shall, by book-entry, or otherwise identify such Securities as
belonging to the Fund.
3
<PAGE>
(d) If Securities purchases by the Fund are to be held in a
Book-Entry System or Securities Depository, the Custodian
shall pay for such Securities upon (i) receipt of advice from
the Book-Entry System or Securities Depository that such
Securities have been transferred to the Depository Account,
and (ii) the making of an entry on the records of the
Custodian to reflect such payment and transfer for the account
of the Fund. If Securities sold by the Fund are held in a
Book-Entry System or Securities Depository, the Custodian
shall transfer such Securities upon (i) receipt of advice from
the Book-Entry System or Securities depository that payment
for such Securities has been transferred to the Depository
Account, and (ii) the making of an entry on the records of the
Custodian to reflect such transfer and payment for the account
of the Fund.
(e) Upon request, the Custodian shall provide the Fund with copies
of any report (obtained by the Custodian from a Book-Entry
System or Securities Depository in which Securities of the
Fund is kept) on the internal accounting controls and
procedures for safeguarding Securities deposited in such
Book-Entry System or Securities Depository.
(f) Anything to the contrary in this Agreement notwithstanding,
the Custodian shall be liable to the Trust for any loss or
damage to the Trust resulting (i) from the use of a Book-Entry
System or Securities Depository by reason of any negligence or
willful misconduct on the part of Custodian or any
sub-custodian appointed pursuant to Section 3.3 above or any
of its or their employees, or (ii) from failure of Custodian
or any such sub-custodian to enforce effectively such rights
as it may have against a Book-Entry System or Securities
Depository. At its election, the Trust shall be subrogated to
the rights of the Custodian with respect to any claim against
a Book-Entry System or Securities Depository or any other
person for any loss or damage to the Funds arising from the
use of such Book-Entry System or Securities Depository, if and
to the extent that the Trust has been made whole for any such
loss or damage.
3.6 Disbursement of Moneys from Custody Accounts. Upon receipt of
Proper Instructions, the Custodian shall disburse moneys from a Fund Custody
Account but only in the following cases:
(a) For the purchase of Securities for the Fund but only upon
compliance with Section 4.1 of this Agreement and only (i) in
the case of Securities (other than options on Securities,
futures contracts and options on futures contracts), against
the delivery to the Custodian (or any sub-custodian appointed
pursuant to Section 3.3 above) of such Securities registered
as provided in Section 3.9 below in proper form for transfer,
or if the purchase of such Securities is effected through a
Book-Entry System or Securities Depository, in accordance with
the conditions set forth in Section 3.5 above; (ii) in the
case of options on Securities, against delivery to the
Custodian (or such sub-custodian) of such receipts as are
required by the customs prevailing among dealers in such
options; (iii) in the case of futures contracts and options on
futures contracts, against delivery to the Custodian (or such
sub-custodian) of evidence of title thereto in favor of the
Trust or any nominee referred to in Section 3.9 below; and
(iv) in the case of repurchase or reverse repurchase
agreements entered into between the Trust and a bank which is
a member of the Federal Reserve System or between the Trust
and a primary dealer in U.S. Government securities, against
delivery of the purchased Securities either in certificate
form or through an entry crediting the Custodian's account at
a Book-Entry System or Securities Depository for the account
of the Fund with such Securities;
4
<PAGE>
(b) In connection with the conversion, exchange or surrender, as
set forth in Section 3.7(f) below, of Securities owned by the
Fund;
(c) For the payment of any dividends or capital gain distributions
declared by the Fund;
(d) In payment of the redemption price of Shares as provided in
Section 5.1 below;
(e) For the payment of any expense or liability incurred by the
Trust, including but not limited to the following payments for
the account of a Fund: interest; taxes; administration,
investment management, investment advisory, accounting,
auditing, transfer agent, custodian, trustee and legal fees;
and other operating expenses of a Fund; in all cases, whether
or not such expenses are to be in whole or in part capitalized
or treated as deferred expenses;
(f) For transfer in accordance with the provisions of any
agreement among the Trust, the Custodian and a broker-dealer
registered under the 1934 Act and a member of the NASD,
relating to compliance with rules of The Options Clearing
Trust and of any registered national securities exchange (or
of any similar organization or organizations) regarding escrow
or other arrangements in connection with transactions by the
Trust;
(g) For transfer in accordance with the provisions of any
agreement among the Trust, the Custodian, and a futures
commission merchant registered under the Commodity Exchange
Act, relating to compliance with the rules of the Commodity
Futures Trading Commission and/or any contract market (or any
similar organization or organizations) regarding account
deposits in connection with transactions by the Trust;
(h) For the funding of any uncertificated time deposit or other
interest-bearing account with any banking institution
(including the Custodian), which deposit or account has a term
of one year or less; and
(i) For any other proper purposes, but only upon receipt, in
addition to Proper Instructions, of a copy of a resolution of
the Board of Trustees, certified by an Officer, specifying the
amount and purpose of such payment, declaring such purpose to
be a proper Trust purpose, and naming the person or persons to
whom such payment is to be made.
3.7 Delivery of Securities from Fund Custody Accounts. Upon receipt of
Proper Instructions, the Custodian shall release and deliver Securities from a
Custody Account but only in the following cases:
(a) Upon the sale of Securities for the account of a Fund but only
against receipt of payment therefor in cash, by certified or
cashiers check or bank credit;
(b) In the case of a sale effected through a Book-Entry System or
Securities Depository, in accordance with the provisions of
Section 3.5 above;
(c) To an Offeror's depository agent in connection with tender or
other similar offers for Securities of a Fund; provided that,
in any such case, the cash or other consideration is to be
delivered to the Custodian;
5
<PAGE>
(d) To the issuer thereof or its agent (i) for transfer into the
name of the Trust, the Custodian or any sub-custodian
appointed pursuant to Section 3.3 above, or of any nominee or
nominees of any of the foregoing, or (ii) for exchange for a
different number of certificates or other evidence
representing the same aggregate face amount or number of
units; provided that, in any such case, the new Securities are
to be delivered to the Custodian;
(e) To the broker selling Securities, for examination in
accordance with the "street delivery" custom;
(f) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the issuer of such Securities, or pursuant to
provisions for conversion contained in such Securities, or
pursuant to any deposit agreement, including surrender or
receipt of underlying Securities in connection with the
issuance or cancellation of depository receipts; provided
that, in any such case, the new Securities and cash, if any,
are to be delivered to the Custodian;
(g) Upon receipt of payment therefor pursuant to any repurchase or
reverse repurchase agreement entered into by a Fund;
(h) In the case of warrants, rights or similar Securities, upon
the exercise thereof, provided that, in any such case, the new
Securities and cash, if any, are to be delivered to the
Custodian;
(i) For delivery in connection with any loans of Securities of a
Fund, but only against receipt of such collateral as the Trust
shall have specified to the Custodian in Proper Instructions;
(j) For delivery as security in connection with any borrowings by
the Trust on behalf of a Fund requiring a pledge of assets by
such Fund, but only against receipt by the Custodian of the
amounts borrowed;
(k) Pursuant to any authorized plan of liquidation,
reorganization, merger, consolidation or recapitalization of
the Trust or a Fund;
(l) For delivery in accordance with the provisions of any
agreement among the Trust, the Custodian and a broker-dealer
registered under the 1934 Act and a member of the NASD,
relating to compliance with the rules of The Options Clearing
Trust and of any registered national securities exchange (or
of any similar organization or organizations) regarding escrow
or other arrangements in connection with transactions by the
Trust on behalf of a Fund;
(m) For delivery in accordance with the provisions of any
agreement among the Trust on behalf of a Fund, the Custodian,
and a futures commission merchant registered under the
Commodity Exchange Act, relating to compliance with the rules
of the Commodity Futures Trading Commission and/or any
contract market (or any similar organization or organizations)
regarding account deposits in connection with transactions by
the Trust on behalf of a Fund; or
(n) For any other proper Trust purposes, but only upon receipt, in
addition to Proper Instructions, of a copy of a resolution of
the Board of Trustees, certified by an Officer, specifying the
Securities to be delivered, setting
6
<PAGE>
forth the purpose for which such delivery is to be made,
declaring such purpose to be a proper Trust purpose, and
naming the person or persons to whom delivery of such
Securities shall be made.
3.8 Actions Not Requiring Proper Instructions. Unless otherwise
instructed by the Trust, the Custodian shall with respect to all Securities held
for a Fund;
(a) Subject to Section 7.4 below, collect on a timely basis all
income and other payments to which the Trust is entitled
either by law or pursuant to custom in the securities
business;
(b) Present for payment and, subject to Section 7.4 below, collect
on a timely basis the amount payable upon all Securities which
may mature or be called, redeemed, or retired, or otherwise
become payable;
(c) Endorse for collection, in the name of the Trust, checks,
drafts and other negotiable instruments;
(d) Surrender interim receipts or Securities in temporary form for
Securities in definitive form;
(e) Execute, as custodian, any necessary declarations or
certificates of ownership under the federal income tax laws or
the laws or regulations of any other taxing authority now or
hereafter in effect, and prepare and submit reports to the
Internal Revenue Service ("IRS") and to the Trust at such
time, in such manner and containing such information as is
prescribed by the IRS;
(f) Hold for a Fund, either directly or, with respect to
Securities held therein, through a Book-Entry System or
Securities Depository, all rights and similar securities
issued with respect to Securities of the Fund; and
(g) In general, and except as otherwise directed in Proper
Instructions, attend to all non-discretionary details in
connection with sale, exchange, substitution, purchase,
transfer and other dealings with Securities and assets of the
Fund.
3.9 Registration and Transfer of Securities. All Securities held for a
Fund that are issued or issuable only in bearer form shall be held by the
Custodian in that form, provided that any such Securities shall be held in a
Book-Entry System for the account of the Trust on behalf of a Fund, if eligible
therefor. All other Securities held for a Fund may be registered in the name of
the Trust on behalf of such Fund, the Custodian, or any sub-custodian appointed
pursuant to Section 3.3 above, or in the name of any nominee of any of them, or
in the name of a Book-Entry System, Securities Depository or any nominee of
either thereof; provided, however, that such Securities are held specifically
for the account of the Trust on behalf of a Fund. The Trust shall furnish to the
Custodian appropriate instruments to enable the Custodian to hold or deliver in
proper form for transfer, or to register in the name of any of the nominees
hereinabove referred to or in the name of a Book-Entry System or Securities
Depository, any Securities registered in the name of a Fund.
3.10 Records. (a) The Custodian shall maintain, by Fund, complete and
accurate records with respect to Securities, cash or other property held for the
Trust, including (i) journals or other records of original entry containing an
itemized daily record in detail of all receipts and deliveries of Securities and
all receipts and disbursements of cash; (ii) ledgers (or other records)
reflecting (A) Securities in transfer, (B) Securities in physical possession,
(C) monies and Securities borrowed and monies and Securities loaned (together
with a record of the collateral therefor and substitutions of such collateral),
(D)
7
<PAGE>
dividends and interest received, and (E) dividends receivable and interest
accrued; and (iii) canceled checks and bank records related thereto. The
Custodian shall keep such other books and records of the Trust as the Trust
shall reasonably request, or as may be required by the 1940 Act, including, but
not limited to Section 3.1 and Rule 31a-1 and Rule 31a-2 promulgated thereunder.
(b) All such books and records maintained by the Custodian shall (i) be
maintained in a form acceptable to the Trust and in compliance with rules and
regulations of the Securities and Exchange Commission, (ii) be the property of
the Trust and at all times during the regular business hours of the Custodian be
made available upon request for inspection by duly authorized officers,
employees or agents of the Trust and employees or agents of the Securities and
Exchange Commission, and (iii) if required to be maintained by Rule 31a-1 under
the 1940 Act, be preserved for the periods prescribed in Rule 31a-2 under the
1940 Act.
3.11 Fund Reports by Custodian. The Custodian shall furnish the Trust
with a daily activity statement by Fund and a summary of all transfers to or
from the Custody Account on the day following such transfers. At least monthly
and from time to time, the Custodian shall furnish the Trust with a detailed
statement, by Fund, of the Securities and moneys held for the Trust under this
Agreement.
3.12 Other Reports by Custodian. The Custodian shall provide the Trust
with such reports, as the Trust may reasonably request from time to time, on the
internal accounting controls and procedures for safeguarding Securities, which
are employed by the Custodian or any sub-custodian appointed pursuant to Section
3.3 above.
3.13 Proxies and Other Materials. The Custodian shall cause all proxies
if any, relating to Securities which are not registered in the name of a Fund,
to be promptly executed by the registered holder of such Securities, without
indication of the manner in which such proxies are to be voted, and shall
include all other proxy materials, if any, promptly deliver to the Trust such
proxies, all proxy soliciting materials, which should include all other proxy
materials, if any, and all notices to such Securities.
3.14 Information on Trust Actions. Custodian will promptly notify the
Trust of Trust actions, limited to those Securities registered in nominee name
and to those Securities held at a Depository or sub-Custodian acting as agent
for Custodian. Custodian will be responsible only if the notice of such Trust
actions is published by Xcitek, DTC, or received by first class mail from the
transfer agent. For market announcements not yet received and distributed by
Custodian's services, Trust will inform its custody representative with
appropriate instructions. Custodian will, upon receipt of Trust's response
within the required deadline, affect such action for receipt or payment for the
Trust. For those responses received after the deadline, Custodian will affect
such action for receipt or payment, subject to the limitations of the agent(s)
affecting such actions. Custodian will promptly notify Trust for put options
only if the notice is received by first class mail from the agent. The Trust
will provide or cause to be provided to Custodian with all relevant information
contained in the prospectus for any security which has unique put/option
provisions and provide Custodian with specific tender instructions at least ten
business days prior to the beginning date of the tender period.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
4.1 Purchase of Securities. Promptly upon each purchase of Securities
for the Trust, Written Instructions shall be delivered to the Custodian,
specifying (a) the name of the issuer or writer of such Securities, and the
title or other description thereof, (b) the number of shares, principal amount
(and accrued interest, if any) or other units purchased, (c) the date of
purchase and settlement, (d) the purchase price per unit, (e) the total amount
8
<PAGE>
payable upon such purchase, and (f) the name of the person to whom such amount
is payable. The Custodian shall upon receipt of such Securities purchased by a
Fund pay out of the moneys held for the account of such Fund the total amount
specified in such Written Instructions to the person named therein. The
Custodian shall not be under any obligation to pay out moneys to cover the cost
of a purchase of Securities for a Fund, if in the relevant Custody Account there
is insufficient cash available to the Fund for which such purchase was made.
4.2 Liability for Payment in Advance of Receipt of Securities
Purchased. In any and every case where payment for the purchase of Securities
for a Fund is made by the Custodian in advance of receipt for the account of the
Fund of the Securities purchased but in the absence of specific Written or Oral
Instructions to so pay in advance, the Custodian shall be liable to the Fund for
such Securities to the same extent as if the Securities had been received by the
Custodian.
4.3 Sale of Securities. Promptly upon each sale of Securities by a
Fund, Written Instructions shall be delivered to the Custodian, specifying (a)
the name of the issuer or writer of such Securities, and the title or other
description thereof, (b) the number of shares, principal amount (and accrued
interest, if any), or other units sold, (c) the date of sale and settlement (d)
the sale price per unit, (e) the total amount payable upon such sale, and (f)
the person to whom such Securities are to be delivered. Upon receipt of the
total amount payable to the Trust as specified in such Written Instructions, the
Custodian shall deliver such Securities to the person specified in such Written
Instructions. Subject to the foregoing, the Custodian may accept payment in such
form as shall be satisfactory to it, and may deliver Securities and arrange for
payment in accordance with the customs prevailing among dealers in Securities.
4.4 Delivery of Securities Sold. Notwithstanding Section 4.3 above or
any other provision of this Agreement, the Custodian, when instructed to deliver
Securities against payment, shall be entitled, if in accordance with generally
accepted market practice, to deliver such Securities prior to actual receipt of
final payment therefor. In any such case, the Trust shall bear the risk that
final payment for such Securities may not be made or that such Securities may be
returned or otherwise held or disposed of by or through the person to whom they
were delivered, and the Custodian shall have no liability for any of the
foregoing.
4.5 Payment for Securities Sold, etc. In its sole discretion and from
time to time, the Custodian may credit the relevant Custody Account, prior to
actual receipt of final payment thereof, with (i) proceeds from the sale of
Securities which it has been instructed to deliver against payment, (ii)
proceeds from the redemption of Securities or other assets of the Trust, and
(iii) income from cash, Securities or other assets of the Trust. Any such credit
shall be conditional upon actual receipt by Custodian of final payment and may
be reversed if final payment is not actually received in full. The Custodian
may, in its sole discretion and from time to time, permit the Trust to use funds
so credited to its Custody Account in anticipation of actual receipt of final
payment. Any such funds shall be repayable immediately upon demand made by the
Custodian at any time prior to the actual receipt of all final payments in
anticipation of which funds were credited to the Custody Account.
4.6 Advances by Custodian for Settlement. The Custodian may, in its
sole discretion and from time to time, advance funds to the Trust to facilitate
the settlement of a Trust transactions on behalf of a Fund in its Custody
Account. Any such advance shall be repayable immediately upon demand made by
Custodian.
9
<PAGE>
ARTICLE V
REDEMPTION OF TRUST SHARES.
Transfer of Funds. From such funds as may be available for the purpose
in the relevant Custody Account, and upon receipt of Proper Instructions
specifying that the funds are required to redeem Shares of a Fund, the Custodian
shall wire each amount specified in such Proper Instructions to or through such
bank as the Trust may designate with respect to such amount in such Proper
Instructions. Upon effecting payment or distribution in accordance with proper
Instruction, the Custodian shall not be under any obligation or have any
responsibility thereafter with respect to any such paying bank.
ARTICLE VI
SEGREGATED ACCOUNTS
Upon receipt of Proper Instructions, the Custodian shall establish and
maintain a segregated account or accounts for and on behalf of each Fund, into
which account or accounts may be transferred cash and/or Securities, including
Securities maintained in a Depository Account,
(a) in accordance with the provisions of any agreement among the
Trust, the Custodian and a broker-dealer registered under the
1934 Act and a member of the NASD (or any futures commission
merchant registered under the Commodity Exchange Act),
relating to compliance with the rules of The Options Clearing
Trust and of any registered national securities exchange (or
the Commodity Futures Trading commission or any registered
contract market), or of any similar organization or
organizations, regarding escrow or other arrangements in
connection with transactions by the Trust,
(b) for purposes of segregating cash or Securities in connection
with securities options purchased or written by a Fund or in
connection with financial futures contracts (or options
thereon) purchased or sold by a Fund,
(c) which constitute collateral for loans of Securities made by a
Fund,
(d) for purposes of compliance by the Trust with requirements
under the 1940 Act for the maintenance of segregated accounts
by registered investment companies in connection with reverse
repurchase agreements and when-issued, delayed delivery and
firm commitment transactions, and
(e) for other proper Trust purposes, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a
resolution of the Board of Trustees, certified by an Officer,
setting forth the purpose or purposes of such segregated
account and declaring such purposes to be proper Trust
purposes.
ARTICLE VII
CONCERNING THE CUSTODIAN
7.1 Standard of Care. The Custodian shall be held to the exercise of
reasonable care in carrying out its obligations under this Agreement, and shall
be without liability to the Trust for any loss, damage, cost, expense (including
attorneys' fees and disbursements), liability or claim unless such loss,
damages, cost, expense, liability or claim arises from negligence, bad faith or
willful misconduct on its part or on the part of any sub-custodian appointed
pursuant to Section 3.3 above. The Custodian's cumulative liability within a
calendar year shall be limited with respect to the Trust or any party claiming
by, through or on behalf of the Trust for the initial and all subsequent renewal
10
<PAGE>
terms of this Agreement the actual damages sustained by the Trust, (actual
damages for uninvested funds shall be the overnight Feds fund rate). The
Custodian shall be entitled to rely on and may act upon advice of counsel on all
matters, and shall be without liability for any action reasonably taken or
omitted pursuant to such advice. The Custodian shall promptly notify the Trust
of any action taken or omitted by the Custodian pursuant to advice of counsel.
The Custodian shall not be under any obligation at any time to ascertain whether
the Trust is in compliance with the 1940 Act, the regulations thereunder, the
provisions of the Trust's charter documents or by-laws, or its investment
objectives and policies as then in effect.
7.2 Actual Collection Required. The Custodian shall not be liable for,
or considered to be the custodian of, any cash belonging to the Trust or any
money represented by a check, draft or other instrument for the payment of
money, until the Custodian or its agents actually receive such cash or collect
on such instrument.
7.3 No Responsibility for title, etc. So long as and to the extent that
it is in the exercise of reasonable care, the Custodian shall not be responsible
for the title, validity or genuineness of any property or evidence of title
thereto received or delivered by it pursuant to this Agreement.
7.4 Limitation on Duty to Collect. Custodian shall not be required to
enforce collection, by legal means or otherwise, of any money or property due
and payable with respect to Securities held for the Trust if such Securities are
in default or payment is not made after due demand or presentation.
7.5 Reliance Upon Documents and Instructions. The Custodian shall be
entitled to rely upon any certificate, notice or other instrument in writing
received by it and reasonably believed by it to be genuine. The Custodian shall
be entitled to rely upon any Oral Instructions and/or any Written Instructions
actually received by it pursuant to this Agreement.
7.6 Express Duties Only. The Custodian shall have no duties or
obligations whatsoever except such duties and obligations as are specifically
set forth in this Agreement, and no covenant or obligation shall be implied in
this Agreement against the Custodian.
7.7 Cooperation. The Custodian shall cooperate with and supply
necessary information, by the Trust, to the entity or entities appointed by the
Trust to keep the books of account of the Trust and/or compute the value of the
assets of the Trust. The Custodian shall take all such reasonable actions as the
Trust may from time to time request to enable the Trust to obtain, from year to
year, favorable opinions from the Trust's independent accountants with respect
to the Custodian's activities hereunder in connection with (a) the preparation
of the Trust's report on Form N-1A and Form N-SAR and any other reports required
by the Securities and Exchange Commission, and (b) the fulfillment by the Trust
of any other requirements of the Securities and Exchange Commission.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification. The Trust shall indemnify and hold harmless the
Custodian and any sub-custodian appointed pursuant to Section 3.3 above, and any
nominee of the Custodian or of such sub-custodian from and against any loss,
damage, cost, expense (including attorneys' fees and disbursements), liability
(including, without limitation, liability arising under the Securities Act of
1933, the 1934 Act, the 1940 Act, and any state or foreign securities and/or
banking laws) or claim arising directly or indirectly (a) from the fact that
Securities are registered in the name of any such nominee, or (b) from any
action or inaction by the Custodian or such sub-custodian (i) at the request
11
<PAGE>
or direction of or in reliance on the advice of the Trust, or (ii) upon Proper
Instructions, or (c) generally, from the performance of its obligations under
this Agreement or any sub-custody agreement with a sub-custodian appointed
pursuant to Section 3.3 above or, in the case of any such sub-custodian, from
the performance of its obligations under such custody agreement, provided that
neither the Custodian nor any such sub-custodian shall be indemnified and held
harmless from and against any such loss, damage, cost, expense, liability or
claim arising from the Custodian's or such sub-custodian's negligence, bad faith
or willful misconduct.
8.2 Indemnity to be Provided. If the Trust requests the Custodian to
take any action with respect to Securities, which may, in the opinion of the
custodian, result in the Custodian or its nominee becoming liable for the
payment of money or incurring liability of some other form, the Custodian shall
not be required to take such action until the Trust shall have provided
indemnity therefor to the Custodian in an amount and form satisfactory to the
Custodian.
ARTICLE IX
FORCE MAJEURE
Neither the Custodian nor the Trust shall be liable for any failure or
delay in performance of its obligations under this Agreement arising out of or
caused, directly or indirectly, by circumstances beyond its reasonable control,
including, without limitation, acts of God; earthquakes; fires; floods; wars;
civil or military disturbances; sabotage; strikes; epidemics; riots; power
failures; computer failure and any such circumstances beyond its reasonable
control as may cause interruption, loss or malfunction of utility,
transportation, computer (hardware or software) or telephone communication
service; accidents; labor disputes, acts of civil or military authority;
governmental actions; or inability to obtain labor, material, equipment or
transportation; provided, however, that the Custodian in the event of a failure
or delay shall use its best efforts to ameliorate the effects of any such
failure or delay. Notwithstanding the foregoing, the Custodian shall maintain
sufficient disaster recovery procedures to minimize interruptions.
ARTICLE X
EFFECTIVE PERIOD; TERMINATION
10.1 Effective Period. This Agreement shall become effective as of the
date first set forth above and shall continue in full force and effect until
terminated as hereinafter provided.
10.2 Termination. Either party hereto may terminate this Agreement by
giving to the other party a notice in writing specifying the date of such
termination, which shall be not less than ninety (90) days after the date of the
giving of such notice. If a successor custodian shall have been appointed by the
Board of Trustees, the Custodian shall, upon receipt of a notice of acceptance
by the successor custodian, on such specified date of termination (a) deliver
directly to the successor custodian all Securities (other than Securities held
in a Book-Entry System or Securities Depository) and cash then owned by the
Trust and held by the Custodian as custodian, and (b) transfer any Securities
held in a Book-Entry System or Securities Depository to an account of or for the
benefit of the Trust at the successor custodian, provided that the Trust shall
have paid to the Custodian all fees, expenses and other amounts to the payment
or reimbursement of which it shall then be entitled. Upon such delivery and
transfer, the Custodian shall be relieved of all obligations under this
Agreement. The Trust may at any time immediately terminate this Agreement in the
event of the appointment of a conservator or receiver for the Custodian by
regulatory authorities in the State of Ohio or upon the happening of a like
event at the direction of an appropriate regulatory agency or court of competent
jurisdiction.
12
<PAGE>
10.3 Failure to Appoint Successor Custodian. If a successor custodian
is not designated by the Trust on or before the date of termination specified
pursuant to Section 10.1 above, then the Custodian shall have the right to
deliver to a bank or trust of its own selection, which is (a) a "Bank" as
defined in the 1940 Act, (b) has aggregate capital, surplus and undivided
profits as shown on its then most recent published report of not less than $25
million, and (c) is doing business in New York, New York, all Securities, cash
and other property held by Custodian under this Agreement and to transfer to an
account of or for the Trust at such bank or trust all Securities of the Trust
held in a Book-Entry System or Securities Depository. Upon such delivery and
transfer, such bank or trust company shall be the successor custodian under this
Agreement and the Custodian shall be relieved of all obligations under this
Agreement. If, after reasonable inquiry, Custodian cannot find a successor
custodian as contemplated in this Section 10.3, then Custodian shall have the
right to deliver to the Trust all Securities and cash then owned by the Trust
and to transfer any Securities held in a Book-Entry System or Securities
Depository to an account of or for the Trust. Thereafter, the Trust shall be
deemed to be its own custodian with respect to the Trust and the Custodian shall
be relieved of all obligations under this Agreement.
ARTICLE XI
COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to compensation as agreed upon from
time to time by the Trust and the Custodian. The fees and other charges in
effect on the date hereof and applicable to the Funds are set forth in Exhibit B
attached hereto.
ARTICLE XII
LIMITATION OF LIABILITY
The Trust is a trust organized under the laws of the State of
Massachusetts. The obligations of the Trust entered into in the name of the
Trust or on behalf thereof by any of the Trustees, officers, employees or agents
are made not individually, but in such capacities, and are not binding upon any
of the Trustees, officers, employees, agents or shareholders of the Trust or the
Funds personally, but bind only the assets of the Trust, and all persons dealing
with any of the Funds of the Trust must look solely to the assets of the Trust
belonging to such Fund for the enforcement of any claims against the Trust.
ARTICLE XIII
NOTICES
Unless otherwise specified herein, all demands, notices, instructions,
and other communications to be given hereunder shall be in writing and shall be
sent or delivered to The receipt at the address set forth after its name herein
below:
To the Trust:
------------
Value Trend Funds
411 West Madison Avenue
El Cajon, CA 92020
Attn: Mr. Ross C. Provence
Telephone: ( 619 ) 588-9700
Facsimile: ( 619 ) 588-9701
13
<PAGE>
To the Custodian:
----------------
The Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263
Attn: Area Manager - Trust Operations
Telephone: (513) 579-5300
Facsimile: (513) 744-6622
or at such other address as either party shall have provided to the other by
notice given in accordance with this Article XIII. Writing shall include
transmission by or through teletype, facsimile, central processing unit
connection, on-line terminal and magnetic tape.
ARTICLE XIV
MISCELLANEOUS
14.1 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Ohio.
14.2 References to Custodian. The Trust shall not circulate any printed
matter which contains any reference to Custodian without the prior written
approval of Custodian, excepting printed matter contained in the prospectus or
statement of additional information or its registration statement for the Trust
and such other printed matter as merely identifies Custodian as custodian for
the Trust. The Trust shall submit printed matter requiring approval to Custodian
in draft form, allowing sufficient time for review by Custodian and its counsel
prior to any deadline for printing.
14.3 No Waiver. No failure by either party hereto to exercise and no
delay by such party in exercising, any right hereunder shall operate as a waiver
thereof. The exercise by either party hereto of any right hereunder shall not
preclude the exercise of any other right, and the remedies provided herein are
cumulative and not exclusive of any remedies provided at law or in equity.
14.4 Amendments. This Agreement cannot be changed orally and no
amendment to this Agreement shall be effective unless evidenced by an instrument
in writing executed by the parties hereto.
14.5 Counterparts. This Agreement may be executed in one or more
counterparts, and by the parties hereto on separate counterparts, each of which
shall be deemed an original but all of which together shall constitute but one
and the same instrument.
14.6 Severability. If any provision of this Agreement shall be invalid,
illegal or unenforceable in any respect under any applicable law, the validity,
legality and enforceability of the remaining provisions shall not be affected or
impaired thereby.
14.7 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns; provided, however, that this Agreement shall not be assignable by
either party hereto without the written consent of the other party hereto.
14.8 Headings. The headings of sections in this Agreement are for
convenience of reference only and shall not affect the meaning or construction
of any provision of this Agreement.
14
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed and delivered in its name and on its behalf by its
representatives thereunto duly authorized, all as of the day and year first
above written.
ATTEST: VALUE TREND FUNDS
/s/ Jeffrey R. Provence By: /s/ Ross C. Provence
Its: President
ATTEST: THE FIFTH THIRD BANK
/s/ Christine Ok By: /s/ Kathryn D. Collom
Its: Trust Officer
15
<PAGE>
Dated: December 21, 1998
EXHIBIT A
TO THE CUSTODY AGREEMENT BETWEEN
VALUE TREND FUNDS
AND THE FIFTH THIRD BANK
December 21, 1998
Name of Fund Date
------------ ----
Value Trend Large Cap Fund December 21, 1998
Value Trend Links Fund December 21, 1998
VALUE TREND FUNDS
By: /s/ Ross C. Provence
--------------------
Its: President
---------
THE FIFTH THIRD BANK
By: /s/ Kathryn D. Collom
---------------------
Its: Trust Officer
-------------
16
<PAGE>
Dated: December 21, 1998
EXHIBIT B
TO THE CUSTODY AGREEMENT BETWEEN
VALUE TREND FUNDS
AND THE FIFTH THIRD BANK
December 21, 1998
AUTHORIZED PERSONS
Set forth below are the names and specimen signatures of the persons
authorized by the Trust to Administer each Custody Account.
Name Signature
- ---- ---------
Ross C. Provence /s/ Ross C. Provence
- ------------------------------------ --------------------
Jeffrey R. Provence /s/ Jeffrey R. Provence
- ------------------------------------ -----------------------
17
<PAGE>
SIGNATURE RESOLUTION
RESOLVED, That all of the following officers of VALUE TREND FUNDS and any of
them, namely the Chairman, President, Vice President, Secretary and Treasurer,
are hereby authorized as signers for the conduct of business for an on behalf of
the Funds with THE FIFTH THIRD BANK:
PRESIDENT /s/ Ross C. Provence
VICE PRESIDENT /s/ Bradley J. DeHaven
TREASURER /s/ Jeffrey R. Provence
SECRETARY /s/ Jeffrey R. Provence
The undersigned officers of VALUE TREND FUNDS hereby certify that the foregoing
is within the parameters of a Resolution adopted by Trustees of the Trust in a
meeting held December 21, 1998, directing and authorizing preparation of
documents and to do everything necessary to effect the Custody Agreement between
VALUE TREND FUNDS and THE FIFTH THIRD BANK.
By: /s/ Ross C. Provence
Its: President
By: /s/ Jeffrey R. Provence
Its: Secretary / Treasurer.
18
<PAGE>
EXHIBIT C
TO THE CUSTODY AGREEMENT BETWEEN
VALUE TREND FUNDS AND THE FIFTH THIRD BANK
December 21, 1998
MUTUAL FUND CUSTODY FEE SCHEDULE
MONTHLY BASIC ACCOUNT FEE
FUND SIZE:
Under $25 Million 1 bp
$25 - $100 Million .75 bp
Over $100 Million .5 bp
Minimum $2,400.00
SECURITY TRANSACTION FEES
DTC & Fed Eligible $9.00
Physical 25.00
Amortized Securities 25.00
Amortized Principal & Income Payments 5.00
Options 25.00
Mutual Funds 11.00
Repos/Money Markets (non 5/3) 11.00
Foreign - Euroclear & Cedel 50.00
Foreign - Other TBD
Other TBD
Turnaround Trade 50.00
Pair - off Trade 25.00
SYSTEMS
Automated Securities Workstation $150.00
$200.00 Initial Setup
Mainframe-To-Mainframe $150.00
$200.00 Initial Setup
Access Single Account $50.00
Multiple Accounts $100.00
MISCELLANEOUS FEES
Per additional issue for repo collateral $5.00
Corporate Actions 25.00
Wire Transfers (In/Out) 7.00
Check Requests 6.00
Deposit Rejected 25.00
Registration Fee 30.00
Automated Asset Reconciliation 25.00
Escrow Receipt 5.00
Special Services - per hr. fee 75.00
Overnight Packages 8.00
19
<PAGE>
EXHIBIT NO. 9(a)
ADMINISTRATION AGREEMENT
THIS AGREEMENT is made and entered into this 5th day of
October, 1998, by and between VALUE TREND FUNDS a registered
management investment company (the "Fund"), and MAXUS INFORMATION
SYSTEMS, INC. DBA MUTUAL SHAREHOLDER SERVICES, an Ohio
corporation ("MSS").
RECITALS:
A. The Fund is a non-diversified, open-end management
investment company registered with the United States Securities
and Exchange Commission under the Investment Company Act of 1940,
as amended (the "1940 Act"); and
B. The Fund desires to appoint MSS as its transfer agent
and dividend disbursing and redemption agent, and MSS desires to
accept such appointment.
AGREEMENTS:
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, the parties hereby agree as follows:
1. DUTIES OF MSS.
1.01 Subject to the terms and conditions set forth in this
Agreement, the Fund hereby employs and appoints MSS to act, and
MSS agrees to act, as transfer agent for the Fund's authorized
and issued shares of beneficial interest of each class of each
portfolio of the Fund (the "Shares"), and as dividend disbursing
and redemption agent for the Fund.
1.02 MSS agrees that it will perform the following services:
(a) In accordance with procedures established from
time to time by agreement between the Fund and MSS, MSS
shall:
(i) Receive for acceptance, orders for the
purchase of Shares, and promptly deliver payment and
appropriate documentation therefore to the Custodian of
the Fund authorized by the Board of Directors of the
Fund (the "Custodian");
(ii) Pursuant to purchase orders, issue the
appropriate number of Shares and hold such Shares in
the appropriate Shareholder account;
1
<PAGE>
(iii) Receive for acceptance redemption requests
and redemption directions and deliver the appropriate
documentation therefore to the Custodian;
(iv) At the appropriate time as and when it
receives monies paid to it by the Custodian with
respect to any redemption, pay over or cause to be paid
over in the appropriate manner such monies as
instructed by the redeeming Shareholders;
(v) Effect transfers of Shares by the registered
owners thereof upon receipt of appropriate
instructions;
(vi) Prepare and transmit payments for dividends
and distributions declared by the Fund;
(vii) Maintain records of account for and advise
the Fund and its Shareholders as to the foregoing; and
(viii) Record the issuance of shares of the Fund and
maintain pursuant to SEC Rule 17Ad-10(e) a record of
the total number of shares of the Fund which are
authorized, based upon data provided to it by the Fund,
and issued and outstanding. MSS shall also provide the
Fund on a regular basis with the total number of shares
which are authorized and issued and outstanding and
shall have no obligation, when recording the issuance
of shares, to monitor the issuance of such shares or to
take cognizance of any laws relating to the issue or
sale of such shares, which functions shall be the sole
responsibility of the Fund.
(b) In addition, MSS shall perform all of the
customary services of a transfer agent, dividend disbursing
and redemption agent, including but not limited to:
maintaining all Shareholder accounts, preparing Shareholder
meeting lists, mailing proxies, receiving and tabulating
proxies, mailing Shareholder reports and prospectuses to
current Shareholders, withholding taxes on U.S. resident and
non-resident alien accounts, preparing and filing U.S.
Treasury Department Forms 1099 and other appropriate forms
required with respect to dividends and distributions by
federal authorities for all Shareholders, preparing and
mailing confirmation forms and statements of account to
Shareholders for all purchases and redemptions of Shares and
other confirmable transactions in Shareholder accounts,
preparing and mailing activity statements for Shareholders,
and providing Shareholder account information and provide a
system and reports which will enable the Fund to monitor the
total number of Shares sold in each State.
Procedures applicable to certain of these services may be
established from time to time by agreement between the Fund and
MSS.
2
<PAGE>
2. FEES AND EXPENSES
2.01 In consideration of the services to be performed by MSS
pursuant to this Agreement, the Fund agrees to pay MSS the fees
set forth in the fee schedule attached hereto as Exhibit "A".
2.02 In addition to the fee paid under Section 2.01 above,
the Fund agrees to reimburse MSS for out-of-pocket expenses or
advances incurred by MSS in connection with the performance of
its obligations under this Agreement. In addition, any other
expenses incurred by MSS at the request or with the consent of
the Fund will be reimbursed by the Fund.
2.03 The Fund agrees to pay all fees and reimbursable
expenses within five days following the receipt of the respective
billing notice. Postage for mailing of dividends, proxies, Fund
reports and other mailings to all shareholder accounts shall be
advanced to MSS by the Fund at least seven days prior to the
mailing date of such materials.
3. REPRESENTATIONS AND WARRANTIES OF MSS
MSS represents and warrants to the Fund that:
3.01 It is a corporation duly organized and existing and in
good standing under the laws of the State of Ohio.
3.02 It is duly qualified to carry on its business in the
State of Ohio.
3.03 It is empowered under applicable laws and by its
charter and by-laws to enter into and perform this Agreement.
3.04 All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
3.05 It has and will continue to have access to the
necessary facilities, equipment and personnel to perform its
duties and obligations under this Agreement.
3.06 MSS is duly registered as a transfer agent under the
Securities Act of 1934 and shall continue to be registered
throughout the remainder of this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to MSS that:
4.01 It is a Massachusetts business trust duly organized and
existing and in good standing under the laws of The Commonwealth
of Massachussets.
3
<PAGE>
4.02 It is empowered under applicable laws and by its
charter and By-Laws to enter into and perform this Agreement.
4.03 All trust proceedings required by said charter and
By-Laws have been taken to authorize it to enter into and perform
this Agreement.
4.04 It is an open-end and diversified management investment
company registered under the 1940 Act.
4.05 A registration statement under the Securities Act of
1933 is currently or will become effective and will remain
effective, and appropriate state securities law filings as
required, have been or will be made and will continue to be made,
with respect to all Shares of the Fund being offered for sale.
5. INDEMNIFICATION
5.01 MSS shall not be responsible for, and the Fund shall
indemnify and hold MSS harmless from and against, any and all
losses, damages, costs, charges, counsel fees, payments, expenses
and liability arising out of or attributable to:
(a) All actions of MSS or its agents or subcontractors
required to be taken pursuant to this Agreement, provided
that such actions are taken in good faith and without gross
negligence or willful misconduct.
(b) The Fund's refusal or failure to comply with the
terms of this Agreement, or which arise out of the Fund's
lack good faith, gross negligence or willful misconduct or
which arise out of the breach of any representation or
warranty of the Fund hereunder.
(c) The reliance on or use by MSS or its agents or
subcontractors of information, records and documents
which (i) are received by MSS or its agents or
subcontractors and furnished to it by or on behalf of the
Fund, and (ii) have been prepared and/or maintained by the
Fund or any other person or firm on behalf of the Fund.
(d) The reliance on, or the carrying out by MSS or its
agents or subcontractors of, any instructions or requests of
the Fund.
(e) The offer or sale of Shares in violation of any
requirement under the federal securities laws or regulations
or the securities laws or regulations of any state that such
Shares be registered in such state or in violation of any
stop order or other determination or ruling by any federal
agency or any state with respect to the offer or sale of
such Shares in such state.
4
<PAGE>
5.02 MSS shall indemnify and hold the Fund harmless from and
against any and all losses, damages, costs, charges, counsel
fees, payments, expenses and liability arising out of or
attributable to any action or failure or omission to act by MSS
as a result of MSS's lack of good faith, gross or ordinary
negligence or willful misconduct.
5.03 At any time MSS may apply to any officer of the Fund
for instructions, and may consult with legal counsel with respect
to any matter arising in connection with the services to be
performed by MSS under this Agreement, and MSS and its agents or
subcontractors shall not be liable and shall be indemnified by
the Fund for any action taken or omitted by it in reliance upon
such instructions or upon the opinion of such counsel. MSS, its
agents and subcontractors shall be protected and indemnified in
acting upon any paper or document furnished by or on behalf of
the Fund, reasonably believed to be genuine and to have been
signed by the proper person or persons, or upon any instruction,
information, data, records or documents provided MSS or its
agents or subcontractors by machine readable input, telex, CRT
data entry or other similar means authorized by the Fund, and
shall not be held to have notice of any change of authority of
any person, until receipt of written notice thereof from the
Fund. MSS, its agents and subcontractors shall also be protected
and indemnified in recognizing stock certificates which are
reasonably believed to bear the proper manual or facsimile
signatures of the officers of the Fund, and the proper
countersignature of any former transfer agent or registrar, or of
a co-transfer agent or co-registrar.
5.04 In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts of
God, strikes, equipment or transmission failure or damage
reasonably beyond its control, or other causes reasonably beyond
its control, such party shall not be liable for damages to the
other for any damages resulting from such failure to perform or
otherwise from such causes.
5.05 Neither party to this Agreement shall be liable to the
other party for consequential damages under any provision of this
Agreement or for any act or failure to act hereunder.
5.06 Upon the assertion of a claim for which either party
may be required to indemnify the other, the party of seeking
indemnification shall promptly notify the other party of such
assertion, and shall keep the other party advised with respect to
all developments concerning such claim. The party who may be
required to indemnify shall have the option to participate with
the party seeking indemnification the defense of such claim. The
party seeking indemnification shall in no case confess any claim
or make any compromise in any case in which the other party may
be required to indemnify it except with the other party's prior
written consent.
5
<PAGE>
6. COVENANTS OF THE FUND AND MSS
6.01 The Fund shall promptly furnish to MSS a certified copy
of the resolution of the Board of Directors of the Fund
authorizing the appointment of MSS and the execution and delivery
of this Agreement.
6.02 MSS hereby agrees to establish and maintain facilities
and procedures reasonably acceptable to the Fund for safekeeping
of stock certificates, check forms and facsimile signature
imprinting devices, if any; and for the preparation or use, and
for keeping account of, such certificates, forms and devices.
6.03 MSS shall keep records relating to the services to be
performed hereunder, in the form and manner as it may deem
advisable. To the extent required by Section 31 of the 1940 Act,
as amended, and the Rules thereunder, MSS agrees that all such
records prepared or maintained by MSS relating to the services to
be performed by MSS hereunder are the property of the Fund and
will be preserved, maintained and made available in accordance
with such Section and Rules, and will be surrendered promptly to
the Fund on and in accordance with its request.
6.04 MSS and the Fund agree that all books, records,
information and data pertaining to the business of the other
party which are exchanged or received pursuant to the negotiation
or the carrying out of this Agreement shall remain confidential,
and shall not be voluntarily disclosed to any other person,
except as may be required by law.
6.05 In case of any requests or demands for the inspection
of the Shareholder records of the Fund, MSS will endeavor to
notify the Fund and to secure instructions from an authorized
officer of the Fund as to such inspection. MSS reserves the
right, however, to exhibit the Shareholder records to any person
whenever it is advised by its counsel that it may be held liable
for the failure to exhibit the Shareholder records to such
person, and shall promptly notify the Fund of any unusual request
to inspect or copy the shareholder records of the Fund or the
receipt of any other unusual request to inspect, copy or produce
the records of the Fund.
7. TERM OF AGREEMENT
7.01 This Agreement shall become effective as of the date
hereof and shall remain in force for a period of three years;
provided, however, that each party to this Agreement have the
option to terminate the Agreement without penalty, upon 90 days
prior written notice.
7.02 Should the Fund exercise its right to terminate, all
out-of-pocket expenses associated with the movement of records
and material will be borne by the Fund. Additionally, MSS
reserves the right to charge for any other reasonable expenses
associated with such termination.
6
<PAGE>
8. MISCELLANEOUS
8.01 Neither this Agreement nor any rights or obligations
hereunder may be assigned by either party without the written
consent of the other party. This Agreement shall inure to the
benefit of and be binding upon the parties and their respective
permitted successors and assigns.
8.02 This Agreement may be amended or modified by a written
agreement executed by both parties and authorized or approved by
a resolution of the Board of Trustees of the Fund.
8.03 The provisions of this Agreement shall be construed and
interpreted in accordance with the laws of the State of Ohio as
at the time in effect and the applicable provisions of the 1940
Act. To the extent that the applicable law of the State of Ohio,
or any of the provisions here in, conflict with the applicable
provisions of the 1940 Act, the latter shall control.
8.04 This Agreement constitutes the entire agreement between
the parties hereto and supersedes any prior agreement with
respect to the subject matter hereof whether oral or written.
8.05 All notices and other communications hereunder shall be
in writing, shall be deemed to have been given when received or
when sent by telex or facsimile, and shall be given to the
following addresses (or such other addresses as to which notice
is given):
To the Fund: To MSS:
VALUE TREND FUNDS MAXUS INFORMATION SYSTEMS, INC.
411 West Madison Avenue DBA MUTUAL SHAREHOLDER SERVICES
El Cajon, CA 92020 1301 East Ninth Street, 36th Floor
Cleveland, OH 44114
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
Fund: MAXUS INFORMATION SYSTEMS, INC.
VALUE TREND FUNDS
By: /s/ Ross Provence By: /s/ Gregory B. Getts
Its: President Its: President
7
<PAGE>
EXHIBIT "A"
FEE SCHEDULE
The following fees will be paid in respect to the Value Trend
Large Cap Fund:
$9.25 shareholder account per annum, payable
monthly, subject to a $775 minimum per month.*
plus:
$12.00 per month for each state in which a Series is
registered under the blue sky laws of such state.*
*Notwithstanding the foregoing, the above amounts will be
discounted by the following percentages depending on the size of
the Value Trend Large Cap Fund:
Discount Net assets of Series
80% - 250,000
70% 250,000 500,000
60% 500,000 1,000,000
50% 1,000,000 2,000,000
45% 2,000,000 3,000,000
40% 3,000,000 4,000,000
35% 4,000,000 5,000,000
30% 5,000,000 6,000,000
25% 6,000,000 7,000,000
20% 7,000,000 8,000,000
15% 8,000,000 9,000,000
10% 9,000,000 10,000,000
5% 10,000,000 11,000,000
0% 11,000,000 -
8
<PAGE>
The following fees will be paid in respect to any additional
Series:
$9.25 shareholder account per annum, payable
monthly, subject to a $775 minimum per month.**
plus:
$12.00 per month for each state in which a Series is
registered under the blue sky laws of such state.**
**Notwithstanding the foregoing, each additional Series will be
charged a fee equal to the non-discounted fee discounted proportionately
by the size of the fund until it reaches $10,000,000.
Net assets of additional Series Percent of Total Fees
100,000 1%
250,000 2.5%
500,000 5%
750,000 7.5%
1,000,000 10%
2,000,000 20%
3,000,000 30%
4,000,000 40%
5,000,000 50%
6,000,000 60%
7,000,000 70%
8,000,000 80%
9,000,000 90%
10,000,000 100%
9
<PAGE>
EXHIBIT NO. 9(b)
ACCOUNTING SERVICES AGREEMENT
THIS AGREEMENT is made and entered into this 5th day of
October, 1998, by and between VALUE TREND FUNDS, a registered
management investment company (the "Fund"), and MAXUS INFORMATION
SYSTEMS, INC., an Ohio corporation doing business as MUTUAL
SHAREHOLDER SERVICES ("MSS").
RECITALS:
A. The Fund is a non-diversified, open-end management
investment company registered with the United States Securities
and Exchange Commission under the Investment Company Act of 1940,
as amended (the "1940 Act"); and
B. MSS is a corporation experienced in providing
accounting services to mutual funds and possesses facilities
sufficient to provide such services; and
C. The Fund desires to avail itself of the experience,
assistance and facilities of MSS and to have MSS perform the Fund
certain services appropriate to the operations of the Fund, and
MSS is willing to furnish such services in accordance with the
terms hereinafter set forth.
AGREEMENTS:
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, the parties hereby agree as follows:
1. DUTIES OF MSS.
MSS will provide the Fund with the necessary office space,
communication facilities and personnel to perform the following
services for the Fund:
(a) Timely calculate and transmit to NASDAQ the daily
net asset value of each class of shares of each portfolio of
the Fund, and communicate such value to the Fund and its
transfer agent;
(b) Maintain and keep current all books and records of
the Fund as required by Rule 31a-1 under the 1940 Act, as
such rule or any successor rule may be amended from time to
time ("Rule 31a-1"), that are applicable to the fulfillment
of MSS's duties hereunder, as well as any other documents
necessary or advisable for compliance with applicable
regulations as may be mutually agreed to between the Fund
and MSS. Without limiting the generality of the foregoing,
MSS will prepare and maintain the following records upon
receipt of information in proper form from the Fund or its
authorized agents:
1
<PAGE>
* Cash receipts journal
* Cash disbursements journal
* Dividend record
* Purchase and sales - portfolio securities journals
* Subscription and redemption journals
* Security ledgers
* Broker ledger
* General ledger
* Daily expense accruals
* Daily income accruals
* Securities and monies borrowed or loaned and
collateral therefore
* Foreign currency journals
* Trial balances
(c) Provide the Fund and its investment adviser with
daily portfolio valuation, net asset value calculation and
other standard operational reports as requested from time to
time.
(d) Provide all raw data available from its fund
accounting system for the preparation by the Fund or its
investment advisor of the following:
1.Semi-annual financial statements;
2.Semi-annual form N-SAR;
3.Annual tax returns;
4.Financial data necessary to update form N-1A;
5.Annual proxy statement.
(e) Provide facilities to accommodate annual audit and
any audits or examinations conducted by the Securities and
Exchange Commission or any other governmental or quasi-
governmental entities with jurisdiction.
MSS shall for all purposes herein be deemed to be an independent
contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Fund in
any way or otherwise be deemed an agent of the Fund.
2. FEES AND EXPENSES.
(a) In consideration of the services to be performed
by MSS pursuant to this Agreement, the Fund agrees to pay
MSS the fees set forth in the fee schedule attached hereto
as Exhibit A.
2
<PAGE>
(b) In addition to the fees paid under paragraph (a)
above, the Fund agrees to reimburse MSS for out-of-pocket
expenses or advances incurred by MSS in connection with the
performance of its obligations under this Agreement. In
addition, any other expenses incurred by MSS at the request
or with the consent of the Fund will be reimbursed by the
Fund.
(c) The Fund agrees to pay all fees and reimbursable
expenses within five days following the receipt of the
respective billing notice.
3. LIMITATION OF LIABILITY OF MSS.
(a) MSS shall be held to the exercise of reasonable
care in carrying out the provisions of the Agreement, but
shall not be liable to the Fund for any action taken or
omitted by it in good faith without gross negligence, bad
faith, willful misconduct or reckless disregard of its
duties hereunder. It shall be entitled to rely upon and may
act upon the accounting records and reports generated by the
Fund, advice of the Fund, or of counsel for the Fund and
upon statements of the Fund's independent accountants, and
shall not be liable for any action reasonably taken or
omitted pursuant to such records and reports or advice,
provided that such action is not, to the knowledge of MSS,
in violation of applicable federal or state laws or
regulations, and provided further that such action is taken
without gross negligence, bad faith, willful misconduct or
reckless disregard of its duties.
(b) Nothing herein contained shall be construed to
protect MSS against any liability to the Fund to which MSS
shall otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence in the performance of its duties
to the Fund, reckless disregard of its obligations and
duties under this Agreement or the willful violation of any
applicable law.
(c) Except as may otherwise be provided by applicable
law, neither MSS nor its stockholders, officers, directors,
employees or agents shall be subject to, and the Fund shall
indemnify and hold such persons harmless from and against,
any liability for and any damages, expenses or losses
incurred by reason of the inaccuracy of information
furnished to MSS by the Fund or its authorized agents.
4. REPORTS.
(a) The Fund shall provide to MSS on a quarterly basis
a report of a duly authorized officer of the Fund
representing that all information furnished to MSS during
the preceding quarter was true, complete and correct in all
material respects. MSS shall not be responsible for the
accuracy of any information furnished to it by the Fund or
its authorized agents, and the Fund shall hold MSS harmless
in regard to any liability incurred by reason of the
inaccuracy of such information.
(b) Whenever, in the course of performing its duties
under this Agreement, MSS determines, on the basis of
information supplied to MSS by the Fund or its authorized
agents,
3
<PAGE>
that a violation of applicable law has occurred or that, to
its knowledge, a possible violation of applicable law may
have occurred or, with the passage of time, would occur, MSS
shall promptly notify the Fund and its counsel of such
violation.
5. ACTIVITIES OF MSS.
The services of MSS under this Agreement are not to be
deemed exclusive, and MSS shall be free to render similar
services to others so long as its services hereunder are not
impaired thereby.
6. ACCOUNTS AND RECORDS.
The accounts and records maintained by MSS shall be the
property of the Fund, and shall be surrendered to the Fund
promptly upon request by the Fund in the form in which such
accounts and records have been maintained or preserved. MSS
agrees to maintain a back-up set of accounts and records of the
Fund (which back-up set shall be updated on at least a weekly
basis) at a location other than that where the original accounts
and records are stored. MSS shall assist the Fund's independent
auditors, or, upon approval of the Fund, any regulatory body, in
any requested review of the Fund's accounts and records. MSS
shall preserve the accounts and records as they are required to
be maintained and preserved by Rule 31a-1.
7. CONFIDENTIALITY.
MSS agrees that it will, on behalf of itself and its
officers and employees, treat all transactions contemplated by
this Agreement, and all other information germane thereto, as
confidential and not to be disclosed to any person except as may
be authorized by the Fund.
8. TERM OF AGREEMENT.
(a) This Agreement shall become effective as of the date
hereof and shall remain in force for a period of three years;
provided, however, that each party to this Agreement have the
option to terminate the Agreement, without penalty, upon 90 days
prior written notice.
(b) Should the Fund exercise its right to terminate, all
out-of-pocket expenses associated with the movements of records
and material will be borne by the Fund. Additionally, MSS
reserves the right to charge for any other reasonable expenses
associated with such termination.
9. MISCELLANEOUS.
(a) Neither this Agreement nor any rights or obligations
hereunder may be assigned by either party without the written
consent of the other party. This Agreement shall inure to the
benefit of and be binding upon the parties and their respective
permitted successors and assigns.
4
<PAGE>
(b) The provisions of this Agreement shall be construed and
interpreted in accordance with the laws of the State of Ohio as
at the time in effect and the applicable provisions of the 1940
Act. To the extent that the applicable law of the State of Ohio,
or any of the provisions herein, conflict with the applicable
provisions of the 1940 Act, the latter shall control.
(c) This Agreement may be amended by the parties hereto
only if such amendment is in writing and signed by both parties.
(d) This Agreement constitutes the entire agreement between
the parties hereto and supersedes any prior agreement with
respect to the subject matter hereof whether oral or written.
(e) All notices and other communications hereunder shall be
in writing, shall be deemed to have been given when received or
when sent by telex or facsimile, and shall be given to the
following addresses (or such other addresses as to which notice
is given):
To the Fund: To MSS:
VALUE TREND FUNDS MAXUS INFORMATION SYSTEMS, INC.
411 West Madison Avenue DBA MUTUAL SHAREHOLDER SERVICES
El Cajon, CA 92020 1301 East Ninth Street, 36th Floor
Cleveland, OH 44114
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
VALUE TREND FUNDS MAXUS INFORMATION SYSTEMS, INC.
By: /s/ Ross Provence By: /s/ Gregory B. Getts
Its: President Its: President
5
<PAGE>
EXHIBIT "A"
FEE SCHEDULE
The following fees will be paid in respect to the Value Trend
Large Cap Fund:
If average value of the Value Trend
Large Cap Fund
is between the following Yearly Fee Monthly Fee
- ------------------------- ------------ -----------
- 25,000,000 21,000* 1,750*
25,000,000 50,000,000 30,500 2,542
50,000,000 75,000,000 36,250 3,021
75,000,000 100,000,000 42,000 3,500
100,000,000 125,000,000 47,750 3,979
125,000,000 150,000,000 53,500 4,458
150,000,000 - 59,250 4,938
*Notwithstanding the foregoing, the above amounts will be
discounted by the following percentages depending on the
size of the Value Trend Large Cap Fund:
Discount Net assets of Series
80% - 250,000
70% 250,000 500,000
60% 500,000 1,000,000
50% 1,000,000 2,000,000
45% 2,000,000 3,000,000
40% 3,000,000 4,000,000
35% 4,000,000 5,000,000
30% 5,000,000 6,000,000
25% 6,000,000 7,000,000
20% 7,000,000 8,000,000
15% 8,000,000 9,000,000
10% 9,000,000 10,000,000
5% 10,000,000 11,000,000
0% 11,000,000 -
6
<PAGE>
The following fees will be paid in respect to any additional
Series:
If average value of the additional Series
is between the following Yearly Fee Monthly Fee
- ------------------------ ------------ -----------
- 25,000,000 21,000** 1,750**
25,000,000 50,000,000 30,500 2,542
50,000,000 75,000,000 36,250 3,021
75,000,000 100,000,000 42,000 3,500
100,000,000 125,000,000 47,750 3,979
125,000,000 150,000,000 53,500 4,458
150,000,000 - 59,250 4,938
**Notwithstanding the foregoing, each additional Series will be
charged a fee equal to the non-discounted fee discounted
proportionately by the size of the fund until it reaches $10,000,000.
Net assets of additional Series Percent of Total Fees
100,000 1%
250,000 2.5%
500,000 5%
750,000 7.5%
1,000,000 10%
2,000,000 20%
3,000,000 30%
4,000,000 40%
5,000,000 50%
6,000,000 60%
7,000,000 70%
8,000,000 80%
9,000,000 90%
10,000,000 100%
7
<PAGE>
EXHIBIT NO. 10
OPINION AND CONSENT
ROSS C. PROVENCE
ATTORNEY AT LAW
411 WEST MADISON AVENUE
EL CAJON, CALIFORNIA 92020
(619) 588-9700 - FAX (619) 588-9701
December 18, 1998
Board of Trustees
Value Trend Funds
411 West Madison Avenue
El Cajon, California 92020
Dear Sirs:
You have requested my opinion, as counsel to Value Trend Funds, a
Massachusetts business trust (the "Trust"), as to certain matters regarding the
organization of the Trust, the registration of the Trust under the Investment
Company Act of 1940 and the registration under the Securities Act of 1933 of an
indefinite number of shares of beneficial interest for the Series of Shares
("Series") of the Trust.
As such counsel, I have examined certified or other copies, believed by
me to be genuine, of the Declaration of Trust, the By-Laws of the Trust,
resolutions and minutes of meetings of the Trust's Board of Trustees and such
other documents as I have deemed to be necessary to render the opinion expressed
herein. Based upon such examination, I am of the opinion that the Trust is duly
organized and existing under the laws of the State of Massachusetts, that the
issuance of the Series has been duly authorized by the Trust and that, when sold
in accordance with the terms of the Trust's Registration Statement on form N-1A,
including receipt by the Trust of full payment for the Series, the Series will
have been validly issued, fully paid and non-assessable.
It is noted, however, that the Trust is an entity of the type commonly known as
a "Massachusetts business trust." Under Massachusetts law, shareholders could,
under certain circumstances, be held personally liable for the obligations of
the Trust. The Declaration of Trust states that all persons extending credit to,
contracting with or having any claim against the Trust or the Trustees shall
look only to the assets of the Trust for payment under such credit, contract or
claim; and neither the Shareholders nor the Trustees, nor any of their agents,
whether past, present or future, shall be personally liable therefor. It also
requires that every note, bond, contact or other undertaking issued by or on
behalf of the Trust or the Trustees relating to the Trust shall include a
recitation limiting the obligations represented thereby to the Trust and its
assets. The Declaration of Trust further provides: (1) for indemnification from
the assets of the Trust for all losses and expenses of any shareholder held
personally liable for the obligations of the Trust by virtue of ownership of
shares of the Trust; and (2) for the Trust to assume the defense of any claim
against the shareholders for any act or obligation of the Trust. Thus, the risk
<PAGE>
Board of Trustees
Value Trend Funds
December 10, 1998
Page Two
of a shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Trust or Series would be unable to meet
its obligations.
I hereby consent to the use of this opinion as an exhibit to the
Trust's Registration Statement on Form N-1A filed with the Securities and
Exchange Commission and in any amendment thereto.
Very truly yours,
/s/ ROSS C. PROVENCE
ROSS C. PROVENCE
<PAGE>
EXHIBIT NO. 11
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use in this
Pre-effective Amendment No. 1 to the Registration Statement for the Value
Trend Funds of our audit report of the statement of assets and liabilities of
the Trust and all references to our firm included in or made a part of this
Amendment.
/s/ McCurdy & Associates
McCurdy & Associates CPA's, Inc.
December 24, 1998
<PAGE>
EXHIBIT NO. 13
SUBSCRIPTION AGREEMENT BETWEEN
THE TRUST AND THE INVESTORS
VALUE TREND FUNDS
LETTER OF INVESTMENT INTENT
December 21, 1998
To the Board of Trustees of Value Trend Funds:
The undersigned (the "Purchaser") hereby subscribes to purchase a
beneficial interest ("Interest") of Value Trend Large Cap Fund in the amount of
twenty-five thousand dollars ($25,000.00) for two thousand five hundred (2,500)
shares at net asset value of ten dollars ($10.00) per share and of Value Trend
Links Fund in the amount of twenty-five thousand dollars ($25,000.00) for two
thousand five hundred (2,500) shares at net asset value of ten dollars ($10.00)
per share, in consideration for which the Purchase agrees to transfer to you
upon demand cash in the amount of fifty thousand dollars ($50,000.00).
The Purchaser agrees that the Interest is being purchases for
investment purposes only and with no present intention of reselling or redeeming
said Interest.
.
PETER K. HELLWIG, D.D.S., INC.,
Profit Sharing Plan
/s/ Peter K. Hellwig
By: Peter K. Hellwig, Trustee
<PAGE>
VALUE TREND FUNDS
LETTER OF INVESTMENT INTENT
December 21, 1998
To the Board of Trustees of Value Trend Funds:
The undersigned (the "Purchaser") hereby subscribes to purchase a
beneficial interest ("Interest") of Value Trend Large Cap Fund in the amount of
twenty-five thousand dollars ($25,000.00) for two thousand five hundred (2,500)
shares at net asset value of ten dollars ($10.00) per share and of Value Trend
Links Fund in the amount of twenty-five thousand dollars ($25,000.00) for two
thousand five hundred (2,500) shares at net asset value of ten dollars ($10.00)
per share, in consideration for which the Purchase agrees to transfer to you
upon demand cash in the amount of fifty thousand dollars ($50,000.00).
The Purchaser agrees that the Interest is being purchases for
investment purposes only and with no present intention of reselling or redeeming
said Interest.
GOD UNLIMITED/UNIVERSITY OF HEALING,
a non profit organization
/s/ Herbert L.Beierle
By: Herbert L. Beierle, Chairman
/s/ Ellen Jermini
By: Ellen Jermini, President
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> LARGE CAP FUND
<S> <C>
<PERIOD-TYPE> 1-MO
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 50000
<INVESTMENTS-AT-VALUE> 50000
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 50000
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 50000
<SHARES-COMMON-STOCK> 5000
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 50000
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5000
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 50000
<PER-SHARE-NAV-BEGIN> 10
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> LINKS FUND
<S> <C>
<PERIOD-TYPE> 1-MO
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 50000
<INVESTMENTS-AT-VALUE> 50000
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 50000
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 50000
<SHARES-COMMON-STOCK> 5000
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 50000
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5000
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 50000
<PER-SHARE-NAV-BEGIN> 10
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
