FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. ___ [_]
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
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"). 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's investment objective is long-term growth of capital.
In seeking to achieve its objective, each Fund invests primarily
in equity securities of US companies, except for the Worldwide
Fund which may invest a large percentage of assets in foreign
corporations. The Links Fund may invest in real estate
investment trusts (REITs). There can be no assurance that the
Funds will achieve their investment objectives.
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 ____ , 1998, 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.
2 VALUE TREND FUNDS
<PAGE>
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.
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 that the
Fund's adviser considers to be undervalued at the time of
purchase. The minimum market capitalization of the stocks in the
Fund is $50 million with no maximum market capitalization.
Companies who are candidates for this Fund may be, but are not
limited to companies in the golfing industry, sponsors of major
golfing events, companies who produce products for the golfing
industry, and real estate investment trusts (REITs) who are
involved with golf properties, hotels, and housing.
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 a least three
different countries and 65% of the common stock held will be in
companies located in foreign countries. Foreign index funds may
also be used. 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. In
addition, the Adviser will consider a stock undervalued if it is
trading at a price below which the investment adviser believes it
should be trading based on price relative to earnings, price
relative to return on equity and the earnings growth rate. Once
the Adviser has determined that a stock is undervalued, the
Adviser will consider it for a Fund, taking into account the
quality, experience and motivation of the management, the
company's market position within its industry and its strength of
pricing power. The Adviser believes the risk of equity investing
is reduced when management's interests are strongly aligned with
the interest of their shareholders.
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
Each Fund is classified as being non-diversified which means that
each Fund may invest no 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 has obligated itself to
reimburse the Funds to the extent that the Funds total annual
expenses, excluding taxes, interest, brokerage commissions,
independent accounts, legal counsel and extraordinary litigation
expenses, during any of the Funds fiscal years, exceed the Funds
fees based on annual percentage rates of the Funds daily net
asset value.
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* (28) 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
199__ 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 16
FOR MORE INFORMATION:
Access our website at www.valuetrend.com or
call 1-800-590-0898
<PAGE>
VALUE TREND FUNDS
SUBJECT TO COMPLETION
PRELIMINARY STATEMENT OF ADDITIONAL INFORMATION
____________, 1998
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 _______, 1998, 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
(28)
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>
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
___________, 1998, together with Report of
Independent Certified Public Accountants dated
___________, 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 Financial Data Schedule.*
*To be filed by Amendment.
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 day of , 1998.
VALUE TREND FUNDS
By:
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
Ross C. Provence President and
Trustee of the Funds
Bradley J. DeHaven Vice President and
Trustee of the Funds
Jeffrey R. Provence Secretary, Tresurer and
Trustee of the Funds
Thomas H. Addis III Trustee of the Funds
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. 1
VALUE TREND FUNDS
---------------------------------------------------------------
AGREEMENT AND DECLARATION OF TRUST
---------------------------------------------------------------
AGREEMENT AND DECLARATION OF TRUST made effective at Boston,
Massachusetts, this 2nd day of September, 1998 by the Trustees
hereunder and by the holders of shares of beneficial interest to
be issued hereunder as hereinafter provided.
WITNESSETH that
WHEREAS, this Trust has been formed to carry on the
business of an investment company; and
WHEREAS, the Trustees have agreed to manage all property
coming into their hands as trustees of a Massachusetts voluntary
association with transferable shares in accordance with the
provisions hereinafter set forth;
NOW, THEREFORE, the Trustees hereby declare that they will
hold all cash, securities and other assets, which they may from
time to time acquire in any manner as Trustees hereunder, IN
TRUST to manage and dispose of the same upon the following terms
and conditions for the benefit of the holders from time to time
of Shares in this Trust as hereinafter set forth.
ARTICLE I
Name and Definitions
Name
Section 1. This Trust shall be known as "Value Trend Funds",
and the Trustees shall conduct the business of the Trust under
that name or any other name as they may from time to time
determine.
Definitions
Section 2. Whenever used herein, unless otherwise required
by the context or specifically provided:
(a) "Trust" refers to the Massachusetts business trust established by
this Agreement and Declaration of Trust, as amended from time to time;
(b) "Trustees" refers to the Trustees of the Trust named herein or
elected in accordance with Article IV hereof;
(c) "Shares" means the equal proportionate transferable units of
interest into which the beneficial interest in the Trust shall be
divided from time to time or, if more than one Series or Class of
Shares is authorized by the Trustees, the equal proportionate
transferable units into which each Series or Class of Shares shall be
divided from time to time;
(d) "Shareholder" means a record owner of Shares;
1
<PAGE>
(e) "1940 Act" refers to the Investment Company Act of 1940 and the
Rules and Regulations thereunder, all as amended from time to time;
(f) The terms "Affiliated Person", "Assignment", "Commission",
"Interested Person", "Principal Underwriter" and "Majority Shareholder
Vote" (the sixty-seven percent (67%) or fifty percent (50%)
requirement of the third sentence of Section 2(a)(42) of the 1940 Act,
whichever may be applicable) shall have the meanings given them in the
1940 Act;
(g) "Declaration of Trust" shall mean this Agreement and Declaration
of Trust as amended or restated from time to time;
(h) "By-Laws" shall mean the By-Laws of the Trust as amended from time
to time;
(i) "Series" or "Series of Shares" refers to the one or more separate
investment portfolios of the Trust into which the assets and
liabilities of the Trust may be divided and the Shares of the Trust
representing the beneficial interest of Shareholders in such
respective portfolios; and
(j) "Class" or "Class of Shares" refers to the division of Shares
representing any Series into two or more Classes as provided in
Article III, Section 1 hereof.
ARTICLE II
Purpose of Trust
The purpose of the Trust is to provide investors a managed
investment primarily in securities, debt instruments and other
instruments and rights of a financial character and to carry on
such other business as the Trustees may from time to time
determine pursuant to their authority under this Declaration of
Trust.
ARTICLE III
Shares
Division of Beneficial Interest
Section 1. The Shares of the Trust shall be issued in one or
more Series as the Trustees may, without shareholder approval,
authorize. Each Series shall be preferred over all other Series
in respect of the assets specifically allocated to that Series
within the meaning of the 1940 Act and shall represent a separate
investment portfolio of the Trust. The beneficial interest in
each Series shall at all times be divided into Shares, without
par value, each of which shall, except as provided in the
following sentence, represent an equal proportionate interest in
the Series with each other Share of the same Series, none having
priority or preference over another. The Trustees may, without
Shareholder approval, divide the Shares of any Series into two or
more Classes, Shares of each such Class having such preferences
and special or relative rights and privileges (including
conversion rights, if any) as the Trustees may determine or as
shall be set forth in the By-Laws. The number of Shares
authorized shall be unlimited. The Trustees may from time to time
divide or combine the Shares of any Series or Class into a
greater or lesser number without thereby changing the
proportionate beneficial interest in the Series or Class.
2
<PAGE>
Ownership of Shares
Section 2. The ownership of Shares shall be recorded on the
books of the Trust or a transfer or similar agent. No
certificates certifying the ownership of Shares shall be issued
except as the Trustees may otherwise determine from time to time.
The Trustees may make such rules as they consider appropriate for
the issuance of Share certificates, the transfer of Shares and
similar matters. The record books of the Trust as kept by the
Trust or any transfer or similar agent, as the case may be, shall
be conclusive as to who are the Shareholders of each Series and
Class and as to the number of Shares of each Series and Class
held from time to time by each Shareholder.
Investment in the Trust; Assets of the Series
Section 3. The Trustees shall accept investments in the
Trust from such persons and on such terms and for such
consideration, which may consist of cash or tangible or
intangible property or a combination thereof, as they or the By-
Laws from time to time authorize.
All consideration received by the Trust for the issue or
sale of Shares of each Series, together with all income,
earnings, profits and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation thereof, and any
funds or payments derived from any reinvestment of such proceeds
in whatever form the same may be, shall irrevocably belong to the
Series of Shares with respect to which the same were received by
the Trust for all purposes, subject only to the rights of
creditors, and shall be so handled upon the books of account of
the Trust and are herein referred to as "assets of" such Series.
No Preemptive Rights
Section 4. Shareholders shall have no preemptive or other
right to subscribe to any additional Shares or other securities
issued by the Trust.
Status of Shares and Limitation of Personal Liability
Section 5. Shares shall be deemed to be personal property
giving only the rights provided in this Declaration of Trust or
the By-Laws. Every Shareholder by virtue of having become a
Shareholder shall be held to have expressly assented and agreed
to the terms of this Declaration of Trust and the By-Laws and to
have become a party hereto. The death of a Shareholder during the
continuance of the Trust shall not operate to terminate the same
nor entitle the representative of any deceased Shareholder to an
accounting or to take any action in court or elsewhere against
the Trust or the Trustees, but such representative shall be
entitled only to the rights of said decedent under this
Declaration of Trust. Ownership of Shares shall not entitle the
Shareholder to any title in or to the whole or any part of the
Trust property or right to call for a partition or division of
the same or for an accounting, nor shall the ownership of Shares
constitute the Shareholders partners. Neither the Trust nor the
Trustees, nor any officer, employee or agent of the Trust, shall
have any power to bind personally any Shareholder, nor except as
specifically provided in this Declaration of Trust to call upon
any Shareholder for the payment of any sum of money or assessment
whatsoever other than such as the Shareholder may at any time
personally agree to pay.
3
<PAGE>
ARTICLE IV
The Trustees
Election, Tenure and Removal
Section 1. The initial Trustee shall be Ross C. Provence.
The Trustees may fix the number of Trustees, fill vacancies in
the Trustees, including vacancies arising from an increase in the
number of Trustees, or remove Trustees with or without cause.
Each Trustee shall serve during the continued lifetime of the
Trust until he or she dies, resigns or is removed, or, if sooner,
until the next meeting of Shareholders called for the purpose of
electing Trustees and until the election and qualification of his
or her successor. Any Trustee may resign at any time by written
instrument signed by him or her and delivered to any officer of
the Trust or to a meeting of the Trustees. Such resignation shall
be effective upon receipt unless specified to be effective at
some other time. Except to the extent expressly provided in a
written agreement with the Trust, no Trustee resigning and no
Trustee removed shall have any right to any compensation for any
period following his or her resignation or removal, or any right
to damages on account of such removal. The Shareholders may fix
the number of Trustees and elect Trustees at any meeting of
Shareholders called by the Trustees for that purpose and to the
extent required by applicable law, including paragraphs (a) and
(b) of Section 16 of the 1940 Act.
No natural person shall serve as Trustee after the holders
of record of not less than two-thirds of the outstanding Shares
have declared that such Trustee be removed from that office
either by declaration in writing filed with the Trust's custodian
or by votes cast in person or by proxy at a meeting called for
the purpose. The Trustees shall promptly call a meeting of
Shareholders for the purpose of voting upon the question of
removal of any Trustee when requested to do so in writing by the
record holders of not less than ten percent (10%) of the
outstanding Shares.
Whenever ten or more Shareholders of record, who have been
such for at least six months preceding the date of application
and who hold Shares in the aggregate having a net asset value of
at least one percent (1%) of the outstanding Shares, shall apply
to the Trustees in writing, stating that they wish to communicate
with other Shareholders with a view to obtaining signatures to
request a meeting pursuant to this Section and accompanied by a
form of communication and request which they wish to transmit,
the Trustees shall within five business days after receipt of
such application either (a) afford to such applicants access to a
list of the names and addresses of all Shareholders as recorded
on the books of the Trust; or (b) inform such applicants as to
the approximate cost of mailing to all Shareholders the proposed
communication and form of request. If the Trustees elect to
follow the course specified in clause (b), the Trustees, upon the
written request of such applicants, accompanied by a tender of
the material to be mailed and of the reasonable expenses of
mailing, shall, with reasonable promptness, mail such material to
all Shareholders of record at their addresses as recorded on the
books of the Trust, unless within five business days after such
tender the Trustees shall mail to such applicants and file with
the Commission, together with a copy of the material proposed to
be mailed, a written statement signed by at least a majority of
the Trustees to the effect that in their opinion either such
material contains untrue statements of fact or omits to state
facts necessary to make the statements contained therein not
misleading, or would be in violation of applicable law, and
specifying the basis of such opinion. If the Commission shall
enter an order refusing to sustain any of the objections
specified in the written statement so filed, or if, after the
entry of an order sustaining one or more of such objections, the
Commission shall find, after notice and opportunity for hearing,
that all objections so sustained have been met, and shall enter
an order so declaring, the Trustees shall mail copies of such
4
<PAGE>
material to all Shareholders with reasonable promptness after the
entry of such order and the renewal of such tender.
Effect of Death, Resignation, etc. of a Trustee
Section 2. The death, declination, resignation, retirement,
removal or incapacity of the Trustees, or any one of them, shall
not operate to annul the Trust or to revoke any existing agency
created pursuant to the terms of this Declaration of Trust.
Powers
Section 3. Subject to the provisions of this Declaration of
Trust, the business of the Trust shall be managed by the
Trustees, and they shall have all powers necessary or convenient
to carry out that responsibility. Without limiting the foregoing,
the Trustees may adopt By-Laws not inconsistent with this
Declaration of Trust providing for the conduct of the business of
the Trust and may amend and repeal them to the extent that such
By-Laws do not reserve that right to the Shareholders; they may
fill vacancies, including vacancies caused by enlargement of
their number, and may remove Trustees with or without cause; they
may elect and remove, with or without cause, such officers and
appoint and terminate such agents as they consider appropriate;
they may appoint from their own number, and terminate, any one or
more committees consisting of two or more Trustees, including an
executive committee which may, when the Trustees are not in
session, exercise some or all of the power and authority of the
Trustees as the Trustees may determine; they may employ one or
more custodians of the assets of the Trust and may authorize such
custodians to employ subcustodians and to deposit all or any part
of such assets in a system or systems for the central handling of
securities, retain a transfer agent or a Shareholder servicing
agent, or both, provide for the distribution of Shares by the
Trust, through one or more principal underwriters or otherwise,
set record dates for the determination of Shareholders with
respect to various matters, and in general delegate such
authority as they consider desirable to any officer of the Trust,
to any committee of the Trustees and to any agent or employee of
the Trust or to any such custodian or underwriter.
Without limiting the foregoing, the Trustees shall have
power and authority:
(a) To invest and reinvest cash, and to hold cash uninvested;
(b) To sell, exchange, lend, pledge, mortgage, hypothecate, write
options on and lease any or all of the assets of the Trust;
(c) To act as a distributor of shares and as underwriter of, or broker
or dealer in, securities and other property;
(d) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and
deliver proxies or powers of attorney to such person or persons as the
Trustees shall deem proper, granting to such person or persons such
power and discretion with relation to securities or property as the
Trustees shall deem proper;
(e) To exercise powers and rights of subscription or otherwise which
in any manner arise out of ownership of securities;
(f) To hold any security or property in a form not indicating any
trust, whether in bearer, unregistered or other negotiable form, or in
the name of
5
<PAGE>
the Trustees or of the Trust or in the name of a custodian,
subcustodian or other depository or a nominee or nominees or
otherwise;
(g) To allocate assets, liabilities, income and expenses of the Trust
to a particular Series of Shares or to apportion the same among two or
more Series, provided that any liabilities or expenses incurred by a
particular Series of Shares shall be payable solely out of the assets
of that Series; and, to the extent necessary or appropriate to give
effect to the preferences and special or relative rights and
privileges of any Classes of Shares, to allocate assets, liabilities,
income and expenses of a Series to a particular Class of Shares of
that Series or to apportion the same among two or more Classes of
Shares of that Series;
(h) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or issuer, any security of
which is or was held in the Trust; to consent to any contract, lease,
mortgage, purchase or sale of property by such corporation or issuer,
and to pay calls or subscriptions with respect to any security held in
the Trust;
(i) To join other security holders in acting through a committee,
depository, voting trustee or otherwise, and in that connection to
deposit any security with, or transfer any security to, any such
committee, depository or trustee, and to delegate to them such power
and authority with relation to any security (whether or not so
deposited or transferred) as the Trustees shall deem proper, and to
agree to pay, and to pay, such portion of the expenses and
compensation of such committee, depository or trustee as the Trustees
shall deem proper;
(j) To compromise, arbitrate or otherwise adjust claims in favor of or
against the Trust or any matter in controversy, including but not
limited to claims for taxes;
(k) To enter into joint ventures, general or limited partnerships and
any other combinations or associations;
(l) To borrow funds, securities or other assets;
(m) To endorse or guarantee the payment of any notes or other
obligations of any person; to make contracts of guaranty or
suretyship, or otherwise assume liability for payment thereof; and to
mortgage and pledge the Trust property or any part thereof to secure
any of or all such obligations;
(n) To purchase and pay for entirely out of Trust property such
insurance as they may deem necessary or appropriate for the conduct of
the Trust's business, including, without limitation, insurance
policies insuring the assets of the Trust and payment of distributions
and principal on its portfolio investments, and insurance policies
insuring the Shareholders, Trustees, officers, employees, agents,
investment advisers or managers, principal underwriters or independent
contractors of the Trust individually against all claims and
liabilities of every nature arising by reason of holding or having
held any such office or position, or by reason of any action alleged
to have been taken or omitted by any such person as Shareholder,
Trustee, officer, employee, agent, investment adviser or manager,
principal underwriter or independent contractor, including any
6
<PAGE>
action taken or omitted that may be determined to constitute
negligence, whether or not the Trust would have the power to indemnify
such person against such liability;
(o) To pay pensions for faithful service, as deemed appropriate by the
Trustees, and to adopt, establish and carry out pension,
profit-sharing, share bonus, share purchase, savings, thrift and other
retirement, incentive and benefit plans, trusts and provisions,
including the purchasing of life insurance and annuity contracts as a
means of providing such retirement and other benefits, for any or all
of the Trustees, officers, employees and agents of the Trust; and
(p) To engage in any other lawful act or activity in which
corporations organized under the Massachusetts Business Corporation
Act may engage.
The Trustees shall not in any way be bound or limited by any
present or future law or custom in regard to investments by
trustees.
Except as otherwise provided herein or from time to time in
the By-Laws, any action to be taken by the Trustees may be taken
(a) by a majority of the Trustees present at a meeting of the
Trustees (a quorum being present), within or without
Massachusetts, including any meeting held by means of a
conference telephone or other communications equipment by means
of which all persons participating in the meeting can hear each
other at the same time (participation by which means shall for
all purposes constitute presence in person at a meeting), or (b)
by written consents of a majority of the Trustees then in office
(which written consents shall be filed with the records of the
meetings of the Trustees and shall be treated for all purposes as
a vote taken at a meeting of Trustees).
Payment of Expenses by Trust and by Shareholders
Section 4. The Trustees are authorized to pay or to cause to
be paid out of the principal or income of the Trust, or partly
out of principal and partly out of income, as they deem fair, all
expenses, fees, charges, taxes and liabilities incurred or
arising in connection with the Trust, in connection with the
management thereof, or in connection with the financing of the
sale of Shares, including, but not limited to, the Trustees'
compensation and such expenses and charges for the services of
the Trust's officers, employees, any investment adviser, manager
or sub-adviser, principal underwriter, auditor, counsel,
custodian, transfer agent, shareholder servicing agent, and such
other agents or independent contractors and such other expenses
and charges as the Trustees may deem necessary or proper to
incur, provided, however, that all expenses, fees, charges, taxes
and liabilities incurred by or arising in connection with a
particular Series of Shares, as determined by the Trustees, shall
be payable solely out of the assets of that Series and may, as
the Trustees from time to time may determine, be allocated to a
particular Class of Shares of a Series or apportioned among two
or more Classes of Shares of a Series.
The Trustees shall have the power, as frequently as they may
determine, to cause each Shareholder, or each Shareholder of any
particular Series or Class, to pay directly, in advance or
arrears, for charges of the Trust's custodian or transfer,
shareholder servicing or similar agent, an amount fixed from time
to time by the Trustees, by setting off such charges due from
such Shareholder from declared but unpaid dividends owed such
Shareholder and/or by reducing the number of Shares in the
account of such Shareholder by that number of full and/or
fractional Shares which represents the outstanding amount of such
charges due from such Shareholder.
7
<PAGE>
Ownership of Assets of the Trust
Section 5. Title to all of the assets of each Series of
Shares and of the Trust shall at all times be considered as
vested in the Trustees.
Advisory, Management and Distribution
Section 6. The Trustees may, at any time and from time to
time, contract for exclusive or nonexclusive advisory and/or
management services with Value Trend Capital Management, LP, a
California Limited Partnership or any corporation, trust,
association or other organization (the "Adviser"), every such
contract to comply with such requirements and restrictions as may
be set forth in the By-Laws; and any such contract may provide
for one or more sub-advisers who shall perform all or part of the
obligations of the Adviser under such contract and may contain
such other terms interpretive of or in addition to said
requirements and restrictions as the Trustees may determine,
including, without limitation, authority to determine from time
to time what investments shall be purchased, held, sold or
exchanged and what portion, if any, of the assets of the Trust
shall be held uninvested and to make changes in the Trust's
investments. The Trustees may also, at any time and from time to
time, contract with the Adviser or any other corporation, trust,
association or other organization, appointing it exclusive or
nonexclusive distributor or principal underwriter for the Shares,
every such contract to comply with such requirements and
restrictions as may be set forth in the By-Laws; and any such
contract may contain such other terms interpretive of or in
addition to said requirements and restrictions as the Trustees
may determine.
The fact that:
(i) any of the Shareholders, Trustees or officers of the Trust is a
shareholder, director, officer, partner, trustee, employee, manager,
adviser, principal underwriter or distributor or agent of or for any
corporation, trust, association or other organization, or of or for
any parent or affiliate of any organization, with which an advisory or
management contract, or principal underwriter's or distributor's
contract, or transfer, shareholder servicing or other agency contract
may have been or may hereafter be made, or that any such organization,
or any parent or affiliate thereof, is a Shareholder or has an
interest in the Trust, or that
(ii) any corporation, trust, association or other organization with
which an advisory or management contract or principal underwriter's or
distributor's contract, or transfer, shareholder servicing or other
agency contract may have been or may hereafter be made also has an
advisory or management contract, or principal underwriter's or
distributor's contract, or transfer, shareholder servicing or other
agency contract with one or more other corporations, trusts,
associations or other organizations, or has other business or
interests shall not affect the validity of any such contract or
disqualify any Shareholder, Trustee or officer of the Trust from
voting upon or executing the same or create any liability or
accountability to the Trust or its Shareholders.
8
<PAGE>
ARTICLE V
Shareholders' Voting Powers and Meetings
Voting Powers
Section 1. The Shareholders shall have power to vote only
(i) for the election of Trustees as provided in Article IV,
Section 1 of this Declaration of Trust, provided, however, that
no meeting of Shareholders is required to be called for the
purpose of electing Trustees unless and until such time as less
than a majority of the Trustees have been elected by the
Shareholders, (ii) with respect to any Adviser as provided in
Article IV, Section 6 of this Declaration of Trust to the extent
required by the 1940 Act, (iii) with respect to any termination
of this Trust to the extent and as provided in Article IX,
Section 5 of this Declaration of Trust, (iv) with respect to any
amendment of this Declaration of Trust to the extent and as
provided in Article IX, Section 8 of this Declaration of Trust,
(v) to the same extent as the stockholders of a Massachusetts
business corporation as to whether or not a court action,
proceeding or claim should or should not be brought or maintained
derivatively or as a class action on behalf of the Trust or the
Shareholders, and (vi) with respect to such additional matters
relating to the Trust as may be required by law, this Declaration
of Trust, the By-Laws or any registration of the Trust with the
Commission (or any successor agency) or any state, or as the
Trustees may consider necessary or desirable. Each whole Share
shall be entitled to one vote as to any matter on which it is
entitled to vote and each fractional Share shall be entitled to a
proportionate fractional vote. On any matter submitted to a vote
of Shareholders all Shares of the Trust then entitled to vote
shall be voted by individual Series, except (i) when required by
the 1940 Act, Shares shall be voted in the aggregate and not by
individual Series and (ii) when the Trustees have determined that
the matter affects only the interests of one or more Series or
Classes, then only Shareholders of such Series or Classes shall
be entitled to vote thereon. There shall be no cumulative voting
in the election of Trustees.
Shares may be voted in person or by proxy. A proxy with
respect to Shares held in the name of two or more persons shall
be valid if executed by any one of them unless at or prior to
exercise of the proxy the Trust receives a specific written
notice to the contrary from any one of them. A proxy purporting
to be executed by or on behalf of a Shareholder shall be deemed
valid unless challenged at or prior to its exercise and the
burden of proving invalidity shall rest on the challenger. Until
Shares are issued, the Trustees may exercise all rights of
Shareholders and may take any action permitted or required of the
Shareholders by law, this Declaration of Trust or the By-Laws.
Meetings
Section 2. Meetings of the Shareholders may be called by the
Trustees for the purpose of electing Trustees as provided in
Article IV, Section 1 of this Declaration of Trust and for such
other purposes as may be prescribed by law, by this Declaration
of Trust or by the By-Laws. Meetings of the Shareholders may also
be called by the Trustees from time to time for the purpose of
taking action upon any other matter deemed by the Trustees to be
necessary or desirable. A meeting of Shareholders may be held at
any place designated by the Trustees. Written notice of any
meeting of Shareholders shall be given or caused to be given by
the Trustees by mailing such notice at least seven days before
such meeting, postage prepaid, stating the time and place of the
meeting, to each Shareholder entitled to vote at such meeting at
the Shareholder's address as it appears on the records of the
Trust. Whenever notice of a meeting is required to be given to a
Shareholder under this Declaration of Trust or the By-Laws, a
written waiver thereof, executed before or after the meeting by
such Shareholder or his or her attorney thereunto
9
<PAGE>
authorized and filed with the records of the meeting, shall be
deemed equivalent to such notice.
Quorum and Required Vote
Section 3. Forty percent (40%) of the Shares entitled to
vote shall be a quorum for the transaction of business at a
Shareholders' meeting, except that where any provision of law or
of this Declaration of Trust or the By-Laws permits or requires
that holders of any Series or Class shall vote as a Series or
Class, then forty percent (40%) of the aggregate number of Shares
of that Series or Class entitled to vote shall be necessary to
constitute a quorum for the transaction of business by that
Series or Class. Any lesser number shall be sufficient for
adjournments. Any adjourned session or sessions may be held,
within a reasonable time after the date set for the original
meeting, without the necessity of further notice. Except when a
larger vote is required by any provision of law or this
Declaration of Trust or the By-Laws, a majority of the Shares
voted shall decide any questions and a plurality shall elect a
Trustee, provided that where any provision of law or of this
Declaration of Trust or the By-Laws permits or requires that the
holders of any Series or Class shall vote as a Series or Class,
then a majority of the Shares of that Series or Class voted on
the matter (or a plurality with respect to the election of a
Trustee) shall decide that matter insofar as that Series or Class
is concerned.
Action by Written Consent
Section 4. Any action taken by Shareholders may be taken
without a meeting if a majority of Shareholders entitled to vote
on the matter (or such larger proportion thereof as shall be
required by any express provision of law or this Declaration of
Trust or the By-Laws) consent to the action in writing and such
written consents are filed with the records of the meetings of
Shareholders. Such consent shall be treated for all purposes as a
vote taken at a meeting of Shareholders.
Additional Provisions
Section 5. The By-Laws may include further provisions for
Shareholders'
votes and meetings and related matters.
ARTICLE VI
Distributions, Redemptions and Repurchases, and
Determination of Net Asset Value
Distributions
Section 1. The Trustees may each year, or more frequently if
they so determine, distribute to the Shareholders of each Series
out of the assets of such Series such amounts as the Trustees may
determine. Any such distribution to the Shareholders of a
particular Series shall be made to said Shareholders pro rata in
proportion to the number of Shares of such Series held by each of
them, except to the extent otherwise required or permitted by the
preferences and special or relative rights and privileges of any
Classes of Shares of that Series, and any distribution to the
Shareholders of a particular Class of Shares shall be made to
such Shareholders pro rata in proportion to the number of Shares
of such Class held by each of them. Such distributions shall be
made in cash, Shares or other property, or a combination thereof,
as determined by the Trustees. Any such distribution paid in
Shares will be paid at the net asset value thereof as determined
in accordance with the By-Laws.
10
<PAGE>
Redemptions and Repurchases
Section 2. The Trust shall purchase such Shares as are
offered by any Shareholder for redemption, upon the presentation
of any certificate for the Shares to be purchased, a proper
instrument of transfer and a request directed to the Trust or a
person designated by the Trust that the Trust purchase such
Shares, or in accordance with such other procedures for
redemption as the Trustees may from time to time authorize; and
the Trust will pay therefor the net asset value thereof, as next
determined in accordance with the By-Laws, less any redemption
charge or fee as the Trustees may from time to time authorize.
Payment for said Shares shall be made by the Trust to the
Shareholder within seven days after the date on which the request
is made. The obligation set forth in this Section 2 is subject to
the provision that in the event that any time the New York Stock
Exchange is closed for other than customary weekends or holidays,
or, if permitted by rules of the Commission, during periods when
trading on the Exchange is restricted or during any emergency
which makes it impractical for the Trust to dispose of its
investments or to determine fairly the value of its net assets,
or during any other period permitted by order or other action of
the Commission for the protection of investors, such obligation
may be suspended or postponed by the Trustees. The Trust may also
purchase or repurchase Shares at a price not exceeding the net
asset value of such Shares in effect when the purchase or
repurchase or any contract to purchase or repurchase is made.
Payment in Kind
Section 3. Subject to any generally applicable limitation
imposed by the Trustees, any payment on redemption of Shares may,
if authorized by the Trustees, be made wholly or partly in kind,
instead of cash. Such payment in kind shall be made by
distributing securities or other property constituting, in the
option of the Trustees, a fair representation of the various
types of securities and other property then held by the Series of
Shares being redeemed (but not necessarily involving a portion of
each of the Series' holdings) and taken at their value used in
determining the net asset value of the Shares in respect of which
payment is made.
Redemption at the Option of the Trust
Section 4. The Trust shall have the right at its option and
at any time to redeem Shares of any Shareholder at the net asset
value thereof as determined in accordance with the By-Laws: (i)
if at such time such Shareholder owns fewer Shares than, or
Shares having an aggregate net asset value of less than, an
amount determined from time to time by the Trustees; or (ii) to
the extent that such Shareholder owns Shares of a particular
Series or Class of Shares equal to or in excess of a percentage
of the outstanding Shares of that Series or Class determined from
time to time by the Trustees; or (iii) to the extent that such
Shareholder owns Shares of the Trust representing a percentage
equal to or in excess of such percentage of the aggregate number
of outstanding Shares of the Trust or the aggregate net asset
value of the Trust determined from time to time by the Trustees.
Dividends, Distributions, Redemptions and Repurchases
Section 5. No dividend or distribution (including, without
limitation, any distribution paid upon termination of the Trust
or of any Series) with respect to, nor any redemption or
repurchase of, the Shares or any Series (or of any Class) shall
be effected by the Trust other than from the assets of such
Series (or of the Series of which such Class is a part).
11
<PAGE>
Additional Provisions Relating to Redemptions and Repurchases
Section 6. The completion of redemption of Shares shall
constitute a full discharge of the Trust and the Trustees with
respect to such shares, and the Trustees may require that any
certificate or certificates issued by the Trust to evidence the
ownership of such Shares shall be surrendered to the Trustees for
cancellation or notation.
Determination of Net Asset Value
Section 7. The term "net asset value" of the Shares, of
each Series or Class shall mean: (i) the value of all the assets
of such Series or Class; (ii) less the total liabilities of such
Series or Class; (iii) divided by the number of Shares of such
Series or Class outstanding, in each case at the time of each
determination. The "number of Shares of such Series or Class
outstanding" for the purposes of such computation shall be
exclusive of any Shares of such Series or Class to be redeemed
and not then redeemed as to which the redemption price has been
determined, but shall include Shares of such Series or Class
presented for repurchase and not then repurchased and Shares of
such Series or Class to be redeemed and not then redeemed as to
which the redemption price has not been determined and Shares of
such Series or Class the sale of which has been confirmed. Any
fractions involved in the computation of net asset value per
share shall be adjusted to the nearer cent unless the Trustees
shall determine to adjust such fractions to a fraction of a cent.
The Trustees, or any officer or officers or agent of this
Trust designated for the purpose by the Trustees, shall determine
the net asset value of the Shares of each Series or Class, and
the Trustees shall fix the times as of which the net asset value
of the Shares of each Series or Class shall be determined and
shall fix the periods during which any such net asset value shall
be effective as to sales, redemptions and repurchases of, and
other transactions in, the Shares of such Series or Class, except
as such times and periods for any such transaction may be fixed
by other provisions of this Declaration of Trust or by the By-
Laws.
In valuing the portfolio investments of any Series or Class
for determination of net asset value per share of such Series or
Class:
(a) Each security for which market quotations are readily available
shall be valued at current market value determined by methods
specified by the Board of Trustees;
(b) Each other security, including any security within subsection (a)
for which the specified price does not appear to represent a
dependable quotation for such security as of the time of valuation,
shall be valued at a fair value as determined in good faith by the
Trustees;
(c) Any cash on hand shall be valued at the face amount thereof;
(d) Any cash on deposit, accounts receivable, and cash dividends and
interest declared or accrued and not yet received, any prepaid
expenses, and any other current asset shall be valued at the face
amount thereof, unless the Trustees shall determine that any such item
is not worth its face amount, in which case such asset shall be valued
at a fair value determined in good faith by the Trustees; and
(e) Any other asset shall be valued at a fair value determined in good
faith by the Trustees.
12
<PAGE>
Notwithstanding the foregoing, short-term debt obligations,
commercial paper and repurchase agreements may be, but need not
be, valued on the basis of quoted yields for securities of
comparable maturity, quality and type, or on the basis of
amortized cost.
Liabilities of any Series or Class for accounts payable for
investments purchased and for Shares tendered for redemption
and not then redeemed as to which the redemption price has been
determined shall be stated at the amounts payable therefor. In
determining the net asset value of any Series or Class, the
person or persons making such determination on behalf of the
Trust may include in liabilities such reserves, estimated
accrued expenses and contingencies as such person or persons may
in its, his or their best judgment deem fair and reasonable
under the circumstances. Any income dividends and gains
distributions payable by the Trust shall be deducted as of such
time or times on the record date therefor as the Trustees shall
determine.
The manner of determining the net assets of any Series or
Class or of determining the net asset value of the Shares of any
Series or Class my from time to time be altered as necessary or
desirable in the judgment of the Trustees to conform to any other
method prescribed or permitted by any applicable law or
regulation.
Determinations under this Section 7 made in good faith and
in accordance with the provisions of the 1940 Act shall be
binding on all parties concerned.
ARTICLE VII
Compensation and Limitation of Liability of Trustees
Compensation
Section 1. The Trustees as such shall be entitled to
reasonable compensation from the Trust; they may fix the amount
of their compensation. Nothing herein shall in any way prevent
the employment of any Trustee for advisory, management, legal,
accounting, investment banking, underwriting, brokerage or other
services and payment for the same by the Trust.
Limitation of Liability
Section 2. The Trustees shall not be responsible or liable
in any event for any neglect or wrongdoing of any officer, agent,
employee, manager or principal underwriter of the Trust, nor
shall any Trustee be responsible for the act or omission of any
other Trustee, but nothing herein contained shall protect any
Trustee against any liability to which he or she 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.
Every note, bond, contract, instrument, certificate or
undertaking and every other act or thing whatsoever executed or
done by or on behalf of the Trust or the Trustees or any of them
in connection with the Trust shall be conclusively deemed to have
been executed or done only in or with respect to their or his or
her capacity as Trustees or Trustee, and such Trustees or Trustee
shall not be personally liable thereon.
13
<PAGE>
ARTICLE VIII
Indemnification
Trustees, Officers, etc.
Section 1. The By-Laws may include provisions whereby the
Trust may provide indemnity to its Trustees and officers,
including persons who serve at the Trust's request as directors,
officers or trustees of another organization in which the Trust
has any interest as a shareholder, creditor or otherwise (each
such Trustee, officer or person hereinafter referred to as a
"Covered Person"), against all liabilities and expenses,
including but not limited to amounts paid in satisfaction of
judgments, in compromise or as fines and penalties, and counsel
fees reasonably incurred by any Covered Person in connection with
the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or
administrative or legislative body, in which such Covered Person
may be or may have been involved as a party or otherwise or with
which such Covered Person may be or may have been threatened,
while in office or thereafter, by reason of being or having been
such a Covered Person. Any indemnity provided to Covered Persons
by the By-Laws may, if the By-Laws so provide, be in addition to
any other indemnity to which such persons may be entitled by law,
contract or otherwise.
Section 2. As to any matter disposed of (whether by a
compromise payment, pursuant to a consent decree or otherwise)
without an adjudication in a decision on the merits by a court,
or by any other body before which the proceeding was brought,
that such Covered Person is liable to the Trust or its
shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of such Covered Person's office, indemnification shall be
provided if (a) approved as in the best interest of the Trust,
after notice that it involves such indemnification, by at least a
majority of the Trustees who are disinterested persons and are
majority of the Trustees who are disinterested persons and are
not Interested Persons (provided that a majority of such Trustees
then in office act on the matter), upon a determination, based
upon a review of readily available facts (but not a full trial-
type inquiry) that such Covered Person is not liable to the
Trust or its Shareholders by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties
involved in the conduct of such Covered Person's office, or (b)
there has been obtained an opinion in writing of independent
legal counsel, based upon a review of readily available facts
(but not a full-trial type inquiry) to the effect that such
indemnification would not protect such Covered Person against any
liability to the Trust to which such Covered Person would
otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in
the conduct of his office.
Any approval pursuant to this Section shall not prevent the
recovery from any Covered Person of any amount paid to such
Covered Person in accordance with this Section as indemnification
if such Covered Person is subsequently adjudicated by a court of
competent jurisdiction to have been liable to the Trust or its
Shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of such Covered Person's office.
Indemnification Not Exclusive; Definitions
Section 3. The right of indemnification hereby provided
shall not be exclusive of or affect any other rights to which any
such Covered Person may be entitled. As used in this Article
VIII, the term "Covered Person" shall include such person's
heirs, executors and administrators, and a "disinterested person"
is a person against whom none of the actions, suits or other
proceedings in question or another action, suit or other
proceeding on the
14
<PAGE>
same or similar grounds is then or has been pending. Nothing
contained in this article shall affect any rights to
indemnification to which personnel of the Trust, other than
Trustees and officers, and other persons may be entitled by
contract or otherwise under law, nor the power of the Trust to
purchase and maintain liability insurance on behalf of such
persons.
Shareholders
Section 4. In case any Shareholder or former Shareholder
shall be held to be personally liable solely by reason of his or
her being or having been a Shareholder and not because of his or
her acts or omissions or for some other reason, the Shareholder
or former Shareholder (or his or her heirs, executors,
administrators or other legal representatives or, in the case of
a corporation or other entity, its corporate or other general
successor) shall be entitled to be held harmless from and
indemnified against all loss and expense arising from such
liability, but only out of the assets of the particular Series
of Shares of which he or she is or was a Shareholder.
ARTICLE IX
Miscellaneous
Trustees, Shareholders etc. Not Personally Liable; Notice
Section 1. All persons extending credit to, contracting
with or having any claim against the Trust or a particular Series
of Shares shall look only to the assets of the Trust or the
assets of that particular Series of Shares for payment under such
credit, contract or claim, and neither the Shareholders nor the
Trustees, nor any of the Trust's officers, employees or agents,
whether past, present or future, shall be personally liable
therefor. Nothing in this Declaration of Trust shall protect any
Trustee against any liability to which such 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 the office of Trustee.
Every note, bond, contract, instrument, certificate or
undertaking made or issued by the Trustees or by any officer or
officers shall give notice that this Declaration of Trust is on
file with the Secretary of State of The Commonwealth of
Massachusetts and shall recite that the same was executed or made
by or on behalf of the Trust or by them as Trustee or Trustees or
as officer or officers and not individually and that the
obligations of such instrument are not binding upon any of them
or the Shareholders individually but are binding only upon the
assets and property of the Trust, and may contain such further
recital as he or she or they may deem appropriate, but the
omission thereof shall not operate to bind any Trustee or
Trustees or officer or officers or Shareholder or Shareholders
individually.
Trustee's Good Faith Action, Expert Advice, No Bond or Surety
Section 2. The exercise by the Trustees of their powers and
discretions hereunder shall be binding upon everyone interested.
A Trustee shall be liable for his or her own willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee, and for nothing
else, and shall not be liable for the errors of judgment or
mistakes of fact or law. The Trustees may take advice of counsel
or other experts with respect to the meaning and operation of
this Declaration of Trust, and shall be under no liability for
any act or omission in accordance with such advice or for failing
to follow such advice. The Trustees as such shall not be required
to give any bond, nor any surety if a bond is required.
15
<PAGE>
Liability of Third Persons Dealing with Trustees
Section 3. No person dealing with the Trustees shall be
bound to make any inquiry concerning the validity of any
transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the
Trust or upon its order.
Duration and Termination of Trust
Section 4. Unless terminated as provided herein, the Trust
shall continue without limitation of time. The Trust may be
terminated at any time by vote of Shareholders holding at least
sixty-six and two-thirds percent (66 2/3%) of the Shares entitled
to vote, or by the Trustees by written notice to the
Shareholders. Any Series or Class of Shares may be terminated at
any time by vote of Shareholders holding at least sixty-six and
two-thirds percent (66 2/3%) of the Shares of such Series or
Class entitled to vote, or by the Trustees by written notice to
the Shareholders of such Series or Class. Upon termination of the
Trust or of any one or more Series or Classes of Shares, after
paying or otherwise providing for all charges, taxes, expenses
and liabilities, whether due or accrued or anticipated, of the
Trust or of the particular Series or Class as may be determined
by the Trustees, the Trust shall in accordance with such
procedures as the Trustees consider appropriate reduce the
remaining assets to distributable form in cash or shares or other
property, or any combination thereof, and distribute the proceeds
to the Shareholders of the Series involved, ratably according to
the number of Shares of such Series held by the several
Shareholders of such Series on the date of termination, except to
the extent otherwise required or permitted by the preferences and
special or relative rights and privileges of any Classes of
Shares of that Series, provided that any distribution to the
Shareholders of a particular Class of Shares shall be made to
such Shareholders pro rata in proportion to the number of Shares
of such Class held by each of them.
Filing and Copies, References, Headings
Section 5. The original or a copy of this instrument and of
each amendment hereto shall be kept at the office of the Trust
where it may be inspected by any Shareholder. A copy of this
instrument and of each amendment hereto shall be filed by the
Trust with the Secretary of State of The Commonwealth of
Massachusetts and with the Boston City Clerk, as well as any
other governmental office where such filing may from time to time
be required. Anyone dealing with the Trust may rely on a
certificate by an officer of the Trust as to whether or not any
such amendments have been made and as to any matters in
connection with the Trust hereunder, and, with the same effect as
if it were the original, may rely on a copy certified by an
officer of the Trust to be a copy of this instrument or of any
such amendments. In this instrument and in any such amendment,
references to this instrument and all expressions like "herein",
"hereof" and "hereunder" shall be deemed to refer to this
instrument as amended or affected by any such amendments.
Headings are placed herein for convenience of reference only and
shall not be taken as a part hereof or control or affect the
meaning, construction or effect of this instrument. This
instrument may be executed in any number of counterparts each of
which shall be deemed an original.
Applicable Law
Section 6. This Declaration of Trust is made effective in
The Commonwealth of Massachusetts, and it is created under and is
to be governed by and construed and administered according to the
laws of said Commonwealth. The Trust shall be of the type
commonly called a Massachusetts business trust and, without
limiting the provisions hereof, the Trust may exercise all powers
which are ordinarily exercised by such a trust.
16
<PAGE>
This Trust is in compliance and will continue to be in compliance
with all applicable laws of the Commonwealth of Massachusetts.
Amendments
Section 7. This Declaration of Trust may be amended at any
time by an instrument in writing signed by a majority of the then
Trustees when authorized to do so by vote of Shareholders holding
a majority of the Shares entitled to vote, except that an
amendment which in the determination of the Trustees shall affect
the holders of one or more Series or Classes of Shares but not
the holders of all outstanding Series and Classes shall be
authorized by vote of the Shareholders holding a majority of the
Shares entitled to vote of each Series and Class affected and no
vote of Shareholders of a Series or Class not affected
shall be required. Amendments having the purpose of changing the
name of the Trust, of establishing, changing or eliminating the
par value of any Shares or of supplying any omission, curing any
ambiguity or curing, correcting or supplementing any defective or
inconsistent provision contained herein shall not require
authorization by vote of any Shareholders.
IN WITNESS WHEREOF, the undersigned has hereunto set his
hand and seal in the City of El Cajon, California for himself and
his assigns, as of the day and year first above written.
/s/ Ross Provence
ROSS C. PROVENCE, TRUSTEE
State of California
County of San Diego
On 9/2/98 before me, Tonga Nguyen ,
personally appeared the above named Trustee, Ross C. Provence,
and acknowledged the foregoing instrument to be his free act and
deed, before me,
/s/ Tonga Nguyen
Notary Public
My Commission Expires
5/28/99
The address of the Trust and Trustee is:
411 West Madison Avenue
El Cajon, CA 92020
The address of the resident agent for the Trust is:
C.T. Corp.
Two Oliver Street
Boston, MA
17
<PAGE>
THE STATE OF CALIFORNIA
September 2, 1998
In conformity with the provisions of Chapter one hundred and
ten, Section six of the General Laws, as amended, the undersigned
hereby declares that a business under the title of Value Trend
Funds, which was established by an Agreement and Declaration of
Trust dated September 2, 1998, a copy of which has been filed
with the Office of the Secretary of State of the Commonwealth of
Massachusetts and with the Office of the City Clerk, Boston, is
being conducted by Trustee at Two Oliver Street, Boston,
Massachusetts, by the following person:
Full Name Residence
Ross C. Provence 2302 Via Dieguenos
Alpine, CA 91901
Signed:
/s/Ross Provence
ROSS C. PROVENCE, TRUSTEE
State of California
County of San Diego
On 9/2/98 before me, Tonga Nguyen ,
personally appeared the above named Trustee, Ross C. Provence,
and acknowledged the foregoing instrument to be his free act and
deed, before me,
/s/ Tonga Nguyen
Notary Public
My Commission Expires 5/28/98
<PAGE>
EXHIBIT NO. 2
BY-LAWS OF THE TRUST
BY-LAWS
OF
VALUE TREND FUNDS
ARTICLE 1
Agreement and Declaration
of Trust and Principal Office
1.1 Agreement and Declaration of Trust. These By-Laws shall be
subject to the Agreement and Declaration of Trust, as from time
to time in effect (the "Declaration of Trust"), of Value Trend
Funds (the "Trust"), the Massachusetts business trust established
by the Declaration of Trust.
1.2 Principal Office of the Trust. The principal office of the
Trust shall be located in San Diego County, California.
ARTICLE 2
Meetings of Trustees
2.1 Regular Meetings. Regular meetings of the Trustees may be
held without call or notice at such places and at such times as
the Trustees may from time to time determine, provided that
notice of the first regular meeting following any such
determination shall be given to absent Trustees.
2.2 Special Meetings. Special meetings of the Trustees may be
held, at any time and at any place designated in the call of the
meeting, when called by the Chairman of the Board, if any, the
President or the Treasurer or by two or more Trustees, sufficient
notice thereof being given to each Trustee by the Secretary or an
Assistant Secretary or by the officer or the Trustees calling the
meeting.
2.3 Notice. It shall be sufficient notice to a Trustee of a
special meeting to send notice by mail at least forty-eight hours
or by telegram at least twenty-four hours before the meeting
addressed to the Trustee at his or her usual or last known
business or residence address or to give notice to him or her in
person or by telephone at least twenty-four hours before the
meeting. Notice of a meeting need not be given (a) to any Trustee
if a written waiver of notice, executed by him before or after
the meeting, is filed with the records of the meeting; or (b) to
any Trustee who attends the meeting without protesting prior
thereto or at its commencement the lack of notice to him or her.
Neither notice of a meeting nor a waiver of a notice need specify
the purposes of the meeting.
2.4 Quorum. At any meeting of the Trustees a majority of the
Trustees then in office shall constitute a quorum. Any meeting
may be adjourned from time to time by a majority of the votes
cast upon the question, whether or not a quorum is present, and
the meeting may be held as adjourned without further notice.
ARTICLE 3
Officers
3.1 Enumeration; Qualification. The officers of the Trust shall
be a President, a Treasurer, a Secretary, and such other
officers, if any, as the Trustees from time to time may in their
discretion elect. The Trust may also have such agents as the
Trustees may appoint from
1
<PAGE>
time to time in their discretion. If a Chairman of the Board is
elected, he or she shall be a Trustee and may but need not be a
shareholder; and any other officer may be but none need be a
Trustee or shareholder. Any two or more offices may be held by
the same person.
3.2 Election and Tenure. The President, the Treasurer, the
Secretary and such other officers as the Trustees may in their
discretion from time to time elect shall each be elected by the
Trustees to serve until his or her successor is elected or
qualified, or until he or she sooner dies, resigns, is removed or
becomes disqualified. Each officer shall hold office and each
agent shall retain authority at the pleasure of the Trustees.
3.3 Powers. Subject to the other provisions of these By-Laws,
each officer shall have, in addition to the duties and powers
herein and in the Declaration of Trust set forth, such duties and
powers as are commonly incident to the office occupied by him or
her as if the Trust were organized as a Massachusetts business
corporation and such other duties and powers as the Trustees may
from time to time designate.
3.4 President and Vice Presidents. The President shall have the
duties and powers specified in these By-Laws and shall have such
other duties and powers as may be determined by the Trustees. Any
Vice Presidents shall have such duties and powers as shall be
designated from time to time by the Trustees.
3.5 Chief Executive Officer. The Chief Executive Officer of the
Trust shall be the Chairman of the Board, the President or such
other officer as is designated by the Trustees and shall, subject
to the control of the Trustees, have general charge and
supervision of the business of the Trust and, except as the
Trustees shall otherwise determine, preside at all meetings of
the shareholders and of the Trustees. If no such designation is
made, the President shall be the Chief Executive Officer.
3.6 Chairman of the Board. If a Chairman of the Board of Trustees
is elected, he or she shall have the duties and powers specified
in these By-Laws and shall have such other duties and powers as
may be determined by the Trustees.
3.7 Treasurer. The Treasurer shall be the chief financial and
accounting officer of the Trust, and shall, subject to the
provisions of the Declaration of Trust and to any arrangement
made by the Trustees with a custodian, investment adviser or
manager or transfer, shareholder servicing or similar agent, be
in charge of the valuable papers, books of account and accounting
records of the Trust, and shall have such other duties and powers
as may be designated from time to time by the Trustees or by the
President.
3.8 Secretary. The Secretary shall record all proceedings of the
Shareholders and the Trustees in books to be kept therefor, which
books or a copy thereof shall be kept at the principal office of
the Trust. In the absence of the Secretary from any meeting of
the Shareholders or Trustees, an assistant Secretary or, if there
be none or if he or she is absent, a temporary clerk chosen at
such meeting shall record the proceedings thereof in the
aforesaid books.
3.9 Resignations and Removals. Any officer may resign at any time
by written instrument signed by him or her and delivered to the
President or the Secretary or to a meeting of the Trustees. Such
resignation shall be effective upon receipt unless specified to
be effective at some other time. The Trustees may remove any
officer with or without cause. Except to the extent expressly
provided in a written agreement with the Trust, no officer
resigning and no officer removed shall have any right to any
compensation for any period following his or her resignation or
removal, or any right to damages on account of such removal.
2
<PAGE>
ARTICLE 4
Indemnification
4.1 Trustees, Officers, etc. The Trust shall indemnify each of
its Trustees and officers (including persons who serve at the
Trust's request as directors, officers or trustees of another
organization in which the Trust has any interest as a
shareholder, creditor or otherwise) (each such Trustee, officer
or person hereinafter referred to as a "Covered Person") against
all liabilities and expenses, including but not limited to
amounts paid in satisfaction of judgments, in compromise or as
fines and penalties, and counsel fees reasonably incurred by any
Covered Person in connection with the defense or disposition of
any action, suit or other proceeding, whether civil or criminal,
before any court or administrative or legislative body, in which
such Covered Person may be or may have been involved as a party
or otherwise or with which such person may be or may have been
threatened, while in office or thereafter, by reason of any
alleged act or omission as a Trustee or officer or by reason of
his or her being or having been such a Trustee or officer, except
with respect to any matter as to which such Covered Person shall
have been finally adjudicated in any such action, suit or other
proceeding not to have acted in good faith in the reasonable
belief that such Covered Person's action was in the best interest
of the Trust, and except that no Covered Person shall be
indemnified against any liability to the Trust or its
Shareholders to which such Covered Person would otherwise be
subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of such Covered Person's office. Expenses, including
counsel fees so incurred by any such Covered Person, may be paid
from time to time by the Trust in advance of the final
disposition of any such action, suit or proceeding on the
condition that the amounts so paid shall be repaid to the Trust
if it is ultimately determined that indemnification of such
expenses is not authorized under this Article.
4.2 Compromise Payment. As to any matter disposed of by a
compromise payment by any such Covered Person referred to in
Section 4.1 above, pursuant to a consent decree or otherwise, no
such indemnification either for said payment or for any other
expenses shall be provided unless such compromise shall be
approved as in the best interests of the Trust, after notice that
it involved such indemnification, (a) by a disinterested majority
of the Trustees then in office; or (b) by a majority of the
disinterested Trustees then in office; or (c) by any
disinterested person or persons to whom the question may be
referred by the Trustees; or (d) by vote of Shareholders holding
a majority of the Shares entitled to vote thereon, exclusive of
any Shares beneficially owned by any interested Covered Person;
provided, however, that such indemnification would not protect
such person against any liability to the Trust or its
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
office. Approval by the Trustees pursuant to clause (a) or (b) or
by any disinterested person or persons pursuant to clause (c) of
this Section shall not prevent the recovery from any Covered
Person of any amount paid as indemnification to such Covered
Person in accordance with any of such clauses if such Covered
Person is subsequently adjudicated by a court of competent
jurisdiction not to have acted in good faith in the reasonable
belief that such Covered Person's action was in the best
interests of the Trust or to have been liable to the Trust or its
Shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of such Covered Person's office.
4.3 Indemnification Not Exclusive. The right of indemnification
hereby provided shall not be exclusive of or affect any other
rights to which any such Covered Person may be entitled. As used
in this Article 4, the term "Covered Person" shall include such
person's heirs, executors and administrators; an "interested
Covered Person" is one against whom the action, suit or other
proceeding in question or another action, suit or other proceeding
3
<PAGE>
on the same or similar grounds is then or has been pending; and a
"disinterested Trustee" or "disinterested person" is a Trustee or
a person against whom none of such actions, suits or other
proceedings or another action, suit or other proceeding on the
same or similar grounds is then or has been pending. Nothing
contained in this Article shall affect any rights to
indemnification to which personnel of the Trust, other than
Trustees and officers, and other persons may be entitled by
contract or otherwise under law, or the power of the Trust to
purchase and maintain liability insurance on behalf of any such
person.
ARTICLE 5
Reports
5.1 General. The Trustees and officers shall render reports at
the time and in the manner required by the Declaration of Trust
or any applicable law. Officers shall render such
additional reports as they may deem desirable or from time to
time as may be required by the Trustees.
ARTICLE 6
Fiscal Year
6.1 General. Except as otherwise provided from time to time by
the Trustees, the fiscal year of the Trust shall end on December
31 in each year.
ARTICLE 7
Seal
7.1 General. The seal of the Trust shall consist of a flat-faced
die with the word "Massachusetts", together with the name of the
Trust and the year of its organization cut or engraved thereon.
Unless otherwise required by the Trustees, it shall not be
necessary to place the seal on, and its absence shall not impair
the validity of, any document, instrument or other paper executed
and delivered by or on behalf of the Trust.
ARTICLE 8
Execution of Papers
8.1 General. Except as the Trustees, generally or in particular
cases, may have authorized the execution thereof in some other
manner, all checks, notes, drafts and other obligations and all
registration statements and amendments thereto and all
applications and amendments thereto to the Securities and
Exchange Commission shall be signed by any of the President, any
Vice- President, the Treasurer or any of such other officers or
agents as shall be designated for that purpose by a vote of the
Trustees.
ARTICLE 9
Issuance of Share Certificates
9.1 Share Certificates. In lieu of issuing certificates for
shares, the Trustees or the transfer agent may either issue
receipts therefor or may keep accounts upon the books of the
Trust for the record holders of such shares, who shall in either
case be deemed, for all purposes hereunder, to be the holders of
certificates for such shares as if they had accepted such
certificates and shall be held to have expressly assented and
agreed to the terms of this Article 9.
The Trustees may at any time authorize the issuance of share
certificates. In that event, each shareholder shall be entitled
to a certificate stating the number of shares owned by him or
her, in such form as shall be prescribed from time to time by the
Trustees. Such certificates
4
<PAGE>
shall be signed by the President or any Vice-President and by the
Treasurer or any Assistant Treasurer. Such signatures may be
facsimile if the certificate is signed by a transfer agent, or by
a registrar, other than a Trustee, officer or employee of the
Trust. In case any officer who has signed or whose facsimile
signature has been placed on such certificate shall cease to be
such officer before such certificate is issued, it may be issued
by the Trust with the same effect as if he or she were such
officer at the time of its issue.
9.2 Loss of Certificates. In case of the alleged loss or
destruction or the mutilation of a share certificate, a duplicate
certificate may be issued in place thereof, upon such terms as
the Trustees shall prescribe.
9.3 Issuance of New Certificates to Pledgee. A pledgee of shares
transferred as collateral security shall be entitled to a new
certificate if the instrument of transfer substantially describes
the debt or duty that is intended to be secured thereby. Such new
certificate shall express on its face that it is held as
collateral security, and the name of the pledgor shall be stated
thereon, who alone shall be liable as a shareholder and entitled
to vote thereon.
9.4 Discontinuance of Issuance of Certificates. The Trustees may
at any time discontinue the issuance of share certificates and
may, by written notice to each shareholder, require the surrender
of share certificates to the Trust for cancellation. Such
surrender and cancellation shall not effect the ownership of
shares in the Trust.
ARTICLE 10
Provisions Relating to the Conduct of the Trust's Business
10.1 Determination of Net Asset Value Per Share. Net asset value
per share of each Series or Class of shares of the Trust shall be
determined at the times and in the manner specified from time to
time by the Trustees.
ARTICLE 11
Shareholders' Voting Powers and Meetings
11.1 Record Dates. For the purpose of determining the
shareholders who are entitled to vote or act at any meeting or
any adjournment thereof, or who are entitled to receive payment
of any dividend or of any other distribution, the Trustees may
from time to time fix a time, which shall be not more than 90
days before the date of any meeting of shareholders or the date
for the payment of any dividend or of any other distribution, as
the record date for determining the shareholders having the right
to notice of and to vote at such meeting and any adjournment
thereof or the right to receive such dividend or distribution,
and in such case only shareholders of record on such record date
shall have such right notwithstanding any transfer of shares on
the books of the Trust after the record date; or without fixing
such record date the Trustees may for any of such purposes close
the register or transfer books for all or any part of such
period.
ARTICLE 12
Amendments to the By-Laws
12.1 General. These By-Laws may be amended or repealed, in whole
or in part, by a majority of the Trustees then in office at any
meeting of the Trustees.
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 day of
, 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
Ross C. Provence Date
Bradley DeHaven Date
Jeffrey R. Provence Date
Thomas H. Addis III Date
Stephen H. Burch Date
Value Trend Capital Management, LP - General Partners
Ross C. Provence Date
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 day of
, 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
Ross C. Provence Date
Bradley DeHaven Date
Jeffrey R. Provence Date
Thomas H. Addis III Date
Stephen H. Burch Date
Value Trend Capital Management, LP - General Partners
Ross C. Provence Date
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 day of
, 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
Ross C. Provence Date
Bradley DeHaven Date
Jeffrey R. Provence Date
Thomas H. Addis III Date
Stephen H. Burch Date
Value Trend Capital Management, LP - General Partners
Ross C. Provence Date
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 ______________, 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 company 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
company registered under the Investment Company 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 2, 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
<PAGE>
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
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
<PAGE>
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.
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 company, 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 company (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. So long as such Securities
Depository or Book-Entry System shall continue to be employed for
the deposit of Securities of the Funds, the Trust shall annually
re-adopt such resolution and deliver a copy thereof, certified by
an Officer, to the Custodian.
3
<PAGE>
(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.
(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
4
<PAGE>
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;
(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 Corporation 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 corporate 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;
5
<PAGE>
(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;
(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 Corporation
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
6
<PAGE>
(n) For any other proper corporate 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 forth the
purpose for which such delivery is to be made, declaring such
purpose to be a proper corporate 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
7
<PAGE>
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)
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 Corporate Actions. Custodian will
promptly notify the Trust of corporate 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 corporate actions is published by the Financial Daily Card
Service, J.J. Kenny Called Bond Service, DTC, or received by
first class mail from the 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 Trusties 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.
8
<PAGE>
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
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
9
<PAGE>
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.
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
Corporation 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 corporate 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 corporate
purposes.
10
<PAGE>
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 terms of this Agreement, to be 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
11
<PAGE>
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 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.
12
<PAGE>
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.
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
company 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 company 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 business trust organized under the laws of
the State of Massachusetts and under a Declaration of Trust, to
which reference is hereby made a copy of which is on file at the
office of the Secretary of The Commonwealth of Massachusetts as
required by law, and to any and all amendments thereto so filed
or hereafter filed. 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
13
<PAGE>
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: Ross C. Provence, President - Board of
Trustees
Telephone: (619) 588-9700
Facsimile: (619) 588-9701
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) 579-4312
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
<PAGE>
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.
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
By:
Its:
Dated: , 1998
ATTEST: THE FIFTH THIRD BANK
By:
Its:
Dated: , 1998
15
<PAGE>
EXHIBIT A
TO THE CUSTODY AGREEMENT BETWEEN
VALUE TREND FUNDS AND THE FIFTH THIRD BANK
1. VALUE TREND LARGE CAP FUND
2. VALUE TREND LINKS FUND
3. VALUE TREND WORLDWIDE FUND
Date: , 1998
By:
Its:
THE FIFTH THIRD BANK
By:
Its:
Dated: , 1998
16
<PAGE>
EXHIBIT B
TO THE CUSTODY AGREEMENT BETWEEN
VALUE TREND FUNDS AND THE FIFTH THIRD BANK
Date: , 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
Jeffrey R. Provence
17
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
VICE PRESIDENT
TREASURER
SECRETARY
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
, 19 , 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:__________________________________________
Its:__________________________________________
By:__________________________________________
Its:___________________________________________
18
<PAGE>
EXHIBIT C
TO THE CUSTODY AGREEMENT BETWEEN
VALUE TREND FUNDS AND THE FIFTH THIRD BANK
, 1998
MUTUAL FUND CUSTODY FEE SCHEDULE
BASIC ACCOUNT CHARGE
FUND SIZE:
TRANSACTION FEES
A transaction is a purchase, sale, maturity, redemption, tender,
exchange, dividend reinvestment, deposit or withdrawal of a
security (with the exception of Fifth Third Certificates of
Deposit, Commercial Paper & Repo's).
MISCELLANEOUS FEES
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: By:
Its: Its:
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:___________________________ By: __________________________
Its:__________________________ Its:__________________________
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>
