VALUE TREND FUNDS January 1, 1999
Value Trend Funds (the "Trust") is a registered open-end management investment
company with three separately managed non-diversified, no-load portfolios (each
a "Fund" and collectively, the "Funds"). The three separate Funds are the Large
Cap Fund, the Links Fund and the Worldwide Fund. Each Fund's investment
objective is long-term growth of capital. The Large Cap Fund seeks to achieve
its objective by investing substantially all of its assets in common stocks of
well-established, high-quality US Companies. The Links Fund seeks to achieve its
objective by investing primarily in common stocks of companies which are
associated with the golfing industry. The Worldwide Fund seeks to achieve its
objective primarily through investments in common stock of foreign and domestic
issuers. For further explanation on each Fund see THE FUNDS. There can be no
assurance that the Funds will achieve their investment objectives. Value Trend
Capital Management, LP ("Value Trend Capital Management, LP" or "Adviser") is
the investment adviser of the Funds. Each Fund's portfolio is managed by Value
Trend Capital Management, LP.
Each Fund currently offers one class of shares. This Prospectus
concisely describes the information that an investor should know
before investing in a Fund. Please read it carefully and keep it
for future reference. A Statement of Additional Information
dated January 1, 1999, is available free of charge. Write to Value
Trend Capital Management, LP, 411 West Madison Avenue, El Cajon,
Ca 92020 or call toll free 1-800-590-0898. The Statement of
Additional Information, which contains more detailed information
about the Funds, has been filed with the Securities and Exchange
Commission (the "SEC") and is incorporated by reference into this
Prospectus.
NO LOAD, NO SALES CHARGE, NO 12b-1 FEES
Minimum Initial Investment - $1,000 or $250 for IRAs
Minimum Subsequent Investments - $50
No Minimum Subsequent Investment for IRAs
(see "How to Purchase Shares")
For more information about establishing an account, or any other
information about the Funds, call 1-800-590-0898.
This prospectus contains information you should know before
investing. Please retain it for future reference. A Statement
of Additional Information regarding the Funds dated the date of
this prospectus has been filed with the Security and Exchange
Commission and (together with any supplement to it) is
incorporated by reference. That Statement may be obtained at no
charge by writing or telephoning the transfer agent at its
address or telephone number shown inside the back cover.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROSPECTUS 1
<PAGE>
The following information is provided to assist an investor in
understanding the various expenses that an investor in a Fund
will bear directly or indirectly. Since the Funds had not
commenced operations as of the date of the Prospectus, the
information about each Fund shown below is based on annualized
projected expenses for each class of shares for the 1999 fiscal
year. The information below should not be considered a
representation of past or future expenses, as actual expenses may
be greater or less than those shown. The examples show the
cumulative expenses attributable to a hypothetical $1,000
investment over specified periods, assuming the 5% annual return
required under federal regulations.
Large
Cap Links Worldwide
Fund Fund Fund
Shareholder Transaction Expenses
Maximum Sales Load none none none
Maximum Deferred Sales Load none none none
Redemption Fees none none none
Exchange Fees none none none
Annual Operating Expenses
(as a percentage of average net assets):
Management Fees 1.25% 1.35% 1.35%
12b-1 Fees none none none
Other Operating Expenses (after expense
reimbursements) none none none
Total Operating Expenses
(after expense reimbursements) 1.25% 1.35% 1.35%
Example(1):
An investor would pay the following
expenses on a $1,000 investment assuming a
5% annual return (with or without a
redemption at the end of each time period):
One Year $13 $14 $14
Three Year $40 $43 $43
(1) Under SEC rules, newly-organized funds, such as the Funds,
are required to show expenses for the one-year and three-year
periods only.
These examples should not be considered a representation of past
or future expenses or performances. Actual expenses may be greater
or less than those shown.
2 VALUE TREND FUNDS
<PAGE>
Value Trend Large Cap Fund
The Large Cap Fund's investment objective is long-term growth of
capital. The Fund is a no-load mutual fund which seeks to
achieve its objective by investing substantially all of its
assets in common stocks of well-established, high-quality US
Companies that have a market capitalization of $5 billion or
more. Some of these companies will have international exposure
through their international divisions. In selecting investments
for the Fund, the investment adviser will consider, among other
things, consistency of earnings, earnings growth rate, and return
on equity. The investment adviser will also consider its
expectations as to the relative performance of various sectors of
the economy and the relative growth prospects of different
companies within such sectors. Under normal market conditions,
the Fund will ordinarily be substantially fully invested in
common stocks of major US companies.
Value Trend Links Fund
The Links Fund's investment objective is long-term growth of capital. The Fund
is a no-load mutual fund which seeks to achieve its objective by investing
primarily in common stocks of companies which are associated with the golfing
industry. The minimum market capitalization of the stocks in the Fund is $50
million with no maximum market capitalization. Companies which are candidates
for this Fund may be, but are not limited to companies in the golfing industry,
sponsors of major golfing events, companies which produce products for the
golfing industry, and real estate investment trusts (REITs) which are involved
with golf properties, hotels, and housing.
Value Trend Worldwide Fund
The Worldwide Fund's investment objective is long-term growth of capital. The
Fund is a no-load mutual fund which seeks to achieve its objective primarily
through investments in common stock of foreign and domestic issuers. The Fund
has the flexibility to invest on a worldwide basis in companies and other
organizations of any size, regardless of country of organization or place of
principal business activity. The adviser under normal circumstances will invest
assets in at least three different countries and 65% of the common stock held
will be in companies located in foreign countries. As of January 1, 1999 the
Worldwide Fund has not commenced operations.
All Funds
Except for necessary reserves including but not limited to
reserves held to cover redemptions and unanticipated expenses, as
determined by management, all assets will be invested in
marketable securities composed primarily of common stocks and
securities convertible into common stocks. The reserves will be
held in cash or high-quality, short-term debt obligations readily
changeable into cash.
Management believes, however, that there may be times when the
shareholders interests are best served by investing in preferred
stocks, bonds or other defensive issues. It retains the freedom
to administer the portfolio of the Funds accordingly when, in the
judgment of the Adviser, economic and market conditions make such
a course desirable. Normally, however, the Funds will maintain
at least 65% of the portfolios in common stocks. These are not
restrictions or guidelines
PROSPECTUS 3
<PAGE>
regarding the investment of Funds assets in shares listed on an
exchange or traded over-the-counter. The Funds may also invest
in issues of the United States Treasury or a United States
government agency subject to repurchase agreements. The use of
repurchase agreements by the Funds involves certain risks. For a
discussion of the risks, see "Repurchase Agreements" below.
In addition to the investments described above, each Fund may
lend its portfolio securities and enter into repurchase
agreements. See "Risk Considerations" below.
INVESTMENT STRATEGIES
Value Trend Capital Management, LP, the investment adviser, as
its name implies follows a value investment strategy. Its
investment objective is to seek long-term growth of capital by
investing primarily in common and preferred stocks and warrants
or other rights and convertible securities.
The Adviser uses several approaches in analyzing economic value, but considers
the primary determinant of value to be a company's long-term ability to generate
profits for its shareholders. The Adviser also considers whether a stock is
trading at a price below which the investment adviser believes it should be
trading based on price relative to projected future earnings, price relative to
return on equity and price relative to the earnings growth rate. Once the
Adviser has identified a potential stock for a portfolio, the Adviser will
consider it for a Fund based on fundamental analysis.
RISK CONSIDERATIONS
It is important to understand the following risks inherent in a
Fund before you invest.
Common Stocks and
Other Equity Securities
Common stocks and similar equity securities are securities that
represent an ownership interest (or the right to acquire such an
interest) in a company and include securities convertible for or
convertible into common stocks (e.g. warrants). While offering
greater potential for long-term growth, common stocks and similar
equity securities are more volatile and more risky than some
other forms of investment. Therefore, the value of your
investment in a Fund may sometimes decrease instead of increase.
With exception of the Large Cap Fund, each Fund may invest in
equity securities of companies with relatively small market
capitalization. Securities of such companies may be more volatile
than the securities of larger, more established companies and the
broad equity market indices. See "Small Companies" below. The
Links Fund investments may include securities traded "over-the-
counter" as well as those traded on a securities exchange. Some
over-the-counter securities may be more difficult to sell under
some market conditions.
4 VALUE TREND FUNDS
<PAGE>
Convertible securities include other securities, such as
warrants, that provide an opportunity for equity participation.
Because convertible securities can be converted into equity
securities, their values will normally increase or decrease as
the values of the underlying equity securities increase or
decrease. The movements in the prices of convertible securities,
however, may be smaller than the movements in the value of the
underlying equity securities.
Small Companies
The Links Fund may invest in companies with relatively small
market capitalization. See "The Funds" above. Investments in
companies with relatively small capitalization may involve
greater risk than is usually associated with stocks of larger
companies. These companies often have sales and earnings growth
rates which exceed those of companies with larger capitalization.
Such growth rates may in turn be reflected in more rapid share
price appreciation. However, companies with smaller
capitalization often have limited product lines, markets or
financial resources and may be dependent upon a relatively small
management group. The securities may have limited marketability
and may be subject to more abrupt or erratic movements in price
than securities of companies with larger capitalization or market
averages in general. The net asset value per share of Funds that
invest in companies with smaller capitalization therefore may
fluctuate more widely than market averages.
Non-diversification Policy
The Funds are classified as non-diversified, which means that they may invest
substantial assets in a single issuer; however, to maintain their tax status
under Subchapter M of the Internal Revenue Code, the Funds may not invest more
than 25% of its total assets in any one issuer other than US government
securities and at the close of each quarter of the taxable year, at least 50% of
the value of each Fund must be represented by a) cash and cash items, including
US government securities and b) other securities of different issuers in which
each Fund has invested no more than 5% of its assets and with respect to which
it owns no more than 10% of the outstanding voting securities of the issuer.
Each Fund, therefore, may be more susceptible than a more widely diversified
fund to a single economic, political, or regulatory occurrence. Each Fund seeks
only diversification for adequate representation among what it considers to be
the best performing securities and to maintain its federal non-taxable status
under Sub-Chapter M of the Internal Revenue Code. Except for investment policies
that are identified as "fundamental," all of the investment policies of each
Fund may be changed without a vote of Fund shareholders.
Repurchase Agreements
Under a repurchase agreement, a Fund buys securities from a
seller, usually a bank or brokerage firm, with the understanding
that the seller will repurchase the securities at a higher price
at a later date. If the seller fails to repurchase the
securities, the Fund has rights to sell the securities to third
parties. Repurchase agreements can be regarded as loans by the
Fund to the seller, collateralized by the securities that are the
subject of the agreement. Repurchase agreements afford an
opportunity for the Fund to earn a return on available cash at
relatively low credit risk, although the Fund may be subject to
various delays and risks of loss if the seller fails to meet its
obligation to repurchase.
PROSPECTUS 5
<PAGE>
The staff of the SEC is currently of the view that repurchase
agreements maturing in more than seven days are illiquid
securities.
Loans of Securities
The Funds may lend their portfolio securities, provided that cash
or equivalent collateral equal to at least 100% of the market
value of the securities loaned is continuously maintained by the
borrower with the Funds. During the time securities are on loan,
the borrower will pay the Fund an amount equivalent to any
dividends or interest paid on such securities, and the Fund may
invest the cash collateral and earn additional income, or it may
receive an agreed upon amount of interest income from the
borrower who has delivered equivalent collateral. These loans are
subject to termination at the option of the Fund or the borrower.
A Fund may pay reasonable administrative and custodial fees in
connection with a loan and may pay a negotiated portion of the
interest earned on the cash or equivalent collateral to the
borrower or placing broker. It is not currently anticipated that
any Fund will have on loan at any given time securities totaling
more than one-fourth of its net assets. A Fund runs the risk
that the counterparty to a loan transaction will default on its
obligation and that the value of the collateral received may be
insufficient to cover the securities loaned as a result of an
increase in the value of the securities of decline in the value
of the collateral.
Options
The Funds may write (i.e. sell) covered call and put options and
purchase put and call options on securities that are traded on
United States listed markets. The value of the underlying
securities on which the options may be written at any one time
will not exceed 15% of the Fund's total assets. The Fund will
not purchase put of call options if the aggregate premium paid
for such options would exceed 5% of the Fund's total assets at
the time of purchase. The risks associated with options are that
the option does not follow the price movement of the underlying
security. Moreover, gains and losses depend on the investment
adviser's ability to predict correctly the direction of stock
prices, interest rates, and other economic factors.
Futures Contracts
The Funds may enter into financial futures contracts to hedge
cash positions. Futures are generally bought and sold on
commodity exchanges. The sale of a futures contract creates a
firm obligation by the Funds, as seller, to deliver to the buyer
the specific type of financial instrument called for in the
contract at a specified future time for a specified price (or the
net cash amount). The risk associated with using futures
contracts are: (i) imperfect correlation between the change in
market value of stocks held by the Funds and the prices of the
futures contracts; and (ii) possible lack of a liquid secondary
market for futures when desired.
Short Sales Against The Box
Each Fund may sell short securities the Fund owns or has the
right to acquire without further consideration, a technique
called selling short "against the box." Short sales against the
box may protect the Fund against the risk of losses in the value
of its portfolio securities because any unrealized losses with
6 VALUE TREND FUNDS
<PAGE>
respect to such securities should be wholly or partially offset
by a corresponding gain in the short position. However, any
potential gains in such securities should be wholly or partially
offset by a corresponding loss in the short position. Short
sales against the box may be used to lock in a profit on a
security when, for tax reasons or otherwise, the Adviser does not
want to sell the security. The Trust does not currently expect
that more than 20% of any Fund's total assets would be involved
in short sales against the box. For a more complete explanation,
please refer to the Statement of Additional Information.
Real Estate Investment Trusts
The Links Fund may invest up to 25% of assets in shares of real
estate investment trusts ("REITs"). REITs pool investors' funds
for investment primarily in income producing real estate or real
estate related loans or interests. Under the federal Internal
Revenue Code (the "Code"), a REIT is not taxed on income it
distributes to its shareholders if it complies with several
requirements relating to its organization, ownership, assets, and
income and a requirement that it generally distribute to its
shareholders at least 95% of its taxable income (other than net
capital gains) for each taxable year. REITs can generally be
classified as Equity REITs, Mortgage REITs, and Hybrid REITs.
Equity REITs, which invest the majority of their assets directly
in real property, derive their income primarily from rents.
Equity REITs can also realize capital gains by selling properties
that have appreciated in value. Mortgage REITs, which invest the
majority of their assets in real estate mortgages, derive their
income primarily from interest payments. Hybrid REITs combine the
characteristics of both Equity REITs and Mortgage REITs.
While the Links Fund will not invest in real estate directly, the
Fund may be subject to risks similar to those associated with the
direct ownership of real estate (in addition to securities
markets risks) because of its option to purchase securities of
companies in the real estate industry. These include declines in
the value of real estate, risks related to general and local
economic conditions, dependency on management skill, heavy cash
flow dependency, possible lack of availability of mortgage funds,
overbuilding, extended vacancies of properties, increased
competition, increases in property taxes and operating expenses,
changes in zoning laws, losses due to costs resulting from the
clean-up of environmental problems, liability to third parties
for damages resulting from environmental problems, casualty or
condemnation losses, limitations on rents, changes in
neighborhood values and in the appeal of properties to tenants
and changes in interest rates.
In addition to these risks, Equity REITs may be affected by
changes in the value of the underlying property owned by the
trusts, while Mortgage REITs may be affected by the quality of
any credit they extend. Further, Equity REITs and Mortgage REITs
are dependent upon management skills and generally may not be
diversified. Equity REITs and Mortgage REITs are also subject to
heavy cash flow dependency, defaults by borrowers and self-
liquidation. In addition, Equity REITs and Mortgage REITs could
possibly fail to qualify for tax free pass-through of income
under the Internal
PROSPECTUS 7
<PAGE>
Revenue Code or to maintain their exemptions from registration
under the 1940 Act. The above factors may also adversely affect a
borrower's or a lessee's ability to meet its obligations to the
REIT. In the event of a default by a borrower or lessee, the REIT
may experience delays in enforcing its rights as a mortgagee or
lessor and may incur substantial costs associated with protecting
its investments. In addition to the foregoing risks, certain
"special purpose" REITs in which the Links Fund invests may
invest their assets in specific real estate sectors, such as
hotel REITs, housing REITs, golf property REITs, etc., and are
therefore subject to the risks associated with adverse
developments in the respective sectors.
MANAGEMENT OF THE FUNDS
Value Trend Capital Management, LP is the investment adviser of
each Fund and has responsibility for the management of the Funds'
affairs, under the supervision of the Trust's Board of Trustees.
Each Fund's investment portfolio is managed on a day-to-day basis
by Value Trend Capital Management, LP under the general oversight
of the Board of Trustees.
Value Trend Capital Management, LP was organized in 1995 and has
been managing investment accounts and money since that time. The
Adviser serves as investment adviser to individuals, trusts,
retirement plans, and non-profit organizations, but has no prior
experience managing mutual funds. The address of Value Trend
Capital Management, LP is 411 West Madison Avenue, El Cajon, Ca
92020. The General Partners of Value Trend Capital Management,
LP are Ross C. Provence and Jeffrey R. Provence who also act as
Trustees to the Trust. Each owns 50% and therefore are regarded
to control Value Trend Capital Management, LP for purposes of the
1940 Act.
Pursuant to the investment advisory contract (the "Advisory
Agreement") Value Trend Capital Management, LP is responsible for
(i) continuous investment supervision and management to the Funds
(ii) office space, equipment and management personnel (iii)
administrative services which include, among other things, day-to-
day administration of matters related to the Fund's existence,
maintenance of its records, preparation of reports and
assistance in the preparation of the Trust's registration
statement under federal and state laws (iv) the compensation of
any of the Trust's trustees, officers and employees who are
directors, officers, employees or shareholders of the Investment
Adviser, (v) expenses of shareholders' and trustees' meetings and
(vi) expenses of preparing, printing and mailing prospectuses to
existing shareholders.
Value Trend Capital Management, LP has retained The Fifth Third
Bank to serve as the custodian for the Funds.
Value Trend Capital Management, LP has retained Mutual
Shareholder Services (the "Transfer Agent") to serve as the
Fund's transfer agent, dividend paying agent and shareholder
service agent, to provide accounting and pricing services to the
Funds, and to assist the Value Trend Capital Management, LP in
providing executive, administrative and regulatory services to
the Funds. Value Trend Capital Management, LP (not the
8 VALUE TREND FUNDS
<PAGE>
Fund) pays the transfer agent's fees for these services.
The Trust uses "Value Trend" in the names of the Funds by license
from the Value Trend Capital Management, LP and would be required
to stop using the name "Value Trend" if Value Trend Capital
Management, LP ceased to be the Adviser. Value Trend Capital
Management, LP has the right to use the name "Value Trend" for
another enterprise, including another investment company.
Advisory Fees
Under the investment advisory contract (the "Advisory Agreement")
each Fund pays Value Trend Capital Management, LP as compensation
for its services, a fee, accrued daily and payable monthly, at
the following annual percentage rates of the Fund's daily net
assets value:
Fund Fee Rate
Large Cap Fund 1.25%
Links Fund 1.35%
Worldwide Fund 1.35%
Value Trend Capital Management, LP (the Adviser) will reimburse the Funds to the
extent that annual expenses exceed the Funds' management fees established under
the advisory contracts, excluding taxes, interest, brokerage commissions,
independent accountants, legal counsel and extraordinary litigation expenses,
during any of the Funds' fiscal years.
Other Fund Expenses
In addition to the investment advisory fee, each Fund pays all
expenses not expressly assumed by Value Trend Capital Management,
LP, including taxes, interest, brokerage commissions,
extraordinary legal counsel, extraordinary independent
accountants and extraordinary litigation expenses.
PORTFOLIO TRANSACTIONS
In addition to selecting portfolio investments for the Fund(s) it
manages, Value Trend Capital Management, LP selects brokers or
dealers to execute securities purchases and sales for the Fund's
accounts. Value Trend Capital Management, LP selects only brokers
or dealers which it believes are financially responsible, will
provide efficient and effective services in executing, clearing
and settling an order and will charge commission rates which,
when combined with the quality of the foregoing services, will
produce best price and execution for the transaction. This does
not necessarily mean that the lowest available brokerage
commission will be paid. However, the commissions are believed
to be competitive with generally prevailing rates. Value Trend
Capital Management, LP will use its best efforts to obtain
information as to the general level of commission rates being
charged by the brokerage community from time to time and will
evaluate the overall reasonableness of brokerage commissions paid
on transactions by reference to such data. In making such
evaluation, all factors affecting liquidity and execution of the
order, as well as the amount of the capital commitment by the
broker in connection with the order, are taken into account. The
Funds will not pay a broker a commission at a higher rate than
otherwise available for the same transaction in recognition of
the value of research services provided by
PROSPECTUS 9
<PAGE>
the broker or in recognition of the value of any other services
provided by the broker which do not contribute to the best price
and execution of the transaction.
Portfolio Turnover
It is not possible to predict the Funds' portfolio turnover rates
with certainty. Value Trend Capital Management, LP has indicated,
however, that it does not expect that the annual portfolio
turnover rate of the Fund(s) it manages would normally exceed the
following rates: 50% for the Large Cap Fund; 75% for the Links
Fund; and 75% for the Worldwide Fund. Any Fund's portfolio
turnover rate in any year could be significantly higher or lower
than these estimates.
Higher levels of portfolio turnover may result in higher
transactions costs and higher levels of realized capital gains.
Tax Efficiency
Value Trend Capital Management, LP, will make a concentrated
effort to manage the Funds in a tax efficient manner. It is the
Adviser's intent to acquire stock in companies which can be held
on a long-term basis. The Adviser believes that so long as a
company continues to increase shareholder equity by a higher than
average return on equity and deploy the profits to enhance
shareholder interest, the stock should be held in the Fund's
portfolio. Other factors, however, such as total accumulated
gain, market conditions and future prospects may result in the
sale or holding of any security. There is no assurance that this
objective can be obtained. The information under Portfolio
Turnover may be affected by the Adviser's ability to execute this
policy.
HOW TO PURCHASE SHARES
Your initial investment in each of the Funds must be at least
$1,000 (or $250 for IRAs). Shares of the Funds are sold on a
continuous basis at the net asset value next determined after
receipt of a purchase order by each of the Funds. Purchase orders
received by dealers prior to 4:00 p.m., Eastern time, on any
business day and transmitted to the Transfer Agent by 5:00 p.m.,
Eastern time, that day are confirmed at the net asset value
determined as of the close of the regular session of trading on
the New York Stock Exchange on that day. It is the
responsibility of dealers to transmit properly completed orders
so that they will be received by the Transfer Agent by 5:00 p.m.,
Eastern time. Dealers may charge a fee for effecting purchase
orders. Direct purchase orders received by the Transfer Agent
after 4:00 p.m., Eastern time, are confirmed at the net asset
value next determined after receipt of such purchase orders.
This means that direct purchase orders received by the Transfer
Agent by 4:00 p.m., Eastern time, are confirmed at that day's net
asset value. Direct investments received by the Transfer Agent
after 4:00 p.m., Eastern time, and orders received from dealers
after 5:00 p.m., Eastern time, are confirmed at the net asset
value next determined on the following business day.
You may open an account and make an initial investment in the
Funds by sending a check and a completed account application form
to:
Value Trend Funds
1301 East Ninth Street, 36th Floor Cleveland, Ohio 44114
10 VALUE TREND FUNDS
<PAGE>
Checks should be made payable to the "Value Trend Funds". You
must provide the amount you wish to be invested in each Fund.
The Transfer Agent mails confirmations of all purchases or
redemptions of Fund shares. Certificates representing shares are
not issued. Each Fund reserves the rights to limit the amount of
investments and to refuse to sell to any person. Investors should
be aware that the Fund's account application contains provisions
in favor of the Funds and certain of its affiliates, excluding
such entities from certain liabilities (including, among others,
losses resulting from unauthorized shareholder transactions)
relating to the various services made available to investors.
Should an order to purchase shares be canceled because your check
does not clear, you will be responsible for any resulting losses
or fees incurred by the Fund or the Transfer Agent in the
transaction.
You may also purchase shares of the Funds by wire. Please
telephone the Transfer Agent (nationwide call toll-free 1-800-590-
0898) for instructions. You should be prepared to give the name
in which the account is to be established, the address, telephone
number and taxpayer identification number for the account, and
the name of the bank, which will wire the money.
Your investment will be made at the next determined net asset
value after your wire is received together with the account
information indicated above. If the transfer agent does not
receive timely and complete account information, there may be a
delay in the investment of your money and any accrual of
dividends. To make your initial wire purchase, you are required
to mail a completed account application to the Transfer Agent.
Your bank may impose a charge for sending your wire. There is
presently no fee for receipt of wired funds, but the Funds
reserves the right to charge shareholders for this service upon
30-days' prior notice to shareholders.
You may purchase and add shares to your account ($50 minimum) by
mail or by bank wire. There is no additional minimum subsequent
investments for IRAs. Checks should be sent to Value Trend Funds,
1301 East Ninth Street, 36th Floor, Cleveland, Ohio 44114.
Checks should be made payable to the "Value Trend Funds" and
include the Fund(s) you wish to invest in. Bank wires should be
sent as outlined above. Each additional purchase request must
contain the name of your account and your account number to
permit proper crediting to your account.
HOW TO REDEEM SHARES
You may redeem shares of the Fund on each day that the Funds are
open for business by sending a written request to the Transfer
Agent. The request must state the number of shares or the dollar
amount to be redeemed from each Fund and your account number.
The request must be signed exactly as your name appears on the
Fund's account records. If the shares to be redeemed have a
value of $25,000 or more, your signature must be guaranteed by
any eligible guarantor institution, including banks, brokers and
dealers, municipal securities brokers and dealers, government
securities brokers
PROSPECTUS 11
<PAGE>
and dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings
associations. A notary public is not an acceptable guarantor.
Redemption requests may direct that the proceeds be wired
directly to your existing account in any commercial bank or
brokerage firm in the United States. There is currently a $15
charge for processing wire redemptions. The Adviser reserves the
right to waive charges for wire redemptions. All charges will be
deducted from your account by redemption of shares in your
account. Your bank or brokerage firm may also impose a charge for
processing the wire. In the event that wire transfer of funds is
impossible or impractical, the redemption proceeds will be sent
by mail to the designated account.
You may also redeem shares by placing a wire redemption through a
securities broker or dealer. Unaffiliated broker-dealers may
impose a fee on the shareholder for this service. You will
receive the net asset value per share next determined after
receipt by the Fund or the Transfer Agent of your wire redemption
request. It is the responsibility of broker-dealers to properly
transmit wire redemption orders.
You will receive the net asset value per share next determined
after receipt by the Transfer Agent of your redemption request in
the form described above. Payment is made within seven business
days after tender in such form, provided that payment in
redemption of shares purchased by check will be effected only
after the check has been collected, which may take up to fifteen
days from the purchase date. To eliminate this delay, you may
purchase shares of the Funds by certified check or wire.
Because the net asset value of each Fund's shares will fluctuate,
the amount that a shareholder receives upon redemption may be
more or less than the amount paid for the shares.
At the discretion of the Trust or the Transfer Agent, corporate
investors and other associations may be required to furnish an
appropriate certification authorizing redemptions to ensure
proper authorization. The Trust reserves the right to require
you to close your account if at any time the value of your shares
is less than $1,000 (based on actual amounts invested,
unaffected by market fluctuations), or such other minimum amount
as the Trust may determine from time to time. After notification
to you of the Trust's intention to close your account, you will
be given 60-days to increase the value of your account to the
minimum amount.
The Trust reserves the right to suspend the right of redemption
or to postpone the date of payment for more than seven business
days under unusual circumstances as determined by the Securities
and Exchange Commission.
SHAREHOLDER SERVICES
The Funds offer the following share-holder services, which are
more fully described in the Statement of Additional Information.
Explanations and forms are available from the Value Trend Funds,
1301 East Ninth Street, Cleveland, Ohio
12 VALUE TREND FUNDS
<PAGE>
44114. Telephone redemption and exchange privileges will be
established automatically when an investor opens an account
unless an investor elects on the application to decline the
privileges. Other privileges must be specifically elected. A
signature guarantee will be required to establish a privilege
after an account is opened.
Free Exchange Privilege
Any Value Trend Fund may be exchanged for shares of any other
Value Trend Fund. Exchanges may be made by written
instructions or by telephone, unless an investor elected on the
application to decline telephone exchange privileges. The
exchange privilege should not be viewed as a means for taking
advantage of short-term swings in the market, and the Funds
reserve the right to terminate or limit the privilege of any
shareholder who makes more than four exchanges in any calendar
year. The Funds may terminate or change the terms of the exchange
privilege at any time, upon 60-days' notice to shareholders.
Contact the Transfer Agent (nationwide call toll-free 1-800-590-
0898) for additional information about the shareholder
services described above. An exchange transaction is a sale and
purchase of shares for federal income tax purposes and may result
in capital gain or loss.
SYSTEMATIC WITHDRAWAL PLAN
Shareholders who own shares of the Fund valued at $25,000 or more
may elect to receive a monthly or quarterly check (or
direct deposit to the shareholder's checking account) in a
stated amount (minimum amount is $100 per month or quarter).
Shares will be redeemed at net asset value as may be
necessary to meet the withdrawal payments. If withdrawal
payments exceed reinvested dividends and distributions, the
investor's shares will be reduced and eventually depleted. A
withdrawal plan may be terminated at any time by the shareholder
or the applicable Fund. Costs associated with a withdrawal plan
are borne by the Fund. Additional information regarding
systematic withdrawal plans may be obtained by calling Value
Trend Funds at 1-800-590-0898 or at (216) 687-1000.
TAX-DEFERRED
RETIREMENT PLANS
Shares of the Fund are available for purchase in connection with
the following tax-deferred retirement plans:
Individual retirement accounts (IRAs), Roth IRAs and Educational
IRAs for individuals and their non-employed spouses. There is an
$8 yearly fee for all IRAs.
DIRECT DEPOSIT PLANS
Shares of the each Fund may be purchased through direct deposit
plans offered by certain employees and government agencies.
These plans enable a shareholder to have all or a portion of his
or her payroll or Social Security checks transferred
automatically to purchase shares of the Funds.
AUTOMATIC INVESTMENT PLAN
You may make automatic monthly investments in the Funds from your
bank, savings and loan or other depository institu-
PROSPECTUS 13
<PAGE>
tion account. The minimum initial and subsequent investments
must be $50 under the plan. Your depository institution may
impose its own charge for debiting your account, which would
reduce your return from an investment in the Fund.
CALCULATION OF
PERFORMANCE INFORMATION
The Funds may include in advertising their "total return" for the
one-year, five-year and ten-year periods (or for the life of a
Fund, if shorter) through the most recent calendar quarter.
These total returns represent the average annual compounded rate
of return on a hypothetical investment of $1,000 in a Fund.
Total return may also be presented for other periods and on a
cumulative (in addition to average annual) basis.
DETERMINATION OF
NET ASSET VALUE
The net asset value of a share of each Fund is determined by the
Funds' transfer agent, Mutual Shareholder Services as of the
close on the New York Stock Exchange, currently 4:00 p.m. New
York City time, on any day on which the Exchange is open for
trading, by dividing the market value of each Fund's assets, less
its liabilities, by the number of shares outstanding, and
rounding down to the nearest full cent.
Portfolio securities are valued using current market valuations
based on last reported sales prices. Securities for which
quotations are not available and other assets are valued at a
fair value as determined by management and approved in good faith
by the Board of Trustees. Short-term obligations with maturities
of 60 days or less are valued at amortized costs as reflecting
fair value.
DIVIDENDS, CAPITAL GAIN
DISTRIBUTIONS AND TAXES
The Funds declare and pay their net investment income to
shareholders as dividends annually. Each Fund also distributes
all of its net capital gains realized from the sale of portfolio
securities. Any capital gain distributions are normally made
annually, but may, to the extent permitted by law, be made more
frequently as deemed advisable by the Trustees of the Trust. The
Trustees may change the frequency with which the Funds declare or
pay dividends.
Dividends and capital gain distributions will automatically be
reinvested in additional shares of the same Fund on the record
date unless an investor has elected to receive cash.
Each Fund intends to elect to be treated and to qualify each year
as a regulated investment company under Subchapter M of the
Internal Revenue Code of 1986. As a regulated investment company,
and provided that the Fund distributes substantially all its net
investment income to its shareholders, the Fund itself will not
pay any federal income tax on its distributed income and gains.
Income dividends and short-term capital gain distributions are
taxable as ordinary income whether distributed in cash or
additional shares. Long-term capital gain distributions from all
Funds are taxable as long-term capital gains whether dis-
14 VALUE TREND FUNDS
<PAGE>
tributed in cash or additional shares and regardless of how long
an investor has owned shares of a Fund. Pursuant to the Taxpayer
Relief Act of 1997, long-term capital gains generally are subject
to a maximum tax rate of 20% depending upon the holding period in
the portfolio investment generating the distributed gains.
Each Fund is required to withhold 31% of any redemption proceeds
(including the value or shares exchanged) and all income
dividends and capital gain distributions it pays to the investor
(1) if the investor does not provide a correct, certified
taxpayer identification number, (2) if the Fund is notified that
the investor has underreported income in the past, or (3) if an
investor fails to certify to the Fund that the investor is not
subject to such withholding.
Certain designated dividends from the Funds are expected to be
eligible for the dividends received deduction for corporate
shareholders (subject to a holding period requirement). However,
any distributions received by a Fund from REITs will not
qualify for the dividend deduction. A Fund's investment in
REIT securities may require such Fund to accrue and distribute
income not yet received. In order to generate sufficient cash to
make the requisite distributions, the Fund may be required to
sell securities in its portfolio that it otherwise would have
continued to hold (including when it is not advantageous to do
so). A Fund's investment in REIT securities also may result in
the Fund's receipt of cash in excess of the REITs earnings; if
the Fund distributes such amounts, such distribution could
constitute a return of capital to Fund shareholders for federal
income tax purposes.
The Transfer Agent will send each investor and the Internal
Revenue Service an annual statement detailing federal tax
information, including information about dividends and
distributions paid to the investor during the preceding year. Be
sure to keep this statement as a permanent record. A fee may be
charged for any duplicate information that an investor requests.
NOTE
The foregoing summarizes certain tax consequences of investing in
the Funds. Before investing, an investor should consult his or
her own tax adviser for more information concerning the federal,
state and local tax consequences of investing in, redeeming or
exchanging Fund shares.
THE TRUST
Each Fund is a series of the Trust. The trust was organized as a
Massachusetts business trust on September 14, 1998. The Trust
is authorized to issue an unlimited number of full and fractional
shares of beneficial interest in multiple series. Currently each
Fund has one class of shares. Each share in a Fund has one vote,
with fractional shares voting proportionally. Shares in each
Fund vote separately from shares of other Funds, except as
otherwise required by law. Shares are freely transferable, are
entitled to dividends as declared by the Trustees of the Trust,
and, if a Fund were liquidated, would receive the net assets of
the Fund. Each Fund may suspend the sale of shares at any time
and may refuse any
PROSPECTUS 15
<PAGE>
order to purchase shares. The Trust does not generally hold
regular shareholder meetings and will do so only when required by
law. Shareholders may remove the trustees of the Trust from
office by votes cast at a shareholder meeting or by written
consent.
TRUSTEES AND OFFICERS
The trustess and officers of the Trust and their principal
business acctivities during the past five years are:
Name, Position(s) with Trust Principal Occupations(s) during
and Age at January 1, 1999 Past Five Years
Ross C. Provence * (60) Portfolio Manager of the Funds.
411 West Madison Avenue General Partner
El Cajon, California 92020 and Portfolio Manager for Value Trend
Trustee of the Trust Capital Management, LP (1995-current).
President of the Trust Estate planning attorney (1963-current).
Bradley J. DeHaven* (32) Owner of De Haven Enterprises (1991-
5473 Hewlett Drive current). Computer consultant and CEO
San Diego, California 92115 for Tech-Solutions (1990-1996).
Trustee of the Trust
Vice President of the Trust
Jeffrey R. Provence* (29) Portfolio Manager of the Funds.
411 West Madison Avenue General Partner and Portfolio Manager
El Cajon, California 92020 for Value Trend Capital Management, LP
Trustee of the Trust, (1995-current). Computer consultant and
Treasurer and Secretary CFO for Tech-Solutions (1992-1995).
of the Trust. Partner of Investment Property Resources
(1989- 1992).
Thomas H. Addis III (53) Senior Vice President of Booth Creek
170 South Main Street Suite 1600 Golf (1998-current). Director of golf at
Salt Lake City, Utah 84101 Singing Hill Golf Resort (1967-1998).
Trustee of the Trust President of Professional Golfers
Association of America (1995-1996).
Honorary President of Professional
Golfers Association of America
1997-1998.
Stephen H. Burch (60) Consultant on Electrical Power
212 Beach Drive Generation (1979-1993). Investments and
Nashville, Indiana 47448 Professional Trustee (1993-current).
Trustee of the Trust
Trustees who are "interested persons" (as defined in the
Investment Company Act of 1940) of the Trust or of the Trust's
investment adviser are indicated by an asterisk (*).
16 VALUE TREND FUNDS
<PAGE>
OTHER INFORMATION
The following parties provide the Funds with administative and
other services.
Custodian
The Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263
Transfer Agent
Maxus Information Systetems, Inc.
DBA Mutual Shareholder Services
1301 East Ninth Street, 36th Floor
Cleveland, OH 44114
Distributor
Value Trend Capital Management, LP
411 West Madison Avenue
El Cajon, CA 92020
For More Information
1-800-590-0898
No dealer, salesman, or other person has been authorized to give any information
or to make any representations, other than those contained in this Prospectus,
and, if given or made, such other information or representations must not be
relied upon as having been authorized by the Funds or the Adviser. This
Prospectus does not constitute an offering in any state in which such offering
may not lawfully be made.
PROSPECTUS 17
<PAGE>
VALUE TREND FUNDS
1999 Prospectus
VALUE TREND FUNDS 1
SUMMARY OF EXPENSES 2
THE FUNDS 3
INVESTMENT STRATEGIES 4
RISK CONSIDERATIONS 4
MANAGEMENT OF THE FUNDS 8
PORTFOLIO TRANSACTIONS 9
HOW TO PURCHASE SHARES 10
HOW TO REDEEM SHARES 11
SHAREHOLDER SERVICES 12
SYSTEMATIC WITHDRAWL PLAN 13
TAX-DEFERRED RETIREMENT PLANS 13
DIRECT DEPOSIT PLANS 13
AUTOMATIC INVESTMENT PLAN 13
CALCULATION OF PERFORMANCE INFORMATION 14
DETERMINATION OF NET ASSET VALUE 14
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS
AND TAXES 14
THE TRUST 15
TRUSTEES AND OFFICERS 16
OTHER INFORMATION 17
FOR MORE INFORMATION:
Access our website at www.valuetrend.com or
call 1-800-590-0898
VALUE TREND LOGO
<PAGE>
VALUE TREND FUNDS
SUBJECT TO COMPLETION
STATEMENT OF ADDITIONAL INFORMATION
January 1, 1999
Information contained herein is subject to completion or
amendment. A registration statement relating to these securities
has been filed with the Securities and Exchange Commission. These
securities may not be sold nor may offers to buy be accepted
prior to the time the registration statement becomes effective.
This Statement of Additional Information shall not constitute an
offer to sell or the solicitation of an offer to buy nor shall
there be any sale of these securities in any state in which such
offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of such
state.
This Statement of Additional Information is not a
prospectus. This Statement of Additional Information relates to
the Value Trend Funds Prospectus dated January 1, 1999, and should
be read in conjunction therewith. A copy of the Prospectus may
be obtained from Value Trend Funds, 411 West Madison Avenue, El
Cajon, California 92020.
<PAGE>
TABLE OF CONTENTS
Caption Page Location in Prospectus
Investment Objectives, 1 The Funds,
Policies Investment
Restrictions
Management Of The Trust 2 Management of the Funds
Investment Advisory And 4 Management of the Funds
Other Services
Portfolio Transactions 6 Portfolio Transactions
And Brokerage
Description Of The Trust 6 The Trust
How To Buy Shares 9 How To Purchase Shares
Net Asset Value 10 Determination of Net
Asset Value
Shareholder Services 10 Sharehlder Services
Redemptions 12 How To Redeem Shares
Income Dividends, 13 Dividends, Capital Gain
Capitasl Gain Distributions And Tax Status
Distributions and Taxes
Calculation Of Total 15 Calculation of Performance
Return Informaition
Performance Comparisons 16 Calculation of Performance
Informaition
<PAGE>
- -----------------------------------------------------------------
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
- -----------------------------------------------------------------
The investment objective and policies of each series (each a
"Fund" and collectively, the "Funds") of Value Trend Funds (the
"Trust") are summarized in the Prospectus under "The Funds" and
"Investments Strategies and Risk Considerations." The investment
policies of each Fund set forth in the Prospectus and in this
Statement of Additional Information may be changed by the Funds'
adviser, subject to review and approval by the Trust's Board of
Trustees, without shareholder approval except that any Fund
policy explicitly identified as "fundamental" may not be changed
without the approval of the holders of a majority of the
outstanding shares of the relevant Fund (which in the Prospectus
and this Statement of Additional Information means the lesser of
(i) 67% of the shares of that Fund represented at a meeting at
which 50% of the outstanding shares are represented or (ii) more
than 50% of the outstanding shares).
The following investment restrictions are fundamental
policies of each Fund.
Each Fund will not:
1. Borrow money in excess of 25% of the value of its
total assets (not including the amount borrowed) at the time
the borrowing is made.
2. Underwrite securities issued by other persons except
to the extent that, in connection with the disposition of
its portfolio investments, it may be deemed to be an
underwriter under certain federal securities laws.
3. Purchase or sell real estate, although it may
purchase securities of issuers which deal in real estate,
securities which are secured by interests in real estate,
and securities which represent interests in real estate, and
it may acquire and dispose of real estate or interests in
real estate acquired through the exercise of its rights as a
holder of debt obligations secured by real estate or
interests therein.
4. Purchase or sell commodities or commodity contracts,
except that the Funds may purchase and sell financial
futures contracts and options, and may enter into swap
agreements, foreign exchange contracts and other financial
transactions not involving physical commodities.
5. Make loans, except by purchase of debt obligations
in which the Funds may invest consistent with its investment
policies, by entering into repurchase agreements, or by
lending its portfolio securities.
1
<PAGE>
6. Issue any class of securities which is senior to the
Fund's shares of beneficial interest, except for permitted
borrowings.
Although the Funds are permitted to borrow money to a
limited extent, no Fund currently intends to do so.
In addition to the foregoing fundamental investment
restrictions, it is contrary to each Fund's present policy, which
may be changed without shareholder approval, to:
Invest in (a) securities which at the time of such
investment are not readily marketable, (b) securities restricted
as to resale (excluding securities determined by the Trustees of
the Trust or the person designated by the Trustees to make such
determinations to be readily marketable), and (c) repurchase
agreements maturing in more than seven days, if, as a result,
more than 15% of the Fund's net assets (taken at current value)
would be invested in securities described in (a), (b) and (c)
above.
All percentage limitations on investments will apply at the
time of the making of an investment (except for the non-
fundamental restriction set forth in the immediately preceding
paragraph) and shall not be considered violated unless an excess
or deficiency occurs or exists immediately after and as a result
of such investment.
- -----------------------------------------------------------------
MANAGEMENT OF THE TRUST
- -----------------------------------------------------------------
The Trustees and officers of the Trust, business addresses
for each Trustee and their principal occupations during the past
five years are set forth below. Trustees who are "interested
persons" (as defined in the Investment Company Act of 1940) of
the Trust or of the Trust's investment adviser are indicated by
an asterisk (*)
Ross C. Provence*
411 West Madison Avenue
El Cajon, California 92020
(60)
Trustee of the Trust and
President of the Trust
Portfolio Manager of the Funds. General Partner and Portfolio
Manager for Value Trend Capital Management, LP (1995-current).
Estate planning attorney (1963-current).
2
<PAGE>
Bradley J. DeHaven*
5473 Hewlett Drive
San Diego, California 92115
(32)
Trustee of the Trust
Vice President of the Trust
Owner of De Haven Enterprises (1991-current). Computer consultant
and CEO for Tech-Solutions (1990-1996).
Jeffrey R. Provence*
411 West Madison Avenue
El Cajon, California 92020
(29)
Trustee of the Trust,
Treasurer and Secretary of the Trust.
Portfolio Manager of the Funds. General Partner and Portfolio
Manager for Value Trend Capital Management, LP (1995-current).
Computer consultant and CFO for Tech-Solutions (1992-1995).
Partner of Investment Property Resources (1989-1992).
Thomas H. Addis III
170 South Main Street Suite 1600
Salt Lake City, Utah 84101
(53)
Trustee of the Trust
Senior Vice President of Booth Creek Golf (1998-current).
Director of golf at Singing Hill Golf Resort (1967-1998).
President of Professional Golfers Association of America in 1995-
1996. Honorary President of Professional Golfers Association of
America 1997-1998.
Stephen H. Burch
212 Beach Drive
Nashville, Indiana 47448
(60)
Trustee of the Trust
Consultant on Electrical Power Generation (1979-1993).
Investments and Professional Trustee (1993-current).
3
<PAGE>
The address of each Trustee and officer of the Trust
affiliated with Value Trend Funds is 411 West Madison Avenue, El
Cajon, California 92020. The Trust pays no compensation to its
officers or to the Trustees listed above who are officers or
employees of Value Trend Funds. Each Trustee who is not an
officer or employee of Value Trend Funds is compensated at the
rate of $500.00 per annum.
- -----------------------------------------------------------------
INVESTMENT ADVISORY AND OTHER SERVICES
- -----------------------------------------------------------------
As described in the Prospectus, Value Trend Capital
Management, LP is the investment adviser of each Fund and has
responsibility for the management of the Funds' affairs, under
the supervision of the Trust's Board of Trustees. Each Fund's
investment portfolio is managed on a day-to-day basis by Value
Trend Capital Management, LP under the general oversight of the
Board of Trustees. See "Management of the Funds" in the
Prospectus.
The Trust pays the compensation of its Trustees who are not
officers or employees of Value Trend Funds; registration, filing
and other fees in connection with requirements of regulatory
authorities; all charges and expenses of its custodian and
transfer agent; the charges and expenses of its independent
accountants; all brokerage commissions and transfer taxes in
connection with portfolio transactions; all taxes and fees
payable to governmental agencies; the cost of any certificates
representing shares of the Funds; the expenses of meetings of the
shareholders and trustees of the Trust; the charges and expenses
of the Trust's legal counsel; interest on any borrowings by the
Funds; the cost of services, including services of counsel,
required in connection with the preparation of, and the cost of
printing, the Trust's registration statements and prospectuses,
including amendments and revisions thereto, annual, semiannual
and other periodic reports of the Trust, and notices and proxy
solicitation material furnished to shareholders or regulatory
authorities, to the extent that any such materials relate to the
Trust or its shareholders; and the Trust's expenses of
bookkeeping, accounting, auditing and financial reporting,
including related clerical expenses.
As described in the Prospectus, Value Trend Capital
Management, LP has agreed to certain additional, voluntary
arrangements to limit each Fund's expenses. These arrangements
may be modified or terminated by Value Trend Capital Management,
LP at any time.
The advisory agreement for all Funds provides that it will
continue in effect for two years from its date of execution and
thereafter from year to year if its continuance is approved at
least annually (i) by the Board of Trustees of the Trust or by
vote of a majority of the outstanding voting securities of the
relevant Fund and (ii) by vote of a majority of the Trustees who
are not "interested persons" of the Trust or Value Trend
4
<PAGE>
Capital Management LP, as that term is defined in the Investment
Company Act of 1940, cast in person at a meeting called for the
purpose of voting on such approval. Any amendment to an advisory
agreement must be approved by vote of a majority of the
outstanding voting securities of the relevant Fund and by vote of
a majority of the Trustees who are not such interested persons,
cast in person at a meeting called for the purpose of voting on
such approval.
The advisory agreement may be terminated without penalty by
vote of the Board of Trustees of the Trust or by vote of a
majority of the outstanding securities of the relevant Fund, upon
ninety days' written notice to the Trust. The advisory agreement
shall automatically terminate in the event of its assignment.
The advisory agreement provides that Value Trend Capital
Management, LP owns all rights to and control of the name "Value
Trend." The advisory agreement will automatically terminate if
the Trust or the Fund shall at any time be required by Value
Trend Capital Management, LP to eliminate all reference to the
words "Value Trend" in the name of the Trust or the Fund, unless
the continuance of the agreement after such change of name is
approved by a majority of the outstanding voting securities of
the relevant Fund and by a majority of the Trustees who are not
interested persons of the Trust or Value Trend Funds.
Each advisory agreement provides that Value Trend Capital
Management, LP shall not be subject to any liability in
connection with the performance of its services thereunder in the
absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations and duties.
Pursuant to an Administration Agreement, Value Trend
Capital Management, LP has entered into an agreement with Maxus
Information Systems, Inc. D.B.A. Mutual Shareholder Services, an
Ohio corporation ("MSS") to provide administrative services for
each Fund. Value Trend Funds has entered into an agreement with
Maxus Information Systems, Inc. D.B.A. Mutual Shareholder
Services, an Ohio corporation ("MSS") for the provision of
certain administrative services to the Funds at Value Trend
Capital Management, LP's expense. See "Management of the Funds"
in the Prospectus.
Pursuant to an Accounting Services Agreement, Value Trend
Capital Management, LP has entered into an agreement with Maxus
Information Systems, Inc. D.B.A. Mutual Shareholder Services, an
Ohio corporation ("MSS") to provide accounting services for each
Fund. Value Trend Funds has entered into an agreement with
Maxus Information Systems, Inc. D.B.A. Mutual Shareholder
Services, an Ohio corporation ("MSS") for the provision of
certain accounting services to the Funds at Value Trend Capital
Management, LP's expense. See "Management of the Funds" in the
Prospectus.
Custodial Arrangements. The Fifth Third Bank (the
"Custodian") is the Trust's custodian. The Custodian holds in
safekeeping certificated securities and cash belonging to the
Funds and, in such capacity, is the registered owner of
securities held in book entry
5
<PAGE>
form belonging to the Funds. Upon instruction, the Custodian
receives and delivers cash and securities of the Funds in
connection with Fund transactions and collects all dividends and
other distributions made with respect to Fund portfolio
securities. The Custodian also maintains certain accounts and
records of the Funds.
Independent Accountants. The Fund's independent accountants
are McCury & Associates CPA's, Inc. McCury & Associates CPA's,
Inc. conducts an annual audit of the Trust's financial
statements, assists in the preparation of the Funds' federal and
state income tax returns and consults with the Funds as to
matters of accounting and federal and state income taxation.
- -----------------------------------------------------------------
PORTFOLIO TRANSACTIONS AND BROKERAGE
- -----------------------------------------------------------------
In placing orders for the purchase and sale of portfolio
securities for each Fund, Value Trend Capital Management, LP
seeks the best price and execution. Value Trend Capital
Management, LP will not pay brokers or dealers commissions in
excess of commissions another broker or dealer would have charged
for effecting such transaction on the basis of receiving
brokerage and research products and/or services. Value Trend
Capital Management, LP does not currently intend to effect
transactions on such basis. Transactions in unlisted securities
are carried out through broker-dealers who make the primary
market for such securities unless, in the judgment Value Trend
Capital Management, LP, a more favorable price can be obtained by
carrying out such transactions through other brokers or dealers.
See "Portfolio Transactions" in the Prospectus.
- -----------------------------------------------------------------
DESCRIPTION OF THE TRUST
- -----------------------------------------------------------------
The Trust, registered with the Securities and Exchange
Commission as an open-end management investment company, is
organized as a Massachusetts business trust under the laws of
Massachusetts by an Agreement and Declaration of Trust (the
"Declaration of Trust") dated September 2, 1998.
The Declaration of Trust currently permits the Trustees to
issue an unlimited number of full and fractional shares of each
series. Each share of each Fund represents an equal proportionate
interest in such Fund with each other share of that Fund and is
entitled to a proportionate interest in the dividends and
distributions from that Fund. The shares of each Fund do not have
any preemptive rights. Upon termination of any Fund, whether
pursuant to liquidation of the Trust or otherwise, shareholders
of that Fund are entitled to share pro rata in the net assets of
that Fund available for distribution to
6
<PAGE>
shareholders. The Declaration of Trust also permits the Trustees
to charge shareholders directly for custodial, transfer agency
and servicing expenses.
The assets received by each Fund for the issue or sale of
its shares and all income, earnings, profits, losses and proceeds
therefrom, subject only to the rights of creditors, are allocated
to, and constitute the underlying assets of, that Fund. The
underlying assets are segregated and are charged with the
expenses with respect to that Fund and with a share of the
general expenses of the Trust. Any general expenses of the Trust
that are not readily identifiable as belonging to a particular
Fund are allocated by or under the direction of the Trustees in
such manner as the Trustees determine to be fair and equitable.
While the expenses of the Trust are allocated to the separate
books of account of each Fund, certain expenses may be legally
chargeable against the assets of all Funds.
The Declaration of Trust also permits the Trustees, without
shareholder approval, to subdivide any series of shares or Fund
into various sub-series of shares with such dividend preferences
and other rights as the Trustees may designate. While the
Trustees have no current intention to exercise this power, it is
intended to allow them to provide for an equitable allocation of
the impact of any future regulatory requirements which might
affect various classes of shareholders differently, or to permit
shares of a series to be distributed through more than one
distribution channel, with the costs of the particular means of
distribution (or costs of related services) to be borne by the
shareholders who purchase through that means of distribution. The
Trustees may also, without shareholder approval, establish one or
more additional separate portfolios for investments in the Trust.
Shareholders' investments in such an additional portfolio would
be evidenced by a separate series of shares (i.e., a new "Fund").
The Declaration of Trust provides for the perpetual
existence of the Trust. The Trust or any Fund, however, may be
terminated at any time by vote of at least two-thirds of the
outstanding shares of each Fund affected. The Declaration of
Trust further provides that the Trustees may also terminate the
Trust or any Fund upon written notice to the shareholders. As a
matter of policy, however, the Trustees will not terminate the
Trust or any Fund without submitting the matter to a vote of the
shareholders of the Trust or the relevant Fund.
Voting Rights
As summarized in the Prospectus, shareholders are entitled
to one vote for each full share held (with fractional votes for
each fractional share held) and may vote (to the extent provided
in the Declaration of Trust) on the election of Trustees and the
termination of the Trust and on other matters submitted to the
vote of shareholders.
The Declaration of Trust provides that on any matter
submitted to a vote of all Trust shareholders, all Trust shares
entitled to vote shall be voted together irrespective of
7
<PAGE>
series or sub-series unless the rights of a particular series or
sub-series would be adversely affected by the vote, in which case
a separate vote of that series or sub-series shall also be
required to decide the question. Also, a separate vote shall be
held whenever required by the Investment Company Act of 1940 or
any rule thereunder. Rule 18f-2 under the 1940 Act provides in
effect that a class shall be deemed to be affected by a matter
unless it is clear that the interests of each class in the matter
are substantially identical or that the matter does not affect
any interest of such class. On matters affecting an individual
series, only shareholders of that series are entitled to vote.
Consistent with the current position of the SEC, shareholders of
all series vote together, irrespective of series, on the election
of Trustees and the selection of the Trust's independent
accountants, but shareholders of each series vote separately on
other matters requiring shareholder approval, such as certain
changes in investment policies of that series or the approval of
the investment advisory agreement relating to that series.
There will normally be no meetings of shareholders for the
purpose of electing Trustees except that, in accordance with the
1940 Act, (i) the Trust will hold a shareholders' meeting for the
election of Trustees at such time as less than a majority of the
Trustees holding office have been elected by shareholders, and
(ii) if, as a result of a vacancy on the Board of Trustees, less
than two-thirds of the Trustees holding office have been elected
by the shareholders, that vacancy may be filled only by a vote of
the shareholders. In addition, Trustees may be removed from
office by a written consent signed by the holders of two-thirds
of the outstanding shares and filed with the Trust's custodian or
by a vote of the holders of two-thirds of the outstanding shares
at a meeting duly called for that purpose, which meeting shall be
held upon the written request of the holders of not less than 10%
of the outstanding shares.
Upon written request by ten holders of shares having an
aggregate net asset value constituting 1% of the outstanding
shares stating that such shareholders wish to communicate with
the other shareholders for the purpose of obtaining the
signatures necessary to demand a meeting to consider removal of a
Trustee, the Trust has undertaken to provide a list of
shareholders or to disseminate appropriate materials (at the
expense of the requesting shareholders).
Except as set forth above, the Trustees shall continue to
hold office and may appoint successor Trustees. Voting rights are
not cumulative.
No amendment may be made to the Declaration of Trust without
the affirmative vote of a majority of the outstanding shares of
the Trust, except (i) to change the Trust's name or to cure
technical problems in the Declaration of Trust and (ii) to
establish, change or eliminate the par value of any shares
(currently all shares have no par value).
8
<PAGE>
Shareholder and Trustee Liability
Under Massachusetts law shareholders could, under certain
circumstances, be held personally liable for the obligations of
the Fund of which they are shareholders. However, the Declaration
of Trust disclaims shareholder liability for acts or obligations
of each Fund and requires that notice of such disclaimer be given
in each agreement, obligation or instrument entered into or
executed by the Trust or the Trustees. The Declaration of Trust
provides for indemnification out of Fund property for all loss
and expense of any shareholder held personally liable for the
obligations of the Fund. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is
considered remote since it is limited to circumstances in which
the disclaimer is inoperative and the Fund
would be unable to meet its obligations.
The Declaration of Trust further provides that the Trustees
will not be liable for errors of judgment or mistakes of fact or
law. However, nothing in the Declaration of Trust protects a
Trustee against any liability to which the Trustee would
otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in
the conduct of his office. The By-Laws of the Trust provide for
indemnification by the Trust of the Trustees and officers of the
Trust except with respect to any matter as to which any such
person did not act in good faith in the reasonable belief that
such action was in the best interests of the Trust. No officer or
Trustee may be indemnified against any liability to the Trust or
the Trust's shareholders to which such person would otherwise be
subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of his or her office.
- -----------------------------------------------------------------
HOW TO BUY SHARES
- -----------------------------------------------------------------
Subject to minimum initial investment requirements and
certain other conditions, an investor may make an initial
purchase of shares of any Fund by submitting a completed
application form and payment to:
Value Trend Funds
1301 East Ninth Street, 36th Floor
Cleveland, Ohio 44114
The procedures for purchasing shares of the Funds are
summarized in "How to
Purchase Shares" in the Prospectus.
9
<PAGE>
- -----------------------------------------------------------------
NET ASSET VALUE
- -----------------------------------------------------------------
The net asset value of the shares of each Fund is determined
by dividing that Fund's total net assets (the excess of its
assets over its liabilities) by the total number of shares of the
Fund outstanding and rounding down to the nearest full cent. Such
determination is made as of the close of regular trading on the
New York Stock Exchange on each day on which that Exchange is
open for unrestricted trading, and no less frequently than once
daily on each day during which there is sufficient trading in a
Fund's portfolio securities that the value of that Fund's shares
might be materially affected. During the 12 months following the
date of this Statement of Additional Information, the New York
Stock Exchange is expected to be closed on the following
weekdays: New Year's Day, Presidents' Day, Martin Luther King,
Jr. Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. Equity securities listed on
an established securities exchange or on the NASDAQ National
Market System are normally valued at their last sale price on the
exchange where primarily traded or, if there is no reported sale
during the day, and in the case of over-the-counter securities
not so listed, at the last bid price. Other securities for which
current market quotations are not readily available (including
restricted securities, if any) and all other assets are taken at
fair value as determined in good faith by the Board of Trustees,
although the actual calculations may be made by persons acting
pursuant to the direction of the Board.
- -----------------------------------------------------------------
SHAREHOLDER SERVICES
- -----------------------------------------------------------------
Open Accounts
A shareholder's investment in any Fund is automatically
credited to an open account maintained for the shareholder by
Maxus Information Systems, Inc. D.B.A. Mutual Shareholder
Services. Certificates representing shares are not issued.
Following each transaction in the account, a shareholder will
receive a statement of the transaction. After the close of each
fiscal year Maxus Information Systems, Inc. D.B.A. Mutual
Shareholder Services will send each shareholder a statement
providing federal tax information on dividends and distributions
paid to the shareholder during the year. This should be retained
as a permanent record. Shareholders will be charged a fee for
duplicate information.
The open account system permits the purchase of full and
fractional shares and, by making the issuance and delivery of
certificates representing shares unnecessary, eliminates the
problems of handling and safekeeping certificates, and the cost
and inconvenience of replacing lost, stolen, mutilated or
destroyed certificates.
10
<PAGE>
The costs of maintaining the open account system are borne
by the Trust, and no direct charges are made to shareholders.
Although the Trust has no present intention of making such direct
charges to shareholders, it reserves the right to do so.
Shareholders will receive prior notice before any such charges
are made.
Systematic Withdrawal Plan
A Systematic Withdrawal Plan, referred to in the Prospectus
Under "Systematic Withdrawal Plan," provides for monthly or
quarterly, withdrawal payments of $100 or more from the account
of a shareholder provided that the account has a value of at
least $25,000 at the time the plan is established.
Since withdrawal payments represent proceeds from
liquidation of shares, the shareholder should recognize that
withdrawals may reduce and possibly exhaust the value of the
account, particularly in the event of a decline in the net asset
value. See "Redemptions" and "Income Dividends, Capital Gain
Distributions and Tax Status" below for certain information as to
federal income taxes.
Exchange Privilege
Shareholders may redeem their shares of any Fund and have
the proceeds applied on the same day to purchase shares of any
other Fund. The value of shares exchanged must be at least $1,000
and all exchanges are subject to the minimum investment
requirement of the Fund into which the exchange is being made.
This option is summarized in the Prospectus under "Shareholder
Services--Free Exchange Privilege."
Exchanges may be effected by (1) making a telephone request
by calling 1-800-590-0898, provided that an investor does not
decline the exchange privilege on the account application or (2)
sending a written exchange request to Maxus Information Systems,
Inc. D.B.A. Mutual Shareholder Services accompanied by an account
application for the appropriate Fund. The Trust reserves the
right to modify this exchange privilege without prior notice.
An exchange constitutes a sale of the shares for federal
income tax purposes on which the investor may realize a capital
gain or loss.
IRAs
Under "Tax-Deferred Retirement Plans" the Prospectus refers
to Individual Retirement Accounts (IRAs), Roth IRAs and
Educational IRAs established under a prototype plan made
available by the Distributor. These plans may be funded with
shares of any Fund. All income dividends and capital gain
distributions of plan
11
<PAGE>
participants must be reinvested. Plan documents and further
information can be obtained from the Distributor.
Check with your financial or tax adviser as to the
suitability of Fund shares for your retirement plan.
- -----------------------------------------------------------------
REDEMPTIONS
- -----------------------------------------------------------------
The procedures for redemption of Fund shares are summarized
in the Prospectus under "How to Redeem Shares."
Except as noted below, signatures on redemption requests
must be guaranteed by commercial banks, trust companies, savings
associations, credit unions or brokerage firms that are members
of domestic securities exchanges. Signature guarantees by
notaries public are not acceptable. However, as noted in the
Prospectus, a signature guarantee will not be required if the
proceeds of the redemption do not exceed $25,000 and the proceeds
check is made payable to the registered owner(s) and mailed to
the record address.
If a shareholder does not decline the telephone redemption
service on the application form, Fund shares may be redeemed by
making a telephone call directly to Maxus Information Systems,
Inc. D.B.A. Mutual Shareholder Services at 1-800-590-0898. There
is currently a $15 charge for processing wire redemptions.
Telephonic redemption requests must be received by 4:00 p.m.
prior to the close of regular trading on the New York Stock
Exchange on a day when the Exchange is open for business.
Requests made after that time or on a day when the New York Stock
Exchange is not open for business cannot be accepted by Maxus
Information Systems, Inc. D.B.A. Mutual Shareholder Services and
a new request will be necessary.
In order to redeem shares by telephone, a shareholder must
not select the DISTRIBUTION & TELEPHONE OPTIONS section which
states: I (we) DO NOT authorize The Transfer Agent to honor
telephone instructions for this account. Neither the Fund nor
the Transfer Agent will be liable for properly acting upon
telephone instructions believed to be genuine. I (we) understand
that redemtions authorized by telephone are paid by check and
mailed to me (us) or wire transferred to an account of the exact
same title. I (we) understand that a limit for telephone
redemptions is $25,000. The Trust, Value Trend Funds and Maxus
Information Systems, Inc. D.B.A. Mutual Shareholder Services are
not responsible for the authenticity of withdrawal instructions
received by telephone.
The redemption price will be the net asset value per share
next determined after the redemption request and any necessary
special documentation are received by Maxus
12
<PAGE>
Information Systems, Inc. D.B.A. Mutual Shareholder Services in
proper form. Proceeds resulting from a written redemption request
will normally be mailed to you within seven days after receipt of
your request in good order. Telephonic redemption proceeds will
normally be wired on the first business day following receipt of
a proper redemption request. In those cases where you have
recently purchased your shares by check and your check was
received less than fifteen days prior to the redemption request,
the Fund may withhold redemption proceeds until your check has
cleared.
Each Fund will normally redeem shares for cash; however,
each Fund reserves the right to pay the redemption price wholly
or partly in kind if the Board of Trustees of the Trust
determines it to be advisable in the interest of the remaining
shareholders. If portfolio securities are distributed in lieu of
cash, the shareholder will normally incur brokerage commissions
upon subsequent disposition of any such securities. However, the
Trust has elected to be governed by Rule 18f-1 under the 1940 Act
pursuant to which the Trust is obligated to redeem shares solely
in cash for any shareholder during any 90-day period up to the
lesser of $250,000 or 1% of the total net asset value of the
Trust at the beginning of such period.
A redemption constitutes a sale of the shares for federal
income tax purposes on which the investor may realize a long-term
or short-term capital gain or loss. See "Income Dividends,
Capital Gain Distributions and Tax Status."
- -----------------------------------------------------------------
INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS
- -----------------------------------------------------------------
As described in the Prospectus under "Dividends, Capital
Gain Distributions and Taxes" it is the policy of each Fund to
pay its shareholders, as dividends, substantially all net
investment income and to distribute annually all net realized
capital gains, if any, after offsetting any capital loss
carryovers.
Income dividends and capital gain distributions are payable
in full and fractional shares of the particular Fund based upon
the net asset value determined as of the close of regular trading
on the New York Stock Exchange on the record date for each
dividend or distribution. Shareholders, however, may elect to
receive their income dividends or capital gain distributions, or
both, in cash. The election may be made at any time by submitting
a written request directly to Value Trend Funds, 1301 East Ninth
Street, 36th Floor Cleveland, Ohio 44114 . In order for a change
to be in effect for any dividend or distribution, it must be
received by 10:00 a.m. on or before the record date for such
dividend or distribution.
As required by federal law, detailed federal tax information
will be furnished to each shareholder for each calendar year on
or before January 31 of the succeeding year.
13
<PAGE>
Each Fund intends to qualify each year as a regulated
investment company under Subchapter M of the Internal Revenue
Code and to qualify for the special tax treatment accorded
regulated investment companies and their shareholders. In order
so to qualify, the Fund must, among other things, (i) derive at
least 90% of its gross income from dividends, interest, payments
with respect to certain securities loans, gains from the sale of
stock, securities or foreign currencies, or other income
(including but not limited to gains from options, futures or
forward contracts) derived with respect to its business of
investing in such stock, securities or currencies; (ii)
distribute with respect to each taxable year at least 90% of the
sum of its taxable net investment income, its net tax-exempt
income (if any), and the excess, if any, of net short-term
capital gains over net long-term capital losses for such year;
and (iii) at the end of each fiscal quarter maintain at least 50%
of the value of its total assets in cash, cash items (including
receivables), government securities, securities of other
regulated investment companies, and other securities of issuers
which represent, with respect to each issuer, no more than 5% of
the value of the Fund's total assets and 10% of the outstanding
voting securities of such issuer, and with no more than 25% of
the value of its total assets invested in the securities (other
than those of the U.S. government or other regulated investment
companies) of any one issuer or of two or more issuers which the
Fund controls and which are engaged in the same, similar or
related trades and businesses. If it qualifies for treatment as a
regulated investment company, the Fund will not be subject to
federal income tax on income paid to its shareholders in the form
of dividends or capital gain distributions.
An excise tax at the rate of 4% will be imposed on the
excess, if any, of each Fund's "required distribution" over its
actual distributions in any calendar year. Generally, the
"required distribution" is 98% of the Fund's ordinary income for
the calendar year plus 98% of its capital gain net income
recognized during the one-year period ending on October 31 (or
December 31, if the Fund so elects) plus undistributed amounts
from prior years. Each Fund intends to make distributions
sufficient to avoid imposition of the excise tax. Distributions
declared by a Fund during October, November or December to
shareholders of record on a date in any such month and paid by
the Fund during the following January will be treated for federal
tax purposes as paid by the Fund and received by shareholders on
December 31 of the year in which declared.
Shareholders of each Fund will be subject to federal income
taxes on distributions made by the Fund whether received in cash
or additional shares of the Fund. Distributions by each Fund of
net income and short-term capital gains, if any, will be taxable
to shareholders as ordinary income. Distributions of long-term
capital gains, if any, will be taxable to shareholders as long-
term capital gains, without regard to how long a shareholder has
held shares of the Fund. Pursuant to the Taxpayer Relief Act of
1997 (the "1997 Act"), dividends of long-term capital gains
generally will be subject to a maximum tax rate of 20% based upon
the holding period in the portfolio investment generating the
distributed gains. A loss on the sale of shares held for 12
months or less will be treated as
14
<PAGE>
a long-term capital loss to the extent of any long-term capital
gain dividend paid to the shareholder with respect to such
shares.
Dividends and distributions on Fund shares received shortly
after their purchase, although in effect a return of capital, are
subject to federal income taxes.
Redemptions and exchanges of each Fund's shares are taxable
events and, accordingly, shareholders may realize gains and
losses on these transactions. If shares have been held for more
than one year, gain or loss realized will be long-term capital
gain or loss, provided the shareholder holds the shares as a
capital asset. Pursuant to the 1997 Act, long-term capital gains
generally will be subject to a maximum tax rate of 20% depending
upon the shareholder's holding period in Fund shares. However, if
a shareholder sells Fund shares at a loss within six months after
purchasing the shares, the loss will be treated as a long-term
capital loss to the extent of any long-term capital gain
distributions received by the shareholder. Furthermore, no loss
will be allowed on the sale of Fund shares to the extent the
shareholder acquired other shares of the same Fund within 30 days
prior to the sale of the loss shares or 30 days after such sale.
The foregoing is a general and abbreviated summary of the
applicable provisions of the Code and regulations currently in
effect. For the complete provisions, reference should be made to
the pertinent Internal Revenue Code sections and regulations. The
Code and regulations are subject to change by legislative or
administrative action.
Dividends and distributions also may be subject to state and
local taxes. Shareholders are urged to consult their tax advisers
regarding specific questions as to federal, state or local taxes.
The foregoing discussion relates solely to U.S. federal
income tax law. Non-U.S. investors should consult their tax
advisers concerning the tax consequences of ownership of shares
of the Fund, including the possibility that distributions may be
subject to a 30% U.S. withholding tax (or a reduced rate of
withholding provided by treaty).
- -----------------------------------------------------------------
CALCULATION OF TOTAL RETURN
- -----------------------------------------------------------------
Total Return with respect to a Fund is a measure of the
change in value of an investment in such Fund over the period
covered, and assumes any dividends or capital gains distributions
are reinvested immediately, rather than paid to the investor in
cash. The formula for calculating total return includes four
steps: (1) adding to the total number of shares purchased through
a hypothetical $1,000 investment in the Fund all additional
shares which would have been purchased if all dividends and
distributions paid or distributed during the period had been
immediately reinvested; (2) calculating the value of
15
<PAGE>
the hypothetical initial investment of $1,000 as of the end of
the period by multiplying the total number of shares owned at the
end of the period by the net asset value per share on the last
trading day of the period; (3) assuming redemption at the end of
the period; and (4) dividing the resulting account value by the
initial $1,000 investment.
- -----------------------------------------------------------------
PERFORMANCE COMPARISONS
- -----------------------------------------------------------------
Total Return. Each Fund may from time to time include its
total return information in advertisements or in information
furnished to present or prospective shareholders. Each Fund may
from time to time include in advertisements or information
furnished to present or prospective shareholders (i) the ranking
of performance figures relative to such figures for groups of
mutual funds categorized by Lipper Analytical Services, Inc. or
Micropal, Inc. as having similar investment objectives, (ii) the
rating assigned to the Fund by Morningstar, Inc. based on the
Fund's risk-adjusted performance relative to other mutual funds
in its broad investment class, and/or (iii) the ranking of
performance figures relative to such figures for mutual funds in
its general investment category as determined by
CDA/Weisenberger's Management Results.
Lipper Analytical Services, Inc. ("Lipper") distributes
mutual fund rankings monthly. The rankings are based on total
return performance calculated by Lipper, generally reflecting
changes in net asset value adjusted for reinvestment of capital
gains and income dividends. They do not reflect deduction of any
sales charges. Lipper rankings cover a variety of performance
periods, including year-to-date, 1-year, 5-year, and 10-year
performance. Lipper classifies mutual funds by investment
objective and asset category.
Micropal, Inc. ("Micropal") distributes mutual fund rankings
weekly and monthly. The rankings are based upon performance
calculated by Micropal, generally reflecting changes in net asset
value that can be adjusted for the reinvestment of capital gains
and dividends. If deemed appropriate by the user, performance can
also reflect deductions for sales charges. Micropal rankings
cover a variety of performance periods, including year-to-date, 1-
year, 5- year and 10-year performance. Micropal classifies mutual
funds by investment objective and asset category.
Morningstar, Inc. ("Morningstar") distributes mutual fund
ratings twice a month. The ratings are divided into five groups:
highest, above average, neutral, below average and lowest. They
represent a fund's historical risk/reward ratio relative to other
funds in its broad investment class as determined by Morningstar.
Morningstar ratings cover a variety of performance periods,
including year-to-date, 1-year, 3-year, 5-year, 10-year and
overall performance. The performance factor for the overall
rating is a weighted-average return performance (if available)
reflecting deduction of expenses and sales charges. Performance
16
<PAGE>
is adjusted using quantitative techniques to reflect the risk
profile of the fund. The ratings are derived from a purely
quantitative system that does not utilize the subjective criteria
customarily employed by rating agencies such as Standard & Poor's
and Moody's Investors Service, Inc.
CDA/Weisenberger's Management Results ("Weisenberger")
publishes mutual fund rankings and is distributed monthly. The
rankings are based entirely on total return calculated by
Weisenberger for periods such as year-to-date, 1-year, 3-year, 5-
year and 10-year. Mutual funds are ranked in general categories
(e.g., international bond, international equity, municipal bond,
and maximum capital gain). Weisenberger rankings do not reflect
deduction of sales charges or fees.
Performance information may also be used to compare the
performance of the Funds to certain widely acknowledged standards
or indices for stock market performance, such as those listed
below.
Consumer Price Index. The Consumer Price Index, published by
the U.S. Bureau of Labor Statistics, is a statistical measure of
changes, over time, in the prices of goods and services in major
expenditure groups.
Dow Jones Industrial Average. The Dow Jones Industrial
Average is a market value- weighted and unmanaged index of 30
large industrial stocks traded on the New York Stock Exchange.
MSCI-EAFE Index. The MSCI-EAFE Index contains over 1000
stocks from 20 different countries with Japan (approximately
50%), United Kingdom, France and Germany being the most heavily
weighted.
MSCI-EAFE ex-Japan Index. The MSCI-EAFE ex-Japan Index
consists of all stocks contained in the MSCI-EAFE Index, other
than stocks from Japan.
Russell 2000 Index. The Russell 2000 Index is comprised of
the 2000 smallest of the 3000 largest U.S.-domiciled
corporations, ranked by market capitalization.
Standard & Poor's/Barra Growth Index. The Standard &
Poor's/Barra Growth Index is constructed by ranking the
securities in the S&P 500 by price-to-book ratio and including
the securities with the highest price-to-book ratios that
represent approximately half of the market capitalization of the
S&P 500.
17
<PAGE>
Standard & Poor's/Barra Value Index. The Standard &
Poor's/Barra Value Index is constructed by ranking the securities
in the S&P 500 by price-to-book ratio and including the
securities with the lowest price-to-book ratios that represent
approximately half of the market capitalization of the S&P 500.
Standard & Poor's 500 Composite Stock Price Index (the "S&P
500"). The S&P 500 is a market value-weighted and unmanaged index
showing the changes in the aggregate market value of 500 stocks
relative to the base period 1941-43. The S&P 500 is composed
almost entirely of common stocks of companies listed on the New
York Stock Exchange, although the common stocks of a few
companies listed on the American Stock Exchange or traded over-
the-counter are included. The 500 companies represented include
400 industrial, 60 transportation and 40 financial services
concerns. The S&P 500 represents about 80% of the market value of
all issues traded on the New York Stock Exchange. The S&P 500 is
the most common index for the overall U.S. stock market.
From time to time, articles about the Funds regarding
performance, rankings and other characteristics of the Funds may
appear in publications. Publications may publish their own
rankings or performance reviews of mutual funds. References to or
reprints of such articles may be used in the Funds' promotional
literature. References to articles regarding personnel of Value
Trend Capital Management, LP who have portfolio management
responsibility may also be used in the Funds' promotional
literature.
18
<PAGE>
TABLE OF CONTENTS
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS 1
MANAGEMENT OF THE TRUST 2
INVESTMENT ADVISORY AND OTHER SERVICES 4
PORTFOLIO TRANSACTIONS AND BROKERAGE 6
DESCRIPTION OF THE TRUST 6
HOW TO BUY SHARES 9
NET ASSET VALUE 10
SHAREHOLDER SERVICES 10
REDEMPTIONS 12
INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS
AND TAX STATUS 13
CALCULATION OF TOTAL RETURN 15
PERFORMANCE COMPARISONS 16
<PAGE>
To The Shareholders and Trustees
Value Trend Funds:
We have audited the accompanying statement of assets and liabili-
ties of the Value Trend Funds (comprised of the Value Trend Large Cap Fund and
Value Trend Links Fund) as of December 24, 1998. This financial statement is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of assets and liabilities is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement of assets and
liabilities. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
statement of assets and liabilities presentation. Our procedures included
confirmation of cash held by the custodian as of December 24, 1998, by
correspondence with the custodian. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the statement of assets and liabilities referred to above
presents fairly, in all material respects, the financial position of the Value
Trend Large Cap Fund and Value Trend Links Fund as of December 24, 1998, in
conformity with generally accepted accounting principles.
/s/ McCurdy & Associates
McCurdy & Associates CPA's, Inc.
Westlake, Ohio
December 24, 1998
<PAGE>
VALUE TREND FUNDS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 24, 1998
Value Trend Value Trend
Large Cap Fund Links Fund
ASSETS:
Cash in Bank $50,000 $50,000
Total Assets $50,000 $50,000
LIABILITIES: $ 0 $ 0
Total Liabilities $ 0 $ 0
NET ASSETS $50,000 $50,000
NET ASSETS CONSIST OF:
Capital Paid In $50,000 $50,000
OUTSTANDING SHARES
Unlimited Number of Shares
Authorized Without Par Value 5,000 5,000
NET ASSET VALUE PER SHARE $10.00 $10.00
<PAGE>
VALUE TREND FUNDS
NOTES TO FINANCIAL STATEMENTS
December 24, 1998
1. ORGANIZATION
Value Trend Funds (the "Trust") is an open-end management investment company
organized as a business trust under the laws of the State of Massachusetts
by a Declaration of Trust dated September 14, 1998. The Declaration of Trust
provides for an unlimited number of authorized shares of beneficial interest
without par value, which may, without shareholder approval, be divided into
an unlimited number of series of such shares, and which presently consist of
two series of shares for the Value Trend Large Cap Fund and the Value Trend
Links Fund (the "Funds"). The investment objective of both Funds is to
provide long term growth of capital.
The Funds use an independent custodian and transfer agent. No transactions
other than those relating to organizational matters and the sale of 5,000
Shares of the Value Trend Large Cap Fund and 5,000 Shares of the Value Trend
Links Fund have taken place to date.
2. RELATED PARTY TRANSACTIONS
As of December 24, 1998, all of the outstanding shares of the Funds were
owned by the Peter K. Hellwig D.D.S., Inc. Profit Sharing Fund and God
Unlimited/University of Healing. A shareholder who beneficially owns,
directly or indirectly, more than 25% of the Funds' voting securities may be
deemed a "control person" (as defined in the 1940 Act) of the Fund.
Value Trend Capital Management, LP, the Fund's investment adviser, is
registered as an investment adviser under the Investment Advisers Act of
1940. Ross C. Provence and Jeffrey R. Provence are owners and officers of
Value Trend Capital Management, LP and trustees of the Fund.
The adviser receives from each Fund as compensation for its services to the
Funds, an annual fee of 1.25% of the Value Trend Large Cap Fund's net assets
and 1.35% of the Value Trend Links Fund's net assets. The fee is paid monthly
and calculated on the basis of that month's net assets.
The adviser pays all of the operating expenses of each Fund except brokerage,
taxes, interest, independent accountants, legal fees, and extraordinary
litigation expenses.
3. CAPITAL STOCK AND DISTRIBUTION
At December 24, 1998, an unlimited number of shares were authorized and paid
in capital amounted to $50,000 for each Fund. Transactions in capital stock
were as follows:
Shares Sold:
Value Trend Large Cap Fund 5,000
Value Trend Links Fund 5,000
<PAGE>
VALUE TREND FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
December 24, 1998
3. CAPITAL STOCK AND DISTRIBUTION (Cont'd)
Shares Redeemed:
Value Trend Large Cap Fund 0
Value Trend Links Fund 0
Net Increase:
Value Trend Large Cap Fund 5,000
Value Trend Links Fund 5,000
Shares Outstanding:
Value Trend Large Cap Fund 5,000
Value Trend Links Fund 5,000
