UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. __ [ ]
Post-Effective Amendment No. 2 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 3
(Check appropriate box or boxes)
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VALUE TREND FUNDS
(Exact Name of Registrant as Specified in Charter)
411 West Madison Avenue
El Cajon, CA 92020
(Address of Principal Executive Offices)
1-619-588-9700
(Registrant's Telephone Number)
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AGENT FOR SERVICE:
Ross C. Provence
Value Trend Funds
411 West Madison Avenue
El Cajon, CA 92020
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It is proposed that this filing will become effective (check appropriate box)
[X] immediately upon filing pursuant to paragraph (b) of Rule 485.
[ ] on (date) pursuant to paragraph (b) of Rule 485.
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485.
[ ] on (date) pursuant to paragraph (a)(1) of Rule 485.
[ ] 75 days after filing pursuant to paragraph (a)(2) of Rule 485.
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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[Outside front cover]
PROSPECTUS
May 1, 2000
The Value Trend Funds
Value Trend
Large Cap Fund
For Investors Seeking Long-Term Growth of Capital
Value Trend
Links Fund
For Investors Seeking Long-Term Growth of Capital
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved of these securities, nor has the Commission determined
that this Prospectus is complete or accurate. Any representation to the
contrary is a criminal offense.
The Value Trend Funds
411 West Madison Avenue
El Cajon, CA 92020
Logo
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Table of Contents
The Funds 4
The Objective of the Large Cap Fund 4
The Principal Investment Strategies and Policies of
the Large Cap Fund 4
The Objective of the Links Fund 5
The Principal Investment Strategies and Policies of
the Links Fund 5
The Investment Selection Process Used by the Funds 6
The Principal Risks of Investing in the Funds 6
Who Should Invest 8
Costs of Investing in the Funds 9
Expense Example 9
Additional Investment Strategies and Risk
Considerations 10
Who Manages the Funds 14
The Investment Adviser 14
How to Buy and Sell Shares 15
Pricing of Fund Shares 15
Investing in the Funds. 16
Minimum Investments 16
Types of Account Ownership. 17
Instructions For Opening and Adding to an Account. 18
Telephone and Wire Transactions 19
Tax-Deferred Plans 20
Types of Tax-Deferred Accounts 21
Automatic Investment Plans 22
Instructions For Selling Fund Shares 22
Additional Redemption Information 24
Shareholder Communications 26
Dividends and Distributions. 26
Taxes 27
Financial Data 28
Trustees and Officers 29
Other Information 30
Prospectus 2
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Your Guide
to the Prospectus
This Prospectus is designed to help you make an informed decision about whether
investing in the Value Trend Funds is appropriate for you. Please read it
carefully before investing and keep it on file for future reference. To make
this Prospectus easy for you to read and understand, we have divided it into
three sections: The Funds, Who Manages the Funds and How to Buy and Sell Shares.
Each section is organized to help you quickly identify the information that you
are looking for. The first section, The Funds, tells you four important things
about each Fund that you should know before you invest:
* The Fund's investment objective - what each Fund is trying to achieve.
* The principal investment strategies of the Funds - how each Fund tries to
meet its investment objective.
* The Funds' method of selecting investments - how the Funds choose their
primary investments.
* Risks you should be aware of - the principal risks of investing in the Funds.
The other sections of the Prospectus - Who Manages the Funds and How to Buy and
Sell Shares - provide you with information about each Fund's management, the
services and privileges available to you, how we price shares of each Fund and
how to buy and sell shares of the Funds.
Prospectus 3
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The Funds
Value Trend Large Cap Fund
The Objective of the Fund
* The Large Cap Fund seeks long-term growth of capital. The Principal
Investment Strategies and Policies of the Large Cap Fund
* The Fund invests primarily in common stocks of well-established, high-quality
US Companies that have a market capitalization of $5 billion or more.
* The Fund invests in companies that may generate income from international
markets through their international divisions.
* The Fund's Advisor considers, among other things, consistency of earnings,
earnings growth rate, and return on equity when selecting investments.
[Side panel: EACH Fund's daily share price can be found at the Value Trend Web
Page at http://www.valuetrend.com or by calling 1-800-590-0898.]
[Side panel: EACH Fund's objective may be changed by the Board of Trustees
without shareholder approval. You will receive advance written notice of any
material changes to the Fund's objective. If there is a material change, you
should consider whether the Fund remains an appropriate investment for you.]
[Side panel: Market capitalization is the most commonly used measure of the size
and value of a company. A company's market capitalization is computed by
multiplying the current share price by the total number of shares outstanding.]
Prospectus 4
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Value Trend Links Fund
The Objective of the Fund
* The Links Fund seeks long-term growth of capital.
The Principal Investment Strategies
and Policies of the Links Fund
* The Fund invests primarily in companies that
are associated with the golfing industry. The minimum market capitalization of
the stocks in the the Fund is $50 million with no maximum market capitalization.
* Companies that are candidates for the Fund include, but are no limited to
companies in the golfing industry, sponsors of major golfing events, companies
that produce products for the golfing industry, and real estate investment trust
(REITs) which are involved with golf properties, hotels and housing.
ALL FUNDS
* The Funds are "non-diversified" portfolios, which means they can invest in
fewer securities at any one time than diversified portfolios.
* Under adverse market conditions, when investment opportunities are limited,
or in the event of exceptional redemption requests, the Funds may hold cash or
cash-equivalents and invest without limit in obligations of the U.S. Government
and its agencies and in money market securities, including high-grade commercial
paper, certificates of deposit, repurchase agreements and short-term debt
securities. Under these circumstances, the Funds may not participate in stock
market advances or declines to the same extent they would had they remained more
fully invested in common stocks. As a result, each Fund may not achieve its
investment objective.
[Side panel: MUTUAL FUNDS GENERALLY emphasize either "value" or "growth" styles
of investing. Value funds invest in companies that appear underpriced according
to certain financial measurements of their intrinsic worth or business
prospects. Growth funds invest in companies that exhibit faster-than-average
growth in revenues and earnings, appealing to investors who are willing to
accept more volatility in hopes of a greater increase in share price. The Funds
invests primarily in companies that the Advisor believes are undervalued and may
display greater-than-average growth in revenues and earning. This type of
investment style is a combination of "value" and "growth" investing.]
[Side panel: All mutual funds must elect to be "diversified" or "non-
diversified." As a non-diversified portfolio, each Fund may invest half of its
total assets in two or more securities, while the other half is spread out among
investments not exceeding 5% of a Fund's total assets at the time of purchase.
As a result, the Funds have the ability to take larger positions in a smaller
number of securities than a diversified portfolio. These limitations do not
apply to U.S. Government securities.]
Prospectus 5
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The Investment Selection Process
Used by the Funds
Value Trend Capital Management, LP, the investment adviser follows a value and
growth 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.
The Principal Risks of
Investing in the Funds
Risks in General
Domestic and foreign economic growth and market conditions, interest rate
levels, and political events are among the factors affecting the securities
markets of the Funds' investments. There is the risk the Adviser will not
accurately predict the direction of these and other factors and, as a result,
the Adviser's investment decisions may not accomplish what they were intended to
achieve. You could lose money investing in the Funds. You should consider your
own investment goals, time horizon, and risk tolerance before investing in the
Funds. An investment in the Funds may not be appropriate for all investors and
is not intended to be a complete investment program.
[Side panel: FUNDAMENTAL VS. TECHNICAL ANALYSIS: There are two major schools of
stock market analysis used in determining whether a particular stock or group
of stocks are undervalued or overvalued relative to their current market price.
The first major school is "fundamental analysis" which relies on an analysis of
the balance sheet and income statements of companies in order to forecast their
future stock price movements. The other major school is "technical analysis"
which is not concerned with the financial position of a company, but instead
relies on price and volume movements through the use of charts and computer
programs to identify and project trends in a market or security. The Adviser
relies on fundamental analysis in selecting portfolio securities for the Funds.]
Prospectus 6
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Risks of Investing in Common Stocks
The Funds invest primarily in the common stocks, which subjects the Funds and
its shareholders to the risks associated with common stock investing. These
risks include the financial risk of selecting individual companies that do not
perform as anticipated, the risk that the stock markets in which the Funds
invest may experience periods of turbulence and instability, and the general
risk that domestic and global economies may go through periods of decline and
cyclical change.
Many factors affect an individual company's performance, such as the strength of
its management or the demand for its product or services. You should be aware
that the value of a company's share price may decline as a result of poor
decisions made by management or lower demand for the company's products or
services. In addition, a company's share price may also decline if its earnings
or revenues fall short of expectations.
Overall stock market risks may also affect the value of the Funds. Over time,
the stock markets tend to move in cycles, with periods when stock prices rise
generally and periods when stock prices decline generally. The value of the
Funds' investments may increase or decrease more than the stock markets in
general.
Management Risk
Under the magement contracts for each Fund, Value Trend Capital Mangement, LP,
assumes the financial responsibility to pay from its mangement fees the ordinary
operating expenses of each Fund. Because the funds became effective on January
1, 1999, the management fees do not cover all operating expenses. Ross
Provence, the managing general partner of the Adviser has agreed to subsidize
the Adviser and the Funds for a period of three years to cover such operating
expenses.
Risk of Non-Diversification
As previously mentioned, the Funds are non-diversified portfolios, which means
that they have the ability to take larger positions in a smaller number of
securities than a diversified portfolio. Non-diversification increases the risk
that the value of the Funds could go down because of the poor performance of a
single investment.
Industry Risk
Industry risk is the possibility that stocks within the same industry will
decline in price due to industry-specific market or economic developments. To
the extent that the Funds concentrate investments in any one industry, the Funds
are subject to the risk that companies in that industry are likely to react
similarly to legislative or regulatory changes, adverse market conditions and/or
increased competition affecting that market segment.
Prospectus 7
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Because of the rapid pace of technological development of certain industries,
there is the risk that the products and services developed by similar companies
may become rapidly obsolete or have relatively short product cycles. There is
also the risk that the products or services offered by similar companies will
not meet expectations or even reach the marketplace. Although the Adviser
currently believes that investments by the Funds in certain industries (ie, the
technology industry) will offer greater opportunity for growth of capital than
investments in other industries, such investments can fluctuate dramatically in
value and will expose you to greater than average risk.
Who Should Invest
The Funds may be suitable for you if:
* You are seeking long-term growth of capital - at least five years.
* You can tolerate greater risks associated with common stock investments.
* You are not looking for current income.
* You characterize your investment temperament as "relatively aggressive."
* You are seeking funds that emphasizes investments in a focused group of
common stocks
* You are willing to accept significant fluctuations in share price.
* You are not pursuing a short-term goal or investing emergency reserves.
Performance History
There is no performance information for the Value Trend Funds as they did not
have one full year of operation as of the filing of this prospectus.
Prospectus 8
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Costs of Investing in the Funds
The following table describes the expenses and fees that you may pay if you buy
and hold shares of the Funds. Annual fund operating expenses are paid out of the
assets of the Funds, so their effect is already included in the Fund's daily
share price.
[Side panel: The Funds are no-load funds, which means you do not pay any fees
when you buy or sell shares of the Funds. As a result, all of your investment
goes to work for you.]
Shareholder Fees Large Cap Links
(fees paid directly from your investment) Fund Fund
Sales Charge (Load) Imposed on Purchases None None
Deferred Sales Charge (Load) None None
Sales Charge (Load) Imposed on Reinvested Dividends None None
Redemption Fee None None
Exchange Fee None None
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)
Management Fees 1.25% 1.35%
12b-1 Distribution Fees None None
Other Expense None None
Total Annual Fund Operating Expenses 1.25% 1.35%
Expense Example
The following example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The examples assumes
that you invest $10,000 in a Fund for the time periods indicated and then redeem
all of your shares at the end of those periods. The examples also assumes that
your investment has a 5% annual return each year and that the Funds' operating
expenses remain the same each year. Although your actual costs may be higher or
lower, based on these assumptions your costs would be:
Shareholder transaction expenses
One Year Three Years Five Years Ten Years
Your costs:
Large Cap Fund $127 $397 $686 $1,511
Links Fund $137 $428 $739 $1,624
[Side panel: UNDERSTANDING EXPENSES:
Operating a mutual fund involves a variety of expenses including those for
portfolio management, shareholder statements, tax reporting and other services.
These expenses are paid from the Fund's assets in the form of a management fee.
Their effect is already factored into the Fund's daily share price and returns.]
Prospectus 9
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Additional Investment Strategies
and Risk Considerations
General
The Funds invests primarily in common stocks and similar securities, including
preferred stocks, warrants, securities convertible into common stock and
securities purchased on a when-issued basis.
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. The Links 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. 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.
Portfolio Turnover
The Funds generally purchases securities for long-term investment although, to a
limited extent, the Funds may purchase securities in anticipation of relatively
short-term price gains. Short-term transactions may also result from liquidity
needs, securities having reached a price or yield objective, changes in interest
rates, or by reason of economic or other developments not foreseen at the time
of the investment decision. 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 and 75% for the Links Fund. Any Fund's portfolio turnover rate in any
year could be significantly higher or lower than these estimates.
Prospectus 10
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* 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. 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.
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.
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.
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 borrow
Propestus 11
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er 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 or 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.
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 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
Prospectus 12
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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 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.
Prospecrtus 13
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Who Manages the Funds
The Investment Adviser
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,
and has been managing the Value Trend Funds since their inception in January of
1999. 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.
Value Trend Capital Management, LP, manages the investment portfolio of each
Fund, subject to policies adopted by the Trust's Board of Trustees. Under the
Investment Advisory Agreement, the Adviser, at its own expense and without
reimbursement from the Trust, furnishes office space and all necessary office
facilities, equipment and executive personnel necessary for managing the Funds.
Value Trend Capital Management also pays the salaries and fees of all officers
and trustees of the Trust who are also officers, directors, or employees of
Value Trend. For its services, the Adviser receives a fee of 1.25% per year of
the average daily net assets of the Value Trend Large Cap Fund and 1.35% per
year of the average daily net assets of the Value Trend Links Fund.
Prospectus 14
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How to Buy and Sell Shares
Pricing of Fund Shares
The price you pay for a share of the Fund, and the price you receive upon
selling or redeeming a share of the Fund, is called the Fund's net asset value
("NAV"). The NAV is calculated by taking the total value of the Fund's assets,
subtracting its liabilities, and then dividing by the total number of shares
outstanding, rounded to the nearest cent:
The NAV is generally calculated as of the close of trading on the New York Stock
Exchange (normally 4:00 p.m. Eastern time) every day the Exchange is open. All
purchases, redemptions or reinvestments of Fund shares will be priced at the
next NAV calculated after your order is received in proper form by the Fund's
Transfer Agent, Mutual Shareholder Services. Your order must be placed with the
Transfer Agent prior to the close of the trading of the New York Stock Exchange
in order to be confirmed for that day's NAV. The Fund's investments are valued
at market value or, if a market quotation is not readily available, at the fair
value determined in good faith by the Adviser, subject to the review and
oversight of the Fund's Board of Trustees. The Fund may use pricing services to
determine market value.
Prospectus 15
<PAGE>
Investing in the Funds
You may purchase shares directly through the Fund's Transfer Agent or through a
brokerage firm or other financial institution that has agreed to sell the Fund's
shares. If you are investing directly in the Fund for the first time, you will
need to establish an account by completing a Shareholder Account Application.
(To establish an IRA, complete an IRA Application.) To request an application,
call toll-free 1-800-590-0898 or visit our website at www.valuetrend.com to
download an application. Your initial investment minimum can be found in the
table below. The Funds reserves the right to change the amount of these
minimums from time to time or to waive them in whole or in part for certain
accounts. Investment minimums may be higher or lower to investors purchasing
shares through a brokerage firm or other financial institution.
[Side panel: INVESTMENTS MADE THROUGH BROKERAGE FIRMS OR OTHER FINANCIAL
INSTITUTIONS:
If you invest through a brokerage firm or other financial institution, the
policies and fees may be different than those described here. Financial
advisers, financial supermarkets, brokerage firms, and other financial
institutions may charge transaction and other fees and may set different minimum
investments or limitations on buying or selling shares. Consult a representative
of your financial institution if you have any questions. Your financial
institution is responsible for transmitting your order in a timely manner.]
Minimum Investments
Initial Additional
Regular Account $1,000 $50
Automatic Investment Plan $250 $50*
IRA Account $250 $50
Education IRA $250 $50
*An Automatic Investment Plan requires a $50 minimum automatic monthly or
quarterly investment.
All purchases must be made in U.S. dollars and checks must be drawn on U.S.
banks. No cash, credit cards or third party checks will be accepted. A $20 fee
will be charged against your account for any payment check returned to the
Transfer Agent or for any incomplete electronic funds transfer, or for
insufficient funds, stop payment, closed account or other reasons. If a check
does not clear your bank or the Fund is unable to debit your predesignated bank
account on the day of purchase, the Fund reserves the right to cancel the
purchase. If your purchase is canceled, you will be responsible for any losses
or fees imposed by your bank and losses that may be incurred as a result of a
decline in the value of the canceled purchase. The Funds (or Funds agent) have
the
Prospectus 16
<PAGE>
authority to redeem shares in your account(s) to cover any losses due to
fluctuations in share price. Any profit on such cancellation will accrue to the
Funds. Your investment in the Funds should be intended to serve as a long-term
investment vehicle. The Funds are not designed to provide you with a means of
speculating on the short-term fluctuations in the stock market. The Funds
reserve the right to reject any purchase request that they regard as disruptive
to the efficient management of the Funds, which includes investors with a
history of excessive trading. The Funds also reserves the right to stop
offering shares at any time.
Types of Account Ownership
You can establish the following types of accounts by completing a Shareholder
Account Application:
* Individual or Joint Ownership
Individual accounts are owned by one person. Joint accounts have two or more
owners.
* A Gift or Transfer to Minor (UGMA or UTMA) An UGMA/UTMA account is a
custodial account managed for the benefit of a minor. To open an UGMA or UTMA
account, you must include the minor's social security number on the application.
* Trust
An established trust can open an account. The names of each trustee, the name of
the trust and the date of the trust agreement must be included on the
application.
* Business Accounts
Corporation and partnerships may also open an account. The application must be
signed by an authorized officer of the corporation or a general partner of a
partner ship.
* IRA Accounts
See "Tax-Deferred Plans" on page 20.
Prospecuts 17
<PAGE>
Instructions For Opening and Adding to an Account
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
By Mail By Mail
Complete and sign the Shareholder Complete the investment slip that is
Application or an IRA Application included with your account statement,
and write your account number on
Make your check payable to your check. If you no longer have
Value Trend Funds your investment slip, please reference
* For IRA accounts, please specify your name, account number, and
the year for which the contribution address on your check.
is made.
Mail your application and check to: Mail the slip and the check to:
Value Trend Funds Value Trend Funds
c/o Mutual Shareholder Services c/o Mutual Shareholder Services
1301 East Ninth Street, Suite 1005 1301 East Ninth Street, Suite 1005
Cleveland, Ohio 44114 Cleveland, Ohio 44114
By overnight courier, send to:
Value Trend Funds
c/o Mutual Shareholder Services
1301 East Ninth Street, Suite 1005
Cleveland, Ohio 44114
Prospectus 18
<PAGE>
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
By Wire By Wire
Call 1-800-590-0898 for instructions Send your investment to Firstar Bank,
and to obtain an investor account N.A. by following the instructions
number an IRA account number prior listed in the column to the left.
to wiring the funds.
Send your investment to Firstar Bank, N.A.
with these instructions:
* Firstar Bank, N.A.
* ABA#: 042000013
* DDA # 821637923
* For further credit to:
19-9470 for Value Trend Large Cap Fund
19-9471 for Value Trend Links Fund
Your account number
Your name
Your SSN or TIN
Telephone and Wire Transactions
With respect to all transactions made by telephone, the Funds and its Transfer
Agent will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. Such procedures may include, among
others, requiring some form of personal identification prior to acting upon
telephone instructions, providing written confirmation of all such transactions,
and/or tape recording all telephone instructions. If reasonable procedures are
followed, then neither the Funds nor the Transfer Agent will be liable for any
loss, cost, or expense for acting upon an investor's telephone instructions or
for any unauthorized telephone redemption. In any instance where the Funds'
Transfer Agent is not reasonably satisfied that instructions received by
telephone are genuine, neither the Funds nor the Transfer Agent shall be liable
for any losses which may occur because of delay in implementing a transaction.
Prospectus 19
<PAGE>
If you purchase your initial shares by wire, the Transfer Agent first must have
received a completed account application and issued an account number to you.
The account number must be included in the wiring instructions as set forth on
the previous page. The Transfer Agent must receive your account application to
establish shareholder privileges and to verify your account information. Payment
of redemption proceeds may be delayed and taxes may be withheld unless the Funds
receives a properly completed and executed account application.
Shares purchased by wire will be purchased at the NAV next determined after
the Transfer Agent receives your wired funds and all required information is
provided in the wire instructions. If the Transfer Agent is notified no later
than 3:00 p.m. Eastern time of the wire instructions, and the wired funds are
received by the Transfer Agent no later than 5:00 p.m. Eastern time, then the
shares purchased will be priced at the NAV determined on that business day. If
the wire is not received by 5:00 p.m. Eastern time, the purchase will be
effective at the NAV next calculated after receipt of the wire.
Tax-Deferred Plans
If you are eligible, you may set up one or more tax-deferred accounts. A tax-
deferred account allows you to shelter your investment income and capital gains
from current income taxes. A contribution to certain of these plans may also be
tax deductible. Tax-deferred accounts include retirement plans described on the
following page and the Education IRA. Distributions from these plans are
generally subject to an additional tax if withdrawn prior to age 59 1/2 or used
for a nonqualifying purpose. Investors should consult their tax adviser or legal
counsel before selecting a tax-deferred account.
Firstar Bank, N.A., serves as the custodian for the tax-deferred accounts
offered by the Fund. You will be charged an annual account maintenance fee of $8
for each tax-deferred account you have with the Funds. You may pay the fee by
check or have it automatically deducted from your account (usually in December).
The custodian reserves the right to change the amount of the fee or to waive it
in whole or part for certain types of accounts.
Prospectus 20
<PAGE>
Types of Tax-Deferred Accounts
* Traditional IRA
An individual retirement account. Your contribution may or may not be deductible
depending on your circumstances. Assets can grow tax-deferred and distributions
are taxable as income.
* Roth IRA
An IRA with non-deductible contributions, tax-free growth of assets, and tax-
free distributions for qualified distributions.
* Spousal IRA
An IRA funded by a working spouse in the name of a non-earning spouse.
* Education IRA
This plan allows individuals, subject to certain income limitations, to
contribute up to $500 annually on behalf of any child under the age of eighteen.
* SEP-IRA
An individual retirement account funded by employer contributions. Your assets
grow tax-deferred and distributions are taxable as income.
* Keogh or Profit Sharing Plans
These plans allow corporations, partnerships and individuals who are self-
employed to make tax-deductible contributions of up to $30,000 for each person
covered by the plans.
* 403(b) Plans
An arrangement that allows employers of charitable or educational organizations
to make voluntary salary reduction contributions to a tax- deferred account.
* 401(k) Plans
Allows employees of corporations of all sizes to contribute a percentage of
their wages on a tax-deferred basis. These accounts need to be established by
the trustee of the plan.
Prospectus 21
<PAGE>
Automatic Investment Plans
By completing the Automatic Investment Plan section of the account application,
you may make automatic monthly or quarterly investments ($50 minimum per
purchase) in the Funds from your bank or savings account. Your initial
investment minimum is $250 if you select this option. Shares of the Funds may
also be purchased through direct deposit plans offered by certain employers and
government agencies. These plans enable a shareholder to have all or a portion
of their payroll or Social Security checks transferred automatically to purchase
shares of the Funds.
FOR INVESTING
Automatic Investment Plan Payroll Direct Deposit Plan
For making automatic investments For making automatic investments from a
designated bank account. from your payroll check.
Dividend Reinvestment
All income dividends and capital gains dis-
tributions will be automatically reinvested
in shares of the Funds unless you indicate
otherwise on the account application or in
writing.
Instructions For Selling Fund Shares
You may sell all or part of your shares on any day that the New York Stock
Exchange is open for trading. Your shares will be sold at the next NAV per share
calculated after your order is received in proper form by the Transfer Agent.
The proceeds of your sale may be more or less than the purchase price of your
shares, depending on the market value of a Fund's securities at the time of your
sale. Your order will be processed promptly and you will generally receive the
proceeds within seven days after receiving your properly completed request. The
Funds will not mail any proceeds unless your investment check has cleared the
bank, which may take up to fifteen calendar days. This procedure is intended to
protect each Fund and its shareholders from loss. If the dollar or share amount
requested is greater than the current value of your account, your entire account
balance will be redeemed. If you choose to redeem your account in full, any
automatic services currently in effect for the account will be terminated unless
you indicate otherwise in writing.
Prospectus 22
<PAGE>
TO SELL SHARES
By Mail
Write a letter of instruction that includes:
* The names(s) and signature(s) of all account owners.
* Your account number.
* The dollar or share amount you want to sell.
* Where to send the proceeds.
* If redeeming from your IRA, please note applicable withholding requirements.
* Obtain a signature guarantee or other documentation, if required.
Mail your request to: By overnight courier, send to:
Value Trend Funds Value Trend Funds
c/o Mutual Shareholder Services c/o Mutual Shareholder Services
1301 East Ninth Street, Suite 1005 1301 East Ninth Street, Suite 1005
Cleveland, Ohio 44114 Cleveland, Ohio 44114
By Telephone
* You will automatically be granted * You will not be able to redeem by
telephone redemption privileges telephone and have a check sent to
unless you decline them in writing your address of record for a period of
or indicate on the appropriate sec- 15 days following an address change.
tion of the account application that
you decline this option. Otherwise, * Unless you decline telephone
you may redeem Fund shares by privileges in writing or on your
calling 1-800-590-0898. Redemption account application, as long as the
proceeds will only be mailed to your Funds takes reasonable measures to
address of record. verify the order, you may be respon-
sible for any fraudulent telephone
order.
* You may only redeem a maximum of
$25,000 per day by telephone.
For specific information on how to redeem your account, and to determine if a
signature guarantee or other documentation is required, please call toll-free in
the U.S. 1-800-590-0898.
Prospectus 23
<PAGE>
Additional Redemption Information
Signature Guarantees
Signature guarantees are designed to protect both you and the Funds from fraud.
A signature guarantee of each owner is required to redeem shares in
the following situations:
* If you change ownership on your account.
* If you request the redemption proceeds to be sent to a different address than
that registered on the account.
* If the proceeds are to be made payable to someone other than the account's
owner(s).
* If a change of address request has been received by the Transfer Agent within
the last 15 days.
* If you wish to redeem $25,000 or more from any shareholder account.
Signature guarantees can be obtained from most banks, savings and loan
associations, trust companies, credit unions, broker/dealers, and member firms
of a national securities exchange. Call your financial institution to see if
they have the ability to guarantee a signature. A notary public cannot provide
signature guarantees.
The Funds reserves the right to require a signature guarantee under other
circumstances or to delay a redemption when permitted by Federal Law. For more
information pertaining to signature guarantees, please call 1-800-590-0898.
Corporate, Trust and Other Accounts
Redemption requests from corporate, trusts, and other accounts may require
documents in addition to those described above, evidencing the authority of the
officers, trustees or others. In order to avoid delays in processing redemption
requests for these accounts, you should call the Transfer Agent at 1-800-590-
0898 to determine what additional documents are required.
[Side panel: WHAT IS A REDEMPTION?
A redemption is a sale by you to the Funds of some or all of your shares. The
price per share you receive when you redeem Fund shares may be more or less than
the price at which you purchased those shares. When you redeem your shares, you
will generally have a gain or loss, depending upon whether the amount you
receive for your shares is more or less than your cost or other basis in the
shares.]
[Side panel: REDEMPTION IN KIND:
The Fund intends to make payments for all redemptions in cash, however, if the
Funds believes that conditions exist which make cash payments detrimental to the
best interests of the Fund, payment for shares redeemed may be made in whole or
in part through a distribution of portfolio securities chosen by the Adviser
(under the supervision of the Board of Trustees). If payment is made in
securities, a shareholder may incur transaction costs in converting these
securities into cash after they have redeemed their shares.]
Prospectus 24
<PAGE>
Address Changes
To change the address on your account, call the Transfer Agent at 1-800-590-0898
or send a written request signed by all account owners. Include the account
number(s) and name(s) on the account and both the old and new addresses. Certain
options may be suspended for a period of 15 days following an address change.
Transfer of Ownership
In order to change the account registration or transfer ownership of an account,
additional documents will be required. In order to avoid delays in processing
these requests, you should call the Transfer Agent at 1-800-590-0898 to
determine what additional documents are required.
Redemption Initiated by the Funds
Because there are certain fixed costs involved with maintaining your account,
the Funds may require you to redeem all of your shares if your account balance
falls below $1,000. After your account balance falls below the minimum balance,
you will receive a notification from the Funds indicating its intent to close
your account along with instructions on how to increase the value of your
account to the minimum amount within 60 days. If your account balance is still
below $1,000 after 60 days, the Funds may close your account and send you the
proceeds. This minimum balance requirement does not apply to IRAs and other tax-
sheltered investment accounts. The right of redemption by the Funds will not
apply if the value of your account balance falls below $1,000 because of market
performance. The Funds reserves the right to close an account if the shareholder
is deemed to engage in activities which are illegal or otherwise believed to be
detrimental to the Funds.
Prospectus 25
<PAGE>
Shareholder Communications
Account Statements
Every quarter, shareholders of the Funds will automatically receive regular
account statements. You will also be sent a yearly statement detailing the tax
characteristics of any dividends and distributions you have received.
Confirmations
Confirmation statements will be sent after each transaction that affects your
account balance or account registration.
Regulatory Mailings
Financial reports will be sent at least semiannually. Annual reports will
include audited financial statements. To reduce expenses, one copy of each
report will be mailed to each taxpayer identification number even though the
investor may have more than one account in the Funds.
Dividends and Distributions
The Funds intends to pay distributions on an annual basis and expects that
distributions will consist primarily of capital gains. You may elect to reinvest
income dividends and capital gain distributions in the form of additional shares
of the Funds or receive these distributions in cash. Dividends and distributions
from the Funds are automatically reinvested in the Funds, unless you elect to
have dividends paid in cash. Reinvested dividends and distributions receive the
same tax treatment as those paid in cash. If you are interested in changing your
election, you may call the Transfer Agent at 1-800-590-0898 or send a written
notification to Value Trend Funds, c/o Mutual Shareholder Services 1301 East
Ninth Street, Suite 1005 Cleveland, Ohio 44114.
[Side panel: WHAT IS A DISTRIBUTION?
As a shareholder, you are entitled to your share of a Fund's income from
interest and dividends, and gains from the sale of investments. You receive such
earnings as either an income dividend or a capital gains distribution. Income
dividends come from both the dividends that a Fund earns from is holdings and
interest it receives from its money market and bond investments. Capital gains
are realized when a Fund sells securities for higher prices than it paid for
them. The capital gains are either short-term or long-term depending on whether
a Fund held the securities for less than or more than one year.]
[Side panel: WHEN A FUND makes a distribution to its shareholders, the share
price of the Fund drops by the amount of the distribution, net of any market
fluctuations.]
Prospectus 26
<PAGE>
Taxes
Fund dividends and distributions are taxable to most investors (unless your
investment is in an IRA or other tax-advantaged account). Dividends paid by a
Fund out of net ordinary income and distributions of net short-term capital
gains are taxable to the shareholders as ordinary income.
Distributions by a Fund of net long-term capital gains to shareholders are
generally taxable to the shareholders at the applicable long-term capital gains
rate, regardless of how long the shareholder has held shares of the Fund.
Redemptions of shares of a Fund are taxable events which you may realize as a
gain or loss. The amount of the gain or loss and the rate of tax will depend
mainly upon the amount paid for the shares, the amount received from the sale,
and how long the shares were held.
A Fund's distributions may be subject to federal income tax whether received in
cash or reinvested in additional shares. In addition to federal taxes, you may
be subject to state and local taxes on distributions.
Because everyone's tax situation is unique, always consult your tax professional
about federal, state, and local tax consequences of an investment in the Funds.
[Side panel: "Buying a Dividend"
If you purchase shares of a Fund just before it makes a distribution, you will
pay the full price for the shares and then receive a portion back in the form of
a taxable distribution. This is referred to as "buying a dividend." In order to
avoid paying unnecessary taxes as a result of the distribution, check the Funds'
distribution schedule before you invest.]
Prospectus 27
<PAGE>
Financial Highlights
The financial highlights table is intended to help you understand the each Funds
financial performance since inception. Certain information reflects financial
results for a single Fund share. The total returns in the table represent the
rate you would have earned (or lost) on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information has been
audited by McCurdy & Associates CPA's, Inc., whose report, along with the Fund's
financial statements, are included in the Fund's annual report, which is
available upon request and incorporated by reference in the Statement of
Additional Information.
LARGE CAP LINKS
VALUE TREND FUNDS (For period ended JUNE 30, 1999) FUND FUND
Per Share Data for a Share
Outstanding Throughout Each Period 01/01/99 01/01/99
to to
06/30/99 06/30/99
NET ASSET VALUE, BEGINNING OF PERIOD: $10.00 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (0.01) (0.01)
Net realized and unrealized gains(losses) on investments 0.98 0.96
Total from investment operations 0.97 0.95
DISTRIBUTIONS:
Dividends (from net investment income) - -
Distributions (from capital gains) - -
Total distributions - -
NET ASSET VALUE, END OF PERIOD: $10.97 $10.95
TOTAL RETURN 9.70% 9.50%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (thousands) $311 $435
Ratio of expenses to average net assets* 1.33% 1.43%
Ratio of net income to average net assets* (0.23%) (0.25%)
Portfolio turnover rate* 57.25% 76.49%
*Annualized
Prospectus 28
<PAGE>
Trustees and Officers
The trustees and officers of the Trust and their principal business activities
during the past five years are:
Name, Position(s) with Trust Principal Occupations(s) during Past Five
and Age at May 1, 2000 Years
Ross C. Provence * (62) Portfolio Manager of the Funds. General Partner
411 West Madison Avenue and Portfolio Manager for Value Trend Capital
El Cajon, California 92020 Management, LP, (1995-current). Estate plan
Trustee of the Trust ning attorney (1963-current).
President of the Trust
Bradley J. DeHaven * (34) Owner of De Haven Enterprises (1991-current).
5473 Hewlett Drive Computer consultant and CEO of Tech-Solutions
San Diego, California 92115 (1990-1996).
Trustee of the Trust
Vice President of the Trust
Jeffrey R. Provence * (30) Portfolio Manager of the Funds. General Partner
411 West Madison Avenue and Portfolio Manager for Value Trend Capital
El Cajon, California 92020 Management, LP, (1995-current). Computer con
Trustee of the Trust sultant and CFO for Tech-Solutions (1992-
Treasurer and Secretary of the 1995). Partner of Investment Property
Trust Resources (1989-1992).
Thomas H. Addis III (54) Vice President of Full Swing Golf
11413 West Bernardo Court (1999 to current). President of Medallion
President San Diego, CA 92127 Golf Management (1999 to current). Director of
Trustee of the Trust golf at Singing Hill Golf Resort (1967-1998).
President of Professional Golfers Association
of America (1995-1996).
George Cossolias, CPA (64) Owner of George Cossolias & Company, CPAs 9455
Ridgehave Court, Suite 101 (1972 to current). President of Lubrication
San Diego, CA 92123 Specialists, Inc. (1996 to current). Management
Trustee of San Diego Cement Masons Pension
Trust (1985 to current).
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 (*).
Prospectus 29
<PAGE>
OTHER INFORMATION
The following parties provide the Funds with administrative and other services.
Custodian
Firstar Bank
425 Walnut Street
Cincinnati, Ohio 45202
Transfer Agent
Mutual Shareholder Services, LLC
1301 East Ninth Street, 1005
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 30
<PAGE>
[Back cover page]
VALUE TREND FUNDS
Where To Go For Information
For shareholder inquiries, please call toll-free in the U.S. at 1-800-590-0898.
You will also find more information about the Value Trend Funds in the following
documents:
Annual Report
Our annual report lists the holdings of each Fund, describe the Funds'
performance, includes financial statements for each Fund, and discusses the
market conditions and strategies that significantly affected each Fund's
performance.
Statement of Additional Information
The Statement of Additional Information contains additional and more detailed
information about the Funds, and is considered to be a part of this Prospectus.
THERE ARE THREE WAYS TO GET A COPY OF THESE DOCUMENTS
1. Call or write for one, and a copy will be sent without charge.
Value Trend Funds
411 West Madison Avenue
El Cajon, CA 92020
1-800-590-0898
2. Call or write to the Public Reference Section of the Securities and Exchange
Commission ("SEC") and ask them to mail you a copy. The SEC charges a fee for
this service. You can also visit the Public Reference Section and copy the
documents while you are there. Information about the Public Reference Section
may be obtained by calling the number below.
Public Reference Section of the SEC
Washington D.C. 20549-6009
1-800-SEC-0330
3. Go to the SEC's website (www.sec.gov) and download a text-only version.
VALUE TREND FUNDS SEC file number 811-09041
Prospectus 31
<PAGE>
PART B
VALUE TREND FUNDS
Value Trend Large Cap Fund
Value Trend Links Fund
411 West Madison Avenue
El Cajon, California 92020
(800) 590-0898
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 2000
This Statement of Additional Information ("SAI") is not a Prospectus, but is
to be read in conjunction with the Prospectus for the Value Trend Funds,
specifically the Value Trend Large Cap Fund and the Value Trend Links dated
May 1, 2000 (the "Prospectus"). This SAI incorporates by reference the
Trust's Annual Report to Shareholders for the fiscal year ended June 30, 1999
("Annual Report"). To obtain a free copy of the Prospectus or Annual Report,
please write or call the Fund at the address or phone number referenced above.
TABLE OF CONTENTS
FUND HISTORY 1
DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS 1
MANAGEMENT OF THE TRUST 5
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES 6
INVESTMENT ADVISORY AND OTHER SERVICES 8
BROKERAGE ALLOCATION AND OTHER PRACTICES 9
DESCRIPTION OF THE TRUST 10
PURCHASE, PRICING AND REDEMPTION 12
TAXATION 15
CALCULATION OF PERFORMANCE DATA 17
- i -
<PAGE>
FUND HISTORY
The Value Trend Large Cap Fund and the Value Trend Links Fund, are open-end,
non-diversified series of Value Trend Funds (the "Trust"). The trust was
organized on September 2, 1998, as a Massachusetts business trust under the laws
of Massachusetts by an Agreement and Declaration of Trust (the "Declaration of
Trust") and is authorized to issue an indefinite number of shares of beneficial
interest.
The Value Trend Large Cap Fund and the Value Trend Links Fund were organized
on September 2, 1998. The Board of Trustees of the Trust is responsible for
managing the business affairs of the Funds.
DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS
The Trust is registered with the Securities and Exchange Commission as an
open-end management investment company.
NON-DIVERSIFICATION: Each Fund is classified as being non-diversified which
means that it has the ability to take larger positions in a smaller number of
securities than a diversified fund. Each Fund, therefore, may be more
susceptible to risk of loss than a more widely diversified fund as a result of a
single economic, political, or regulatory occurrence. The policy of each Fund is
one of selective investments rather than broad diversification. Each Fund seeks
only enough diversification for adequate representation among what it considers
to be the best performing securities and to maintain its federal non-taxable
status under Subchapter M of the Internal Revenue Code.
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.
STATEMENT OF ADDITIONAL INFORMATION 1
<PAGE>
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.
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.
Each Fund reserves the right to assume a temporary defensive position 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.
Concentrating investments in a particular industry or group of industries is
commonly referred to as "industry risk". Industry risk is the possibility that
stocks within the same industry will decline in price due to industry-specific
market or economic developments. To the extent that the Funds concentrate
investments in any one industry, the Funds are subject to the risk that
companies in that industry are likely to react similarly to legislative or
regulatory changes, adverse market conditions and/or increased competition
affecting that market segment. Because of the rapid pace of technological
development of certain industries, there is the risk that the products and
services developed by similar companies may become rapidly obsolete or have
relatively short product cycles. There is also the risk that the products or
STATEMENT OF ADDITIONAL INFORMATION 2
<PAGE>
services offered by similar companies will not meet expectations or even reach
the marketplace. Although the Adviser currently believes that investments by the
Funds in certain industries (ie, the technology industry) will offer greater
opportunity for growth of capital than investments in other industries, such
investments can fluctuate dramatically in value and will expose you to greater
than average risk.
OTHER INVESTMENTS: In connection with its investment objective and policies
each Fund (except as otherwise indicated) may invest in the following types of
securities which can involve certain risks:
Small Companies
The Links Fund may invest in companies with relatively small market
capitalization. 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.
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.
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
STATEMENT OF ADDITIONAL INFORMATION 3
<PAGE>
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 or 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.
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 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
STATEMENT OF ADDITIONAL INFORMATION 4
<PAGE>
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 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 TRUST
The business of each Fund is managed under the direction of its Board of
Trustees in accordance with the Declaration of Trust of the Value Trend Funds,
which Declaration of Trust has been filed with the Securities and Exchange
Commission and is available upon request. The Board of Trustees is responsible
to manage each Fund under the laws of the State of Massachusetts. Pursuant to
the Declaration of Trust, the trustees shall elect officers including a
president, secretary and treasurer. The Board of Trustees retains the power to
conduct, operate and carry on the business of each Fund and has the power to
incur and pay any expenses which, in the opinion of the Board of Trustees, are
necessary or incidental to carry out any of the Funds' purposes. The trustees,
officers, employees and agents of the Trust, when acting in such capacities,
shall not be subject to any personal liability except for his or her own bad
faith, willful misfeasance, gross negligence or reckless disregard of his or her
duties. The trustees and officers, together with their addresses, age, principal
occupations during the past five years are as follows:
Ross C. Provence*
411 West Madison Avenue
El Cajon, California 92020
(62)
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).
STATEMENT OF ADDITIONAL INFORMATION 5
<PAGE>
Bradley J. DeHaven*
9528 Blossom Valley Road
El Cajon, California 92020
(34)
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
(30)
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
11413 West Bernardo Court
San Diego, CA 92127
(54)
Trustee of the Trust
Vice President of Full Swing Golf (1999 to current). President of Medallion
Golf Management (1999 to current) Director of golf at Singing Hill Golf Resort
(1967-1998). President of Professional Golfers Association of America
(1995-1996).
George Cossolias, CPA
9455 Ridgehave Court, Suite 101
San Diego, CA 92123
(64)
Trustee of the Trust
Owner of George Cossolias & Company, CPAs (1972 to current). President of
Lubrication Specialists, Inc. (1996 to current). Management Trustee of San
Diego Cement Masons Pension
STATEMENT OF ADDITIONAL INFORMATION 6
<PAGE>
Trustees who are "interested persons" (as defined in the Investment Company Act
of Trust (1985 to current).1940) of the Trust or of the Trust's investment
adviser are indicated by an asterisk (*)
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 by the Adviser, not the Trust. The compensation paid to the
Trustees for the fiscal year end of June 30, 1999 from the trust is set forth in
the following table:
===============================================
Total Compensation from Trust (the Trust is not
part of a Fund Complex)
===============================================
Ross C. Provence 0
Bradley J. DeHaven 0
Jeffrey R. Provence 0
Thomas H. Addis III 0
George Cossolias, CPA 0
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of April 24, 2000, National Investors Services Corp., 55 Water Street,
32nd Floor, New York, NY owned of record or beneficially 72.19% of the Value
Trend Large Cap Fund's outstanding shares and 56.06% of the Value Trend Links
Fund's outstanding shares and are considered control persons as defined under
Section 2(a)(9) of the 1940 Act by virtue of their ownership of more than 25% of
the voting securities of the each Fund.
As of April 24, 2000, the following persons owned of record 5% or more of
the shares of the Value Trend Large Cap Fund:
National Investors Services Corp.,
55 Water Street, 32nd Floor, New York, NY
72.19%;
Irene Merkle
1101 Far Valley Road
Campo, California 91906
7.04%;
Christina Nussbaum
1101 Far Valley Road
Campo, California 91906
5.82%;
As of April 24, 2000 the Trustees and officers of the Trust owned of record
or beneficially 0.00% of the Value Trend Large Cap Fund's outstanding shares.
As of April 24, 2000, the following persons owned of record 5% or more of
the shares of the Value Trend Links Fund:
National Investors Services Corp.,
55 Water Street, 32nd Floor, New York, NY
56.04%;
Randolph Williams, IRA
1214 Borders Drive
Palatine, Illinois 60067
5.72%;
As of April 24, 2000 the Trustees and officers of the Trust owned of record
or beneficially less than 1% of the Value Trend Links Fund's outstanding shares.
STATEMENT OF ADDITIONAL INFORMATION 7
<PAGE>
INVESTMENT ADVISORY AND OTHER SERVICES
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, and 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.
Value Trend Capital Management, LP manages the investment portfolio of each
Fund, subject to policies adopted by the Trust's Board of Trustees. Under the
Investment Advisory Agreement, the Adviser, at its own expense and without
reimbursement from the Trust, furnishes office space and all necessary office
facilities, equipment and executive personnel necessary for managing the Funds.
Value Trend Capital Management also pays the salaries and fees of all officers
and trustees of the Trust who are also officers, directors, or employees of
Value Trend. For its services, the Adviser receives a fee of 1.25% per year of
the average daily net assets of the Value Trend Large Cap Fund, and 1.35% per
year of the average daily net assets of the Value Trend Links Fund.
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 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.
Each advisory agreement is terminable on 60 days' written notice, without
penalty, by a vote of a majority of applicable Fund's outstanding shares or by
vote of a majority of the Board of Trustees, or by the Adviser on 60 days'
written notice, and automatically terminates 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.
TRANSFER AGENT
The Trust has entered into an agreement with Mutual Shareholder Services, LLC
(Formerly known as Maxus Information Systems, Inc), 1301 East Ninth Street,
Suite 1005, Cleveland, Ohio, 44114 ("MSS"), to act as each Fund's transfer
agent, and to provide the Trust with accounting services, record-keeping and
STATEMENT OF ADDITIONAL INFORMATION 8
<PAGE>
shareholder service functions. For its services as fund accountant, MSS
receives an annual fee from Value Trend Capital Management, LP based upon the
average value of each Fund, with a maximum annual fee of $59,250. At Fund net
asset values averaging less than $25 million, the annual fee would be $21,000
subject to a discounted fee until each fund reaches $10 million. For all other
services provided, MSS receives from Value Trend Capital Management, LP an
annual fee of $9.25 per shareholder (with a minimum charge of $775 per month
subject to a discounted fee until each fund reaches $11) for shareholders
services provided and a monthly fee of $12 per state for state registration and
qualification of Fund shares provided._.
CUSTODIAN
The Firstar Bank, 425 Walnut Street, Cincinnati, Ohio 45202 (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 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.
AUDITORS
The firm of McCurdy & Associates CPA's, Inc., 27955 Clemens Road, Westlake,
Ohio 44145 has been selected as independent auditors for the Trust for the year
ending June 30, 2000. McCurdy & Associates CPA's, Inc. performs an annual audit
of each Fund's financial statements and provides financial, tax and accounting
consulting services as requested.
FINANCIAL STATEMENTS
The financial statements and independent auditors report required to be
included in the Statement of Additional Information are incorporated herein by
reference to the Trust's Annual Report to Shareholders for the fiscal year ended
June 30, 1999. The Trust will provide the Annual Report without charge at
written or telephone request.
BROKERAGE ALLOCATION AND OTHER PRACTICES
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.
For the period January 1, 1999 (commencement of operations) to the fiscal
year ended June 30, 1999, the Value Trend Funds paid brokerage commissions of
$729.00.
STATEMENT OF ADDITIONAL INFORMATION 9
<PAGE>
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 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
STATEMENT OF ADDITIONAL INFORMATION 10
<PAGE>
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 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).
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
STATEMENT OF ADDITIONAL INFORMATION 11
<PAGE>
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.
PURCHASE, PRICING AND REDEMPTION
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, Suite 1005
Cleveland, Ohio 44114
The procedures for purchasing shares of the Funds are summarized in
"Investing in the Funds" in the Prospectus.
Pricing - Net Asset Value
The price you pay for a share of the Fund, and the price you receive upon
selling or redeeming a share of the Fund, is called the Fund's net asset value
("NAV"). The NAV is calculated by taking the total value of the Fund's assets,
subtracting its liabilities, and then dividing by the total number of shares
outstanding, rounded to the nearest cent:
The NAV is generally calculated as of the close of trading on the New York
Stock Exchange (normally 4:00 p.m. Eastern time) every day the Exchange is open.
All purchases, redemptions or reinvestments of Fund shares will be priced at the
next NAV calculated after your order is received in proper form by the Fund's
Transfer Agent, Mutual Shareholder Services. Your order must be placed with the
Transfer Agent prior to the close of the trading of the New York Stock Exchange
in order to be confirmed for that day's NAV. The Fund's investments are valued
at market value or, if a market quotation is not readily available, at the fair
value determined in good faith by the Adviser, subject to the review and
oversight of the Fund's Board of Trustees. The Fund may use pricing services to
determine market value.
STATEMENT OF ADDITIONAL INFORMATION 12
<PAGE>
Shareholder Services
A shareholder's investment in any Fund is automatically credited to an open
account maintained for the shareholder by . 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 . 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.
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 . 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.
STATEMENT OF ADDITIONAL INFORMATION 13
<PAGE>
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
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 "Instructions for Selling Fund 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 . 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 . 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
redemptions 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
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 . 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
STATEMENT OF ADDITIONAL INFORMATION 14
<PAGE>
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."
TAXATION
As described in the Prospectus under "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, Suite 1005 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.
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
STATEMENT OF ADDITIONAL INFORMATION 15
<PAGE>
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 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.
STATEMENT OF ADDITIONAL INFORMATION 16
<PAGE>
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 PERFORMANCE DATA
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 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.
For the purposes of quoting and comparing the performance of a Fund to that
of other mutual funds and to other relevant market indices in advertisements,
performance will be stated in terms of average annual total return. Under
regulations adopted by the Securities and Exchange Commission, funds that intend
to advertise performance must include average annual total return quotations
calculated according to the following formula
n
P(1+T) = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years (1, 5, or 10)
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the 1-, 5-, or 10-year period, at the end of such period (or
fractional portion thereof).
Performance Comparison
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.
STATEMENT OF ADDITIONAL INFORMATION 17
<PAGE>
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 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.
STATEMENT OF ADDITIONAL INFORMATION 18
<PAGE>
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.
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.
STATEMENT OF ADDITIONAL INFORMATION 19
<PAGE>
PART C
OTHER INFORMATION
Item 23. Financial Statements and Exhibits.
(a) Articles of Incorporation. Copy of Registrant's Declaration of Trust, which
was filed as an Exhibit to Registrant's Pre-Effective Amendment No. 1, is hereby
incorporated by reference.
(b) By-Laws. Copy of Registrant's By-Laws, which were filed as an Exhibit to
Registrant's Pre-Effective Amendment No. 1, is hereby incorporated by reference.
(c) Instruments Defining Rights of Security Holder. None.
(d) Investment Advisory Contracts. Copy of Registrant's Investment Advisory
Agreement with Value Trend Capital Management, LP, which was filed as an exhibit
to Registrant's Pre-Effective Amendment No. 1, is hereby incorporated by
reference.
(e) Underwriting Contracts. None.
(f) Bonus or Profit Sharing Contracts. None.
(g) Custodial Agreements. Copy of Registrant's agreement with the Custodian is
filed herewith.
(h) Other Material Contracts. None.
(i) Legal Opinion. Legal Opinion of Ross C. Provence, which was filed as an
Exhibit to Registrants Pre Effective Amendment No. 1, is hereby incorporated
by reference.
(j) Other Opinions. Consent of McCurdy & Associates CPAs is filed herewith.
(k) Omitted Financial Statements. None.
(l) Initial Capital Agreements. Subscription Agreements of the Value Trend Large
Cap Fund and the Value Trend Links Fund, which were filed as an Exhibit to
Registrant's Pre-Effective Amendment No. 1, are hereby incorporated by
reference.
(m) Rule 12b-1 Plan. None.
(n) Financial Data Schedule. None.
(o) Rule 18f-3 Plan. None.
(p) Code of Ethics.
(i) Registrants Code of Ethics and Value Trend Capital Management, LP's Code
of Ethics is filed herewith.
Item 24. Control Persons.
The Funds and the Adviser may be deemed to be under common control of Ross C.
Provence (President of the Funds) and Jeffrey R. Provence (Secretary and
Treasurer of the Funds), who are both General Partners of the Adviser.
Item 25. Indemnification.
Reference is made to Article IV of the Registrant's Agreement and Declaration
of Trust which was filed as an Exhibit to Registrant's Pre-Effective Amendment
No.1. The application of these provisions is limited by the following
undertaking set forth in the rules promulgated by the Securities and
Exchange Commission:
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to trustees, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in
such Act and is, therefore, unenforce able. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a trustee, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such trustee, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in such Act and will be governed by the final
adjudication of such issue.
Item 26. Activities of Investment Adviser.
(a) Value Trend Capital Mangement, LP, 411 West Madison Avenue, El Cajon,
California 92020 ("Value Trend") is a registered investment adviser. It has
engaged in no other business during the past two fiscal years.
(b) The following list sets forth other substantial business activities of the
directors and officers of Value Trend during the past two years - None.
Item 27. Principal Underwriter. None.
Item 28. Location of Accounts and Records.
All accounts, books and documents required to be maintained by the Registrant
pursuant to Section 31(a) of the Investment Company Act of 1940 and Rules 31a-
1 through 31a-3 thereunder are maintained at the office of the
Registrant and the Transfer Agent at The Tower at Erieview, 1301 East Ninth
Street, Suite 1005, Cleveland, Ohio 44114, except that all records relating to
the activities of the Fund's Custodian are maintained at the office of the
Custodian, Firstar Bank, 425 Walnut Street, Cincinnati, Ohio 45202.
Item 29. Management Services. Not Discussed in Parts A or B. None.
Item 30. Undertakings. None.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of El Cajon, State of California, on the 28th day of
April, 2000
VALUE TREND FUNDS
By: /s/ Ross C. Provence
------------------
Ross C. Provence, President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
Signature Title Date
/s/ Ross C. Provence 04/28/00
- -------------------- ---------
Ross C. Provence President and
Trustee of the Funds
/s/ Bradley J. DeHaven 04/28/00
- -------------------- ---------
Bradley J. DeHaven Vice President and
Trustee of the Funds
/s/ Jeffrey R. Provence 04/28/99
- -------------------- ---------
Jeffrey R. Provence Secretary, Tresurer and
Trustee of the Funds
/s/ Thomas H. Addis 04/28/00
- -------------------- ---------
Thomas H. Addis III Trustee of the Funds
/s/ George Cossolias 04/28/00
- -------------------- ---------
George Cossolias, CPA Trustee of the Funds
<PAGE>
VALUE TREND FUNDS
PART C - EXHIBIT LIST FOR POST-EFFECTIVE AMENDMENT 2
AS FILED ON MAY 1, 2000
ITEM
23 (g) Form of Custody Agreement with Firstar Bank, N.A.
23 (j) Consent of Independent Certified Public Accountants.
23 (p) Code of Ethics for Value Trend Funds & Value Trend Capital
Management, LP.
<PAGE>
EXHIBIT 99.23G
CUSTODY AGREEMENT
This agreement (the "Agreement") is entered into as of the 10th day
of February, 2000, by and between Value Trend Funds, (the "Trust") and
Firstar Bank, National Association, (the "Custodian"), a national banking
association having its principal office at 425 Walnut Street, Cincinnati,
Ohio, 45202.
WHEREAS, the Trust and the Custodian desire to enter into this
Agreement to provide for the custody and safekeeping of the assets of the
Trust as required by the Act (as hereafter defined).
THEREFORE, in consideration of the mutual promises hereinafter set
forth, the Trust and the Custodian agree as follows:
ARTICLE I
Definitions
The following words and phrases, when used in this Agreement, unless
the context otherwise requires, shall have the following meanings:
Act - the Investment Company Act of 1940, as amended.
1934 Act - the Securities and Exchange Act of 1934, as amended.
Authorized Person - any (i) Officer of the Trust or (ii) any other
person, whether or not any such person is an officer or employee of the
Trust, who is duly authorized by the Board of Trustees of the Trust to
give Oral Instructions and Written Instructions on behalf of the Trust or
any Fund, and named in Appendix A attached hereto and as amended from time
to time by resolution of the Board of Trustees, certified by an Officer,
and received by the Custodian.
Board of Trustees - the Trustees from time to time serving under the
Trust's Agreement and Declaration of Trust, as from time to time amended.
1
<PAGE>
Book-Entry System - a federal book-entry system as provided in
Subpart O of Treasury Circular No. 300, 31 CFR 306, in Subpart B of 31 CFT
Part 350, or in such book-entry regulations of federal agencies as are
substantially in the form of Subpart O.
Business Day - any day recognized as a settlement day by The New
York Stock Exchange, Inc. and any other day for which the Trust computes
the net asset value of Shares of any fund.
Depository - The Depository Trust Company ("DTC"), a limited purpose
trust company, its successor(s) and its nominee(s). Depository shall
include any other clearing agency registered with the SEC under Section
17A of the 1934 Act which acts as a system for the central handling of
Securities where all Securities of any particular class or series of an
issuer deposited within the system are treated as fungible and may be
transferred or pledged by bookkeeping entry without physical delivery of
the Securities provided that the Custodian shall have received a copy of a
resolution of the Board of Trustees, certified by an Officer, specifically
approving the use of such clearing agency as a depository for the Funds.
Dividend and Transfer Agent - the dividend and transfer agent
appointed, from time to time, pursuant to a written agreement between the
dividend and transfer agent and the Trust.
Foreign Securities - a) securities issued and sold primarily outside
of the United States by a foreign government, a national of any foreign
country, or a trust or other organization incorporated or organized under
the laws of any foreign country or; b) securities issued or guaranteed by
the government of the United States, by any state, by any political
subdivision or agency thereof, or by any entity organized under the laws
of the United States or of any state thereof, which have been issued and
sold primarily outside of the United States.
Fund - each series of the Trust listed in Appendix B and any
additional series added
2
<PAGE>
pursuant to Proper Industries. A series is individually referred to as a
"Fund" and collectively referred to as the "Funds."
Money Market Security - debt obligations issued or guaranteed as to
principal and/or interest by the government of the United States or
agencies or instrumentalities thereof, commercial paper, obligations
(including certificates of deposit, bankers' acceptances, repurchase
agreements and reverse repurchase agreements with respect to the same),
and time deposits of domestic banks and thrift institutions whose deposits
are insured by the Federal Deposit Insurance Corporation, and short-term
corporate obligations where the purchase and sale of such securities
normally require settlement in federal funds or their equivalent on the
same day as such purchase and sale, all of which mature in not more than
thirteen (13) months.
NASD - the National Association of Securities Dealers, Inc.
Officer - the Chairman, President, Secretary, Treasurer, any Vice
President, Assistant Secretary or Assistant Treasurer of the Trust.
Oral Instructions - instructions orally transmitted to and received
by the Custodian from an Authorized Person (or from a person that the
Custodian reasonably believes in good faith to be an Authorized Person)
and confirmed by Written Instructions in such a manner that such Written
Instructions are received by the Custodian on the Business Day immediately
following receipt of such Oral Instructions.
Proper Instructions - Oral Instructions or Written Instructions.
Proper Instructions may be continuing Written Instructions when deemed
appropriate by both parties.
Prospectus - the Trust's then currently effective prospectus and
Statement of Additional Information, as filed with and declared effective
from time to time by the Securities and Exchange Commission.
3
<PAGE>
Security or Securities - Money Market Securities, common stock,
preferred stock, options, financial futures, bonds, notes, debentures,
corporate debt securities, mortgages, bank certificates of deposit,
bankers' acceptances, mortgage-backed securities or other obligations and
any certificates, receipts, warrants, or other instruments or documents
representing rights to receive, purchase, or subscribe for the same or
evidencing or representing any other rights or interest therein, or any
similar property or assets that the Custodian has the facilities to clear
and to service.
SEC - the Securities and Exchange Commission of the United States of
America.
Shares - with respect to a Fund, the units of beneficial interest
issued by the Trust on account of such Fund.
Trust - the Value Trend Funds a business trust organized under the
laws of Massachusetts which is a open-end management investment company
registered under the Act.
Written Instructions - communications in writing actually received
by the Custodian from an Authorized Person. A communication in writing
includes a communication by facsimile, telex or between electro-mechanical
or electronic devices (where the use of such devices have been approved by
resolution of the Trustee and the resolution is certified by an Officer
and delivered to the Custodian). All written communications shall be
directed to the Custodian, attention: Mutual Fund Custody Department.
ARTICLE II
Appointment; Acceptance; and Furnishing of Documents
A. Appointment of Custodian. The Trust hereby constitutes and
appoints the Custodian as custodian of all Securities and cash owned by
the Trust at any time during the term of this Agreement.
4
<PAGE>
B. Acceptance of Custodian. The Custodian hereby accepts
appointment as such custodian and agrees to perform the duties thereof as
hereinafter set forth.
C. Documents to be Furnished. The following documents, including
any amendments thereto, will be provided contemporaneously with the
execution of the Agreement, to the Custodian by the Trust:
1. A copy of the Articles of Incorporation of the Trust
certified by the Secretary.
2. A copy of the By-Laws of the Trust certified by the
Secretary.
3. A copy of the resolution of the Board of Trustees of the
Trust appointing the Custodian, certified by the Secretary.
4. A copy of the then current Prospectus.
5. A Certificate of the President and Secretary of the
Trust setting forth the names and signatures of the current Officers of
the Trust and other Authorized Persons.
D. Notice of Appointment of Dividend and Transfer Agent. The
Trust agrees to notify the Custodian in writing of the appointment,
termination or change in appointment of any Dividend and Transfer Agent.
ARTICLE III
Receipt of Trust Assets
A. Delivery of Moneys. During the term of this Agreement, the
Trust will deliver or cause to be delivered to the Custodian all moneys to
be held by the Custodian for the account of any Fund. The Custodian shall
be entitled to reverse any deposits made on any Fund's behalf where such
deposits have been entered and moneys are not finally collected within 30
days of the
5
<PAGE>
making of such entry.
B. Delivery of Securities. During the term of this Agreement,
the Trust will deliver or cause to be delivered to the Custodian all
Securities to be held by the Custodian for the account of any Fund. The
Custodian will not have any duties or responsibilities with respect to
such Securities until actually received by the Custodian.
C. Payments for Shares. As and when received, the Custodian
shall deposit to the account(s) of a Fund any and all payments for Shares
of that Fund issued or sold from time to time as they are received from
the Trust's distributor or Dividend and Transfer Agent or from the Trust
itself.
D. Duties Upon Receipt. The Custodian shall not be responsible
for any Securities, moneys or other assets of any Fund until actually
received by it.
E. Validity of Title. The Custodian shall not be responsible for
the title, validity or genuineness of any property or evidence of title
thereto received or delivered by it pursuant to this Agreement.
ARTICLE IV
Disbursement of Trust Assets
A. Declaration of Dividends by Trust. The Trust shall furnish to
the Custodian a copy of the resolution of the Board of Trustees of the
Trust, certified by the Trust's Secretary, either (i) setting forth the
date of the declaration of any dividend or distribution in respect of
Shares of any Fund of the Trust, the date of payment thereof, the record
date as of which the Fund shareholders entitled to payment shall be
determined, the amount payable per share to Fund shareholders of record as
of that date, and the total amount to be paid by the Dividend and Transfer
Agent on the payment date, or (ii) authorizing the declaration of
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dividends and distributions in respect of Shares of a Fund on a daily
basis and authorizing the Custodian to rely on Written Instructions
setting forth the date of the declaration of any such dividend or
distribution, the date of payment thereof, the record date as of which the
Fund shareholders entitled to payment shall be determined, the amount
payable per share to Fund shareholders of record as of that date, and the
total amount to be paid by the Dividend and Transfer Agent on the payment
date.
On the payment date specified in the resolution or Written
Instructions described above, the Custodian shall segregate such amounts
from moneys held for the account of the Fund so that they are available
for such payment.
B. Segregation of Redemption Proceeds. Upon receipt of Proper
Instructions so directing it, the Custodian shall segregate amounts
necessary for the payment of redemption proceeds to be made by the
Dividend and Transfer Agent from moneys held for the account of the Fund
so that they are available for such payment.
C. Disbursements of Custodian. Upon receipt of a Certificate
directing payment and setting forth the name and address of the person to
whom such payment is to be made, the amount of such payment, the name of
the Fund from which payment is to be made, and the purpose for which
payment is to be made, the Custodian shall disburse amounts as and when
directed from the assets of that Fund. The Custodian is authorized to
rely on such directions and shall be under no obligation to inquire as to
the propriety of such directions.
D. Payment of Custodian Fees. Upon receipt of Written
Instructions directing payment, the Custodian shall disburse moneys from
the assets of the Trust in payment of the Custodian's fees and expenses as
provided in Article VIII hereof.
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ARTICLE V
Custody of Trust Assets
A. Separate Accounts for Each Fund. As to each Fund, the
Custodian shall open and maintain a separate bank account or accounts in
the United States in the name of the Trust coupled with the name of such
Fund, subject only to draft or order by the Custodian acting pursuant to
the terms of this Agreement, and shall hold all cash received by it from
or for the account of the Fund, other than cash maintained by the Fund in
a bank account established and used by the Fund in accordance with Rule
17f-3 under the Act. Moneys held by the Custodian on behalf of a Fund may
be deposited by the Custodian to its credit as Custodian in the banking
department of the Custodian. Such moneys shall be deposited by the
Custodian in its capacity as such, and shall be withdrawable by the
Custodian only in such capacity.
B. Segregation of Non-Cash Assets. All Securities and non-cash
property held by the Custodian for the account of a Fund (other than
Securities maintained in a Depository or Book-entry System) shall be
physically segregated from other Securities and non-cash property in the
possession of the Custodian (including the Securities and non-cash
property of the other Funds) and shall be identified as subject to this
Agreement.
C. Securities in Bearer and Registered Form. All Securities held
which are issued or issuable only in bearer form, shall be held by the
Custodian in that form; all other Securities held for the Fund may be
registered in the name of the Custodian, any sub-custodian appointed in
accordance with this Agreement, or the nominee of any of them. The Trust
agrees to furnish to the Custodian appropriate instruments to enable the
Custodian to hold, or deliver in proper form for transfer, any Securities
that it may hold for the account of any Fund and which may, from time to
time, be registered in the name of a Fund.
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D. Duties of Custodian As to Securities. Unless otherwise
instructed by the Trust, with respect to all Securities held for the
Trust, the Custodian shall on a timely basis (concerning items 1 and 2
below, as defined in the Custodian's Standards of Service Guide, as
amended from time to time, annexed hereto as Appendix D):
1.) Collect all income due and payable with respect to such
Securities;
2.) Present for payment and collect amounts payable upon all
Securities which may mature or be called, redeemed, or retired, or
otherwise become payable;
3.) Surrender interim receipts or Securities in temporary
form for Securities in definitive form; and
4.) Execute, as Custodian, any necessary declarations or
certificates of ownership under the Federal income tax laws or the laws or
regulations of any other taxing authority, including any foreign taxing
authority, now or hereafter in effect.
E. Certain Actions Upon Written Instructions. Upon receipt of a
Written Instructions and not otherwise, the Custodian shall:
1.) Execute and deliver to such persons as may be designated
in such Written Instructions proxies, consents, authorizations, and any
other instruments whereby the authority of the Trust as beneficial owner
of any Securities may be exercised;
2.) Deliver any Securities in exchange for other Securities
or cash issued or paid in connection with the liquidation, reorganization,
refinancing, merger, consolidation, or recapitalization of any trust, or
the exercise of any conversion privilege;
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3.) Deliver any Securities to any protective committee,
reorganization committee, or other person in connection with the
reorganization, refinancing, merger, consolidation, recapitalization, or
sale of assets of any trust, and receive and hold under the terms of this
Agreement such certificates of deposit, interim receipts or other
instruments or documents as may be issued to it to evidence such delivery;
4.) Make such transfers or exchanges of the assets of any
Fund and take such other steps as shall be stated in the Written
Instructions to be for the purpose of effectuating any duly authorized
plan of liquidation, reorganization, merger, consolidation or
recapitalization of the Trust; and
5.) Deliver any Securities held for any Fund to the
depository agent for tender or other similar offers.
F. Custodian to Deliver Proxy Materials. The Custodian shall
promptly deliver to the Trust all notices, proxy material and executed but
unvoted proxies pertaining to shareholder meetings of Securities held by
any Fund. The Custodian shall not vote or authorize the voting of any
Securities or give any consent, waiver or approval with respect thereto
unless so directed by Written Instructions.
G. Custodian to Deliver Tender Offer Information. The Custodian
shall promptly deliver to the Trust all information received by the
Custodian and pertaining to Securities held by any Fund with respect to
tender or exchange offers, calls for redemption or purchase, or expiration
of rights. If the Trust desires to take action with respect to any tender
offer, exchange offer or other similar transaction, the Trust shall notify
the Custodian at least five Business Days prior to the date on which the
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Custodian is to take such action. The Trust will provide or cause to be
provided to the Custodian all relevant information for any Security which
has unique put/option provisions at least five Business Days prior to the
beginning date of the tender period.
ARTICLE VI
Purchase and Sale of Securities
A. Purchase of Securities. Promptly after each purchase of
Securities by the Trust, the Trust shall deliver to the Custodian (i) with
respect to each purchase of Securities which are not Money Market
Securities, Written Instructions, and (ii) with respect to each purchase
of Money Market Securities, Proper Instructions, specifying with respect
to each such purchase the;
1.) name of the issuer and the title of the Securities,
2.) the number of shares, principal amount purchased (and
accrued interest, if any) or other units purchased,
3.) date of purchase and settlement,
4.) purchase price per unit,
5.) total amount payable,
6.) name of the person from whom, or the broker through
which, the purchase was made,
7.) the name of the person to whom such amount is payable,
and
8.) the Fund for which the purchase was made.
The Custodian shall, against receipt of Securities purchased by or for the
Trust, pay out of the moneys held for the account of such Fund the total
amount specified in the Written Instructions, or Oral Instructions, if
applicable, to the person named therein. The Custodian shall not be under
any obligation to pay out moneys to cover the cost of a purchase of
Securities for a Fund, if in the relevant Fund custody account there is
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insufficient cash available to the Fund for which such purchase was made.
B. Sale of Securities. Promptly after each sale of Securities by
a Fund, the Trust shall deliver to the Custodian (i) with respect to each
sale of Securities which are not Money Market Securities, Written
Instructions, and (ii) with respect to each sale of Money Market
Securities, Proper Instructions, specifying with respect to each such sale
the:
1.) name of the issuer and the title of the Securities,
2.) number of shares, principal amount sold (and accrued
interest, if any) or other units sold,
3.) date of sale and settlement,
4.) sale price per unit,
5.) total amount receivable,
6.) name of the person to whom, or the broker through which,
the sale was made,
7.) name of the person to whom such Securities are to be
delivered, and
8.) Fund for which the sale was made.
The Custodian shall deliver the Securities against receipt of the total
amount specified in the Written Instructions, or Oral Instructions, if
applicable. Notwithstanding any other provision of this Agreement, the
Custodian, when properly instructed as provided herein to deliver
Securities against payment, shall be entitled, if in accordance with
generally accepted market practice, to deliver such Securities prior to
actual receipt of final payment therefor. In any such case, the Fund for
which the Securities were delivered shall bear the risk that final payment
for the Securities may not be made or that the Securities may be returned
or otherwise held or disposed of by or through the person to whom they
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were delivered, and the Custodian shall have no liability for any of the
foregoing.
C. Payment on Settlement Date. On contractual settlement date,
the account of the Fund will be charged for all purchased Securities
settling on that day, regardless of whether or not delivery is made.
Likewise, on contractual settlement date, proceeds from the sale of
Securities settling that day will be credited to the account of the Fund,
irrespective of delivery. Any such credit shall be conditioned upon
actual receipt by Custodian of final payment and may be reversed if final
payment is not actually received in full.
D. Credit of Moneys Prior to Receipt. With respect to any credit
given prior to actual receipt of final payment, the Custodian may, in its
sole discretion and from time to time, permit a Fund to use funds so
credited to its Fund custody account in anticipation of actual receipt of
final payment. Any such funds shall be deemed a loan from the Custodian
to the Trust payable on demand and bearing interest accruing from the date
such loan is made up to but not including the date on which such loan is
repaid at the rate per annum customarily charged by the Custodian on
similar loans.
E. Segregated Accounts. The Custodian shall, upon receipt of
Proper Instructions so directing it, establish and maintain a segregated
account or accounts for and on behalf of a Fund. Cash and/or Securities may be
transferred into such account or accounts for specific purposes, to-wit:
1.) in accordance with the provision of any agreement among
the Trust, the Custodian, and a broker-dealer registered under the 1934
Act, and also a member of the NASD (or any futures commission merchant
registered under the Commodity Exchange Act), relating to compliance with
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the rules of the Options Clearing Corporation and of any registered
national securities exchange, the Commodity Futures Trading Commission,
any registered contract market, or any similar organization or
organizations requiring escrow or other similar arrangements in connection
with transactions by the Fund;
2.) for purposes of segregating cash or Securities in
connection with options purchased, sold, or written by the Fund or
commodity futures contracts or options thereon purchased or sold by the
Fund;
3.) for the purpose of compliance by the Fund with the
procedures required for reverse repurchase agreements, firm commitment
agreements, standby commitment agreements, and short sales by Act Release
No. 10666, or any subsequent release or releases or rule of the SEC
relating to the maintenance of segregated accounts by registered investment
companies;
4.) for the purpose of segregating collateral for loans of
Securities made by the Fund; and
5.) for other proper corporate purposes, but only upon
receipt of, in addition to Proper Instructions, a copy of a resolution of
the Board of Trustees, certified by an Officer, setting forth the purposes
of such segregated account.
Each segregated account established hereunder shall be established
and maintained for a single Fund only. All Proper Instructions relating to
a segregated account shall specify the Fund involved.
F. Advances for Settlement. Except as otherwise may be agreed
upon by the parties hereto, the Custodian shall not be required to comply
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with any Written Instructions to settle the purchase of any Securities on
behalf of a Fund unless there is sufficient cash in the account(s)
pertaining to such Fund at the time or to settle the sale of any Securities
from such an account(s) unless such Securities are in deliverable form.
Notwithstanding the foregoing, if the purchase price of such Securities
exceeds the amount of cash in the account(s) at the time of such purchase,
the Custodian may, in its sole discretion, advance the amount of the
difference in order to settle the purchase of such Securities. The amount
of any such advance shall be deemed a loan from the Custodian to the Trust
payable on demand and bearing interest accruing from the date such loan is
made up to but not including the date such loan is repaid at the rate per
annum customarily charged by the Custodian on similar loans.
ARTICLE VII
Trust Indebtedness
In connection with any borrowings by the Trust, the Trust will cause
to be delivered to the Custodian by a bank or broker requiring Securities
as collateral for such borrowings (including the Custodian if the borrowing
is from the Custodian), a notice or undertaking in the form currently
employed by such bank or broker setting forth the amount of collateral.
The Trust shall promptly deliver to the Custodian Written Instructions
specifying with respect to each such borrowing: (a) the name of the bank or
broker, (b) the amount and terms of the borrowing, which may be set forth
by incorporating by reference an attached promissory note duly endorsed by
the Trust, or a loan agreement, (c) the date, and time if known, on which
the loan is to be entered into, (d) the date on which the loan becomes due
and payable, (e) the total amount payable to the Trust on the borrowing
date, and (f) the description of the Securities securing the loan,
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including the name of the issuer, the title and the number of shares or
other units or the principal amount. The Custodian shall deliver on the
borrowing date specified in the Written Instructions the required
collateral against the lender's delivery of the total loan amount then
payable, provided that the same conforms to that which is described in the
Written Instructions. The Custodian shall deliver, in the manner directed
by the Trust, such Securities as additional collateral, as may be specified
in Written Instructions, to secure further any transaction described in
this Article VII. The Trust shall cause all Securities released from
collateral status to be returned directly to the Custodian and the
Custodian shall receive from time to time such return of collateral as may
be tendered to it.
The Custodian may, at the option of the lender, keep such collateral
in its possession, subject to all rights therein given to the lender
because of the loan. The Custodian may require such reasonable conditions
regarding such collateral and its dealings with third-party lenders as it
may deem appropriate.
ARTICLE VIII
Concerning the Custodian
A. Limitations on Liability of Custodian. Except as otherwise
provided herein, the Custodian shall not be liable for any loss or damage
resulting from its action or omission to act or otherwise, except for any
such loss or damage arising out of its own gross negligence or willful
misconduct. The Trust shall defend, indemnify and hold harmless the
Custodian and its directors, officers, employees and agents with respect to
any loss, claim, liability or cost (including reasonable attorneys' fees)
arising or alleged to arise from or relating to the Trust's duties
hereunder or any other action or inaction of the Trust or its Trustees,
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officers, employees or agents, except such as may arise from the grossly
negligent action or omission, willful misconduct or breach of this
Agreement by the Custodian. The Custodian shall be entitled to rely on and
may act upon the advice and opinion of counsel on all matters, at the
expense of the Trust, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice or opinion of counsel.
The provisions under this paragraph shall survive the termination of this
Agreement.
B. Actions Not Required By Custodian. Without limiting the
generality of the foregoing, the Custodian, acting in the capacity of
Custodian hereunder, shall be under no obligation to inquire into, and
shall not be liable for:
1.) The validity of the issue of any Securities purchased by
or for the account of any Fund, the legality of the purchase thereof, or
the propriety of the amount paid therefor;
2.) The legality of the sale of any Securities by or for the
account of any Fund, or the propriety of the amount for which the same are
sold;
3.) The legality of the issue or sale of any Shares of any
Fund, or the sufficiency of the amount to be received therefor;
4.) The legality of the redemption of any Shares of any Fund,
or the propriety of the amount to be paid therefor;
5.) The legality of the declaration or payment of any
dividend by the Trust in respect of Shares of any Fund;
6.) The legality of any borrowing by the Trust on behalf of
the Trust or any Fund, using Securities as collateral;
7.) Whether the Trust or a Fund is in compliance with the
1940 Act, the regulations thereunder, the provisions of the Trust's charter
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documents or by-laws, or its investment objectives and policies as then in
effect.
C. No Duty to Collect Amounts Due From Dividend and Transfer
Agent. The Custodian shall not be under any duty or obligation to take
action to effect collection of any amount due to the Trust from any
Dividend and Transfer Agent of the Trust nor to take any action to effect
payment or distribution by any Dividend and Transfer Agent of the Trust of
any amount paid by the Custodian to any Dividend and Transfer Agent of the
Trust in accordance with this Agreement.
D. No Enforcement Actions. Notwithstanding Section D of Article
V, the Custodian shall not be under any duty or obligation to take action,
by legal means or otherwise, to effect collection of any amount, if the
Securities upon which such amount is payable are in default, or if payment
is refused after due demand or presentation, unless and until (i) it shall
be directed to take such action by Written Instructions and (ii) it shall
be assured to its satisfaction (including prepayment thereof) of
reimbursement of its costs and expenses in connection with any such action.
E. Authority to Use Agents and Sub-Custodians. The Trust
acknowledges and hereby authorizes the Custodian to hold Securities through
its various agents described in Appendix C annexed hereto. The Fund hereby
represents that such authorization has been duly approved by the Board of
Trustees of the Trust as required by the Act.
In addition, the Trust acknowledges that the Custodian may appoint
one or more financial institutions, as agent or agents or as sub-custodian
or sub-custodians, including, but not limited to, banking institutions
located in foreign countries, for the purpose of holding Securities and
moneys at any time owned by the Fund. The Custodian shall not be relieved
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of any obligation or liability under this Agreement in connection with the
appointment or activities of such agents or sub-custodians. Any such agent
or sub-custodian shall be qualified to serve as such for assets of
investment companies registered under the Act. The Funds shall reimburse
the Custodian for all costs incurred by the Custodian in connection with
opening accounts with any such agents or sub-custodians. Upon request, the
Custodian shall promptly forward to the Trust any documents it receives
from any agent or sub-custodian appointed hereunder which may assist
trustees of registered investment companies to fulfill their
responsibilities under Rule 17f-5 of the Act.
F. No Duty to Supervise Investments. The Custodian shall not be
under any duty or obligation to ascertain whether any Securities at any
time delivered to or held by it for the account of the Trust are such as
properly may be held by the Trust under the provisions of the Articles of
Incorporation and the Trust's By-Laws.
G. All Records Confidential. The Custodian shall treat all
records and other information relating to the Trust and the assets of all
Funds as confidential and shall not disclose any such records or
information to any other person unless (i) the Trust shall have consented
thereto in writing or (ii) such disclosure is required by law.
H. Compensation of Custodian. The Custodian shall be entitled to
receive and the Trust agrees to pay to the Custodian such compensation as
shall be determined pursuant to Appendix E attached hereto, or as shall be
determined pursuant to amendments to Appendix E. The Custodian shall be
entitled to charge against any money held by it for the account of any
Fund, the amount of any of its fees, any loss, damage, liability or
expense, including counsel fees. The expenses which the Custodian may
charge against the account of a Fund include, but are not limited to, the
expenses of agents or sub-custodians incurred in settling transactions
involving the purchase and sale of Securities of the Fund.
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I. Reliance Upon Instructions. The Custodian shall be entitled to
rely upon any Proper Instructions. The Trust agrees to forward to the
Custodian Written Instructions confirming Oral Instructions in such a
manner so that such Written Instructions are received by the Custodian,
whether by hand delivery, telex, facsimile or otherwise, on the same
Business Day on which such Oral Instructions were given. The Trust agrees
that the failure of the Custodian to receive such confirming instructions
shall in no way affect the validity of the transactions or enforceability
of the transactions hereby authorized by the Trust. The Trust agrees that
the Custodian shall incur no liability to the Trust for acting upon Oral
Instructions given to the Custodian hereunder concerning such transactions.
J. Books and Records. The Custodian will (i) set up and maintain
proper books of account and complete records of all transactions in the
accounts maintained by the Custodian hereunder in such manner as will meet
the obligations of the Fund under the Act, with particular attention to
Section 31 thereof and Rules 3la-1 and 3la-2 thereunder and those records
are the property of the Trust, and (ii) preserve for the periods prescribed
by applicable Federal statute or regulation all records required to be so
preserved. All such books and records shall be the property of the Trust,
and shall be available, upon request, for inspection by duly authorized
officers, employees or agents of the Trust and employees of the SEC.
K. Internal Accounting Control Systems. The Custodian shall send
to the Trust any report received on the systems of internal accounting
control of the Custodian, or its agents or sub-custodians, as the Trust may
reasonably request from time to time.
L. No Management of Assets By Custodian. The Custodian performs
only the services of a custodian and shall have no responsibility for the
management, investment or reinvestment of the Securities or other assets
from time to time owned by any Fund. The Custodian is not a selling agent
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for Shares of any Fund and performance of its duties as custodian shall not
be deemed to be a recommendation to any Fund's depositors or others of
Shares of the Fund as an investment. The Custodian shall have no duties or
obligations whatsoever except such duties and obligations as are
specifically set forth in this Agreement, and no covenant or obligation
shall be implied in this Agreement against the Custodian.
M. Assistance to Trust. The Custodian shall take all reasonable
action, that the Trust may from time to time request, to assist the Trust
in obtaining favorable opinions from the Trust's independent accountants,
with respect to the Custodian's activities hereunder, in connection with
the preparation of the Fund's Form N- IA, Form N-SAR, or other annual
reports to the SEC.
N. Grant of Security Interest. The Trust hereby pledges to and
grants the Custodian a security interest in the assets of any Fund to
secure the payment of any liabilities of the Trust to the Custodian,
whether acting in its capacity as Custodian or otherwise, or on account of
money borrowed from the Custodian. This pledge is in addition to any other
pledge of collateral by the Trust to the Custodian.
ARTICLE IX
Initial Term; Termination
A. Initial Term. This Agreement shall become effective as of its
execution and shall continue in full force and effect until terminated as
hereinafter provided.
B. Termination. Either party hereto may terminate this Agreement
after the Initial Term for any reason by giving to the other party a notice
in writing specifying the date of such termination, which shall be not less
than ninety (90) days after the date of giving of such notice. If such
notice is given by the Trust, it shall be accompanied by a copy of a
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resolution of the Board of Trustees of the Trust, certified by the
Secretary of the Trust, electing to terminate this Agreement and
designating a successor custodian or custodians. In the event such notice
is given by the Custodian, the Trust shall, on or before the termination
date, deliver to the Custodian a copy of a resolution of the Board of
Trustees of the Trust, certified by the Secretary, designating a successor
custodian or custodians to act on behalf of the Trust. In the absence of
such designation by the Trust, the Custodian may designate a successor
custodian which shall be a bank or trust company having not less than
$100,000,000 aggregate capital, surplus, and undivided profits. Upon the
date set forth in such notice this Agreement shall terminate, and the
Custodian, provided that it has received a notice of acceptance by the
successor custodian, shall deliver, on that date, directly to the successor
custodian all Securities and moneys then owned by the Fund and held by it
as Custodian. Upon termination of this Agreement, the Trust shall pay to
the Custodian on behalf of the Trust such compensation as may be due as of
the date of such termination. The Trust agrees on behalf of the Trust that
the Custodian shall be reimbursed for its reasonable costs in connection
with the termination of this Agreement.
C. Failure to Designate Successor Custodian. If a successor
custodian is not designated by the Trust, or by the Custodian in accordance
with the preceding paragraph, or the designated successor cannot or will
not serve, the Trust shall, upon the delivery by the Custodian to the Trust
of all Securities (other than Securities held in the Book-Entry System
which cannot be delivered to the Trust) and moneys then owned by the Trust,
be deemed to be the custodian for the Trust, and the Custodian shall
thereby be relieved of all duties and responsibilities pursuant to this
Agreement, other than the duty with respect to Securities held in the Book-
Entry System, which cannot be delivered to the Trust, which shall be held
by the Custodian in accordance with this Agreement.
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ARTICLE X
Force Majeure
Neither the Custodian nor the Trust shall be liable for any failure
or delay in performance of its obligations under this Agreement arising out
of or caused, directly or indirectly, by circumstances beyond its
reasonable control, including, without limitation, acts of God;
earthquakes; fires; floods; wars; civil or military disturbances; sabotage;
strikes; epidemics; riots; power failures; computer failure and any such
circumstances beyond its reasonable control as may cause interruption, loss
or malfunction of utility, transportation, computer (hardware or software)
or telephone communication service; accidents; labor disputes; acts of
civil or military authority; governmental actions; or inability to obtain
labor, material, equipment or transportation; provided, however, that the
Custodian, in the event of a failure or delay, shall use its best efforts
to ameliorate the effects of any such failure or delay.
ARTICLE XI
Miscellaneous
A. Designation of Authorized Persons. Appendix A sets forth the
names and the signatures of all Authorized Persons as of this date, as
certified by the Secretary of the Trust. The Trust agrees to furnish to
the Custodian a new Appendix A in form similar to the attached Appendix A,
if any present Authorized Person ceases to be an Authorized Person or if
any other or additional Authorized Persons are elected or appointed. Until
such new Appendix A shall be received, the Custodian shall be fully
protected in acting under the provisions of this Agreement upon Oral
Instructions or signatures of the then current Authorized Persons as set
forth in the last delivered Appendix A.
B. Limitation of Personal Liability. No recourse under any
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obligation of this Agreement or for any claim based thereon shall be had
against any organizer, shareholder, officer, trustee, past, present or
future as such, of the Trust or of any predecessor or successor, either
directly or through the Trust or any such predecessor or successor, whether
by virtue of any constitution, statute or rule of law or equity, or by the
enforcement of any assessment or penalty or otherwise; it being expressly
agreed and understood that this Agreement and the obligations thereunder
are enforceable solely against the Trust, and that no such personal
liability whatever shall attach to, or is or shall be incurred by, the
organizers, shareholders, officers, or trustees of the Trust or of any
predecessor or successor, or any of them as such. To the extent that any
such liability exists, it is hereby expressly waived and released by the
Custodian as a condition of, and as a consideration for, the execution of
this Agreement.
C. Authorization By Board. The obligations set forth in this
Agreement as having been made by the Trust have been made by the Board of
Trustees, acting as such Trustees for and on behalf of the Trust, pursuant
to the authority vested in them under the laws of the Commonwealth of
Massachusetts, the Declaration of Trust and the By-Laws of the Trust. This
Agreement has been executed by Officers of the Trust as officers, and not
individually, and the obligations contained herein are not binding upon any
of the Trustees, Officers, agents or holders of shares, personally, but
bind only the Trust.
D. Custodian's Consent to Use of Its Name. The Trust shall review
with the Custodian all provisions of the Prospectus and any other documents
(including advertising material) specifically mentioning the Custodian
(other than merely by name and address) and shall obtain the Custodian's
consent prior to the publication and/or dissemination or distribution
thereof.
24
<PAGE>
E. Notices to Custodian. Any notice or other instrument in
writing, authorized or required by this Agreement to be given to the
Custodian, shall be sufficiently given if addressed to the Custodian and
mailed or delivered to it at its offices at Firstar Bank Center, 425 Walnut
Street, M. L. 6118, Cincinnati, Ohio 45202, attention Mutual Fund Custody
Department, or at such other place as the Custodian may from time to time
designate in writing.
F. Notices to Trust. Any notice or other instrument in writing,
authorized or required by this Agreement to be given to the Trust shall be
sufficiently given when delivered to the Trust or on the second Business
Day following the time such notice is deposited in the U.S. mail postage
prepaid and addressed to the Trust at its office at 9802 Nicholas, Suite
250, Omaha, Nebraska 68114 or at such other place as the Trust may from
time to time designate in writing.
G. Amendments In Writing. This Agreement, with the exception of
the Appendices, may not be amended or modified in any manner except by a
written agreement executed by both parties with the same formality as this
Agreement, and authorized and approved by a resolution of the Board of
Trustees of the Trust.
H. Successors and Assigns. This Agreement shall extend to and
shall be binding upon the parties hereto, and their respective successors
and assigns; provided, however, that this Agreement shall not be assignable
by the Trust or by the Custodian, and no attempted assignment by the Trust
or the Custodian shall be effective without the written consent of the
other party hereto.
I. Governing Law. This Agreement shall be construed in accordance
with the laws of the State of Ohio.
J. Jurisdiction. Any legal action, suit or proceeding to be
instituted by either party with respect to this Agreement shall be brought
25
<PAGE>
by such party exclusively in the courts of the State of Ohio or in the
courts of the United States for the Southern District of Ohio, and each
party, by its execution of this Agreement, irrevocably (i) submits to such
jurisdiction and (ii) consents to the service of any process or pleadings
by first class U.S. mail, postage prepaid and return receipt requested, or
by any other means from time to time authorized by the laws of such
jurisdiction.
K. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
L. Headings. The headings of paragraphs in this Agreement are for
convenience of reference only and shall not affect the meaning or
construction of any provision of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective Officers, thereunto duly authorized as of
the day and year first above written.
ATTEST: TRUST: Value Trend Funds
/s/ Jeff Provence By: /s/ Ross Provence
_____________________ ________________________
Title: President
ATTEST: CUSTODIAN: Firstar Bank, N.A.
/s/ R Wessendoy By: /s/ Lynette C. Gibson
______________________ _________________________
Title: Vice President
APPENDIX A
Authorized Persons Specimen Signatures
President: Ross C. Provence /s/ Ross C. Provence
__________________ ___________________
Vice President: Brad DeHaven /s/ Brad DeHaven
__________________ ___________________
Secretary: Jeff Provence /s/ Jeff Provence
__________________ ___________________
Treasurer: Jeff Provence /s/ Jeff Provence
__________________ ___________________
Assistant
Treasurer:
__________________ ___________________
Adviser Employees:
__________________ ___________________
Transfer Agent/Fund Accountant
Employees: Gregory B. Getts /s/ Gregory B. Getts
__________________ ___________________
Justine S. Marquit /s/ Justine S. Marquit
__________________ ___________________
Rita White /s/ Rita White
__________________ ___________________
__________________ ___________________
* Authority restricted; does not
include:_________________________________________________________________
______________________________________________________
APPENDIX B
TO THE CUSTODY AGREEMENT BETWEEN
VALUE TREND FUNDS
AND THE FIRSTAR BANK
February 10, 2000
FUND CUSIP
Value Trend Large Cap Fund 92046P107
Value Trend Links Fund 92046P206
VALUE TREND FUNDS
By: /s/ Ross Provence
___________________
Its: President
___________________
FIRSTAR BANK
By: Lynette C. Gibson
___________________
Its: Vice Presient
___________________
APPENDIX C
Agents of the Custodian
The following agents are employed currently by Firstar Bank, N.A. for
securities processing and control;
The Depository Trust Company (New York)
7 Hanover Square
New York, NY 10004
The Federal Reserve Bank
Cincinnati and Cleveland Branches
Bank of New York
1 Wall Street
New York, NY 10286
(For Foreign Securities and certain non-DTC eligible
Securities)
APPENDIX D
Standards Service Guide
Firstar, N.A.
Domestic Custody Fee Schedule for the Value Trend Funds
Firstar Bank, as Custodian, will receive monthly compensation for services
according to the terms of the following Schedule:
I. Portfolio Transaction Fees:
(a) For each repurchase agreement transaction $7.00
(b) For each portfolio transaction processed through
DTC or Federal Reserve $9.00
(c) For each portfolio transaction processed through
Our New York custodian $25.00
(d) For each GNMA/Amortized Security Purchase $25.00
(e) For each GNMA Prin/Int Paydown, GNMA sales $8.00
(f) For each covered call option/future contract written,
Exercised or expired $10.00
(g) For each Cedel/Euro clear transaction $80.00
(h) For each Disbursement (Fund expenses only) $5.00
A transaction is a purchase/sale of a security, free receipt/free delivery
(exclude initial conversion), maturity, tender or exchange:
II. Market Value Fee
Based upon an annual rate of: Miliion
.0003 (3 Basis Points) on First $20
.0002 (2 Basis Points) on Next $30
.00015 (1.5 Basis Points) on Balance
III. Monthly Minimum Fee-Per Fund $300
IV. Out-of-Pocket Expenses
The only out-of-pocket expenses charged to your account will be shipping
fees or transfer fees.
V. IRA Documents
Per Shareholder/year to hold each IRA Document $4.00
VI. Earnings Credits
On a monthly basis any earnings credits generated from uninvested custody
balances will be applied against cash management service fees generated.
Firstar Bank
Cash Management Fee Schedule for Value Trend Funds
Services Unit Cost ($)Monthly Cost ($)
D.D.A. Account Maintenance 15.00
Deposits .42
Deposited Items .109
Checks Paid .159
Balance Reporting - P.C. Access 50.00 1st acct.
35.00 each add'l
ACH Transaction .105
ACH Monthly Maintenance 40.00
ACH Additions, Deletions, Changes 6.00
ACH Stop Payment 5.00
ACH Debits .12
Deposited Items Returned 6.00
International Items Returned 10.00
NSF Returned Checks 25.00
Stop Payments 22.00
Data Transmission per account 115.00
Drafts Cleared .179
Lockbox Maintenance 60.00
Lockbox Items Processed .34
Miscellaneous Lockbox Items .12
Positive Pay .06
Issued Items .015
Invoicing for Service Charge 15.00
Wires Incoming
Domestic 11.00
International 11.00
Wires Outgoing
Domestic International
Repetitive 14.00 Repetitive 35.00
Non-Repetitive 13.00 Non-Repetitive 40.00
PC - Initiated Wires:
Domestic International
Repetitive 10.00 Repetitive 25.00
Non-Repetitive 11.00 Non-Repetitive 25.00
Customer Intitiated 9.00
Uncollected Charge - Firstar Prime Rate as of first of the month plus 4%
Other available cash management services are priced separately.
EXHBIT 99.23J
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report dated July 17, 1999 and to all references to our firm included in
or made a part of this Post-Effective Amendment No. 2 to the Value Trend
Funds' Registration Statement on Form N-1A (File No. 811-09041), including
the references to our firm under the heading "Financial Highlights" in the
Prospectus and the heading "Auditors" in the Statement of Additional
Information.
<McCurdy & Associates>
McCurdy & Associates CPA's, Inc.
Westlake, Ohio
April 25, 2000
EXHIBIT 99.23P
CODE OF ETHICS
VALUE TREND FUNDS &
VALUE TREND CAPITAL MANAGEMENT, LP.
I. Statement of General Principles
This Code of Ethics has been adopted by Value Trend Funds (the
"Trust")and its adviser, Value Trend Capital Management, LP. (the
"Adviser"), for the purpose of instructing all employees, officers,
directors and trustees of the Trust and/or the Adviser in their ethical
obligations and to provide rules for their personal securities
transactions. All such employees, officers, directors and trustees owe a
fiduciary duty to the Trust and its shareholders. A fiduciary duty
means a duty of loyalty, fairness and good faith towards the Trust and
its shareholders, and the obligation to adhere not only to the specific
provisions of this Code but to the general principles that guide the
Code. These general principles are:
The duty at all times to place the interests of the Trust and its
shareholders first;
The requirement that all personal securities transactions be
conducted in a manner consistent with the Code of Ethics and in such a
manner as to avoid any actual or potential conflict of interest or any
abuse of any individual's position of trust and responsibility; and
The fundamental standard that such employees, officers, directors
and trustees should not take inappropriate advantage of their positions,
or of their relationship with the Trust or its shareholders.
It is imperative that the personal trading activities of the
employees, officers, directors and trustees of the Trust and the
Adviser, respectively, be conducted with the highest regard for these
general principles in order to avoid any possible conflict of interest,
any appearance of a conflict, or activities that could lead to
disciplinary action. This includes executing transactions through or for
the benefit of a third party when the transaction is not in keeping with
the general principles of this Code. All personal securities
transactions must also comply with the Securities & Exchange
Commission's Rule 17j-1. Under this rule, no Employee may:
employ any device, scheme or artifice to defraud the Trust or any
of its shareholders;
make to the Trust or any of its shareholders any untrue statement
of a material fact or omit to state to such client a material fact
necessary in order to make the statements made, in light of the
circumstances under which they are made, not misleading;
engage in any act, practice, or course of business which operates
or would operate as a fraud or deceit upon the Trust or any of its
shareholders; or
engage in any manipulative practice with respect to the Trust or
any of its shareholders.
II. Definitions
A. Advisory Employees: Employees who participate in or make
recommendations with respect to the purchase or sale of securities.
B. Beneficial Interest: ownership or any benefits of ownership,
including the opportunity to directly or indirectly profit or otherwise
obtain financial benefits from any interest in a security.
C. Compliance Officer: Ross C. Provence, or with respect to
Ross C. Provence, a majority of the Disinterested Trustees.
D. Disinterested Trustees: trustees whose affiliation with the
Trust is solely by reason of being a trustee of the Trust.
E. Employee Account: each account in which an Employee or a
member of his or her family has any direct or indirect Beneficial
Interest or over which such person exercises control or influence,
including, but not limited to, any joint account, partnership, corporation,
trust or estate. An Employee's family members include the Employee's spouse,
minor children, any person living in the home of the Employee and any
relative of the Employee (including in laws) to whose support an Employee
directly or indirectly contributes.
F. Employees: the employees, officers, and trustees of the
Trust and the employees, officers and directors of the Adviser,
including Advisory Employees.
G. Exempt Transactions: transactions which are 1) effected in
an amount or in a manner over-which the Employee has no direct or
indirect influence or control, 2) pursuant to a systematic dividend
reinvestment plan, systematic cash purchase plan or systematic
withdrawal plan, 3) in connection with the exercise or sale of rights to
purchase additional securities from an issuer and granted by such issuer
pro-rata to all holders of a class of its securities, 4) in
connection with the call by the issuer of a preferred stock or bond, 5)
pursuant to the exercise by a second party of a put or call option, 6)
closing transactions no more than five business days prior to the
expiration of a related put or call option, 7) with respect to
affiliated registered open-end investment companies.
H. Funds: any series of the Trust.
I. Related Entity: a partnership or other entity 1) in which
persons unaffiliated with the Adviser or any Employee (and not otherwise
subject to this Code) participate and 2) to which the Adviser or an
Employee acts as adviser, general partner or other fiduciary.
J. Related Securities: securities issued by the same issuer or
issuer under common control, or when either security gives the holder
any contractual rights with respect to the other security, including
options, warrants or other convertible securities.
K. Securities: any note, stock, treasury stock, bond,
debenture, evidence of indebtedness, certificate of interest or
participation in any profit sharing agreement, collateral-trust
certificate, pre-organization certificate or subscription, transferable
share, investment contract, voting-trust certificate, certificate of
deposit for a security, fractional undivided interest in oil, gas or
other mineral rights, or, in general, any interest or instrument
commonly known as a "security," or any certificate or interest or
participation in temporary or interim certificate for, receipt for,
guarantee of, or warrant or right to subscribe to or purchase (including
options) any of the foregoing; except for the following: 1) securities
issued by the government of the United States, 2) bankers' acceptances,
3) bank certificates of deposit, 4) commercial paper, and 5) shares of
registered open-end investment companies.
L. Securities Transaction: the purchase or sale, or any action
to accomplish the purchase or sale, of a Security for an Employee
Account.
III. Personal Investment Guidelines
A. Personal Accounts:
1 . The Personal Investment Guidelines in this Section III do
not apply to Exempt Transactions. Employees must remember that
regardless of the transaction's status as exempt or not exempt, the
Employee's fiduciary obligations remain unchanged.
2. While trustees of the Trust are subject at all times to the
fiduciary obligations described in this Code, the Personal Investment
Guidelines and Compliance Procedures in Sections III and IV of this Code
apply to Disinterested Trustees only if the trustee knew, or in the
ordinary course of fulfilling the duties of that position, should have
known, that during the fifteen days immediately preceding or after the
date of the trustee's transaction that the same Security or a Related
Security was or was to be purchased or sold for a Fund or that such
purchase or sale for a Fund was being considered, in which case such
Sections apply only to such transaction.
3. A Securities Transaction effected on behalf of a Related
Entity is subject to this Code because the Adviser or an Employee has
an interest in the Related Entity. While the Adviser and each Employee
is subject at all times to the fiduciary obligations described in this.
Code, paragraphs 4 and 5 of this Section III do not apply to a
Securities Transaction effected on behalf of a Related Entity.
4. Except as provided in paragraph 3 of this Section 111,
Employees may not execute a Securities Transaction on a day during
which a purchase or sell order in that same Security or a Related
Security is pending for a Fund. Securities Transactions executed in
violation of this prohibition shall be unwound or, if not possible or
practical, the Employee must disgorge to the Fund the value received by
the Employee due to any favorable price differential received by the
Employee. For example, if the Employee buys 100 shares at $10 per
share, and the Fund buys 1000 shares at $11 per share, the Employee will
pay $100 (100 shares x $1 differential) to the Fund.
5. Except as provided in paragraph 3 on this Section III, an
Advisory Employee may not execute a Securities Transaction within seven
(7) calendar days before or after a transaction in the same Security or
a Related Security has been executed on behalf of a Fund. If the
Compliance Officer determines that a transaction has violated this
prohibition, the transaction shall be unwound or, if not possible or
practical, the Employee must disgorge to the Fund the value received by
the Employee due to any favorable price differential received by the
Employee.
6. In connection with a private placement acquisition the
Employee must pre- clear the acquisition with the Compliance Officer.
The Compliance Officer will take into account, among other factors,
whether the investment opportunity should be reserved for a Fund, and
whether the opportunity is being offered to the Employee by virtue of
the Employee's position with the Trust or the Adviser. Employees who
have been authorized to acquire securities in a private placement will,
in connection therewith, be required to disclose that investment if and
when the Employee takes part in any subsequent investment in the same
issuer. In such circumstances, the determination to purchase Securities
of that issuer on behalf of a Fund will be subject to an independent
review by personnel of the Adviser with no personal interest in the
issuer.
7. Employees are prohibited from acquiring any Securities in
an initial public offering without pre clearance by the Compliance
Officer.
B. Other Restrictions:
1. Employees are prohibited from serving on the boards of
directors of publicly traded companies, absent prior authorization by
the Compliance Officer. The consideration of prior authorization will be
based upon a determination that the board service will be consistent
with the interests of the Trust and the Funds' shareholders. In the
event that board service is authorized, Employees serving as directors
will be isolated from other Employees making investment decisions with
respect to the securities of the company in question.
2. No Employee may accept from a customer or vendor an amount
in excess of $50 per year in the form of gifts or gratuities, or as
compensation for services. If there is a question regarding receipt of a
gift, gratuity or compensation, it is to be reviewed by the Compliance
Officer.
IV. Compliance Procedures
A. Employee Disclosure and Certification:
1. At the commencement of employment with the Trust or the
Adviser, each Employee must certify that he or she has read and
understands this Code and recognizes that he or she is subject to it,
and must disclose all personal Securities holdings.
2. The above disclosure and certification is also required
annually, along with an additional certification that the Employee has
complied with the requirements of this Code and has disclosed or
reported all personal Securities Transactions required to be disclosed
or reported pursuant to the requirements of this Code.
B. Compliance:
1. All Employees must provide copies of all broker
confirmations and periodic account statements to the Compliance
Officer. Each Employee must report, no later than ten (10) days after
the close of each calendar quarter, on the Securities Transaction Report
form provided by the Trust or the Adviser, all transactions in which the
Employee acquired any direct or indirect Beneficial Interest in a
Security, including Exempt Transactions but excluding transactions
effected on behalf of a Related Entity, and certify that he or she has
reported all transactions required to be disclosed pursuant to the
requirements of this Code.
2. The Compliance Officer will, on a quarterly basis, check the
trading confirmations provided by brokers to verify that the Employee
has not violated the Code. The Employee's annual disclosure of
Securities holdings will be reviewed by the Compliance Officer for
compliance with this Code, including transactions that reveal a pattern
of trading inconsistent with this Code.
3. If an Employee violates this Code, the Compliance Officer
will report the violation to management personnel of the Trust and the
Adviser for appropriate remedial action which, in addition to the
actions specifically delineated in other sections of this Code, may
include a reprimand of the Employee, or suspension or termination of the
Employee's relationship with the Trust and or the Adviser.
4. For purposes of reviewing the Securities Transactions
permitted by paragraph 3 of Section 111, the Compliance Officer will, on
a quarterly basis, provide the Disinterested Trustees with a report
which discloses all Securities Transactions effected on behalf of a
Related Entity if the Fund sold or purchased the same Security or
Related Security on the same day. The report to will disclose, for the
Fund transaction and the Related Entity transaction, the name of the
broker, number of shares, commission and price paid. The Compliance
Officer will also disclose to the Disinterested Trustees the name of
each Related Entity and the percentage of each Related Entity not owned
by Employees or the Adviser, and report to the Disinterested Trustees
any material change in such information.
5. The management personnel of the Trust will prepare an annual
report to the Trust's board of trustees that summarizes existing
procedures and any changes in the procedures made during the past year.
The report will identify any violations of this Code, any significant
remedial action during the past year and any recommended procedural or
substantive changes to this Code based on management's experience under
this Code, evolving industry practices or legal developments.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> LINKS FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> DEC-31-1999
<INVESTMENTS-AT-COST> 617,750
<INVESTMENTS-AT-VALUE> 879,111
<RECEIVABLES> 19,688
<ASSETS-OTHER> 1,798
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 900,597
<PAYABLE-FOR-SECURITIES> 14,462
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 948
<TOTAL-LIABILITIES> 15,410
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 647,514
<SHARES-COMMON-STOCK> 60,137
<SHARES-COMMON-PRIOR> 5,000
<ACCUMULATED-NII-CURRENT> (2,838)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (20,849)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 261,361
<NET-ASSETS> 885,187
<DIVIDEND-INCOME> 735
<INTEREST-INCOME> 582
<OTHER-INCOME> 0
<EXPENSES-NET> 3,787
<NET-INVESTMENT-INCOME> (2,470)
<REALIZED-GAINS-CURRENT> (10,432)
<APPREC-INCREASE-CURRENT> 220,495
<NET-CHANGE-FROM-OPS> 207,593
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 22,135
<NUMBER-OF-SHARES-REDEEMED> (19,878)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 450,687
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,787
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,787
<AVERAGE-NET-ASSETS> 565,495
<PER-SHARE-NAV-BEGIN> 10.95
<PER-SHARE-NII> (0.04)
<PER-SHARE-GAIN-APPREC> 3.81
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 14.72
<EXPENSE-RATIO> 1.34
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> LARGE CAP GROWTH FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> DEC-31-1999
<INVESTMENTS-AT-COST> 495,965
<INVESTMENTS-AT-VALUE> 687,775
<RECEIVABLES> 0
<ASSETS-OTHER> 235
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 688,010
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 663
<TOTAL-LIABILITIES> 663
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 488,496
<SHARES-COMMON-STOCK> 44,996
<SHARES-COMMON-PRIOR> 5,000
<ACCUMULATED-NII-CURRENT> (1,060)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 8,101
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 191,810
<NET-ASSETS> 687,347
<DIVIDEND-INCOME> 1,026
<INTEREST-INCOME> 823
<OTHER-INCOME> 0
<EXPENSES-NET> 2,650
<NET-INVESTMENT-INCOME> (801)
<REALIZED-GAINS-CURRENT> 17,960
<APPREC-INCREASE-CURRENT> 157,010
<NET-CHANGE-FROM-OPS> 174,169
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 216,796
<NUMBER-OF-SHARES-REDEEMED> (14,403)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 376,562
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,650
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,650
<AVERAGE-NET-ASSETS> 427,106
<PER-SHARE-NAV-BEGIN> 10.97
<PER-SHARE-NII> (0.02)
<PER-SHARE-GAIN-APPREC> 4.33
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 15.28
<EXPENSE-RATIO> 1.24
</TABLE>
