U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /x/
Pre-Effective Amendment No. 1
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Post-Effective Amendment No.
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /x/
Amendment No. 1
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(Check appropriate box or boxes)
CHECK INVESTMENT TRUST
(Exact Name of Registrant as Specified in Charter)
575 Anton Boulevard, Suite 510
Costa Mesa, California, 92626
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (714) 641-3579
Steven G. Check
Check Capital Management
575 Anton Bouelvard, Suite 510
Costa Mesa, California 92626
(Name and Address of Agent for Service)
Copies to:
Wade R. Bridge, Esq.
Countrywide Fund Services, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
Approximate Date of Proposed Public Offering: As soon as practicable after this
Registration Statement becomes effective.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission acting pursuant to said Section 8(a)
may determine.
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CHECK INVESTMENT TRUST
CROSS REFERENCE SHEET
PURSUANT TO RULE 481(A)
UNDER THE SECURITIES ACT OF 1933
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PART A
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Item No. Registration Statement Caption Caption in Prospectus
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1. Front and Back Cover Pages Front and Back Cover Pages
2. Risk/Return Summary: Overview;
Investments, Risks, and Performance Investment Objective,
Investment Strategies and
Risk Considerations
3. Risk/Return Summary: Fee Table Expense Information
4. Investment Objectives, Principal Investment Objective,
Investment Strategies, and Related Investment Strategies and
Risks Risk Considerations
5. Management's Discussion of Fund Inapplicable
Performance
6. Management, Organization, and Operation of the Fund
Capital Structure
7. Shareholder Information How to Purchase Shares; How
to Redeem Shares;
Shareholder Services
8. Distribution Arrangements Dividends and Distributions;
Taxes
9. Financial Highlights Information Inapplicable
PART B
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Caption in Statement
of Additional
Item No. Registration Statement Caption Information
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10. Cover Page and Table of Contents Cover Page and Table of
Contents
11. Fund History Description of the Trust
12. Description of the Fund and Its Description of the Trust;
Investments and Risks Investment Limitations;
Description of Bond Ratings
(i)
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13. Management of the Fund Trustees and Officers
14. Control Persons and Principal Inapplicable
Holders of Securities
15. Investment Advisory and Other Services Investment Adviser
16. Brokerage Allocation and Other Brokerage
Practices
17. Capital Stock and Other Securities Description of the Trust
18. Purchase, Redemption and Pricing of Redemptions in Kind;
Shares Purchase of Shares;
Redemption of Shares; Net
Asset Value Determination
19. Taxation of the Fund Additional Tax Information
20. Underwriters Other Services
21. Calculation of Performance Data Calculation of Performance
Data
22. Financial Statements Financial Statements and
Reports
PART C
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The information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
(ii)
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PROSPECTUS
JULY 1, 1999
CHECK
INVESTMENT TRUST
PROSPECTUS
CHECK VALUE FUND
This Prospectus has information you should know before you invest. Please read
it carefully and retain it with your investment records.
These Securities have not been approved or disapproved by the Securities and
Exchange Commission nor has the Securities and Exchange Commission passed upon
the accuracy or adequacy of this Prospectus. Any representation to the contrary
is a criminal offense.
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PROSPECTUS
July 1, 1999
CHECK VALUE FUND
A SERIES OF THE
CHECK INVESTMENT TRUST
312 WALNUT STREET, 21ST FLOOR
CINCINNATI, OHIO 45202-4094
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Check Investment Trust currently offers one series of shares to investors,
the CHECK VALUE FUND (the "Fund").
The Fund's investment objective is to provide long-term capital
appreciation. The Fund seeks to achieve its objective by investing primarily in
common stocks.
Check Capital Management Inc. (the "Adviser"), 575 Anton Boulevard, Suite
510, Costa Mesa, California 92626, manages the Fund's investments. The Adviser
is an independent investment- advisory firm that has advised individual and
institutional clients since 1987.
This Prospectus has information you should know before you invest. Please
read it carefully and keep it with your investment records.
TABLE OF CONTENTS
Overview...................................................................
Expense Information........................................................
Investment Strategies and
Risk Considerations......................................................
How to Purchase Shares.....................................................
How to Redeem Shares.......................................................
Shareholder Services.......................................................
Dividends and Distributions................................................
Taxes......................................................................
Operation of the Fund......................................................
Calculation of Share Price.................................................
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FOR INFORMATION OR ASSISTANCE IN OPENING AN ACCOUNT, PLEASE CALL:
NATIONWIDE (TOLL-FREE) . . . . . . . . . . . . . . . 800-404-7912
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OVERVIEW
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Check Value Fund seeks to provide long-term capital appreciation.
WHAT ARE THE FUND'S PRINCIPAL INVESTMENT STRATEGIES?
The Check Value Fund invests primarily in the common stocks of companies
whose earnings have shown growth. Before investing in the stock of any business,
the Adviser first estimates the worth, or intrinsic value, of the business.
Based upon the intrinsic value, a purchase price is determined. The Adviser
believes the stock market, with its inherent volatility, irrationally
underprices companies on a periodic basis. The Adviser attempts to take
advantage of such opportunities and purchase proven growth stocks at undervalued
prices.
Although the Fund invests primarily in common stocks, the Fund may also
invest in securities convertible into common stock, such as convertible
preferred stocks. In addition, the Fund may borrow money and sell stocks short
in attempting to achieve its investment objective.
WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUND?
The return on and value of an investment in the Fund will fluctuate in
response to stock market movements. Stocks are subject to market risks and
fluctuations in value due to earnings, economic conditions and other factors
beyond the control of the Adviser. As result, there is a risk that you may lose
money by investing in the Fund.
The Fund is non-diversified and, as such, it has the option of committing a
larger portion of its assets to individual securities when investment
opportunities arise. If the price of one or more of these securities should
decrease, it would have a greater impact on the Fund's share price than on a
diversified fund.
The Fund will not concentrate in securities of issuerers in a particular
industry or group of industries. However, the Fund, at any given time, may have
a significant portion (less than 25%) of its assets in a particular industry and
other closely related industries. When the Fund invests in a particular industry
and other closely related industries, the Fund may be subjected to greater risk
because any movements may expose you to above average financial and market risk.
The Fund may borrow money, which increases the potential for gain or loss
on the Fund's portfolio securities. Therefore, if employed, borrowing will
increase the possibility of fluctuation in the Fund's net asset value. This is
the speculative factor known as "leverage".
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Further risks associated with an investment in the Fund include the Fund's
ability to sell stocks short. Positions in shorted securities have the potential
for greater losses than long positions (purchases) in stocks. The loss on a
stock purchased is limited to the amount paid for the stock plus transaction
costs, while a stock sold short has no such limit. Therefore, in theory, stocks
sold short have unlimited risk.
EXPENSE INFORMATION
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
SHAREHOLDER FEES (fees paid directly from your investment)
Sales Load Imposed on Purchases . . . . . . . . . . . . None
Sales Load Imposed on Reinvested Dividends . . . . . . . None
Redemption Fee. . . . .. . . . . . . . . . . . . . . . . None*
* A wire transfer fee is charged by the Fund's Custodian in the case of
redemptions made by wire. Such fee is subject to change and is currently
$8. See "How to Redeem Shares."
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
Management Fees . . . . . . . . . . . . . . . . 1.00%
Distribution (12b-1) Fees . . . . . . . . . . . None
Estimated Other Expenses. . . . . . . . . . . . .60%
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Total Annual Fund Operating Expenses . . . . . 1.60%(1)
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Fee Waiver and Expense Reimbursement . . . . . 1.60%(2)
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Net Expenses . . . . . . . . . . . . . . . . . 0.00%(2)
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(1) This table represents estimated Gross Expenses
(2) Pursuant to a written contract between the Adviser and the Fund, the
Adviser will waive all management fees and reimburse other expenses to
maintain total annual operating expenses of the Fund at 0.00% of its
average daily net assets. The Adviser has agreed to maintain these expense
limitations with regard to the Fund through July 1, 2000.
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EXAMPLE:
This Example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds. It assumes that you
invest $10,000 in the Fund for the time periods indicated and then redeem all of
your shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
1 Year 3 Years
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$0 $242
INVESTMENT STRATEGIES AND RISK CONSIDERATIONS
The Check Investment Trust (the "Trust") has one fund, the Check Value
Fund. The Fund's investment objective may be changed by the Board of Trustees
without shareholder approval, but only after notification has been given to
shareholders. Unless otherwise indicated, all investment practices and
limitations of the Fund are non-fundamental policies which may be changed by the
Board of Trustees without shareholder approval.
PRINCIPAL INVESTMENT STRATEGIES. In selecting stocks for the Fund, the
Adviser primarily selects as candidates those companies that have a history of
growth, strong competitive positions in their markets and experienced, capable
management. The Adviser considers shares of stock to be part-ownership in a
business and believes the most intelligent investing is businesslike investing.
By purchasing proven growth companies at a significant discount to intrinsic
value, the Adviser believes it can generate attractive returns.
Although the Fund invests primarily in common stocks, the Fund may also
invest in securities convertible into common stock, such as convertible
preferred stocks.
The Fund may sell stocks short. In a short sale, the Fund sells stock it
does not own and makes delivery with securities borrowed from a broker. The Fund
then becomes obligated to replace the security borrowed by purchasing it at the
market price at the time of replacement. This price may be more or less than the
price at which the stock was sold by the Fund. Until the stock is replaced, the
Fund is obligated to pay to the lender any dividends or interest accruing during
the period of the loan. In
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order to borrow the security, the Fund may be required to pay a premium that
would increase the cost of the stock sold. The proceeds of the short sale will
be retained by the broker, to the extent necessary to meet margin requirements,
until the short position is closed out.
The Fund may borrow money in an amount not exceeding 33.3% of the Fund's
total assets. The Fund may pledge assets in connection with borrowing but will
not pledge more than one-third of its total assets. The Fund's policies on
borrowing and pledging are fundamental policies which may not be changed without
the affirmative vote of a majority of its outstanding shares.
When the Adviser believes substantial price risks exist for common stocks
because of uncertainties in the investment outlook or when in the judgment of
the Adviser it is otherwise warranted in selling to manage the Fund's portfolio,
the Fund may temporarily hold all or a portion of its assets in cash or cash
equivalents or in short-term obligations such as bank debt instruments
(certificates of deposit, bankers' acceptances and time deposits), commercial
paper, U.S. Government obligations having a maturity of less than one year,
shares of money market investment companies, or repurchase agreements. The Fund
may not achieve its investment objective during periods when the Fund has taken
such a temporary defensive position.
The Fund does not intend to use short-term trading as a primary means of
achieving its investment objective. However, the Fund's rate of portfolio
turnover will depend upon market and other conditions, and it will not be a
limiting factor when portfolio changes are deemed necessary or appropriate by
the Adviser. High turnover involves correspondingly greater commission expenses
and transaction costs and may result in the Fund recognizing greater amounts of
income and capital gains, which would increase the amount of income and capital
gains which the Fund must distribute to shareholders in order to maintain its
status as a regulated investment company and to avoid the imposition of federal
income or excise taxes. See "Taxes."
RISK CONSIDERATIONS. The Fund is designed for investors who are investing
for the long term and it is not intended for investors seeking assured income.
Changes in market prices can occur at any time. Accordingly, there is no
assurance that the Fund will achieve its investment objective. When you redeem
your shares, they may be worth more or less than what you paid for them.
The Fund is a non-diversified fund and therefore may invest more than 5% of
its total assets in the securities of one or more issuers. Because a relatively
high percentage of the assets of the Fund may be invested in the securities of a
limited number of
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issuers, the value of shares of the Fund may be more sensitive to any single
economic, business, political or regulatory occurrence than the value of shares
of a diversified investment company.
The Fund will not concentrate in any particular industry. However, if the
Adviser invests a significant portion of its assets in a particular industry and
other closely related industries, the Fund is subject to greater risk because
any movements may expose your investment to greater than average financial and
market risk.
Because the Fund normally invests most of its assets in stocks, the value
of the Fund's portfolio will be affected by changes in the stock markets. At
times, the stock markets can be volatile, and stock prices can change
substantially. This market risk will affect the Fund's net asset value per
share, which will fluctuate as the values of the Fund's portfolio securities
change. Not all stock prices change uniformly or at the same time and not all
stock markets move in the same direction at the same time. Other factors can
affect a particular stock's price (for example, poor earnings reports by an
issuer, loss of major customers, major litigation against an issuer, or changes
in general economic conditions or in government regulations affecting an
industry). Not all of these factors can be predicted.
The Fund may borrow money which magnifies the potential for gain or loss on
the portfolio securities of the Fund and, therefore, if employed, increases the
possibility of fluctuation in the Fund's net asset value. This is the
speculative factor known as leverage.
When the Fund engages in short selling activities, its short positions are
more risky than long positions, which are purchases in stocks. The loss on a
stock purchased is limited to the amount paid for the stock plus transaction
costs, while a stock sold short has no such limit. Therefore, in theory, stocks
sold short have unlimited risk.
HOW TO PURCHASE SHARES
Your initial investment in the Fund ordinarily must be at least $5,000. The
Trust may, in the Adviser's sole discretion, accept certain accounts with less
than the stated minimum initial investment. Shares of the Fund are sold on a
continuous basis at the net asset value next determined after receipt of a
purchase order by the Trust. Direct purchase orders received by the Trust's
transfer agent, Countrywide Fund Services, Inc. (the "Transfer Agent") by 4:00
p.m., Eastern time, are confirmed at that day's net asset value. Purchase orders
received by dealers prior to 4:00 p.m., Eastern time, on any business day and
transmitted to the Transfer Agent by 5:00 p.m., Eastern time,
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that day are confirmed at the net asset value determined as of the close of the
regular session of trading on the New York Stock Exchange on that day. It is the
responsibility of dealers to transmit properly completed orders so that they
will be received by the Transfer Agent by 5:00 p.m., Eastern time. Dealers may
charge a fee for effecting purchase orders. Direct investments received by the
Transfer Agent after 4:00 p.m., Eastern time, and orders received from dealers
after 5:00 p.m., Eastern time, are confirmed at the net asset value next
determined on the following business day.
INITIAL INVESTMENTS BY MAIL. You may open an account and make an initial
investment in the Fund by sending a check and a completed account application
form to Check Value Fund, P.O. Box 5354, Cincinnati, Ohio 45201-5354. Checks
should be made payable to the "Check Value Fund". An account application is
included in this Prospectus.
The Trust mails you confirmations of all purchases or redemptions of Fund
shares. Certificates representing shares are not issued. The Trust and the
Adviser reserve the right to limit the amount of investments and to refuse to
sell to any person.
You should be aware that the Fund's account application contains provisions
in favor of the Trust, the Transfer Agent and certain of their affiliates,
excluding such entities from certain liabilities (including, among others,
losses resulting from unauthorized shareholder transactions) relating to the
various services made available to investors.
If an order to purchase shares is canceled because your check does not
clear, you will be responsible for any resulting losses or fees incurred by the
Trust or the Transfer Agent in the transaction.
INITIAL INVESTMENTS BY WIRE. You may also purchase shares of the Fund by
bank wire. Please telephone the Transfer Agent (Nationwide call toll-free
800-404-7912) for instructions. You should be prepared to provide to us by mail
or facsimile, a completed account application with your signature.
Your investment will be made at the net asset value next determined after
your wire is received together with the account information indicated above. If
the Trust does not receive timely and complete account information, there may be
a delay in the investment of your money and any accrual of dividends. To make
your initial wire purchase, you are required to mail a completed account
application to the Transfer Agent. Your bank may impose a charge for sending
your wire. There is presently no fee for receipt of wired funds, but the
Transfer Agent reserves the right to charge shareholders for this service upon
thirty days' prior notice.
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ADDITIONAL INVESTMENTS. You may purchase and add shares to your account by
mail or by bank wire. Checks should be sent to Check Value, P.O. Box 5354,
Cincinnati, Ohio 45201-5354. Checks should be made payable to the "Check Value
Fund". Bank wires should be sent as outlined above. You may also make additional
investments at the Trust's offices at 312 Walnut Street, 21st Floor, Cincinnati,
Ohio 45202. Each additional purchase request must contain the name of your
account and your account number to permit proper crediting to your account.
Unless you are participating in the Automatic Investment Plan, all subsequent
investments must be $1000 or more.
HOW TO REDEEM SHARES
You may redeem shares of the Fund on each day that the Trust is open for
business. You will receive the net asset value per share next determined after
receipt by the Transfer Agent of your redemption request in the form described
below. Payment is normally made within three business days after tender in such
form, provided that payment in redemption of shares purchased by check will be
effected only after the check has been collected, which may take up to fifteen
days from the purchase date. To eliminate this delay, you may purchase shares of
the Fund by certified check or wire.
BY MAIL. You may redeem any number of shares from your account by sending a
written request to the Transfer Agent. The request must state the number of
shares or the dollar amount to be redeemed and your account number. The request
must be signed exactly as your name appears on the Trust's account records. If
the shares to be redeemed have a value of $25,000 or more, your signature must
be guaranteed by any of the eligible guarantor institutions outlined above. If
the name(s) or the address on your account has been changed within 30 days of
your redemption request, you will be required to request the redemption in
writing with your signature guaranteed, regardless of the value of the shares
being redeemed.
Written redemption requests may also direct that the proceeds be deposited
directly in a domestic bank or brokerage account designated on your account
application for telephone redemptions. Proceeds of redemptions requested by mail
are normally mailed within three business days following receipt of instructions
in proper form.
THROUGH BROKER-DEALERS. You may also redeem shares of the Fund by placing a
wire redemption request through a securities broker or dealer. Unaffiliated
broker-dealers may charge you a fee for this service. You will receive the net
asset value per share next determined after receipt by the Trust or its agent of
your wire redemption request. It is the responsibility of broker-dealers to
promptly transmit wire redemption orders.
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ADDITIONAL REDEMPTION INFORMATION. If your instructions request a
redemption by wire, the proceeds will be wired directly to your existing account
in any commercial bank or brokerage firm in the United States as designated on
your application, and you will be charged an $8 processing fee by the Fund's
Custodian. The Trust reserves the right, upon thirty days' written notice, to
change the processing fee. All charges will be deducted from your account by
redemption of shares in your account. Your bank or brokerage firm may also
impose a charge for processing the wire. In the event that wire transfer of
funds is impossible or impractical, the redemption proceeds will be sent by mail
to the designated account.
Redemption requests may direct that the proceeds be deposited directly in
your account with a commercial bank or other depository institution via an
Automated Clearing House (ACH) transaction. There is currently no charge for ACH
transactions. Contact the Transfer Agent for more information about ACH
transactions.
At the discretion of the Trust or the Transfer Agent, corporate investors
and other associations may be required to furnish an appropriate certification
authorizing redemptions to ensure proper authorization. The Trust reserves the
right to require you to close your account if at any time the value of your
shares is less than $2,000 (based on actual amounts invested, unaffected by
market fluctuations), or such other minimum amount as the Trust may determine
from time to time. After notification to you of the Trust's intention to close
your account, you will be given thirty days to increase the value of your
account to the minimum amount.
The Trust reserves the right to suspend the right of redemption or to
postpone the date of payment for more than three business days under unusual
circumstances as determined by the Securities and Exchange Commission. Under
unusual circumstances, when the Board of Trustees deems it appropriate, the Fund
may make payment for shares redeemed in portfolio securities of the Fund taken
at current value.
SHAREHOLDER SERVICES
Contact the Transfer Agent (Nationwide call 800-404-7912) for additional
information about the shareholder services described below.
Automatic Withdrawal Plan
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If the shares in your account have a value of at least $5,000, you may
elect to receive, or may designate another person to receive, monthly or
quarterly payments in a specified amount of not less than $50 each. There is no
charge for this service.
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Tax-Deferred Retirement Plans
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Shares of the Fund are available for purchase in connection with the
following tax-deferred retirement plans:
-- Keogh Plans for self-employed individuals
-- Individual retirement account (IRA) plans for individuals and their
non-employed spouses, including Roth IRAs and Education IRAs
-- Qualified pension and profit-sharing plans for employees, including
those profit-sharing plans with a 401(k) provision -- 403(b)(7)
custodial accounts for employees of public school systems, hospitals,
colleges and other non-profit organizations meeting certain
requirements of the Internal Revenue Code
Direct Deposit Plans
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Shares of the Fund may be purchased through direct deposit plans offered by
certain employers and government agencies. These plans enable you to have all or
a portion of your payroll or social security checks transferred automatically to
purchase shares of the Fund.
Automatic Investment Plan
-------------------------
You may make automatic monthly investments in the Fund from your bank,
savings and loan or other depository institution account. The minimum initial
and subsequent investments must be $50 under the plan. The Transfer Agent pays
the costs associated with these transfers, but reserves the right, upon thirty
days' written notice, to make reasonable charges for this service. Your
depository institution may impose its own charge for debiting your account which
would reduce your return from an investment in the Fund.
DIVIDENDS AND DISTRIBUTIONS
The Fund expects to distribute substantially all of its net investment
income, if any, on a quarterly basis. The Fund expects to distribute any net
realized long-term capital gains at least once each year. Management will
determine the timing and frequency of the distributions of any net realized
short-term capital gains.
Distributions are paid according to one of the following options:
Share Option - income distributions and capital gains distributions
reinvested in additional shares.
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Income Option - income distributions and short-term capital gains
distributions paid in cash; long-term capital gains
distributions reinvested in additional shares.
Cash Option - income distributions and capital gains distributions paid
in cash.
You should indicate your choice of option on your application. If no option
is specified on your application, distributions will automatically be reinvested
in additional shares. All distributions will be based on the net asset value in
effect on the payable date.
If you select the Income Option or the Cash Option and the U.S. Postal
Service cannot deliver your checks or if your checks remain uncashed for six
months, your dividends may be reinvested in your account at the then-current net
asset value and your account will be converted to the Share Option. No interest
will accrue on amounts represented by uncashed distribution checks.
TAXES
The Fund intends to qualify for the special tax treatment afforded a
"regulated investment company" under Subchapter M of the Internal Revenue Code
so that it does not pay federal taxes on income and capital gains distributed to
shareholders. The Fund intends to distribute substantially all of its net
investment income and any realized capital gains to its shareholders.
Distributions of net investment income as well as from net realized short-term
capital gains, if any, are taxable to investors as ordinary income. Dividends
distributed by the Fund from net investment income may be eligible, in whole or
in part, for the dividends received deduction available to corporations.
Distributions of net capital gains (the excess of net long-term capital
gains over net short-term capital losses) by the Fund to its shareholders are
taxable to the recipient shareholders as capital gains, without regard to the
length of time a shareholder has held Fund shares. Capital gains distributions
may be taxable at different rates depending on the length of time the Fund holds
its assets.
Redemptions of shares of the Fund is a taxable event on which a shareholder
may realize a gain or loss. An exchange of the Fund's shares for shares of
another fund, where available, will be treated as a sale of such shares and any
gain on the transaction may be subject to federal income tax.
The Fund will mail you a statement indicating the amount and federal income
tax status of all distributions made during the year. The Fund's distributions
may be subject to federal income
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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.
OPERATION OF THE FUND
The Fund is a non-diversified series of the Check Investment Trust, an
open-end management investment company organized as an Ohio business trust. The
Board of Trustees supervises the business activities of the Trust. Like other
mutual funds, the Trust retains various organizations to perform specialized
services for the Funds.
The Trust retains Check Capital Management Inc., 575 Anton Boulevard, Suite
510, Costa Mesa, California 92626 (the "Adviser"), to manage the Fund's
investments. The Adviser is an independent investment counsel firm that has
advised individual and institutional clients since 1987. The Adviser has not
previously provided investment advisory services to a registered investment
company. The Fund pays the Adviser a fee at the annual rate of 1.00% of the
average value of its daily net assets.
Steven G. Check and Peter W. Hughes will be primarily responsible for
managing the Fund's portfolio. Mr. Check founded the Adviser in 1987 and serves
as its President and Chief Investment Officer. Mr. Hughes is a Portfolio Manager
of the Adviser. Prior to joining the Adviser in 1998, Mr. Hughes was a Position
Control Analyst with Utilicorp United from 1995 to 1997 and an auditor with
Arthur Andersen LLP from 1994 to 1995.
CW Fund Distributors, Inc., 312 Walnut Street, Cincinnati, Ohio 45202 (the
"Distributor"), serves as principal underwriter for the Fund and, as such, is
the exclusive agent for the distribution of shares of the Fund. The Distributor
is an indirect wholly-owned subsidiary of Countrywide Credit Industries, Inc., a
New York Stock Exchange listed company principally engaged in the business of
residential mortgage lending.
YEAR 2000 READINESS. Computer users around the world are faced with the dilemma
of the Year 2000 issue, which stems from the use of two digits in most computer
systems to designate the year. When the year advances from 1999 to 2000, many
computers will not recognize "00" as the Year 2000. This issue could potentially
affect every aspect of computer-related activity, on an individual and corporate
level. The Fund could be adversely impacted if the computer systems used by the
Adviser and other service providers have not been converted to meet the
requirements of the new century. The Fund's Adviser has evaluated its internal
systems and expects them to handle the change of millennium. The Adviser is
monitoring on an ongoing basis the progress of the Fund's service providers to
convert their systems to comply with the requirements of the Year 2000.
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The Adviser currently has no reason to believe that these service providers will
not be fully and timely complaint. However, you should be aware that there can
be no assurance that all systems will be successfully converted prior to January
1, 2000, in which case it would become necessary for the Fund to enter into
agreements with new service providers or to make other arrangements. In
addition, although the Adviser considers an issuer's Year 2000 compliance status
in the investment decision process, companies in which the Fund invests may
experience Year 2000 difficulties and the Fund is unable to predict to what
extent the Year 2000 issue will impact the value of those securities.
CALCULATION OF SHARE PRICE
On each day that the Trust is open for business, the share price (net asset
value) of the shares of the Fund is determined as of the close of the regular
session of trading on the New York Stock Exchange (normally 4:00 p.m., Eastern
time). The Trust is open for business on each day the New York Stock Exchange is
open for business and on any other day when there is sufficient trading in the
Fund's investments that its net asset value might be materially affected. The
net asset value per share of the Fund is calculated by dividing the sum of the
value of the securities held by the Fund plus cash or other assets minus all
liabilities (including estimated accrued expenses) by the total number of shares
outstanding of the Fund, rounded to the nearest cent. The price at which a
purchase or redemption of Fund shares is effected is based on the next
calculation of net asset value after the order is placed.
Portfolio securities are valued as follows: (1) securities which are traded
on stock exchanges or are quoted by NASDAQ are valued at the last reported sale
price as of the close of the regular session of trading on the New York Stock
Exchange on the day the securities are being valued, or, if not traded on a
particular day, at the closing bid price, (2) securities traded in the
over-the-counter market, and which are not quoted by NASDAQ, are valued at the
last sale price (or, if the last sale price is not readily available, at the
last bid price as quoted by brokers that make markets in the securities) as of
the close of the regular session of trading on the New York Stock Exchange on
the day the securities are being valued, (3) securities which are traded both in
the over-the-counter market and on a stock exchange are valued according to the
broadest and most representative market, and (4) securities (and other assets)
for which market quotations are not readily available are valued at their fair
value as determined in good faith in accordance with consistently applied
procedures established by and under the general supervision of the Board of
Trustees. The net asset value per share of the Fund will fluctuate with the
value of the securities it holds.
-13-
<PAGE>
CHECK INVESTMENT TRUST
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
Nationwide: (Toll-Free) 800-404-7912
Cincinnati: 513-629-2000
BOARD OF TRUSTEES
Steven G. Check
Peter Hughes
Eric A. Cha
James F. Lineback
James A. Schmiesing
INVESTMENT ADVISER
CHECK CAPITAL MANAGEMENT INC.
575 Anton Boulevard, Suite 510
Costa Mesa, California 92626
DISTRIBUTOR
CW FUND DISTRIBUTORS, INC.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
TRANSFER AGENT
COUNTRYWIDE FUND SERVICES, INC.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
Shareholder Service
- -------------------
Nationwide: (Toll-Free) 800-404-7912 (press option 3)
Rate Line
- ---------
Nationwide: (Toll-Free) 800-404-7912 (press option 2)
Additional information about the Fund is included in the Statement of
Additional Information ("SAI") dated July 1, 1999 and which is incorporated by
reference in its entirety. To obtain a free copy of the SAI or other information
about the Fund, or to make inquiries about the Fund, please call toll-free
nationwide 800-404-7912.
Information about the Fund (including the SAI) can be reviewed and copied
at the Securities and Exchange Commission's public reference room in Washington,
D.C. Information about the operation of the public reference room can be
obtained by calling the Commission at 1-800-SEC-0330. Reports and other
information about the Fund is available on the Commission's Internet site at
http://www.sec.gov. Copies of information on the Commission's Internet site may
be obtained, upon payment of a duplicating fee, by writing to: Securities and
Exchange Commission, Public Reference Section, Washington, D.C. 20549-6009.
File No. 811-09307
-14-
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
CHECK VALUE FUND
July 1, 1999
A series of
CHECK INVESTMENT TRUST
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
Telephone 1-800-404-7912
TABLE OF CONTENTS
-----------------
INVESTMENT OBJECTIVE AND POLICIES..............................................2
DESCRIPTION OF BOND RATINGS....................................................6
INVESTMENT LIMITATIONS.........................................................7
TRUSTEES AND OFFICERS..........................................................8
INVESTMENT ADVISER............................................................10
ADMINISTRATOR.................................................................11
OTHER SERVICES................................................................12
BROKERAGE.....................................................................12
REDEMPTIONS IN KIND...........................................................13
TRANSFER OF REGISTRATION......................................................13
PURCHASE OF SHARES............................................................13
REDEMPTION OF SHARES..........................................................14
NET ASSET VALUE DETERMINATION.................................................14
ADDITIONAL TAX INFORMATION....................................................15
DESCRIPTION OF THE TRUST......................................................16
CALCULATION OF PERFORMANCE DATA...............................................16
FINANCIAL STATEMENTS AND REPORTS..............................................18
This Statement of Additional Information is not a prospectus and should only be
read in conjunction with the Prospectus of the Check Value Fund (the "Fund")
dated July 1, 1999. The Prospectus may be obtained at no charge by contacting
the Fund, at the address and phone number shown above.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The investment objective and policies of the Fund are described in the
Prospectus. Supplemental information about these policies is set forth below.
Certain capitalized terms used herein are defined in the Prospectus.
OPTIONS. The Fund may write (sell) covered call and covered put options on
equity securities that are eligible for purchase by the Fund. Call options
written by the Fund give the holder the right to buy the underlying securities
from the Fund at a stated exercise price; put options give the holder the right
to sell the underlying security to the Fund. These options are covered by the
Fund because, in the case of call options, it will own the underlying securities
as long as the option is outstanding or because, in the case of put options, it
will maintain a segregated account of cash or liquid securities which can be
liquidated promptly to satisfy any obligation of the Fund to purchase the
underlying securities. The Fund may also write straddles (combinations of puts
and calls on the same underlying security). The Fund will receive a premium from
writing a put or call option, which increases the Fund's return in the event the
option expires unexercised or is closed out at a profit. The amount of the
premium will reflect, among other things, the relationship of the market price
of the underlying security to the exercise price of the option and the remaining
term of the option. By writing a call option, the Fund limits its opportunity to
profit from any increase in the market value of the underlying security above
the exercise price of the option. By writing a put option, the Fund assumes the
risk that it may be required to purchase the underlying security for an exercise
price higher than its then current market value, resulting in a potential
capital loss unless the security subsequently appreciates in value.
The Fund may purchase put or call options. In purchasing a call option, the
Fund would be in a position to realize a gain if, during the option period, the
price of the security increased by an amount greater than the premium paid. The
Fund would realize a loss if the price of the security decreased or remained the
same or did not increase during the period by more than the amount of the
premium. If a put or call option purchased by the Fund were permitted to expire
without being sold or exercised, its premium would represent a realized loss to
the Fund.
The purchaser of an option risks a total loss of the premium paid for the
option if the price of the underlying security does not increase or decrease
sufficiently to justify exercise. The seller of an option, on the other hand,
will recognize the premium as income if the option expires unrecognized and may
be required to pay a price in excess of current market value in the case of a
put option.
-2-
<PAGE>
The Fund may purchase and sell options listed on an exchange or in the
over-the-counter market. The Fund's ability to terminate options positions
established in the over-the-counter market may be more limited than in the case
of exchange-traded options and may also involve the risk that securities dealers
participating in such transactions would fail to meet their obligations to the
Fund. The Fund will not purchase any option, which in the opinion of the
Adviser, is illiquid if, as a result thereof, more than 25% of the Fund's net
assets would be invested in illiquid securities.
STOCK INDEX FUTURES CONTRACTS. The Fund may enter into S&P Index (or other major
market index) futures contracts ("Futures" or "Futures Contracts") as a hedge
against changes in prevailing levels of stock values in order to establish more
definitely the effective return on securities held or intended to be acquired by
the Fund. The Fund's hedging may include the purchase of Futures in anticipation
of purchasing underlying index stocks prior to the availability of sufficient
assets to purchase such stocks or to offset potential increase in stocks prices.
When selling Futures Contracts, the Fund will segregate cash assets to cover any
related liability.
The Fund will not enter into Futures Contracts for speculation and will only
enter into Futures Contracts which are traded on national futures exchanges and
are standardized as to maturity date and underlying financial instrument. The
principal Futures exchanges in the United States are the Board of Trade of the
City of Chicago and the Chicago Mercantile Exchange. Futures exchanges and
trading are regulated under the Commodity Exchange Act by the Commodity Futures
Trading Commission.
The Fund will not enter into a Futures Contract if, as a result thereof, more
than 25% of the Fund's total assets (taken at market value at the time of
entering into the contract) would be committed to "margin" (down payment)
deposits on such Futures Contracts.
WARRANTS AND RIGHTS. Warrants are essentially options to purchase equity
securities at specific prices and are valid for a specific period of time.
Prices of warrants do not necessarily move in concert with the prices of the
underlying securities. Rights are similar to warrants but generally have a short
duration and are distributed directly by the issuer to its shareholders. Rights
and warrants have no voting rights, receive no dividends and have no rights with
respect to the assets of the issuer.
FOREIGN SECURITIES. The Fund may invest in foreign securities if the Adviser
believes such investment would be consistent with the Fund's investment
objective. The same factors would be considered in selecting foreign securities
as with domestic securities, as discussed in the Prospectus. Foreign securities
-3-
<PAGE>
investment presents special considerations not typically associated with
investments in domestic securities. Foreign taxes may reduce income. Currency
exchange rates and regulations may cause fluctuation in the value of foreign
securities. Foreign securities are subject to different regulatory environments
than in the United States and, compared to the United States, there may be a
lack of uniform accounting, auditing and financial reporting standards, less
volume and liquidity and more volatility, less public information, and less
regulation of foreign issuers. Countries have been known to expropriate or
nationalize assets, and foreign investments may be subject to political,
financial or social instability or adverse diplomatic developments. There may be
difficulties in obtaining service of process on foreign issuers and difficulties
in enforcing judgments with respect to claims under the U.S. securities laws
against such issuers. Favorable or unfavorable differences between U.S. and
foreign economies could affect foreign securities values. The U.S. Government
has, in the past, discouraged certain foreign investments by U.S. investors
through taxation or other restrictions and it is possible that such restrictions
could be imposed again.
REPURCHASE AGREEMENTS. The Fund may acquire U.S. Government Securities subject
to repurchase agreements. A repurchase transaction occurs when, at the time the
Fund purchases a security (normally a U.S. Treasury obligation), it also resells
it to the vendor (normally a member bank of the Federal Reserve System or a
registered Government Securities dealer) and must deliver the security (and/or
securities substituted for them under the repurchase agreement) to the vendor on
an agreed upon date in the future. Such securities, including any securities so
substituted, are referred to as the "Repurchase Securities." The repurchase
price exceeds the purchase price by an amount which reflects an agreed upon
market interest rate effective for the period of time during which the
repurchase agreement is in effect.
The majority of these transactions run day to day, and the delivery pursuant to
the resale typically will occur within one to five days of the purchase. The
Fund's risk is limited to the ability of the vendor to pay the agreed upon sum
upon the delivery date; in the event of bankruptcy or other default by the
vendor, there may be possible delays and expenses in liquidating the instrument
purchased, decline in its value and loss of interest. These risks are minimized
when the Fund holds a perfected security interest in the Repurchase Securities
and can therefore sell the instrument promptly. Under guidelines issued by the
Trustees, the Adviser will carefully consider the creditworthiness of a vendor
during the term of the repurchase agreement. Repurchase agreements are
considered as loans collateralized by the Repurchase Securities, such agreements
being defined as "loans" under the Investment Company Act of 1940 (the "1940
Act"). The return on such "collateral" may be more or
-4-
<PAGE>
less than that from the repurchase agreement. The market value of the resold
securities will be monitored so that the value of the "collateral" is at all
times as least equal to the value of the loan, including the accrued interest
earned thereon. All Repurchase Securities will be held by the Fund's custodian
either directly or through a securities depository.
LOANS OF PORTFOLIO SECURITIES. The Fund may lend its portfolio securities
subject to the restrictions stated in its Prospectus. Under applicable
regulatory requirements (which are subject to change), the loan collateral must,
on each business day, at least equal the value of the loaned securities. To be
acceptable as collateral, letters of credit must obligate a bank to pay amounts
demanded by the Fund if the demand meets the terms of the letter. Such terms and
the issuing bank must be satisfactory to the Fund. The Fund receives amounts
equal to the dividends or interest on loaned securities and also receives one or
more of (a) negotiated loan fees, (b) interest on securities used as collateral,
or (c) interest on short-term debt securities purchased with such collateral;
either type of interest may be shared with the borrower. The Fund may also pay
fees to placing brokers as well as custodian and administrative fees in
connection with loans. Fees may only be paid to a placing broker provided that
the Trustees determine that the fee paid to the placing broker is reasonable and
based solely upon services rendered, that the Trustees separately consider the
propriety of any fee shared by the placing broker with the borrower, and that
the fees are not used to compensate the Adviser or any affiliated person of the
Trust or an affiliated person of the Adviser or other affiliated person. The
terms of the Fund's loans must meet applicable tests under the Internal Revenue
Code and permit the Fund to reacquire loaned securities on five days' notice or
in time to vote on any important matter.
DESCRIPTION OF DEBT INSTRUMENTS AND CASH EQUIVALENTS. Debt instruments may
include U.S. Government Securities or corporate debt obligations (including
those subject to repurchase agreements) as described herein, provided that they
mature in thirteen months or less from the date of acquisition and are otherwise
eligible for purchase by the Fund. Debt instruments also may include Bankers'
Acceptances and Certificates of Deposit of domestic branches of U.S. banks,
Commercial Paper and Variable Amount Demand Master Notes ("Master Notes").
BANKERS' ACCEPTANCES are time drafts drawn on and "accepted" by a bank, are the
customary means of effecting payment for merchandise sold in import-export
transactions and are a source of financing used extensively in international
trade. When a bank "accepts" such a time draft, it assumes liability for its
payment. When the Fund acquires a Bankers' Acceptance, the bank which "accepted"
the time draft is liable for payment of interest and principal when due. The
Bankers' Acceptance, therefore, carries the full faith and credit of such bank.
A CERTIFICATE OF DEPOSIT ("CD") is an unsecured interest-bearing debt obligation
of a bank. CDs
-5-
<PAGE>
acquired by the Fund would generally be in amounts of $100,000 or more.
COMMERCIAL PAPER is an unsecured, short term debt obligation of a bank,
corporation or other borrower. Commercial Paper maturity generally ranges from
two to 270 days and is usually sold on a discounted basis rather than as an
interest-bearing instrument. The Fund will invest in Commercial Paper only if it
is rated in the highest rating category by any nationally recognized statistical
rating organization ("NRSRO") or, if not rated, the issuer must have an
outstanding unsecured debt issue rated in the three highest categories by any
NRSRO or, if not so rated, be of equivalent quality in the Adviser's assessment.
Commercial Paper may include Master Notes of the same quality. MASTER NOTES are
unsecured obligations which are redeemable upon demand of the holder and which
permit the investment of fluctuating amounts at varying rates of interest.
Master Notes are acquired by the Fund only through the Master Note program of
the Fund's custodian, acting as administrator thereof. The Adviser will monitor,
on a continuous basis, the earnings power, cash flow and other liquidity ratios
of the issuer of a Master Note held by the Fund.
FORWARD COMMITMENT AND WHEN-ISSUED SECURITIES. The Fund may purchase securities
on a when-issued basis or for settlement at a future date if the Fund holds
sufficient assets to meet the purchase price. In such purchase transactions the
Fund will not accrue interest on the purchased security until the actual
settlement. Similarly, if a security is sold for a forward date, the Fund will
accrue the interest until the settlement of the sale. When-issued security
purchases and forward commitments have a higher degree of risk of price movement
before settlement due to the extended time period between the execution and
settlement of the purchase or sale. As a result, the exposure to the
counterparty of the purchase or sale is increased. Although the Fund would
generally purchase securities on a forward commitment or when-issued basis with
the intention of taking delivery, the Fund may sell such a security prior to the
settlement date if the Adviser felt such action was appropriate. In such a case
the Fund could incur a short-term gain or loss.
DESCRIPTION OF BOND RATINGS
The Fund will normally be invested in equities, although the percentage of its
assets fully invested in equities may vary based on market and economic
conditions. The Fund may invest a portion of its assets in fixed-income
securities, including corporate debt securities and U.S. Government Securities.
As a temporary defensive position, however, the Fund may invest up to 100% of
its assets in money market instruments. When the Fund invests in money market
instruments, it is not pursuing its investment objective. Under normal
circumstances, however, the
-6-
<PAGE>
Fund may invest in money market instruments or repurchase agreements as
described in the Prospectus. When the Fund invests in fixed-income securities or
money market instruments, it will limit itself to debt securities within the
rating categories described below or, if unrated, of equivalent quality.
The Fund may invest in preferred stocks and bonds without regard to quality
ratings assigned by rating organizations such as Moody's Investors Service, Inc.
("Moody's") and Standard & Poor's Ratings Group ("S&P"). Lower-rated securities
(commonly called "junk bonds"), i.e. securities rated below Baa by Moody's or
below BBB by S&P, or the equivalent, will have speculative characteristics
(including the possibility of default or bankruptcy of the issuers of such
securities, market price volatility based upon interest rate sensitivity,
questionable creditworthiness and relative liquidity of the secondary trading
market). Because lower-rated securities have been found to be more sensitive to
adverse economic changes or individual corporate developments and less sensitive
to interest rate changes than higher-rated investments, an economic downturn
could disrupt the market for such securities and adversely affect the value of
outstanding bonds and the ability of issuers to repay principal and interest. In
addition, in a declining interest rate market, issuers of lower-rated securities
may exercise redemption or call provisions, which may force the Fund, to the
extent it owns such securities, to replace those securities with lower yielding
securities. This could result in a decreased return for investors.
INVESTMENT LIMITATIONS
The Fund has adopted the following investment limitations which cannot be
changed without approval by holders of a majority of the outstanding voting
shares of the Fund. A "majority" for this purpose, means the lesser of (i) 67%
of the Fund's outstanding shares represented in person or by proxy at a meeting
at which more than 50% of its outstanding shares are represented, or (ii) more
than 50% of its outstanding shares.
Under these limitations, the Fund MAY NOT:
(1) Issue senior securities, pledge its assets or borrow money, or purchase
securities on margin except that it may do so if, immediately after such
borrowing, the value of the Fund's assets, including all borrowings then
outstanding, less its liabilities (excluding all borrowings), is equal to
at least 300% of the aggregate amount of borrowings then outstanding, and
may pledge its assets to secure all such borrowings;
-7-
<PAGE>
(2) Purchase more than 25% of the outstanding voting securities or any class of
securities of any one issuer;
(3) Invest for the purpose of exercising control or management of another
issuer;
(4) Invest in interests in real estate, real estate mortgage loans, oil, gas or
other mineral exploration or development programs, except that the Fund may
invest in the securities of companies (other than those which are not
readily marketable) which own or deal in such things.
(5) Underwrite securities issued by others except to the extent the Fund may be
deemed to be an underwriter under the federal securities laws in connection
with the disposition of portfolio securities;
(6) Make loans of money or securities, except that the Fund may invest in
repurchase agreements (but repurchase agreements having a maturity of
longer than seven days, together with other securities which are not
readily marketable, are limited to 15% of the Fund's net assets);
(7) Write, purchase or sell commodities, commodities contracts or related
options;
(8) The Fund will not invest more than 25% of its total assets in the
securities of issuers in any particular industry; provided, however, that
there is no limitation with respect to investments in obligations issued or
guaranteed by the United States Government or its agencies or
instrumentalities or repurchase agreements with respect thereto.
Percentage restrictions stated as an investment policy or investment limitation
apply at the time of investment; if a later increase or decrease in percentage
beyond the specified limits results from a change in securities values or total
assets, it will not be considered a violation. However, in the case of the
borrowing limitation(limitation number 1, above), the Fund will, to the extent
necessary, reduce its existing borrowings to comply with the limitation.
TRUSTEES AND OFFICERS
Following are the Trustees and executive officers of The Check Investment Trust
(the "Trust"), their present position with the Trust, age, principal occupation
during the past 5 years and
-8-
<PAGE>
their estimated compensation from the Trust.
<TABLE>
<CAPTION>
Name, Age Position With Trust Occupation for the Last Estimated Compensation
and Current Address 5 Years From the Trust
- ----------------------------- ----------------------- ----------------------
<S> <C> <C>
*Steven G. Check (37) President, Check Capital None
President and Trustee Management Inc.
575 Anton Boulevard (the "Adviser")
Suite 510
Costa Mesa, CA
*Peter Hughes(27) Auditor, Arthur Andersen None
Trustee LLP., Control Analyst,
575 Anton Boulevard Utilicorp United, Equity
Suite 510 Analyst, Check Capital
Costa Mesa, CA Management Inc.
Eric A. Cha(41) Architect, CL Architects $1000
Trustee
3807 Wilshire Bl.
Suite 1226
Los Angeles, CA 90010
James F. Lineback(51) Staff Physcian, Pacific $1000
Trustee Health Services
2100 N. Main Street
Santa Ana, CA 92706
James A. Schmiesing(61) Attorney, Schmiesing & $1000
Trustee Blied, a Law Corporation
19712 MacArthur Blvd
Suite 210
Irvine, CA 92612
Robert L. Bennett(57) First Vice President and None
Treasurer Chief Operations Officer,
312 Walnut Street Countrywide Fund Services,
Suite 2100 Inc., Chief Operations Officer,
Cincinnati, OH 45202 The Calvert Group
Wade R. Bridge(30) Counsel, Countrywide Fund None
Secretary Services, Inc, Attorney, KHEAA
312 Walnut Street
Suite 2100
Cincinnati, OH 45202
</TABLE>
*Indicates that Trustee is an "interested person" for purposes of the 1940 Act.
-9-
<PAGE>
Messrs. Cha, Lineback and Schmiesing constitute the Trust's Audit Committee. The
Audit Committee reviews annually the nature and cost of the professional
services rendered by the Trust's independent accountants, the results of their
year-end audit and their findings and recommendations as to accounting and
financial matters, including the adequacy of internal controls. On the basis of
this review the Audit Committee makes recommendations to the Trustees as to the
appointment of independent accountants for the following year. The Trustees have
not appointed a compensation committee or a nominating committee.
INVESTMENT ADVISER
Check Capital Management Inc. (the "Adviser") supervises the Fund's investments
pursuant to an Investment Advisory Agreement (the "Advisory Agreement"). The
Advisory Agreement is effective until July 1, 2001 and will be renewed
thereafter for one year periods only so long as such renewal and continuance is
specifically approved at least annually by the Board of Trustees or by vote of a
majority of the Fund's outstanding voting securities, provided the continuance
is also approved by a majority of the Trustees who are not "interested persons"
of the Trust or the Adviser by vote cast in person at a meeting called for the
purpose of voting on such approval. The Advisory Agreement is terminable without
penalty on sixty days notice by the Board of Trustees of the Trust or by the
Adviser. The Advisory Agreement provides that it will terminate automatically in
the event of its assignment.
Compensation of the Adviser is at the annual rate of 1.00% of the Fund's average
daily net assets.
The Adviser, organized as a California corporation in 1987, is controlled by
Steven G. Check by virtue of his ownership of 100% of the outstanding shares of
the Adviser. Mr. Check is deemed to be an affiliate of the Adviser and may
directly or indirectly receive benefits from the advisory fees paid to the
Adviser. In addition to acting as Adviser to the Fund, the Adviser also provides
investment advice to corporations, trusts, pension and profit sharing plans,
other business and institutional accounts and individuals.
The Adviser provides a continuous investment program for the Fund, including
investment research and management with respect to all securities, investments,
cash and cash equivalents of the Fund. The Adviser determines what securities
and other investments will be purchased, retained or sold by the Fund, and does
so in accordance with the investment objective and policies of the Fund as
described herein and in the Prospectus. The Adviser places all securities orders
for the Fund, determining with which broker, dealer, or issuer to place the
orders.
-10-
<PAGE>
The Adviser must adhere to the brokerage policies of the Fund in placing all
orders, the substance of which policies are that the Adviser must seek at all
times the most favorable price and execution for all securities brokerage
transactions.
The Adviser also provides, at its own expense, certain executive officers to the
Trust, and pays the entire cost of distributing Fund shares.
ADMINISTRATOR
Countrywide Fund Services, Inc. (the "Administrator") maintains the records of
each shareholder's account, answers shareholders' inquiries concerning their
accounts, processes purchases and redemptions of the Fund's shares, acts as
dividend and distribution disbursing agent and performs other shareholder
service functions. The Administrator receives for such services a fee payable
monthly at an annual rate of $25 per account. In addition, the Fund pays
out-of-pocket expenses, including but not limited to, postage, envelopes,
checks, drafts, forms, reports, record storage and communication lines.
The Administrator has also been retained to provide administrative services to
the Fund. In this capacity, the Administrator supplies non-investment related
statistical and research data, internal regulatory compliance services and
executive and administrative services. The Administrator supervises the
preparation of tax returns, reports to shareholders of the Fund, reports to and
filings with the SEC and state securities commissions, and materials for
meetings of the Board of Trustees. For the performance of these administrative
services, the Fund pays the Administrator a fee at the annual rate of .150% of
the average value of its daily net assets up to $25 million; .125% of the next
$25 million; and .100% of such assets in excess of $50 million, subject to a
minimum monthly fee of $2000.
The Administrator also provides accounting and pricing services to the Fund. For
calculating daily net asset value per share and maintaining such books and
records as are necessary to enable the Administrator to perform its duties, the
Fund pays the Administrator a monthly fee in accordance with the following
schedule: $2,500 per month for average monthly assets up to $100,000,000, $3,500
per month for average monthly assets from $100,000,000 to $200,000,000, $4,500
per month for average monthly assets from $200,000,000 to $300,000,000, and
$5,500 per month for average monthly assets over $300,000,000. There is also a
.001% pricing charge for assets over $300,000,000.
-11-
<PAGE>
OTHER SERVICES
The firm of Arthur Andersen LLP has been retained by the Board of Trustees to
perform an independent audit of the books and records of the Trust and to
consult with the Trust as to matters of accounting and federal and state income
taxation.
The Custodian of the Fund's assets is The Fifth Third Bank N.A. The Custodian
holds all cash and securities of the Fund (either in its possession or in its
favor through "book entry systems" authorized by the Trustees in accordance with
the 1940 Act), collects all income and effects all securities transactions on
behalf of the Fund.
BROKERAGE
It is the Fund's practice to seek the best price and execution for all portfolio
securities transactions. The Adviser (subject to the general supervision of the
Board of Trustees) directs the execution of the Fund's portfolio transactions.
The Fund's fixed-income portfolio transactions will normally be principal
transactions executed in over-the-counter markets and will be executed on a
"net" basis, which may include a dealer markup. The Fund's common stock
portfolio transactions will normally be exchange traded and will be effected
through broker-dealers who will charge brokerage commissions. Options will also
normally be exchange traded involving the payment of commissions. With respect
to securities traded only in the over-the-counter market, orders will be
executed on a principal basis with primary market makers in such securities
except where better prices or executions may be obtained on an agency basis or
by dealing with other than a primary market maker.
While there is no formula, agreement or undertaking to do so, the Adviser may
allocate a portion of the Fund's brokerage commissions to persons or firms
providing the Adviser with research services, which may typically include, but
are not limited to, investment recommendations, financial, economic, political,
fundamental and technical market and interest rate data, and other statistical
or research services. Much of the information so obtained may also be used by
the Adviser for the benefit of the other clients it may have. Conversely, the
Fund may benefit from such transactions effected for the benefit of other
clients. In all cases, the Adviser is obligated to effect transactions for the
Fund based upon obtaining the most favorable price and execution. Factors
considered by the Adviser in determining whether the Fund will receive the most
favorable price and execution include, among other things: the size of the
order, the broker's ability to effect and settle the transaction promptly and
efficiently and the Adviser's perception of the broker's reliability, integrity
and financial condition.
respectively.
-12-
<PAGE>
REDEMPTIONS IN KIND
The Fund does not intend, under normal circumstances, to redeem its securities
by payment in kind. It is possible, however, that conditions may arise in the
future which would, in the opinion of the Trustees, make it undesirable for the
Fund to pay for all redemptions in cash. In such case, the Board of Trustees may
authorize payment to be made in portfolio securities or other property of the
Fund. Securities delivered in payment of redemptions would be valued at the same
value assigned to them in computing the net asset value per share. Shareholders
receiving them would incur brokerage costs when these securities are sold.
TRANSFER OF REGISTRATION
To transfer shares to another owner, send a written request to the Administrator
at the address shown herein. Your request should include the following: (1) the
existing account registration; (2) signature(s) of the registered owner(s)
exactly as the signature(s) appear(s) on the account registration; (3) the new
account registration, address, social security or taxpayer identification number
and how dividends and capital gains are to be distributed; (4) signature
guarantees (see the Prospectus under the heading "Signature Guarantees"); and
(5) any additional documents which are required for transfer by corporations,
administrators, executors, trustees, guardians, etc. If you have any questions
about transferring shares, call or write the Administrator.
PURCHASE OF SHARES
The purchase price of shares of the Fund is the net asset value next determined
after the order is received. An order received prior to the close of trading on
the New York Stock Exchange (normally 4:00 p.m., Eastern time) will be executed
at the price computed on the date of receipt; and an order received after that
time will be executed at the price computed on the next business day. An order
to purchase shares is not binding on the Fund until confirmed in writing (or
unless other arrangements have been made with the Fund, for example in the case
of orders utilizing wire transfer of funds) and payment has been received.
The Fund reserves the right in its sole discretion (i) to suspend the offering
of its shares, (ii) to reject purchase orders when in the judgment of management
such rejection is in the best interest of the Fund and its shareholders, and
(iii) to reduce or waive the minimum for initial and subsequent investments
under some circumstances, including circumstances where certain economies can be
achieved in sales of Fund shares.
-13-
<PAGE>
EMPLOYEES AND AFFILIATES OF THE FUND. The Fund has adopted initial investment
minimums for the purpose of reducing the cost to the Fund (and consequently to
the shareholders) of communicating with and servicing its shareholders. However,
the minimum initial investment requirement does not apply to Trustees, officers
and employees of the Fund, the Adviser and certain parties related thereto,
including clients of the Adviser or any sponsor, officer, committee member
thereof, or the immediate family of any of them. In addition, accounts having
the same mailing address may be aggregated for purposes of the minimum
investment if shareholders consent in writing to share a single mailing of
shareholder reports, proxy statements (but each such shareholder would receive
his/her own proxy) and other Fund literature.
REDEMPTION OF SHARES
The Fund may suspend redemption privileges or postpone the date of payment (i)
during any period that the New York Stock Exchange is closed, or trading on the
New York Stock Exchange is restricted as determined by the SEC, (ii) during any
period when an emergency exists as defined by the rules of the SEC as a result
of which it is not reasonably practicable for the Fund to dispose of securities
owned by it, or to fairly determine the value of its assets, and (iii) for such
other periods as the SEC may permit.
No charge is made by the Fund for redemptions, although the Trustees could
impose a redemption charge in the future. Any redemption may be more or less
than the amount of the shareholder's investment depending on the market value of
the securities held by the Fund.
NET ASSET VALUE DETERMINATION
Under the 1940 Act, the Trustees are responsible for determining in good faith
the fair value of the securities and other assets of the Fund, and they have
adopted procedures to do so, as follows. The net asset value of the Fund is
determined as of the close of trading on the New York Stock Exchange (normally
4:00 p.m., Eastern time) on each "Business Day." A Business Day means any day,
Monday through Friday, except for the following holidays: New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Fourth of
July, Labor Day, Thanksgiving Day, Christmas and any other day the New York
Stock Exchange may close. Net asset value per share is determined by dividing
the total value of all Fund securities and other assets, less liabilities, by
the total number of shares then outstanding. Net asset value includes interest
on fixed-income securities, which is accrued daily.
-14-
<PAGE>
ADDITIONAL TAX INFORMATION
TAXATION OF THE FUND. The Fund intends to qualify as a "regulated investment
company" under Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"). Among the requirements to qualify under Subchapter M, the Fund
must distribute annually at least 90% of its net investment income. In addition
to this distribution requirement, the Fund must derive at least 90% of its gross
income each taxable year from dividends, interest, payments with respect to
securities' loans, gains from the disposition of stock or securities, and
certain other income.
While the above requirements are aimed at qualification of the Fund as a
regulated investment company under Subchapter M of the Code, the Fund also
intends to comply with certain requirements of the Code to avoid liability for
federal income and excise tax. If the Fund remains qualified under Subchapter M,
it will not be subject to federal income tax to the extent it distributes its
taxable net investment income and net realized capital gains. A nondeductible 4%
federal excise tax will be imposed on the Fund to the extent it does not
distribute at least 98% of its ordinary taxable income for a calendar year, plus
98% of its capital gain net taxable income for the one year period ending each
October 31, plus certain undistributed amounts from prior years. While the Fund
intends to distribute its taxable income and capital gains in a manner so as to
avoid imposition of the federal excise and income taxes, there can be no
assurance that the Fund indeed will make sufficient distributions to avoid
entirely imposition of federal excise or income taxes.
Should additional series, or funds, be created by the Trustees, each fund would
be treated as a separate tax entity for federal income tax purposes.
TAX STATUS OF THE FUND'S DIVIDENDS AND DISTRIBUTIONS. Dividends paid by the Fund
derived from net investment income or net short-term capital gains are taxable
to shareholders as ordinary income, whether received in cash or reinvested in
additional shares. Distributions, if any, of long-term capital gains are taxable
to shareholders as long-term capital gains, whether received in cash or
reinvested in additional shares, regardless of how long Fund shares have been
held. For information on "backup" withholding, see "How to Purchase Shares" in
the Prospectus.
For corporate shareholders, the dividends received deduction, if applicable,
should apply to dividends from the Fund. The Fund will send shareholders
information each year on the tax status of dividends and disbursements. A
dividend or capital gains distribution paid shortly after shares have been
purchased, although in effect a return of investment, is subject to federal
income taxation. Dividends from net investment income, along
-15-
<PAGE>
with capital gains, will be taxable to shareholders, whether received in cash or
shares and no matter how long you have held Fund shares, even if they reduce the
net asset value of shares below your cost and thus in effect result in a return
of a part of your investment.
DESCRIPTION OF THE TRUST
The Trust was organized as a Ohio business trust pursuant to an Agreement and
Declaration of Trust. Shares of the Fund, when issued, are fully paid and
non-assessable and have no preemptive or conversion rights. Shareholders are
entitled to one vote for each full share and a fractional vote for each
fractional share held. Shares have noncumulative voting rights, which means that
the holders of more than 50% of the shares voting for the election of Trustees
can elect 100% of the Trustees and, in this event, the holders of the remaining
shares voting will not be able to elect any Trustees. The Trustees will hold
office indefinitely, except that: (1) any Trustee may resign or retire and (2)
any Trustee may be removed with or without cause at any time (a) by a written
instrument, signed by at least a majority of the number of Trustees prior to
such removal; or (b) by vote of shareholders holding not less than two-thirds of
the outstanding shares of the Trust, cast in person or by proxy at a meeting
called for that purpose; or (c) by a written declaration signed by shareholders
holding not less than two-thirds of the outstanding shares of the Trust and
filed with the Trust's Custodian. Shareholders have certain rights, as set forth
in the Declaration of Trust, including the right to call a meeting of the
shareholders for the purpose of voting on the removal of one or more Trustees.
Shareholders holding not less than ten percent (10%) of the shares then
outstanding may require the Trustees to call such a meeting and the Trustees are
obligated to provide certain assistance to shareholders desiring to communicate
with other shareholders in such regard (e.g., providing access to shareholder
lists, etc.). Shareholder inquiries may be made in writing, addressed to the
Fund at the address contained in this Statement of Additional Information. In
case a vacancy or an anticipated vacancy shall for any reason exist, the vacancy
shall be filled by the affirmative vote of a majority of the remaining Trustees,
subject to the provisions of Section 16(a) of the 1940 Act. The Trust does not
expect to have an annual meeting of shareholders.
CALCULATION OF PERFORMANCE DATA
As indicated in the Prospectus, the Fund may, from time to time, advertise
certain total return information. The average annual total return of the Fund
for a period is computed by subtracting the net asset value per share at the
beginning of the period from the net asset value per share at the end of the
period (after
-16-
<PAGE>
adjusting for the reinvestment of any income dividends and capital gain
distributions), and dividing the result by the net asset value per share at the
beginning of the period. In particular, the average annual total return of the
Fund ("T") is computed by using the redeemable value at the end of a specified
period of time ("ERV") of a hypothetical initial investment of $1,000 ("P") over
a period of time ("n") according to the formula
n
P(l+T) = ERV
In addition, the Fund may advertise other total return performance data
("Nonstandardized Return"). Nonstandardized Return shows as a percentage rate of
return encompassing all elements of return (i.e., income and capital
appreciation or depreciation); it assumes reinvestment of all dividends and
capital gain distributions. Nonstandardized Return may consist of a cumulative
percentage of return, actual year-by-year rates or any combination thereof.
The Fund's performance may be compared in advertisements, sales literature and
other communications to the performance of other mutual funds having similar
objectives or to standardized indices or other measures of investment
performance. In particular, the Fund may compare its performance to the S&P 500
Index, which is generally considered to be representative of the performance of
unmanaged common stocks that are publicly traded in the United States securities
markets. Comparative performance may also be expressed by reference to a ranking
prepared by a mutual fund monitoring service, such as Lipper Analytical
Services, Inc. or Morningstar, Inc., or by one or more newspapers, newsletters
or financial periodicals. Performance comparisons may be useful to investors who
wish to compare the Fund's past performance to that of other mutual funds and
investment products. Of course, past performance is not a guarantee of future
results.
o LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes
the reinvestment of all capital gains distributions and income dividends
and takes into account any change in net asset value over a specific period
of time.
o MORNINGSTAR, INC., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for
two weeks.
Investors may use such indices in addition to the Fund's Prospectus to obtain a
more complete view of the Fund's performance before investing. Of course, when
comparing the Fund's performance to any index, factors such as composition of
the index and prevailing market conditions should be considered
-17-
<PAGE>
in assessing the significance of such comparisons. When comparing funds using
reporting services, or total return, investors should take into consideration
any relevant differences in funds such as permitted portfolio compositions and
methods used to value portfolio securities and compute offering price.
Advertisements and other sales literature for the Fund may quote total returns
that are calculated on non-standardized base periods. The total returns
represent the historic change in the value of an investment in the Fund based on
monthly reinvestment of dividends over a specified period of time.
From time to time the Fund may include in advertisements and other
communications information, charts, and illustrations relating to inflation and
the effects of inflation on the dollar, including the purchasing power of the
dollar at various rates of inflation. The Fund may also disclose from time to
time information about its portfolio allocation and holdings at a particular
date (including ratings of securities assigned by independent rating services
such as S&P and Moody's). The Fund may also depict the historical performance of
the securities in which the Fund may invest over periods reflecting a variety of
market or economic conditions either alone or in comparison with alternative
investments, performance indices of those investments, or economic indicators.
The Fund may also include in advertisements and in materials furnished to
present and prospective shareholders statements or illustrations relating to the
appropriateness of types of securities and/or mutual funds that may be employed
to meet specific financial goals, such as saving for retirement, children's
education, or other future needs.
The Fund may also disclose from time to time information about IRAs and the
benefits of IRAs, including the potential tax deduction and tax-deferred growth.
The Fund may also provide examples of the accumulated amounts that would be
available in an IRA with specified contributions over a specified amount of time
with a specified annual return. For example, a $2,000 IRA contribution each year
for 30 years earning a 10% average annual return would be worth approximately
$360,000 at the end of 30 years. Such examples will be used for illustration
purposes only and will not be indicative of past or future performance of the
Fund.
STATEMENT OF ASSETS AND LIABILITIES
The Fund's Statement of Assets and Liabilities as of June 22, 1999, which has
been audited by Arthur Andersen is attached to this Statement of Additional
Information.
-18-
<PAGE>
CHECK INVESTMENT TRUST
CHECK VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 22, 1999
- --------------------------------------------------------------------------------
ASSETS
Cash $ 100,000
----------
NET ASSETS $ 100,000
==========
SHARES OF BENEFICIAL INTEREST OUTSTANDING (UNLIMITED $ 10,000
==========
NUMBER OF SHARES AUTHORIZED, NO PAR VALUE)
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE $ 10.00
==========
The accompanying notes are an integral part of this statement.
-19-
<PAGE>
CHECK INVESTMENT TRUST
NOTES TO STATEMENT OF ASSETS AND LIABILITIES
AS OF JUNE 22, 1999
(1) The CHECK VALUE FUND (the Fund) is a non-diversified series of the CHECK
INVESTMENT TRUST, an open-end management investment company organized as an
Ohio business trust under a Declaration of Trust dated March 4, 1999. On
June 22, 1999, 10,000 shares of the Fund were issued for cash at $10.00 per
share. The Fund has had no operations except for the initial issuance of
shares.
(2) Expenses incurred in connection with the organization of the Fund and the
initial offering of shares have been or will be paid by Check Capital
Management, Inc. (the Adviser). The Adviser has permanently waived any
reimbursement of organization expenses associated with the initial offering
of shares. As of June 22, 1999, al outstanding shares of the Fund were held
by the Adviser, who purchased these initial shares in order to provide the
Trust with its required capital.
(3) Reference is made to the Prospectus and the Statement of Additional
Information for a description of the Investment Advisory Agreement, the
Underwriting Agreement, the Administration Agreement, the Accounting
Services Agreement, the Transfer, Dividend Disbursing, Shareholder Service
and Plan Agency Agreement, tax aspects of the Fund and the calculation of
the net asset value of shares of the Fund.
<PAGE>
ARTHUR ANDERSEN LLP
Report of Independent Public Accountants
To the Trustees and Shareholder of
The Check Value Fund of Check Investment Trust:
We have audited the accompanying statement of assets and liabilities of the
Check Value Fund of Check Investment Trust as of June 22, 1999. This financial
statement is the responsibility of the Trust's management. Our responsibility is
to express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement of assets and liabilities is
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the statement of assets and
liabilities. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the statement of assets and liabilities referred to above
presents fairly, in all material respects, the financial position of the Check
Value Fund of Check Investment Trust as of June 22, 1999 in conformity with
generally accepted accounting principles.
Arthur Andersen LLP
Cincinnati, Ohio
June 24, 1999
<PAGE>
CHECK INVESTMENT TRUST
----------------------
PART C: OTHER INFORMATION
- ------- -----------------
Item 23. Exhibits
- -------- --------
(a) Declaration of Trust*
(b) Bylaws*
(c) See Declaration of Trust and Bylaws
(d) Form of Advisory Agreement with Check Capital Management,
Inc.*
(e) Form of Underwriting Agreement with CW Fund Distributors,
Inc.*
(f) Inapplicable
(g) Form of Custody Agreement
(h)(i) Form of Administration Agreement with Countrywide Fund
Services, Inc.*
(ii) Form of Accounting Services Agreement with Countrywide Fund
Services, Inc.*
(iii) Form of Transfer, Dividend Disbursing, Shareholder Service
and Plan Agency Agreement with Countrywide Fund Services,
Inc.*
(iv) Inapplicable
(i) Opinion and Consent of Counsel
(j) Consent of Independent Accountants
(k) Inapplicable
(l) Form of Agreement Relating to Initial Capital*
(m) Inapplicable
(n) Financial Data Schedule
(o) Inapplicable
- --------------------------------------
* Incorporated by reference to the Trust's registration statement on Form N-1A.
- 1 -
<PAGE>
Item 24. Persons Controlled by or Under Common Control with the Fund.
- -------- ------------------------------------------------------------
After commencement of the public offering of the Registrant's shares,
the Registrant expects that no person will be directly or indirectly
controlled by or under common control with the Registrant.
Item 25. Indemnification
- -------- ---------------
Article VII of the Registrant's Declaration of Trust, incorporated
herein by reference, provides for the indemnification of officers and
Trustees.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to Trustees, officers, employees 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 the Act and is, therefore,
unenforceable. 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, employee or controlling person
of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such Trustee, officer, employee 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 the Act and will be
governed by the final adjudication of such issue.
The Registrant is not going to maintain a standard mutual fund and
investment advisory professional and directors and officers liability
policy.
The Advisory Agreement with the Adviser provides that the Adviser
shall not be liable for any action taken, omitted or suffered to be
taken by it in its reasonable judgment, in good faith and believed by
it to be authorized or within the discretion or rights or powers
conferred upon it by this Agreement, or in accordance with (or in the
absence of) specific directions or instructions from the Trust,
provided, however, that such acts or omissions shall not have resulted
from the
- 2 -
<PAGE>
Adviser's willful misfeasance, bad faith or gross negligence, a
violation of the standard of care established by and applicable to the
Adviser in its actions under the Agreement or breach of its duty or of
its obligations thereunder.
The Underwriting Agreement provides that the Underwriter, its
directors, officers, employees, shareholders and control persons shall
not be liable for any error of judgment or mistake of law or for any
loss suffered by Registrant in connection with the matters to which
the Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of any of such
persons in the performance of Underwriter's duties or from the
reckless disregard by any of such persons of Underwriter's obligations
and duties under the Agreement. Registrant will advance attorneys'
fees or other expenses incurred by any such person in defending a
proceeding, upon the undertaking by or on behalf of such person to
repay the advance if it is ultimately determined that such person is
not entitled to indemnification.
Item 26. Business and Other Connections of the Investment Adviser
- -------- --------------------------------------------------------
The Adviser is a registered investment adviser, providing investment
advisory services to the Registrant. The Adviser is a California
corporation. The Adviser has not previously provided investment
advisory services to a registered investment company.
The directors and officers of the Adviser and any other business,
profession, vocation or employment of a substantial nature engaged in
at any time during the past two years:
(i) Steven G. Check - President of the Adviser.
- 3 -
<PAGE>
Item 27. Principal Underwriters
- -------- ----------------------
(a) CW Fund Distributors, Inc. (the "Distributor") also acts as
principal underwriter for other open- end investment companies:
Brundage, Story and Rose Investment Trust, The Caldwell & Orkin
Funds, Inc., Profit Funds Investment Trust, Firsthand Funds, the
Lake Shore Family of Funds, UC Investment Trust, The Winter
Harbor Fund and The James Advantage Funds.
(b) The following list sets forth the directors and executive
officers of the Distributor. Unless otherwise noted with an
asterisk(*), the address of the persons named below is 312 Walnut
Street, Cincinnati, Ohio 45202.
*The address is 4500 Park Granada Boulevard, Calabasas,
California 91302.
Position Position
with with
Name Distributor Registrant
*Angelo R. Mozilo Chairman of None
the Board/
Director
*Andrew S. Bielanski Director None
*Thomas H. Boone Director None
*Marshall M. Gates Director None
Robert H. Leshner President/ None
Vice Chairman/
Chief Executive
Officer/Director
Maryellen Peretzky Vice President, None
Secretary
Robert L. Bennett Vice President, Treasurer
Chief Operations
Officer
Terrie A. Wiedenheft Vice President, None
Chief Financial
Officer, Treasurer None
(c) Inapplicable
- 4 -
<PAGE>
Item 28. Location of Accounts and Records
- -------- --------------------------------
Accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules
promulgated thereunder will be maintained by the Registrant at its
offices located at 575 Anton Boulevard, Suite 510, Costa Mesa,
California 92626 as well as at the offices of the Registrant's
administrator and transfer agent located at 312 Walnut Street, 21st
Floor, Cincinnati, Ohio 45202.
Item 29. Management Services
- -------- -------------------
Not Applicable
Item 30. Undertakings
- -------- ------------
Not Applicable
- 5 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed below on its behalf by the undersigned, thereunto duly
authorized, in the City of Costa Mesa, and State of California, on the 29 day of
June, 1999.
CHECK INVESTMENT TRUST
By: /s/ Steven G. Check
--------------------
Steven G. Check
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
/s/ Steven G. Check President June 29, 1999
- ----------------------------- and Trustee
Steven G. Check
/s/ Robert L. Bennett Treasurer June 29, 1999
- -----------------------------
Robert L. Bennett
Trustee
- ----------------------------- /s/ Wade R. Bridge
Eric A. Cha* --------------------
Wade R. Bridge
Trustee Attorney-in-fact*
- ----------------------------- June 29, 1999
Peter Hughes*
Trustee
- -----------------------------
James A. Schmiesing*
Trustee
- -----------------------------
James F. Lineback*
<PAGE>
INDEX TO EXHIBITS
-----------------
(a) Declaration of Trust*
(b) Bylaws*
(c) See Declaration of Trust and Bylaws
(d) Form of Advisory Agreement*
(e) Form of Underwriting Agreement*
(f) Inapplicable
(g) Form of Custody Agreement
(h)(i) Form of Administration Agreement*
(ii) Form of Accounting Services Agreement*
(iii) Form of Transfer, Dividend Disbursing, Shareholder
Service and Plan Agency Agreement*
(iv) Inapplicable
(i) Opinion and Consent of Counsel
(j) Consent of Independent Accountants
(k) Inapplicable
(l) Form of Agreement Relating to Initial Capital*
(m) Inapplicable
(n) Financial Data Schedule
(o) Inapplicable
- ----------------------------
* Incorporated by reference to the Trust's registration statement on Form N-1A.
CUSTODY AGREEMENT
-----------------
THIS AGREEMENT, is made as of ______________, by and between THE CHECK
INVESTMENT TRUST, a business trust organized under the laws of the State of Ohio
(the "Company"), and THE FIFTH THIRD BANK, a banking trust organized under the
laws of the State of Ohio (the "Custodian").
WITNESSETH:
WHEREAS, the Trust desires that the Securities and cash of each of the
investment portfolios identified in Exhibit A hereto (such investment portfolios
and individually referred to herein as a "Fund" and collectively as the
"Funds"), be held and administered by the Custodian pursuant to this Agreement;
and
WHEREAS, the Trust is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Custodian represents that it is a bank having the
qualifications prescribed in Section 26(a)(i) of the 1940 Act;
NOW, THEREFORE, in consideration of the mutual agreements herein made, the
Trust and the Custodian hereby agree as follows:
ARTICLE I
---------
DEFINITIONS
-----------
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
1.1 "Authorized Person" means any Officer or other person duly authorized
by resolution of the Board of Trustees to give Oral Instructions and Written
Instructions on behalf of the Trust and named in Exhibit B hereto or in such
resolutions of the Board of Trustees, certified by an Officer, as may be
received by the Custodian from time to time.
1.2 "Board of Trustees" shall mean the Trustees from time to time serving
under the Trust's Agreement and Declaration of Trust, dated _____________,as
from time to time amended.
1.3 "Book-Entry System" shall mean a federal book-entry system as provided
in Subpart O of Treasury Circular No. 300, 31 CFR 306, in Subpart B of 31 CFR
Part 350, or in such book-entry regulations of federal agencies as are
substantially in the form of such Subpart O.
1.4 "Business Day" shall mean any day recognized as a settlement day by The
New York Stock Exchange, Inc. and any other day for which the Fund computes the
net asset value of the Fund.
1.5 "NASD" shall mean The National Association of Securities Dealers, Inc.
1.6 "Officer" shall mean the President, any Vice President, the Secretary,
any Assistant Secretary, the Treasurer, or any Assistant Treasurer of the Trust.
1.7 "Oral Instructions" shall mean instructions orally transmitted to and
accepted by the Custodian because such instructions are: (i) reasonably believed
by the Custodian to have been given by an Authorized Person, (ii) recorded and
kept among the records of the Custodian made in the ordinary course of business
and (iii) orally confirmed by the Custodian. The Trust shall cause all Oral
Instructions to be confirmed by Written Instructions. If such Written
Instructions confirming Oral Instructions are not received by the Custodian
prior to a transaction, it shall in no way affect the validity of the
transaction or the authorization thereof by the Trust. If Oral Instructions vary
from the Written Instructions which purport to confirm them, the Custodian shall
notify the of such variance but such Oral Instructions will govern unless the
Custodian has not yet acted.
1.8 "Custody Account" shall mean any account in the name of the Trust,
which is provided for in Section 3.2 below.
1.9 "Proper Instructions" shall mean Oral Instructions or Written
Instructions. Proper Instructions may be continuing Written Instructions when
deemed appropriate by both parties.
1.10 "Securities Depository" shall mean The Participants Trust Company or
The Depository Trust Company and (provided that Custodian shall have received a
copy of a resolution of the Board of Trustees, certified by an Officer,
specifically approving the use of such clearing agency as a depository for the
Trust) any other clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities and Exchange Act of 1934 (the
"1934 Act"), which acts as a system for the central handling of Securities where
all Securities of any particular class or series of an issuer deposited within
the system are treated as fungible and may be transferred or pledged by
bookkeeping entry without physical delivery of the Securities.
<PAGE>
1.11 "Securities" shall include, without limitation, common and preferred
stocks, bonds, call options, put options, debentures, notes, bank certificates
of deposit, bankers' acceptances, mortgage-backed securities, other money market
instruments or other obligations, and any certificates, receipts, warrants or
other instruments or documents representing rights to receive, purchase or
subscribe for the same, or evidencing or representing any other rights or
interests therein, or any similar property or assets that the Custodian has the
facilities to clear and to service.
1.12 "Shares" shall mean the units of beneficial interest issued by the
Trust.
1.13 "Written Instructions" shall mean (i) written communications actually
received by the Custodian and signed by one or more persons as the Board of
Trustees shall have from time to time authorized, or (ii) communications by
telex or any other such system from a person or persons reasonably believed by
the Custodian to be Authorized, or (iii) communications transmitted
electronically through the Institutional Delivery System (IDS), or any other
similar electronic instruction system acceptable to Custodian and approved by
resolutions of the Board of Trustees, a copy of which, certified by an Officer,
shall have been delivered to the Custodian.
ARTICLE II
----------
APPOINTMENT OF CUSTODIAN
------------------------
2.1 Appointment. The Trust hereby constitutes and appoints the Custodian as
custodian of all Securities and cash owned by or in the possession of the Trust
at any time during the period of this Agreement, provided that such Securities
or cash at all times shall be and remain the property of the Trust.
2.2 Acceptance. The Custodian hereby accepts appointment as such custodian
and agrees to perform the duties thereof as hereinafter set forth and in
accordance with the 1940 Act as amended. Except as specifically set forth
herein, the Custodian shall have no liability and assumes no responsibly for any
non-compliance by the Trust or a Fund of any laws, rules or regulations.
ARTICLE III
-----------
CUSTODY OF CASH AND SECURITIES
------------------------------
3.1 Segregation. All Securities and non-cash property held by the Custodian
for the account of the Fund, except Securities maintained in a Securities
Depository or Book-Entry System, shall be physically segregated from other
Securities and non-cash property in the possession of the Custodian and shall be
identified as subject to this Agreement.
3.2 Custody Account. The Custodian shall open and maintain in its trust
department a custody account in the name of each Fund, subject only to draft or
order of the Custodian, in which the Custodian shall enter and carry all
Securities, cash and other assets of the Fund which are delivered to it.
3.3 Appointment of Agents. In its discretion, the Custodian may appoint,
and at any time remove, any domestic bank or trust company, which has been
approved by the Board of Trustees and is qualified to act as a custodian under
the 1940 Act, as sub-custodian to hold Securities and cash of the Funds and to
carry out such other provisions of this Agreement as it may determine, and may
also open and maintain one or more banking accounts with such a bank or trust
company (any such accounts to be in the name of the Custodian and subject only
to its draft or order), provided, however, that the appointment of any such
agent shall not relieve the Custodian of any of its obligations or liabilities
under this Agreement.
3.4 Delivery of Assets to Custodian. The Fund shall deliver, or cause to be
delivered, to the Custodian all of the Fund's Securities, cash and other assets,
including (a) all payments of income, payments of principal and capital
distributions received by the Fund with respect to such Securities, cash or
other assets owned by the Fund at any time during the period of this Agreement,
and (b) all cash received by the Fund for the issuance, at any time during such
period, of Shares. The Custodian shall not be responsible for such Securities,
cash or other assets until actually received by it.
3.5 Securities Depositories and Book-Entry Systems. The Custodian may
deposit and/or maintain Securities of the Funds in a Securities Depository or in
a Book-Entry System, subject to the following provisions:
(a) Prior to a deposit of Securities of the Funds in any Securities
Depository or Book-Entry System, the Fund shall deliver to the
Custodian a resolution of the Board of Trustees, certified by an
Officer, authorizing and instructing the Custodian on an on-going
basis to deposit in such Securities Depository or Book-Entry System
all Securities eligible for deposit therein and to make use of such
Securities Depository or Book-Entry System to the extent possible and
practical in connection with its performance hereunder, including,
without limitation, in connection with settlements of purchases and
sales of Securities, loans of Securities, and deliveries and returns
of collateral consisting of Securities.
2
<PAGE>
(b) Securities of the Fund kept in a Book-Entry System or Securities
Depository shall be kept in an account ("Depository Account") of the
Custodian in such Book-Entry System or Securities Depository which
includes only assets held by the Custodian as a fiduciary, custodian
or otherwise for customers.
(c) The records of the Custodian and the Custodian's account on the books
of the Book-Entry System and Securities Depository as the case may be,
with respect to Securities of a Fund maintained in a Book-Entry System
or Securities Depository shall, by book-entry, or otherwise identify
such Securities as belonging to the Fund.
(d) If Securities purchases by the Fund are to be held in a Book-Entry
System or Securities Depository, the Custodian shall pay for such
Securities upon (i) receipt of advice from the Book-Entry System or
Securities Depository that such Securities have been transferred to
the Depository Account, and (ii) the making of an entry on the records
of the Custodian to reflect such payment and transfer for the account
of the Fund. If Securities sold by the Fund are held in a Book-Entry
System or Securities Depository, the Custodian shall transfer such
Securities upon (i) receipt of advice from the Book-Entry System or
Securities depository that payment for such Securities has been
transferred to the Depository Account, and (ii) the making of an entry
on the records of the Custodian to reflect such transfer and payment
for the account of the Fund.
(e) Upon request, the Custodian shall provide the Fund with copies of any
report (obtained by the Custodian from a Book-Entry System or
Securities Depository in which Securities of the Fund is kept) on the
internal accounting controls and procedures for safeguarding
Securities deposited in such Book-Entry System or Securities
Depository.
(f) Anything to the contrary in this Agreement notwithstanding, the
Custodian shall be liable to the Trust for any loss or damage to the
Trust resulting (i) from the use of a Book-Entry System or Securities
Depository by reason of any negligence or willful misconduct on the
part of Custodian or any sub-custodian appointed pursuant to Section
3.3 above or any of its or their employees, or (ii) from failure of
Custodian or any such sub-custodian to enforce effectively such rights
as it may have against a Book-Entry System or Securities Depository.
At its election, the Trust shall be subrogated to the rights of the
Custodian with respect to any claim against a Book-Entry System or
Securities Depository or any other person for any loss or damage to
the Funds arising from the use of such Book-Entry System or Securities
Depository, if and to the extent that the Trust has been made whole
for any such loss or damage.
3.6 Disbursement of Moneys from Custody Accounts. Upon receipt of Proper
Instructions, the Custodian shall disburse moneys from a Fund Custody Account
but only in the following cases:
(a) For the purchase of Securities for the Fund but only upon compliance
with Section 4.1 of this Agreement and only (i) in the case of
Securities (other than options on Securities, futures contracts and
options on futures contracts), against the delivery to the Custodian
(or any sub-custodian appointed pursuant to Section 3.3 above) of such
Securities registered as provided in Section 3.9 below in proper form
for transfer, or if the purchase of such Securities is effected
through a Book-Entry System or Securities Depository, in accordance
with the conditions set forth in Section 3.5 above; (ii) in the case
of options on Securities, against delivery to the Custodian (or such
sub-custodian) of such receipts as are required by the customs
prevailing among dealers in such options; (iii) in the case of futures
contracts and options on futures contracts, against delivery to the
Custodian (or such sub-custodian) of evidence of title thereto in
favor of the Trust or any nominee referred to in Section 3.9 below;
and (iv) in the case of repurchase or reverse repurchase agreements
entered into between the Trust and a bank which is a member of the
Federal Reserve System or between the Trust and a primary dealer in
U.S. Government securities, against delivery of the purchased
Securities either in certificate form or through an entry crediting
the Custodian's account at a Book-Entry System or Securities
Depository for the account of the Fund with such Securities;
(b) In connection with the conversion, exchange or surrender, as set forth
in Section 3.7(f) below, of Securities owned by the Fund;
(c) For the payment of any dividends or capital gain distributions
declared by the Fund;
(d) In payment of the redemption price of Shares as provided in Section
5.1 below;
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<PAGE>
(e) For the payment of any expense or liability incurred by the Trust,
including but not limited to the following payments for the account of
a Fund: interest; taxes; administration, investment management,
investment advisory, accounting, auditing, transfer agent, custodian,
trustee and legal fees; and other operating expenses of a Fund; in all
cases, whether or not such expenses are to be in whole or in part
capitalized or treated as deferred expenses;
(f) For transfer in accordance with the provisions of any agreement among
the Trust, the Custodian and a broker-dealer registered under the 1934
Act and a member of the NASD, relating to compliance with rules of The
Options Clearing Corporation and of any registered national securities
exchange (or of any similar organization or organizations) regarding
escrow or other arrangements in connection with transactions by the
Trust;
(g) For transfer in accordance with the provisions of any agreement among
the Trust, the Custodian, and a futures commission merchant registered
under the Commodity Exchange Act, relating to compliance with the
rules of the Commodity Futures Trading Commission and/or any contract
market (or any similar organization or organizations) regarding
account deposits in connection with transactions by the Trust;
(h) For the funding of any uncertificated time deposit or other
interest-bearing account with any banking institution (including the
Custodian), which deposit or account has a term of one year or less;
and
(i) For any other proper purposes, but only upon receipt, in addition to
Proper Instructions, of a copy of a resolution of the Board of
Trustees, certified by an Officer, specifying the amount and purpose
of such payment, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom such payment is to
be made.
3.7 Delivery of Securities from Fund Custody Accounts. Upon receipt of
Proper Instructions, the Custodian shall release and deliver Securities from a
Custody Account but only in the following cases:
(a) Upon the sale of Securities for the account of a Fund but only against
receipt of payment therefor in cash, by certified or cashiers check or
bank credit;
(b) In the case of a sale effected through a Book-Entry System or
Securities Depository, in accordance with the provisions of Section
3.5 above;
(c) To an Offeror's depository agent in connection with tender or other
similar offers for Securities of a Fund; provided that, in any such
case, the cash or other consideration is to be delivered to the
Custodian;
(d) To the issuer thereof or its agent (i) for transfer into the name of
the Trust, the Custodian or any sub-custodian appointed pursuant to
Section 3.3 above, or of any nominee or nominees of any of the
foregoing, or (ii) for exchange for a different number of certificates
or other evidence representing the same aggregate face amount or
number of units; provided that, in any such case, the new Securities
are to be delivered to the Custodian;
(e) To the broker selling Securities, for examination in accordance with
the "street delivery" custom;
(f) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of the
issuer of such Securities, or pursuant to provisions for conversion
contained in such Securities, or pursuant to any deposit agreement,
including surrender or receipt of underlying Securities in connection
with the issuance or cancellation of depository receipts; provided
that, in any such case, the new Securities and cash, if any, are to be
delivered to the Custodian;
(g) Upon receipt of payment therefor pursuant to any repurchase or reverse
repurchase agreement entered into by a Fund;
(h) In the case of warrants, rights or similar Securities, upon the
exercise thereof, provided that, in any such case, the new Securities
and cash, if any, are to be delivered to the Custodian;
(i) For delivery in connection with any loans of Securities of a Fund, but
only against receipt of such collateral as the Trust shall have
specified to the Custodian in Proper Instructions;
(j) For delivery as security in connection with any borrowings by the
Trust on behalf of a Fund requiring a pledge of assets by such Fund,
but only against receipt by the Custodian of the amounts borrowed;
4
<PAGE>
(k) Pursuant to any authorized plan of liquidation, reorganization,
merger, consolidation or recapitalization of the Trust or a Fund;
(l) For delivery in accordance with the provisions of any agreement among
the Trust, the Custodian and a broker-dealer registered under the 1934
Act and a member of the NASD, relating to compliance with the rules of
The Options Clearing Corporation and of any registered national
securities exchange (or of any similar organization or organizations)
regarding escrow or other arrangements in connection with transactions
by the Trust on behalf of a Fund;
(m) For delivery in accordance with the provisions of any agreement among
the Trust on behalf of a Fund, the Custodian, and a futures commission
merchant registered under the Commodity Exchange Act, relating to
compliance with the rules of the Commodity Futures Trading Commission
and/or any contract market (or any similar organization or
organizations) regarding account deposits in connection with
transactions by the Trust on behalf of a Fund; or
(n) For any other proper corporate purposes, but only upon receipt, in
addition to Proper Instructions, of a copy of a resolution of the
Board of Trustees, certified by an Officer, specifying the Securities
to be delivered, setting forth the purpose for which such delivery is
to be made, declaring such purpose to be a proper corporate purpose,
and naming the person or persons to whom delivery of such Securities
shall be made.
3.8 Actions Not Requiring Proper Instructions. Unless otherwise instructed
by the Trust, the Custodian shall with respect to all Securities held for a
Fund;
(a) Subject to Section 7.4 below, collect on a timely basis all income and
other payments to which the Trust is entitled either by law or
pursuant to custom in the securities business;
(b) Present for payment and, subject to Section 7.4 below, collect on a
timely basis the amount payable upon all Securities which may mature
or be called, redeemed, or retired, or otherwise become payable;
(c) Endorse for collection, in the name of the Trust, checks, drafts and
other negotiable instruments;
(d) Surrender interim receipts or Securities in temporary form for
Securities in definitive form;
(e) Execute, as custodian, any necessary declarations or certificates of
ownership under the federal income tax laws or the laws or regulations
of any other taxing authority now or hereafter in effect, and prepare
and submit reports to the Internal Revenue Service ("IRS") and to the
Trust at such time, in such manner and containing such information as
is prescribed by the IRS;
(f) Hold for a Fund, either directly or, with respect to Securities held
therein, through a Book-Entry System or Securities Depository, all
rights and similar securities issued with respect to Securities of the
Fund; and
(g) In general, and except as otherwise directed in Proper Instructions,
attend to all non-discretionary details in connection with sale,
exchange, substitution, purchase, transfer and other dealings with
Securities and assets of the Fund.
3.9 Registration and Transfer of Securities. All Securities held for a Fund
that are issued or issuable only in bearer form shall be held by the Custodian
in that form, provided that any such Securities shall be held in a Book-Entry
System for the account of the Trust on behalf of a Fund, if eligible therefor.
All other Securities held for a Fund may be registered in the name of the Trust
on behalf of such Fund, the Custodian, or any sub-custodian appointed pursuant
to Section 3.3 above, or in the name of any nominee of any of them, or in the
name of a Book-Entry System, Securities Depository or any nominee of either
thereof; provided, however, that such Securities are held specifically for the
account of the Trust on behalf of a Fund. The Trust shall furnish to the
Custodian appropriate instruments to enable the Custodian to hold or deliver in
proper form for transfer, or to register in the name of any of the nominees
hereinabove referred to or in the name of a Book-Entry System or Securities
Depository, any Securities registered in the name of a Fund.
3.10 Records. (a) The Custodian shall maintain, by Fund, complete and
accurate records with respect to Securities, cash or other property held for the
Trust, including (i) journals or other records of original entry containing an
itemized daily record in detail of all receipts and deliveries of Securities and
all receipts and disbursements of cash; (ii) ledgers (or other records)
reflecting (A) Securities in transfer, (B) Securities in physical possession,
(C) monies and Securities borrowed and monies and Securities loaned (together
with a record of the collateral therefor and substitutions of such collateral),
(D) dividends and interest received, and (E) dividends receivable and interest
accrued; and (iii) canceled checks and bank records related thereto. The
Custodian shall keep such other books and records of the Trust as the Trust
shall reasonably request, or as may be required by the 1940 Act, including, but
not limited to Section 3.1 and Rule 31a-1 and Rule 31a-2 promulgated thereunder.
5
<PAGE>
(b) All such books and records maintained by the Custodian shall (i) be
maintained in a form acceptable to the Trust and in compliance with rules and
regulations of the Securities and Exchange Commission, (ii) be the property of
the Trust and at all times during the regular business hours of the Custodian be
made available upon request for inspection by duly authorized officers,
employees or agents of the Trust and employees or agents of the Securities and
Exchange Commission, and (iii) if required to be maintained by Rule 31a-1 under
the 1940 Act, be preserved for the periods prescribed in Rule 31a-2 under the
1940 Act.
3.11 Fund Reports by Custodian. The Custodian shall furnish the Trust with
a daily activity statement by Fund and a summary of all transfers to or from the
Custody Account on the day following such transfers. At least monthly and from
time to time, the Custodian shall furnish the Trust with a detailed statement,
by Fund, of the Securities and moneys held for the Trust under this Agreement.
3.12 Other Reports by Custodian. The Custodian shall provide the Trust with
such reports, as the Trust may reasonably request from time to time, on the
internal accounting controls and procedures for safeguarding Securities, which
are employed by the Custodian or any sub-custodian appointed pursuant to Section
3.3 above.
3.13 Proxies and Other Materials. The Custodian shall cause all proxies if
any, relating to Securities which are not registered in the name of a Fund, to
be promptly executed by the registered holder of such Securities, without
indication of the manner in which such proxies are to be voted, and shall
include all other proxy materials, if any, promptly deliver to the Trust such
proxies, all proxy soliciting materials, which should include all other proxy
materials, if any, and all notices to such Securities.
3.14 Information on Corporate Actions. Custodian will promptly notify the
Trust of corporate actions, limited to those Securities registered in nominee
name and to those Securities held at a Depository or sub-Custodian acting as
agent for Custodian. Custodian will be responsible only if the notice of such
corporate actions is published by Xcitek, DTC, or received by first class mail
from the transfer agent. For market announcements not yet received and
distributed by Custodian's services, Trust will inform its custody
representative with appropriate instructions. Custodian will, upon receipt of
Trust's response within the required deadline, affect such action for receipt or
payment for the Trust. For those responses received after the deadline,
Custodian will affect such action for receipt or payment, subject to the
limitations of the agent(s) affecting such actions. Custodian will promptly
notify Trust for put options only if the notice is received by first class mail
from the agent. The Trust will provide or cause to be provided to Custodian with
all relevant information contained in the prospectus for any security which has
unique put/option provisions and provide Custodian with specific tender
instructions at least ten business days prior to the beginning date of the
tender period.
ARTICLE IV
----------
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
--------------------------------------------
4.1 Purchase of Securities. Promptly upon each purchase of Securities for
the Trust, Written Instructions shall be delivered to the Custodian, specifying
(a) the name of the issuer or writer of such Securities, and the title or other
description thereof, (b) the number of shares, principal amount (and accrued
interest, if any) or other units purchased, (c) the date of purchase and
settlement, (d) the purchase price per unit, (e) the total amount payable upon
such purchase, and (f) the name of the person to whom such amount is payable.
The Custodian shall upon receipt of such Securities purchased by a Fund pay out
of the moneys held for the account of such Fund the total amount specified in
such Written Instructions to the person named therein. The Custodian shall not
be under any obligation to pay out moneys to cover the cost of a purchase of
Securities for a Fund, if in the relevant Custody Account there is insufficient
cash available to the Fund for which such purchase was made.
4.2 Liability for Payment in Advance of Receipt of Securities Purchased. In
any and every case where payment for the purchase of Securities for a Fund is
made by the Custodian in advance of receipt for the account of the Fund of the
Securities purchased but in the absence of specific Written or Oral Instructions
to so pay in advance, the Custodian shall be liable to the Fund for such
Securities to the same extent as if the Securities had been received by the
Custodian.
4.3 Sale of Securities. Promptly upon each sale of Securities by a Fund,
Written Instructions shall be delivered to the Custodian, specifying (a) the
name of the issuer or writer of such Securities, and the title or other
description thereof, (b) the number of shares, principal amount (and accrued
interest, if any), or other units sold, (c) the date of sale and settlement (d)
the sale price per unit, (e) the total amount payable upon such sale, and (f)
the person to whom such Securities are to be delivered. Upon receipt of the
total amount payable to the Trust as specified in such Written Instructions, the
Custodian shall deliver such Securities to the person specified in such Written
Instructions. Subject to the foregoing, the Custodian may accept payment in such
form as shall be satisfactory to it, and may deliver Securities and arrange for
payment in accordance with the customs prevailing among dealers in Securities.
6
<PAGE>
4.4 Delivery of Securities Sold. Notwithstanding Section 4.3 above or any
other provision of this Agreement, the Custodian, when instructed to deliver
Securities against payment, shall be entitled, if in accordance with generally
accepted market practice, to deliver such Securities prior to actual receipt of
final payment therefor. In any such case, the Trust shall bear the risk that
final payment for such Securities may not be made or that such Securities may be
returned or otherwise held or disposed of by or through the person to whom they
were delivered, and the Custodian shall have no liability for any of the
foregoing.
4.5 Payment for Securities Sold, etc. In its sole discretion and from time
to time, the Custodian may credit the relevant Custody Account, prior to actual
receipt of final payment thereof, with (i) proceeds from the sale of Securities
which it has been instructed to deliver against payment, (ii) proceeds from the
redemption of Securities or other assets of the Trust, and (iii) income from
cash, Securities or other assets of the Trust. Any such credit shall be
conditional upon actual receipt by Custodian of final payment and may be
reversed if final payment is not actually received in full. The Custodian may,
in its sole discretion and from time to time, permit the Trust to use funds so
credited to its Custody Account in anticipation of actual receipt of final
payment. Any such funds shall be repayable immediately upon demand made by the
Custodian at any time prior to the actual receipt of all final payments in
anticipation of which funds were credited to the Custody Account.
4.6 Advances by Custodian for Settlement. The Custodian may, in its sole
discretion and from time to time, advance funds to the Trust to facilitate the
settlement of a Trust transactions on behalf of a Fund in its Custody Account.
Any such advance shall be repayable immediately upon demand made by Custodian.
ARTICLE V
---------
REDEMPTION OF TRUST SHARES
--------------------------
Transfer of Funds. From such funds as may be available for the purpose in
the relevant Custody Account, and upon receipt of Proper Instructions specifying
that the funds are required to redeem Shares of a Fund, the Custodian shall wire
each amount specified in such Proper Instructions to or through such bank as the
Trust may designate with respect to such amount in such Proper Instructions.
Upon effecting payment or distribution in accordance with proper Instruction,
the Custodian shall not be under any obligation or have any responsibility
thereafter with respect to any such paying bank.
ARTICLE VI
----------
SEGREGATED ACCOUNTS
-------------------
Upon receipt of Proper Instructions, the Custodian shall establish and
maintain a segregated account or accounts for and on behalf of each Fund, into
which account or accounts may be transferred cash and/or Securities, including
Securities maintained in a Depository Account,
(a) in accordance with the provisions of any agreement among the Trust,
the Custodian and a broker-dealer registered under the 1934 Act and a
member of the NASD (or any futures commission merchant registered
under the Commodity Exchange Act), relating to compliance with the
rules of The Options Clearing Corporation and of any registered
national securities exchange (or the Commodity Futures Trading
commission or any registered contract market), or of any similar
organization or organizations, regarding escrow or other arrangements
in connection with transactions by the Trust,
(b) for purposes of segregating cash or Securities in connection with
securities options purchased or written by a Fund or in connection
with financial futures contracts (or options thereon) purchased or
sold by a Fund,
(c) which constitute collateral for loans of Securities made by a Fund,
(d) for purposes of compliance by the Trust with requirements under the
1940 Act for the maintenance of segregated accounts by registered
investment companies in connection with reverse repurchase agreements
and when-issued, delayed delivery and firm commitment transactions,
and
(e) for other proper corporate purposes, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a resolution of
the Board of Trustees, certified by an Officer, setting forth the
purpose or purposes of such segregated account and declaring such
purposes to be proper corporate purposes.
7
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ARTICLE VII
-----------
CONCERNING THE CUSTODIAN
------------------------
7.1 Standard of Care. The Custodian shall be held to the exercise of
reasonable care in carrying out its obligations under this Agreement, and shall
be without liability to the Trust for any loss, damage, cost, expense (including
attorneys' fees and disbursements), liability or claim unless such loss,
damages, cost, expense, liability or claim arises from negligence, bad faith or
willful misconduct on its part or on the part of any sub-custodian appointed
pursuant to Section 3.3 above. The Custodian's cumulative liability within a
calendar year shall be limited with respect to the Trust or any party claiming
by, through or on behalf of the Trust for the initial and all subsequent renewal
terms of this Agreement, to the actual damages sustained by the Trust, (actual
damages for uninvested funds shall be the overnight Feds fund rate). However,
Custodian will not be liable for special incidental or punitive damages. The
Custodian shall be entitled to rely on and may act upon advice of counsel on all
matters, and shall be without liability for any action reasonably taken or
omitted pursuant to such advice. The Custodian shall promptly notify the Trust
of any action taken or omitted by the Custodian pursuant to advice of counsel.
The Custodian shall not be under any obligation at any time to ascertain whether
the Trust is in compliance with the 1940 Act, the regulations thereunder, the
provisions of the Trust's charter documents or by-laws, or its investment
objectives and policies as then in effect.
7.2 Actual Collection Required. The Custodian shall not be liable for, or
considered to be the custodian of, any cash belonging to the Trust or any money
represented by a check, draft or other instrument for the payment of money,
until the Custodian or its agents actually receive such cash or collect on such
instrument.
7.3 No Responsibility for title, etc. So long as and to the extent that it
is in the exercise of reasonable care, the Custodian shall not be responsible
for the title, validity or genuineness of any property or evidence of title
thereto received or delivered by it pursuant to this Agreement.
7.4 Limitation on Duty to Collect. Custodian shall not be required to
enforce collection, by legal means or otherwise, of any money or property due
and payable with respect to Securities held for the Trust if such Securities are
in default or payment is not made after due demand or presentation.
7.5 Reliance Upon Documents and Instructions. The Custodian shall be
entitled to rely upon any certificate, notice or other instrument in writing
received by it and reasonably believed by it to be genuine. The Custodian shall
be entitled to rely upon any Oral Instructions and/or any Written Instructions
actually received by it pursuant to this Agreement.
7.6 Express Duties Only. The Custodian shall have no duties or obligations
whatsoever except such duties and obligations as are specifically set forth in
this Agreement, and no covenant or obligation shall be implied in this Agreement
against the Custodian.
7.7 Cooperation. The Custodian shall cooperate with and supply necessary
information, by the Trust, to the entity or entities appointed by the Trust to
keep the books of account of the Trust and/or compute the value of the assets of
the Trust. The Custodian shall take all such reasonable actions as the Trust may
from time to time request to enable the Trust to obtain, from year to year,
favorable opinions from the Trust's independent accountants with respect to the
Custodian's activities hereunder in connection with (a) the preparation of the
Trust's report on Form N-1A and Form N-SAR and any other reports required by the
Securities and Exchange Commission, and (b) the fulfillment by the Trust of any
other requirements of the Securities and Exchange Commission.
ARTICLE VIII
------------
INDEMNIFICATION
---------------
8.1 Indemnification. The Trust shall indemnify and hold harmless the
Custodian and any sub-custodian appointed pursuant to Section 3.3 above, and any
nominee of the Custodian or of such sub-custodian from and against any loss,
damage, cost, expense (including attorneys' fees and disbursements), liability
(including, without limitation, liability arising under the Securities Act of
1933, the 1934 Act, the 1940 Act, and any state or foreign securities and/or
banking laws) or claim arising directly or indirectly (a) from the fact that
Securities are registered in the name of any such nominee, or (b) from any
action or inaction by the Custodian or such sub-custodian (i) at the request or
direction of or in reliance on the advice of the Trust, or (ii) upon Proper
Instructions, or (c) generally, from the performance of its obligations under
this Agreement or any sub-custody agreement with a sub-custodian appointed
pursuant to Section 3.3 above or, in the case of any such sub-custodian, from
the performance of its obligations under such custody agreement, provided that
neither the Custodian nor any such sub-custodian shall be indemnified and held
harmless from and against any such loss, damage, cost, expense, liability or
claim arising from the Custodian's or such sub-custodian's negligence, bad faith
or willful misconduct.
8.2 Indemnity to be Provided. If the Trust requests the Custodian to take
any action with respect to Securities, which may, in the opinion of the
custodian, result in the Custodian or its nominee becoming liable for the
payment of money or incurring liability of some other form, the Custodian shall
not be required to take such action until the Trust shall have provided
indemnity therefor to the Custodian in an amount and form satisfactory to the
Custodian.
8
<PAGE>
ARTICLE IX
----------
FORCE MAJEURE
-------------
Neither the Custodian nor the Trust shall be liable for any failure or
delay in performance of its obligations under this Agreement arising out of or
caused, directly or indirectly, by circumstances beyond its reasonable control,
including, without limitation, acts of God; earthquakes; fires; floods; wars;
civil or military disturbances; sabotage; strikes; epidemics; riots; power
failures; computer failure and any such circumstances beyond its reasonable
control as may cause interruption, loss or malfunction of utility,
transportation, computer (hardware or software) or telephone communication
service; accidents; labor disputes, acts of civil or military authority;
governmental actions; or inability to obtain labor, material, equipment or
transportation; provided, however, that the Custodian in the event of a failure
or delay shall use its best efforts to ameliorate the effects of any such
failure or delay. Notwithstanding the foregoing, the Custodian shall maintain
sufficient disaster recovery procedures to minimize interruptions.
ARTICLE X
---------
EFFECTIVE PERIOD; TERMINATION
-----------------------------
10.1 Effective Period. This Agreement shall become effective as of the date
first set forth above and shall continue in full force and effect until
terminated as hereinafter provided.
10.2 Termination. Either party hereto may terminate this Agreement by
giving to the other party a notice in writing specifying the date of such
termination, which shall be not less than ninety (90) days after the date of the
giving of such notice. If a successor custodian shall have been appointed by the
Board of Trustees, the Custodian shall, upon receipt of a notice of acceptance
by the successor custodian, on such specified date of termination (a) deliver
directly to the successor custodian all Securities (other than Securities held
in a Book-Entry System or Securities Depository) and cash then owned by the
Trust and held by the Custodian as custodian, and (b) transfer any Securities
held in a Book-Entry System or Securities Depository to an account of or for the
benefit of the Trust at the successor custodian, provided that the Trust shall
have paid to the Custodian all fees, expenses and other amounts to the payment
or reimbursement of which it shall then be entitled. Upon such delivery and
transfer, the Custodian shall be relieved of all obligations under this
Agreement. The Trust may at any time immediately terminate this Agreement in the
event of the appointment of a conservator or receiver for the Custodian by
regulatory authorities in the State of Ohio or upon the happening of a like
event at the direction of an appropriate regulatory agency or court of competent
jurisdiction.
10.3 Failure to Appoint Successor Custodian. If a successor custodian is
not designated by the Trust on or before the date of termination specified
pursuant to Section 10.1 above, then the Custodian shall have the right to
deliver to a bank or trust company of its own selection, which is (a) a "Bank"
as defined in the 1940 Act, (b) has aggregate capital, surplus and undivided
profits as shown on its then most recent published report of not less than $25
million, and (c) is doing business in New York, New York, all Securities, cash
and other property held by Custodian under this Agreement and to transfer to an
account of or for the Trust at such bank or trust company all Securities of the
Trust held in a Book-Entry System or Securities Depository. Upon such delivery
and transfer, such bank or trust company shall be the successor custodian under
this Agreement and the Custodian shall be relieved of all obligations under this
Agreement. If, after reasonable inquiry, Custodian cannot find a successor
custodian as contemplated in this Section 10.3, then Custodian shall have the
right to deliver to the Trust all Securities and cash then owned by the Trust
and to transfer any Securities held in a Book-Entry System or Securities
Depository to an account of or for the Trust. Thereafter, the Trust shall be
deemed to be its own custodian with respect to the Trust and the Custodian shall
be relieved of all obligations under this Agreement.
ARTICLE XI
----------
COMPENSATION OF CUSTODIAN
-------------------------
The Custodian shall be entitled to compensation as agreed upon from time to
time by the Trust and the Custodian. The fees and other charges in effect on the
date hereof and applicable to the Funds are set forth in Exhibit B attached
hereto.
ARTICLE XII
-----------
LIMITATION OF LIABILITY
-----------------------
The Trust is a business trust organized under the laws of the State of Ohio
and under a Declaration of Trust, to which reference is hereby made a copy of
which is on file at the office of Secretary of State of Ohio as required by law,
and to any and all amendments thereto so filed or hereafter filed. The
obligations of the Trust entered into in the name of the Trust or on behalf
thereof by any of the Trustees, officers, employees or agents are made not
individually, but in such capacities, and are not binding upon any of the
Trustees, officers, employees, agents or shareholders of the Trust or the Funds
personally, but bind only the assets of the Trust, and all persons dealing with
any of the Funds of the Trust must look solely to the assets of the Trust
belonging to such Fund for the enforcement of any claims against the Trust.
9
<PAGE>
ARTICLE XIII
------------
NOTICES
-------
Unless otherwise specified herein, all demands, notices, instructions, and
other communications to be given hereunder shall be in writing and shall be sent
or delivered to The receipt at the address set forth after its name herein
below:
To the Trust:
Check Investment Trust
575 Anton Boulevard, Suite 510
Costa Mesa, CA 92626
Attn: Mr. Steven G. Check
Telephone: (714) 641-3579
Facsimile:
To the Custodian:
The Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263
Attn: Area Manager - Trust Operations
Telephone: (513) 579-5300
Facsimile: (513) 744-6622
or at such other address as either party shall have provided to the other by
notice given in accordance with this Article XIII. Writing shall include
transmission by or through teletype, facsimile, central processing unit
connection, on-line terminal and magnetic tape.
ARTICLE XIV
-----------
MISCELLANEOUS
-------------
14.1 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio.
14.2 References to Custodian. The Trust shall not circulate any printed
matter which contains any reference to Custodian without the prior written
approval of Custodian, excepting printed matter contained in the prospectus or
statement of additional information or its registration statement for the Trust
and such other printed matter as merely identifies Custodian as custodian for
the Trust. The Trust shall submit printed matter requiring approval to Custodian
in draft form, allowing sufficient time for review by Custodian and its counsel
prior to any deadline for printing.
14.3 No Waiver. No failure by either party hereto to exercise and no delay
by such party in exercising, any right hereunder shall operate as a waiver
thereof. The exercise by either party hereto of any right hereunder shall not
preclude the exercise of any other right, and the remedies provided herein are
cumulative and not exclusive of any remedies provided at law or in equity.
14.4 Amendments. This Agreement cannot be changed orally and no amendment
to this Agreement shall be effective unless evidenced by an instrument in
writing executed by the parties hereto.
14.5 Counterparts. This Agreement may be executed in one or more
counterparts, and by the parties hereto on separate counterparts, each of which
shall be deemed an original but all of which together shall constitute but one
and the same instrument.
14.6 Severability. If any provision of this Agreement shall be invalid,
illegal or unenforceable in any respect under any applicable law, the validity,
legality and enforceability of the remaining provisions shall not be affected or
impaired thereby.
14.7 Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that this Agreement shall not be assignable by
either party hereto without the written consent of the other party hereto.
14.8 Headings. The headings of sections in this Agreement are for
convenience of reference only and shall not affect the meaning or construction
of any provision of this Agreement.
10
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed and delivered in its name and on its behalf by its representatives
thereunto duly authorized, all as of the day and year first above written.
ATTEST: THE CHECK INVESTMENT TRUST
_____________________________ By:________________________________
Its:_______________________________
ATTEST: THE FIFTH THIRD BANK
_____________________________ By:_________________________________
Its:________________________________
11
<PAGE>
Dated:__________, 19
EXHIBIT A
TO THE CUSTODY AGREEMENT BETWEEN
THE CHECK INVESTMENT TRUST
AND THE FIFTH THIRD BANK
_____________, 1999
Name of Fund Date
- ------------ ----
Check Value Fund
THE CHECK INVESTMENT TRUST
By: ___________________________________
Its:___________________________________
THE FIFTH THIRD BANK
By: ___________________________________
Its: __________________________________
12
<PAGE>
Dated:________________, 19
EXHIBIT B
TO THE CUSTODY AGREEMENT BETWEEN
THE CHECK INVESTMENT TRUST
AND THE FIFTH THIRD BANK
______________, 1999
AUTHORIZED PERSONS
Set forth below are the names and specimen signatures of the persons
authorized by the Trust to Administer each Custody Account.
Name Signature
------------------------------------ -------------------------------------
- ------------------------------------- -------------------------------------
- ------------------------------------- -------------------------------------
- ------------------------------------- -------------------------------------
- ------------------------------------- -------------------------------------
- ------------------------------------- -------------------------------------
<PAGE>
SIGNATURE RESOLUTION
RESOLVED, That all of the following officers of THE CHECK INVESTMENT TRUST and
any of them, namely the Chairman, President, Vice President, Secretary and
Treasurer, are hereby authorized as signers for the conduct of business for an
on behalf of the Funds with THE FIFTH THIRD BANK:
________________________________ CHAIRMAN ___________________________
________________________________ PRESIDENT __________________________
________________________________ VICE PRESIDENT ___________________________
________________________________ VICE PRESIDENT ___________________________
________________________________ VICE PRESIDENT ___________________________
________________________________ VICE PRESIDENT ___________________________
________________________________ TREASURER ___________________________
________________________________ SECRETARY ___________________________
In addition, the following Assistant Treasurer is authorized to sign on behalf
of the Trust for the purpose of effecting securities transactions:
________________________________ ASSISTANT TREASURER ________________________
The undersigned officers of THE CHECK INVESTMENT TRUST hereby certify that the
foregoing is within the parameters of a Resolution adopted by Trustees of the
Trust in a meeting held ______________, 1999, directing and authorizing
preparation of documents and to do everything necessary to effect the Custody
Agreement between THE CHECK INVESTMENT TRUST and THE FIFTH THIRD BANK.
By:_____________________________________
Its:____________________________________
By:_____________________________________
Its:____________________________________
Countrywide
FUND SERVICES, INC.
June 28, 1999
Check Investment Trust
575 Anton Blvd
Costa Mesa, CA 92626
Ladies and Gentlemen:
You have requested my opinion in connection with the registration by Check
Investment Trust, an Ohio business trust (the "Trust"), of an indefinite number
of shares (the "Shares") of beneficial interest of the Check Investment Trust,
authorized by the Trust's Agreement and Declaration of Trust, which has been
filed with the Securities and Exchange Commission as an exhibit to the Trust's
registration statement on Form N-1A (File No. 333-76827), as amended (the
"Registration Statement"), under the Securities Act of 1933 and the Investment
Company Act of 1940.
I have examined and relied upon originals or copies, certified or otherwise
identified to my satisfaction, of such records, agreements, documents and other
instruments and certificates or comparable documents of public officials and of
officers and representatives of the Trust, and I have made such inquiries of the
officers and representatives of the Trust, as I have deemed relevant and
necessary as the basis for the opinion hereinafter set forth.
In such examination, I have assumed, without independent verification, the
genuineness of all signatures (whether original or photostatic) and the
authenticity of all documents submitted to me as originals and the conformity to
authentic original documents of all documents submitted to me as certified or
photostatic copies. As to all questions of fact material to such opinion, I have
relied upon the certificates referred to hereinabove. I have assumed, without
independent verification, the accuracy of the relevant facts stated therein.
This letter expresses my opinion as to the provisions of the Trust's Agreement
and Declaration of Trust and the laws of the State of Ohio applying to business
trusts generally, but does not extend to the Ohio Securities Act or to federal
securities or other laws.
312 Walnut Street o Cincinnati, Ohio 45202 o 513.629.2000 o 800.543.8721
<PAGE>
Check Investment Trust
June 28, 1999
Page Two
Based on the foregoing, and subject to the qualifications set forth herein, I am
of the opinion that the Shares have been duly and validly authorized, and, when
issued and delivered as described in the Registration Statement, will be fully
paid and nonassessable by the Trust.
I hereby consent to the filing of this opinion as an exhibit to the Registration
Statement. In giving such consent, I do not thereby admit that I come within the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933 or under the rules and regulations of the Securities and Exchange
Commission promulgated thereunder.
Very truly yours,
/s/ Tina D. Hosking
Tina D. Hosking
Counsel
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the use in this
Pre-Effective Amendment No. 1 of our report dated June 24, 1999 and to all
references to our Firm included in or made a part of this Pre-Effective
Amendment.
ARTHUR ANDERSEN LLP
Cincinnati, Ohio
June 25, 1999
