PROSPECTUS
10k SmartTrust Fund
5952 ROYAL LANE, SUITE 270
DALLAS, TX 75230
FOR INFORMATION, SHAREHOLDER SERVICES AND REQUESTS:
TOLL FREE: 1-800-733-1183
The 10k SmartTrust Fund seeks long-term capital growth. Monument Investments,
Inc. is the investment manager of The 10k SmartTrust Fund.
The 10k SmartTrust Fund is a special purpose mutual fund designed for investors
who want to make long-term gifts in order to utilize either or both the $10,000
Annual Gift and the $650,000 Life Time Exemption for Estate planning purposes.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED OF THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
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TABLE OF CONTENTS
RISK/RETURN SUMMARY
FEES AND EXPENSES
INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS
MANAGEMENT
HOW TO INVEST IN 10k SmartTrust
SHARE PRICE AND DISTRIBUTIONS
TAXES
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RISK/RETURN SUMMARY
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The fund seeks long term capital growth.
WHAT ARE THE PRINCIPAL INVESTMENT STRATEGIES?
The Fund invests primarily in no-load mutual funds specializing in large
capitalization value and growth stocks. We believe that, by carefully selecting
the mutual funds in which the Fund invests ("underlying funds"), we will provide
you with an investment that is flexible in terms of both the investment
techniques used by the underlying funds and the companies represented in the
portfolios of the underlying funds.
The fund advisor, Monument Investments Inc., tries to achieve the greatest
return for the level of risk assumed by each mutual fund. Our investment
strategy stresses three factors: fund performance, investment style, and cost
structure.
WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUND?
The value of the fund's shares depends on the value of the mutual funds and
other securities it owns. The value of the mutual funds and the individual
securities that the fund owns will go up and down depending on the performance
of the companies that issued them, general market and economic conditions, and
investor confidence.
There is no guarantee that the Fund will achieve its investment objective and
the beneficiary could lose money as a result of the investment in the Fund.
WHO MAY WANT TO INVEST IN THE FUND?
You may want to invest in the Fund if you are looking for a unique and effective
way to reduce your Estate taxes by making a gift to a child, grandchild or
another individual. The 10k SmartTrust is an excellent way to utilize your
Lifetime Exemption equivalent of $650,000 and/or the Annual Gift Tax Exclusion.
WHO MAY NOT WANT TO INVEST IN THE FUND?
The fund is not a good investment if you or your beneficiary will need to
withdraw the money before maturity or if you do not want to give up control of
the money you invest by making an irrevocable gift.
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FEES AND EXPENSES
The following tables describe the fees and expenses that you will pay during the
life the 10k SmartTrust Account. Each 10k SmartTrust Account will also be
subject to a fee to help offset a portion of the cost of preparing tax returns
for that account and administrative costs that arise upon the maturity of a 10k
SmartTrust Account. (SEE "WHAT ARE THE TAX CONSEQUENCES OF ESTABLISHING A 10K
SMARTTRUST ACCOUNT?" ON PAGE 12)
SHAREHOLDER FEES:
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum sales charge (load) imposed on purchases
(as a percentage of offering price) 2.00%
Maximum deferred sales charge (load) None
ANNUAL OPERATING EXPENSES: (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
Management Fees 1.50%
Distribution Plan (12b-1) and Service Fees 1.00%
Other Expenses* 0.00%
-----
Total Annual Fund Operating Expenses 2.50%
=====
*Other expenses, which include the fees and expenses of the Fund's independent
trustee, their legal counsel, interest and extraordinary expenses, are expected
to be less than 0.005%.
EXAMPLE
This example is intended to help you compare the costs of investing in the Fund
with the cost of investing in other mutual funds. The Example 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, under these
assumptions, your costs would be:
One Year $ 451
Three Years $ 972
TRUST EXPENSES
Each 10k SmartTrust Account for which the trustee files a tax return will be
charged a $25 fee to help offset a portion of the tax return. See "Taxes" on
page 10.
Additionally, as each 10k SmartTrust Account reaches maturity a $100
administrative fee will be charged to help offset any costs incurred by the
trustee associated with the 10k SmartTrust attaining maturity.
FUND EXPENSES
The Fund is responsible for its own operating expenses. These expenses include
the fee that we receive in exchange for our advisory services to the Fund, fees
and expenses of the various organizations that provide necessary services to the
Fund and brokerage commissions.
Investment Management Fee. For our services to the Fund, the Advisor receives an
annual fee, calculated daily and paid monthly, of 1.5% of the average net assets
of the Fund. We may choose to reduce our fees and/or pay expenses of the Fund in
order to reduce the Fund's aggregate annual operating expenses.
12b-1 Distribution Fee. The Fund has also adopted a distribution plan pursuant
to Rule 12b-1 under the Investment Company Act of 1940. This rule allows the
Fund to pay distribution fees for the sale and distribution of its shares and
for services provided to its shareholders. The annual distribution and service
fee is 1.00% of the Fund's average daily net assets. This fee is payable to the
Advisor, as Distribution Coordinator. Because these fees are paid out of the
Fund's assets on an on-going basis, over time these fees will increase the cost
of your investment in Fund shares and may cost you more than paying other types
of sales charges.
WHAT IS THE PURPOSE OF THE FUND?
The purpose of the 10k SmartTrust Fund ("Fund") is to provide a Cost efficient
and Tax effective mean of transferring wealth utilizing the $10,000 Annual Gift
and/or the $650,000 Lifetime Exemption. By investing in the Fund you can make a
long-term gift that may qualify for the $10,000 Annual Gift Tax exclusion.
HOW DOES IT WORK?
If you invest in the Fund, the shares you purchase will be held in an
irrevocable trust -- a "10k SmartTrust Account"-- for the benefit of the
individual you designate (Beneficiary). The duration of the 10k SmartTrust
Account must be at least 10 years or until the beneficiary reaches the age of
maturity, whichever is longer. Neither you nor your designated beneficiary may
withdraw any money from the Fund or change the terms of the 10k SmartTrust
Account in any way.
The 10k SmartTrust Account trustee invests your gift in the fund for the benefit
of the beneficiary you name under the Agreement. The shares in the fund are held
in trust until the maturity date(s) you designate. NOTE: THE 10k SMARTRUST
ACCOUNT IS IRREVOCABLE. ONCE ESTABLISHED, NEITHER YOU (THE GRANTOR) NOR THE
BENEFICIARY CAN CHANGE THE TERMS OF THE TRUST IN ANY WAY. You cannot establish a
10k SmartTrust Account for yourself, your spouse or an entity other than an
individual as a beneficiary.
WHAT IS THE LIFETIME EXEMPTION AND WHAT IS
THE ANNUAL GIFT TAX EXCLUSION?
The Lifetime Exemption is a tax credit wherein the first $650,000 of ones estate
is not taxed (exempt). This exemption amount will increase to $1,000,000 by
2006.
The $10,000 Annual Gift Tax Exclusion allows any individual to gift to anyone
they choose up to $10,000 per year without taxes being owed by either party. The
gift must by definition be a "current interest" gift. This means the gift must
be given irrevocably and the gift must be given at the present time and not
sometime in the future. THE 10k SmartTrust DOES HAVE A PROVISION THAT ALLOWS FOR
THE GIFT TO BE DEEMED A `CURRENT INTEREST GIFT'. (see `Important Note' under
`Tax Consequences' page 10
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INVESTMENT OBJECTIVES,PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS
INVESTMENT OBJECTIVES
The fund seeks long term capital growth.
IMPLEMENTATION OF INVESTMENT OBJECTIVES
The Fund invests primarily in no-load mutual funds specializing in large
capitalization value and growth stocks. We believe that, by carefully selecting
the mutual funds in which the Fund invests ("underlying funds"), we will provide
you with an investment that is flexible in terms of both the investment
techniques used by the underlying funds and the companies represented in the
portfolios of the underlying funds.
The fund advisor, Monument Investments Inc., tries to achieve the greatest
return for the level of risk assumed by each mutual fund. Our investment
strategy stresses three factors: fund performance, investment style, and cost
structure.
Performance. The fund advisor continuously monitors the performance of the broad
universe of equity mutual funds selecting those funds which have proven
themselves consistent performers relative to their asset class for the 1, 3, and
5 year time horizons. Though past performance does not guarantee future returns
it does suggest in the opinion of this advisor, that the better performing funds
continue to exhibit investment success over time.
Investment Style. Growth or value or both? The fund advisor realizes that one
style may outperform the other style dramatically over a period of time but not
all the time. Hence, the flexibility to invest in the segment of the market
which is in favor greatly enhances the efforts of the fund advisor to deliver
consistent performance.
Cost Structure. The fund advisor is acutely aware of the effects that the cost
structure of the invested mutual funds can have on performance. To this end,
every effort is made to measure the `cost vs. reward' of each fund in which this
fund invests. Funds which perform well, even those with a higher cost structure
will be maintained, while a poor performing fund, even with a low cost
structure, will be liquidated.
THE FUND IS DESIGNED AS A "FUND OF FUNDS" BUT MAY ALSO INVEST DIRECTLY IN LARGE,
WELL-CAPITALIZED U.S. COMPANIES.
While the Fund intends to invest primarily in equity mutual Funds, the Fund may
also invest up to 25% of the Fund's assets directly in equity securities which
also have large capitalization value and growth characteristics, as viewed by
the Fund's advisor. Large capitalization stocks have a value of approximately
one billion or more and are therefore more liquid in nature, i.e., they usually
have enough shares outstanding to accommodate supply and demand for their shares
on typical trading days. Usually, stocks with greater liquidity are less
volatile.
Value stocks typically are stocks which are out of favor with their particular
industry or the stock market as a whole. Value stocks usually have a lower price
to earnings ratio than growth stocks and as a result are usually less volatile.
Growth stocks are generally companies with higher price to earnings ratios as
investors are more willing to pay a higher price for expected future earnings.
Growth stocks can be more volatile than value stocks in light of their higher
price to earnings ratios.
The Fund will avail itself of both investment styles. Hence the Fund is not
"locked" into just one investment style, but is designed to be more flexible.
WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUND?
The value of the fund's shares depends on the value of the mutual funds and
other securities it owns. The value of the mutual funds and the individual
securities that the fund owns will go up and down depending on the performance
of the companies that issued them, general market and economic conditions, and
investor confidence.
There is no guarantee that the Fund will achieve its investment objective and
the beneficiary could lose money as a result of the investment in the Fund.
We will invest only in mutual funds that have an investment objective similar to
the Fund's. The mutual funds we acquire, however, may use certain investment
techniques and strategies that are different from those adopted by the Fund. For
example, an underlying fund might invest a portion of its assets in foreign
securities or concentrate investments in a single industry. These and other
techniques and strategies may involve investment risks in addition to those
normally associated with investments made in accordance with policies adopted by
the Fund. Your investment in the Fund will be subject to such risks to the
extent that the underlying funds make use of such investment techniques and
strategies.
By investing in other mutual funds, the 10k SmartTrust will incur greater
expenses than you would incur if you invested directly in mutual funds. There is
also risk associated with the emphasis placed on our judgment in assembling the
underlying mutual funds. This increased reliance on our judgment exposes you to
the risk that we could be incorrect in our evaluations and assumptions and thus
may make allocation decisions that may not prove profitable.
In summary, 10k SmartTrust is intended for investors who want to give an
irrevocable gift to another individual, but want that gift to have the potential
to grow, outside of the grantors estate, over time (at least 10 years) in a fund
whose objective is long term capital growth through large capitalization value
and growth equity funds. A grantor (the person making the gift) willing to make
such a gift must be willing to give up control over the gift and accept the
risks associated with the fund's investment strategy.
EXPENSES OF THE FUND AND UNDERLYING FUNDS
We will normally invest only in other mutual funds that do not impose sales
charges of any kind or redemption fees. If we do select a mutual fund that
imposes such a charge, however, we will use available waivers and quantity
discounts to [reduce or] eliminate the sales load. We may also invest in mutual
funds that incur fees and expenses for distribution services or shareholder
services under 12b-1 plans or shareholder services plans. The Fund will
indirectly bear its proportionate share of these fees and expenses. Because the
Fund will bear its share of the costs of the underlying funds, you will pay
higher expenses than would be the case if you made a direct investment in the
underlying fund. These costs include items such as the fees paid to the manager
of the underlying fund and fees paid to other organizations that provide
necessary services to the underlying funds, as well as fees, if any, related to
the distribution of shares of the underlying fund.
CERTAIN INVESTMENT TECHNIQUES AND ASSOCIATED RISKS
Investments in foreign securities, and related transaction in foreign
currencies, may be affected by fluctuations in currency exchange rates, unstable
political and economic structures, reduced availability of public information,
and lack of uniform financial reporting and regulatory practices similar to
those that apply to U.S. issuers. An underlying fund that concentrates its
investments in a single industry is likely to be adversely affected by market
and economic conditions that are unfavorable for that industry. The liquidity of
an underlying fund will be affected if that fund invests in restricted or
illiquid issues and this could affect the ability of the Fund to redeem shares
of that fund. An underlying fund that engages in techniques such as selling
short, borrowing money, hedging strategies using futures contracts or options,
may incur transaction costs not associated with direct investments in securities
as well as certain other risks. Investments in fixed income securities by an
underlying fund will subject that fund to the risk that the value of the fixed
income securities held will fluctuate with changes in the prevailing interest
rates.
The underlying funds may actively trade their portfolios, resulting in higher
brokerage commissions and increased realization of taxable capital gains. In
addition, the underlying funds may invest in money market funds and money market
instruments as a temporary defensive strategy; such investments may reduce the
potential for capital appreciation.
The Fund is independent from any of the other mutual funds in which it invests
and has little voice in or control over the investment practices, policies or
decisions of those funds. If the Fund disagrees with those practices, policies
or decisions, it may have no choice other than to liquidate its investment in
the underlying fund, which can entail further losses. In addition, if the Fund
holds more than 1% of the underlying fund's shares, the Fund may encounter
delays in redeeming its holding in that fund.
MANAGEMENT
WHO MANAGES THE FUND?
The Board of Trustees oversees the management of the Fund and meets at least
quarterly to review reports about Fund operations. The Board of Trustees has
hired the Advisor to provide investment management services to the Fund. These
services include day-to-day investment decision for the Fund, placing securities
transactions with brokers selected by the Advisor and coordination of other
services necessary for the Fund to operate.
Monument Investments, Inc. is the Advisor and is located at 5952 Royal Lane,
Suite 270, Dallas, Texas 75230. J. Paul Hamilton, the founder and president of
the advisor, is responsible for day to day investment decisions for the Fund.
Mr. Hamilton has been a portfolio manager for 15 years. Before founding Monument
Investments, Inc. in 1996, Mr. Hamilton was a Vice President, Trust Officer and
Portfolio Manager with Texas Commerce Bank (1986 to 1996) and prior to that, a
Portfolio Manager and Trust Officer with First National Bank, Abilene, Texas
1984 to 1986). Mr. Hamilton is a graduate of Hardin-Simmons University, where he
also earned an MBA in Finance. Neither the Advisor nor Mr. Hamilton have
previously managed assets organized as a mutual fund. The Fund has no operating
history.
FUNDAMENTAL INVESTMENT POLICIES
Fundamental investment policies contained in the Statement of Additional
Information and the investment objective of the fund may not be changed without
a shareholder vote. The Board of Trustees may change any other policies and
investment strategies.
WHAT ABOUT YEAR 2000?
Many computer systems used today cannot tell the year 2000 from the year 1900
because of the way dates are encoded. This could be a problem when the year 2000
arrives and could affect securities trades, interest and dividend payments,
pricing, and account services.
Although we cannot guarantee, we have received representations that the
investment advisor and the service providers are ready and prepared for Year
2000.
In addition, the issuers of securities the fund owns could have Year 2000
computer problems. These problems could negatively affect the value of the
securities, which, in turn, could impact the funds performance. The advisor has
established a process to gather publicly available information about the Year
2000 readiness of these issuers. However, this process may not uncover all
relevant information, and the information gathered may not be complete and
accurate. Moreover, an issuers Year 2000 readiness is only one of many factors
the fund mangers may consider when making investment decisions, and other
factors may receive greater weight.
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HOW TO INVEST IN 10K SMARTTRUST FUND
HOW DOES A 10K SMARTTRUST ACCOUNT OPERATE?
Establishing a 10k SmartTrust Account. You may establish a 10k SmartTrust
Account by completing an application and forwarding it to the Adviser. As part
of the application process, you will be asked to designate a beneficiary,
maturity date(s) and to approve other terms of your 10k SmartTrust Account.
Please remember that, once your 10k SmartTrust Account is established, you may
make additional investments in your 10k SmartTrust Account until it matures, but
under the terms of the irrevocable trust, you will not be permitted to withdraw
money from the 10k SmartTrust Account or change the terms of the Trust in any
way.
You may send a check or money order payable to the Advisor with your application
or, if you prefer, you may arrange to wire your payment to us. The minimum
investment required to establish your 10k SmartTrust Account is $10,000. Once
your 10k SmartTrust Account is established, you may make additional investments
in the 10k SmartTrust Account, by wire or by mail. You may also establish
telephone services or wire transfer services; please contact us for details.
YOU MAY ESTABLISH YOUR 10K SMARTTRUST ACCOUNT:
BY TELEPHONE OPEN AN ACCOUNT
MAKE ADDITIONAL GIFTS
Additional gift must be Your initial 10k SmartTrust Account must
at an initial gift of at be established in writing with at least
least $10,000. $10,000.
BY MAIL OPEN AN ACCOUNT
MAKE ADDITIONAL GIFTS
Send your check or money Send a signed and completed application
order for at least $5,000. and a check or money order payable to:
Include the account name, Monument Investments, Inc.
address and number to be P. O. Box 670662
credited on your check or Dallas, TX 75367
money order.
BY WIRE OPEN AN ACCOUNT
MAKE AN ADDITIONAL
INVESTMENTS
Follow the wire instructions Send a signed and completed application.
provided in the "Open an Give your bank the following information:
account" section ABA #0420-0001-3
Attn: 10k SmartTrust Fund
DDA #821-253549
10k SmartTrust beneficiary's name
ONLINE
Log on to our website and follow the instructions.
IN PERSON
If you prefer to handle your transactions in person, our Investor Center and a
representative can help you open an account and make additional investments. Our
offices are open Monday-Friday 8 a.m. to 5 p.m. Visit us at Monument
Investments, Inc. 5952 Royal Lane, Suite 270, Dallas, TX. 75230.
Managing a Matured 10k SmartTrust Account. Your designated beneficiary will be
notified prior to the date on which the 10k SmartTrust Account reaches maturity.
At that time, shares of the Fund will be transferred to an account ("Matured
Account") established in the sole name and Social Security number of your
designated beneficiary. After the 10k SmartTrust Account matures and is
transferred to your designated beneficiary, neither you nor your designated
beneficiary may make any additional investments to that Matured Account.
Shares of the Fund held in a matured account may be redeemed by the designated
beneficiary, upon written instructions from the beneficiary. Redemption orders
for $100,000 or more must include a signature guarantee. Alternatively, the
beneficiary may establish telephone or wire transfer services; please contact us
for details. A $100 fee will be assessed at final maturity to help offset the
expense of closing the account.
MANAGING A MATURED ACCOUNT:
BY WIRE: SELL SHARES:
If the beneficiary requests a A beneficiary can receive redemption
redemption by wire, $25 will proceeds by wire or electronic
be deducted from the amount transfer. (This service is not
wired. Your bank also may available if the beneficiary
charge a fee. Has chosen to do business in writing
only.)
IN PERSON: IF YOU PREFER TO HANDLE YOUR TRANSACTIONS IN PERSON, OUR INVESTOR
CENTER AND A REPRESENTATIVE CAN HELP YOU OPEN AN ACCOUNT AND MAKE ADDITIONAL
INVESTMENTS. OUR OFFICES ARE OPEN MONDAY-FRIDAY 8 A.M. TO 5 P.M. VISIT US AT:
MONUMENT INVESTMENTS, INC.
5952 ROYAL LANE, SUITE 270
DALLAS, TX 75230
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SHARE PRICE AND DISTRIBUTIONS
SHARE PRICE
The value of an individual share in the Fund (the net asset value) is
calculated by dividing the total value of the Fund's investments and other
assets (including accrued income), less any liabilities (including estimated
accrued expenses), by the number of shares outstanding, rounded to the nearest
cent. Net asset value per share is determined as of the close of the New York
Stock Exchange (4:00 p.m., Eastern time) on each day that the exchange is open
for business, and on any other day on which there is sufficient trading in the
Fund's securities to materially affect the net asset value. The net asset value
per share of the Fund will fluctuate.
Securities which are traded on any exchange or on the NASDAQ over-the-counter
market are valued at the last quoted sale price. Lacking a last sale price, a
security is valued at its last bid price except when, in the Advisor's opinion,
the last bid price does not accurately reflect the current value of the
security. All other securities for which over-the-counter market quotations are
readily available are valued at their last bid price. When market quotations are
not readily available or when the Advisor determines the last bid price does not
accurately reflect the current value then such securities are valued pursuant to
methods established by the Board of Trustees.
Fixed income securities generally are valued by using market quotations, but may
be valued on the basis of prices furnished by a pricing service when the Advisor
believes such prices accurately reflect the fair market value of such
securities. A pricing service utilizes electronic data processing techniques
based on yield spreads relating to securities with similar characteristics to
determine prices for normal institutional-size trading units of debt securities
without regard to sale or bid prices. When prices are not readily available from
a pricing service such securities are valued pursuant to methods established by
the Board of Trustees. Short term investments in fixed income securities with
maturities of less than 60 days when acquired, or which subsequently are within
60 days of maturity, are valued by using the amortized cost method of valuation,
which the Board has determined will represent fair value.
DIVIDENDS AND DISTRIBUTIONS
The Fund intends to make distributions of dividends and capital gains; to assure
that the relevant provisions of the tax code relating to irrevocable gift trusts
such as the 10k SmartTrust Account are met, all distributions will be reinvested
in Fund shares. Dividends will nevertheless be taxable to the 10k SmartTrust
Account as ordinary income under federal, state and local tax law. (SEE "TAXES"
ON PAGE #). The Fund will make distributions of dividends and capital gains, if
any, at least annually, typically after year end. The Fund will make another
distribution of any additional undistributed capital gains earned during the
12-month period ended October 31 on or about December 31.
Dividend or distributions on shares of the Fund held in the 10k SmartTrust
Account will be credited to the 10k SmartTrust, starting on the day after a
purchase is effective. For example, if shares are purchased on a day that a
distribution is declared, the 10k SmartTrust will not receive that distribution.
Redeemed shares will receive any distribution declared on the day of redemption.
When shares held in a Matured Account are redeemed, we will include any
distributions received with the redemption proceeds. Other than to make certain
tax payments, the redemption's from a 10k SmartTrust Account are not permitted
before the account matures.
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TAXES
WHAT ARE THE TAX CONSEQUENCES OF ESTABLISHING A 10K SMARTTRUST ACCOUNT?
The following is only a summary of the tax laws that will affect a 10k
SmartTrust Account. The tax laws applicable to trusts in general are quite
complex. You should consider consulting your tax advisor or attorney before
opening or establishing a 10k SmartTrust Account.
Distribution and dividends earned in a 10k SmartTrust Account may be subject to
federal, state and local taxes and a tax return is generally required to be
filed by the Trustee of the 10k SmartTrust Account. The Trustee for the 10k
SmartTrust Account will file all state and federal tax returns and will pay any
taxes that are due by redeeming Fund shares from your 10k SmartTrust Account. A
$25 fee is charged to the trust for each year a tax return is filed. This also
is done by redeeming shares from the 10k SmartTrust Account.
Taxation of Distributions. Distributions of income are taxable to the 10k
SmartTrust Account as ordinary income. Distributions of capital gains are
classified either as short-term or long-term and are taxed as follows:
<TABLE>
<S> <C> <C> <C>
Type of Distribution Tax Rate of 15% Bracket Tax Rate of 28% or above
Short-term capital gains Ordinary income rate Ordinary income rate
Long-term capital gains 10% 20%
</TABLE>
The tax status of any distribution of capital gains is determined by how long
the Fund held the underlying security that was sold, not by how long the 10k
SmartTrust has been in existence. No federal income tax is due from the 10k
SmartTrust Account unless its income exceeds approximately $100 in a year.
Redemption's from Matured Accounts. Redemption's from a Matured Account will be
subject to capital gains tax. Based on current tax law, which is subject to
change, gains or losses will be treated as either short-term capital gains or
losses or long-term capital gains or losses.
Gift Taxes. When you establish a 10k SmartTrust Account, you will be treated,
for Federal gift tax purposes, as the donor of a future interest. Any additional
investments you make in your 10k SmartTrust Account during the term of your 10k
SmartTrust will likewise be considered to be gifts of a future interest. As a
result, neither your initial investment nor any subsequent investment will
qualify for the Annual Gift Tax Exclusion of $10,000 (indexed for inflation).
Accordingly, you will be required to file a United States Gift Tax Return (Form
709) with respect to any year in which you make an investment in your 10k
SmartTrust. No gift tax is payable, however, until your "Lifetime Exemption" or
"Unified Tax Credit" is exceeded. For tax years through 1999, the Unified Tax
Credit is $650,000; this amount will increase to $1,000,000 by 2006. Each gift
is applied against the exemption equivalent that would otherwise be available in
the future.
NOTE: THE ABOVE PARAGRAPH HOLDS TRUE UNLESS THE GRANTOR OFFERS THE BENEFICIARY
THE RIGHT TO WITHDRAWAL THE ANNUAL GIFT TAX EXCLUSION OF $10,000 (INDEXED
FOR INFLATION) WITHIN 30 DAYS OF ESTABLISHING THE 10K SMARTTRUST. IN MAKING
AVAILABLE THE WITHDRAWAL OPTION TO THE BENEFICIARY, THE GIFT WOULD BE
DEEMED A CURRENT INTEREST GIFT AND WOULD NOW QUALIFY FOR THE ANNUAL GIFT
TAX EXCLUSION OF $10,000.
NOTE: Only the annual gift tax exclusion amount would qualify as a current
interest gift. The remaining gift would utilize the lifetime exemption and
a gift tax return would need to be filed. Example: Suppose a gift of
$100,000 was made and the beneficiary chose to forgo the withdrawal option.
$10,000 would qualify for the annual gift tax exclusion and only $90,000 of
the Lifetime Exemption would be utilized.
<PAGE>
ANNUAL AND SEMIANNUAL REPORTS MORE INFORMATION:
These reports contain more information You can review and copy
about the Fund's investments and the information including the
market conditions and investment Fund's reports and SAI at the
strategies that significantly Public Reference Room of the
affected the Fund's performance Securities and Exchange
during the most recent fiscal period. Commission in Washington, D.C.
These reports about can be obtained Your can obtain information on
free of charge by calling the Fund the operations of the Public
at 1-800-489-0061. Reference Room by calling
1-800-SEC-0330.
STATEMENT OF ADDITIONAL INFORMATION
SAI).
The SAI contains a more detailed, You can get text only copies:
legal description of the Fund's For a fee by writing to the
operations, investment restrictions, Public Reference Room of the
policies and practices. The SAI is Commission, Washington, D.C.
incorporated by reference into this 20549-6009, or for a fee, by
Prospectus. This means that it is calling 1-800-SEC-0330, or
legally part of this Prospectus, free of charge Commission's
even if you don't request a copy. Internet website at
This report can be obtained free http:\\www.sec.gov.
of charge by calling the Fund at
1-800-489-0061.
Shareholders may make inquires to the Fund by calling 1-800-733-1183.
<PAGE>
10k SmartTrust Fund
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------
This Statement of Additional Information is not a prospectus. It should
be read in conjunction with the Prospectus of 10k SmartTrust Fund dated
________________. A copy of the Prospectus can be obtained by writing the
Transfer Agent at 431 North Pennsylvania Street, Indianapolis, Indiana 46204, or
by calling 1-888-733-1183.
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STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
PAGE
DESCRIPTION OF THE TRUST
ADDITIONAL INFORMATION ABOUT FUND INVESTMENTS AND RISK
CONSIDERATIONS
INVESTMENT LIMITATIONS
THE INVESTMENT ADVISOR
TRUSTEES AND OFFICERS
PORTFOLIO TRANSACTIONS AND BROKERAGE
DETERMINATION OF SHARE PRICE
INVESTMENT PERFORMANCE
CUSTODIAN
TRANSFER AGENT
ACCOUNTANTS
DISTRIBUTOR
ADMINISTRATOR
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DESCRIPTION OF THE TRUST
The 10k SmartTrust Fund (the "Fund") was organized as a series of 10k SmartTrust
(the "Trust"). The Trust is an open-end investment company
established under the laws of Ohio by an Agreement and Declaration of Trust
dated April 6, 1999 (the "Trust Agreement"). The Trust Agreement permits the
Trustees to issue an unlimited number of shares of beneficial interest of
separate series without par value. The Fund is one of a series of funds
currently authorized by the Trustees.
Each share of a series represents an equal proportionate interest in
the assets and liabilities belonging to that series with each other share of
that series and is entitled to such dividends and distributions out of income
belonging to the series as are declared by the Trustees. The shares do not have
cumulative voting rights or any preemptive or conversion rights, and the
Trustees have the authority from time to time to divide or combine the shares of
any series into a greater or lesser number of shares of that series so long as
the proportionate beneficial interest in the assets belonging to that series and
the rights of shares of any other series are in no way affected. In case of any
liquidation of a series, the holders of shares of the series being liquidated
will been titled to receive as a class a distribution out of the assets, net of
the liabilities, belonging to that series. Expenses attributable to any series
are borne by that series. Any general expenses of the Trust not readily
identifiable as belonging to a particular series are allocated by or under the
direction of the Trustees in such manner as the Trustees determine to be fair
and equitable. No shareholder is liable to further calls or to assessment by the
Trust without his or her express consent.
For information concerning the purchase and redemption of shares of the
Fund, see "How to Invest in the Fund" and "How to Redeem Shares" in the Fund's
Prospectus. For a description of the methods used to determine the share price
and value of the Fund's assets, see "Share Price Calculation" in the Fund's
Prospectus.
INVESTMENT LIMITATIONS
Fundamental. The investment limitations described below have been
adopted by the Trust with respect to the Fund and are fundamental
("Fundamental"), i.e., they may not be changed without the affirmative vote of a
majority of the outstanding shares of the Fund. As used in the Prospectus and
this Statement of Additional Information, the term "majority" of the outstanding
shares of the Fund means the lesser of (1) 67% or more of the outstanding shares
of the Fund present at a meeting, if the holders of more than 50% of the
outstanding shares of the Fund are present or represented at such meeting; or
(2) more than 50% of the outstanding shares of the Fund. Other investment
practices which may be changed by the Board of Trustees without the approval of
shareholders to the extent permitted by applicable law, regulation or regulatory
policy are considered non-fundamental ("Non-Fundamental").
1. Borrowing Money. The Fund will not borrow money, except (a) from a
bank, provided that immediately after such borrowing there is an asset coverage
of 300% for all borrowings of the Fund; or (b) from a bank or other persons for
temporary purposes only, provided that such temporary borrowings are in an
amount not exceeding 5% of the Fund's total assets at the time when the
borrowing is made. This limitation does not preclude the Fund from entering into
reverse repurchase transactions, provided that the Fund has an asset coverage of
300% for all borrowings and repurchase commitments of the Fund pursuant to
reverse repurchase transactions.
2. Senior Securities. The Fund will not issue senior securities. This
limitation is not applicable to activities that may be deemed to involve the
issuance or sale of a senior security by the Fund, provided that the Fund's
engagement in such activities is consistent with or permitted by the Investment
Company Act of 1940, as amended, the rules and regulations promulgated
thereunder or interpretations of the Securities and Exchange Commission or its
staff.
3. Underwriting. The Fund will not act as underwriter of securities
issued by other persons. This limitation is not applicable to the extent that,
in connection with the disposition of portfolio securities (including restricted
securities), the Fund may be deemed an underwriter under certain federal
securities laws.
4. Real Estate. The Fund will not purchase or sell real estate. This
limitation is not applicable to investments in marketable securities which are
secured by or represent interests in real estate. This limitation does not
preclude the Fund from investing in mortgage-related securities or investing in
companies engaged in the real estate business or that have a significant portion
of their assets in real estate (including real estate investment trusts).
5. Commodities. The Fund will not purchase or sell commodities unless
acquired as a result of ownership of securities or other investments. This
limitation does not preclude the Fund from purchasing or selling options or
futures contracts, from investing in securities or other instruments backed by
commodities or from investing in companies which are engaged in a commodities
business or have a significant portion of their assets in commodities.
6. Loans. The Fund will not make loans to other persons, except (a) by
loaning portfolio securities, (b) by engaging in repurchase agreements, or (c)
by purchasing nonpublicly offered debt securities. For purposes of this
limitation, the term "loans" shall not include the purchase of a portion of an
issue of publicly distributed bonds, debentures or other securities.
7. Concentration. The Fund will not invest 25% or more of its total
assets in a particular industry. This limitation is not applicable to
investments in obligations issued or guaranteed by the U.S. government,
its agencies and instrumentalities or repurchase agreements with respect
thereto.
With respect to the percentages adopted by the Trust as maximum
limitations on its investment policies and limitations, an excess above the
fixed percentage will not be a violation of the policy or limitation unless the
excess results immediately and directly from the acquisition of any security or
the action taken. This paragraph does not apply to the borrowing policy set
forth in paragraph 1 above.
Notwithstanding any of the foregoing limitations, any investment
company, whether organized as a trust, association or corporation, or a personal
holding company, may be merged or consolidated with or acquired by the Trust,
provided that if such merger, consolidation or acquisition results in an
investment in the securities of any issuer prohibited by said paragraphs, the
Trust shall, within ninety days after the consummation of such merger,
consolidation or acquisition, dispose of all of the securities of such issuer so
acquired or such portion thereof as shall bring the total investment therein
within the limitations imposed by said paragraphs above as of the date of
consummation.
Non-Fundamental. The following limitations have been adopted by the Trust with
respect to the Fund and are Non-Fundamental (see "Investment Restrictions"
above).
1. Pledging. The Fund will not mortgage, pledge, hypothecate or in any
manner transfer, as security for indebtedness, any assets of the Fund except as
may be necessary in connection with borrowings described in limitation (1)
above. Margin deposits, security interests, liens and collateral arrangements
with respect to transactions involving options, futures contracts, short sales
and other permitted investments and techniques are not deemed to be a mortgage,
pledge or hypothecation of assets for purposes of this limitation.
2. Borrowing. The Fund will not engage in borrowing.
3. Margin Purchases. The Fund will not purchase securities or evidences
of interest thereon on "margin." This limitation is not applicable to short term
credit obtained by the Fund for the clearance of purchases and sales or
redemption of securities, or to arrangements with respect to transactions
involving options, futures contracts, short sales and other permitted
investments and techniques.
4. Short Sales. The Fund will not effect short sales of securities.
5. Options. The Fund will not purchase or sell puts, calls, options or
straddles.
6. Illiquid Investments. The Fund will not invest in securities for
which there are legal or contractual restrictions on resale and other illiquid
securities.
7. Loans of Portfolio Securities. The Fund will not make loans of
portfolio securities.
THE INVESTMENT ADVISOR
The Fund's investment advisor is Monument Investments, Inc. (the
"Advisor"). J. Paul Hamilton may be deemed to be a controlling person of the
Advisor due to his ownership of a majority of its shares.
Under the terms of the management agreement (the "Agreement"), the
Advisor manages the Fund's investments subject to approval of the Board of
Trustees and pays all of the expenses of the Fund except brokerage, taxes,
interest, fees and expenses of the non-interested person trustees and
extraordinary expenses (including organizational expenses). As compensation for
its management services and agreement to pay the Fund's expenses, the Fund is
obligated to pay the Advisor a fee computed and accrued daily and paid monthly
at an annual rate of 1.50% of the average daily net assets of the Fund. The
Advisor may waive all or part of its fee, at any time, and at its sole
discretion, but such action shall not obligate the Advisor to waive any fees in
the future.
The Advisor retains the right to use the name 10k SmartTrust in
connection with another investment company or business enterprise with which the
Advisor is or may become associated. The Trust's right to use the name 10k
SmartTrust automatically ceases ninety days after termination of the Agreement
and may be withdrawn by the Advisor on ninety days written notice.
The Advisor may make payments to banks or other financial institutions
that provide shareholder services and administer shareholder accounts. The
Glass-Steagall Act prohibits banks from engaging in the business of
underwriting, selling or distributing securities. Although the scope of this
prohibition under the Glass-Steagall Act has not been clearly defined by the
courts or appropriate regulatory agencies, management of the Fund believes that
the Glass-Steagall Act should not preclude a bank from providing such services.
However, state securities laws on this issue may differ from the interpretations
of federal law expressed herein and banks and financial institutions may be
required to register as dealers pursuant to state law. If a bank were prohibited
from continuing to perform all or a part of such services, management of the
Fund believes that there would be no material impact on the Fund or its
shareholders. Banks may charge their customers fees for offering these services
to the extent permitted by applicable regulatory authorities, and the overall
return to those shareholders availing themselves of the bank services will be
lower than to those shareholders who do not. The Fund may from time to time
purchase securities issued by banks which provide such services; however, in
selecting investments for the Fund, no preference will be shown for such
securities.
TRUSTEES AND OFFICERS
The names of the Trustees and executive officers of the Trust are shown
below. Each Trustee who is an "interested person" of the Trust, as defined in
the Investment Company Act of 1940, is indicated by an asterisk.
============================================= ==================================
NAME, AGE AND ADDRESS POSITION PRINCIPAL OCCUPATIONS DURING
PAST 5 YEARS
J. Paul Hamilton President President of Monument
Vice President, Investments, Inc. since 1996.
Trust Officer and Portfolio
Manager at Texas Commerce Bank
from 1984 to 1996.
============================================== =================================
The compensation paid to the Trustees of the Trust for the fiscal year
ended October 31, 1998 is set forth in the following table. Trustee fees are
Trust expenses and each series of the Trust pays a portion of the Trustee fees.
==================== ========================== ================================
NAME AGGREGATE TOTAL COMPENSATION
COMPENSATION FROM TRUST FROM TRUST (THE TRUST IS
NOT IN A FUND COMPLEX)
J. Paul Hamilton 0 0
==================== ========================== ================================
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to policies established by the Board of Trustees of the Trust,
the Advisor is responsible for the Fund's portfolio decisions and the placing of
the Fund's portfolio transactions. In placing portfolio transactions, the
Advisor seeks the best qualitative execution for the Fund, taking into account
such factors as price (including the applicable brokerage commission or dealer
spread), the execution capability, financial responsibility and responsiveness
of the broker or dealer and the brokerage and research services provided by the
broker or dealer. The Advisor generally seeks favorable prices and commission
rates that are reasonable in relation to the benefits received.
The Advisor is specifically authorized to select brokers or dealers who
also provide brokerage and research services to the Fund and/or the other
accounts over which the Advisor exercises investment discretion and to pay such
brokers or dealers a commission in excess of the commission another broker or
dealer would charge if the Advisor determines in good faith that the commission
is reasonable in relation to the value of the brokerage and research services
provided. The determination may be viewed in terms of a particular transaction
or the Advisor's overall responsibilities with respect to the Trust and to other
accounts over which it exercises investment discretion.
Research services include supplemental research, securities and
economic analyses, statistical services and information with respect to the
availability of securities or purchasers or sellers of securities and analyses
of reports concerning performance of accounts. The research services and other
information furnished by brokers through whom the Fund effects securities
transactions may also be used by the Advisor in servicing all of its accounts.
Similarly, research and information provided by brokers or dealers serving other
clients may be useful to the Advisor in connection with its services to the
Fund. Although research services and other information are useful to the Fund
and the Advisor, it is not possible to place a dollar value on the research and
other information received. It is the opinion of the Board of Trustees and the
Advisor that the review and study of the research and other information will not
reduce the overall cost to the Advisor of performing its duties to the Fund
under the Agreement.
Over-the-counter transactions will be placed either directly with
principal market makers or with broker-dealers, if the same or a better price,
including commissions and executions, is available. Fixed income securities are
normally purchased directly from the issuer, an underwriter or a market maker.
Purchases include a concession paid by the issuer to the underwriter and the
purchase price paid to a market maker may include the spread between the bid and
asked prices.
[To the extent that the Trust and another of the Advisor's clients seek to
acquire the same security at about the same time, the Trust may not be able to
acquire as large a position in such security as it desires or it may have to pay
a higher price for the security. Similarly, the Trust may not be able to obtain
as large an execution of an order to sell or as high a price for any particular
portfolio security if the other client desires to sell the same portfolio
security at the same time. On the other hand, if the same securities are bought
or sold at the same time by more than one client, the resulting participation in
volume transactions could produce better executions for the Trust. In the event
that more than one client wants to purchase or sell the same security on a given
date, the purchases and sales will be prorated in the event full execution of
the trade was not possible.]
DETERMINATION OF SHARE PRICE
The price (net asset value) of the shares of the Fund is determined as
of 4:00 p.m., Eastern time on each day the Trust is open for business and on any
other day on which there is sufficient trading in the Fund's securities to
materially affect the net asset value. The Trust is open for business on every
day except Saturdays, Sundays and the following holidays: New Year's Day, Martin
Luther King, Jr. Day, President's Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving and Christmas. For a description of the methods
used to determine the net asset value (share price), see "Share Price
Calculation" in the Prospectus.
INVESTMENT PERFORMANCE
"Average annual total return," as defined by the Securities and
Exchange Commission, is computed by finding the average annual compounded rates
of return for the period indicated that would equate the initial amount invested
to the ending redeemable value, according to the following formula:
P(1+T)n=ERV
Where: P = a hypothetical $1,000 initial investment
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the
applicable period of the hypothetical
$1,000 investment made at the beginning of
the applicable period.
The computation assumes that all dividends and distributions are reinvested at
the net asset value on the reinvestment dates and that a complete redemption
occurs at the end of the applicable period.
In addition to providing average annual total return, the Fund may also
provide non-standardized quotations of total return for differing periods and
may provide the value of a $10,000 investment (made on the date of the initial
public offering of the Fund's shares) as of the end of a specified period.
The Fund's investment performance will vary depending upon market
conditions, the composition of the Fund's portfolio and operating expenses of
the Fund. These factors and possible differences in the methods and time periods
used in calculating non-standardized investment performance should be considered
when comparing the Fund's performance to those of other investment companies or
investment vehicles The risks associated with the Fund's investment objective,
policies and techniques should also be considered. At any time in the future,
investment performance may be higher or lower than past performance, and there
can be no assurance that any performance will continue.
From time to time, in advertisements, sales literature and information
furnished to present or prospective shareholders, the performance of the Fund
may be compared to indices of broad groups of unmanaged securities considered to
be representative of or similar to the portfolio holdings of the Fund or
considered to be representative of the stock market in general. The Fund may use
the Standard & Poor's 500 Stock Index or the Dow Jones Industrial Average.
In addition, the performance of the Fund may be compared to other
groups of mutual funds tracked by any widely used independent research firm
which ranks mutual funds by overall performance, investment objectives and
assets, such as Lipper Analytical Services, Inc. or Morningstar, Inc. The
objectives, policies, limitations and expenses of other mutual funds in a group
may not be the same as those of the Fund. Performance rankings and ratings
reported periodically in national financial publications such as Barron's and
Fortune also may be used.
CUSTODIAN
Firstar Bank, N.A., 425 Walnut Street, Cincinnati, Ohio 45202, is
Custodian of the Fund's investments. The Custodian acts as the Fund's
depository, safekeeps its portfolio securities, collects all income and other
payments with respect thereto, disburses funds at the Fund's request and
maintains records in connection with its duties.
TRANSFER AGENT
Unified Fund Services, Inc., 431 North Pennsylvania Street,
Indianapolis, Indiana 46204, acts as the Fund's transfer agent and, in such
capacity, maintains the records of each Unified 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 accounting and shareholder service functions. In
addition, Unified provides the Fund with certain monthly reports, record-keeping
and other management-related services.
ACCOUNTANTS
The firm of McCurdy & Associates, CPA's, 27955 Clemens Road, Westlake,
Ohio 44145, has been selected as independent public accountants for the Trust
for the fiscal year ending October 31, 1999. McCurdy & Associates performs an
annual audit of the Fund's financial statements and provides financial, tax and
accounting consulting services as requested.
DISTRIBUTOR
AmeriPrime Financial Securities, Inc., 1793 Kingswood Drive, Suite 200,
Southlake, Texas 76092, is the exclusive agent for distribution of shares of the
Fund. The Distributor is obligated to sell the shares of the Fund on a best
efforts basis only against purchase orders for the shares. Shares of the Fund
are offered to the public on a continuous basis.
ADMINISTRATOR
The Fund retains AmeriPrime Financial Services, Inc., 1793 Kingswood
Drive, Suite 200, Southlake, TX 76092, (the "Administrator") to manage the
Fund's business affairs and provide the Fund with administrative services,
including all regulatory reporting and necessary office equipment, personnel and
facilities.
