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As filed with the Securities and Exchange
Commission on June 25, 1999
File Nos.
333-
811-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No.
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No.
_______________________________
VALENZUELA CAPITAL TRUST
(Exact Name of Registrant as Specified in Charter)
3435 Stelzer Road, Columbus, Ohio 43219
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code:(888) 247-9744
_____________________________
GARY TENKMAN
BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219
(Name and address of agent for service)
Copies of communications to:
Kathleen K. Clarke, Esq.
Seward & Kissel LLP
1200 G Street, N.W.
Washington, D.C. 20005
or
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Robert B. Van Grover, Esq.
Seward & Kissel LLP
One Battery Park Plaza
New York, New York 10004
It is proposed that this filing will become effective (check
appropriate box)
immediately upon filing pursuant to paragraph (b)
on (date) pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(1)
on (date) pursuant to paragraph (a)(1)
75 days after filing pursuant to paragraph (a)(2)
on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
This post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
The Registrant hereby amends this Registration Statement
under the Securities Act of 1933 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 the provisions of 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
Section 8(a), may determine.
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THE VALENZUELA CAPITAL TRUST
PROSPECTUS
September 15, 1999
VCP MID-CAP VALUE FUND
VCP SMALL-CAP VALUE FUND
Class A Shares
Class I Shares
Questions?
Call 1-888-247-9744
or your investment representative.
The Securities and Exchange Commission has not approved or
disapproved the shares described in this prospectus or determined
whether this prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
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TABLE OF CONTENTS
Carefully review this important section, which summarizes each
Fund's investments, risks, past performance, and fees.
Risk/Return Summary and Fund Expenses
3 VCP Mid-Cap Value Fund
5 VCP Small-Cap Value Fund
Review this section for information on investment strategies and
their risks.
Investment Goal and Principal Strategy and Risks
8 VCP Mid-Cap Value Fund
10 VCP Small-Cap Value Fund
Review this section for details on the people and organizations
who oversee the Funds.
Fund Management
12 The Investment Adviser
14 The Administrator and Distributor
14 Year 2000
Review this section for details on how shares are valued, how to
purchase, sell and exchange shares, related charges and payments
of dividends and distributions.
Shareholder Information
16 Pricing of Fund Shares
17 Purchasing and Adding to Your Shares
21 Selling Your Shares
22 General Policies on Selling Shares
24 Distribution Arrangements/Sales Charges
26 Distribution and Service (12b-1) Fees
26 Service Organizations
27 Exchanging Your Shares
28 Dividends, Distributions and Taxes
Back Cover
29 Where to learn more about the Funds
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RISK/RETURN SUMMARY AND FUND EXPENSES
The following is a summary of certain key information about the
Funds. You will find additional information about the Funds
after this summary. In this summary, we will identify principal
risks that apply to the Funds such as market risk, which is the
risk of market fluctuations, and management risk, which is the
risk that a Fund's manager will make poor choices in selecting
securities. More detailed descriptions of these and other risks
of an investment in the Funds can be found further back in the
Prospectus.
Other important things for you to note:
- -- You may lose money by investing in a Fund.
- -- An investment in a Fund is not a deposit in a bank and is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Risk/Return Summary of the VCP Mid-Cap Value Fund
INVESTMENT GOAL The Fund's objective is capital
appreciation primarily through
equity investments in mid-
capitalization companies.
PRINCIPAL INVESTMENT
STRATEGY The Fund invests at least 65% of its
total assets in mid-capitalization,
or mid-cap, companies with market
values from $1.5 billion to $10
billion. The Fund primarily invests
in common stocks of U.S. companies
with an emphasis on stocks that have
attractive valuations and the
potential for future earnings
growth.
PRINCIPAL INVESTMENT RISKS The principal risks of investing in
the Fund are market risk and
management risk. The Fund's
investments in mid-cap companies
have capitalization risk. The
stocks of mid-cap companies tend to
be more volatile than those of
large-capitalization companies. In
addition, these companies may have
more risk because they often have
more limited product lines, markets,
or financial resources.
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WHO MAY WANT TO INVEST? Consider investing in the Fund if
you are:
- seeking a long-term goal such as
retirement
- looking to add a value component
to your portfolio
- willing to accept higher risks
of investing in the stock market
in general and in mid-cap stocks
in particular
This Fund will not be appropriate
for anyone:
- seeking monthly income
- pursuing a short-term goal or
investing emergency reserves
- seeking safety of principal
PERFORMANCE INFORMATION
This is a new Fund for which no performance information is
available.
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RISK/RETURN SUMMARY OF THE VCP SMALL-CAP VALUE FUND
INVESTMENT GOAL The Fund's objective is capital
appreciation primarily through
equity investments in small-
capitalization companies.
PRINCIPAL INVESTMENT
STRATEGIES The Fund invests at least 65% of its
total assets in small-
capitalization, or small-cap,
companies with market values of less
than $1.5 billion. The Fund
primarily invests in common stocks
of U.S. companies with an emphasis
on stocks that have attractive
valuations and the potential for
future earnings growth.
PRINCIPAL INVESTMENT RISKS The principal risks of investing in
the Fund are market risk and
management risk. The Fund's
investments in small-cap companies
have capitalization risk. The
stocks of small-cap companies tend
to be more volatile than those of
large-capitalization companies. In
addition, these companies may have
more risk because they often have
limited product lines, markets, or
financial resources.
WHO MAY WANT TO INVEST? Consider investing in the Fund if
you are:
- seeking a long-term goal such as
retirement
- looking to add a value component
to your portfolio
- willing to accept higher risks
of investing in the stock market
in general and in small-cap
stocks in particular
This Fund will not be appropriate
for anyone:
- seeking monthly income
- pursuing a short-term goal or
investing emergency reserves
- seeking safety of principal
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PERFORMANCE INFORMATION
This is a new Fund for which no performance information is
available.
6
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RISK/RETURN SUMMARY AND FUND EXPENSES
FEES AND EXPENSES
As an investor in the Funds, you will pay the following fees and
expenses when you buy and hold shares. Shareholder transaction
fees are paid from your account. Annual Fund operating expenses
are paid out of Fund assets, and are reflected in the share
price.
Fee Table
Shareholder Transaction Mid-Cap Small-Cap
Expenses (fees paid by Value Fund Value Fund
you directly) Class A Class I Class A Class I
Maximum Sales Charge
(Load) Imposed on
Purchases 5.75%* None 5.75%* None
Maximum Deferred Sales
Charge (Load) None None None None
Annual Fund Operating
Expenses (fees paid from
Fund assets)
Management Fees** .75% .75% .75% .75%
Distribution and Service
(12b-1) Fees .25% None .25% None
Other Expenses _____% _____% _____% _____%
Shareholder Service Fee _____% _____% _____% _____%
Total Fund Operating
Expenses _____% _____% _____% _____%
Waiver and/or Expense
reimbursement** _____% _____% _____% _____%
Net Expenses _____% _____% _____% _____%
______________________
* Lower sales charges are available depending upon the amount
invested. See Distribution Arrangements.
** The Adviser has contractually agreed to waive a portion of
its advisory fees or reimburse a portion of the Funds
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operating expenses so that each of the Funds Class A and
Class I shares net expenses do not exceed 1.45% [until
October 1, 2000]. Other expenses are based on estimates for
the current fiscal year.
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Risk/Return Summary and Fund Expenses
Expense Example
Use the table at the right to compare fees and expenses with
those of other funds. It illustrates the amount of fees and
expenses you would pay, assuming the following:
-- $10,000 investment
-- 5% annual return
-- reinvestment of all dividends and distributions
-- redemption at the end of each period
-- no changes in the Fund's operating expenses
Because this example is hypothetical and for comparison only,
your actual costs will be different.
1 Year 3 Year
Mid-Cap Value Fund
Class A Shares $_____ $_____
Class I Shares $_____ $_____
Small-Cap Value Fund
Class A Shares $_____ $_____
Class I Shares $_____ $_____
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INVESTMENT GOAL AND PRINCIPAL STRATEGY AND RISKS
This section of the Prospectus provides a more complete
description of the Fund's investment objectives and principal
strategies and risks. Of course, there can be no assurance that
the Funds will achieve their investment objectives. The Funds
may change their investment objectives without shareholder
approval, although they do not contemplate that there will be any
change in the objectives. Additional descriptions of the Funds'
risks, strategies, and investments, as well as other strategies
and investments not described below, may be found in the Fund's
Statement of Additional Information of SAI.
VCP MID-CAP VALUE FUND
INVESTMENT GOAL The Fund's objective is capital appreciation
primarily through equity investments in mid-cap companies.
PRINCIPAL STRATEGIES The Fund invests at least 65% of its total
assets in equity securities of mid-cap companies with market
valuations from $1.5 billion to $10 billion. The Fund primarily
invests in the common stocks of U.S. companies.
The Fund's investment strategy is based on stock selection and
valuation analysis. The Fund selects mid-cap companies for
investment based on both quantitative and qualitative analysis.
The Fund's quantitative analysis uses statistical financial data,
mainly 3-to 5-year historical quarterly ratio analysis.
Normally, the Fund tracks about 180 mid-cap companies using
approximately 25 different ratios calculated from financial
statements, which are updated continuously. The Fund's
qualitative analysis of companies for investment includes
interviewing a company's management, on-site if possible, as well
as its customers, competitors, and suppliers, about, in
particular, issues raised by the Fund's quantitative analysis.
The Fund uses this process to assess risk and to identify
conditions that can lead to earnings growth.
As a result of this analysis, the Fund compiles a purchase list
with buy and sell target stock prices of about 100 companies,
which includes current portfolio holdings. The Fund uses
"investment disciplines" in determining whether to buy or sell
stocks.
The Fund will buy a stock that:
-- based on its analysis, may appreciate 50% over a 3-year
period;
-- has a stock price that has declined to the Fund's buy
price; or
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-- for a current portfolio holding, has a stock price that
has declined by more than 10% when there has been no
negative change in the company's fundamentals.
The Fund will sell a stock that:
-- reaches a predetermined price objective and is at a
premium market/industry valuation;
-- has a negative change in the company's fundamentals;
-- has appreciated substantially to replace it with a stock
that may appreciate 50% over a 3-year period; or
-- has appreciated substantially and becomes more than 7%
of the Fund's portfolio.
The Fund also reviews any stock on its purchase list that
relatively underperforms its peer group by 15% over a 6-month
rolling period and considers whether to retain it on the list.
PRINCIPAL RISKS The Fund's principal risks include market risk,
which is the risk that the value of the Fund's investments will
fluctuate as the stock market fluctuates and that stock prices
overall will decline over short or longer-term periods. The
Fund's investments in mid-cap companies have capitalization risk.
These companies' stocks may be more volatile than the over-all
market. Mid-cap companies may have limited resources, product
lines, and market share. As a result, their share prices tend to
fluctuate more than those of larger companies. For this reason,
the Fund's returns may vary from the stock market generally.
The Fund also has management risk, which is the possibility that
the Fund's managers may make poor choices in selecting securities
and that the Fund will not perform as well as other Funds. There
also is the risk of using a "value" strategy. Stocks in which
the Fund invests may remain undervalued during a given period or
continue to decline in price. This may occur because larger
stocks or investments based on the large-stock indices are more
appealing to investors or because value stocks as a category lose
favor with investors compared to growth stocks.
OTHER CONSIDERATIONS
Portfolio Turnover. The Fund is actively managed and, in some
cases in response to market positions, the Fund's portfolio
turnover may exceed 100%. A higher rate of portfolio turnover
increases brokerage and other expenses and may affect the Fund's
returns. A higher portfolio turnover rate also may result in the
realization of substantial net short-term gains, which when
distributed, are taxable to the Fund's shareholders.
Temporary Defensive Position. For temporary defensive purposes
in response to adverse market or other conditions, the Fund may
make investments, including short-term money market instruments
11
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or holding substantial cash reserves that are inconsistent with
the Fund's primary investment strategies. While the Fund is
investing for temporary defensive purposes, it may not meet its
investment objectives.
12
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VCP SMALL-CAP VALUE FUND
INVESTMENT GOAL The Fund's objective is capital appreciation
primarily through equity investments in small-capitalization
companies.
PRINCIPAL STRATEGIES The Fund invests at least 65% of its total
assets in equity securities of small-cap companies with market
valuations of less than $1.5 billion. The Fund primarily invests
in the common stocks of U.S. companies.
The Fund's investment strategy is based on stock selection and
valuation analysis. The Fund selects small-cap companies for
investment based on both quantitative and qualitative analysis.
The Fund's quantitative analysis uses statistical financial data,
mainly 3-to 5-year historical quarterly ratio analysis.
Normally, the Fund tracks about 180 small-cap companies using
approximately 25 different ratios calculated from financial
statements, which are updated continuously. The Fund's
qualitative analysis of companies for investment includes
interviewing a company's management, on-site if possible, as well
as its customers, competitors, and suppliers, about, in
particular, issues raised by the Fund's quantitative analysis.
The Fund uses this process to assess risk and to identify
conditions that can lead to earnings growth.
As a result of this analysis, the Fund compiles a purchase list
with buy and sell target stock prices of about 100 companies,
which includes current portfolio holdings. The Fund uses
"investment disciplines" in determining whether to buy or sell
stocks.
The Fund will buy a stock that:
-- based on its analysis, may appreciate 50% over a 3-year
period;
-- has a stock price that has declined to the Fund's buy
price; or
-- for a current portfolio holding, has a stock price that
has declined by more than 10% when there has been no
negative change in the company's fundamentals.
The Fund will sell a stock that:
-- reaches a predetermined price objective and is at a
premium market/industry valuation;
-- has a negative change in the company's fundamentals;
-- has appreciated substantially to replace it with a stock
that may appreciate 50% over a 3-year period; or
-- has appreciated substantially and becomes more than 7%
of the Fund's portfolio.
13
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The Fund also reviews any stock on its purchase list that
relatively underperforms its peer group by 15% over a 6-month
rolling period and considers whether to retain it on the list.
PRINCIPAL RISKS The Fund's principal risks include market risk,
which is the risk that the value of the Fund's investments will
fluctuate as the stock market fluctuates and that stock prices
overall will decline over short or longer-term periods. The
Fund's investments in small-cap companies have capitalization
risk. These companies' stocks may be more volatile than the
over-all market. Smaller companies tend to have limited
resources, product lines and market share. As a result, their
share prices tend to fluctuate more than those of larger
companies. Their shares may also trade less frequently and in
limited volume, negatively affecting the share price and making
them potentially more difficult to sell or less liquid. For this
reason, the Fund's returns may vary from the stock market
generally.
The Fund also has management risk, which is the possibility that
the Fund's managers may make poor choices in selecting securities
and that the Fund will not perform as well as other Funds. There
also is the risk of using a "value" strategy. Stocks in which
the Fund invests may remain undervalued during a given period or
continue to decline in price. This may occur because larger
stocks or investments based on the large-stock indices are more
appealing to investors or because value stocks as a category lose
favor with investors compared to growth stocks.
OTHER CONSIDERATIONS
PORTFOLIO TURNOVER. The Fund is actively managed and, in some
cases in response to market positions, the Fund's portfolio
turnover may exceed 100%. A higher rate of portfolio turnover
increases brokerage and other expenses and may affect the Fund's
returns. A higher portfolio turnover rate also may result in the
realization of substantial net short-term gains, which when
distributed, are taxable to the Fund's shareholders.
TEMPORARY DEFENSIVE POSITION. For temporary defensive purposes
in response to adverse market or other conditions, the Fund may
make investments, including short-term money market instruments
or holding substantial cash reserves that are inconsistent with
the Fund's primary investment strategies. While the Fund is
investing for temporary defensive purposes, it may not meet its
investment objectives.
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FUND MANAGEMENT
THE INVESTMENT ADVISER
Valenzuela Capital Partners, LLC ("VCP"), 1270 Avenue of the
Americas (Suite 508), New York, NY 10020 serves as investment
adviser to the Funds. VCP, founded in 1989, is a registered
investment adviser that manages more than $2 billion in assets,
primarily through institutional accounts. Subject to the Funds'
respective investment goals and policies approved by the Trustees
of the Funds, VCP makes the day-to-day investment decisions and
continuously reviews, supervises and administers the Funds'
investment programs. VCP utilizes a team approach in making
investment decisions on behalf of each Fund, with 8 professionals
working collectively to ensure a disciplined investment process
designed to result in long-term performance consistent with each
Fund's investment goal. No one person is responsible for a
Fund's management.
For its advisory services, the Funds pay VCP an annual advisory
fee equal to 0.75%, net of fee waivers of the average daily net
assets of each Fund.
The tables and charts that follow present performance data for
VCP with respect to its small-cap and mid-cap value products and
does not represent performance of either Fund. Information
presented is based on performance data provided by VCP for
accounts ("Accounts") it manages that have investment objectives,
policies, styles and strategies substantially similar to the ones
that will be employed in the VCP Mid-Cap Value Fund and VCP
Small-Cap Value Fund. The Accounts include VCP's individual and
unregistered accounts from January 1998 for the small-cap value
product and January 1990 for the mid-cap value product. The
Accounts are individual and unregistered accounts primarily
managed for tax-exempt investors, and are not subject to
diversification and other requirements that apply to mutual funds
under applicable laws and regulations. If the Accounts had be
registered, performance may have been adversely affected. As a
result, portfolio management strategies used on the Accounts and
those used on the Funds may vary in some respects. Also, fees on
the Accounts are imposed [quarterly] rather than daily for mutual
funds, which may inflate performance. The information should not
be considered a prediction of the future performance of either
Fund. The actual performance may be higher or lower than that
shown.
The tables and charts show the total returns for various periods
ended December 31, 1998 of the VCP Mid Cap Composite and the VCP
Small Cap Composite as compared to the Russell 2000 Index and the
Russell Mid Cap Index, respectively, each an unmanaged Index
which is representative of the performance of the small
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capitalization and medium capitalization sectors of the U.S.
securities market. The performance shown below is calculated in
accordance with AIMR standards. The performance shown below is
calculated net of expenses of each Fund's Class A shares based on
estimated expenses for the fiscal period ending December 31,
1999, adjusted to reflect estimated effective waivers and
reimbursements as set forth in the Fee Table in this Prospectus.
To the extent the fees used reflected expense waivers or
reimbursements, actual performance would have been lower.
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VCP MID CAP VALUE PRODUCT COMPOSITE
Total Return
-------------------------------
VCP Russell Mid Cap Index
-------------------------------
1990.......................... -3.99% -11.50%
1991.......................... 36.22% 41.51%
1992.......................... 15.21% 16.35%
1993.......................... 13.75% 14.30%
1994.......................... -1.01% -2.10%
1995.......................... 30.27% 34.45%
1996.......................... 32.41% 19.00%
1997.......................... 39.77% 29.01%
1998.......................... 1.30% 10.10%
Average Annual Returns
GRAPHIC (BAR CHART)
VCP SMALL CAP VALUE PRODUCT COMPOSITE
Total Return
-------------------------------
VCP Russell 2000 Index
-------------------------------
1998.......................... 5.38% -2.56%
Average Annual Returns
GRAPH (BAR CHART)
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THE ADMINISTRATOR AND DISTRIBUTOR
BISYS Fund Services ("BISYS"), 3435 Stelzer Road, Columbus, Ohio
43219-3035, serves as the Fund's administrator, transfer agent
and fund accounting agent. Management and administrative
services of BISYS include (i) providing office space, equipment
and officers and clerical personnel to the Fund, (ii) obtaining
valuations, calculating net asset values and performing other
accounting, tax and financial services, (iii) recordkeeping, (iv)
legal and regulatory services, (v) processing shareholder account
transactions and dispersing fund distributions, and (vi)
supervising custodial and other third party services. BISYS also
serves as the principal underwriter of the Funds' shares. BISYS
may provide financial assistance in connection with pre-approved
seminars, conferences and advertising to the extent permitted by
applicable state or self-regulatory agencies, such as the
National Association of Securities Dealers.
The SAI has more detailed information about VCP and other service
providers to the Funds.
YEAR 2000
Like other funds and business organizations around the world, the
Funds could be adversely affected if the computer systems used by
VCP and the Funds' other service providers do not properly
process and calculate date-related information for the year 2000
and beyond. In addition, Year 2000 issues may adversely affect
companies in which the Funds invest where, for example, such
companies incur substantial costs to address Year 2000 issues or
suffer losses caused by the failure to adequately or timely do
so.
The Funds have been assured that VCP and the Funds' other service
providers (i.e., Administrator, Transfer Agent, Fund Accounting
Agent, Custodian and Distributor) have developed and implemented
clearly defined and documented plans intended to minimize risks
to services critical to the Funds' operations associated with
Year 2000 issues. Internal efforts include a commitment to
dedicate adequate staff and funding to identify and remedy Year
2000 issues, and specific actions such as inventorying software
systems, determining inventory items that may not function
properly after December 31, 1999, reprogramming or replacing such
systems, and retesting for Year 2000 readiness. VCP and the
Funds' service providers are likewise seeking assurances from
their respective vendors and suppliers that such entities are
addressing any Year 2000 issues, and each provider intends to
engage or has engaged, where appropriate, in private and industry
or "streetwide" interface testing of systems for Year 2000
readiness.
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In the event that any systems upon which the Fund is dependent
are not Year 2000 ready by December 31, 1999, administrative
errors and account maintenance failures would likely occur.
While the ultimate costs or consequences of incomplete or
untimely resolution of Year 2000 issues by VCP or the Funds'
service providers cannot be accurately assessed at this time, the
Fund currently has no reason to believe that the Year 2000 plans
of VCP and the Funds' service providers will not be completed by
December 31, 1999, or that the anticipated costs associated with
full implementation of their plans will have a material adverse
impact on either their business operations or financial
conditions or those of the Funds. The Funds and VCP will continue
to closely monitor developments relating to this issue, including
development by VCP and the Funds' service providers of
contingency plans for providing back-up computer services in the
event of a systems failure or the inability of any provider to
achieve Year 2000 readiness. Separately, VCP will monitor
potential investment risk related to Year 2000 issues.
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SHAREHOLDER INFORMATION
PRICING OF FUND SHARES
How NAV is Calculated
The NAV is calculated by addition the total value of the Fund's
investments and other assets, subtracting its liabilities and
then dividing that figure by the number of outstanding shares of
the Fund:
Total Assets - Liabilities
NAV = ----------------------------
Number of Shares Outstanding
1. NAV is calculated separately for Class A and Class I shares.
2. You can find most Funds' NAV daily in The Wall Street Journal
and other newspapers.
Per share net asset value ("NAV") for each Fund is determined and
its shares are priced at the close of regular trading on the New
York Stock Exchange or Exchange, normally at 4:00 p.m., Eastern
time, on days the Exchange is open.
Your order for purchase, sale or exchange of shares is priced at
the next NAV calculated after your order is accepted by the Fund
less any applicable sales charge. This is what is known as the
offering price.
The Funds' securities are generally valued at current market
prices. If market quotations are not available, prices will be
based on a fair value estimate, determined in accordance with
methods approved by the Funds' Trustees.
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SHAREHOLDER INFORMATION
You may purchase shares of the Funds through the Fund Distributor
or through banks, brokers and other financial intermediaries,
which may charge additional fees and may require higher minimum
investments or impose other limitations on buying and selling
shares. If you purchase shares through a financial intermediary,
that party is responsible for transmitting orders by close of
business and may have an earlier cut-off time for purchase and
sale requests. Consult your investment representative or
institution for specific information.
Purchasing and Adding to Your Shares
Account type Minimum Minimum
Initial Subsequent
Class A Investment Investment
Regular
(non-retirement) $ 1,000 $ 250
Retirement (IRA) $ 250 $ 250
Automatic Investment Plan $ 250 $ 25
Class I $1,000,000 $5,000
All purchases must be in U.S. dollars. A fee will be charged for
any checks that do not clear. Third-party checks are not
accepted.
A Fund may waive its minimum purchase requirement and the
Distributor may reject a purchase order if it considers it in the
best interest of the Fund and its shareholders
AVOID 31% TAX WITHHOLDING
Each Fund is required to withhold 31% of taxable dividends,
capital gains distributions and redemptions paid to shareholders
who have not provided the Fund with their certified taxpayer
identification number in compliance with IRS rules. To avoid
this, make sure you provide your correct Tax Identification
Number (Social Security Number for most investors) on your
account application.
You can add to your account by using the convenient options
described below. The Fund reserves the right to change or
eliminate these privileges at any time with 60 days notice.
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SHAREHOLDER INFORMATION
Purchasing and Adding to Your Shares - continued
Instructions for Opening or Adding to an Account
By Mail
If purchasing through your financial advisor or brokerage
account, simply tell your advisor or broker that you wish to
purchase shares of the Funds and he or she will take care of the
necessary documentation. For all other purchases, follow the
instructions below.
Initial Investment:
1. Carefully read and complete the application. Establishing
your account privileges now saves you the inconvenience of
having to add them later.
2. Make check, bank draft or money order payable to the Fund in
which you are investing.
3. Send by mail to: The Valenzuela Capital Trust, P.O. Box 0000,
Columbus, OH 43219; or send by overnight service to The
Valenzuela Trust, c/o BISYS Fund Services, Attn: T.A.
Operations, 3435 Stelzer Road, Columbus, OH 43219
Subsequent Investment:
1. Use the investment slip attached to your account statement.
Or, if unavailable, include the following information:
-- Fund name
-- Share class
-- Amount invested
-- Account name
-- Account number
Include your account number on your check.
2. See mailing instructions in No. 3 above.
Electronic Purchases
Your bank must participate in the Automated Clearing House (ACH)
and must be a U.S. Bank. Your bank or broker may charge for this
service.
Establish electronic purchase option on your account application
or call 1-888-247-9744. Your account can generally be set up
for electronic purchases within 15 days.
Call 1-888-247-9744 to arrange a transfer from your bank account.
22
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SHAREHOLDER INFORMATION
Purchasing and Adding to Your Shares - continued
Electronic vs. Wire Transfer
Wire transfers allow financial institutions to send funds to each
other, almost instantaneously. With an electronic purchase or
sale, the transaction is made through the Automated Clearing
House (ACH) and may take up to eight days to clear. There is
generally no fee for ACH transactions.
Wire Transfer
For initial investment:
Fax the completed application, along with a request for a
confirmation number to 1-888-247-9744. Follow the instructions
below after receiving your confirmation number.
For initial and subsequent investments:
Instruct your bank to wire transfer your investment to:
Name of Bank
Routing Number: ABA #000000
DDA#
Include:
Your name
Your confirmation number
After instructing your bank to wire the funds, call 1-888-247-
9744 to advise us of the amount being transferred and the name of
your bank. Your bank may charge a wire transfer fee.
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SHAREHOLDER INFORMATION
Purchasing and Adding to Your Shares - continued
Automatic Investment Plan
You can make automatic investments in the Funds from your bank
account, through payroll deduction or from your federal
employment, Social Security or other regular government checks.
Automatic investments can be as little as $25, once you've
invested the $250 minimum required to open the account.
To invest regularly from your bank account:
- Complete the Automatic Investment Plan portion on your
account application.
Make sure you note:
-- Your bank name, address and account number
-- The amount you wish to invest automatically
(minimum $25)
-- How often you want to invest (every month, 4 times
a year, twice a year or once a year)
- Attach a voided personal check.
To invest regularly from your paycheck or government check call
1-888-247-9744 for an enrollment form.
Directed Dividend Option
By selecting the appropriate box in the account application, you
can elect to receive your distributions in cash (check) or have
distributions (capital gains and dividends) reinvested in another
VCP Fund without a sales charge. You must maintain the minimum
balance in each Fund into which you plan to reinvest dividends or
the reinvestment will be suspended and your dividends paid to
you. The Fund may modify or terminate this reinvestment option
without notice. You can change or terminate your participation
in the reinvestment option at any time.
Dividends and Distributions
All dividends and distributions will be automatically reinvested
unless you request otherwise. There are no sales charges for
reinvested distributions. Dividends and capital gains are
distributed at least annually.
Distributions are made on a per share basis regardless of how
long you've owned your shares. Therefore, if you invest shortly
before the distribution date, some of your investment will be
returned to you in the form of a distribution.
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SHAREHOLDER INFORMATION
Selling Your Shares
You may sell your shares at any time. Your sales price will be
the next NAV after your sell order is received by the Fund, its
transfer agent, or your investment representative. Normally you
will receive your proceeds within a week after your request is
received. See section on "General Policies on Selling Shares
below."
Withdrawing Money from Your Fund Investment
As a mutual fund shareholder, you are technically selling shares
when you request a withdrawal in cash. This is also know as
redeeming shares or a redemption of shares.
Instructions for selling shares
If selling your shares through your financial adviser or broker,
ask him or her for redemption procedures. Your adviser and/or
broker may have transaction minimums and/or transaction times
which will affect your redemption. For all other sales
transactions, follow the instructions below.
By telephone
(unless you have declined telephone sales privileges)
1. Call 1-888-247-9744 with instructions as to how you wish to
receive your funds (mail, wire, electronic transfer). (See
"General Policies on Selling Shares--Verifying Telephone
Redemptions" below)
By mail or overnight service
(See "General Policies on Selling Shares--Redemptions in Writing
Required" below)
1. Call 1-888-247-9744 to request redemption forms or write a
letter of instruction indicating:
- -- your Fund and account number
- -- amount you wish to redeem
- -- address where your check should be sent
- -- account owner signature
2. Mail to: The Valenzuela Trust, P.O. Box, Columbus, OH 43219 or
send by overnight service to the Trust, c/o BISYS Fund Services,
Attn: T.A. Operations, 3435 Stelzer Road, Columbus, OH 43219
Wire transfer
You must indicate this option on your application.
Call 1-888-247-9744 to request a wire transfer.
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If you call by 4 p.m., Eastern time, your payment will normally
be wired to your bank on the next business day.
26
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SHAREHOLDER INFORMATION
Selling Your Shares - continued
Electronic Redemptions
Your bank must participate in the Automated Clearing House (ACH)
and must be a U.S. bank.
Call 1-888-247-9744 to request an electronic redemption.
If you call by 4 p.m., Eastern time, the NAV of your shares will
normally be determined on the same day and the proceeds credited
within 8 days. Your bank may charge you for this service.
Systematic Withdrawal Plan
You can receive automatic payments from your account on a
monthly, quarterly, semi-annual or annual basis. The minimum
withdrawal is $25. To activate this feature:
- -- Make sure you've checked the appropriate box on the account
application, or call 1-888-247-9744.
- -- Include a voided personal check.
- -- Your account must have a value of $5,000 or more to start
withdrawals.
- -- If the value of your account falls below $500, you may be
asked to add sufficient funds to bring the account back to
$500, or the Fund may close your account and mail the
proceeds to you.
General Policies on Selling Shares
Redemptions In Writing Required
You must request redemption in writing in the following
situations:
1. Redemptions from Individual Retirement Accounts ("IRAs").
2. Redemption requests requiring a signature guarantee, which
include each of the following.
-- Redemptions over $10,000
-- Your account registration or the name(s) on your account
has changed within the last 15 days
-- The check is not being mailed to the address on your
account
-- The check is not being made payable to the owner of the
account
-- The redemption proceeds are being transferred to another
Fund account with a different registration
-- The redemption proceeds are being wired to a bank
account other than the account designated on your
application
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A signature guarantee can be obtained from a financial
institution, such as a bank, broker-dealer, or credit union, or
from members of the STAMP (Securities Transfer Agents Medallion
Program), MSP (New York Stock Exchange Medallion Signature
Program) or SEMP (Stock Exchanges Medallion Program). Members
are subject to dollar limitations which must be considered when
requesting their guarantee. BISYS, the Funds' Transfer Agent,
may reject any signature guarantee if it believes the transaction
would otherwise be improper.
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<PAGE>
SHAREHOLDER INFORMATION
SELLING YOUR SHARES - CONTINUED
VERIFYING TELEPHONE REDEMPTIONS
The Fund makes every effort to insure that telephone redemptions
are only made by authorized shareholders. All telephone calls are
recorded for your protection and you will be asked for
information to verify your identity. Given these precautions,
unless you have specifically indicated on your application that
you do not want the telephone redemption feature, you may be
responsible for any fraudulent telephone orders. If appropriate
precautions have not been taken, the Transfer Agent may be liable
for losses due to unauthorized transactions.
REDEMPTIONS WITHIN 15 DAYS OF INITIAL INVESTMENT
When you have made your initial investment by check, the proceeds
of your redemption may be held up to 15 business days until the
Transfer Agent is satisfied that the check has cleared. You can
avoid this delay by purchasing shares with a certified check.
REFUSAL OF REDEMPTION REQUEST
Payment for shares may be delayed under extraordinary
circumstances or as permitted by the Securities and Exchange
Commission in order to protect remaining shareholders.
REDEMPTION IN KIND
Each Fund reserves the right to make payment in securities rather
than cash, known as "redemption in kind." This could occur under
extraordinary circumstances, such as a very large redemption that
could affect Fund operations (for example, more than 1% of the
Fund's net assets). If the Fund deems it advisable for the
benefit of all shareholders, redemption in kind will consist of
securities equal in market value to your shares. When you convert
these securities to cash, you will pay brokerage charges.
CLOSING OF SMALL ACCOUNTS
If your account falls below $500, the Fund may ask you to
increase your balance. If it is still below $500 after 30 days,
the Fund may close your account and send you the proceeds at the
current NAV.
UNDELIVERABLE REDEMPTION CHECKS
If you choose to receive distributions in cash and checks (1) are
returned and marked as "undeliverable," or (2) are not cashed
within six months of issuance, your account will be changed
automatically so that future distributions will be reinvested in
your account. Checks that have not been negotiated will be
canceled and the money reinvested in your account in the Fund
from which the distribution was made, as of the cancellation
29
<PAGE>
date. No interest is paid during the time the check is
outstanding.
30
<PAGE>
SHAREHOLDER INFORMATION
DISTRIBUTION ARRANGEMENTS/SALES CHARGES
CALCULATION OF SALES CHARGES
Class A Shares
Class A shares are sold at their public offering price. This
price includes the initial sales charge. Therefore, part of the
money you invest will be used to pay the sales charge. The sales
charge decreases with larger purchases. There is no sales charge
on reinvested dividends and distributions.
The current sales charge rates are as follows:
For the VCP Mid-Cap Value Fund and the VCP Small-Cap Value Fund
Sales Charge Sales Charge
as a % of as a % of
Your Investment Offering Price Your Investment
- ---------------------------------------------------------------
Up to $49,999 5.75% 6.10%
$50,000 up to $99,999 4.50% 4.71%
$100,000 up to $249,999 3.50% 3.63%
$250,000 up to $499,999 2.50% 2.56%
$500,000 up to $999,999 2.00% 2.04%
$1,000,000 and above(1) 0.00% 0.00%
_______________________
(1) There is no initial sales charge on purchases of $1 million
or more. However, a contingent deferred sales charge (CDSC) of
up to 1.00% of the purchase price will be charged to the
shareholder if shares are redeemed in the first year after
purchase, or up to 0.50% if redeemed in the second year after
purchase. This charge will be based on the lower of your cost for
the shares or their NAV at the time of redemption. There will be
no CDSC on reinvested distributions.
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SHAREHOLDER INFORMATION
DISTRIBUTION ARRANGEMENTS/SALES CHARGES - CONTINUED
SALES CHARGE REDUCTIONS
Reduced sales charges for Class A shares are available to
shareholders with investments of $50,000 or more. In addition,
you may qualify for reduced sales charges under the following
circumstances.
LETTER OF INTENT. You inform the Fund in writing that you intend
to purchase enough shares over a 13-month period to qualify for a
reduced sales charge. You must include a minimum of 5% of the
total amount you intend to purchase with your letter of intent.
RIGHTS OF ACCUMULATION. When the value of shares you already own
plus the amount you intend to invest reaches the amount needed to
qualify for reduced sales charges, your added investment will
qualify for the reduced sales charge.
COMBINATION PRIVILEGE. Combine accounts of multiple Funds or
accounts of immediate family household members (spouse and
children under 21) to achieve reduced sales charges.
SALES CHARGE WAIVERS
Class A Shares
The following qualify for waivers of sales charges:
- -- Shares purchased by investment representatives through fee-
based investment products or accounts.
- -- Proceeds from redemptions from another mutual fund complex
within 90 days after redemption, if you paid a front end
sales charge for those shares. BISYS, the Funds'
Distributor, must be notified in writing by you or by your
financial institution at the time the purchase is made. A
copy of your account statement showing the redemption must
accompany the notice.
- -- Reinvestment of distributions from a deferred compensation
plan, agency, trust, or custody account that was maintained
by VCP or its affiliates or invested in any VCP Fund.
- -- Shares purchased for trust or other advisory accounts
established with VCP or its affiliates.
- -- Shares purchased by directors, trustees, employees, and
family members of VCP and its affiliates and any organization
that provides services to the Funds; retired Fund trustees;
dealers or financial advisors who have an agreement with the
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<PAGE>
Distributor; and any trade organization to which VCP or the
Administrator belongs.
Reinstatement Privilege
If you have sold Class A shares and decide to reinvest in the
Fund within a 90 day period, you will not be charged the
applicable sales load on amounts up to the value of the shares
you sold. You must provide a written reinstatement request and
payment within 90 days of the date of instructions to sell were
processed.
33
<PAGE>
SHAREHOLDER INFORMATION
DISTRIBUTION AND SERVICE (12B-1) FEES
The Funds have adopted a plan under SEC Rule 12b-1 that allows
the Funds to pay distribution fees for the sale and distribution
of their shares. These fees compensate the Distributor and other
dealers and financial intermediaries for services and expenses
relating to the sale and distribution of the Funds' shares and/or
for providing shareholder services. Each Fund pays a 12b-1 fee of
up to 0.25% of the average daily net assets of the respective
Fund.
Because these fees are paid out of the Funds' assets on an on-
going basis, these fees will increase the cost of your investment
and may cost more than other types of sales charges.
CLASS I SHARES
Class I shares may be purchased by endowments, foundations and
plan sponsors of retirement plans, and individuals. In order to
be eligible to purchase Class I shares, an institution or
individual must make an initial investment of at least $1 million
in the particular Fund. Class I shares are sold without any
initial or deferred sales charges and are not subject to any
ongoing distribution expenses or shareholder servicing fees.
SERVICE ORGANIZATIONS
Various banks, trust companies, broker-dealers (other than the
Distributor) and other financial organizations ("Service
Organization(s)") may provide certain administrative services for
its customers who invest in the Funds through accounts maintained
at that Service Organization. The Funds, under servicing
agreements with the Service Organization, will pay the Service
Organization an annual rate up to 0.25% of the Fund's average
daily net assets for these services, which include:
-- receiving and processing shareholder orders
-- performing the accounting for customers' sub-accounts
-- maintaining retirement plan accounts
-- answering questions and handling correspondence for
customer accounts
-- acting as the sole shareholder of record for customer
accounts
-- issuing shareholder reports and transaction
confirmations
-- performing daily "sweep" functions
Investors who purchase, sell or exchange shares of the Funds
through a customer account maintained at a Service Organization
34
<PAGE>
may be charged extra for other services which are not specified
in the servicing agreement with the Fund but are covered under
separate fee schedules provided by the Service Organization to
their customers. Customers with accounts at Service
Organizations should consult their Service Organization for
information concerning their sub-accounts. VCP or the
Administrator also may pay Service Organizations for rendering
services to customers' sub-accounts.
35
<PAGE>
SHAREHOLDER INFORMATION
EXCHANGING YOUR SHARES
You can exchange your shares in one Fund for shares of the same
class of another VCP Fund, usually without paying additional
sales charges (see "Notes" below). No transaction fees are
charges for exchanges.
You must meet the minimum investment requirements for the Fund
into which you are exchanging. Exchanges from one Fund to another
are taxable.
INSTRUCTIONS FOR EXCHANGING SHARES
Exchanges may be made by sending a written request to The
Valenzuela Funds, P.O. Box 0000, Columbus OH 43219, or by calling
1-888-247-9744. Please provide the following information:
-- Your name and telephone number
-- The exact name on your account and account number
-- Taxpayer identification number (usually your Social
Security number)
-- Dollar value or number of shares to be exchanged
-- The name of the Fund from which the exchange is to be
made
-- The name of the Fund into which the exchange is being
made.
See "Selling your Shares" for important information about
telephone transactions.
To prevent disruption in the management of the Funds, due to
market timing strategies, exchange activity may be limited to
_____ exchanges within a _____ period.
Notes on exchanges
The registration and tax identification numbers of the two
accounts must be identical.
The exchange privilege may be changed or eliminated at any time
upon a 60-day notice to shareholders.
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<PAGE>
SHAREHOLDER INFORMATION
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Fund pays out to shareholders net income and net capital
gains. Ordinarily the Funds make these distributions once a year
(in December).
When you sell Fund shares, you generally realize a gain or loss.
Except for tax-deferred accounts, any sale or exchange of Fund
shares may generate a tax liability. Of course, withdrawals or
distributions from tax-deferred accounts are taxable when
received.
Except for tax-advantaged retirement accounts, distributions you
receive are taxable to you, regardless of whether you take them
in cash or additional shares. Dividends are taxable in the year
in which they are paid, even if they appear on your account
statement the following year. Income dividends and short-term
capital gains are generally taxed as ordinary income.
Distributions of capital gains are generally taxed as long-term
capital gains. The tax treatment of capital gain distributions
depends on how long the Fund held the securities it sold, not
when you bought your shares of the Fund or whether you reinvested
your distributions.
You will be notified in January each year about the federal tax
status of distributions made by the Fund. Depending on your
residence for tax purposes, distributions also may be subject to
state and local taxes, including withholding taxes.
Foreign shareholders may be subject to special withholding
requirements. There is a penalty on certain pre-retirement
distributions from retirement accounts. Because everyone's tax
situation is unique, you should consult your tax professional
about Federal, state and local tax consequences.
For more information about the Funds, the following are available
free upon request:
ANNUAL/SEMIANNUAL REPORTS: The Funds will publish annual and
semiannual reports to shareholders that contain detailed
information on the Funds' investments. The annual report will
contain a discussion of the market conditions and investment
strategies that significantly affected the Funds' performance
during that fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more
detailed information about the Funds, including their operating
and investment policies. It is incorporated by reference and is
legally considered a part of this prospectus.
37
<PAGE>
You can get free copies of the SAI, or request other information
and discuss your questions about the Funds by contacting a broker
or bank that sells the Funds. Or contact the Funds at:
The Valenzuela Trust
3435 Stelzer Road
Columbus, Ohio 43219
Telephone: 1-888-247-9744
You can review the Funds' SAI at the Public Reference Room of the
Securities and Exchange Commission. You can get text-only copies:
-- For a fee, by writing the Public Reference Section of
the Commission, Washington, D.C. 20549-6009 or calling
1-800-SEC-0330.
-- Free from the Commission's Website at
http://www.sec.gov.
38
<PAGE>
VCP MID-CAP VALUE FUND
VCP SMALL-CAP VALUE FUND
Each an Investment Portfolio of
THE VALENZUELA CAPITAL TRUST
Statement of Additional Information
September 15, 1999
This Statement of Additional Information is not a Prospectus,
but should be read in conjunction with the Prospectus for The
Valenzuela Capital Trust dated September 15, 1999, which may be
supplemented from time to time. This Statement of Additional
Information is incorporated by reference in its entirety into the
Prospectus. Copies of the Prospectus may be obtained without
charge, upon request, by writing The Valenzuela Capital Trust at
3435 Stelzer Road, Columbus, Ohio 43219, or by calling toll free
(888) 247-9744.
1
<PAGE>
TABLE OF CONTENTS
FUND OBJECTIVES, INVESTMENTS, STRATEGIES AND RISKS 3
NET ASSET VALUE 7
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION 8
MANAGEMENT OF THE TRUST 8
CONTROL PERSONS AND PRINICIPAL HOLDERS OF SECURITIES 9
INVESTMENT ADVISER 9
PORTFOLIO TRANSACTIONS 9
OTHER SERVICE PROVIDERS 10
GENERAL INFORMATION 13
ADDITIONAL TAX INFORMATION 14
PERFORMANCE INFORMATION 14
MISCELLANEOUS 15
2
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
THE VALENZUELA CAPITAL TRUST
The Valenzuela Capital Trust (the "Trust") is an open-end
management investment company which offers two separate and
diversified investment portfolios, the VCP Mid-Cap Value Fund and
the VCP Small-Cap Value Fund (collectively, the "Funds" and each
individually, a "Fund"). The Trust was organized and its
Certificate of Trust was filed with the State of Delaware on June
22, 1999.
FUND OBJECTIVES, INVESTMENTS, STRATEGIES AND RISKS
INVESTMENT OBJECTIVES
The VCP Mid-Cap Value Fund seeks capital appreciation
primarily through equity investments in mid-capitalization
companies. The VCP Small-Cap Value Fund seeks capital
appreciation primarily through equity investments in small-
capitalization companies.
Information contained in this Statement of Additional
Information or SAI expands upon information contained in the
Funds' Prospectus. No investment in shares of a Fund should be
made without first reading the Prospectus.
ADDITIONAL INFORMATION ON PORTFOLIO INVESTMENTS, STRATEGIES
AND RISKS
The following policies supplement the investment policies and
strategies of each Fund described in their Prospectus.
CONVERTIBLE SECURITIES
The Funds may invest in convertible securities. Prior to
conversion, convertible securities have the same general
characteristics as non-convertible debt securities, which
generally provide a stable stream of income with yields that are
generally higher than those of equity securities of the same or
similar issuers. The price of a convertible security will
normally vary with changes in the price of the underlying equity
security, although the higher yields tends to make the
convertible security less volatile than the underlying equity
security. As with debt securities, the market value of
convertible securities tends to decrease as interest rates rise
and increase as interest rates decline. While convertible
securities generally offer lower interest or dividend yields than
non-convertible debt securities of similar quality, they offer
3
<PAGE>
investors the potential to benefit from increases in the market
price of the underlying common stock.
FOREIGN SECURITIES
The Funds may invest up to 20% of their total assets in
foreign securities. Investment in foreign securities is subject
to special investment risks that differ from those related to
securities of U.S. domestic issuers. Since investments in the
securities of foreign issuers may involve currencies of foreign
countries, the Funds may be affected favorably or unfavorably by
changes in currency rates and in exchange control regulations and
may incur costs in connection with conversions between various
currencies.
Since foreign companies are not subject to accounting,
auditing and financial reporting standards, practices and
requirements comparable to those applicable to U.S. companies,
there may be less publicly available information about a foreign
company than about a U.S. company. Securities of many foreign
companies are less liquid and more volatile than securities of
comparable U.S. companies. Fixed commissions on foreign
securities exchanges are generally higher than negotiated
commissions on U.S. exchanges, although the Funds endeavor to
achieve the most favorable net results in their portfolio
transactions. There is generally less government supervision and
regulation of the securities exchanges, brokers, dealers and
listed companies than in the U.S., thus increasing the risk of
delayed settlements of portfolio transactions or loss of
certificates for portfolio securities.
Foreign markets also have different clearance and settlement
procedures, and in certain markets there have been times when
settlements have been unable to keep pace with the volume of
securities transactions, making it difficult to conduct such
transactions. Such delays in settlement could result in temporary
periods when a portion of the assets of a Fund is not invested
and no return is earned thereon. The inability of a Fund to make
intended security purchases due to settlement problems could
cause that Fund to miss attractive investment opportunities.
Losses to a Fund due to subsequent declines in the value of
portfolio securities, or losses arising out of the Fund's
inability to fulfill a contract to sell portfolio securities,
could result in potential liability to the Fund. In addition,
with respect to certain foreign countries, there is the
possibility of expropriation or confiscatory taxation, political
or social instability, or diplomatic developments which could
affect a Fund's investments in those countries. Moreover,
individual foreign economies may differ favorably or unfavorably
from the U.S. economy in such respects as growth of gross
4
<PAGE>
national product, rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments position.
The conversion of the eleven member states of the European
Union to a common currency, the "euro," occurred on January 1,
1999. As a result of the conversion, securities issued by the
member states are subject to certain risks, including competitive
implications of increased price transparency of European Union
markets (including labor markets) resulting from adoption of a
common currency and issuers' plans for pricing their own products
and services in euro; an issuer's ability to make any required
information technology updates on a timely basis, and costs
associated with the conversion (including costs of dual currency
operations through January 1, 2002); currency exchange rate risk
and derivatives exposure (including the disappearance of price
sources, such as certain interest rate induces); continuity of
material contracts and potential tax consequences. Other risks
include the legal treatment of certain outstanding financial
contracts after January 1, 1999 that refer to currencies other
than the euro; the maintenance of exchange rates for currencies
that were converted into the euro; the fluctuation of the euro
relative to other currencies during the transition period from
January 1, 1999 to December 31, 2000 and beyond; whether the
interest rate, tax and labor regimes of European countries
participating in the Fund will converge over time; and whether
the conversion of the currencies of other EU countries such as
the United Kingdom, Denmark and Greece into the euro and the
admission of other non-EU countries such as Poland, Latvia and
Lithuania as members of the EU may have an impact on the euro.
These or other factors, including political and economic risks,
could cause market disruptions and could adversely affect the
value of securities and foreign currencies held by the Funds.
Commissions on transactions in foreign securities may be higher
than those for similar transactions on domestic stock markets. In
addition, clearance and settlement procedures may be different in
foreign countries and, in certain markets, such procedures have
been unable to keep pace with the volume of securities
transactions, thus making it difficult to conduct such
transactions.
The Funds may acquire foreign securities only when the
Adviser believes that the risks associated with such investments
are minimal relative to those of securities of domestic issuers.
For many foreign securities, U.S. dollar-denominated ADRs,
which are traded in the United States on exchanges or over-the-
counter, are issued by domestic banks. ADRs represent the right
to receive securities of foreign issuers deposited in a domestic
bank or a correspondent bank. ADRs do not eliminate all of the
risk inherent in investing in the securities of foreign issuers.
However, by investing in ADRs rather than directly in foreign
5
<PAGE>
issuers' stock, a Fund can avoid currency risks during the
settlement period for either purchases or sales. In general,
there is a large liquid market in the United States for many
ADRs. The information available for ADRs is subject to the
accounting, auditing and financial reporting standards of the
domestic market or exchange on which they are traded, standards
which are more uniform and more exacting than those to which many
foreign issuers may be subject. The Funds also may invest in EDRs
which are receipts evidencing an arrangement with a European bank
similar to that for ADRs and are designed for use in the European
securities markets. EDRs are not necessarily denominated in the
currency of the underlying security.
Generally unsponsored ADRs and EDRs require the holders to
bear most of the costs of such facilities while issuers of
sponsored facilities normally pay more of the costs. The
depository of an unsponsored facility frequently is under no
obligation to distribute shareholder communications received from
the issuer of the deposited securities or to pass through the
voting rights to facility holders with respect to the deposited
securities, whereas the depository of a sponsored facility
typically distributes shareholder communications and passes
through the voting rights.
OPTIONS TRADING
Each of the Funds may purchase put and call options. A call
option gives the purchaser of the option the right to buy, and
the writer the obligation to sell, the underlying security or
foreign currency at the stated exercise price at any time prior
to the expiration of the option, regardless of the market price
or exchange rate of the security or foreign currency, as the case
may be. The premium paid to the writer is consideration for
undertaking the obligations under the option contract. A put
option gives the purchaser the right to sell the underlying
security or foreign currency at the stated exercise price at any
time prior to the expiration date of the option, regardless of
the market price or exchange rate of the security or foreign
currency, as the case may be. Put and call options purchased by
the Funds are valued at the last sale price, or in the absence of
such a price, at the mean between bid and asked price.
When a Fund writes an option, an amount equal to the net
premium (the premium less the commission) received by the Fund is
included in the liability section of the Fund's statement of
assets and liabilities as a deferred credit. The amount of the
deferred credit will be subsequently marked-to-market to reflect
the current value of the option written. The current value of the
traded option is the last sale price or, in the absence of a
sale, the average of the closing bid and asked prices. If an
option expires on the stipulated expiration date or if the Fund
6
<PAGE>
enters into a closing purchase transaction, it will realize a
gain (or a loss if the cost of a closing purchase transaction
exceeds the net premium received when the option is sold) and the
deferred credit related to such option will be eliminated. If an
option is exercised, the Fund may deliver the underlying security
in the open market. In either event, the proceeds of the sale
will be increased by the net premium originally received and the
Fund will realize a gain or loss.
In order to close out a call option it has written, the Fund
will enter into a "closing purchase transaction" (the purchase of
a call option on the same security or currency with the same
exercise price and expiration date as the call option which such
Fund previously has written). When a portfolio security or
currency subject to a call option is sold, the Fund will effect a
closing purchase transaction to close out an existing call option
on that security or currency. If the Fund is unable to effect a
closing purchase transaction, it will not be able to sell the
underlying security or currency until the option expires or that
Fund delivers the underlying security or currency upon exercise.
In addition, upon the exercise of a call option by the option
holder, the Fund will forego the potential benefit represented by
market depreciation over the exercise price.
Each Fund also may purchase or sell index options. Index
options (or options on securities indices) are similar in many
respects to options on securities except that an index option
gives the holder the right to receive, upon exercise, cash
instead of securities, if the closing level of the securities
index upon which the option is based is greater than, in the case
of a call, or less than, in the case of a put, the exercise price
of the option.
Because index options are settled in cash, a call writer
cannot determine the amount of its settlement obligations in
advance and, unlike call writing on specific securities, cannot
provide in advance for, or cover, its potential settlement
obligations by acquiring and holding the underlying securities. A
Fund may be required to segregate assets or provide an initial
margin to cover index options that would require it to pay cash
upon exercise.
MONEY MARKET MUTUAL FUNDS
Each of the Funds may invest up to 5% of the value of its
total assets in the securities of any one money market mutual
fund, provided that no more than 10% of a Fund's total assets may
be invested in the securities of money market mutual funds in the
aggregate. The Funds may incur additional expenses due to the
duplication of expenses as a result of investing in securities of
other unaffiliated money market mutual funds.
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COMMERCIAL PAPER
Commercial paper consists of unsecured promissory notes
issued by corporations. Issues of commercial paper normally have
maturities of less than 9 months and fixed rates of return.
The Funds may invest in commercial paper rated in any rating
category or not rated by an NRSRO. In general, investment in
lower-rated instruments is more risky than investment in
instruments in higher-rated categories. The Funds also may
invest in Canadian commercial paper issued by a Canadian
Corporation or counterpart of a U.S. Corporation and Europaper.
ILLIQUID SECURITIES
The Funds will limit their investments in illiquid securities
to no more than 15% of their net assets. Illiquid securities
generally include (i) direct placements or other securities that
are subject to legal or contractual restrictions on resale or for
which there is no readily available market (e.g., when trading in
the security is suspended or, in the case of unlisted securities,
when market makers do not exist or will not entertain bids or
offers), including many individually negotiated currency swaps
and most privately negotiated investments in state enterprises
that have not yet conducted an initial equity offering, (ii)
over-the-counter options and assets used to cover over-the-
counter options, and (iii) repurchase agreements not terminable
within seven days.
Because of the absence of a trading market for illiquid
securities, a Fund may not be able to realize their full value
upon sale. The Adviser will monitor the liquidity of the Funds'
investments in illiquid securities. Rule 144A securities will
not be treated as "illiquid" for purposes of this limit on
investments.
A Fund that invests in securities for which there is no ready
market may not be able to readily sell such securities. Such
securities are unlike securities that are traded in the open
market and can be expected to be sold immediately if the market
is adequate. The sale price of illiquid securities may be lower
or higher than the Adviser's most recent estimate of their fair
market value. Generally, less public information is available
about the issuers of such securities than about companies whose
securities are traded on an exchange. To the extent that these
securities are foreign securities, there is no law in many of the
countries in which the Funds may invest similar to the Securities
Act requiring an issuer to register the sale of securities with a
governmental agency or imposing legal restrictions on resales of
securities, either as to length of time the securities may be
held or manner of resale. However, there may be contractual
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restrictions on resales of non-publicly traded foreign
securities.
REPURCHASE AGREEMENTS
Securities held by the Funds may be subject to repurchase
agreements. Under the terms of a repurchase agreement, a Fund
acquires securities from member banks of the Federal Deposit
Insurance Corporation and registered broker-dealers which the
Adviser deems creditworthy under the guidelines approved by the
Trustees, subject to the seller's agreement to repurchase such
securities at a mutually agreed upon date and price. The
repurchase price generally equals the price paid by a Fund plus
interest negotiated on the basis of current short-term rates,
which may be more or less than the rate on the underlying
portfolio securities. The seller under a repurchase agreement
maintains at all times the value of collateral held pursuant to
the agreement at not less than the repurchase price (including
accrued interest). If the seller defaults on its repurchase
obligations or becomes insolvent, the Fund holding the obligation
suffers a loss to the extent that the proceeds from the sale of
the underlying portfolio securities were less than the repurchase
price under the agreement, or to the extent that the disposition
of the securities by the Fund were delayed pending court action.
Additionally, there is no controlling legal precedent confirming
that a Fund would be entitled, as against the claim by the seller
or its receiver or trustee in bankruptcy, to retain the
underlying securities, although the Trustees of the Trust believe
that, under the regular procedures normally in effect for the
custody of a Fund's securities subject to repurchase agreements,
and under federal laws, a court of competent jurisdiction would
rule in favor of the Trust if presented with the question.
Securities subject to repurchase agreements are held by the
Trust's Custodian or another qualified custodian or in the
Federal Reserve/Treasury book-entry system. Repurchase agreements
are considered to be loans by a Fund under the 1940 Act.
LENDING OF PORTFOLIO SECURITIES
In order to generate additional income, each of the Funds
may, from time to time, lend its portfolio securities to broker-
dealers, banks or institutional borrowers of securities. A Fund
must receive 100% collateral in the form of cash or U.S.
government securities. This collateral must be valued daily by
the Adviser and, should the market value of the loaned securities
increase, the borrower must furnish additional collateral to the
Fund. During the time portfolio securities are on loan, the
borrower pays the Fund any dividends or interest paid on such
securities. Loans are subject to termination by the Fund or the
borrower at any time. While the Fund does not have the right to
vote securities on loan, it intends to terminate the loan and
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regain the right to vote if that is considered important with
respect to the investment. In the event the borrower defaults in
its obligation to a Fund, the Fund bears the risk of delay in the
recovery of its portfolio securities and the risk of loss of
rights in the collateral. The Fund will only enter into loan
arrangements with broker-dealers, banks or other institutions
which the Adviser has determined are creditworthy under
guidelines established by the Trustees.
INVESTMENT RESTRICTIONS
Each Fund's investment objective may be changed without a
vote of the holders of a majority of the Fund's outstanding
shares. In addition, each Fund is subject to the following
investment restrictions, which may be changed with respect to a
particular Fund by the Trustees without the vote of shareholders.
No Fund may:
1. Purchase securities which would cause 25% or more of the
value of its total assets at the time of purchase to be
invested in the securities of one or more issuers
conducting their principal business activities in the
same industry.
2. Borrow money, issue senior securities or mortgage,
pledge or hypothecate its assets except to the extent
permitted under the 1940 Act.
3. Acquire another investment company or investment company
securities except in connection with a merger,
consolidation, reorganization or acquisition of assets
or except to the extent permitted under the 1940 Act.
4. Purchase securities of companies for the purpose of
exercising control.
5. Purchase or sell real estate or commodities.
PORTFOLIO TURNOVER
The portfolio turnover rate for each of the Funds is
calculated by dividing the lesser of a Fund's purchases or sales
of portfolio securities for the year by the monthly average value
of the securities. The portfolio turnover rates for the Funds may
vary greatly from year to year as well as within a particular
year, and may also be affected by cash requirements for
redemption of shares. High portfolio turnover rates will
generally result in higher transaction costs to a Fund, including
brokerage commissions, and may result in additional tax
consequences to a Fund's shareholders.
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NET ASSET VALUE
The net asset value of each Fund is determined and the shares
of each Fund are priced, as of the close of trading on each day
on which the New York Stock Exchange (the "NYSE") is open for
trading. Currently, the NYSE will not be open in observance of
the following holidays: New Year's Day, Martin Luther King, Jr.
Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day.
VALUATION OF THE FUNDS
If the principal market for a security held by a Fund is a
securities exchange, the security will be priced or valued at the
closing sales price on that exchange on the day of computation.
If there have been no sales during the day, it will be priced at
the last bid quotation. If the principal market for a portfolio
security is not a securities exchange, it will be valued at its
latest bid quotation in the principal market in which it traded.
All other assets and securities, including securities for
which market quotations are not readily available, will be valued
at their fair value as determined in good faith under the general
supervision of and pursuant to procedures approved by, the
Trustees of the Trust.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares of the Funds are sold on a continuous basis by the
Fund's Distributor, BISYS Fund Services Limited Partnership d/b/a
BISYS Fund Services (the "Distributor" or "BISYS"). Shares of the
Funds are sold at their offering price and redeemed at their net
asset value as next determined after receipt of the purchase or
redemption order.
The Funds may suspend the right of redemption or postpone the
date of payment for shares during a period when: (a) trading on
the NYSE is restricted by applicable rules and regulations of the
SEC; (b) the NYSE is closed for other than customary weekend and
holiday closings; (c) the SEC has by order permitted these
suspensions; or (d) an emergency exists as a result of which: (i)
disposal by a Fund of securities owned by it is not reasonably
practicable, or (ii) it is not reasonably practicable for a Fund
to determine the fair market value of its net assets.
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MANAGEMENT OF THE TRUST
TRUSTEES AND OFFICERS
Overall responsibility for management of the Trust rests with
its Trustees, who are elected by the Fund shareholders. The
initial Trustees were elected by the Adviser as the initial
shareholders of the Trust. The Trustees elect the officers of
the Trust to actively supervise its day-to-day operations.
Certain officers of the Trust also may serve as a Trustee.
The Trust will be managed by the Trustees in accordance with
the laws of the State of Delaware governing business trusts.
There are currently seven Trustees, four of whom are not
"interested persons" of the Trust within the meaning of that term
under the 1940 Act. The disinterested Trustees receive
compensation for their services as a Trustee and attendance at
meetings of the Trustees. Officers of the Trust receive no
compensation from the Trust for performing the duties of their
offices.
The Trustees and Officers of the Trust, their addresses and
their principal occupations during the past five (5) years are as
follows:
NAME AND ADDRESS POSITION WITH THE PRINCIPAL OCCUPATION
TRUST DURING PAST 5 YEARS
AND OTHER AFFILIATIONS
* "Interested Person" of the Trust, as defined in the 1940 Act.
Each Trustee who is not an affiliated person of the Adviser
receives an annual fee of $[____] for services as a Trustee to
the Trust, plus a per meeting fee of $[____] for each meeting
attended. Trustees are reimbursed for expenses incurred in
attending such meetings.
CONTROL PERSONS AND PRINICPAL HOLDERS OF SECURITIES
[To be inserted]
INVESTMENT ADVISER
Valenzuela Capital Partners, LLC (the "Adviser"), 1270 Avenue
of the Americas (Suite 508), New York, NY 10020 serves as
investment adviser to the Funds under an investment advisory
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agreement dated [________], 1999 (the "Advisory Agreement"). The
Adviser, founded in 1989, is a registered investment adviser that
manages more than $2 billion in assets, primarily through
institutional accounts. Subject to the Funds' respective
investment objectives and policies approved by the Trustees of
the Funds, the Adviser makes the day-to-day investment decisions
and continuously reviews, supervises and administers the Funds'
investment programs. The Adviser utilizes a team approach in
making investment decisions on behalf of each Fund, with eight
professionals working collectively to ensure a disciplined
investment process designed to result in long-term performance
consistent with each Fund's investment objective. No one person
is responsible for a Fund's management.
For its advisory services, the Funds pay the Adviser an
annual advisory fee equal to 0.75% of the average daily net
assets of each Fund.
Pursuant to the Advisory Agreement, the Adviser will pay all
expenses, (including as applicable, the compensation of any
subadvisers directly appointed by it) incurred by it in
connection with its activities under the Advisory Agreement other
than the cost of securities (including brokerage commissions)
purchased for the Trust.
Unless sooner terminated, the Advisory Agreement shall
continue in effect for each Fund for a period of two years, and
thereafter, shall continue for successive one-year periods if
continuance is approved at least annually (i) by the Trustees or
by vote of a majority of the outstanding voting securities of the
Fund and (ii) by vote of a majority of the Trustees who are not
parties to the Advisory Agreements, or interested persons (as
defined in the 1940 Act) of any of these parties, cast in person
at a meeting called for this purpose. The Advisory Agreement is
terminable as to a particular Fund at any time on 60 days' prior
written notice without penalty by the Trustees, by vote of a
majority of outstanding shares of that Fund, or by the Adviser.
The Agreement also terminates automatically in the event of its
assignment, as defined in the 1940 Act.
The Advisory Agreement provides that the Adviser shall not be
liable for any error of judgment or mistake of law or for any
loss suffered by the Trust in connection with the performance of
its duties, except a loss suffered by a Fund resulting from a
breach of fiduciary duty with respect to the Adviser's receipt of
compensation for services, a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of the
Adviser in the performance of its duties, or from reckless
disregard of its duties and obligations thereunder.
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PORTFOLIO TRANSACTIONS
Pursuant to the Advisory Agreement, the Adviser determines,
subject to the general supervision of the Trustees of the Trust
and in accordance with each Fund's objective, policies and
restrictions, which securities are to be purchased and sold by a
Fund and which brokers are eligible to execute such Fund's
portfolio transactions.
Purchases and sales of portfolio securities that are debt
securities usually are principal transactions in which portfolio
securities are normally purchased directly from the issuer or
from an underwriter or market maker for the securities. Purchases
from underwriters of portfolio securities generally include a
commission or concession paid by the issuer to the underwriter,
and purchases from dealers, serving as market makers may include
the spread between the bid and asked prices. Transactions on
stock exchanges involve the payment of negotiated brokerage
commissions. Transactions in the over-the-counter market are
generally principal transactions with dealers. With respect to
the over-the-counter market, the Trust, where possible will deal
directly with the dealers who make a market in the securities
involved except under those circumstances where better price and
execution are available elsewhere.
Allocation of transactions, including their frequency, to
various brokers and dealers is determined by the Adviser in its
best judgment and in a manner deemed fair and reasonable to
shareholders. The primary consideration is prompt execution of
orders in an effective manner at the most favorable price.
Subject to this consideration, brokers and dealers who provide
investment research to the Adviser may receive orders for
transactions on behalf of the Trust. Information so received is
in addition to and not in lieu of services required to be
performed by the Adviser and does not reduce the fees payable to
the Adviser by the Trust. Such information may be useful to the
Adviser in serving both the Trust and other clients and,
conversely supplemental information obtained by the placement of
business of other clients may be useful to the Adviser in
carrying out its obligations to the Trust.
While the Adviser generally seeks competitive commissions,
the Trust may not necessarily pay the lowest commission available
on each brokerage transaction for the reasons discussed above.
Investment decisions for each Fund in the Trust are made
independently from those made for the other Funds, or for other
portfolio, investment companies or accounts managed by the
Adviser. Any other portfolio, investment company or account may
also invest in the securities in which a Fund invests. When a
purchase or sale of the same security is made at substantially
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the same time on behalf of a Fund and another Fund, portfolio,
investment company or account, the transaction will be averaged
as to price and available investments will be allocated as to
amount in a manner which the Adviser believes to be equitable to
the Fund(s) and such other portfolio, investment company, or
account. In some instances, this investment procedure may
adversely affect the price paid or received by a Fund or the size
of the position obtained by the Fund. To the extent permitted by
law, the Adviser may aggregate the securities to be sold or
purchased for a Fund with those to be sold or purchased for other
Funds or for other portfolios, investment companies, or accounts
in order to obtain best execution.
OTHER SERVICE PROVIDERS
ADMINISTRATOR
BISYS serves as the administrator (the "Administrator") to
the Trust pursuant to an administration agreement dated
[_______], 1999 (the "Administration Agreement"). The
Administrator assists in supervising all operations of each Fund
(other than those performed by the Adviser) under the Advisory
Agreement, by The Bank of New York (the "Custodian") under the
Custody Agreement, and by BISYS under the Fund Accounting and
Transfer Agency Agreement.
Under the Administration Agreement, the Administrator has
agreed to perform or arrange for the performance of the following
services (under the Administration Agreement, the Administrator
may delegate all or any part of its responsibilities thereunder):
-- prepares and assembles reports required to be sent to
the Funds' shareholders and arranges for the printing
and dissemination of such reports;
-- assembles reports required to be filed with the SEC and
files such completed reports with the SEC;
-- arranges for the dissemination to shareholders of the
Funds' proxy materials and oversees the tabulation of
proxies by the Funds' transfer agent;
-- negotiates the terms and conditions under which
custodian services will be provided to the Funds and the
fees to be paid by the Funds to its custodian;
-- negotiates the dividend disbursing services fees to be
paid by the Funds and reviews the provision of dividend
disbursing services to the Funds;
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-- calculates, or arranges for the calculation of, the NAV
of the Funds' shares;
-- determines the amounts available for distribution as
dividends and distributions to be paid by the Funds to
its shareholders; prepares and arranges for the printing
of dividend notices to shareholders; and provides the
Funds' dividend disbursing agent and custodian with such
information as is required for them to effect the
payment of dividends and distributions;
-- assists in providing to the Funds' independent
accountants such information as is necessary for such
accountants to prepare and file the Funds' federal
income and excise tax returns and the Funds' state and
local tax returns;
-- monitors compliance of the Funds' operation with the
1940 Act and with its investment policies and
limitations;
-- monitors compliance of the Funds' operations, with
respect to engaging in short sales, with the 1940 Act
and the Code;
-- provides accounting and bookkeeping services (including
the maintenance of such accounts, books and records of
the Fund as may be required by Section 31(a) of the 1940
Act and the rules and regulations thereunder); and
-- makes such reports and recommendations to the Funds'
Board of Trustees as the Board reasonably requests or
deems appropriate.
The Administrator receives a fee from each Fund for its
services as Administrator and expenses assumed pursuant to the
Administration Agreement, calculated daily and paid monthly, at
the annual rate of [__]% of the combined average daily net assets
of the Funds up to [______]. The Administrator also receives a
separate annual fee from each Fund for transfer agency and fund
accounting services. From time to time, the Administrator may
voluntarily waive all or a portion of the administration fee
payable to it by the Funds.
Unless sooner terminated as provided therein, the
Administration Agreement between the Trust and BISYS will
continue in effect until [________], 1999. The Administration
Agreement thereafter shall be renewed for successive five-year
terms ending on [________] of each period if continuance is
approved by the Trustees.
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The Administration Agreement provides that the Administrator
shall not be liable for any error of judgment or mistake of law
or any loss suffered by the Trust in connection with the matters
to which the Administration Agreement relates, except a loss from
willful misfeasance, bad faith or gross negligence in the
performance of its duties, or from the reckless disregard by the
Administrator of its obligations and duties thereunder.
DISTRIBUTOR AND DISTRIBUTION ARRANGEMENTS
BISYS serves as Distributor or principal underwriter of the
shares of the Funds pursuant to a distribution agreement dated
[________], 1999 (the "Distribution Agreement"). Included in the
Distribution Agreement is a plan adopted by the Funds under Rule
12b-1 under the 1940 Act (the "Rule 12b-1 Plan") to permit the
Funds to pay distribution fees to defray expenses associated with
the distribution of its Class A and Class I shares. In approving
the Distribution Agreement and Rule 12b-1 Plan, the Trustees of
the Funds determined that there was a reasonable likelihood that
the they would benefit the Funds and their shareholders. The
distribution fee of a particular class will not be used to
subsidize the provision of distribution services with respect to
any other class.
Only the Funds' Class A shares currently pay 12b-1 fees,
which is 0.25% of the average daily net assets. Under the Rule
12b-1 Plan, the Funds may pay distribution fees for advertising,
printing and mailing of prospectuses to other than current
shareholders, compensation to broker-dealers and other financial
intermediaries, compensation to sales personnel, printing of
sales literature, travel, entertainment, due diligence and other
promotional expenses.
Unless otherwise terminated in accordance with its terms, the
Distribution Agreement between the Trust and BISYS will continue
in effect for successive one-year periods if approved at least
annually (i) by the Trustees or by the vote of a majority of the
outstanding shares of the Trust, and (ii) by the vote of a
majority of the Trustees of the Trust who are not parties to the
Distribution Agreement or interested persons (as defined in the
1940 Act) of any party to the Distribution Agreement, cast in
person at a meeting called for the purpose of voting on such
approval. The Distribution Agreement is terminable at any time on
60 days' written notice without penalty by the Trustees, by a
vote of a majority of the shareholders of the Trust, or by BISYS
on 90 days' written notice. The Distribution Agreement will
automatically terminate in the event of any assignment as defined
in the 1940 Act.
The Adviser may from time to time and from its own funds or
other resources as may be permitted by rules of the SEC make
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payments for distribution services to BISYS, which may in turn
pay part or all of this compensation to brokers or other persons
for their distribution services.
The Rule 12b-1 Plan is in compliance with rules of the
National Association of Securities Dealers, Inc. which
effectively limit the annual asset-based sales charges and
service fees that a mutual fund may pay on a class of shares to
0.75% and 0.25%, respectively, of the average annual net assets
attributable to that class. The rules also limit the aggregate
of all front-end, deferred and asset-based sales charges imposed
with respect to a class of shares by a mutual fund that also
charges a service fee to 6.25% of cumulative gross sales of
shares of that class, plus interest at the prime rate plus 1% per
annum.
CUSTODIAN
The Bank of New York, 101 Barclay Street, New York, New York
10286 serves as Custodian to the Trust pursuant to a custody
agreement dated [________], 1999 (the "Custody Agreement"). The
Custodian's responsibilities include safeguarding and controlling
the Funds' cash and securities, handling the receipt and
delivery of securities, and collecting interest and dividends on
the Funds' investments. The Bank of New York is paid an annual
custody fee of [___]% of each Fund's average daily net assets up
to $[______]. [___]% of each Fund's next [_] million of average
daily net assets and [__]% of the average daily net assets of
each Fund which exceed $[_] million, exclusive of out-of-pocket
expenses and transaction charges. Custody fees shall be
calculated daily and paid monthly.
TRANSFER AGENCY AND FUND ACCOUNTING SERVICES
BISYS serves as Transfer Agent and Fund Accounting Agent for
the Funds pursuant to a transfer agency agreement dated
[________], 1999 (the "Transfer Agency Agreement") and a fund
accounting agreement dated [________], 1999 (the "Fund Accounting
Agreement").
BISYS, as Transfer Agent, receives an annual base fee for its
transfer agency services for each Fund equal to $[____] per Fund,
payable in equal monthly installments. BISYS, as Fund Accounting
Agent, receives an annual base fee for its fund accounting
services equal to $[____] per Fund, payable in equal monthly
installments.
The Transfer Agent performs the following services in
connection with each of the Funds' shareholders of record:
maintains shareholder records for each of the Fund's shareholders
of record; processes shareholder purchase and redemption orders;
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processes transfers and exchanges of shares of the Funds' on the
shareholder files and records; processes dividend payments and
reinvestments; and assists in the mailing of shareholder reports
and proxy solicitation materials.
The Fund Accounting Agent maintains the accounting books and
records for the Funds, including journals containing an itemized
daily record of all purchases and sales of portfolio securities,
all receipts and disbursements of cash and all other debits and
credits, general and auxiliary ledgers reflecting all asset,
liability, reserve, capital, income and expense accounts,
including interest accrued and interest received, and other
required separate ledger accounts. The Fund Accounting Agent
also maintains a monthly trial balance of all ledger accounts;
performs certain accounting services for the Funds, including
calculation of the net asset value per share, calculation of the
dividend and capital gain distributions, reconciles cash
movements with the Custodian, affirms to the Custodian all
portfolio trades and cash settlements, verifies and reconciles
with the Custodian all daily trade activities; provides certain
reports; obtains dealer quotations, prices from pricing services,
matrix prices or "fair value" computations on all portfolio
securities in order to mark the portfolio to the market; and
prepares an interim balance sheet, statement of income and
expense, and statement of changes in net assets for the Funds.
INDEPENDENT AUDITORS
The Trust has selected Ernst & Young LLP, 787 7th Avenue, New
York, New York 10019 to serve as independent auditors for the
Trust and to audit the financial statements of the Trust for its
first fiscal period ending December 31, 1999.
TRUST COUNSEL
The Trust has selected Seward & Kissel LLP, One Battery Park
Plaza, New York, New York 10004, serves as counsel for the Funds.
GENERAL INFORMATION
DESCRIPTION OF SHARES
The Trust is a Delaware business trust. The Trust was
organized and its Certificate of Trust was filed with the
Secretary of State of the Delaware on June 22, 1999. The Trustees
have authorized the issuance of shares in two series, each
representing interests in two separate portfolios: The VCP Mid-
Cap Value Fund and the VCP Small-Cap Value Fund. Each series is
currently authorized to issue two classes of shares.
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The governing document of the Trust (the "Trust Instrument")
authorizes the Trustees to issue an unlimited number of shares
and to classify or re-classify any unissued shares into one or
more additional classes without shareholder approval. Currently,
the Funds' have two classes of shares, Class A and Class I.
Accordingly, the Trustees may create additional classes or series
of shares for reasons such as the desire to establish one or more
additional portfolios with different investment objectives,
policies or restrictions. Any issuance of shares of another
class or series would be governed by the 1940 Act and the law of
the State of Delaware. If shares of another series were issued
in connection with the creation of an additional portfolio, each
share of the portfolios would normally be entitled to one vote
for all purposes. Shareholders are entitled to one vote for each
dollar of net asset value invested and a proportionate fractional
vote for any fraction of one dollar of net asset value invested,
and will vote in the aggregate, and not by class or series except
as otherwise required by the 1940 Act or other applicable law, or
when the matter to be voted upon only affects the interests of
shareholders of a particular class or series. The rights of
shareholders of a series may not be modified except by the vote
of majority of the outstanding shares of that series.
Voting rights are not cumulative, and, accordingly, the
holders of more than 50% of the Trust's outstanding shares may
elect all of the Trustees. The Trust does not intend to hold
annual shareholder meetings except as may be required by the 1940
Act.
The Trust's shares have no pre-emptive rights and only such
conversion or exchange rights as Trustees may grant in their
discretion. When issued for payment as described in the
Prospectus, the Trust's shares will be fully paid and non-
assessable. In the event of the liquidation or dissolution of the
Trust or an individual Fund, shareholders of a Fund are entitled
to receive the assets available for distribution belonging to the
particular Fund, and a proportionate distribution, based on the
relative asset values of the respective Funds, of any general
assets of the Trust not belonging to any particular Fund which
are available for distribution.
The Trust Instrument authorizes the Trustees, without
shareholder approval (unless otherwise required by applicable
law) to (a) sell and convey the assets of a class of shares to
another management investment company for consideration which may
include securities issued by the purchaser and, in connection
therewith, to cause all outstanding shares of the class to be
redeemed at a price which is equal to their net asset value and
which may be cash or by distribution of the securities or other
consideration received from the sale and conveyance; (b) sell and
convert the assets belonging to a class of shares into money and,
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in connection therewith, to cause all outstanding shares of the
class to be redeemed at their net asset value; or (c) combine the
assets belonging to a class of shares with the assets belonging
to one or more other classes of shares of the Trust if the Board
of Trustees reasonably determines that the combination will not
have a material adverse effect on the shareholders of any class
participating in the combination and, in connection therewith, to
cause all outstanding shares of any class to be redeemed at their
net asset value or converted into shares of another class of the
Trust's shares at their net asset value. The exercise of this
authority by the Trustees may be subject to certain restrictions
under the 1940 Act. The Trustees may authorize the termination
of any class of shares after the assets belonging to the class
have been distributed to its shareholders.
SHAREHOLDER AND TRUSTEE LIABILITY
Under Delaware law, shareholders of beneficial interest in a
business trust may, under certain circumstances, be held
personally liable as partners for the obligations of the Trust.
However, the Trust Instrument provides that the shareholders
shall not be subject to any personal liability for the
obligations of the Trust, and that every written agreement,
obligation, instrument or undertaking made by the Trust shall
contain a provision to the effect that the shareholders are not
personally liable thereunder. The Trust Instrument provides for
indemnification out of the Trust property of any shareholder held
personally liable solely by reason of his being or having been a
shareholder. The Trust Instrument also provides that the Trust
shall, upon request, assume the defense of any claim made against
any shareholder for any act or obligations of the Trust, and
shall satisfy any judgment thereon. Thus, the risk of the
shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which the Trust itself
would be unable to meet its obligations.
The Trust Instrument states further that no Trustee, officer
or agent of the Trust shall be personally liable in connection
with the administration or preservation of the assets of the
Trust or the conduct of the Trust's business; nor shall any
Trustee, officer or agent be personally liable to any person for
any action or failure to act except for bad faith, willful
misfeasance, gross negligence, or reckless disregard of his
duties. The Trust Instrument also provides that all persons
having any claim against the Trustees or the Trust shall look
solely to the assets of the Trust for payment.
21
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ADDITIONAL TAX INFORMATION
Each Fund intends to qualify as a "regulated investment
company" or "RIC" under the Internal Revenue Code of 1986, as
amended (the "Code"). Qualification generally will relieve the
Funds of liability for federal income taxes to the extent their
earnings are distributed in accordance with the Code. However,
taxes may be imposed on the Funds by foreign countries with
respect to income received on foreign securities. Depending on
the extent of each Fund's activities in states and localities in
which its offices are maintained, in which its agents or
independent contractors are located, or in which it is otherwise
deemed to be conducting business, each Fund may be subject to the
tax laws of these states or localities. If for any taxable year
the Fund does not qualify for the special tax treatment afforded
regulated investment companies, all of its taxable income will be
subject to a federal tax at regular corporate rates (without any
deduction for distributions to its shareholders). In such event,
dividend distributions would be taxable to shareholders to the
extent of earnings and profits, and would be eligible for the
dividends-received deduction for corporations. To qualify as a
RIC, a Fund must comply with certain distribution,
diversification, source of income and other applicable
requirements.
Information set forth in the Prospectus and this SAI which
relates to federal taxation is only a summary of some of the
important federal tax considerations generally affecting
shareholders. No attempt has been made to present a detailed
explanation of the federal income tax treatment of a Fund or its
shareholders and this description is not intended as a substitute
for federal tax planning. Accordingly, potential shareholders of
a Fund are urged to consult their tax advisers with specific
reference to their own tax situation. In addition, the tax
discussion in the Prospectus and this SAI is based on tax laws
and regulations which are in effect on the date of the Prospectus
and this SAI; these laws and regulations may be changed by
legislative or administrative action.
PERFORMANCE INFORMATION
From time to time performance information for the Funds
showing their average annual total return and aggregate total
return may be presented in advertisements, sales literature and
shareholder reports. Such performance figures are based on
historical earnings and are not intended to indicate future
performance. Average annual total return of a Fund will be
calculated for the period since the establishment of the Fund and
will reflect the imposition of the maximum sales charge. Average
annual total return is measured by comparing the value of an
investment in a Fund at the beginning of the relevant period to
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<PAGE>
the redemption value of the investment at the end of the period
(assuming immediate reinvestment of any dividends or capital
gains distributions) and annualizing the result. Aggregate total
return is calculated similarly to average annual total return
except that the return figure is aggregated over the relevant
period instead of annualized. Each Fund may also present its
average annual total return and aggregate total return as the
case may be, excluding the effect of a sales charge, if any.
In addition, from time to time the Funds may present their
respective distribution rates in shareholder reports and in
supplemental sales literature which is accompanied or preceded by
a Prospectus. Distribution rates will be computed by dividing
the distribution per share over a twelve-month period by the
maximum offering price per share. The calculation of income in
the distribution rate includes both income and capital gains
dividends and does not reflect unrealized gains or losses,
although a Fund may also present a distribution rate excluding
the effect of capital gains. Distribution rates may also be
presented excluding the effect of a sales charge, if any.
Total return is a function of the type and quality of
instruments held in the portfolio, levels of operation expenses
and changes in market conditions. Consequently, total return
will fluctuate and is not necessarily representative of future
results. Any fees charged by financial intermediaries with
respect to customer accounts for investing in shares of the Funds
will not be included in performance calculations. These fees, if
charged, will reduce the actual performance from that quoted. If
the Adviser or BISYS voluntarily waives all or a part of their
respective fees, the total return of a Fund will be higher than
it would otherwise be in the absence of such voluntary waiver.
CALCULATION OF TOTAL RETURN
Average annual total return is a measure of the change in
value of the investment in a Fund over the period covered, which
assumes any dividends or capital gains distributions are
reinvested in the Fund immediately rather than paid to the
investor in cash. Average annual total return will be calculated
by: (1) adding to the total number of shares purchased by a
hypothetical $1,000 investment in the Fund and all additional
shares which would have been purchased if all dividends and
distributions paid or distributed during the period had
immediately been reinvested, (2) calculating the value of the
hypothetical initial investment of $1,000 as of the end of the
period by multiplying the total number of shares owned at the end
of the period by the net asset value per share on the last
trading day of the period, (3) assuming redemption at the end of
the period, and (4) dividing this account value for the
23
<PAGE>
hypothetical investor by the initial $1,000 investment and
annualizing the result for periods of less than one year.
PERFORMANCE COMPARISONS
Investors may judge the performance of the Funds by comparing
the performance to other mutual funds with comparable investment
objectives and policies through various mutual fund or market
indices such as those prepared by Dow-Jones & Co., Inc., Standard
& Poor's Corporation, Shearson-Lehman Brothers, Inc., Morgan
Stanley Capital International and Russell, as well as data
prepared by Lipper, Inc. and Morningstar, Inc., widely recognized
independent services which monitor the performance of mutual
funds, and the Consumer Price Index. Comparisons may also be made
to indices or data published in Money Magazine, Forbes, Barron's,
The Wall Street Journal, The New York Times, Business Week,
Pensions and Investments, and USA Today. In addition to
performance information, general information about the Funds that
appears in a publication such as those mentioned above, may be
included in advertisements and in reports to shareholders,
From time to time, the Funds (or the Adviser) may include the
following types of information in advertisements, supplemental
sales literature and reports to shareholders: (1) discussions of
general economic or financial principles (such as the effects of
compounding and the benefits of dollar-cost averaging); (2)
discussions of general economic trends; (3) presentations of
statistical data to supplement these discussions; (4)
descriptions of past or anticipated portfolio holdings for one or
more of the Funds within the Trust; (5) descriptions of
investment strategies for one or more of the Funds; (6)
descriptions or comparisons of various savings and investment
policies (including, but not limited to, insured bank products,
annuities, qualified retirement plans and individual stocks and
bonds), which may or may not include the Funds; (7) comparisons
of investment products (including the Funds) with relevant market
or industry indices or other appropriate benchmarks; and (8)
discussions of fund rankings or ratings by recognized rating
organizations. The Funds may also include calculations, such as
hypothetical compounding examples which describe hypothetical
investment results in such communications. These performance
examples will be based on an expressed set of assumptions and are
not indicative of the performance of any of the Funds.
Morningstar, Inc., Chicago, Illinois, rates mutual funds on a
one- to five-star rating scale with five stars representing the
highest rating. Such ratings are based on a fund's historical
risk/reward ratio as determined by Morningstar relative to other
funds in that fund's investment objective category or class. The
one- to five-star ratings represent the following ratings by
24
<PAGE>
Morningstar, respectively: Lowest, Below Average, Neutral, Above
Average and Highest.
MISCELLANEOUS
Trustees are elected by the shareholders and serve for a term
lasting until the next meeting of shareholders at which Trustees
are elected. These meetings are not required to be held at any
specific intervals.
The Trust is registered with the SEC as a open-end management
investment company. Such registration does not involve
supervision of the management policies of the Trust.
The Prospectus and this SAI omit certain of the information
contained in the Registration Statement filed with the SEC.
Copies of that information may be obtained from the SEC by
payment of the prescribed fee.
The Prospectus and this SAI are not an offering of the
securities herein described in any state in which an offering may
not lawfully be made. No salesman, dealer or other person is
authorized to give any information or make any representation
other than those contained in the Prospectus and this SAI.
25
<PAGE>
PART C
OTHER INFORMATION
ITEM 23. Exhibits
(a) Trust Instrument of the Registrant.*
(b) Not applicable.
(c) Not applicable.
(d) Form of proposed Advisory Agreement between the
Registrant and Valenzuela Capital Partners LLC.*
(e) (1) Form of proposed Distribution Agreement between the
Registrant and BISYS Fund Services.*
(2) Form of Selected Dealer Agreement between BISYS
Fund Services and selected dealers offering shares
of Registrant.*
(3) Form of Selected Agent Agreement between BISYS Fund
Services and selected agents making available
shares of Registrant.*
(f) Not applicable.
(g) Custodian Contract.*
(h) Form of proposed Transfer Agency Agreement between the
Registrant and BISYS Fund Services Ohio, Inc.*
(i) Opinion and Consent of Seward & Kissel LLP.*
(j) Not Applicable.
(k) Not applicable.
(l) Investment representation letter of Valenzuela Capital
Partners LLC.*
(m) Form of proposed Rule 12b-1 Plan.*
(n) Not applicable.
(o) Form of proposed Rule 18f - 3 Plan.*
Other Exhibits - Powers of Attorney.*
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ITEM 24. Persons Controlled by or under Common Control with
Registrant.
None. The Registrant is a recently organized
corporation and has no outstanding shares of common
stock.
___________________________
* To be filed in a pre-effective amendment
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<PAGE>
ITEM 25. Indemnification.
It is the Registrant's policy to indemnify its directors
and officers, employees and other agents to the maximum
extent permitted by Section 3817, Title 12 of the
Delaware Code, which is incorporated by reference
herein, and as set forth in Article IX of
Registrant's Trust Instrument, filed as Exhibit (a)
hereto and paragraph 1.11 of the proposed Distribution
Agreement, filed as Exhibit (e)(1) hereto. The
Adviser's liability for any loss suffered by the
Registrant or its shareholders is set forth in
Section __ of the proposed Advisory Agreement, filed as
Exhibit (d) hereto.
Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors,
officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that, in the opinion of the
Securities and Exchange Commission, such indemnification
is against public policy as expressed in the Securities
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 director, officer or controlling
person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection
with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of
whether such indemnification by it is against public
policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
In accordance with Release No. IC-11330 (September 2,
1980), the Registrant will indemnify its directors,
officers, investment manager and principal underwriters
only if (1) a final decision on the merits was issued by
the court or other body before whom the proceeding was
brought that the person to be indemnified (the
"indemnitee") was not liable by reason or willful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his
office ("disabling conduct") or (2) a reasonable
determination is made, based upon a review of the facts,
that the indemnitee was not liable by reason of
disabling conduct, by (a) the vote of a majority of a
quorum of the directors who are neither "interested
C-3
<PAGE>
persons" of the Registrant as defined in section
2(a)(19) of the Investment Company Act of 1940 nor
parties to the proceeding ("disinterested, non-party
directors"), or (b) an independent legal counsel in a
written opinion. The Registrant will advance attorneys
fees or other expenses incurred by its directors,
officers, investment adviser or principal underwriters
in defending a proceeding, upon the undertaking by or on
behalf of the indemnitee to repay the advance unless it
is ultimately determined that he is entitled to
indemnification and, as a condition to the advance,
(1) the indemnitee shall provide a security for his
undertaking, (2) the Registrant shall be insured against
losses arising by reason of any lawful advances, or
(3) a majority of a quorum of disinterested, non-party
directors of the Registrant, or an independent legal
counsel in a written opinion, shall determine, based on
a review of readily available facts (as opposed to a
full trial-type inquiry), that there is reason to
believe that the indemnitee ultimately will be found
entitled to indemnification.
The Registrant maintains a trustees/directors and
officers liability insurance policy issued by [
]. Coverage under this policy has been extended to
trustees and officers of the investment companies
managed by Valenzuela Capital Partners LLC. Under this
policy, outside trustees are covered up to the limits
specified for any claim against them for acts committed
in their capacities as trustee. A pro rata share of the
premium for this coverage is charged to each investment
company and to the Adviser.
ITEM 26. Business and Other Connections of Adviser.
The descriptions of Valenzuela Capital Partners LLC
under the captions "Management of the Fund" in the
Prospectus and in the Statement of Additional
Information constituting Parts A and B, respectively, of
this Registration Statement are incorporated by
reference herein.
The information as to the directors and executive
officers of Valenzuela Capital Partners LLC, set forth
in its Form ADV filed with the Securities and Exchange
Commission on [_________ __, 19__ (File No. 801-______)
and amended through the date hereof, is incorporated by
reference.
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ITEM 27. Principal Underwriters.
(a) BISYS Fund Services, Limited Partnership ("BISYS Fund
Services") the Registrant's Principal Underwriter in connection
with the sale of shares of the Registrant. BISYS Fund Services
also acts as Principal Underwriter or Distributor for the
following investment companies: Alpine Equity Trust, American
Performance Funds, the AmSouth Mutual Funds, The BB&T Mutual
Funds Group, The Coventry Group, ESC Strategic Funds, Inc., the
Eureka Funds, Fifth Third Funds, Governor Funds, Gradison
Custodian Trust, Gradison Growth Trust, Gradison-McDonald Cash
Reserves Trust, Gradison-McDonald Municipal Trust, Hirtle
Callaghan Trust, HSBC Funds Trust, Mutual Funds Trust, INTRUST
Funds Trust, The Mutual Funds, Inc., The Kent Funds, Magna Funds,
MMA Praxis Mutual Funds, Mercantile Mutual Funds, Inc., Meyers
Investment trust, M.S.D.&T. Funds, Pacific Capital Funds, The
Parkstone Advantage Fund, Puget sound alternative Investment
Series Trust, The Republic Funds Trust, The Republic Advisors
Funds Trust, SSgA International Liquidity Fund, Summit Investment
Trust, Variable Insurance Funds, The Portfolios, The Victory
Variable Insurance Funds and The Vintage Mutual Funds, Inc.
(b) The following were, as of June 1, 1999, the Partners of
BISYS Fund Services, the principal place of business of which is
3435 Stelzer Road, Columbus, Ohio, 43219.
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<PAGE>
NAME AND POSITIONS AND POSITIONS AND
PRINCIPAL OFFICES WITH OFFICES WITH
BUSINESS ADDRESS UNDERWRITER REGISTRANT
BISYS Fund Services, Inc. Sole General Partner None
3435 Stelzer Road
Columbus, Ohio 43219
WC Subsidiary Corporation Sole Limited Partner None
150 Clove Road
Little Falls, New Jersey 07424
(c) Not applicable.
ITEM 28. Location of Accounts and Records.
The majority of the accounts, books and other documents
required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and the rules thereunder
are maintained as follows: journals, ledgers,
securities records and other original records are
maintained principally at the offices of BISYS Fund
Services, 3435 Stelzer Road, Columbus, Ohio 43219 and at
the offices of The Bank of New York, the Registrant's
custodian, 101 Barclay Street, New York, New York 10286.
All other records so required to be maintained are
maintained at the offices of Valenzuela Capital Partner
LLC, 1270 Avenue of the Americas, Suite 508, New York,
New York, 10020.
ITEM 29. Management Services.
Not applicable.
ITEM 30. Undertakings.
None.
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SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as
amended, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in The City of New York, New York, on
the 25th day of June, 1999.
Valenzuela Capital Trust
/s/Jennifer Brancato
________________________
Jennifer Brancato
Secretary
Pursuant to the requirements of the Securities Act of
1933, as amended, this Registration Statement has been signed
below by the following persons in the capacities and on the date
indicated.
Signature Position Date
_____________ ___________ _________
(1) Principal Executive Officer:
/s/ Kathleen K. Clarke Chairman June 25, 1999
______________________
Kathleen K. Clarke
(2) Principal Financial
and Accounting Officer:
/s/ Gary Tenkman Treasurer June 25, 1999
_____________________
Gary Tenkman
(3) Trustees:
/s/ Kathleen K. Clarke
_________________________ June 25, 1999
Kathleen K. Clarke
/s/ Frederick H. Sherley
_________________________ June 25, 1999
Frederick H. Sherley
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Index To Exhibits
None.
C-8
52289006.AA0
