As filed with the Securities and Exchange Commission on June 6, 1997
Registration Nos. 333-24377
811-________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. _____
Post-Effective Amendment No. _____
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 1
DELTA MUTUAL FUNDS
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(Exact Name of Registrant as Specified in Charter)
511 Fifth Avenue, Suite 605
New York, NY 10017
- -------------------------------------------------- ---------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code.
(212) 681-7007
- --------------------------------------------------
John P. Figliolini, President
Berkshire International Finance
551 Fifth Avenue, Suite 605
New York, NY 10017
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(Name and Address of Agent for Service)
(with a copy to Hecht & Steckman, P.C., 60 East 42nd St., Suite 5101,
New York, NY 10165-5101)
<PAGE>
Approximate Date of Proposed Public Offering:
As soon as practicable after this registration statement becomes effective.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant
hereby elects to register an indefinite number of its shares of beneficial
interest.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that the Registration Statement
shall thereafter become effective in accordance with Section 8(A) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(A),
may determine.
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<PAGE>
FORM N-1A
CROSS REFERENCE TABLE
Part A
Item Prospectus
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1 Cover Page.....................................................Cover Page
2 Synopsis..............................................Expense Information
3 Condensed Financial Information.......................................N/A
4 General Description of Registrant.......Investment Objective and Policies
5 Management of the Fund.............................Management of the Fund
5A Management's Discussion of Fund Performance...........................N/A
6 Capital Stock and Other Securities......................Capital Structure
7 Purchase of Securities
Being Offered..............Investing in the Fund, Plan of Distribution
8 Redemption or Repurchase........................How to Redeem Fund Shares
9 Legal Proceedings.....................................................N/A
Part B STATEMENT OF ADDITIONAL INFORMATION
Item
- ----
10 Cover Page....................................................Cover Page
11 Table of Contents.........................................Not Applicable
12 General Information and History......................General Information
13 Investment Objectives and Policies.....Investment Objective and Policies
14 Management of the Registrant...................Management of the Company
15 Control Persons and Principal Holders
of Securities................................Management of the Company
16 Investment Advisory and Other Services.......................The Adviser
17 Brokerage Allocation................................Plan of Distribution
18 Capital Stock and Other Securities....Agreement and Declaration of Trust
19 Purchase, Redemption and Pricing of Securities
Being Offered...........Additional Purchase and Redemption Information
20 Tax Status.......................Additional Information Concerning Taxes
21 Underwriters................................................Distribution
22 Calculation of Performance Data....Additional Information on Performance
23 Financial Statements................................Financial Statements
Part C OTHER INFORMATION
Item
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24 Financial Statements and Exhibits....................Financial Statements
25 Persons Controlled by or Under Common Control...Management of the Company
26 Number of Holders of Securities.......................................N/A
27 Indemnification........................Declaration and Agreement of Trust
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28 Business and Other Connections of
Investment Adviser...........................Management of the Company,
Management of the Fund
29 Principal Underwriters...Plan of Distribution, Distributorship Agreement
30 Location of Accounts and Records.................Performance Advertising
31 Management Services..........................American Data Services, Inc.
32 Undertakings.....................................................Item 32
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<PAGE>
DELTA MUTUAL FUNDS
DELTA MICRO CAP GROWTH FUND
INVESTMENT ADVISER
Utopia Capital Management Corporation
551 Fifth Avenue, Suite 605
New York, New York 10017
DISTRIBUTOR
European Equity Partners, Inc.
551 Fifth Avenue, Suite 605
New York, New York 10017
TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
American Data Services, Inc.
24 West Carver Street
Huntington, New York 11743
LEGAL COUNSEL
Hecht & Steckman, P.C.
60 East 42nd St., Suite 5101
New York, New York 10165-5101
INDEPENDENT ACCOUNTANTS
McCurdy & Associates CPA's, Inc.
27955 Clemens Road, Suite #2
Cleveland, Ohio 44145-1121
DELTA MICRO CAP
GROWTH FUND
PROSPECTUS
JUNE ___, 1997
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAW OF ANY SUCH STATE
DELTA MICRO CAP
GROWTH FUND
DELTA MUTUAL FUNDS
DELTA MICRO CAP GROWTH FUND
PROSPECTUS
JUNE ___, 1997
Delta Mutual Funds ("Trust") is a mutual fund offering its shares in
separate investment portfolios. This Prospectus relates to the Delta Micro Cap
Growth Fund ("Fund"). The Fund seeks capital appreciation through long-term
growth of capital. It pursues its objective by investing primarily in equity
securities of small-sized companies, which have market capitalizations less than
$100 million at the time of purchase ("micro cap companies"). Utopia Capital
Management Corporation ("Adviser") serves as the Fund's investment adviser. See
"Management." Purchasers of shares are charged a 5% front-end sales load. See
"Investing in the Fund."
This Prospectus gives you information about the Fund that you should know
before investing. Please read it carefully and retain it for future reference.
Additional information is contained in the Statement of Additional Information
dated June ___, 1997 ("SAI"), which is incorporated by reference into this
Prospectus, and has been filed with the Securities and Exchange Commission
("SEC"). To obtain a copy of the SAI without charge, call the Fund at 1-888
295-8330 or the Administrator at 1-888-214-1360.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
1
<PAGE>
TABLE OF CONTENTS
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Cover Page ..................................................... Cover
Expense Information ............................................ 3
Investment Objective and Policies .............................. 4
Other Investment Practices and Risk Factors .................... 5
Rights and Warrants ............................................ 6
Convertible Securities ......................................... 6
When-Issued and Delayed Delivery
Securities and Forward Commitments ........................... 6
When, As and If Issued Securities .............................. 6
Options ........................................................ 7
Short-Term Instruments ......................................... 7
Portfolio Turnover ............................................. 7
Experience of Adviser .......................................... 8
Certain Investment Restrictions ................................ 8
Management of the Fund ......................................... 8
Investment Adviser ............................................. 8
Portfolio Managers ............................................. 9
How to Purchase Shares ......................................... 10
Shareholder Services ........................................... 12
How to Redeem Shares ........................................... 13
Dividends and Distributions .................................... 14
Investing in the Fund .......................................... 15
Purchases by Mail .............................................. 16
How to Purchase Fund Shares .................................... 16
Procedure for Requesting Redemption ............................ 19
Redemption at the Option of the Fund ........................... 20
Distributions .................................................. 20
The Objective of the Fund is Long-Term Capital Growth
and Not the Production of Income Distributions ............... 20
Taxes .......................................................... 21
Determination of Net Asset Value ............................... 22
Plan of Distribution ........................................... 22
Capital Structure .............................................. 23
2
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EXPENSE INFORMATION
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The tables and example below are designed to assist you in understanding
the various costs and expenses that you will bear directly or indirectly as an
investor in the Fund. See "Investing in the Fund" and "Management of the Fund"
for more information.
INVESTOR TRANSACTION EXPENSES
Maximum sales load imposed on purchases ....................... 5%
(as a percentage of public offering price)
Maximum sales load imposed on reinvested dividends ............ None
Deferred sales charges ........................................ None
Redemption fees (a) ........................................... None
ANNUAL FUND OPERATING EXPENSES (b)
(as a percentage of average net assets)
Management fees (c) ........................................... 1.00%
12b-1 Fees (d) ................................................ 0.25%
Other Expenses (e) ............................................ 0.75%
TOTAL FUND OPERATING EXPENSES (f)
(after reimbursement) ......................................... 2.0%
(a) Redemption proceeds sent by wire are subject to an $8.00 processing
fee.
(b) The fees and expenses in this table are based on the estimated fees
and expenses that the Fund expects to incur, and on the estimated size
of the Fund, during its initial fiscal year.
(c) The Adviser's fee is 1% of the Fund's average daily assets on the
first $100 million, 0.85% on the average daily assets of the next $100
million and 0.70% on the average daily assets over $200 million.
(d) Long-term investors of the Fund may pay more in sales charges and
12b-1 fees than the economic equivalent of the maximum front-end sales
charges permitted by the National Association of Securities Dealers,
Inc.
(e) This includes estimated custody, transfer agency, accounting and legal
fees but not other operating expenses the Fund may incur.
(f) The Fund's Adviser, Utopia Capital Management Corporation ("Adviser")
will voluntarily waive its fees and, if necessary, reimburse the Fund
to the extent that operating expenses exceed 2.00% of the Fund's
average daily net assets. The Adviser will only seek reimbursement for
legal, accounting and filing fees,--printing and other costs advanced
by the Adviser in connection with the filing and processing of this
registration statement are related blue sky fees.
3
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EXAMPLE:
<TABLE>
<S> <C> <C>
ONE YEAR THREE YEAR
-------- ----------
You would pay the following expenses
on a hypothetical $1,000 investment,
assuming (1) a 5% annual return and
(2) redemption at the end of each
time period. $20.00 $63.00
</TABLE>
This example should not be considered a representation of past or future
expenses or returns which may be more or less than those shown.
INVESTMENT OBJECTIVE AND POLICIES
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Delta Mutual Funds ("Trust") was organized as an Ohio business trust on May
20, 1997. The Trust is an open-end, diversified management investment company
registered under the Investment Company Act of 1940, as amended ("1940 Act").
The Delta Micro Cap Growth Fund ("Fund") is a diversified mutual fund series of
the Trust. The Trust does not presently intend to offer any other series but may
do so in the future. This section takes a closer look at the Fund's investment
objectives, policies and the securities in which it invests. If you have any
inquiries about investing in the Funds, please call the Trust toll-free at
888-295-8330 or the Administrator toll-free at 888-214-1360, or write to
American Data Services, Inc., 24 West Carver Street, 2nd Floor, Huntington, New
York 11743.
The Fund's investment objective is capital appreciation through long-term
growth. The Fund pursues its objective by investing, under normal market
conditions, at least 80% of its total assets in equity securities of companies
with market capitalizations of less than $100 million at the time of purchase
("micro cap companies"). Such securities are common stock and preferred stock,
warrants, options and debt securities convertible into common stock.
Although micro cap companies have potential for rapid growth, investments
in micro cap companies often involve greater risks than investments in larger,
more established companies. Micro cap companies may have shorter operating
histories, a relative lack of management experience, financial resources and
product diversification, and less market liquidity than larger companies. The
securities of micro cap companies are, in many cases, traded only
over-the-counter or on regional securities exchanges, and the frequency and
volume of their trading are substantially less than is typical of larger
companies. For these reasons, securities of micro cap companies may be subject
to greater and more abrupt price fluctuations. The Adviser's research skills and
ability to select securities for the Fund are very important because the
securities of micro cap companies are not followed as closely as large company
stocks. Investors in the Fund should consider their holdings to be long-term
investments, given the risks associated with equity investing, especially in
stocks of micro cap companies.
The Adviser's portfolio managers will generally utilize the following
analytical approach. Phase I consists of identifying "micro cap" public
companies which generally have the following characteristics:
- a specified stock price to sales ratio in conjunction with appropriate
gross margins
- a 1.5 ratio of current assets to current liabilities
- limited potential dilution issuance of securities
- a specified stock price to book value
4
<PAGE>
The Adviser's portfolio managers will also look at the price-earnings
ratio, realizing that many "micro cap" companies are not yet profitable. Current
profitability is not a prerequisite for a Fund investment, but in those cases
where a company is not yet profitable, the Adviser will consider stable or
increasing sales growth coupled with appropriate gross margins.
Once a potential investment satisfies Phase I of the Adviser's analytical
approach, its data is then inserted into a model developed by the Adviser in an
attempt to determine what the stock price will be in two to three years. The
Adviser prefers market niche leaders where it is difficult or uneconomical for
much larger companies to compete, or companies that are unique in their
technology, approach to the market, ability to provide technological solutions
to long-established problems, licensing or patent protection or some other
unique aspect. It will also compare the stock price to other public companies in
the same industry sector and the level of trading liquidity of the securities to
be purchased. The Adviser's portfolio managers will also use technical analysis
to determine the timing of proposed purchase and sale of investments by the
Fund.
The Fund generally invests in micro cap companies its portfolio manager
considers to be well-managed and to have potential for exceptional growth. So
long as a sufficient number of equity securities of such companies are
available, the Fund intends to stay fully invested in these securities
regardless of the movement of stock prices generally. In most circumstances, the
Fund's actual level of cash and cash equivalents will fluctuate between 0% and
10% of total assets with 90% to 100% of its assets committed to equity and
equity equivalent investments. The Fund may invest from time to time a portion
of its assets, not to exceed 20% at the time of purchase, in companies with
market capitalizations greater than $100 million. The Fund does not intend to
effect any short sales or futures transactions.
The Fund may also invest up to 5% of its net assets in securities
convertible into common stock rated below investment grade by Standard & Poor's
Ratings Services ("S&P") or Moody's Investors Service, Inc. ("Moody's")
(commonly referred to as junk bonds or lower-rated securities) or unrated
securities deemed to be below investment grade by the Adviser. The Fund does not
intend to invest in securities rated below "B" by S&P or Moody's, or the
equivalent. Securities rated below investment grade are deemed to be
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal and may involve major risk exposure to adverse conditions.
See the Statement of Additional Information for a discussion of the risks
associated with these lower-rated securities and for a description of corporate
bond ratings by S&P and Moody's.
For temporary defensive purposes during anticipated periods of general
market decline or to receive a return on idle cash, the Fund may invest a
portion of its net assets in money market instruments, including securities
issued or guaranteed by the U.S. Government, its agencies or instrumentalities
and repurchase agreements secured thereby, as well as bank certificates of
deposit and banker's acceptances issued by banks having net assets of at least
$1 billion as of the end of their most recent fiscal year, high-grade commercial
paper, and other high quality long-term and short-term debt instruments. Under
normal circumstances, the Fund will not invest more than 10% of its total assets
in short-term instruments to meet anticipated redemption requests and other cash
flow needs, when, in the opinion of the Advisor, other suitable securities are
unavailable or for temporary defensive purposes. See "Other Investment Practices
and Risk Factors."
OTHER INVESTMENT PRACTICES AND RISK FACTORS
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An investment in the Fund should not be considered a complete investment
program and there is no assurance that the Fund will achieve its investment
objective. Investors should carefully consider their ability to assume the risks
described herein before making an investment in the Fund.
5
<PAGE>
RIGHTS AND WARRANTS
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The Fund may acquire rights and/or warrants which are attached to other
securities in its portfolio, or which are issued as a distribution by the issuer
of a security held in its portfolio. Rights and/or warrants are, in effect,
options to purchase equity securities at a specific price, generally valid for a
specific period of time, and have no voting rights, pay no dividends and have no
rights with respect to the corporation issuing them.
CONVERTIBLE SECURITIES
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The Fund may acquire, through purchase or a distribution by the issuer of a
security held in its portfolio, a fixed-income security which is convertible
into common stock of the issuer. Convertible securities rank senior to common
stocks in a corporation's capital structure and, therefore, entail less risk
than the corporation's common stock. The value of a convertible security is a
function of its "investment value" (its value as if it did not have a conversion
privilege), and its "conversion value" (the security's worth if it were to be
exchanged for the underlying security, at market value, pursuant to its
conversion privilege).
To the extent that a convertible security's investment value is greater
than its conversion value, its price will be primarily a reflection of such
investment value and its price will be likely to increase when interest rates
fall and decrease when interest rates rise. As with a fixed-income security, the
credit standing of the issuer and other factors may also have an effect on the
convertible security's value. If the conversion value exceeds the investment
value, the price of the convertible security will rise above its investment
value and, in addition, will sell at some premium over its conversion value.
This premium represents the price investors are willing to pay for the privilege
of purchasing a fixed-income security with a possibility of capital appreciation
due to the conversion privilege. At such times the price of the convertible
security will tend to fluctuate directly with the price of the underlying equity
security. A portion of the convertible securities in which the Fund may invest
may be unrated or, if rated, rated below investment grade by a nationally
recognized statistical rating organization.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS
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From time to time, in the ordinary course of business, the Fund may
purchase securities on a when-issued or delayed delivery basis or may purchase
or sell securities on a forward commitment basis. When such transactions are
negotiated, the price is fixed at the time of the commitment, but delivery and
payment can take place a month or more after the date of the commitment. There
is no overall limit on the percentage of the Fund's assets which may be
committed to the purchase of securities on a when-issued, delayed delivery or
forward commitment basis. An increase in the percentage of the Fund's assets
committed to the purchase of securities on a when-issued, delayed delivery or
forward commitment basis may increase the volatility of the Fund's net asset
value.
WHEN, AS AND IF ISSUED SECURITIES
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The Fund may purchase securities on a "when, as and if issued" basis under
which the issuance of the security depends upon the occurrence of a subsequent
event, such as approval of a merger, corporate reorganization, leveraged buyout
or debt restructuring. If the anticipated event does not occur and the
securities are not issued, the Fund will have lost an investment opportunity.
There is no overall limit on the percentage of the Fund's assets which may be
committed to the purchase of securities on a "when, as and if issued" basis. An
increase in the percentage of the Fund's assets committed to the purchase of
securities on a "when, as and if issued" basis may increase the volatility of
its net asset value.
6
<PAGE>
OPTIONS
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The Fund may invest in call and put options on portfolio securities.
However, the Fund is not permitted to write uncovered or naked options. The Fund
may purchase listed and over-the-counter ("OTC") call and put options in amounts
equalling up to 5% of its net assets. The Fund may purchase call options to
protect against an increase in the price of a security it anticipates
purchasing, or for the purpose of speculating in the common stock underlying the
call option. The Fund may purchase put options on securities which it holds in
its portfolio to protect itself against a decline in the value of the security.
SHORT-TERM INSTRUMENTS
- --------------------------------------------------------------------------------
The Fund may hold short-term U.S. Government obligations, high quality
money market instruments (i.e., rated A-1 or better by S&P or Prime-1 by Moody's
or unrated instruments deemed by the Adviser to be of comparable quality),
certificates of deposit, bank obligations and cash equivalents, (i) to meet
anticipated redemption requests and other cash flow needs, (ii) when, in the
opinion of the Adviser, other suitable securities are unavailable, or (iii) for
temporary defensive purposes. Under normal conditions, it is not anticipated
that more than 10% of the total assets of the Fund will be invested in
short-term instruments. The foregoing instruments may also include, among other
things, commercial paper, and corporate bonds with remaining maturities of
thirteen months or less, short-term obligations of U.S. banks and money market
mutual funds. In addition to the advisory fees and other expenses the Fund bears
directly in connection with its own operations, when the Fund invests in another
mutual fund, the Fund would bear its pro rata portion of the other mutual fund's
advisory fees and other expenses, and such fees and other expenses will be borne
indirectly by the Fund's investors. See the SAI for a description of S&P's and
Moody's commercial paper ratings.
BORROWINGS
The Fund may borrow money in an amount up to one-third of the value of its
total assets at the time of entering into the borrowing, for temporary or
emergency purposes (including to meet redemption requests prior to the
settlement of securities already sold or in the process of being sold by the
Fund). If the securities held by a Fund should decline in value while borrowings
are outstanding, the net asset value of the Fund's outstanding shares will
decline in value by proportionately more than the decline in market value of the
Fund's portfolio securities. As a result, the Fund's share price may be subject
to greater fluctuation until the borrowing is repaid.
PORTFOLIO TURNOVER
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The Fund may sell a portfolio investment soon after its acquisition if the
Adviser believes that such a disposition is consistent with attaining the
investment objective of the Fund. Portfolio investments may be sold for a
variety of reasons, such as a more favorable investment opportunity or other
circumstances bearing on the desirability of continuing to hold such
investments. A high rate of portfolio turnover (over 100%) may involve
correspondingly greater brokerage commission expenses and other transaction
costs, which must be borne directly by the Fund and ultimately by its investors.
High portfolio turnover may result in the realization of substantial net capital
gains. To the extent short-term net capital gains are realized, distributions
resulting from such gains will be ordinary income for federal income tax
purposes. See "Taxes". The Adviser expects that the annual portfolio turnover
for the Fund will not exceed 200%.
7
<PAGE>
EXPERIENCE OF ADVISER
- --------------------------------------------------------------------------------
Although the Fund's portfolio managers and other officers of the Company
have experience in analyzing micro cap companies, the Adviser has only recently
been formed and has no previous experience managing a registered investment
company such as the Fund.
CERTAIN INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
The Fund's investment objective and, except as otherwise stated herein or
in the SAI, the investment policies and restrictions are not fundamental and may
be changed by the Board of Trustees without investor approval. As a matter of
non-fundamental policy, the Fund will not, among other matters described herein
under "Types of Investments" and "Other Investment Practices and Risk Factors,"
(i) engage in short sales or futures transactions; (ii) write uncovered or naked
options; (iii) purchase restricted or illiquid securities; (iv) invest in
foreign securities or ADRs; (v) purchase securities owned by any of the Arista
group of mutual funds; (vi) lend its securities; or (vii) invest in other
investment companies except money market funds.
Among other fundamental restrictions described in the SAI which cannot be
changed without investor approval, the Fund may not (i) invest more than 25% of
its total assets in securities of issuers in any single industry (other than
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities); (ii) with respect to 75% of its total assets, invest more
than 5% of the fair market value of its assets in securities of any one issuer
(other than securities issued or guaranteed by the U.S. Government, its agencies
or instrumentalities); (iii) invest in a company to get control or manage it or,
with respect to 75% of its total assets, purchase more than 10% of the
outstanding voting securities of an issuer; (iv) invest Fund assets in
restricted securities; (v) issue any senior securities, except for temporary
borrowings permissible under the 1940 Act; (vi) make loans, except to the extent
permitted by the 1940 Act; or (vii) invest in commodities or commodities
options.
You will be notified of any changes to the Fund's investment objective,
policies or restrictions that are considered by the Board of Trustees to be
material. If there is a material change to the Fund's investment objective,
policies or restrictions, you should consider whether the Fund remains an
appropriate investment for you. For further information regarding the Fund's
investment restrictions, see the SAI.
MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------
The business and affairs of the Fund are managed by the Adviser under the
supervision and direction of the Board of Trustees. The officers of the Trust
are responsible for the Fund's daily operations. The SAI contains the name and
background information of each Trustee and officer of the Trust.
INVESTMENT ADVISER
- --------------------------------------------------------------------------------
Utopia Capital Management Corporation ("Adviser"), 551 Fifth Avenue, New
York, New York, serves as the Investment Adviser pursuant to an Investment
Advisory Agreement (the "Agreement"), which provides that the Adviser will
furnish continuous investment advisory services to the Fund. The Adviser
supervises and manages the investment portfolio, and administers the operations,
of the Fund, and subject to such policies as the Board of Trustees of the Fund
may determine, directs the purchase or sale of investment securities in the
day-to-day management of the Fund's investment portfolio. Under the Agreement,
the Adviser, at its own expense and without reimbursement from the Fund,
furnishes office space and all necessary office facilities, equipment and
executive personnel for making the investment decisions necessary for managing
the Fund and maintaining the Company's organization, and pays the salaries and
fees of all officers and Trustees of the Company (except the fees paid to
disinterested Trustees). The Fund pays all of its own expenses, including,
without limitation, the cost of preparing and printing registration statements,
the expense of registering its shares with the SEC and qualifying
8
<PAGE>
them for sale in the various states, advisory fees, costs of organization and
maintenance of corporate existence, the printing and distribution costs of
prospectuses mailed to existing shareholders, reports to shareholders, reports
to government authorities and proxy statements, costs of meetings of
shareholders, fees paid to Trustees who are not interested persons of the
Adviser, the cost of office supplies, travel expenses, interest charges, taxes,
legal expenses, association membership dues, auditing services, insurance
premiums, brokerage commissions and other expenses in connection with portfolio
transactions, fees and expenses of the custodian of the Fund's assets, fees of
fund accounting and pricing services, ent.the fees and expenses of the Fund's
dividend disbursing agent, accounting services agent, and transfer agent.
For its services, the Adviser receives a management fee from the Fund
computed at the annual rate of 1.00% of the Fund's average daily net assets up
to $100 million. The Agreement provides that the management fee is reduced at
predetermined break points. The management fee is reduced to 0.85% of the Fund's
average daily net assets greater than $100 million but less than or equal to
$200 million. The fee is further reduced to 0.70% of the Fund's daily net asset
value greater than $200 million. The fee is paid monthly.
The Adviser is a recently organized corporation, the sole stockholder of
which is John Figliolini, who is president of both the Advisor and Trust.
The Adviser may serve as investment adviser to individual and institutional
clients, but currently does not do so.
As of the date of this Prospectus the Adviser owned of record all
outstanding shares of the Fund.
PORTFOLIO MANAGERS
- --------------------------------------------------------------------------------
The portfolio managers of the Fund are Oleg Batratchenko and Peter
Kambolin, who have day-to-day responsibility for management of the Fund's
portfolio.
Oleg Batratchenko has over eight years of financial research and investment
banking experience. Since April 1995, he has served as Vice President of
research at Berkshire International Finance, Inc., a New York corporate finance
and investment banking boutique which also acts as a consultant to the Arista
group of off-shore mutual funds (the "Arista Group"). Mr. Batratchenko has been
managing the firm's equity research department in consulting for the Arista
Group and providing analytical support for monitoring and deal structuring of
companies who retain Berkshire International Finance, Inc. Mr. Batratchenko
would be considered a generalist specializing in small cap firms. Mr.
Batratchenko provides analytical coverage for over 20 U.S. and European
companies, mostly in the high-tech, biomedical, environmental, computer and
electronics sectors. In addition to that, Mr. Batratchenko provides consulting
services to a Swiss-based money management firm, Berkshire Capital Management
Group, Ltd., which acts as the adviser to the Arista Group. From 1993 to 1995,
Mr. Batratchenko was a research analyst with Safian Investment Research, Inc., a
financial research and money management firm, where he was engaged in the
analysis of international markets on both macro- and microeconomic levels. Prior
to that Mr. Batratchenko worked as a Performance Analyst with Neuberger and
Berman, a money management firm.
Mr. Batratchenko has a B.A. in Economics from Moscow State University.
Between 1987 and 1990 Mr. Batratchenko was a research associate at the Moscow
Institute of World Economy and International Relations, where he completed a
Master's program in Economics and was involved in a number of high profile
research projects being conducted by this leading Russian think tank for the
Kremlin. Mr. Batratchenko also has a Master's Degree in International Political
Economy from New York University and is an Associate Member of the Financial
Analysts - Money Managers Society (New York).
Peter Kambolin has over four years of experience in financial research,
investment banking, brokerage and trading. Since May 1996 he has served as
Equity Analyst at Berkshire International Finance, Inc., a New York corporate
finance and investment banking boutique. Mr. Kambolin has been
9
<PAGE>
providing analytical coverage for over 10 U.S. and European micro cap growth
oriented companies in the high-technology, biomedical, environmental and oil and
gas sectors. In addition, Mr. Kambolin provides consulting services to a
Swiss-based money management firm which manages the Arista group of mutual
funds. Since the beginning of 1997, Mr. Kambolin has been locating investment
opportunities for the Fund. From November 1995 to May 1996, he was a systems
administrator with Unibank, Inc., Denmark's second largest bank, where he was
involved in the bank's currency risk exposure and securities department. From
September, 1994 to June, 1995, Mr. Kambolin worked at PaineWebber, Inc. as an
assistant to a Portfolio Manager. Mr. Kambolin is a registered General
Securities Representative and holds a Magnum Cum Laude B.B.A. Degree in finance
from Baruch College of New York.
HOW TO PURCHASE SHARES
- --------------------------------------------------------------------------------
Your initial investment in the Fund ordinarily must be at least $1,000
($250 for tax-deferred retirement plans). You may purchase additional shares
through the Open Account Program described below. The Fund may, in the Advisor's
sole discretion, accept certain accounts with less than the stated minimum
initial investment. You may open an account and make an initial investment
through securities dealers having a sales agreement with the Fund's principal
underwriter, European Equity Partners, Inc. (the "Underwriter"). You may also
make a direct initial investment by sending a check and a completed account
application form to Delta Micro Cap Growth Fund, 24 West Carver Street,
Huntington, New York 11743. Checks should be made payable to "Delta Micro Cap
Growth Fund". An account application is included in this Prospectus.
Shares of the Fund are sold on a continuous basis at the public offering
price next determined after receipt of a purchase order by the Fund. Purchase
orders received by dealers prior to 4:00 p.m. Eastern Standard time, on any
business day and transmitted to the Fund by 5:00 p.m. Eastern Standard time, are
confirmed that day at the public offering price determined as of the close of
the regular session of trading on the New York Stock Exchange on that day. It is
the responsibility of dealers to transmit properly completed orders so that they
will be received by the Fund by 5:00 p.m. Eastern Standard time. Dealers may
charge a fee for effecting purchase orders. Direct purchase orders received by
the Fund by 4:00 p.m. Eastern Standard time, are confirmed at that day's public
offering price. Direct investments received by the Fund after 4:00 p.m. Eastern
Standard time, and orders received from dealers after 5:00 p.m. Eastern Standard
time, are confirmed at the public offering price next determined on the
following business day.
The public offering price of the Fund's shares is the next determined net
asset value per share plus a sales load as shown in the following table.
<TABLE>
<S> <C> <C> <C> <C>
REALLOWANCE
SALES LOAD AS % OF AS % OF TO
PUBLIC NET PUBLIC PARTICIPATING
OFFERING AMOUNT OFFERING SELECTED
AMOUNT OF INVESTMENT PRICE INVESTED PRICE DEALER
- ----------------------------------------------------------------------------------------
Less than $100,000 5.00% 5.26% 4.25% 4.50%
- ----------------------------------------------------------------------------------------
$100,000 but less than $250,000 4.00 4.17 3.50 3.50
- ----------------------------------------------------------------------------------------
$250,000 but less than $500,000 3.25 3.36 2.75 3.00
- ----------------------------------------------------------------------------------------
$500,000 but less than $1,000,000 2.25 2.30 1.75 2.00
- ----------------------------------------------------------------------------------------
$1,000,000 or more None None None None
</TABLE>
Under certain circumstances, the Underwriter may increase or decrease the
reallowance to dealers. Dealers engaged in the sale of shares of the Fund may be
deemed to be underwriters under the
10
<PAGE>
Securities Act of 1933. The Underwriter retains the entire sales load on all
direct initial investments in the Fund and on all investments in accounts with
no designated dealer of record.
The Fund mails you confirmations of all purchases or redemptions of Fund
shares. Certificates representing shares are not issued. The Fund and the
Underwriter reserve the right to limit the amount of investments and to refuse
to sell to any person.
Investors should be aware that the Fund's account application contains
provisions in favor of the Fund, the Underwriter, American Data and certain of
their affiliates, excluding such entities from certain liabilities (including,
among others, losses resulting from unauthorized shareholder transactions)
relating to the various services made available to investors.
Should an order to purchase shares be canceled because your check does not
clear, you will be responsible for any resulting losses or fees incurred by the
Fund or American Data in the transaction.
Open Account Program. Please direct inquiries concerning the services
described in this section to the Fund at the address or numbers listed below.
After an initial investment, all investors are considered participants in
the Open Account Program. The Open Account Program helps investors make
purchases of shares of the Fund over a period of years and permits the automatic
reinvestment of dividends and distributions of the Fund in additional shares
without a sales load.
Under the Open Account Program, you may purchase and add shares to your
account at any time either through your securities dealer or by sending a check
to Delta Micro Cap Growth Fund, 24 West Carver Street, Huntington, New York
11743. The check should be made payable to "Delta Micro Cap Growth Fund".
Under the Open Account Program, you may also purchase shares of the Fund by
bank wire. Please telephone the Fund (Nationwide call toll-free 888-295-8330) or
the Administrator (nationwide call toll-free 888-214-1360) for instructions.
Your bank may impose a charge for sending your wire. There is presently no fee
for receipt of wired funds, but the Fund reserves the right to charge
shareholders for this service upon thirty days' prior notice to shareholders.
Each additional purchase request must contain the name of your account and
your account number to permit proper crediting to your account. While there is
no minimum amount required for subsequent investments, the Fund reserves the
right to impose such requirement. All purchases under the Open Account Program
are made at the public offering price next determined after receipt of a
purchase order. If a broker-dealer received concessions for selling shares of
the Fund to a current shareholder, such broker-dealer will receive the
concessions described above with respect to additional investments by the
shareholder.
Reduced Sales Load. A "purchaser" (defined below) may use the Right of
Accumulation to combine the cost or current net asset value (whichever is
higher) of his existing Fund shares with the amount of his current purchases in
order to take advantage of the reduced sales loads set forth in the table above.
Purchases made pursuant to a Letter of Intent may also be eligible for the
reduced sales loads. The minimum initial investment under a Letter of Intent is
$10,000. Shareholders should contact the Fund for information about the Right of
Accumulation and Letter of Intent.
Purchases at Net Asset Value. You may purchase shares of the Fund at net
asset value when the payment for your investment represents the proceeds from
the redemption of shares of any other mutual fund which has a front-end sales
load. Your investment will qualify for this provision if the purchase price of
the shares of the other fund included a sales load and the redemption occurred
within one year of the purchase of such shares and no more than sixty days prior
to your purchase of shares of the Fund. To make a purchase at net asset value
pursuant to this provision, you must submit photocopies of the confirmations (or
similar evidence) showing the purchase and redemption of shares of the other
fund. Your payment may be made with the redemption check representing the
proceeds of the shares
11
<PAGE>
redeemed, endorsed to the order of the Fund. The redemption of shares of the
other fund is, for federal income tax purposes, a sale on which you may realize
a gain or loss. These provisions may be modified or terminated at any time.
Contact your securities dealer or the Fund for further information.
Banks, bank trust departments and savings and loan associations, in their
fiduciary capacity or for their own accounts, may also purchase shares of the
Fund at net asset value. To the extent permitted by regulatory authorities, a
bank trust department may charge fees to clients for whose account it purchases
shares at net asset value. Federal and state credit unions may also purchase
shares at net asset value.
In addition, shares of the Fund may be purchased at net asset value by
broker-dealers who have a sales agreement with the Underwriter, and their
registered personnel and employees, including members of the immediate families
of such registered personnel and employees.
Clients of investment advisors and financial planners may also purchase
shares of the Fund at net asset value if their investment advisor or financial
planner has made arrangements to permit them to do so with the Fund and the
Distributor. The investment advisor or financial planner must notify the Fund
that an investment qualifies as a purchase at net asset value. Trustees,
directors, officers and employees of the Fund, the Advisor, the Underwriter or
American Data including members of the immediate family of such individuals and
employee benefit plans established by such entities, may also purchase shares of
the Fund at net asset value.
Additional Information. For purposes of determining the applicable sales
load and for purposes of the Letter of Intent and Right of Accumulation
privileges, a purchaser includes an individual, his spouse and their children
under the age of 21, purchasing shares for his or their own account; a trustee
or other fiduciary purchasing shares for a single fiduciary account although
more than one beneficiary is involved; employees of a common employer, provided
that economies of scale are realized through remittances from a single source
and quarterly confirmation of such purchases; or an organized group, provided
that the purchases are made through a central administration, or a single
dealer, or by other means which result in economy of sales effort or expense.
Contact the Fund for additional information concerning purchases at net asset
value or at reduced sales loads.
SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
Contact the Fund (Nationwide call toll-free 888-295-8330) or the
Administrator (nationwide call toll-free 888-214-1360) for additional
information about the shareholder services described below.
AUTOMATIC WITHDRAWAL PLAN
If the shares in your account have a value of at least $5,000, you may
elect to receive, or may designate another person to receive, monthly or
quarterly payments in a specified amount of not less than $50 each. There is no
charge for this service. Purchases of additional shares of the Fund while the
plan is in effect are generally undesirable because a sales load is incurred
whenever purchases are made.
TAX-DEFERRED RETIREMENT PLANS
Shares of the Fund are available for purchase in connection with the
following tax-deferred retirement plans:
- Keogh Plans for self-employed individuals
- Individual retirement account (IRA) plans for individuals and their
non-employed spouses
- Qualified pension and profit-sharing plans including those
profit-sharing plans with a 401(k) provision
12
<PAGE>
- 403(b)(7) custodial accounts for employees of public school systems,\
hospitals, colleges and other non-profit organizations meeting certain
requirements of the Internal Revenue Code Direct Deposit Plans
Shares of the Fund may be purchased through direct deposit plans offered by
certain employers and government agencies. These plans enable a shareholder to
have all or a portion of his or her payroll or social security checks
transferred automatically to purchase shares of the Fund.
AUTOMATIC INVESTMENT PLAN
You may make automatic monthly investments in the Fund from your bank,
savings and loan or other depository institution account. The minimum initial
and subsequent investments must be $50 under the plan. The Fund pays the costs
associated with these transfers, but reserves the right, upon thirty days'
written notice, to make reasonable charges for this service. Your depository
institution may impose its own charge for debiting your account which would
reduce your return from an investment in the Fund.
REINVESTMENT PRIVILEGE
If you have redeemed shares of the Fund, you may reinvest all or part of
the proceeds without any additional sales load. This reinvestment must occur
within ninety days of the redemption and the privilege may only be exercised
once per year.
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
You may redeem shares of the Fund on each day that the Fund is open for
business by sending a written request to the Fund. The request must state the
number of shares or the dollar amount to be redeemed and your account number.
The request must be signed exactly as your name appears on the Fund's account
records. If the shares to be redeemed have a value of $25,000 or more, your
signature must be guaranteed by any eligible guarantor institution, including
banks, brokers and dealers, municipal securities brokers and dealers, government
securities brokers and dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings associations.
You may also redeem shares by placing a wire redemption request through a
securities broker or dealer. Unaffiliated broker-dealers may impose a fee on the
shareholder for this service. You will receive the net asset value per share
next determined after receipt by the Fund or its agent of your wire redemption
request. It is the responsibility of broker-dealers to properly transmit wire
redemption orders.
If your instructions request a redemption by wire, you will be charged an
$8.00 processing fee. The Fund reserves the right, upon thirty days' written
notice, to change the processing fee. All charges will be deducted from your
account by redemption of shares in your account. Your bank or brokerage firm may
also impose a charge for processing the wire. In the event that wire transfer of
funds is impossible or impractical, the redemption proceeds will be sent by mail
to the designated account.
Redemption requests may direct that the proceeds be deposited directly in
your account with a commercial bank or other depository institution via an
Automated Clearing House ("ACH") transaction. There is currently no charge for
ACH transactions. Contact the Fund for more information about ACH transactions.
Shares are redeemed at their net asset value per share next determined
after receipt by the Fund of a proper redemption request in the form described
above, less any applicable contingent deferred sales load. Payment is normally
made within three business days after tender in such form, provided that payment
in redemption of shares purchased by check will be effected only after the check
has been collected, which may take up to fifteen days from the purchase date. To
eliminate this delay, you may purchase shares of the Fund by certified check or
wire.
13
<PAGE>
At the discretion of the Fund or American Data, corporate investors and
other associations may be required to furnish an appropriate certification
authorizing redemptions to ensure proper authorization. The Fund reserves the
right to require you to close your account if at any time the value of your
shares is less than $1,000 (based on actual amounts invested including any sales
load paid, unaffected by market fluctuations), or $250 in the case of
tax-deferred retirement plans, or such other minimum amount as the Fund may
determine from time to time. After notification to you of the Fund's intention
to close your account, you will be given thirty days to increase the value of
your account to the minimum amount.
The Fund reserves the right to suspend the right of redemption or to
postpone the date of payment for more than three business days under unusual
circumstances as determined by the Securities and Exchange Commission.
DIVIDENDS AND DISTRIBUTIONS
- --------------------------------------------------------------------------------
The Fund expects to distribute substantially all of its net investment
income, if any, on an annual basis. The Fund expects to distribute any net
realized long-term capital gains at least once each year. Management will
determine the timing and frequency of the distributions of any net realized
short-term capital gains.
DISTRIBUTIONS ARE PAID ACCORDING TO ONE OF THE FOLLOWING OPTIONS:
SHARE OPTION - income distributions and capital gains
distributions reinvested in additional shares.
INCOME OPTION - income distributions and short-term capital gains
distributions paid in cash; long-term capital gains
distributions reinvested in additional shares.
CASH OPTION - income distributions and capital gains distributions
paid in cash.
You should indicate your choice of option on your application. If no option
is specified on your application, distributions will automatically be reinvested
in additional shares. All distributions will be based on the net asset value in
effect on the payable date.
If you select the Income Option or the Cash Option and the U.S. Postal
Service cannot deliver your checks or if your checks remain uncashed for six
months, your dividends may be reinvested in your account at the then-current net
asset value and your account will be converted to the Share Option.
An investor who has received in cash any dividend or capital gains
distribution from the Fund may return the distribution within thirty days of the
distribution date to the Fund for reinvestment at the net asset value next
determined after its return. The investor or his dealer must notify the Fund
that a distribution is being reinvested pursuant to this provision.
DISTRIBUTOR
European Equity Partners, Inc., 501 Fifth Avenue, New York, New York (the
"Distributor"), an affiliate of the Advisor, serves as principal underwriter for
the Fund and, as such, is the exclusive agent for the distribution of shares of
the Fund. John Figliolini, a controlling shareholder of the Advisor and
President and a Trustee of the Trust, is a controlling shareholder of the
Distributor.
ADMINISTRATOR
The Trust has retained American Data Services, Inc., 24 West Carver Street,
2nd floor, Huntington, New York 11743 ("American Data") to serve as the Fund's
transfer agent, dividend paying agent and shareholder service agent.
American Data also provides accounting and pricing services to the Fund.
American Data receives a monthly fee from the Fund for calculating daily net
asset value per share and maintaining such books and records as are necessary to
enable it to perform its duties.
14
<PAGE>
In addition, American Data has been retained to provide administrative
services to the Fund. In this capacity, American Data supplies executive,
administrative and regulatory services, supervises the preparation of tax
returns, and coordinates the preparation of reports to shareholders and reports
to and filings with the Securities and Exchange Commission and state securities
authorities. The Fund pays American Data a fee for these administrative services
at the annual rate of .015% of the average value of its daily net assets
provided, however, that the minimum fee schedule of $1,300 per month for funds
under $10,000,000; $1,600 per month for funds between $10,000,000 and
$20,000,000 and $2,000 per month in funds over $20,000,000.
INVESTING IN THE FUND
- --------------------------------------------------------------------------------
Shares of the Fund are sold on a continuous basis at the net asset value
next determined after receipt of a purchase order in proper form less a sales
charge equal to 5% of the amount invested. American Data Services, Inc., 24 West
Carver Street, 2nd floor, Huntington, New York 11743 also serves as the Fund's
transfer agent and dividend disbursing agent ("Transfer Agent").
Pursuant to a Distribution Agreement between the Fund and European Equity
Partners, Inc. (the "Distributor"), an affiliate of the Investment Adviser,
shares of the Fund are distributed by the Distributor and offered by dealers who
have entered into selected dealer agreements with the Distributor ("Selected
Broker-Dealers"). The principal executive office of the Distributor is located
at 551 Fifth Avenue, Suite 605, New York, NY 10017.
The minimum initial purchase is $1,000. Minimum subsequent purchases of
$100 or more may be made by sending a check, payable to Delta Micro Cap Growth
Fund directly to American Data Services, Inc. (the "Transfer Agent") at 24 West
Carver Street, 2nd floor, Huntington, New York 11743 or by contacting an account
executive of the Distributor or other Selected Broker-Dealer. In the case of
investments pursuant to Individual Retirement Plans, the Fund, in its
discretion, may accept investments without regard to any minimum amounts which
would otherwise be required if the Fund has reason to believe that additional
investments will increase the investment in all accounts under such Plans to at
least $1,000. The Fund does not issue share Certificates. All shares are held in
non-certificate form registered on the books of the Fund and the Fund's Transfer
Agent for the account of the shareholder. The offering price will be the net
asset value per share next determined following receipt of an order (see
"Determination of Net Asset Value").
Shares of the Fund are sold through the Distributor on a normal three
business day settlement basis; that is, payment is due on the third business day
(settlement date) after the order is placed with the Distributor. A 5% sales
charge is imposed at the time shares are purchased. Shares of the Fund purchased
through the Distributor are entitled to any dividends declared beginning on the
next business day following settlement date. Since Selected Broker-Dealers
forward investors' funds on settlement date, they will benefit from the
temporary use of the funds if payment is made prior thereto. Shares purchased
through the Transfer Agent are entitled to any dividends declared beginning on
the next business day following receipt of an order. As noted above, orders
placed directly with the Transfer Agent must be accompanied by payment.
Investors will be entitled to receive dividends and capital gains distributions
if their order is received by the close of business on the day prior to the
record date for such distributions. (See "How to Sell (Redeem) Fund Shares".)
Sales personnel are compensated for selling shares of the Fund at the time of
their sale by the Distributor and/or the Selected Broker-Dealer. The Fund and
the Distributor reserve the right to reject any purchase orders.
PURCHASES BY MAIL
- --------------------------------------------------------------------------------
Your purchase application, if properly filled out and accompanied by
payment in the form of a check made payable to "Delta Micro Cap Growth Fund,"
will be processed upon receipt by the Transfer Agent. If the Transfer Agent
receives you order and payment by the close of regular trading (currently 4:00
p.m. Eastern Standard Time) on the New York Stock Exchange, your shares will be
purchased at the net asset
15
<PAGE>
value calculated at the close of regular trading on that day. If received after
that time, your shares will be purchased at the net asset value determined as of
the close of regular trading on the next business day.
HOW TO PURCHASE FUND SHARES
- --------------------------------------------------------------------------------
BY MAIL OR COURIER TO OPEN AN ACCOUNT
Complete and sign the Purchase Application. Make your check payable to
"Delta Micro Cap Growth Fund."
BY MAIL, SEND TO:
Delta Micro Cap Growth Fund
c/o American Data Services
24 West Carver Street, 2nd floor
Huntington, NY 11743
BY OVERNIGHT COURIER, SEND TO:
Delta Micro Cap Growth Fund
c/o American Data Services
24 West Carver Street, 2nd floor
Huntington, NY 11743
If you are investing through a qualified retirement plan, you will need to
use a special application.
BY TELEPHONE
Telephone transactions may not be used for initial purchases. If you want
to make subsequent telephone transactions, please select this service on your
Purchase Application or call 1-888-214-1360 to add telephone transactions to an
existing account.
TO ADD TO AN ACCOUNT
Make your check payable to "Delta Micro Cap Growth Fund" and mail it to the
address noted above. Put your account name, address and Fund account number on
your check. Subsequent investment forms will be included with each investor
statement. An investor wishing to add to an account should complete this form
and include it with the check. Alternatively, include with your check a note
indicating your Fund account number, your name and your address. No cash will be
accepted.
No cash will be accepted. A $9 fee will be charged against an investor's
account for any payment check returned to the Transfer Agent for insufficient
funds, stop payment, closed account or other reasons. The investor will also be
responsible for any losses suffered by the Funds or the Transfer Agent as a
result. For purchases made by corporations, executors, administrators, trustees,
guardians, general partners, managers, agents or attorneys-in-fact, further
documentation may be requested.
Call 888-214-1360 to make your purchase from a bank checking or money
market account by electronic funds transfer. Specify account name, address and
Fund account number. This service must be established by you in advance by
following the instructions in the "By Wire" section.
16
<PAGE>
BY WIRE
You may also purchase shares of the Fund by wiring federal funds from your
bank, which may charge you a fee for doing so. If money is to be wired, you must
call the Transfer Agent at 1-888-214-1360 to set up your account and obtain an
account number. You should be prepared at that time to provide the information
on the Purchase Application. Then, you should provide your bank with the
following information for purposes of wiring your investment:
Star Bank, N.A. Cinti/Trust
ABA #0420-0001-3
Attn: Delta Micro Cap Growth Fund Master Account
D.D.A. #486479553
Account Name _____________(write in shareholder name)
For the Account # _______________(write in account number)
You are required to mail a signed Purchase Application to the Transfer
Agent marked "follow-up" at the above address in order to complete your initial
wire purchase. The Transfer Agent must receive the signed Purchase Application
before any of the shares purchased can be redeemed. Wire orders will be accepted
only on the day on which the Fund and the Custodian and Transfer Agent are open
for business. A wire purchase will not be considered made until the wired money
is received and the purchaes is accepted by the Fund. Any delays which may occur
in wiring money, including delays which may occur in processing by the banks,
are not the responsibility of the Fund or the Transfer Agent. There is presently
no fee for the receipt of wired funds, but the right to charge shareholders for
this service is reserved by the Fund.
PURCHASES BY TELEPHONE
Telephone transactions may not be used for initial purchases. Your account
must already be established prior to initiating telephone purchases. Only bank
accounts held at domestic financial institutions that are ACH members can be
used for telephone transactions. Your shares will be purchased at the net asset
value determined as of the close of regular trading on the date that the
Transfer Agent receives payment for shares purchased by electronic funds
transfer through the ACH system. Most transfers are completed within three
business days after your call to place the order. To preserve flexibility, the
Fund may revise or remove the ability to purchase shares by phone, or may charge
a fee for such service, although currently the Fund does not expect to charge a
fee. Investors in the Funds may also request by telephone a change of address, a
change in investments made through an Automatic Investment Plan, and a change in
the manner in which dividends are received.
The Fund will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. Such procedures may include, among
others, requiring some form of personal identification prior to acting upon
telephone instructions, providing written confirmations of all such
transactions, and/or tape recording all telephone instructions. The Fund
reserves the right to refuse a telephone redemption if it believes it advisable
to do so. Assuming procedures such as the above have been followed, the Funds
will not be liable for any loss, cost, or expense for acting upon an investor's
telephone instructions or for any fraudulent or unauthorized telephone
redemption. As a result of this policy, the investor will bear the risk of any
loss unless the Fund has failed to follow such procedure(s). The telephone
purchase privilege may be modified or terminated by the Fund at any time.
AUTOMATIC INVESTMENT PLAN
The Fund offers an Automatic Investment Plan whereby an investor may
automatically make purchases of shares of a Fund on a convenient monthly basis
($100 minimum per transaction) out of his or her savings or checking account.
The $1,000 minimum initial investment must be met before an Automatic Investment
Plan may be established. Under the Automatic Investment Plan, an investor's
designated bank or other financial institutional debits a preauthorized amount
on the investor's account each month and applies the amount to the purchase of
Fund shares. The Automatic Investment Plan must be implemented with a financial
institution that is an ACH member. In addition, the Fund must have a currently
effective registration in those states in which it is required. No service fee
is currently charged by the Fund for participating in the Automatic Investment
Plan. Applications to establish the Automatic Investment Plan are available from
the Administrator by calling 888-214-1360 or the Transfer Agent by calling
888-214-1360 or the Fund by calling 888-295-8330.
MISCELLANEOUS PURCHASE INFORMATION
For reasons of economy and convenience, the Fund will not issue
certificates for shares purchased.
17
<PAGE>
Federal regulations require that you provide a certified taxpayer
identification number whenever you open or reopen an account. Congress has
mandated that if any investor fails to provide and certify to the accuracy of
the investor's Social Security number or other tax-payer identification number,
the Fund will be required to withhold 31% of all dividends, distributions and
payments, including redemption proceeds, from such investor as a backup
withholding procedure.
Payment for shares of a Fund may, in the discretion of the Fund, be made in
the form of liquid securities that are permissible investments for the Fund,
provided that, among other conditions, the investor making the contribution of
securities is a tax-exempt entity and the aggregate amount of the purchase
(including cash and contributed securities) be at least $1,000,000. Investors
considering a contribution of securities to the Fund should consult with their
own tax advisers regarding the tax consequences, if any, of such contribution.
For further information, contact the Fund at 24 West Carver Street, 2nd floor,
Huntington, New York 11743.
HOW TO SELL (REDEEM) FUND SHARES
You may sell (redeem) any or all of your shares on any day the Fund is open
for business at the next determined net asset value. Ordinarily, the Fund makes
payments by check for the shares redeemed within three business days after it
receives your properly completed request. However, the right of redemption may
be suspended or payment may be postponed under unusual circumstances such as
when trading on the New York Stock Exchange is restricted or when it is not
reasonably practical for the Fund to determine the fair market value of its net
assets. Payment of redemption proceeds with respect to shares purchased by check
will not be made until the check or payment received for investment has cleared,
which may take up to 15 calendar days from the purchase date.
Payment of the redemption proceeds for shares of the Fund where an investor
requests wire payment will normally be made in federal funds on the next
business day. The Transfer Agent will wire redemption proceeds only to the bank
and account designated on the Purchase Application or in written instructions
subsequently received by the Transfer Agent, and only if the bank is a
commercial bank that is a member of the Federal Reserve System. The Transfer
Agent currently charges an $8.00 fee for each payment made by wire of redemption
proceeds, which fee will be deducted from the investor's account.
PROCEDURE FOR REQUESTING REDEMPTION
- --------------------------------------------------------------------------------
You may request the sale of your shares either by mail or courier or by
telephone as described below.
BY MAIL:
Sale (redemption) requests should be mailed to:
Delta Micro Cap Growth Fund
c/o American Data Services, Inc.
24 West Carver Street, 2nd floor
Huntington, New York 11743
BY OVERNIGHT COURIER:
Delta Micro Cap Growth Fund
c/o American Data Services, Inc.
24 West Carver Street, 2nd floor
Huntington, New York 11743
18
<PAGE>
THE REQUESTS SHOULD BE SENT TO:
Delta Micro Cap Growth Fund
c/o American Data Services, Inc.
24 West Carver Street, 2nd floor
Huntington, New York 11743
The selling price of each share being redeemed will be the Fund's per share
net asset value next calculated after receipt of all required documents in good
order. There is no load or charge imposed on redemptions. Good order means that
the request must include:
- Your account number
- The number of shares or dollar amount to be sold (redeemed)
- The signatures of all account owners exactly as they are
registered on the account
- Any required signature guarantees
- Any supporting legal documentation that is required in the case of
estates, trusts, corporations or partnerships
- In the case of shares being redeemed from a qualified retirement
plan, including an IRA or IRA/SEP Plan, a statement of whether or
not federal income tax should be withheld (in the absence of any
statement, federal tax will be withheld)
A signature guarantee of each owner is required to redeem shares in the
following situations: (i) if you change ownership on your account; (ii) when you
want the redemption proceeds sent to a different address from that registered on
the account; (iii) if the proceeds are to be made payable to someone other than
the account's owner(s); (iv) any redemption transmitted by federal wire transfer
to your bank; and (v) if a change of address request has been received by the
Fund or the Transfer Agent within the last 15 days. In addition, signature
guarantees are required for all redemptions of $25,000 or more from any investor
account.
Signature guarantees are designed to protect both you and the Fund from
fraud. Signature guarantees can be obtained from most banks, credit unions or
savings associations, or from broker/dealers, municipal securities
broker/dealers, government securities broker/dealers, national securities
exchanges, registered securities associations or clearing agencies deemed
eligible by the Securities and Exchange Commission. Notaries public cannot
provide signature guarantees.
BY TELEPHONE:
Shares of the Fund may also be sold by calling the Transfer Agent at
(888)-214-1360. In order to utilize this procedure for telephone redemption, an
investor must have previously elected this procedure in writing, which election
will be reflected in the records of the Transfer Agent, and the redemption
proceeds must be mailed directly to the investor or transmitted to the
investor's predesignated account at a domestic bank. To change the designated
account, send a written request with signature(s) guaranteed to the Transfer
Agent. To change the address, call the Transfer Agent at (888)-214-1360 or send
a written request with signature(s) guaranteed to the Transfer Agent. Any
written redemption requests received within 15 days after an address change made
by telephone must be accompanied by a signature guarantee and no telephone
redemptions will be allowed within 15 days of such a change. The Fund reserves
the right to limit the number of telephone redemptions by an investor. Once
made, telephone redemption requests may not be modified or canceled. The selling
price of each share being redeemed will be the Fund's per share net asset value
next calculated after receipt by the Transfer Agent of the telephone redemption
request. There is currently no charge for telephone redemptions, although a
charge may be imposed in the future.
The Fund will not be liable for following instructions communicated by
telephone that it reasonably believes to be genuine. See "Purchases by
Telephone" for discussion of liability for telephone errors.
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During periods of substantial economic or market changes, telephone
redemptions may be difficult to implement. If an investor is unable to contact
the Transfer Agent by telephone, shares may also be redeemed by delivering the
redemption request to the Transfer Agent by mail or overnight courier as
previously described.
The Fund reserves the right to modify or terminate this telephone
redemption service at any time.
REDEMPTION AT THE OPTION OF THE FUND
- --------------------------------------------------------------------------------
The Fund reserves the right to redeem shares held in any account if the net
asset value remains below $1,000 in order to relieve the Fund of the cost of
maintaining very small accounts. Before such involuntary redemption, the Fund
will give the investor 30 days written notice to bring the account up to $1,000
before any action is taken. This minimum balance requirement does not apply to
qualified retirement plan accounts. The right of redemption shall not apply if
the value of an investor's account drops below $1,000 as the result of market
action.
DISTRIBUTIONS
- --------------------------------------------------------------------------------
In general, distributions of the Fund's net investment income and net
realized securities gains, if any, are declared and paid annually on or before
December 31 of each year, but the Fund may make distributions on a more frequent
basis to comply with the distribution requirements of the Internal Revenue Code
in a manner consistent with the provisions of the 1940 Act.
THE OBJECTIVE OF THE FUND IS LONG-TERM CAPITAL GROWTH AND NOT
THE PRODUCTION OF INCOME DISTRIBUTIONS.
- --------------------------------------------------------------------------------
Distributions will be reinvested in additional Fund shares unless you elect
to receive them in cash by notifying the Company in writing. Distributions of
less than $10 and distributions on shares purchased within the last 15 days,
however, will not be paid in cash and will be reinvested. You may elect to have
distributions on shares held in qualified retirement plans paid in cash only if
you are 59 1/2 years old or permanently and totally disabled. Distribution
checks normally are mailed within seven days after the record date.
The Board of Directors may elect not to distribute capital gains in whole
or in part to take advantage of loss carryovers.
A distribution on shares of a Fund does not increase the value of your
shares or your total return. At any given time the value of your shares includes
the undistributed net gains, if any, realized by the Fund on the sale of
portfolio securities, and undistributed dividends and interest received, less
Fund expenses. Because such gains and dividends are included in the value of
your shares, when they are distributed the value of your shares is reduced by
the amount of the distribution. If you buy your shares just before the
distribution, you will pay the full price for your shares, and then receive a
portion of the purchase price back as a taxable distribution.
TAXES
- --------------------------------------------------------------------------------
The Fund intends to qualify under Subchapter M of the Internal Revenue
Code, which means that to the extent its earnings and gains are distributed to
investors in a timely manner it pays no income tax. Accordingly, the Fund
intends to distribute to its shareholders substantially all of its net
investment income and net realized gains.
Distributions of net investment income and net short-term capital gains are
taxable to you as ordinary income. Distributions from net long-term capital
gains are taxable as long-term capital gains regardless of the length of time
you have held the shares on which such distributions are paid. However, you
should note that any loss realized upon the sale or redemption of shares held
for six months or more
20
<PAGE>
will be treated as a long-term capital loss to the extent of any distribution of
long-term capital gain to you with respect to such shares. Distributions are
taxable to you regardless of whether they are taken in cash or reinvested, even
if the value of your shares is below your cost. If you purchase shares shortly
before a distribution, you must pay income taxes on the distribution, even
though the value of your investment (plus cash received, if any) remains the
same. In addition, the share price at the time you purchase shares may include
unrealized gains in the securities held in the investment portfolio of the Fund.
If these portfolio securities are subsequently sold and the gains are realized,
they will, to the extent not offset by capital losses, be paid to you as a
distribution of capital gains and will be taxable to you as short-term or
long-term capital gains.
After the end of each calendar year, the Company will send you a Form 1099
notifying you of the federal income tax status of the distributions paid to you
during the year.
If you have not complied with certain provisions of the Internal Revenue
Code and Regulations, the Company is required by federal law to withhold and
remit to the IRS 31% of reportable payments (which may include dividends,
capital gains distributions and redemptions). Those regulations require you to
certify that the social security number or tax identification number you provide
is correct and that you are not subject to 31% withholding for previous
under-reporting to the IRS. You will be asked to make the appropriate
certification on your application.
Redemptions of shares of the Fund will be taxable transactions for federal
income tax purposes and investors will generally recognize gain or loss in an
amount equal to the difference between the basis of the shares redeemed and the
amount received. Assuming that investors hold such shares as a capital asset,
the gain or loss will be a capital gain or loss and will generally be long term
if investors have held such shares for a period of more than one year. If a loss
is realized on the redemption of Fund shares, the reinvestment in additional
Fund shares within 30 days before or after the redemption may be subject to the
"wash sale" rules of the Code, resulting in a postponement of the recognition of
such loss for federal income tax purposes.
The foregoing tax discussion is only general in nature, and each investor
is advised to consult his or her tax adviser for additional information.
DETERMINATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------
The price investors pay when buying shares of the Fund, and the price
investors receive when redeeming shares of the Fund, is the net asset value of
the shares. A 5% sales charge is deducted upon purchases of shares. No charge is
deducted upon a redemption (except for redemption proceeds sent by wire).
The per share net asset value of the Fund is determined by dividing the
total value of its net assets (meaning its assets less its liabilities) by the
total number of its shares outstanding at that time. The net asset value is
determined as of the close of regular trading (currently 4:00 p.m. Eastern
Standard Time) on the New York Stock Exchange on each day the New York Stock
Exchange is open for trading. This determination is applicable to all
transactions in shares of the Fund prior to that time and after the previous
time as of which net asset value was determined. Accordingly, purchase orders
accepted or shares tendered for redemption prior to the close of regular trading
on a day the New York Stock Exchange is open for trading will be valued as of
the close of trading, and purchase orders accepted or shares tendered for
redemption after that time will be valued as of the close of the next trading
day.
Securities which are traded on a recognized stock exchange are valued at
the last sale price on the securities exchange on which such securities are
primarily traded or at last sale price on the national securities market.
Exchange-traded securities for which there were no transactions are valued at
the current bid prices. Securities traded over-the-counter are valued on the
basis of closing bid prices. Debt securities (other than short-term instruments)
are valued at prices furnished by a national pricing service,
21
<PAGE>
subject to review by the Adviser. Any securities for which market quotations are
not readily available are valued at their fair value as determined in good faith
by the Board of Trustees.
PLAN OF DISTRIBUTION
- --------------------------------------------------------------------------------
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under
the 1940 Act (the "Plan"), under which the Fund pays the Distributor a fee,
which is accrued daily and payable monthly, at an annual rate of 0.25% of the
Fund's average daily net assets. This fee is treated by the Fund as an expense
in the year it is accrued.
Amounts paid under the Plan are paid to the Distributor for services
provided and the expenses borne by the Distributor and others in the
distribution of the Fund's shares, including the payment of commissions for
sales of the Fund's shares and incentive compensation to account executives and
others who engage in or support distribution of shares or who service
shareholder accounts, including overhead and telephone expenses; printing and
distribution of prospectuses and reports used in connection with the offering of
the Fund's shares to other than current shareholders; and preparation, printing
and distribution of sales literature and advertising materials. In addition, the
Distributor may utilize fees paid pursuant to the Plan to compensate other
Selected Broker-Dealers for their opportunity costs in advancing such amounts,
which compensation would be in the form of a carrying charge on any unreimbursed
expenses.
At any given time, the expenses in distributing shares of the Fund may be
greater than or less than the total of (i) the payments made by the Fund
pursuant to the Plan, and (ii) the proceeds of contingent deferred sales charges
paid by investors upon the purchase of shares.
Because there is no requirement under the Plan that the Distributor be
reimbursed for all distribution expenses or any requirement that the Plan be
continued from year to year, excess amount, if any, does not constitute a
liability of the Fund. Although there is no legal obligation for the Fund to pay
expenses incurred in excess of payments made to the Distributor under the Plan,
and the proceeds of sales charges paid by investors upon purchase of shares, if
for any reason the Plan is terminated the Trustees will consider at that time
the manner in which to treat such expenses.
CAPITAL STRUCTURE
- --------------------------------------------------------------------------------
The Trust is a diversified open-end management investment company
registered under the 1940 Act and organized as an Ohio business trust. The Trust
is organized as a series fund which permits it to issue its authorized capital
stock in one or more funds, each such fund representing a separate investment
portfolio. The Trust currently consists of the one diversified equity fund, the
Delta Micro Cap Growth Fund, described in this Prospectus.
The Trust is authorized to issue an indefinite number of shares of the
Fund. The Board of Trustees may, in its discretion, create additional funds
within the Trust. Each share outstanding entitles the holder to one vote. The
Trust's Declaration of Trust does not require that meetings of shareholders be
held annually. However, special meetings of shareholders may be called for
purposes such as electing or removing trustees, changing fundamental policies or
approving investment advisory contracts. Shares have no preemptive, cumulative
voting, subscription or conversion rights, and can be issued as full or
fractional shares. A fractional share has the same kind of rights and privileges
as a full share on a pro rata basis.
PERFORMANCE ADVERTISING
The Fund may provide from time to time in advertisements, reports to
investors and other communications with investors its cumulative total return or
average annual total return. Cumulative total return data is computed by
considering all elements of return, including reinvestment of dividends and
capital gains distributions, over a stated period of time. Average annual total
return is determined by computing
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<PAGE>
the annual compound return over a stated period of time that would have produced
a Fund's cumulative total return over the same period if the Fund's performance
had remained constant throughout.
The Fund may also advertise total return (a "nonstandardized quotation")
which is calculated differently from average annual total return. A
nonstandardized quotation of total return may be a cumulative return which
measures the percentage change in the value of an account between the beginning
and end of a period, assuming no activity in the account other than reinvestment
of dividends and capital gains distributions. A nonstandardized quotation may
also indicate average annual compounded rates of return over periods other than
those specified for average annual total return.
In reports or other communications to investors and in advertising
material, the Fund may also compare their performance to other mutual funds with
similar investment objectives and to the industry as a whole, as quoted by
ranking services and publications that monitor or report on the performance of
mutual funds (such as Lipper Analytical Services, Inc.). Performance information
may be quoted numerically or may be presented in a table, graph or other
illustration. In addition, fund performance may be compared to well-known
indices of market performance including the Standard & Poor's (S&P) 500 Index,
the S&P Mid-Cap Index, the NASDAQ Composite Index, the Dow Jones Industrial
Average, Russell 2000 Index, Russell 1000 Index, Wilshire Top 750 Index and
Wilshire Next 1750 Index. Further information on performance measurement may be
found in the SAI.
All performance information advertised by the Fund is historical in nature
and is not intended to represent or guarantee future results. The value of
shares when redeemed may be more or less than their original cost.
23
<PAGE>
DELTA MUTUAL FUNDS
DELTA MICRO CAP GROWTH FUND
STATEMENT OF ADDITIONAL INFORMATION
June 6, 1997
This Statement of Additional Information is meant to be read in
conjunction with the Prospectus dated June ___, 1997 concerning the Delta Micro
Cap Growth Fund ("Fund"), a series of the Delta Mutual Funds (the "Trust"), and
is incorporated by reference in its entirety into the Prospectus. Because this
Statement of Additional Information is not itself a prospectus, no investment in
shares of this Fund should be made solely upon the information contained herein.
Copies of the Prospectus for the Fund may be obtained by writing to the Fund at
24 West Carver Street, Huntington, New York 11743 or by calling (888) 295-8330.
Capitalized terms used but not defined herein have the same meanings as in the
Prospectus.
TABLE OF CONTENTS
GENERAL INFORMATION
The Trust is a registered open-end management investment company
organized as an Ohio business trust on June ___, 1997. The Trust is authorized
to issue separate series of shares of common stock representing interests in
separate investment portfolios. This Statement of Additional Information
pertains to the Delta Micro Cap Growth Fund ("Fund").
Each share of the Fund represents an equal proportionate interest in
the assets and liabilities belonging to the Fund with each other share of the
Fund and is entitled to such dividends and distributions out of the income
belonging to the Fund as are declared by the Trustees. The shares do not have
cumulative voting rights or any preemptive or conversion rights, and the
Trustees have the authority from time to time to divide or combine the shares of
the Fund into a greater or lesser number of shares of the Fund so long as the
proportionate beneficial interest in the assets belonging to the Fund are in no
way affected. In case of any liquidation of the Fund, the holders of shares of
the Fund will be entitled to receive as a class a distribution out of the
assets, net of the liabilities, belonging to the Fund. No shareholder is liable
to further calls or to assessment by the Fund without his express consent.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
Delta Mutual Funds ("Trust") was organized as an Ohio business trust on
May 20, 1997. The Trust is an open-end, diversified management investment
company registered under the Investment Company Act of 1940, as amended ("1940
Act"). The Delta Micro Cap Growth Fund ("Fund") is a diversified mutual fund
series of the Trust. The Trust does not presently intend to offer any other
series but may do so in the future. This section takes a closer look at the
Fund's investment objectives, policies and the securities in which it invests.
If you have any inquiries about investing in the Funds, please call the Trust at
888-295-8330, or write to American Data Services, Inc., 24 West Carver Street,
Huntington, New York 11743.
The Fund's investment objective is capital appreciation through
long-term growth. The Fund pursues its objective by investing, under normal
market conditions, at least 80% of its total assets in equity securities of
companies with market capitalizations of less than $100 million at the time of
purchase ("micro cap companies"). Such securities are common stock, preferred
stock, warrants, options and convertible debt securities.
Although micro cap companies have potential for rapid growth,
investments in micro cap companies often involve greater risks than investments
in larger, more established companies. Micro cap companies may have shorter
operating histories, a relative lack of management experience, financial
resources and product diversification, and less market liquidity than larger
companies. The securities of micro cap companies are, in many cases, traded only
over-the-counter or on regional securities exchanges, and the frequency and
volume of their trading are substantially less than is typical of larger
companies. For these reasons, securities of micro cap companies may be subject
to greater and more abrupt price fluctuations. The Adviser's research skills and
ability to select securities for the Fund are very important because the
securities of micro cap companies are not followed as closely as large company
stocks. Investors in the Fund should consider their holdings to be long-term
investments, given the risks associated with equity investing, especially in
stocks of micro cap companies.
The Adviser's portfolio managers will generally utilize the following
analytical approach. Phase I consists of identifying "micro cap" public
companies which generally have the following characteristics:
- a specified stock price to sales ratio in conjunction
with appropriate gross margins
- a 1.5 ratio of current assets to current liabilities
- limited potential dilution issuance of securities
- a specified stock price to book value
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The Adviser's portfolio managers will also look at the price-earnings
ratio, realizing that many "micro cap" companies are not yet profitable. Current
profitability is not a prerequisite for a Fund investment, but in those cases
where a company is not yet profitable, the Adviser will consider stable or
increasing sales growth coupled with appropriate gross margins.
Once a potential investment satisfies Phase I of the Adviser's
analytical approach, its data is then inserted into a model developed by the
Adviser in an attempt to determine what the stock price will be in two to three
years. The Adviser prefers market niche leaders where it is difficult or
uneconomical for much larger companies to compete, or companies that are unique
in their technology, approach to the market, ability to provide technological
solutions to long-established problems, licensing or patent protection or some
other unique aspect. It will also compare the stock price to other public
companies in the same industry sector and the level of trading liquidity of the
securities to be purchased. The Adviser's portfolio managers will also use
technical analysis to determine the timing of proposed purchase and sale of
investments by the Fund.
The Fund generally invests in micro cap companies its portfolio manager
considers to be well-managed and to have potential for exceptional growth. So
long as a sufficient number of equity securities of such companies are
available, the Fund intends to stay fully invested in these securities
regardless of the movement of stock prices generally. In most circumstances, the
Fund's actual level of cash and cash equivalents will fluctuate between 0% and
10% of total assets with 90% to 100% of its assets committed to equity and
equity equivalent investments. The Fund may invest from time to time a portion
of its assets, not to exceed 20% at the time of purchase, in companies with
market capitalizations greater than $100 million. The Fund does not intend to
effect any short sales or futures transactions.
The Fund may also invest up to 5% of its net assets in convertible
securities rated below investment grade by Standard & Poor's Ratings Services
("S&P") or Moody's Investors Service, Inc. ("Moody's")(commonly referred to as
junk bonds or lower-rated securities) or unrated securities deemed to be below
investment grade by the Adviser. The Fund does not intend to invest in
securities rated below "B" by S&P or Moody's, or the equivalent. Securities
rated below investment grade are deemed to be predominantly speculative with
respect to the issuer's capacity to pay interest and repay principal and may
involve major risk exposure to adverse conditions. See the Statement of
Additional Information for a discussion of the risks associated with these
lower-rated securities and for a description of corporate bond ratings by S&P
and Moody's.
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For temporary defensive purposes during anticipated periods of general
market decline or to receive a return on idle cash, the Fund may invest a
portion of its net assets in money market instruments, including securities
issued or guaranteed by the U.S. Government, its agencies or instrumentalities
and repurchase agreements secured thereby, as well as bank certificates of
deposit and banker's acceptances issued by banks having net assets of at least
$1 billion as of the end of their most recent fiscal year, high-grade commercial
paper, and other high quality long-term and short-term debt instruments. Under
normal circumstances, the Fund will not invest more than 10% of its total assets
in short-term instruments to meet cash flow needs, pending investments or for
temporary defensive purposes. See "Other Investment Practices and Risk Factors."
SHORT-TERM INSTRUMENTS. As described in the Prospectus, the Fund may
invest from time to time in "short-term instruments," a term that includes,
among other things, U.S. bank obligations, commercial paper and corporate bonds
with remaining maturities of thirteen months or less. However, the Fund intends
to stay fully invested and therefore investments in short-term instruments are
expected to represent normally less than 10% of the Fund's net assets.
Bank obligations include bankers' acceptances, negotiable certificates
of deposit and nonnegotiable time deposits. All investments in bank obligations
are limited to the obligations of financial institutions having more than $1
billion in total assets at the time of purchase. Investments by the Fund in
commercial paper will consist of issues rated at the time A-1 and/or P-1 by
Standard & Poor's, Moody's or similar rating by another nationally recognized
rating agency. In addition, the Fund may acquire unrated commercial paper and
corporate bonds that are determined by the Adviser at the time of purchase to be
of comparable quality to rated instruments that may be acquired by the Fund as
previously described.
U.S. GOVERNMENT OBLIGATIONS. Examples of the types of U.S. Government
obligations that may be acquired by the Fund include U.S. Treasury bonds, notes
and bills and the obligations of Federal Home Loan Banks, Federal Farm Credit
Banks, Federal Land Banks, the Federal Housing Administration, Farmers Home
Administration, Export-Import Bank of the United States Small Business
Administration, Government National Mortgage Association, Federal National
Mortgage Association, General Services Administration, Student Loan Marketing
Association, Federal Home Loan Mortgage Corporation, and Resolution Trust Corp.
CONVERTIBLE SECURITIES. The Fund may hold convertible
securities. Convertible securities entitle the holder to receive
interest paid or accrued on debt or the dividend paid on preferred
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<PAGE>
stock until the securities mature or are redeemed, converted or exchanged. Prior
to conversion, convertible securities have characteristics similar to ordinary
debt in that they normally provide a stable stream of income with generally
higher yields than those of common stock of the same or similar issuers. The
prices of convertible securities are sensitive to changes in interest rates and,
thus, an increase in interest rates can have an adverse effect on the market
price of convertible securities notwithstanding other factors, such as the
earnings of the company which would impact favorably on the trading prices for
these securities. Convertible securities rank senior to common stock in a
corporation's capital structure and therefore generally entail less risk than
the corporation's common stock, although the extent to which such risk is
reduced depends in large measure upon the degree to which the convertible
security sells above its value as a fixed income security.
The Fund may invest a portion of its respective assets (less
than 5% of total assets) in convertible debt securities that are
rated below investment grade. See "Preferred Stock and Corporate
Bond Ratings"
WARRANTS. The Fund may invest in warrants. Warrants basically are
options to purchase equity securities at a specific price valid for a specific
period of time. They do not represent ownership of the securities, but only the
right to buy them. They have no voting rights, pay no dividends and have no
rights with respect to the assets of the company issuing them. Warrants differ
from call options in that warrants are issued by the issuer of the security
which may be purchased on their exercise, whereas call options may be written or
issued by anyone. The prices of warrants do not necessarily move parallel to the
prices of the underlying securities.
UNSEASONED COMPANIES. Securities of unseasoned companies, that is,
companies with less than three years of continuous operation, which present
risks considerably greater than do common stocks of more established companies,
may be acquired from time to time by the Fund when the Adviser believes such
investments offer possibilities of attractive capital appreciation.
INVESTMENT LIMITATIONS
The Fund is subject to the investment limitations enumerated below
which may be changed only by a vote of the holders of a majority of a Fund's
outstanding shares (as defined under "Miscellaneous" below).
The Fund may not:
1. With respect to 75% of the Fund's total assets, invest
-5-
<PAGE>
more than 5% of the fair market value of its assets in
securities of any one issuer (other than securities issued or
guaranteed by the U.S. Government, its agencies or
instrumentalities).
2. Invest more than 25% of its total assets, based on current
market value at the time of purchase, in securities of issuers
conducting their principal business activity in the same
industry (other than securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities).
3. Invest in a company to get control or manage it or, with
respect to 75% of the Fund's total assets, purchase more than
10% of the outstanding voting securities of an issuer.
4. Purchase or sell real estate except that the Fund may purchase
securities of issuers which deal in real estate (including
real estate investment trusts) and may purchase securities
which are secured by interests in real estate.
5. Act as an underwriter of securities within the meaning of the
Securities Act of 1933, except insofar as the Fund may be
deemed an underwriter under the Securities Act in distributing
its securities, although it may invest in companies engaged in
such businesses.
6. Purchase or sell commodity contracts, or invest in oil, gas or
mineral exploration or development programs, except that the
Fund may, to the extent appropriate to its investment
objective, purchase publicly traded securities of companies
engaging in whole or in part in such activities.
7. Purchase the security of any issuer where the security is
in the portfolio of any of the Arista group of mutual
funds.
8. Make loans, except that it may (a) acquire publicly
distributed bonds, debentures, notes and other debt
securities.
9. Borrow money or issue senior securities (as defined in the
1940 Act), except that the Fund may purchase securities on
margin and borrow from banks for temporary purposes in amounts
up to one-third of the value of the total assets at the time
of such borrowing.
10. The Fund may not mortgage, pledge or hypothecate any
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assets, except in connection with any such borrowing and in
amounts not in excess of the lesser of the dollar amounts
borrowed or one-third of the value of the Fund's total assets
at the time of such borrowing. Securities held in segregated
accounts in connection with the Fund's investment practices
described in this Statement of Additional Information or in
the Prospectus are not deemed to be pledged for purposes of
this limitation. If due to market fluctuations or other
reasons, the total assets of the Fund fall below 300% of its
borrowings, the Fund will reduce its borrowings in accordance
with the 1940 Act.
If a percentage limitation is satisfied at the time of investment, a
later increase or decrease in such percentage resulting from a change in the
value of the Fund's portfolio securities will not constitute a violation of such
limitation.
In accordance with the following non-fundamental policies, which may be
changed without investor approval, the Fund may not:
1. Invest more than 5% of its total assets in preferred
stock, convertible securities and warrants.
2. Engage in short sales or futures transactions.
3. Invest in securities of foreign issuers (including ADRs).
4. Invest 5% or more of its total assets in debt securities
rated below "investment grade."
5. Lend its securities or enter into reverse repurchase
agreements.
6. Purchase restricted securities.
7. Invest in other investment companies other than money
market funds.
8. Write uncovered or naked options.
LEVERAGE THROUGH BORROWING
The Fund may borrow money from banks and use the borrowed money
principally to purchase additional securities. This technique may be used in
order to increase the amount of money available to the Fund for investment in
securities believed to have appreciation potential and to increase the amount of
money available to secure short positions. So that the Fund does not have to
have specific securities which it sells released from pledge by a lender, all of
the Fund's assets may be pledged as
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<PAGE>
collateral for such borrowings. The Fund may only borrow money from banks.
Any investment gains made on the borrowed money in excess of interest
paid will cause the per share net asset value of the Fund to rise faster than
would otherwise be the case. On the other hand, if the investment performance of
the securities purchased with the additional monies fails to cover the interest
cost to the Fund, the net asset value of the Fund will decrease faster than
would otherwise be the case.
The amount of money the Fund may borrow is limited by the Investment
Company Act of 1940. Immediately after such borrowing, the total amount borrowed
may not exceed 331/3% of the value of the Fund's assets (including the amount of
such borrowings), less its liabilities (not including any borrowings, but
including the fair market value at the time of computation of any securities
with respect to which there are open short positions). If for any reason,
including market fluctuations, the value of the Fund's assets falls below the
coverage requirement of the statute, the Fund will, within three business days,
reduce its borrowings to the extent necessary to again comply with the 331/3%
test. To do this, the Fund may have to sell a portion of its investments at a
time when it may be disadvantageous to do so. The use of leveraging, to a
material extent, will significantly increase the level of risk of an investment
in the Fund.
PORTFOLIO TURNOVER
The portfolio turnover rate for the Fund is calculated by dividing the
lesser of purchases or sales of portfolio securities for the reporting period by
the monthly average value of the portfolio securities owned during the reporting
period. The calculation excludes all securities whose maturity dates at the time
of acquisition are one year or less. Portfolio turnover may vary greatly from
year to year as well as within a particular year, and may be affected by cash
requirements for redemption of shares and other factors. Portfolio turnover will
not be a limiting factor in making portfolio decisions, and the Fund may engage
in short-term trading to achieve its investment objective.
MANAGEMENT OF THE COMPANY
TRUSTEES AND OFFICERS
The Directors and officers of the Fund, their addresses, principal
occupations during the past five years and other affiliations are as follows:
-8-
<PAGE>
<TABLE>
<S> <C>
Name Title
---- -----
John Figliolini* President and Trustee
Oleg Batratchenko* Executive Vice
President/Trustee
Anatoly E. Kambolin Trustee
Carmine A. Chiappetta Trustee
Henry Shapiro Trustee
Michael Miola Vice President
Michelle LoCascio Secretary
Michael Miola Treasurer
<FN>
*Denotes Trustees who are "interested persons" of the Fund as
defined in the 1940 Act.
</FN>
</TABLE>
The principal occupations of the Trustees and executive officers of the
Fund during the past five years are set forth below:
John Figliolini, 551 Fifth Avenue, Suite 605, New York, NY 10017, is President
of Utopia Capital Management Corporation ("Adviser"). He is President of
Berkshire International Finance, Inc., an investment banking firm. He is Vice
President of Berkshire Capital Management Group, Ltd., a Swiss-based fund
manager. He is also President of Fifth Avenue Research and Advisory Group, Inc.,
an investment research company. He is also President of European Equity
Partners, Inc., the Fund's distributor. Prior to August 1992, he was a principal
of Berkshire Securities, Inc., an investment banking firm.
Oleg Batratchenko, 551 Fifth Avenue, Suite 605, New York, NY 10017, is the
Executive Vice President and a portfolio manager of the Adviser. He is a
registered representative with European Equity Partners, Inc., the Fund's
distributer. He is Vice President of Research for Berkshire International
Finance, Inc., an investment banking firm. He is Senior Vice President of Fifth
Avenue Research and Advisory Group, Inc., an investment research firm. Prior to
January 1995 he was a broker trainee at Rickel & Associates, Inc., and South
Richmond Securities, Inc., both brokerage firms. Prior to November 1994, he was
a research analyst with Safian Investment Research, Inc., a money management and
investment research firm. Prior to November 1994, he was a free-lance translator
with Corporate Language Services, a translation agency. Prior to November 1993
he was a performance analyst with Neuberger & Berman,
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<PAGE>
Inc., an investment management firm. Prior to May 1993, he was a project manager
for MR International, Inc., an international trading company. Prior to December
1992, he was a telemarketer for PageNet, Inc., a paging services company.
Anatoly E. Kambolin, 488 Madison Avenue, Suite 1505, New York, NY 10022, has
been the President of Taj-Amer, Inc., which acts as a consultant to construction
projects for joint ventures in Russia since January 1, 1992. In addition,
Taj-Amer, Inc. is in the business of acting as a consultant to American
companies seeking to do business in what was formerly the Soviet Union and
representing Russian companies and organizations in the United States. Mr.
Kambolin graduated from the Moscow Auto Mechanical Institute with a degree in
mechanical engineering. He received a graduate degree in Economics and
International Trade from the All-Union Academy for Foreign Trade. He is the
father of Peter Kambolin, a portfolio manager with the Adviser.
Carmine Chiappetta, 480 Pine Acres Boulevard, Brightwaters, NY 11718, manages
his own accounting firm specializing in taxes. Prior to March 1996, he was a tax
accountant for United States Trust Company of New York, Tucker Anthony & R.L.
Day and Morgan Stanley & Co., Inc.
Henry Shapiro, 301 Ocean View Avenue, Brooklyn, NY 11235, has been a registered
investment adviser since March 1993. From March 1993 to March 1995, he was a
real estate and mortgage broker, and a certified real estate appraiser. For the
five years prior thereto, he managed Shapiro & Co., a real estate and mortgage
broker, in Fort Lauderdale, Florida. Mr. Shapiro is a regular contributor to
Radio Free Europe/Radio Liberty and was a regular contributor of financial
articles to ITAR-TASS, the Russian State News Agency. Mr. Shapiro also had a
regular financial column for NRS, a Russian daily newspaper, and appeared
regularly on the Russian Television Network.
Michael Miola, 24 West Carver Street, Huntington, New York 11743, is Vice
President and Treasurer of Delta Micro Cap Growth Fund. Since 1984, Mr. Miola
has been the President of American Data Services ("American Data"). American
Data is acting as the Fund's Administrator, Transfer, Dividend and Disbursing
Agent and Accounting Services Manager. Mr. Miola has specialized in serving the
investment company industry since 1974. As a senior staff member of Coopers &
Lybrand, he designed and implemented that firm's audit approach and working
paper documentation model. During his tenure, he was called upon to write
portions of the AICPA's Investment Company Audit Guide. Mr. Miola serves as a
consultant to many mutual fund groups, designing accounting processes for new
and complex financial transactions. Mr. Miola is a Certified Public Accountant,
a member of the American Institute of Certified Public Accountants, and the New
York Society of
-10-
<PAGE>
Certified Public Accountants. Mr. Miola graduated magna cum laude from Fordham
University's College of Business Administration, with a Bachelor of Science
Degree.
Michelle LoCascio, 24 West Carver Street, Huntington, New York 11743, is
Corporate Secretary of Delta Micro Cap Growth Fund. Ms. LoCascio has been the
Registration Compliance Officer of American Data from 1995 to the present.
During the ten years prior thereto, Ms. LoCascio worked in both the Fund
Accounting and Stock Transfer Departments, where she attained the title of
Senior Administrator in each Department. She is responsible for the filing of
all state registrations for all funds administered by American Data.
Officers and Trustees who are "interested persons" of the Fund receive
no compensation from the Fund for serving in such capacities. Each
non-interested Trustee receives an annual fee of $5,000, a $500 per meeting
attendance fee and reimbursement of expenses incurred as a Trustee.
THE ADVISER
Utopia Capital Management Corporation is the Investment Adviser to the
Fund. The Adviser was organized as a New York corporation in January 1997 and is
a registered investment adviser. The equity interests of the Adviser are owned
100% by John Figliolini.
The Adviser provides the Fund with overall investment advisory services
pursuant to the Agreement. Subject to such policies as the Board of Trustees may
determine the Adviser makes investment decisions on behalf of the Fund, makes
available research and statistical data in connection therewith, and supervises
the acquisition and disposition of investments by the Fund, including the
selection of broker-dealers to carry out portfolio transactions.
The Agreement will remain in effect until June 10, 1999, with respect
to the Fund and continue thereafter from year to year, as long as it is approved
at least annually by the Board of Trustees or by a vote of the outstanding
voting securities of the Fund and in either case by a majority of the Trustees
who are not parties to the Agreement or interested persons of any such party
(the "Independent Trustees"). The Agreement terminates automatically if it is
assigned and may be terminated without penalty by either party on 60 days
notice. The Agreement provides that neither the Adviser nor its personnel shall
be liable for any error of judgment or mistake of law or for any loss arising
out of any investment or for any act or omission in the execution and management
of the Fund, except for willful misfeasance, bad faith or gross negligence in
the performance of its duties or by reason of reckless disregard of its
obligations and duties under the Agreement.
-11-
<PAGE>
DISTRIBUTOR
As discussed in the Prospectus, shares of the Fund are distributed by
European Equity Partners, Inc. (the "Distributor"). The Distributor may enter
into agreements to sell shares of the Fund with selected dealers ("Selected
Broker-Dealers"). The Distributor, a Connecticut corporation, is wholly-owned by
John Figliolini, the President of the Fund and the Adviser. The Trustees,
including a majority of the Trustees who are not, and were not at the time they
voted, interested persons of the Fund, as defined in the Act (the "Independent
Directors"), approved, at their meeting held on June 10, 1997, a Distribution
Agreement (the "Distribution Agreement") appointing the Distributor exclusive
distributor of the Fund's shares and providing for the Distributor to bear
distribution expenses not borne by the Fund. By its terms, the Distribution
Agreement continues until June 10, 1999, and provides that it will remain in
effect from year to year thereafter if approved by the Board.
PLAN OF DISTRIBUTION
To compensate the Distributor for the services it or any selected
dealer provides and for the expenses it bears under the Distribution Agreement,
the Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under the Act
(the "Plan") pursuant to which the Fund pays the Distributor compensation
accrued daily and payable monthly at the annual rate of 0.25% of the Fund's
average daily net assets. The Distributor receives the proceeds of the sales
charges, which are separate and apart from payments made pursuant to the Plan.
The Plan has been adopted by a vote of the Trustees of the Fund,
including the vote of a majority of the Trustees of the Fund who are not
"interested persons" of the Fund (as defined in the Act) and who have no direct
or indirect financial interest in the operation of the Plan (the "Independent
12b-1 Trustees"). In making their decision to adopt the Plan, the Trustees
requested from the Distributor and received such information as they deemed
necessary to make an informed determination as to whether or not adoption of the
Plan was in the best interests of the shareholders of the Fund. After due
consideration of the information received, the Trustees, including the
Independent 12b-1 Trustees, determined that adoption of the Plan would benefit
the shareholders of the Fund.
Under its terms, the Plan continues in effect until from year to year,
provided such continuance is approved annually by a vote of the Trustees in the
manner described above. Under the Plan and as required by Rule 12b-1, the
Trustees will receive and review promptly after the end of each fiscal quarter a
written report provided by the Distributor of the amounts expended by the
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<PAGE>
Distributor under the Plan and the purpose for which such expenditures were
made.
Pursuant to the Plan and as required by Rule 12b-1, the Trustees will
receive and review promptly after the end of each calendar quarter a written
report provided by the Distributor of the amounts expended by the Distributor
under the Plan and the purpose for which such expenditures were made.
At any given time, the expenses in distributing shares of the Fund may
be more or less than the total of (i) the payments made by the Fund pursuant to
the Plan and (ii) the proceeds of sales charges paid by investors upon purchase
of shares. Because there is no requirement under the Plan that the Distributor
be reimbursed for all expenses or any requirements that the Plan by continued
from year to year, this excess amount does not constitute a liability of the
Fund.
Mr. Figliolini and Mr. Batratchenko may be deemed to have an interest
in the operation of the Plan or as a result of receiving a portion of the
amounts expended thereunder by the Fund.
The Plan may not be amended to increase materially the amount to be
spent for the services described therein without approval of the shareholders of
the Fund, and all material amendments of the Plan must also be approved by the
Trustees in the manner described above. The Plan may be terminated at any time,
without payment of any penalty, by vote of a majority of the Independent 12b-1
Trustees or by a vote of a majority of the outstanding voting securities of the
Fund (as defined in the Act). So long as the Plan is in effect, the election and
nomination of Independent Trustees shall be committed to the discretion of the
Independent Trustees.
NET ASSET VALUE
The net asset value per share of the Fund is calculated by adding the
value of all portfolio securities and other assets belonging to the Fund,
subtracting the liabilities charged to the Fund, and dividing the result by the
number of outstanding shares of the Fund.
Net asset value calculations are made as of the close of trading each
day that the New York Stock Exchange is open for business, every weekday, Monday
through Friday, except on the following customary national business holidays
which result in the closing of the New York Stock Exchange (New Year's Day,
Washington's Birthday, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas); or days when no security is tendered for redemption
from and no customer purchase order is received.
-13-
<PAGE>
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares of the Fund for which a redemption order is received in proper
form by the Transfer Agent before close of the Exchange (currently 4:00 p.m.
Eastern Standard Time) on a business day will be as of the determination of net
asset value on that day. Orders for a redemption received on a day after the
close of the Exchange or on a non-business day will be priced as of the
determination of net asset value on the next day on which shares of the Fund are
priced. If an investor requests that redemption proceeds be paid by federal
funds wire, the proceeds will be wired to a correspondent member bank if the
investor's designated bank is not a member of the Federal Reserve System.
Under the 1940 Act, the Fund may suspend the right of redemption or
postpone the date of payment for shares during any period when (a) trading on
the Exchange is restricted by applicable rules and regulations of the Securities
and Exchange Commission ("SEC"); (b) the Exchange is closed for other than
customary weekend and holiday closings; (c) the SEC has by order permitted such
suspension; or (d) an emergency exists as determined by the SEC. The Fund may
also suspend or postpone the recording of the transfer of its shares upon the
occurrence of any of the foregoing conditions.
The Funds may redeem an account involuntarily, upon 30 days notice, if
a redemption causes the account's net asset value to fall below $1,000. The Fund
may redeem shares involuntarily to reimburse the Fund for any loss sustained by
reason of the failure of an investor to make full payment for shares purchased
by the Shareholder or to collect any charge relating to a transaction effected
for the benefit of an investor which is applicable to Fund shares as provided in
the Prospectus from time to time.
Special Procedures for In-Kind Securities Payments. Payment for shares
of the Fund may, in the discretion of the Fund, be made in the form of
securities that are permissible investments for the Fund as described in the
Prospectus. In connection with an in-kind securities payment, the Fund will
require, among other things, that the investor making the contribution of
securities be a tax-exempt entity; that the securities be valued on the day of
purchase in accordance with the pricing methods used by the Fund; that the Fund
receive satisfactory assurances that it will have good and marketable title to
the securities received by it; that the securities be in proper form for
transfer to the Fund; that adequate information be provided to the Fund
concerning the basis and other tax matters relating to the securities; and that
the amount of the purchase be at least $1,000,000. The Fund will consider
accepting securities as consideration for shares only if such securities meet
the investment objectives and policies of the Fund and otherwise are deemed by
the Adviser to be suitable and
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<PAGE>
appropriate for the Fund, are acquired for investment and not for resale
(although the Fund may sell such securities in response to market conditions),
are liquid and have a value which is readily ascertainable.
Investors should consult their own tax advisers before contributing
securities to the Fund because of possible adverse tax consequences resulting
from such contributions. See "Additional Information Concerning Taxes."
PORTFOLIO TRANSACTIONS
Subject to the general supervision of the Board of Trustees, the
Adviser is responsible for, makes decisions with respect to, and places orders
for all purchases and sales of portfolio securities for the Fund.
Transactions on national or regional stock exchanges involve the
payment of negotiated brokerage commissions. On exchanges on which commissions
are negotiated, the cost of transactions may vary among different brokers.
Transactions in the over-the-counter market are generally principal transactions
with dealers and the costs of such transactions involve dealer spreads rather
than brokerage commissions. With respect to over-the-counter transactions, the
Adviser will normally deal directly with dealers who make a market in the
securities involved except in those circumstances where better prices and
execution are available elsewhere or as described below.
The Fund may participate, if and when practicable, in bidding for the
purchase of portfolio securities directly from an issuer in order to take
advantage of the lower purchase price available to members of a bidding group.
The Fund will engage in this practice, however, only when the Adviser, in its
sole discretion, believes such practice to be in the Fund's interests.
In executing portfolio transactions and selecting brokers or dealers,
the Adviser will seek to obtain the best overall terms available. In assessing
the best overall terms available for any transaction, the Adviser shall consider
factors it deems relevant, including the breadth of the market in the security,
the price of the security, size of order, the financial condition and execution
capability of the broker or dealer, and the reasonableness of the commissions
and dealer spreads, if any, both for the specific transaction and on a
continuing basis. While the Adviser seeks reasonably competitive rates, it does
not necessarily pay the lowest commission or spreads available. Transactions in
micro cap companies in which the Fund invests may involve specialized services
on the part of the broker and thereby entail higher commissions or spreads than
would be paid in transactions involving more widely traded securities.
Allocation of transactions,
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<PAGE>
including their frequency, to various broker-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 and efficient execution of
orders in an effective manner at the most favorable price. Subject to this
primary consideration, the Adviser may also consider the provision of
supplemental research services in the selection of broker-dealers to execute
portfolio transactions. The Adviser is authorized to cause the Fund to pay a
broker-dealer which furnishes brokerage and research services a higher
commission that which might be charged by another broker-dealer for effecting
the same transaction, provided that the Adviser determines in good faith that
such commission is reasonable in relation to the value of the brokerage and
research services provided by such broker-dealer, viewed in terms of either the
particular transaction or the overall responsibilities of the Adviser to the
Fund. Such brokerage and research services might consist of reports and
statistics relating to specific companies or industries, general summaries of
groups of stocks or bonds and their comparative earnings and yields, or broad
overviews of the stock, bond and government securities markets and the economy.
Supplementary research 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 advisory fees payable to it by the Fund. The Trustees will
periodically review the commissions paid by the Fund to consider whether the
commissions paid over representative periods of time appear to be reasonable in
relation to the benefits inuring to the Fund.
Portfolio securities will not be purchased from or sold to the Adviser,
or an affiliated person (as such term is defined in the 1940 Act) of that Trust
or the Adviser, acting as principal.
The Fund will not acquire any securities of an issuer for which the
Adviser or any affiliate of the Adviser is acting as an agent in the placement
of such issuer's securities. This restriction is imposed to eliminate any
potential conflict of interest between the Fund and Berkshire International
Finance, Inc. ("BIF"), which acts as an investment consultant for such issuers
for which BIF receives a fee. BIF also acts as a consultant to the "Arista
group" of mutual funds based in the Cayman Islands, whose shareholders are
non-residents of the United States. The Fund will not acquire any securities of
an issuer which any of the Arista group of funds has a position in such issuer
(except for money market instruments or US government obligations).
ADDITIONAL INFORMATION CONCERNING TAXES
The following is only a summary of certain additional tax
considerations generally affecting the Fund and its investors that are not
described in the Prospectus. No attempt is made to present
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<PAGE>
a detailed explanation of the tax treatment of the Funds or its investors, and
the discussion here and in the Prospectus is not intended as a substitute for
careful tax planning. Investors are advised to consult their tax advisers with
specific reference to their own tax situations.
A 4% non-deductible excise tax is imposed on regulated investment
companies that fail to currently distribute specified percentages of their
ordinary taxable income and capital gain net income (excess of capital gains
over capital losses). The Fund intends to make sufficient distributions or
deemed distributions of its ordinary taxable income and any capital gain net
income with respect to each calendar year to avoid liability for this excise
tax.
Although the Fund expects to qualify as a "regulated investment
company" and to be relieved of all or substantially all federal income taxes,
depending upon the extent of the Company'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, the Fund may be subject to the tax laws of such states or localities.
In addition, in those states and localities which have income tax laws, the
treatment of the Fund and its investors under such laws may differ from their
treatment under federal income tax laws.
If for any taxable year the Fund does not qualify for the special
federal income tax treatment afforded regulated investment companies, all of its
taxable income will be subject to federal income tax at regular corporate rates
(without any deduction for distributions to its investors). In such event,
dividend distributions would be taxable as ordinary income to investors to the
extent of the Fund's current and accumulated earnings and profits, and would be
eligible for the dividends received deduction in the case of corporate
investors.
The Fund will designate any distribution of the excess of net long-term
capital gain over net short-term capital loss as a capital gain dividend in a
written notice mailed to investors after the close of a Fund's taxable year.
Investors who contribute securities as payment for an investment in the
Fund should be aware that generally the contribution will result in gain or loss
pursuant to Section 351(e)(1) of the Code, in an amount equal to the difference
between the fair market value of the securities at time of contribution and the
investor's tax basis in the securities.
The foregoing discussion is based on federal tax laws and regulations
which are in effect on the date of this Statement of
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<PAGE>
Additional Information; such laws and regulations may be changed by legislative
or administrative action.
CUSTODIAN
Star Bank, N.A. 425 Walnut Street, Cincinnati, Ohio 45202, has been
retained to act as Custodian for the Fund's investments. Star Bank, N.A. acts as
the Fund's depository, safekeeps its portfolio securities, collects all income
and other payments with respect thereto, disburses funds as instructed and
maintains records in connection with its duties.
AMERICAN DATA SERVICES, INC.
The Trust's transfer agent, American Data Services, Inc. ("American
Data"), maintains the records of each shareholder's account, answers
shareholders' inquiries concerning their accounts, processes purchases and
redemptions of the Fund's shares, acts as dividend and distribution disbursing
agent and performs other shareholder service functions. American Data receives
from the Fund for its services as transfer agent a fee payable monthly at an
annual rate of $9 per account, provided, however, that the minimum fee received
is $900 per month. In addition, the Fund pays out-of-pocket expenses, including,
but not limited to, postage, envelopes, checks, drafts, forms, reports, record
storage and communication lines.
American Data also provides accounting and pricing services to the
Fund. For calculating daily net asset value per share and maintaining such books
and records as are necessary to enable American Data to perform its duties, the
Fund pays American Data a minimum fee of $1,200 per month, which can be
increased to a maximum of $1,700 per month depending on the level of net assets
under management. In addition, the Fund pays all costs of external pricing
services.
American Data also provides administrative services to the Fund. In
this capacity, American Data supplies non-investment related statistical and
research data, internal regulatory compliance services and executive and
administrative services. American Data supervises the preparation of tax
returns, reports to shareholders of the fund, reports to and filings with the
Securities and Exchange Commission and state securities commissions, and
materials for meetings of the Board of Trustees. For the performance of these
administrative services, the Fund pays American Data a fee at the annual rate of
.015% of the average value of its daily net assets provided, however, that the
minimum fee schedule of $1,300 per month for funds under $10,000,000; $1,600 per
month for funds between $10,000,000 and $20,000,000 and $2,000 per month in
funds over $20,000,000.
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<PAGE>
INDEPENDENT ACCOUNTANTS
McCurdy & Associates CPAs, Inc., the Company's independent accountants,
serve as auditors for the Company.
COUNSEL
Hecht & Steckman, P.C., New York, New York, serves as counsel to the
Company and the independent trustees. As to matters of Ohio law, Hecht &
Steckman may rely on the legal opinion of John Splain, Ohio counsel.
ADDITIONAL INFORMATION ON PERFORMANCE
From time to time, the total return of the Micro Cap Fund may be quoted
in advertisements, reports to investors or other communications to investors.
TOTAL RETURN CALCULATIONS.
The Fund computes "average annual total return" by determining the
average annual compounded rates of return during specified periods that equate
the initial amount invested in a particular series to the ending redeemable
value of such investment in the series. This is done by dividing the ending
redeemable value of a hypothetical $1,000 initial payment by $1,000 and raising
the quotient to a power equal to one divided by the number of years (or
fractional portfolio hereof) covered by the computation and subtracting one from
the result. This calculation can be expressed as follows:
n
P(1+T) = ERV
Where:
P = hypothetical initial payment of $1,000
T = average annual total return.
n = period covered by the computation,
expressed in terms of years.
ERV = ending redeemable value at the end
of the period covered by the
computation of a hypothetical $1,000
payment made at the beginning of the
period.
The calculations of average annual total returns assume the deduction
of the maximum initial sales charge applicable to the Fund and the reinvestment
of all dividends and capital gain
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<PAGE>
distributions on the reinvestment dates during the period. The ending redeemable
value (variable "ERV") is determined by assuming complete redemption of the
hypothetical investment and the deduction of all nonrecurring charges at the end
of the period covered by the computations.
The Fund may also advertise total return (a "nonstandardized
quotation") which is calculated differently from average annual total return. A
nonstandardized quotation of total return may be a cumulative return which
measures the percentage change in the value of an account between the beginning
and end of a period, assuming no activity in the account other than reinvestment
of dividends and capital gains distributions. A nonstandardized quotation may
also indicate average annual compounded rates of return over periods other than
those specified for average annual total return. A nonstandardized quotation of
total return will always be accompanied by the Fund's average annual total
return as described above.
The Fund may also from time to time include discussions or
illustrations of the effect of compounding in advertisements. "Compounding"
refers to the fact that, if dividends or other distributions on a series'
investment are reinvested by being paid in additional shares of that series, any
future income or capital appreciation of the Fund would increase the value, not
only of the original Fund investment, but also of the additional Fund shares
received through reinvestment. As a result, the value of a Fund investment would
increase more quickly than if dividends or other distribution had been paid in
cash. The Fund may also include discussions or illustrations of the potential
investment goals of a prospective investor, investment management techniques,
policies or investment suitability of the Fund, economic conditions, the effects
of inflation and historical performance of various asset classes, including but
not limited to, stocks, bonds and Treasury bills. From time to time
advertisements or communications to investors may summarize the substance of
information contained in investor reports (including the investment composition
of the Fund), as well as the views of the Adviser as to market, economic, trade
and interest rate trends, legislative, regulatory and monetary developments,
investment strategies and related matters believed to be of relevance to the
Fund. The Fund may also include in advertisements, charts, graphs or drawings
which illustrate the potential risks and rewards of investment in various
investment vehicles, including but not limited to stocks, bonds, treasury bills
and shares of the Fund. In addition, advertisement or investor communications
may include a discussion of certain attributes or benefits to be derived by an
investment in the Fund. Such advertisements or communications may include
symbols, headlines or other materials which highlight or summarize the
information discussed in more detail therein. The total returns of the Fund may
be compared to the following indices:
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S&P 500 Index, an Index of 500 selected common stocks most of
which are listed on the New York Stock Exchange.
Nasdaq Composite Index, an Index of unmanaged groups of common
stock of domestic companies that are quoted on the National
Association of Securities Quotation System.
Dow Jones Industrial Average, a recognized unmanaged Index of
common stocks of 30 industrial companies listed on the New
York Stock Exchange.
Wilshire Top 750 Index, an Index of all domestic equity issues
which are traded over the national exchanges.
Any other recognized index of equity securities comparable to
the composition of the Fund's investment portfolios, including
the S&P Mid-Cap Index, Russell 2000 Index, Russell 1000 Index
and Wilshire Next 1750 Index.
MISCELLANEOUS
As used in this Statement of Additional Information and in the
Prospectus, a majority of the outstanding shares of the Fund, with respect to
the approval of an investment advisory agreement or a change in a fundamental
investment policy, the lesser of (1) 67% of the shares of the Fund represented
at a meeting at which the holders of more than 50% of the outstanding shares of
the Fund are present in person or by proxy, or (2) more than 50% of the
outstanding shares of or Fund.
The Prospectus and this Statement of Additional Information do not
contain all the information included in the Registration Statement filed with
the Securities and Exchange Commission under the Securities Act of 1933 with
respect to the securities offered by the Prospectus. Certain portions of the
Registration Statement have been omitted from the Prospectus and this Statement
of Additional Information pursuant to the rules and regulations of the
Securities and Exchange Commission. The Registration Statement, including the
exhibits filed therewith, may be examined at the office of the Securities and
Exchange Commission in Washington, D.C. or via the Commission's worldwide web
site (http://www.sec.gov).
Statements contained in the Prospectus or in this Statement of
Additional Information as to the contents of any contract or other document
referred to are not necessarily complete, and, in each instance, reference is
made to the copy of such contract or other document filed as an exhibit to the
Registration Statement of which the Prospectus and this Statement of Additional
Information for a part, each such statement being qualified in all respects by
such reference.
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COMMERCIAL PAPER RATINGS
RATINGS BY MOODY'S
Moody's commercial paper ratings are opinions of the ability to repay
punctually promissory obligations. Moody's employs the following three category
designations, all judged to be investment grade, to indicate the relative
repayment capacity of rated issuers: Prime 1 - highest quality; Prime 2 - higher
quality; Prime 3 - high quality.
RATINGS BY STANDARD & POOR'S
A Standard & Poor's commercial paper rating is a current assessment of
the likelihood of timely payment. Ratings are graded into four categories,
ranging from "A" for the highest quality obligations to "D" for the lowest.
Issues assigned the highest rating category, A, are regarded as having
the greatest capacity for timely payment. Issues in this category are delineated
with the numbers "1," "2" and "3" to indicate the relative degree of safety. The
designation A-1 indicates that the degree of safety regarding timely payment is
either overwhelming or very strong. A+ designation is applied to those issues
rated "A-1" which possess extremely strong safety characteristics. Capacity for
timely payment on issues with the designation "A-2" is strong. However, the
relative degree of safety is not as high as for issues designated A-1. Issues
carrying the designation A-3 have a satisfactory capacity for timely payment.
They are, however, somewhat more vulnerable to the adverse effect of changes in
circumstances than obligations carrying the higher designations.
CORPORATE BOND AND PREFERRED STOCK RATINGS
MOODY'S INVESTORS SERVICE, INC. - BOND RATING
Aaa - Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower that the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of
-22-
<PAGE>
greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated to possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Baa - Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
MOODY'S PREFERRED STOCK RATINGS
aaa - An issue which is rated aaa is considered to be a topquality
preferred stock. This rating indicates good asset protection and the least risk
of dividend impairment within the universe of preferred stocks.
aa - An issue which is rated aa is considered a high-grade preferred
stock. This rating indicates that there is reasonable assurance that earnings
and asset protection will remain relatively well maintained in the foreseeable
future.
a - An issue which is rated a is considered to be an uppermedium grade
preferred stock. While risks are judged to be somewhat greater than in the "aaa"
and "aa" classifications, earnings and asset protection are, nevertheless,
expected to be maintained at adequate levels.
baa - An issue which is rated baa is considered to be medium grade,
neither highly protected nor poorly secured. Earnings and asset protection
appear adequate at present but may be questionable over any great length of
time.
-23-
<PAGE>
ba - An issue which is rated ba is considered to have speculative
elements and its future cannot be considered well assured. Earnings and asset
protection may be very moderate and not well safeguarded during adverse periods.
Uncertainty of position characterizes preferred stocks in this class.
b - An issue which is rated b generally lacks the characteristics of a
desirable investment. Assurance of dividend payments and maintenance of other
terms of the issue over any long period of time may be small.
STANDARD & POOR'S RATING SERVICES - BOND RATINGS
AAA - Bonds rated AAA have the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay principal is
extremely strong.
AA - Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only in small degree.
A - Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB - Bonds rated BBB are regarded as having an adequate capacity to
pay interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay interest and repay principal
for bonds in this category than for bonds in higher rated categories.
BB and B - Bonds rated BB and B are regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and B the higher degree of speculation. While such
bonds will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.
STANDARD & POOR'S RATING SERVICES - PREFERRED STOCK RATINGS
AAA - This is the highest rating that may be assigned by Standard &
Poor's to a preferred stock issue and indicates an extremely strong capacity to
pay the preferred stock obligations.
AA - A preferred stock issue rated AA also qualifies as a high-quality
fixed-income security. The capacity to pay preferred stock obligations is very
strong, although not as overwhelming as for issues rated AAA.
-24-
<PAGE>
A - An issue rated A is backed by a sound capacity to pay the preferred
stock obligations, although it is somewhat more susceptible to the diverse
effects of changes in circumstances and economic conditions.
BBB - An issue-rated BBB is regarded as backed by an adequate capacity
to pay the preferred stock obligations. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to make payments for a preferred
stock in this category than for issues in the A category.
BB and B - Preferred stock rated BB and B are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay preferred
stock obligations. BB indicates the lowest degree of speculation and B the
highest degree of speculation. While such issued will likely have some quality
and protective characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions.
RISK FACTORS OF LOWER-RATED SECURITIES
Lower-rated debt securities (commonly called "junk bonds") may be
subject to certain risk factors to which other securities are not subject to the
same degree. An economic downturn tends to disrupt the market for lower-rated
bonds and adversely affect their values. Such an economic downturn may be
expected to result in increased price volatility of lower-rated bonds and of the
value of the Fund's shares, and an increase in issuers' defaults on such bonds.
Also, many issuers of lower-rated bonds are substantially leveraged,
which may impair their ability to meet their obligations. In some cases, the
securities in which the Fund invests are subordinated to the prior payment of
senior indebtedness, thus potentially limiting the Fund's ability to recover
full principal or to receive payments when senior securities are in default.
The credit rating of a security does not necessarily address its market
value risk. Also, ratings may, from time to time, be changed to reflect
developments in the issuer's financial condition. Lower-rated securities held by
the Fund have speculative characteristics which are apt to increase in number
and significance with each lower rating category.
When the secondary market for lower-rated bonds becomes increasingly
illiquid, or in the absence of readily available market quotations for
lower-rated bonds, the relative lack of reliable, objective data makes the
responsibility of the Trustees to value such securities more difficult, and
judgment plays a
-25-
<PAGE>
greater role in the valuation of portfolio securities. Also, increased
illiquidity of the market for lower-rated bonds may affect the Fund's ability to
dispose of portfolio securities at a desirable price.
In addition, if the Fund experiences unexpected net redemptions, it
could be forced to sell all or a portion of its lower-rated bonds without regard
to their investment merits, thereby decreasing the asset base upon which the
Fund's expenses can be spread, possibly reducing the Fund's rate of return.
Also, prices of lower-rated bonds have been found to be less sensitive to
interest rate changes and more sensitive to adverse economic changes and
individual corporate developments than more highly rated investments. Certain
laws or regulations may have a material effect on the Fund's investments in
lower-rated bonds.
FINANCIAL STATEMENTS
The Statement of Assets and Liabilities, related notes and report of
McCurdy & Associates CPAs, Inc., independent accountants, showing the initial
capital contributed to the Company, are set forth below.
-26-
<PAGE>
McCurdy 27955 Clemens Road
& Associates Westlake, Ohio 44145
CPA's, Inc. Phone: (216) 836-8500
Fax: (216) 835-1093
CERTIFIED PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To The Shareholders and Trustees
Delta Mutual Funds
We have audited the accompanying statement of assets and liabilities of Delta
Mutual Funds (comprising, respectively, the Delta Micro Cap Growth Fund), as of
May 22, 1997. This financial statement is the responsibility of the Company's
management. Our responsibility is to express an opinion on this financial
statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of assets and liabilities is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement of assets and
liabilities. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statement of assets and liabilities. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall statement of assets and
liabilities presentation. Our procedures included confirmation of cash held by
the custodian as of May 22, 1997, by correspondence with the custodian. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the statements of assets and liabilities referred to above
presents fairly, in all material respects, the financial position of the Delta
Micro Cap Growth Fund constituting Delta Mutual Funds as of May 22, 1997, in
conformity with generally accepted accounting principles.
/s/ McCurdy & Associates CPA's, Inc.
McCurdy & Associates CPA's, Inc.
Westlake, Ohio 44145
May 22, 1997
<PAGE>
<TABLE>
<CAPTION>
DELTA MUTUAL FUNDS
STATEMENT OF ASSETS AND LIABILITIES
MAY 22, 1997
<S> <C>
Delta Micro Cap
Growth Fund
--------------
ASSETS:
Cash in Bank $100,000
--------
Total Assets $100,000
--------
NET ASSETS $100,000
========
NET ASSETS CONSIST OF:
Capital Paid In $100,000
========
OUTSTANDING SHARES
Unlimited Number of Shares
Authorized Without par Value 10,000
NET ASSET VALUE PER SHARE $10
OFFERING PRICE PER SHARE $10
</TABLE>
See Accountants' Audit Report
<PAGE>
DELTA MUTUAL FUNDS
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
Delta Mutual Funds is a registered open-end investment company established
under the laws of Ohio by an Agreement and Declaration of Trust dated May
20, 1997. The Trust Agreement permits the Trustees to issue an unlimited
number of shares of beneficial interest of separate series without par
value. Shares of one series have been authorized, which shares constitute
the interests in Delta Micro Cap Growth.
The Fund uses an independent administrator, transfer agent, custodian, and
dividend paying agent. No transactions other than those relating to
organizational matters and the sale of 10,000 shares of Delta Micro Cap
Growth Fund have taken place to date.
2. RELATED PARTY TRANSACTIONS
The initial purchase of registrant's shares was made by Utopia Capital
Management Corporation, the Fund's adviser (the "Adviser"). As a result of
this purchase, the registrant may be controlled by the Adviser, and the
registrant and the Adviser may be deemed to be under the common control of
John Figliolini, who owns 100% of the equity interests of the Adviser.
For its services, the Adviser receives a management fee from the Fund
computed at the annual rate of 1.00% of the Fund's average daily net assets
up to $100 million. The Agreement provides that the management fee is
reduced at predetermined break points. THe management fee is reduced to
0.85% of the Fund's average daily net assets greater than $100million but
less than or equal to $200million. The fee is further reduced to 0.70% of
the Fund's daily net asset value greater than $200 million. The fee is paid
monthly.
The Adviser will voluntarily waive its fees and, if necessary, reimburse
the Fund to the extent that operating expenses exceed 2.00% of the Fund's
average daily net assets.
3. CAPITAL STOCK AND DISTRIBUTION
At May 22,1997, an unlimited number of shares were authorized and paid in
capital amounted to $100,000 for Delta Micro Cap Growth Fund. Transactions
in capital stock were as follows:
<TABLE>
<S> <C>
Delta Micro Cap
Growth Fund
---------------
Shares Sold 10,000
Shares Redeemed 0
------
Net Increase 10,000
======
Share Outstanding:
Beginning of Period 0
End of Period 10,000
</TABLE>
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
None
(b) Exhibits:
1. Agreement and Declaration of Trust of Registrant
2. None
3. None
4. Not Applicable
5. Form of Investment Management Agreement between
Registrant and Utopia Capital Management Corporation
6.(a) Form of Distribution Agreement between Registrant and
European Equity Partners, Inc.
6.(b) Form of Selected Dealer Agreement
7. None
8.(a) Form of Custodian Agreement between Registrant and Star
Bank, N.A., apparently already filed
8.(b) Form of Administrative Service Agreement between
Registrant and American Data Services, Inc.
8.(c) Form of Transfer Agency and Service Agreement between
Registrant and American Data Services, Inc.
8.(d) Form of Fund Accounting Service Agreement between
Registrant and American Data Services, Inc.
9. None
10. Opinion of Hecht & Steckman, P.C.
11. Consent of Independent Accountants
12. None
13. Investment Letter of Utopia Capital Management
Corporation
14. None
<PAGE>
15. Form of Rule 12b-1 Plan between Registrant and European
Equity Partners, Inc.
16. Schedule for Computation of Performance Quotations - to
be filed with first post-effective amendment
17. Financial Data Schedule
18. None
Other Powers of Attorney
Item 25. Persons Controlled by or Under Common Control with
Registrant
Prior to the effectiveness of this Registration Statement, the
Registrant sold 10,000 of its shares of beneficial interest to Utopia
Capital Management Corporation, a New York corporation.
Item 26. Number of Holders of Securities
(1) (2)
Number of Record Holders
Title of Class at March 24, 1997
Shares of Beneficial Interest 1
Item 27. Indemnification
Reference is made to Article IV of the registrant's Declaration of
Trust filed as Exhibit No. 1 to Registrant's Registration Statement
with respect to the indemnification of Registrant's officers and
directors, which is set forth below:
ARTICLE VI
LIMITATION OF LIABILITY; INDEMNIFICATION
----------------------------------------
Section 6.1 TRUSTEES, SHAREHOLDERS, ETC. NOT PERSONALLY
LIABLE; NOTICE. All persons extending credit to, contracting with or
having any claim against the Trust shall look only to the assets of
the Trust for payment under such credit, contract or claim; and
neither the Shareholders nor the Trustees, nor any of the Trust's
officers, employees or agents, whether past, present or future, shall
be personally liable therefor. Every note, bond, contract,
instrument, certificate or undertaking and every other act or thing
whatsoever executed or done
-2-
<PAGE>
by or on behalf of the Trust or the Trustees or any of them in
connection with the Trust shall be conclusively deemed to have been
executed or done only by or for the Trust or the Trustees and not
personally. Nothing in this Declaration of Trust shall protect any
Trustee or officer against any liability to the Trust or the
Shareholders to which such Trustee or officer would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of the
office of Trustee or of such officer.
Every note, bond, contract, instrument, certificate or undertaking
made or issued by the Trustees or by any officers or officer shall
give notice that this Declaration of Trust is on file with the
Secretary of the State of Ohio and shall recite to the effect that
the same was executed or made by or on behalf of the Trust or by them
as Trustees or Trustee or as officers or officer and not individually
and that the obligations of such instrument are not binding upon any
of them or the Shareholders individually but are binding only upon
the assets and property of the Trust, but the omission thereof shall
not operate to bind any Trustees or Trustee or officers or officer or
Shareholders or Shareholder individually.
Section 6.2 TRUSTEE'S GOOD FAITH ACTION; EXPERT ADVICE; NO BOND OR
SURETY. The exercise by the Trustees of their powers and discretions
hereunder shall be binding upon everyone interested. A Trustee shall
be liable for his own willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of the office of Trustee, and for nothing else, and shall not
be liable for errors of judgment or mistakes of fact or law. Subject
to the foregoing, (a) the Trustees shall not be responsible or liable
in any event for any neglect or wrongdoing of any officer, agent,
employee, consultant, adviser, administrator, distributor or
principal underwriter, custodian or transfer, dividend disbursing,
Shareholder servicing or accounting agent of the Trust, nor shall any
Trustee be responsible for the act or omission of any other Trustee;
(b) the Trustees may take advice of counsel or other experts with
respect to the meaning and operation of this Declaration of Trust and
their duties as Trustees, and shall be under no liability for any act
or omission in accordance with such advice or for failing to follow
such advice; and (c) in discharging their duties, the Trustees, when
acting in good faith, shall be entitled to rely upon the books of
account of the Trust and upon
-3-
<PAGE>
written reports made to the Trustees by any officer appointed by
them, any independent public accountant, and (with respect to the
subject matter of the contract involved) any officer, partner or
responsible employee of a Contracting Party appointed by the Trustees
pursuant to Section 3.3. The Trustees as such shall not be required
to give any bond or surety or any other security for the performance
of their duties. Nothing stated herein is intended to detract from
the protection accorded to Trustees by Ohio Revised Code Sections
1746.08 and 1701.59, as amended from time to time.
Section 6.3 INDEMNIFICATION OF SHAREHOLDERS. In case any Shareholder
or former Shareholder shall be charged or held to be personally
liable for any obligation or liability of the Trust solely by reason
of being or having been a Shareholder and not because of such
Shareholder's acts or omissions or for some other reason, the Trust
(upon proper and timely request by the Shareholder) shall assume the
defense against such charge and satisfy any judgment thereon, and the
Shareholder or former Shareholder (or his heirs, executors,
administrators or other legal representatives or in the case of a
corporation or other entity, its corporate or other general
successor) shall be entitled out of the assets of the Trust estate to
be held harmless from and indemnified against all loss and expense
arising from such liability.
Section 6.4 INDEMNIFICATION OF TRUSTEES, OFFICERS, ETC. Subject to
and except as otherwise provided in the Securities Act of 1933, as
amended, and the 1940 Act, the Trust shall indemnify each of its
Trustees and officers, including persons who serve at the Trust's
request as directors, officers or trustees of another organization in
which the Trust has any interest as a shareholder, creditor or
otherwise (hereinafter referred to as a "Covered Person") against all
liabilities, including but not limited to amounts paid in
satisfaction of judgments, in compromise or as fines and penalties,
and expenses, including reasonable accountants' and counsel fees,
incurred by any Covered Person in connection with the defense or
disposition of any action, suit or other proceeding, whether civil or
criminal, before any court or administrative or legislative body, in
which such Covered Person may be or may have been involved as a party
or otherwise or with which such person may be or may have been
threatened, while in office or thereafter, by reason of being or
having been such a Trustee or officer, director or trustee, and
except that no Covered Person shall be indemnified against any
liability to the Trust or its Shareholders to which such Covered
Person would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of such
-4-
<PAGE>
Covered Person's office.
Section 6.5 ADVANCES OF EXPENSES. The Trust shall advance attorneys'
fees or other expenses incurred by a Covered Person in defending a
proceeding to the full extent permitted by the Securities Act of
1933, as amended, the 1940 Act, and Ohio Revised Code Chapter 1707,
as amended. In the event any of these laws conflict with Ohio Revised
Code Section 1701.13(E), as amended, these laws, and not Ohio Revised
Code Section 1701.13(E), shall govern.
Section 6.6 INDEMNIFICATION NOT EXCLUSIVE, ETC. The right of
indemnification provided by this Article VI shall not be exclusive of
or affect any other rights to which any such Covered Person may be
entitled. As used in this Article VI, "Covered Person" shall include
such person's heirs, executors and administrators. Nothing contained
in this article shall affect any rights to indemnification to which
personnel of the Trust, other than Trustees and officers, and other
persons may be entitled by contract or otherwise under law, nor the
power of the Trust to purchase and maintain liability insurance on
behalf of any such person.
Section 6.7 LIABILITY OF THIRD PERSONS DEALING WITH TRUSTEES. No
person dealing with the Trustees shall be bound to make any inquiry
concerning the validity of any transaction made or to be made by the
Trustees or to see to the application of any payments made or
property transferred to the Trust or upon its order.
Item 28. Business and Other Connections of Investment Adviser
See "Management of the Fund" in the Prospectus regarding the business
of the investment adviser. The following information is given
regarding officers of Utopia Capital Management Corporation. The
principal address of the Delta Funds is 551 Fifth Avenue, Suite 605,
New York, NY 10017.
John Figliolini, 551 Fifth Avenue, Suite 605, New York, NY 10017, is
President of Utopia Capital Management Corporation ("Adviser"). He is
President of Berkshire International Finance, Inc., an investment
banking firm. He is Vice President of Berkshire Capital Management
Group, Ltd., a Swiss-based fund manager. He is also President of
Fifth Avenue Research and Advisory Group, Inc., an investment
research company. He is also President of European Equity Partners,
Inc., the Fund's distributor. Prior to August 1992, he was a
principal of Berkshire Securities, Inc., an investment banking firm.
-5-
<PAGE>
Oleg Batratchenko, 551 Fifth Avenue, Suite 605, New York, NY 10017,
is the Executive Vice President and a portfolio manager of the
Adviser. He is a registered representative with European Equity
Partners, Inc., the Fund's distributer. He is Vice President of
Research for Berkshire International Finance, Inc., an investment
banking firm. He is Senior Vice President of Fifth Avenue Research
and Advisory Group, Inc., an investment research firm. Prior to
January 1995 he was a broker trainee at Rickel & Associates, Inc.,
and South Richmond Securities, Inc., both brokerage firms. Prior to
November 1994, he was a research analyst with Safian Investment
Research, Inc., a money management and investment research firm.
Prior to November 1994, he was a free-lance translator with Corporate
Language Services, a translation agency. Prior to November 1993 he
was a performance analyst with Neuberger & Berman, Inc., an
investment management firm. Prior to May 1993, he was a project
manager for MR International, Inc., an international trading company.
Prior to December 1992, he was a telemarketer for PageNet, Inc., a
paging services company.
Anatoly E. Kambolin, 488 Madison Avenue, Suite 1505, New York, NY
10022, has been the President of Taj-Amer, Inc., which acts as a
consultant to construction projects for joint ventures in Russia
since January 1, 1992. In addition, Taj-Amer, Inc. is in the business
of acting as a consultant to American companies seeking to do
business in what was formerly the Soviet Union and representing
Russian companies and organizations in the United States. Mr.
Kambolin graduated from the Moscow Auto Mechanical Institute with a
degree in mechanical engineering. He received a graduate degree in
Economics and International Trade from the All-Union Academy for
Foreign Trade. He is the father of Peter Kambolin, a portfolio
manager with the Adviser.
Carmine Chiappetta, 480 Pine Acres Boulevard, Brightwaters, NY 11718,
manages his own accounting firm specializing in taxes. Prior to March
1996, he was a tax accountant for United States Trust Company of New
York, Tucker Anthony & R.L. Day and Morgan Stanley & Co., Inc.
Henry Shapiro, 301 Ocean View Avenue, Brooklyn, NY 11235, has been a
registered investment adviser since March 1993. From March 1993 to
March 1995, he was a real estate and mortgage broker, and a certified
real estate appraiser. For the five years prior thereto, he managed
Shapiro & Co., a real estate and mortgage broker, in Fort Lauderdale,
Florida. Mr. Shapiro is a regular contributor to Radio Free
Europe/Radio Liberty and was a regular contributor of financial
articles to ITAR-TASS, the Russian State News Agency. Mr. Shapiro
also had a regular financial column for NRS, a Russian daily
-6-
<PAGE>
newspaper, and appeared regularly on the Russian Television Network.
Michael Miola, 24 West Carver Street, Huntington, New York 11743, is
Vice President and Treasurer of Delta Micro Cap Growth Fund. Since
1984, Mr. Miola has been the President of American Data Services
("American Data"). American Data is acting as the Fund's
Administrator, Transfer, Dividend and Disbursing Agent and Accounting
Services Manager. Mr. Miola has specialized in serving the investment
company industry since 1974. As a senior staff member of Coopers &
Lybrand, he designed and implemented that firm's audit approach and
working paper documentation model. During his tenure, he was called
upon to write portions of the AICPA's Investment Company Audit Guide.
Mr. Miola serves as a consultant to many mutual fund groups,
designing accounting processes for new and complex financial
transactions. Mr. Miola is a Certified Public Accountant, a member of
the American Institute of Certified Public Accountants, and the New
York Society of Certified Public Accountants. Mr. Miola graduated
magna cum laude from Fordham University's College of Business
Administration, with a Bachelor of Science Degree.
Michelle LoCascio, 24 West Carver Street, Huntington, New York 11743,
is Corporate Secretary of Delta Micro Cap Growth Fund. Ms. LoCascio
has been the Registration Compliance Officer of American Data from
1995 to the present. During the ten years prior thereto, Ms. LoCascio
worked in both the Fund Accounting and Stock Transfer Departments,
where she attained the title of Senior Administrator in each
Department. She is responsible for the filing of all state
registrations for all funds administered by American Data.
Item 29. Principal Underwriter
European Equity Partners, Inc.
Item 30. Location of Accounts and Records
c/o American Data Services, Inc.
24 West Carver Street
Huntington, NY 11743
(a) Adviser: Articles of incorporation, bylaws, minute books,
corporate records and contracts of the Registrant; general
ledger and certain separate ledger accounts; transaction
journals and confirmations for portfolio trades.
551 Fifth Avenue, Suite 605
New York, NY 10017
-7-
<PAGE>
(b) Transfer Agent: Ledger accounts and other records relating to
shareholders of the Fund.
American Data Services, Inc.
24 West Carver Street
Huntington, NY 11743
(c) Custodian: Accounts, records and other documentation required
to be maintained by the custodian for the Funds.
American Data Services, Inc.
24 West Carver Street
Huntington, NY 11743
Item 31. Management Services
Registrant is not a party to any such management-related service
contract.
Item 32. Undertakings
(a) The Registrant undertakes to file an amendment to the
Registration Statement with certified financial statements
showing the initial capital received before accepting
subscriptions from any persons in excess of 25.
(b) The Registrant undertakes to file a post-effective amendment,
using financial statements which need not be certified, for
the Funds, within four to six months from the effective date
of this Registration Statement.
(c) The Registrant undertakes to call a meeting of shareholders,
if requested to do so by holders of at least 10% of the
Trust's outstanding shares, for the purpose of voting upon the
question of removal of a trustee or trustees and to assist in
communications with other shareholders as required by Section
16(c) of the Investment Company Act of 1940.
-8-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment
No. 1 to the Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of New York, State of New
York, on the _____ day of June 1997.
DELTA FUNDS, INC.
By: /s/ John Figliolini
Name: John Figliolini
Title: President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to the Registration Statement has been signed on this _____ day
of June 1997, by or on behalf of the following persons in the capacities
indicated.
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Charles J. Hecht and Michael Miola or
either of them, with full power of substitution, his or her true and lawful
attorneys-in-fact and agents, for him and in his name, place and stead, in any
and all capacities, to sign in his or her name and on his or her behalf, in any
and all capacities any and all pre-and post-effective amendments to this
Registration Statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission and any state securities divisions, agencies, departments or
commissions, granting unto said attorneys-in-fact and agents full power and
authority to do and to perform each and every act and things requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents may lawfully do or cause to be done by
virtue hereof.
SIGNATURE TITLE
President and Trustee
John Figliolini
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Executive Vice
Oleg Batratchenko President/Trustee
Trustee
Anatoly E. Kambolin
Trustee
Carmine A. Chiappetta
Trustee
Henry Shapiro
Vice President
Michael Miola
Secretary
Michelle LoCascio
Treasurer
Michael Miola
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DELTA MUTUAL FUNDS
AGREEMENT AND DECLARATION OF TRUST
AGREEMENT AND DECLARATION OF TRUST made this 11th day of March 1997, by
the Trustees hereunder, and by the holders of Shares of beneficial interest to
be issued hereunder as hereinafter provided.
WITNESSETH:
WHEREAS, this Trust is being formed to carry on the business of an
investment company; and
WHEREAS, the Trustees have agreed to manage all property coming into
their hands as trustees of an Ohio business trust in accordance with the
provisions hereinafter set forth;
NOW, THEREFORE, the Trustees hereby declare that they will hold all
cash, securities and other assets which they may from time to time acquire in
any manner as Trustees hereunder IN TRUST to manage and dispose of the same upon
the following terms and conditions for the benefit of the holders from time to
time of shares of beneficial interest in this Trust as hereinafter set forth.
ARTICLE I
NAME AND DEFINITIONS
Section 1.1 Name. This Trust shall be known as the "Delta Mutual Funds"
and the Trustees shall conduct the business of the Trust under that name.
Section 1.2 Definitions. Whenever used herein, unless otherwise
required by the context or specifically provided:
(a) The "Trust" refers to the Ohio business trust established by
this Agreement and Declaration of Trust, as amended from time
to time;
(b) "Trustees" refers to the Trustees of the Trust named herein or
elected in accordance with Article III;
(c) "Shares" refers to the transferable units of interest into
which the beneficial interest in the Trust or any Series of
the Trust (as the context may require) shall be divided from
time to time;
(d) "Series" refers to Series of Shares established and designated
under or in accordance with the provisions of Article IV;
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(e) "Shareholder" means a record owner of Shares;
(f) The "1940 Act" refers to the Investment Company Act of 1940
and the Rules and Regulations thereunder, all as amended from
time to time;
(g) "Commission" shall have the meaning given it in the 1940 Act;
(h) "Declaration of Trust" shall mean this Agreement and
Declaration of Trust as amended or restated from time to time;
and
(i) "Bylaws" shall mean the Bylaws of the Trust as amended from
time to time.
ARTICLE II
PURPOSE OF TRUST
The purpose of the Trust is to operate as an investment company, to
offer Shareholders one or more investment programs primarily in securities and
debt instruments and to engage in any and all lawful acts or activities for
which business trusts may be formed under Chapter 1746.01 through 1746.99 of the
Ohio Revised Code. Until the Trustees determine otherwise, the principal office
of the Trust is to be located at 551 Fifth Avenue, New York, New York 10017.
ARTICLE III
THE TRUSTEES
Section 3.1 Number, Designation, Election, Term, etc.
----------- -----------------------------------------
(a) Initial Trustees. Upon execution of this Declaration of Trust
or a counterpart hereof or some other writing in which he
accepts such Trusteeship and agrees to the provisions hereof,
John Figliolini and Oleg Batrachenko shall become Trustees
hereof.
(b) Number. The Trustees serving as such, whether named ------
above or hereafter becoming a Trustee, may increase or
decrease the number of Trustees to a number other than the
number theretofore determined. No decrease in the number of
Trustees shall have the effect of removing any Trustee from
office prior to the expiration of his term, but the number of
Trustees may be decreased in conjunction with the removal of a
Trustee pursuant to subsection (e) of this Section 3.1.
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<PAGE>
(c) Term. Each Trustee shall serve as a Trustee during the
lifetime of the Trust and until its termination as hereinafter
provided or until such Trustee sooner dies, resigns, retires
or is removed. The Trustees may elect their own successors and
may, pursuant to Section 3.1(f) hereof, appoint Trustees to
fill vacancies; provided that, immediately after filling a
vacancy, at least two- thirds of the Trustees then holding
office shall have been elected to such office by the
Shareholders at an annual or special meeting. If at any time
less than a majority of the Trustees then holding office were
so elected, the Trustees shall forthwith cause to be held as
promptly as possible, and in any event within 60 days, a
meeting of Shareholders for the purpose of electing Trustees
to fill any existing vacancies.
(d) Resignation and Retirement. Any Trustee may resign his trust
or retire as a Trustee, by written instrument signed by him
and delivered to the other Trustees or to any officer of the
Trust, and such resignation or retirement shall take effect
upon such delivery or upon such later date as is specified in
such instrument.
(e) Removal. Any Trustee may be removed with or without cause at
any time: (i) by written instrument, signed by at least
two-thirds of the number of Trustees prior to such removal,
specifying the date upon which such removal shall become
effective, (ii) by vote of the Shareholders holding not less
than two-thirds of the Shares then outstanding, cast in person
or by proxy at any meeting called for the purpose, or (iii) by
a declaration in writing signed by Shareholders holding not
less than two- thirds of the Shares then outstanding and filed
with the Trust's Custodian.
(f) Vacancies. Any vacancy or anticipated vacancy resulting from
any reason, including without limitation, the death,
resignation, retirement, removal or incapacity of any of the
Trustees or resulting from an increase in the number of
Trustees by the Trustees, may (but so long as there are at
least three remaining Trustees, need not unless required by
the 1940 Act) be filled either by a majority of the remaining
Trustees through the appointment in writing of such other
person as such remaining Trustees in their discretion shall
determine (unless a shareholder election is required by the
1940 Act) or by the election by the Shareholders, at a meeting
called for the purpose, of a person to fill such vacancy, and
such appointment or election shall be effective upon the
written acceptance of the person named therein to serve as a
Trustee and
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<PAGE>
agreement by such person to be bound by the provisions of this
Declaration of Trust, except that any such appointment or
election in anticipation of a vacancy to occur by reason of
retirement, resignation, or increase in number of Trustees to
be effective at a later date shall become effective only at or
after the effective date of said retirement, resignation, or
increase in number of Trustees. As soon as any Trustee so
appointed or elected shall have accepted such appointment or
election and shall have agreed in writing to be bound by this
Declaration of Trust and the appointment or election is
effective, the Trust estate shall vest in the new Trustee,
together with the continuing Trustees, without any further act
or conveyance.
(g) Effect of Death, Resignation, etc. The death, resignation,
retirement, removal, or incapacity of the Trustees, or any one
of them, shall not operate to annul or terminate the Trust or
to revoke or terminate any existing agency or contract created
or entered into pursuant to the terms of this Declaration of
Trust.
(h) No Accounting. Except to the extent required by the 1940 Act
or under circumstances which would justify his removal for
cause, no person ceasing to be a Trustee as a result of his
death, resignation, retirement, removal or incapacity (nor the
estate of any such person) shall be required to make an
accounting to the Shareholders or remaining Trustees upon such
cessation.
Section 3.2 Powers of the Trustees. Subject to the provisions of this
Declaration of Trust, the business of the Trust shall be managed by the
Trustees, and they shall have all powers necessary or convenient to carry out
that responsibility and the purpose of the Trust. Without limiting the
foregoing, the Trustees may adopt Bylaws not inconsistent with this Declaration
of Trust providing for the conduct of the business and affairs of the Trust and
may amend and repeal them to the extent that such Bylaws do not reserve that
right to the Shareholders; they may as they consider appropriate elect and
remove officers and appoint and terminate agents and consultants and hire and
terminate employees, any one or more of the foregoing of whom may be a Trustee,
and may provide for the compensation of all of the foregoing; they may appoint
from their own number, and terminate, any one or more committees consisting of
two or more Trustees, including without implied limitation an executive
committee, which may, when the Trustees are not in session and subject to the
1940 Act, exercise some or all of the power and authority of the Trustees as the
Trustees may determine; in accordance with Section 3.3 they may employ one or
more advisers, administrators, depositories and custodians and may
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<PAGE>
authorize any depository or custodian to employ subcustodians or agents and to
deposit all or any part of such assets in a system or systems for the central
handling of securities and debt instruments, retain transfer, dividend,
accounting or Shareholder servicing agents or any of the foregoing, provide for
the distribution of Shares by the Trust through one or more distributors,
principal underwriters or otherwise, set record dates or times for the
determination of Shareholders or various of them with respect to various
matters; they may compensate or provide for the compensation of the Trustees,
officers, advisers, administrators, custodians, other agents, consultants and
employees of the Trust or the Trustees on such terms as they deem appropriate;
and in general they may delegate to any officer of the Trust, to any committee
of the Trustees and to any employee, adviser, administrator, distributor,
principal underwriter, depository, custodian, transfer and dividend disbursing
agent, or any other agent or consultant of the Trust such authority, powers,
functions and duties as they consider desirable or appropriate for the conduct
of the business and affairs of the Trust, including without implied limitation
the power and authority to act in the name of the Trust and of the Trustees, to
sign documents and to act as attorney-in-fact for the Trustees.
Without limiting the foregoing and to the extent not inconsistent with
the 1940 Act or other applicable law, the Trustees shall have power and
authority:
(a) Investments. To invest and reinvest cash and other property,
and to hold cash or other property uninvested without in any
event being bound or limited by any present or future law or
custom in regard to investments by trustees;
(b) Disposition of Assets. To sell, exchange, lend, pledge,
mortgage, hypothecate, write options on and lease any or all
of the assets of the Trust;
(c) Ownership Powers. To vote or give assent, or exercise any
rights of ownership, with respect to stock or other
securities, debt instruments or property; and to execute and
deliver proxies or powers of attorney to such person or
persons as the Trustees shall deem proper, granting to such
person or persons such power and discretion with relation to
securities, debt instruments or property as the Trustees shall
deem proper;
(d) Subscription. To exercise powers and rights of subscription or
otherwise which in any manner arise out of ownership of
securities or debt instruments;
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<PAGE>
(e) Form of Holding. To hold any security, debt instrument or
property in a form not indicating any trust, whether in
bearer, unregistered or other negotiable form, or in the name
of the Trustees or of the Trust or in the name of a custodian,
subcustodian or other depository or a nominee or nominees or
otherwise;
(f) Reorganization, etc. To consent to or participate in any plan
for the reorganization, consolidation or merger of any
corporation or issuer, any security or debt instrument of
which is or was held in the Trust; to consent to any contract,
lease, mortgage, purchase or sale of property by such
corporation or issuer, and to pay calls or subscriptions with
respect to any security or debt instrument held in the Trust;
(g) Voting Trusts, etc. To join with other holders of any
securities or debt instruments in acting through a committee,
depository, voting trustee or otherwise, and in that
connection to deposit any security or debt instrument with, or
transfer any security or debt instrument to, any such
committee, depository or trustee, and to delegate to them such
power and authority with relation to any security or debt
instrument (whether or not so deposited or transferred) as the
Trustees shall deem proper, and to agree to pay, and to pay,
such portion of the expenses and compensation of such
committee, depository or trustee as the Trustees shall deem
proper;
(h) Compromise. To compromise, arbitrate or otherwise adjust
claims in favor of or against the Trust or any matter in
controversy, including but not limited to claims for taxes;
(i) Partnerships, etc. To enter into joint ventures, general or
limited partnerships and any other combinations or
associations;
(j) Borrowing and Security. To borrow funds and to mortgage and
pledge the assets of the Trust or any part thereof to secure
obligations arising in connection with such borrowing;
(k) Guarantees, etc. To endorse or guarantee the payment of any
notes or other obligations of any person; to make contracts of
guaranty or suretyship, or otherwise assume liability for
payment thereof; and to mortgage and pledge the Trust property
or any part thereof to secure any of or all such obligations;
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<PAGE>
(l) Insurance. To purchase and pay for entirely out of Trust
property such insurance as they may deem necessary or
appropriate for the conduct of the business, including,
without limitation, insurance policies insuring the assets of
the Trust and payment of distributions and principal on its
portfolio investments, and insurance policies insuring the
Shareholders, Trustees, officers, employees, agents,
consultants, investment advisers, managers, administrators,
distributors, principal underwriters, or independent
contractors, or any thereof (or any person connected
therewith), of the Trust individually against all claims and
liabilities of every nature arising by reason of holding,
being or having held any such office or position, or by reason
of any action alleged to have been taken or omitted by any
such person in any such capacity, including any action taken
or omitted that may be determined to constitute negligence;
provided, however, that insurance which protects the Trustees
and officers against liabilities rising from action involving
willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of their
offices may not be purchased; and,
(m) Pensions, etc. To pay pensions for faithful service, as deemed
appropriate by the Trustees, and to adopt, establish and carry
out pension, profit-sharing, share bonus, share purchase,
savings, thrift and other retirement, incentive and benefit
plans, trusts and provisions, including the purchasing of life
insurance and annuity contracts as a means of providing such
retirement and other benefits, for any or all of the Trustees,
officers, employees and agents of the Trust.
Except as otherwise provided by the 1940 Act or other applicable law,
this Declaration of Trust or the Bylaws, any action to be taken by the Trustees
may be taken by a majority of the Trustees present at a meeting of Trustees (a
quorum, consisting of at least a majority of the Trustees then in office, being
present), within or without Ohio, including any meeting held by means of a
conference telephone or other communications equipment by means of which all
persons participating in the meeting can hear each other at the same time and
participation by such means shall constitute presence in person at a meeting, or
by written consents of a majority of the Trustees then in office (or such larger
or different number as may be required by the 1940 Act or other applicable law).
Section 3.3 Certain Contracts. Subject to compliance with the
provisions of the 1940 Act, but notwithstanding any limitations of present and
future law or custom in regard to delegation of powers by trustees generally,
the Trustees may, at any time and from time to time and without limiting the
generality of their
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powers and authority otherwise set forth herein, enter into one or more
contracts with any one or more corporations, trusts, associations, partnerships,
limited partnerships, other type of organizations, or individuals ("Contracting
Party") to provide for the performance and assumption of some or all of the
following services, duties and responsibilities to, for or of the Trust and/or
the Trustees, and to provide for the performance and assumption of such other
services, duties and responsibilities in addition to those set forth below as
the Trustees may determine appropriate:
(a) Advisory. Subject to the general supervision of the Trustees
and in conformity with the stated policy of the Trustees with
respect to the investments of the Trust or of the assets
belonging to any Series of Shares of the Trust (as that phrase
is defined in subsection (a) of Section 4.2), to manage such
investments and assets, make investment decisions with respect
thereto, and to place purchase and sale orders for portfolio
transactions relating to such investments and assets;
(b) Administration. Subject to the general supervision of the
Trustees and in conformity with any policies of the Trustees
with respect to the operations of the Trust, to supervise all
or any part of the operations of the Trust, and to provide all
or any part of the administrative and clerical personnel,
office space and office equipment and services appropriate for
the efficient administration and operations of the Trust;
(c) Distribution. To distribute the Shares of the Trust, to be
principal underwriter of such Shares, and/or to act as agent
of the Trust in the sale of Shares and the acceptance or
rejection of orders for the purchase of Shares;
(d) Custodian and Depository. To act as depository for and to
maintain custody of the property of the Trust and accounting
records in connection therewith;
(e) Transfer and Dividend Disbursing Agency. To maintain records
of the ownership of outstanding Shares, the issuance and
redemption and the transfer thereof, and to disburse any
dividends declared by the Trustees and in accordance with the
policies of the Trustees and/or the instructions of any
particular Shareholder to reinvest any such dividends;
(f) Shareholder Servicing. To provide service with respect to the
relationship of the Trust and its Shareholders, records with
respect to Shareholders and their Shares, and similar matters;
and
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(g) Legal, Accounting, Taxes and Other. To handle all or any part
of the legal, accounting, tax or other responsibilities,
whether with respect to the Trust's properties, Shareholders
or otherwise.
The same person may be the Contracting Party for some or all of the services,
duties and responsibilities to, for and of the Trust and/or the Trustees, and
the contracts with respect thereto may contain such terms interpretive of or in
addition to the delineation of the services, duties and responsibilities
provided for, including provisions that are not inconsistent with the 1940 Act
relating to the standard of duty of and the rights to indemnification of the
Contracting Party and others, as the Trustees may determine. Nothing herein
shall preclude, prevent or limit the Trust or a Contracting Party from entering
into subcontractual arrangements relative to any of the matters referred to in
Sections 3.3(a) through (g) hereof.
Subject to the provisions of the 1940 Act, the fact that:
(i) any of the Shareholders, Trustees or officers of the Trust
is a shareholder, director, officer, partner, trustee, employee,
manager, adviser, principal underwriter or distributor or agent of or
for any Contracting Party, or of or for any parent or affiliate of any
Contracting Party or that the Contracting Party or any parent or
affiliate thereof is a Shareholder or has an interest in the Trust, or
that
(ii) any Contracting Party may have a contract providing for
the rendering of any similar services to one or more other
corporations, trusts, associations, partnerships, limited partnerships
or other organizations, or has other business or interests,
shall not affect the validity of any contract for the performance and
assumption of services, duties and responsibilities to, for or of the
Trust and/or the Trustees or disqualify any Shareholder, Trustee or
officer of the Trust from voting upon or executing the same or create
any liability or accountability to the Trust or its Shareholders,
provided that in the case of any relationship or interest referred to
in the preceding clause (i) on the part of any Trustee or officer of
the Trust either (1) the material facts as to such relationship or
interest have been disclosed to or are known by the Trustees not having
any such relationship or interest and the contract involved is approved
in good faith reasonably justified by such facts by a majority of such
Trustees not having any such relationship or interest (even though such
unrelated or disinterested Trustees are less than a quorum of all of
the Trustees), or (2) the specific contract involved is fair to the
Trust as of the time it is authorized, approved or ratified by the
Trustees or by the Shareholders.
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Section 3.4 Payment of Trust Expenses and Compensation of Trustees. The
Trustees are authorized to pay or to cause to be paid out of the principal or
income of the Trust, or partly out of principal and partly out of income, and to
charge or allocate the same to, between or among such one or more of the Series
that may be established and designated pursuant to Article IV, as the Trustees
deem fair, all expenses, fees, charges, taxes and liabilities incurred or
arising in connection with the Trust, or in connection with the management
thereof, including, but not limited to, the Trustees' compensation and such
expenses and charges for the services of the Trust's officers, employees,
investment adviser, administrator, distributor, principal underwriter, auditor,
counsel, depository, custodian, transfer agent, dividend disbursing agent,
accounting agent, Shareholder servicing agent, and such other agents,
consultants, and independent contractors and such other expenses and charges as
the Trustees may deem necessary or proper to incur. Without limiting the
generality of any other provision hereof, the Trustees shall be entitled to
reasonable compensation from the Trust for their services as Trustees and may
fix the amount of such compensation.
Section 3.5 Ownership of Assets of the Trust. Title to all of the
assets of the Trust shall at all times be considered as vested in the Trustees.
ARTICLE IV
SHARES
Section 4.1 Description of Shares. The beneficial interest in the Trust
shall be divided into Shares, all without par value, but the Trustees shall have
the authority from time to time to divide the Shares into two or more Series of
Shares, as they deem necessary or desirable, to establish and designate such
Series, and to fix and determine the relative rights and preferences as between
the different Series of Shares as to right of redemption and the price, terms
and manner of redemption, special and relative rights as to dividends and other
distributions and on liquidation, sinking or purchase fund provisions,
conversion rights, and conditions under which the several Series shall have
separate voting rights or no voting rights. Except as aforesaid all Shares of
the different Series shall be identical.
The Shares of each Series may be issued or reissued from time to time
in one or more classes ("Classes"), as determined by the Board of Trustees
pursuant to resolution. Each Class shall be appropriately designated, prior to
the issuance of any shares thereof, by some distinguishing letter, number or
title. All Shares within a Class shall be alike in every particular. All Shares
of each Series shall be of equal rank and have the same
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powers, preferences and rights, and shall be subject to the same
qualifications, limitations and restrictions without distinction between the
shares of different Classes thereof, except with respect to such differences
among such Classes, as the Board of Trustees shall from time to time determine
to be necessary or desirable, including differences in the rate or rates of
dividends or distributions. The Board of Trustees may from time to time increase
the number of Shares allocated to any Class already created by providing that
any unissued Shares of the applicable Series shall constitute part of such
Class, or may decrease the number of Shares allocated to any Class already
created by providing that any unissued Shares previously assigned to such Class
shall no longer constitute part thereof. The Board of Trustees is hereby
empowered to classify or reclassify from time to time any unissued Shares of
each Series by fixing or altering the terms thereof and by assigning such
unissued shares to an existing or newly created Class. Notwithstanding anything
to the contrary in this paragraph the Board of Trustees is hereby empowered (i)
to redesignate any issued Shares of any Series by assigning a distinguishing
letter, number or title to such shares and (ii) to reclassify all or any part of
the issued Shares of any Series to make them part of an existing or newly
created Class. The number of authorized Shares and the number of Shares of each
Series that may be issued is unlimited, and the Trustees may issue Shares of any
Series for such consideration and on such terms as they may determine (or for no
consideration if pursuant to a Share dividend or split-up), all without action
or approval of the Shareholders. All Shares when so issued on the terms
determined by the Trustees shall be fully paid and non-assessable (but may be
subject to mandatory contribution back to the Trust as provided in subsection
(g) of Section 4.2). The Trustees may classify or reclassify any unissued Shares
or any Shares previously issued and reacquired of any Series into one or more
Series that may be established and designated from time to time. The Trustees
may hold as treasury Shares (of the same or some other Series), reissue for such
consideration and on such terms as they may determine, or cancel, at their
discretion from time to time, any Shares of any Series reacquired by the Trust.
The Trustees may from time to time close the transfer books or
establish record dates and times for the purposes of determining the holders of
Shares entitled to be treated as such, to the extent provided or referred to in
Section 5.3.
The establishment and designation of any Series of Shares in addition
to that established and designated in Section 4.2, or of any Class of Shares,
shall be effective upon the execution by a majority of the then Trustees of an
instrument setting forth such establishment and designation and the relative
rights and preferences of such Series or Class, or as otherwise provided in
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such instrument. At any time that there are no Shares outstanding of any
particular Series or Class previously established and designated the Trustees
may by an instrument executed by a majority of their number abolish that Series
or Class and the establishment and designation thereof. Each instrument referred
to in this paragraph shall have the status of an amendment to this Declaration
of Trust.
Any Trustee, officer or other agent of the Trust, and any organization
in which any such person is interested may acquire, own, hold and dispose of
Shares of any Series of the Trust to the same extent as if such person were not
a Trustee, officer or other agent of the Trust; and the Trust may issue and sell
or cause to be issued and sold and may purchase Shares of any Series from any
such person or any such organization subject only to the general limitations,
restrictions or other provisions applicable to the sale or purchase of Shares of
such Series generally.
Section 4.2 Establishment and Designation of Series. Without limiting
the authority of the Trustees set forth in Section 4.1 to establish and
designate any further Series, the Trustees hereby establish and designate one
Series of Shares: the "Delta Micro Cap Growth Fund". The Shares of this Series
and any Shares of any further Series that may from time to time be established
and designated by the Trustees shall (unless the Trustees otherwise determine
with respect to some further Series or Class at the time of establishing and
designating the same) have the following relative rights and preferences:
(a) Assets Belonging to Series. All consideration received by the
Trust for the issue or sale of Shares of a particular Series,
together with all assets in which such consideration is
invested or reinvested, all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation of such assets, and any funds or
payments derived from any reinvestment of such proceeds in
whatever form the same may be, shall irrevocably belong to
that Series for all purposes, subject only to the rights of
creditors, and shall be so recorded upon the books of account
of the Trust. Such consideration, assets, income, earnings,
profits and proceeds thereof, including any proceeds derived
from the sale, exchange or liquidation of such assets, and any
funds or payments derived from any reinvestment of such
proceeds, in whatever form the same may be, together with any
General Items allocated to that Series as provided in the
following sentence, are herein referred to as "assets
belonging to" that Series. In the event that there are any
assets, incomes, earnings, profits, and proceeds thereof,
funds, or payments which are not readily identifiable as
belonging to any
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particular Series (collectively "General Items"), the Trustees
shall allocate such General Items to and among any one or more
of the Series established and designated from time to time in
such manner and on such basis as they, in their sole
discretion, deem fair and equitable; and any General Items so
allocated to a particular Series shall belong to that Series.
Each such allocation by the Trustees shall be conclusive and
binding upon the Shareholders of all Series for all purposes.
The Trustees shall have full discretion, to the extent not
inconsistent with the 1940 Act, to determine which items shall
be treated as income and which items as capital; and each such
determination and allocation shall be conclusive and binding
upon the Shareholders.
(b) Liabilities Belonging to Series. The assets belonging to each
particular Series shall be charged with the liabilities of the
Trust in respect of that Series and all expenses, costs,
charges and reserves attributable to that Series, and any
general liabilities, expenses, costs, charges or reserves of
the Trust which are not readily identifiable as belonging to
any particular Series shall be allocated and charged by the
Trustees to and among any one or more of the Series
established and designated from time to time in such manner
and on such basis as the Trustees in their sole discretion
deem fair and equitable. The liabilities, expenses, costs,
charges and reserves allocated and so charged to a Series are
herein referred to as "liabilities belonging to" that Series.
Each allocation of liabilities, expenses, costs, charges and
reserves by the Trustees shall be conclusive and binding upon
the holders of all Series for all purposes.
(c) Dividends. Dividends and distributions on Shares of a
particular Series may be paid with such frequency as the
Trustees may determine, which may be daily or otherwise
pursuant to a standing resolution or resolutions adopted only
once or with such frequency as the Trustees may determine, to
the holders of Shares of that Series, from such of the
estimated income and capital gains, accrued or realized, from
the assets belonging to that Series, as the Trustees may
determine, after providing for actual and accrued liabilities
belonging to that Series. All dividends and distributions on
Shares of a particular Series shall be distributed pro rata to
the holders of that Series in proportion to the number of
Shares of that Series held by such holders at the date and
time of record established for the payment of such dividends
or distributions, except that in connection with any dividend
or distribution program or procedure the Trustees may
determine that no dividend or distribution
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shall be payable on Shares as to which the Shareholder's
purchase order and/or payment have not been received by the
time or times established by the Trustees under such program
or procedure, and except that if Classes have been established
for any Series, the rate of dividends or distributions may
vary among such Classes pursuant to resolution, which may be a
standing resolution, of the Board of Trustees. Such dividends
and distributions may be made in cash or Shares or a
combination thereof as determined by the Trustees or pursuant
to any program that the Trustees may have in effect at the
time for the election by each Shareholder of the mode of the
making of such dividend or distribution to that Shareholder.
Any such dividend or distribution paid in Shares will be paid
at the net asset value thereof as determined in accordance
with subsection (h) of Section 4.2.
The Trust intends to qualify each Series as a "regulated
investment company" under the Internal Revenue Code of 1986,
as amended, or any successor or comparable statute thereto,
and regulations promulgated thereunder. Inasmuch as the
computation of net income and gains for federal income tax
purposes may vary from the computation thereof on the books of
the Trust, the Board of Trustees shall have the power, in its
sole discretion, to distribute in any fiscal year as
dividends, including dividends designated in whole or in part
as capital gains distributions, amounts sufficient, in the
opinion of the Board of Trustees, to enable each Series to
qualify as a regulated investment company and to avoid
liability of the Series for federal income tax in respect of
that year. However, nothing in the foregoing shall limit the
authority of the Board of Trustees to make distributions
greater than or less than the amount necessary to qualify as a
regulated investment company and to avoid liability of each
Series for such tax.
(d) Liquidation. In event of the liquidation or dissolution of the
Trust, the Shareholders of each Series that has been
established and designated shall be entitled to receive, as a
Series, when and as declared by the Trustees, the excess of
the assets belonging to that Series over the liabilities
belonging to that Series. The assets so distributable to the
Shareholders of any particular Series shall be distributed
among such Shareholders in proportion to the number of Shares
of that Series held by them and recorded on the books of the
Trust. The liquidation of any particular Series may be
authorized by vote of a majority of the Trustees then in
office subject to the approval of a majority of the
outstanding voting Shares of that Series, as defined in the
1940 Act.
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(e) Voting. All shares of all Series shall have "equal voting
rights" as such term is defined in the Investment Company Act
of 1940 and except as otherwise provided by that Act or rules,
regulations or orders promulgated thereunder. On each matter
submitted to a vote of the Shareholders, all Shares of all
Series shall vote as a single class ("Single Class Voting");
provided, however, that (a) as to any matter with respect to
which a separate vote of any Series is required by the 1940
Act or rules and regulations promulgated thereunder, or would
be required under the Ohio General Corporation Law if the
Trust were an Ohio corporation, such requirements as to a
separate vote by that Series shall apply in lieu of Single
Class Voting as described above; (b) in the event that the
separate vote requirements referred to in (a) above apply with
respect to one or more Series, then, subject to (c) below, the
Shares of all other Series shall vote as a single class; and
(c) as to any matter which does not affect the interest of a
particular Series, only the holders of Shares of the one or
more affected Series shall be entitled to vote.
(f) Redemption by Shareholder. Each holder of Shares of a
particular Series shall have the right at such times as may be
permitted by the Trust, but no less frequently than once each
week, to require the Trust to redeem all or any part of his
Shares of that Series at a redemption price equal to the net
asset value per Share of that Series next determined in
accordance with subsection (h) of this Section 4.2 after the
Shares are properly tendered for redemption. Payment of the
redemption price shall be in cash; provided, however, that if
the Trustees determine, which determination shall be
conclusive, that conditions exist which make payment wholly in
cash unwise or undesirable, the Trust may make payment wholly
or partly in securities or other assets belonging to the
Series of which the Shares being redeemed are part at the
value of such securities or assets used in such determination
of net asset value.
Notwithstanding the foregoing, the Trust may postpone payment
of the redemption price and may suspend the right of the
holders of Shares of any Series to require the Trust to redeem
Shares of that Series during any period or at any time when
and to the extent permissible under the 1940 Act, and such
redemption is conditioned upon the Trust having funds or
property legally available therefor.
(g) Redemption by Trust. Each Share of each Series that has been
established and designated is subject to redemption by the
Trust at the redemption price which would be applicable if
such Share was then being redeemed by the
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Shareholder pursuant to subsection (f) of this Section 4.2:
(a) at any time, if the Trustees determine in their sole
discretion that failure to so redeem may have materially
adverse consequences to all or any of the holders of the
Shares, or any Series thereof, of the Trust, or (b) upon such
other conditions as may from time to time be determined by the
Trustees and set forth in the then current Prospectus of the
Trust with respect to maintenance of Shareholder accounts of a
minimum amount. Upon such redemption the holders of the Shares
so redeemed shall have no further right with respect thereto
other than to receive payment of such redemption price.
(h) Net Asset Value. The net asset value per Share of any Series
shall be the quotient obtained by dividing the value of the
net assets of that Series (being the value of the assets
belonging to that Series less the liabilities belonging to
that Series) by the total number of Shares of that Series
outstanding, all determined in accordance with the methods and
procedures, including without limitation those with respect to
rounding, established by the Trustees from time to time.
(i) Transfer. All Shares of each particular Series shall be
transferable, but transfers of Shares of a particular Series
will be recorded on the Share transfer records of the Trust
applicable to that Series only at such times as Shareholders
shall have the right to require the Trust to redeem Shares of
that Series and at such other times as may be permitted by the
Trustees.
(j) Equality. All Shares of each particular Series shall represent
an equal proportionate interest in the assets belonging to
that Series (subject to the liabilities belonging to that
Series), and each Share of any particular Series shall be
equal to each other Share of that Series; but the provisions
of this sentence shall not restrict any distinctions
permissible under subsection (c) of this Section 4.2 that may
exist with respect to dividends and distributions on Shares of
the same Series. The Trustees may from time to time divide or
combine the Shares of any particular Series into a greater or
lesser number of Shares of that Series without thereby
changing the proportionate beneficial interest in the assets
belonging to that Series or in any way affecting the rights of
Shares of any other Series.
(k) Fractions. Any fractional Share of any Series or Class, if any
such fractional Share is outstanding, shall carry
proportionately all the rights and obligations of a whole
Share of that Series or Class, including with respect to
voting, receipt of dividends and distributions, redemption of
Shares, and liquidation of the Trust.
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<PAGE>
(l) Conversion Rights. Subject to compliance with the requirements
of the 1940 Act, the Trustees shall have the authority to
provide that holders of Shares of any Series shall have the
right to convert said Shares into Shares of one or more other
Series of Shares in accordance with such requirements and
procedures as may be established by the Trustees.
Section 4.3 Ownership of Shares. The ownership of Shares shall be
recorded on the books of the Trust or of a transfer or similar agent for the
Trust, which books shall be maintained separately for the Shares of each Series
that has been established and designated. No certificates certifying the
ownership of Shares need be issued except as the Trustees may otherwise
determine from time to time. The Trustees may make such rules as they consider
appropriate for the issuance of Share certificates, the use of facsimile
signatures, the transfer of Shares and similar matters. The record books of the
Trust as kept by the Trust or any transfer or similar agent, as the case may be,
shall be conclusive as to who are the Shareholders and as to the number of
Shares of each Series and Class held from time to time by each such Shareholder.
Section 4.4 Investments in the Trust. The Trustees may accept
investments in the Trust from such persons and on such terms and for such
consideration, not inconsistent with the provisions of the 1940 Act, as they
from time to time authorize. The Trustees may authorize any distributor,
principal underwriter, custodian, transfer agent or other person to accept
orders for the purchase of Shares that conform to such authorized terms and to
reject any purchase orders for Shares whether or not conforming to such
authorized terms.
Section 4.5 No Preemptive Rights. Shareholders shall have no preemptive
or other right to subscribe to any additional Shares or other securities issued
by the Trust.
Section 4.6 Status of Shares and Limitation of Personal Liability.
Shares shall be deemed to be personal property giving only the rights provided
in this instrument. Every Shareholder by virtue of having become a Shareholder
shall be held to have expressly assented and agreed to the terms hereof and to
have become a party hereto. The death of a Shareholder during the continuance of
the Trust shall not operate to terminate the Trust nor entitle the
representative of any deceased Shareholder to an accounting or to take any
action in court or elsewhere against the Trust or the Trustees, but only to the
rights of said decedent under this Trust. Ownership of Shares shall not entitle
the Shareholder to any title in or to the whole or any part of the Trust
property or right to call for a partition or division of the same or for an
accounting, nor shall the ownership of Shares
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constitute the Shareholders as partners. Neither the Trust nor the Trustees, nor
any officer, employee or agent of the Trust shall have any power to bind
personally any Shareholder, nor except as specifically provided herein to call
upon any Shareholder for the payment of any sum of money or assessment
whatsoever other than such as the Shareholder may at any time personally agree
to pay.
ARTICLE V
SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 5.1 Voting Powers. The Shareholders shall have power to vote
only (i) for the election or removal of Trustees as provided in Section 3.1,
(ii) with respect to any contract with a Contracting Party as provided in
Section 3.3 as to which Shareholder approval is required by the 1940 Act, (iii)
with respect to any termination or reorganization of the Trust or any Series to
the extent and as provided in Sections 7.1 and 7.2, (iv) with respect to any
amendment of this Declaration of Trust to the extent and as provided in Section
7.3, (v) to the same extent as the stockholders of an Ohio business corporation
as to whether or not a court action, proceeding or claim should or should not be
brought or maintained derivatively or as a class action on behalf of the Trust
or the Shareholders, and (vi) with respect to such additional matters relating
to the Trust as may be required by the 1940 Act, this Declaration of Trust, the
Bylaws or any registration of the Trust with the Commission (or any successor
agency) or any state, or as the Trustees may consider necessary or desirable.
There shall be no cumulative voting in the election of any Trustee or Trustees.
Shares may be voted in person or by proxy. A proxy with respect to Shares held
in the name of two or more persons shall be valid if executed by any one of them
unless at or prior to exercise of the proxy the Trust receives a specific
written notice to the contrary from any one of them. A proxy purporting to be
executed by or on behalf of a Shareholder shall be deemed valid unless
challenged at or prior to its exercise and the burden of proving invalidity
shall rest on the challenger. Until Shares are issued, the Trustees may exercise
all rights of Shareholders and may take any action required by law, this
Declaration of Trust or the Bylaws to be taken by Shareholders.
Section 5.2 Meetings. Meetings (including meetings involving only the
holders of Shares of one or more but less than all Series) of Shareholders may
be called by the Trustees from time to time for the purpose of taking action
upon any matter requiring the vote or authority of the Shareholders as herein
provided or upon any other matter deemed by the Trustees to be necessary or
desirable. Written notice of any meeting of Shareholders shall be given or
caused to be given by the Trustees by mailing such notice
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at least seven days before such meeting, postage prepaid, stating the time,
place and purpose of the meeting, to each Shareholder at the Shareholder's
address as it appears on the records of the Trust. The Trustees shall promptly
call and give notice of a meeting of Shareholders for the purpose of voting upon
removal of any Trustee of the Trust when requested to do so in writing by
Shareholders holding not less than 10% of the Shares then outstanding. If the
Trustees shall fail to call or give notice of any meeting of Shareholders
(including a meeting involving only the holders of Shares of one or more but
less than all Series) for a period of 30 days after written application by
Shareholders holding at least 25% of the Shares then outstanding requesting a
meeting be called for any other purpose requiring action by the Shareholders as
provided herein or in the Bylaws, then Shareholders holding at least 25% of the
Shares then outstanding may call and give notice of such meeting, and thereupon
the meeting shall be held in the manner provided for herein in case of call
thereof by the Trustees.
Section 5.3 Record Dates. For the purpose of determining the
Shareholders who are entitled to vote or act at any meeting or any adjournment
thereof, or who are entitled to participate in any dividend or distribution, or
for the purpose of any other action, the Trustees may from time to time close
the transfer books for such period, not exceeding 30 days (except at or in
connection with the termination of the Trust), as the Trustees may determine; or
without closing the transfer books the Trustees may fix a date and time not more
than 60 days prior to the date of any meeting of Shareholders or other action as
the date and time of record for the determination of Shareholders entitled to
vote at such meeting or any adjournment thereof or to be treated as Shareholders
of record for purposes of such other action, and any Shareholder who was a
Shareholder at the date and time so fixed shall be entitled to vote at such
meeting or any adjournment thereof or (subject to any provisions permissible
under subsection (c) of Section 4.2 with respect to dividends or distributions
on Shares that have not been ordered and/or paid for by the time or times
established by the Trustees under the applicable dividend or distribution
program or procedure then in effect) to be treated as a Shareholder of record
for purposes of such other action, even though he has since that date and time
disposed of his Shares, and no Shareholder becoming such after that date and
time shall be so entitled to vote at such meeting or any adjournment thereof or
to be treated as a Shareholder of record for purposes of such other action.
Section 5.4 Quorum and Required Vote. A majority of the Shares entitled
to vote shall be a quorum for the transaction of business at a Shareholders'
meeting, but any lesser number shall be sufficient for adjournments. Any
adjourned session or sessions may be held, within a reasonable time after the
date set for the original meeting without the necessity of further notice. A
majority of the Shares voted, at a meeting of which a quorum is
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present, shall decide any questions and a plurality shall elect a Trustee,
except when a different vote is required or permitted by any provision of the
1940 Act or other applicable law or by this Declaration of Trust or the Bylaws.
Section 5.5 Action by Written Consent. Subject to the provisions of the
1940 Act and other applicable law, any action taken by Shareholders may be taken
without a meeting if a majority of Shareholders entitled to vote on the matter
(or such other proportion thereof as shall be required by the 1940 Act or by any
express provision of this Declaration of Trust or the Bylaws) consent to the
action in writing and such written consents are filed with the records of the
meetings of Shareholders. Such consent shall be treated for all purposes as a
vote taken at a meeting of Shareholders.
Section 5.6 Inspection of Records. The records of the Trust shall be
open to inspection by Shareholders to the same extent as is permitted
stockholders of an Ohio corporation under the Ohio General Corporation Law.
Section 5.7 Additional Provisions. The Bylaws may include further
provisions for Shareholders' votes and meetings and related matters not
inconsistent with the provisions hereof.
ARTICLE VI
LIMITATION OF LIABILITY; INDEMNIFICATION
Section 6.1 Trustees, Shareholders, etc. Not Personally Liable; Notice.
All persons extending credit to, contracting with or having any claim against
the Trust shall look only to the assets of the Trust for payment under such
credit, contract or claim; and neither the Shareholders nor the Trustees, nor
any of the Trust's officers, employees or agents, whether past, present or
future, shall be personally liable therefor. Every note, bond, contract,
instrument, certificate or undertaking and every other act or thing whatsoever
executed or done by or on behalf of the Trust or the Trustees or any of them in
connection with the Trust shall be conclusively deemed to have been executed or
done only by or for the Trust or the Trustees and not personally. Nothing in
this Declaration of Trust shall protect any Trustee or officer against any
liability to the Trust or the Shareholders to which such Trustee or officer
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of the
office of Trustee or of such officer.
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Every note, bond, contract, instrument, certificate or undertaking made
or issued by the Trustees or by any officers or officer shall give notice that
this Declaration of Trust is on file with the Secretary of the State of Ohio and
shall recite to the effect that the same was executed or made by or on behalf of
the Trust or by them as Trustees or Trustee or as officers or officer and not
individually and that the obligations of such instrument are not binding upon
any of them or the Shareholders individually but are binding only upon the
assets and property of the Trust, but the omission thereof shall not operate to
bind any Trustees or Trustee or officers or officer or Shareholders or
Shareholder individually.
Section 6.2 Trustee's Good Faith Action; Expert Advice; No Bond or
Surety. The exercise by the Trustees of their powers and discretions hereunder
shall be binding upon everyone interested. A Trustee shall be liable for his own
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee, and for nothing else,
and shall not be liable for errors of judgment or mistakes of fact or law.
Subject to the foregoing, (a) the Trustees shall not be responsible or liable in
any event for any neglect or wrongdoing of any officer, agent, employee,
consultant, adviser, administrator, distributor or principal underwriter,
custodian or transfer, dividend disbursing, Shareholder servicing or accounting
agent of the Trust, nor shall any Trustee be responsible for the act or omission
of any other Trustee; (b) the Trustees may take advice of counsel or other
experts with respect to the meaning and operation of this Declaration of Trust
and their duties as Trustees, and shall be under no liability for any act or
omission in accordance with such advice or for failing to follow such advice;
and (c) in discharging their duties, the Trustees, when acting in good faith,
shall be entitled to rely upon the books of account of the Trust and upon
written reports made to the Trustees by any officer appointed by them, any
independent public accountant, and (with respect to the subject matter of the
contract involved) any officer, partner or responsible employee of a Contracting
Party appointed by the Trustees pursuant to Section 3.3. The Trustees as such
shall not be required to give any bond or surety or any other security for the
performance of their duties. Nothing stated herein is intended to detract from
the protection accorded to Trustees by Ohio Revised Code Sections 1746.08 and
1701.59, as amended from time to time.
Section 6.3 Indemnification of Shareholders. In case any Shareholder or
former Shareholder shall be charged or held to be personally liable for any
obligation or liability of the Trust solely by reason of being or having been a
Shareholder and not because of such Shareholder's acts or omissions or for some
other reason, the Trust (upon proper and timely request by the
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Shareholder) shall assume the defense against such charge and satisfy any
judgment thereon, and the Shareholder or former Shareholder (or his heirs,
executors, administrators or other legal representatives or in the case of a
corporation or other entity, its corporate or other general successor) shall be
entitled out of the assets of the Trust estate to be held harmless from and
indemnified against all loss and expense arising from such liability.
Section 6.4 Indemnification of Trustees, Officers, etc. Subject to and
except as otherwise provided in the Securities Act of 1933, as amended, and the
1940 Act, the Trust shall indemnify each of its Trustees and officers, including
persons who serve at the Trust's request as directors, officers or trustees of
another organization in which the Trust has any interest as a shareholder,
creditor or otherwise (hereinafter referred to as a "Covered Person") against
all liabilities, including but not limited to amounts paid in satisfaction of
judgments, in compromise or as fines and penalties, and expenses, including
reasonable accountants' and counsel fees, incurred by any Covered Person in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or administrative or
legislative body, in which such Covered Person may be or may have been involved
as a party or otherwise or with which such person may be or may have been
threatened, while in office or thereafter, by reason of being or having been
such a Trustee or officer, director or trustee, and except that no Covered
Person shall be indemnified against any liability to the Trust or its
Shareholders to which such Covered Person would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such Covered Person's office.
Section 6.5 Advances of Expenses. The Trust shall advance attorneys'
fees or other expenses incurred by a Covered Person in defending a proceeding to
the full extent permitted by the Securities Act of 1933, as amended, the 1940
Act, and Ohio Revised Code Chapter 1707, as amended. In the event any of these
laws conflict with Ohio Revised Code Section 1701.13(E), as amended, these laws,
and not Ohio Revised Code Section 1701.13(E), shall govern.
Section 6.6 Indemnification Not Exclusive, etc. The right -----------
of indemnification provided by this Article VI shall not be exclusive of or
affect any other rights to which any such Covered Person may be entitled. As
used in this Article VI, "Covered Person" shall include such person's heirs,
executors and administrators. Nothing contained in this article shall affect any
rights to indemnification to which personnel of the Trust, other than Trustees
and officers, and other persons may be entitled by contract or otherwise under
law, nor the power of the Trust to purchase and maintain liability insurance on
behalf of any such person.
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Section 6.7 Liability of Third Persons Dealing with Trustees. No person
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the Trust or upon
its order.
ARTICLE VII
MISCELLANEOUS
Section 7.1 Duration and Termination of Trust. Unless terminated as
provided herein, the Trust shall continue without limitation of time. The Trust
may be terminated at any time by a majority of the Trustees then in office
subject to a favorable vote of a majority of the outstanding voting Shares, as
defined in the 1940 Act, of each Series voting separately by Series.
Upon termination, after paying or otherwise providing for all charges,
taxes, expenses and liabilities, whether due or accrued or anticipated as may be
determined by the Trustees, the Trust shall in accordance with such procedures
as the Trustees consider appropriate reduce the remaining assets to
distributable form in cash, securities or other property, or any combination
thereof, and distribute the proceeds to the Shareholders, in conformity with the
provisions of subsection (d) of Section 4.2.
Section 7.2 Reorganization. The Trustees may sell, convey and transfer
the assets of the Trust, or the assets belonging to any one or more Series, to
another trust, partnership, association or corporation organized under the laws
of any state of the United States, or to the Trust to be held as assets
belonging to another Series of the Trust, in exchange for cash, shares or other
securities (including, in the case of a transfer to another Series of the Trust,
Shares of such other Series) with such transfer being made subject to, or with
the assumption by the transferee of, the liabilities belonging to each Series
the assets of which are so transferred; provided, however, that if shareholder
approval is required by the 1940 Act, no assets belonging to any particular
Series shall be so transferred unless the terms of such transfer shall have
first been approved at a meeting called for the purpose by the affirmative vote
of the holders of a majority of the outstanding voting Shares, as defined in the
1940 Act, of that Series. Following such transfer, the Trustees shall distribute
such cash, shares or other securities (giving due effect to the assets and
liabilities belonging to and any other differences among the various Series the
assets belonging to which have so been transferred) among the Shareholders of
the Series the assets belonging to which have been so transferred; and if all of
the assets of the Trust have been so transferred, the Trust shall be terminated.
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Section 7.3 Amendments. All rights granted to the Shareholders under
this Declaration of Trust are granted subject to the reservation of the right to
amend this Declaration of Trust as herein provided, except that no amendment
shall repeal the limitations on personal liability of any Shareholder or Trustee
or repeal the prohibition of assessment upon the Shareholders without the
express consent of each Shareholder or Trustee involved. Subject to the
foregoing, the provisions of this Declaration of Trust (whether or not related
to the rights of Shareholders) may be amended at any time by an instrument in
writing signed by a majority of the then Trustees (or by an officer of the Trust
pursuant to the vote of a majority of such Trustees), when authorized so to do
by the vote in accordance with subsection (e) of Section 4.2 of Shareholders
holding a majority of the Shares entitled to vote, except that amendments either
(a) establishing and designating any new Series of Shares not established and
designated in Section 4.2, or any Class or (b) having the purpose of changing
the name of the Trust or the name of any Shares theretofore established and
designated or of supplying any omission, curing any ambiguity or curing,
correcting or supplementing any provision hereof which is internally
inconsistent with any other provision hereof or which is defective or
inconsistent with the 1940 Act or with the requirements of the Internal Revenue
Code and applicable regulations for the Trust's obtaining the most favorable
treatment thereunder available to regulated investment companies, shall not
require authorization by Shareholder vote. Subject to the foregoing, any such
amendment shall be effective as provided in the instrument containing the terms
of such amendment or, if there is no provision therein with respect to
effectiveness, upon the execution of such instrument and of a certificate (which
may be a part of such instrument) executed by a Trustee or officer of the Trust
to the effect that such amendment has been duly adopted.
Section 7.4 Filing of Copies; References; Headings. The original or a
copy of this instrument and of each amendment hereto shall be kept at the office
of the Trust where it may be inspected by any Shareholder. A copy of this
instrument and of each amendment hereto shall be filed by the Trust with the
Secretary of the State of Ohio, as well as any other governmental office where
such filing may from time to time be required, but the failure to make any such
filing shall not impair the effectiveness of this instrument or any such
amendment. Anyone dealing with the Trust may rely on a certificate by an officer
of the Trust as to whether or not any such amendments have been made, as to the
identities of the Trustees and officers, and as to any matters in connection
with the Trust hereunder; and, with the same effect as if it were the original,
may rely on a copy certified by an officer of the Trust to be a copy of this
instrument or of any such amendments. In this instrument and in any such
amendment, references to this
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instrument, and all expressions like "herein," "hereof" and "hereunder" shall be
deemed to refer to this instrument as a whole as the same may be amended or
affected by any such amendments. The masculine gender shall include the feminine
and neuter genders. Headings are placed herein for convenience of reference only
and shall not be taken as a part hereof or control or affect the meaning,
construction or effect of this instrument. This instrument may be executed in
any number of counterparts each of which shall be deemed an original.
Section 7.5 Applicable Law. This Declaration of Trust is created under
and is to be governed by and construed and administered according to the laws of
the State of Ohio, including the Ohio General Corporation Law as the same may be
amended from time to time, but the reference to said Corporation Law is not
intended to give the Trust, the Trustees, the Shareholders or any other person
any right, power, authority or responsibility available only to or in connection
with an entity organized in corporate form. The Trust shall be of the type
referred to in Section 1746.01 of the Ohio Revised Code, and without limiting
the provisions hereof, the Trust may exercise all powers which are ordinarily
exercised by such a trust.
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IN WITNESS WHEREOF, each of the undersigned has hereunto set his hand
for himself and his assigns, as of the day and year first above written.
-----------------------------
John Figliolini
-----------------------------
Oleg Batrachenko
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
Before me, a Notary Public in and for said county and state, personally
appeared the above named John Figliolini and Oleg Batrachenko, who acknowledged
that they did sign the foregoing instrument and that the same is their free act
and deed.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal on this ____ day of ________, 1997.
------------------------
Notary Public
My Commission Expires: _______
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<PAGE>
DELTA MUTUAL FUNDS
AGREEMENT AND DECLARATION OF TRUST
PAGE
ARTICLE I. NAME AND DEFINITIONS.......................................1
- ---------- --------------------
Section 1.1 Name.......................................................1
Section 1.2 Definitions................................................1
(a) "Trust".............................................1
(b) "Trustees"..........................................1
(c) "Shares"............................................1
(d) "Series"............................................1
(e) "Shareholder".......................................2
(f) "1940 Act"..........................................2
(g) "Commission"........................................2
(h) "Declaration of Trust"..............................2
(i) "Bylaws"............................................2
ARTICLE II. PURPOSE OF TRUST...........................................2
- ---------- ----------------
ARTICLE III. THE TRUSTEES...............................................2
- ------------ ------------
Section 3.1 Number, Designation, Election, Term, etc...................2
(a) Initial Trustees....................................2
(b) Number..............................................2
(c) Term................................................3
(d) Resignation and Retirement..........................3
(e) Removal.............................................3
(f) Vacancies...........................................3
(g) Effect of Death, Resignation, etc...................4
(h) No Accounting.......................................4
Section 3.2 Powers of the Trustees.....................................4
(a) Investments.........................................5
(b) Disposition of Assets...............................5
(c) Ownership Powers....................................5
(d) Subscription........................................5
(e) Form of Holding.....................................6
(f) Reorganization, etc.................................6
(g) Voting Trusts, etc..................................6
(h) Compromise..........................................6
(i) Partnerships, etc...................................6
- i -
<PAGE>
(j) Borrowing and Security..............................6
(k) Guarantees, etc.....................................6
(l) Insurance...........................................7
(m) Pensions, etc.......................................7
Section 3.3 Certain Contracts..........................................7
(a) Advisory............................................8
(b) Administration......................................8
(c) Distribution........................................8
(d) Custodian and Depository............................8
(e) Transfer and Dividend Disbursing Agency.............8
(f) Shareholder Servicing...............................8
(g) Legal, Accounting, Taxes and Other..................9
Section 3.4 Payment of Trust Expenses and Compensation
of Trustees............................................10
Section 3.5 Ownership of Assets of the Trust..........................10
ARTICLE IV. SHARES....................................................10
- ---------- ------
Section 4.1 Description of Shares.....................................10
Section 4.2 Establishment and Designation of Series...................12
(a) Assets Belonging to Series.........................12
(b) Liabilities Belonging to Series....................13
(c) Dividends..........................................13
(d) Liquidation........................................14
(e) Voting.............................................15
(f) Redemption by Shareholder..........................15
(g) Redemption by Trust................................15
(h) Net Asset Value....................................16
(i) Transfer...........................................16
(j) Equality...........................................16
(k) Fractions..........................................16
(l) Conversion Rights..................................17
Section 4.3 Ownership of Shares.......................................17
Section 4.4 Investments in the Trust..................................17
Section 4.5 No Preemptive Rights......................................17
Section 4.6 Status of Shares and Limitation of Personal
Liability...............................................17
- ii -
<PAGE>
ARTICLE V. SHAREHOLDERS' VOTING POWERS AND MEETINGS..................18
- --------- ----------------------------------------
Section 5.1 Voting Powers.............................................18
Section 5.2 Meetings..................................................18
Section 5.3 Record Dates..............................................19
Section 5.4 Quorum and Required Vote..................................19
Section 5.5 Action by Written Consent.................................20
Section 5.6 Inspection of Records.....................................20
Section 5.7 Additional Provisions.....................................20
ARTICLE VI. LIMITATION OF LIABILITY; INDEMNIFICATION..................20
- ---------- ----------------------------------------
Section 6.1 Trustees, Shareholders, etc. Not Personally
Liable; Notice..........................................20
Section 6.2 Trustee's Good Faith Action; Expert Advice;
No Bond or Surety.......................................21
Section 6.3 Indemnification of Shareholders...........................21
Section 6.4 Indemnification of Trustees, Officers, etc................22
Section 6.5 Advances of Expenses......................................22
Section 6.6 Indemnification Not Exclusive, etc........................22
Section 6.7 Liability of Third Persons Dealing with
Trustees................................................23
ARTICLE VII. MISCELLANEOUS.............................................23
- ----------- -------------
Section 7.1 Duration and Termination of Trust.........................23
Section 7.2 Reorganization............................................23
Section 7.3 Amendments................................................24
Section 7.4 Filing of Copies; References; Headings....................24
Section 7.5 Applicable Law............................................25
- iii -
<PAGE>
DELTA MUTUAL FUNDS
AGREEMENT AND DECLARATION OF TRUST
MARCH 11, 1997
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 10th day of June 1997 by and between Delta Funds,
an Ohio Business Trust (the "Trust") and Utopia Capital Management Corporation,
a New York corporation (the "Adviser").
1. Duties of Adviser. The Trust hereby appoints the Adviser to act as
investment adviser to the Delta Micro Cap Growth Fund, a series of the Trust
(the "Fund") for the period and on such terms as set forth in this Agreement.
The Trust employs the Adviser to manage the investment and reinvestment of the
assets of the Fund, to continuously review, supervise and administer the
investment program of the Fund, to determine in its discretion the securities to
be purchased or sold and the portion of the Fund's assets to be held uninvested,
to provide the Fund with records concerning the Adviser's activities which the
Fund is required to maintain, and to render regular reports to the Trust's
officers and Board of Trustees concerning the Adviser's discharge of the
foregoing responsibilities. The Adviser shall discharge the foregoing
responsibilities subject to the control of the officers and the Board of
Trustees of the Trust, and in compliance with the objectives, policies and
limitations set forth in the Fund's prospectus and applicable laws and
regulations. The Adviser accepts such employment and agrees to render the
services and to provide, at its own expense, the office space, furnishings and
equipment and the personnel required by it to perform the services on the terms
and for the compensation provided herein.
2. Portfolio Transactions. The Adviser is authorized to select the
brokers or dealers that will execute the purchases and sales of securities for
the Fund and is directed to use its best efforts to obtain the best available
price and most favorable execution, except as prescribed herein. Unless and
until otherwise directed by the Board of Trustees of the Fund, the Adviser is
authorized to effect individual securities transactions at commission rates in
excess of the minimum commission rates available, if the Adviser determines in
good faith that such amount of commission is reasonable in relation to the value
of the brokerage or research services provided by such broker or dealer, viewed
in terms of either that particular transaction or the Adviser's overall
responsibilities with respect to the Fund. The execution of such transactions
shall not be deemed to represent an unlawful act or breach of any duty created
by this Agreement or otherwise. The Adviser will promptly communicate to the
officers and Trustees of the Trust such information relating to portfolio
transactions as they may reasonably request.
3. Compensation of the Adviser. For the services to be rendered by the
Adviser as provided in Section 1 of this Agreement, the Trust shall pay to the
Adviser, at the end of each month, an
<PAGE>
advisory fee calculated based on the annual percentage rates as set forth in
Schedule A attached hereto with respect to the average daily net assets of the
Fund for the month. In the event of termination of this Agreement, the fee
provided in this Section shall be computed on the basis of the period ending on
the last business day on which this Agreement is in effect subject to a pro rata
adjustment based on the number of days elapsed in such month as a percentage of
the total number of days in such month.
4. Other Services. At the request of the Trust, the Adviser in its
discretion may make available to the Fund office facilities, equipment,
personnel and other services. Such office facilities, equipment, personnel and
services shall be provided for or rendered by the Adviser and billed to the Fund
at the Adviser's cost.
5. Reports. The Trust agrees to furnish to the Adviser current
prospectuses, statements of additional information, proxy statements, reports to
stockholders, certified copies of its financial statements, and such other
information with regard to the Trust and the Fund as the Adviser may reasonably
request.
6. Status of Adviser. The services of the Adviser to the Fund are not
to be deemed exclusive, and the Adviser shall be free to render similar services
to others.
7. Liability of Adviser. In the absence of (i) willful misfeasance, bad
faith or gross negligence on the part of the Adviser in performance of its
obligations and duties hereunder, (ii) reckless disregard by the Adviser of its
obligations and duties hereunder, or (iii) a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services (in
which case any award of damages shall be limited to the period and the amount
set forth in Section 36(b)(3) of the Investment Company Act of 1940, as amended
("1940 Act")), the Adviser shall not be subject to any liability whatsoever to
the Trust, or to any stockholder of the Trust, for any error of judgment,
mistake of law or any other act or omission in the course of, or connected with,
rendering services hereunder including, without limitation, for any losses that
may be sustained in connection with the purchase, holding, redemption or sale of
any security on behalf of the Fund.
8. Permissible Interests. Subject to and in accordance with the
Agreement and Declaration of Trust and the Certificate of Incorporation of the
Adviser, Trustees, officers, agents and shareholders of the Trust are or may be
interested in the Adviser (or any successor thereof) as Trustees, officers,
agents, shareholders or otherwise; Trustees, officers, agents and shareholders
of the Adviser are or may be interested in the Trust as Trustees, officers,
shareholders or otherwise; and the Adviser (or any successor) is or may be
interested in the Fund as a
-2-
<PAGE>
shareholder or otherwise; and that the effect of any such interrelationships
shall be governed by said Agreement and Declaration of Trust and the provisions
of the 1940 Act.
9. Duration and Termination. This Agreement, unless sooner terminated
as provided herein, shall continue until the earlier of the end of two years
after the date first written above or a date within such two-year period as
specifically approved (a) by the vote of a majority of those members of the
Board of Trustees of the Trust who are not parties to this Agreement or
interested persons of any such party, cast in person at a meeting called for the
purpose of voting on such approval, and (b) by the Board of Trustees of the
Trust or by vote of a majority of the outstanding voting securities of the Fund.
This Agreement shall thereafter continue for periods of one year so long as such
continuance is specifically approved at least annually; (a) by the vote of a
majority of those members of the Board of Trustees of the Trust who are not
parties to this Agreement or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such approval, and (b)
by the Board of Trustees of the Trust or by vote of a majority of the
outstanding voting securities of the Fund; provided, however, that if the
holders of the Fund fail to approve the Agreement as provided herein, the
Adviser may continue to serve in such capacity in the manner and to the extent
permitted by the 1940 Act and rules thereunder. This Agreement may be terminated
with respect to the Fund at any time, without the payment of any penalty, by
vote of a majority of the entire Board of Trustees of the Trust or by vote of a
majority of the outstanding voting securities of the Fund on 60 days' written
notice to the Adviser. This Agreement may be terminated by the Adviser at any
time, without the payment of any penalty, upon 90 days' written notice to the
Trust. This Agreement will automatically and immediately terminate in the event
of its assignment, provided that an assignment to a corporate successor to all
or substantially all of the Adviser's business or to a wholly-owned subsidiary
of such corporate successor which does not result in a change of actual control
of the Adviser's business shall not be deemed to be an assignment for the
purposes of this Agreement. Any notice under this Agreement shall be given in
writing, addressed and delivered or mailed postpaid, to the other party at any
office of such party and shall be deemed given when received by the addressee.
As used in this Section 9, the terms "assignment," "interested persons," and "a
vote of a majority the outstanding voting securities" shall have the respective
meanings set forth in Section 2(a)(4), Section 2(a)(19) and Section 2(a)(42) of
the 1940 Act.
10. Amendment of Agreement. This Agreement may be amended by mutual
consent, but the consent of the Trust must be approved (a) by vote of a majority
of those members of the Board of Trustees of the Trust who are not parties to
this Agreement or interested
-3-
<PAGE>
persons of any such party, cast in person at a meeting called for the purpose of
voting on such amendment, and (b) by vote of a majority of the outstanding
voting securities of the Fund.
11. Use of Name. The Trust agrees that if this Agreement is terminated
and the Adviser shall no longer be the investment adviser to the Fund, the Trust
will, within a reasonable period of time, change its name to delete reference to
"Delta."
12. Severability. If any provisions of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
13. Applicable Law. This Agreement shall be construed in accordance
with the laws of the State of New York, provided, that nothing herein shall be
construed as being inconsistent with the 1940 Act.
14. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers thereunto duly authorized as of the day and year
first written above.
UTOPIA CAPITAL MANAGEMENT DELTA FUNDS
CORPORATION
By: By:
Name: Name:
Title: Title:
-4-
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE A
PORTFOLIO ADVISORY FEES
<S> <C>
Assets Percent
------ ------
First $100 million 1.00
From $100 million to $200 million 0.85
More than $200 million 0.70
</TABLE>
-5-
DISTRIBUTION AGREEMENT
This Agreement made as of June, 1997 by and between The Delta Funds, an
Ohio business trust (the "Trust"), and European Equity Partners, Inc., a
Connecticut corporation ("Underwriter").
WHEREAS, the Trust is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "Act"); and
WHEREAS, Underwriter is a broker-dealer registered with the Securities
and Exchange Commission and a member of the National Association of Securities
Dealers, Inc. (the "NASD"); and
WHEREAS, the Trust and Underwriter are desirous of entering into an
agreement providing for the distribution by Underwriter of shares of beneficial
interest (the "Shares") of the Delta Micro-Cap Fund, a series of shares of the
Trust;
WHEREAS, the Trust has adopted a plan of distribution pursuant to Rule
12b-1 under the Investment Company Act with respect to the Shares (the "Plan")
authorizing payment by the Trust to the Distributor with respect to the
distribution of Shares and the maintenance of related shareholder accounts.
NOW, THEREFORE, in consideration of the promises and agreements of the
parties contained herein, the parties agree as follows:
1. Appointment.
The Trust hereby appoints Underwriter as its exclusive agent
for the distribution of the Shares, and Underwriter hereby accepts such
appointment under the terms of this Agreement. While this Agreement is in force,
the Trust shall not sell any Shares except on the terms set forth in this
Agreement. Notwithstanding any other provision hereof, the Trust may terminate,
suspend or withdraw the offering of Shares whenever, in its sole discretion, it
deems such action to be desirable.
2. Sale and Repurchase of Shares.
(a) Underwriter will have the right, as agent for the Trust,
to sell Shares to responsible investment dealers against orders therefor at the
public offering price (as defined in subparagraph 2(d) hereof). Upon receipt of
an order to purchase Shares from a dealer, Underwriter will promptly cause such
order to be filled by the Trust.
(b) Underwriter will also have the right, as agent for the
Trust, to sell such Shares to the public against orders therefor at the public
offering price.
<PAGE>
(c) Underwriter will also have the right to take, as agent for
the Trust, all actions which, in Underwriter's judgment, are necessary to carry
into effect the distribution of the Shares.
(d) The public offering price for the Shares shall be the
respective net asset value of the Shares then in effect, plus any applicable
sales charge determined in the manner set forth in the Trust's effective
Registration Statement on Form N-1A under the Securities Act of 1933, as
amended, including the then current prospectus and statement of additional
information (the "Registration Statement"), or as permitted by the Act and the
rules and regulations of the Securities and Exchange Commission promulgated
thereunder. In no event shall any applicable sales charge exceed the maximum
sales charge permitted by the Rules of Fair Practice of the NASD.
(e) The net asset value of the Shares shall be determined in
the manner provided in the Registration Statement, and when determined shall be
applicable to transactions as proved for in the Registration Statement. The net
asset value of the Shares shall be calculated by the Trust or by another entity
on behalf of the Trust. Underwriter shall have no duty to inquire into or
liability for the accuracy of the net asset value per Share as calculated.
(f) On every sale, the Trust shall receive the applicable net
asset value of the Shares promptly, but in no event later than the tenth
business day following the date on which Underwriter shall have received an
order for the purchase of the Shares. Underwriter shall have the right to retain
the sales charge, if any, less any applicable dealer discount.
(g) Upon receipt of purchase instructions, Underwriter will
transmit such instructions to the Trust or its transfer agent for registration
of the Shares purchased.
(h) Nothing in this Agreement shall prevent Underwriter or any
affiliated person (as defined in the Act) of Underwriter from acting as
underwriter or distributor for any other person, firm or corporation (including
other investment companies) or in any way limit or restrict Underwriter or any
such affiliated person from buying, selling or trading any securities for its or
their own account or for the accounts of others for whom it or they amy be
acting; provided, however, that Underwriter expressly represents that it will
undertake no activities which, in its judgment, will adversely affect the
performance of its obligations to the Trust under this Agreement.
(i) Underwriter, as agent of and for the account of the Trust,
may repurchase the Shares at such prices and upon such terms and conditions as
shall be specified in the Registration Statement.
-2-
<PAGE>
3. Sale of Shares by the Trust.
The Trust reserves the right to issue any Shares at any time
directly to the holders of Shares ("Shareholders"), to sell Shares to its
Shareholders or to other persons approved by Underwriter at not less than net
asset value and to issue Shares in exchange for substantially all the assets of
any corporation or trust or for the shares of any corporation or trust.
4. Basis of Sale of Shares.
Underwriter does not agree to sell any specific number of
Shares. Underwriter, as agent for the Trust, undertakes to sell Shares on a best
efforts basis only against orders therefor.
5. Rules of NASD, etc.
(a) Underwriter will conform to the Rules of Fair Practice of
the NASD and the securities laws of any jurisdiction in which it sells, directly
or indirectly, any Shares.
(b) Underwriter will require each dealer to whom Underwriter
sells Shares to conform to the applicable provisions hereof and the Registration
Statement with respect to the public offering price of the Shares, and neither
Underwriter nor any such dealers shall withhold the placing of purchase orders
so as to make a profit thereby.
(c) Underwriter agrees to furnish to the Trust sufficient
copies of any agreements, plans or other materials it intends to use in
connection with any sales of Shares in adequate time for the Trust to file and
clear them with the proper authorities before they are put in use, and not to
use them until so filed and cleared.
(d) Underwriter, at its own expense, will qualify as dealer or
broker, or otherwise, under all applicable State or federal laws required in
order that Shares may be sold in such States as may be mutually agreed upon by
the parties.
(e) Underwriter shall not make, or permit any representative,
broker or dealer to make, in connection with any sale or solicitation of a sale
of the Shares, any representations concerning the Shares except those contained
in the then current prospectus and statement of additional information covering
the Shares and in printed information approved by the Trust as information
supplemental to such prospectus and statement of additional information. Copies
of the then effective prospectus and statement of additional information and any
such printed supplemental information will be supplied by the Trust to
Underwriter in reasonable quantities upon request.
-3-
<PAGE>
6. Records to be Supplied by Trust.
The Trust shall furnish to Underwriter copies of all
information, financial statement and other papers which Underwriter may
reasonably request for use in connection with the distribution of the Shares,
and this shall include, but shall not be limited to, one certified copy, upon
request by Underwriter, of all financial statements prepared for the Trust by
independent public accountants.
7. Expenses.
In the performance of its obligations under this Agreement,
Underwriter will pay only the costs incurred in qualifying as a broker or dealer
under state and federal laws and in establishing and maintaining its
relationships with the dealers selling the Shares. All other costs in connection
with the offering of the Shares will be paid by the Trust or the Trust's
investment adviser (the "Adviser") in accordance with agreements between them as
permitted by applicable law, including the Act and rules and regulations
promulgated thereunder.
8. Indemnification of Trust.
Underwriter, to the extent of the net commission, if any,
received by it from the sale of Shares but to no greater amount, agrees to
indemnify and hold harmless the Trust, the Adviser and each person who has been,
is, or amy hereafter be a trustee, director, officer, employee, partner,
shareholder or control person of the Trust or the Adviser, against any loss,
damage or expense (including the reasonable costs of investigation) reasonably
incurred by any of them in connection with any claim or in connection with any
action, suit or proceeding to which any of them may be a party, which arises out
of or is alleged to arise out of or is based upon any untrue statement or
alleged untrue statement of a material fact, or the omission or alleged omission
to state a material fact necessary to make the statements not misleading, on the
part of Underwriter or any agent or employee of Underwriter or any other person
for whose acts Underwriter is responsible, unless such statement or omission was
made in reliance upon written information furnished by the Trust or the Adviser.
Underwriter likewise, to the extent of the net commission received by it from
the sale of Shares but to no greater amount, agrees to indemnify and hold
harmless the Trust, the Adviser and each such person in connection with any
claim or in connection with any action, suit or proceeding which arises out of
or is alleged to arise out of Underwriter's failure to exercise reasonable care
and diligence with respect to its services, if any, rendered in connection with
investment, reinvestment, automatic withdrawal and other loans for Shares. The
term "expenses" for purposes of this and the next paragraph includes amounts
paid in satisfaction of judgments or in settlements which are made with
Underwriter's consent. The
-4-
<PAGE>
foregoing rights of indemnification shall be in addition to any other rights to
which the Trust, the Adviser or each such person may be entitled as a matter of
law.
9. Indemnification of Underwriter.
Underwriter, its directors, officers, employees, partners,
shareholders and control persons 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
matters to which this Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of any of such persons in
the performance of Underwriter's duties or from the reckless disregard by any of
such persons of Underwriter's obligations and duties under this Agreement. The
Trust will advance attorneys' fees or other expenses incurred by any such person
in defending a proceeding, upon the undertaking by or on behalf of such person
to repay the advance if it is ultimately determined that such person is not
entitled to indemnification. Any person employed by Underwriter who may also be
or become any officer or employee of the Trust shall be deemed, when acting
within the scope of his employment by the Trust, to be acting in such employment
solely for the Trust and not as an employee or agent of Underwriter.
10. Termination and Amendment of this Agreement.
This Agreement shall automatically terminate, without the
payment of any penalty, in the event of its assignment. This Agreement may be
amended only if such amendment is approved (i) by Underwriter, (ii) either by
action of the Board of Trustees of the Trust or at a meeting of the Shareholders
of the Trust by the affirmative vote of a majority of the outstanding Shares,
and (iii) by a majority of the Trustees of the Trust who are not interested
persons of the Trust or of Underwriter by vote cast in person at a meeting
called for the purpose of voting on such approval.
Either the Trust or Underwriter may at any time terminate this
Agreement on sixty (60) days' written notice delivered or mailed by registered
mail, postage prepaid, to the other party.
11. Effective Period of this Agreement.
This Agreement shall take effect upon its execution and shall
remain in full force and effect for a period of two (2) years from the date of
its execution (unless terminated automatically as set forth in Section 10), and
from year to year thereafter, subject to annual approval (i) by Underwriter,
(ii) by the Board of Trustees of the Trust or a vote of a majority of the
outstanding Shares, and (iii) by a majority of the Trustees of the Trust who are
not interested persons of the Trust or of Underwriter by vote cast in person at
a meeting called for the purpose of voting on such approval.
-5-
<PAGE>
12. Limitation of Liability.
It is expressly agreed that the obligations of the Trust
hereunder shall not be binding upon any of the Trustees, Shareholders, nominees,
officers, agents or employees of the Trust, personally, but bind only the trust
property of the Trust, as provided in the Agreement and Declaration of Trust of
the Trust. The execution and delivery of this Agreement have been authorized by
the Trustees and Shareholders of the Trust and signed by an officer of the
Trust, acting as such, and neither such authorization by such Trustees and
Shareholders nor such execution and delivery by such officer shall be deemed to
have been made by any of them individually or to impose any liability on any of
them personally, but shall bind only the trust property of the Trust as provided
in its Agreement and Declaration of Trust.
13. New Series.
The terms and provisions of this Agreement shall become
automatically applicable to any additional series of the Trust established
during the initial or renewal term of this Agreement.
14. Successor Investment Company.
Unless this Agreement has been terminated in accordance with
Paragraph 10, the terms and provisions of this Agreement shall become
automatically applicable to any investment company which is a successor to the
Trust as a result of reorganization, recapitalization or change of domicile.
15. Severability.
In the event any provision of this Agreement is determined to
be void or unenforceable, such determination shall not affect the remainder of
this Agreement, which shall continue to be in force.
16. Questions of Interpretation.
(a) This Agreement shall be governed by the laws of the
State of New York.
(b) Any question of interpretation of any term or provision of
this Agreement having a counterpart in or otherwise derived from a term or
provision of the Act shall be resolved by reference to such term or provision of
the Act and to interpretation thereof, if any, by the United States courts or in
the absence of any controlling decision of any such court, by rules, regulations
or orders of the Securities and Exchange Commission issued pursuant to said Act,
reflected in any provision of this Agreement is revised by rule, regulation or
order of the Securities and Exchange Commission, such provision shall be deemed
-6-
<PAGE>
to incorporate the effect of such rule, regulation or order.
17. Notices.
Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice. Until
further notice to the other party, it is agreed that the address of the Trust
for this purpose shall be 312 Walnut Street, Cincinnati, Ohio 45202 and the
address of the Underwriter for this purpose shall be 551 Fifth Avenue, New York,
NY 10022.
IN WITNESS WHEREOF, the Trust and Underwriter have each caused this
Agreement to be signed in duplicate on their behalf, all as of the date and year
first above written.
ATTEST: THE DELTA FUNDS
_______________________ By:___________________________
JOHN FIGLIOLINI
Its: President
ATTEST: EUROPEAN EQUITY PARTNERS, INC.
_______________________ By:____________________________
Its:___________________________
-7-
HECHT & STECKMAN, P.C.
Attorneys at Law
60 East 42nd Street, Suite 5101
New York, N.Y. 10165-5101
CHARLES J. HECHT Tel: (212) 490-3232
LAWRENCE A. STECKMAN Fax: (212) 490-3263
- ----------------------
LINDA MANDEL GATES E-Mail: [email protected]
(also admitted in New Jersey)
ROSS ROSEN
(also admitted in New Jersey)
JOHN P. SCHWARTZ
June 4, 1997
Delta Mutual Funds
551 Fifth Avenue, Suite 605
New York, NY 10017
Gentlemen:
You have requested our opinion in connection with the registration of
Delta Mutual Funds, an Ohio business trust (the "Trust"), of an indefinite
number of shares of beneficial interest of the Delta Micro Cap Growth Fund of
the Trust (the "Shares") authorized by the Trust's Agreement and Declaration of
Trust, to be filed with the Securities and Exchange Commission as an exhibit to
the Trust's registration statement on form N-1A (File No. 333- 24377), as
amended (the "Registration Statement"), under the Securities Act of 1933 and the
Investment Company Act of 1940.
We have examined and relied upon originals or copies, certified or
otherwise identified to our satisfaction, of such records, agreements, documents
and other instruments and certificates or comparable documents of public
officials and of officers and representatives of the Trust, and we have made
such inquiries of the officers and representatives of the Trust, as we have
deemed relevant and necessary as the basis for the opinion hereinafter set
forth.
In such examination, we have assumed, without independent verification,
the genuineness of all signatures (whether original or photostatic) and the
authenticity of all documents submitted to us as originals and the conformity to
authentic original documents of all documents submitted to us as certified or
photostatic copies. As to all questions of fact material to such opinion, we
have relied upon the certificates referred to hereinabove. We have assumed,
without independent verification, the accuracy of the relevant facts stated
therein.
<PAGE>
Delta Mutual Funds
June 4, 1997
Page 2
This letter expresses our opinion as to the provisions of the Trust's
Agreement and Declaration of Trust and the laws of the State of Ohio applying to
business trusts generally, but does not extend to the Ohio, federal or other
securities laws.
Based on the foregoing, and subject to the qualifications set forth
herein, we are of the opinion that the Shares, when issued, will have been duly
and validly authorized, and, when issued and delivered as described in the
Registration Statement, will be fully paid and nonassessable by the Trust.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving such consent, we do not thereby admit that we
come within the definition of experts as that term is used in the Securities Act
of 1933, as amended, or under the rules and regulations of the Securities and
Exchange Commission promulgated thereunder.
Respectfully submitted,
Hecht & Steckman, P.C.
/s/ Charles J. Hecht
By: Charles J. Hecht,
A Principal
CJH/eb/530
McCurdy 27955 Clemens Road
& Associates Westlake, Ohio 44145
CPA's, Inc. Phone: (216) 836-8500
Fax: (216) 835-1093
CERTIFIED PUBLIC ACCOUNTANTS
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CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use in this
Pre-effective Amendment No. 1 to the Registration Statement for Delta Mutual
Funds of all references to our firm included in or made a part of this
Amendment.
/s/ McCurdy & Associates CPA's, Inc.
McCurdy & Associates CPA's, Inc.
May 22, 1997
May 20, 1997
Board of Trustees
Delta Micro Cap Growth Fund
551 Fifth Avenue, Suite 605
New York, New York 10017
The undersigned, as a condition to acquire 10,000 shares of common
stock, without par value (the "Securities") of Delta Micro Cap Growth Fund (the
"Company") for $10.00 per share, represents that the Securities are being
acquired for investment, not for resale or distribution and not for the purpose
of effecting or causing to be effected, a public offering of any of the
Securities; that none of the Securities will be sold, transferred, assigned or
disposed of, except in accordance with the Securities Act of 1933, as amended,
and the rules and regulations of the Securities and Exchange Commission
promulgated thereunder; that all of the Securities are being acquired for the
sole account of the undersigned and no other person has any beneficial interest
in any of the Securities; and that no agreement or understanding exists with
regard to the disposition, sale, transfer or assignment of the Securities other
than that set forth herein.
The undersigned acknowledges that it has been advised that the
Securities have not been registered under the Securities Act of 1933, as
amended, and that none of the Securities may be sold, transferred, assigned or
disposed of, except in accordance with such Act and the Rules and Regulations of
the Securities and Exchange Commission promulgated thereunder. The undersigned
hereby consents that the Securities to be issued and delivered to him may
contain the following legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 ("THE ACT") OR QUALIFIED OR
REGISTERED UNDER ANY STATE SECURITIES OR BLUE SKY LAWS.
NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE
OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT AND SUCH STATE LAWS UNLESS SUCH OFFER, SALE,
TRANSFER, PLEDGE OR OTHER DISPOSITION IS EXEMPT FROM
REGISTRATION OR QUALIFICATION UNDER THE ACT AND SUCH STATE
LAWS.
The undersigned understands that the Company is in its initial
organizational stages and that the Securities being acquired involve a high
degree of risk. It is the best judgment of the undersigned that the Securities
being acquired hereby are securities of the kind which the undersigned wishes to
acquire and hold for investment and that the nature and amount of the Securities
being acquired are consistent with the investment program of the undersigned.
The undersigned represents and warrants that the present and anticipated
financial position of the undersigned permit the undersigned to hold the
Securities for investment, as aforesaid.
<PAGE>
Board of Directors
June 4, 1997
Page 2
The undersigned hereby acknowledges that neither the Company nor any
persons or parties associated with the Company has made any representation or
warranty of any kind, nature or description in connection with the acquisition
of the Securities, and that the undersigned has made his own independent
investigation as to this transaction. The undersigned is relying solely on his
investigation of the Company and its prospects and represents that the Company
and its agents have answered all its questions and made available all
information requested.
The undersigned represents that, by reason of his business or financial
experience, he is capable of evaluating the merits and risks of this investment
and of protecting his own interests in connection with the acquisition of the
Securities.
The foregoing sets forth the understanding and agreement between the
parties, and the Company and its agents have the right to rely on these
representations, understanding and agreement.
Very truly yours,
Utopia Capital Management Corp.
By: /s/ John Figliolini
John Figliolini, President
