AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON 3/6/98
FILE NOS: 811-3176 & 2-72066
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION
STATEMENT UNDER THE SECURITIES
ACT OF 1933 / X /
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 29 / X /
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 / X /
Amendment No. 29
(Check appropriate box or boxes.)
DECLARATION FUND
(Exact name of Registrant as Specified in Charter)
Suite 6160, 555 North Lane
Conshohocken, PA 19428
(Address of Principal Executive Office)
Registrant's Telephone Number, including Area Code:
(610) 832-1075
Terence P. Smith, Suite 6160
555 North Lane, Conshohocken, PA 19428
(Name and Address of Agent for Service)
Please send copy of communications to:
MARTIN V. MILLER, ESQUIRE
P.O. Box 2512
Doylestown, Pennsylvania 18901
215-345-7110
Approximate Date of Proposed Public Offering: Continuous
It is proposed that this filing will become effective
(check appropriate box):
/ / immediately upon filing pursuant to paragraph (b)
/ / on _____________ pursuant to paragraph (b)
/ X / 60 days after filing pursuant to paragraph (a) (1)
/ / on _____________ pursuant to paragraph (a) (1)
/ / 75 Days after filing pursuant to paragraph (a) (2)
/ / on _____________ pursuant to paragraph (a) (2) of rule 485
If appropriate, check the following box:
/ / this post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
A Rule 24f-2 Notice for the year ended December 31, 1997 was filed on February
26, 1998.
<PAGE>
EXHIBIT INDEX BEGINS ON PAGE __.
FORM N-1A
CROSS REFERENCE SHEET
Form N-1A Part A - MICHIGAN HERITAGE FUND (both classes of shares)
ITEM NO. PROSPECTUS LOCATION
- --------- -------------------
1. Cover Page .................. Cover Page
2. Synopsis .................... Summary of Fees and Expenses
3. Condensed Financial
Information ................. Not Applicable
4. General Description of
Registrant .................. The Fund, Investment Objectives,
Investment Policies and Risks.
Special Factors Affecting
Investments in Michigan Companies.
5. Management of the
Fund ........................ Trustees, The Investment Advisor,
The Administrator, The Distributor
6. Capital Stock and
Other Securities ............ General Information,
Distribution and Taxes
7. Purchase of Securities
Being Offered ............... How to Purchase Shares,
Shareholder Services
Rule 12b-1 Distribution Plan
Valuing Fund Shares:
Performance Information
Shareholder Services
8. Redemption or
Repurchases ................. How to Redeem Shares
Valuing Fund Shares
9. Pending Legal
Proceedings ................. Not Applicable
<PAGE>
FORM N-1A PART B MICHIGAN HERITAGE FUND
LOCATION OF STATEMENT
ITEM NO. OF ADDITIONAL INFORMATION
- --------- -------------------------
10. Cover Page .................. Cover Page
11. Table of Contents ........... Table of Contents
12. General Information and
History ..................... General Information
13. Investment Objectives
and Policies ................ Investment Objective and Policies;
Investment Limitations;
Portfolio Transactions
14. Management of
Fund ........................ Management of the Fund;
Investment Advisory Services;
Trustees and Officers of
Declaration Fund
15. Control Persons
Principal Holders
of Securities ............... Control Persons and Principal Holders of
Securities of Cash Account
16. Investment Advisory
and Other
Services .................... Investment Advisory Services; Administrative
Services; Transfer Agency and Other
Services; and Custodian; Independent Public
Accountants
17. Brokerage Allocation ........ Brokerage
18. Capital Stock and Other
Securities .................. Not Applicable
19. Purchase, Redemption and
Pricing of Securities
Being Offered ............... Additional Information
20. Tax Status .................. Tax Status
21. Underwrites ................. Rule 12b-1 Distribution Plan;
Distribution Agreement
22. Calculation of Performance
Data ........................ Calculation of Performance Data
23. Financial Statements......... None
<PAGE>
FORM N-1A PART C
ITEM NO. LOCATION IN PART C
- --------- ------------------
24. Financial Statements......... None
25. Persons Controlled by or
Under Common Control
with Registrant ............. Persons Controlled by or Under
Common Control with Registrant
26. Number of Holders of
Securities .................. Number of Holders of Securities
27. Indemnification ............. Indemnification
28. Business and Other
Connections of Investment
Advisor ..................... Business and Other Connections
of Investment Advisor
29. Principal
Underwriters ................ Principal Underwriters
30. Location of Accounts
and Records ................. Location of Accounts and Records
31. Management Services ......... Management Services
32. Undertakings ................ Undertakings
<PAGE>
PART A: PROSPECTUS
THE MICHIGAN HERITAGE FUND
Series of The Declaration Fund
THE MICHIGAN HERITAGE FUND
301 MAC Avenue
Suite 120
East Lansing, MI 48823
1-800-___-____
(INFORMATION, SHAREHOLDER SERVICES AND REQUESTS)
PROSPECTUS
_______ ___, 1998
This Prospectus relates to shares of the No-Load Class issued with respect
to the Michigan Heritage Fund.
The Michigan Heritage Fund's objective is long-term growth through capital
appreciation. The Fund seeks to achieve this goal mainly by investing in a
diversified portfolio of companies that have headquarters in the State of
Michigan or companies based elsewhere that have significant operations (as
defined by the Fund's Advisor) in the State of Michigan. There can be no
guarantee the investment objective of the Fund will be achieved.
The shares of the No-Load Class are not subject to a sales charge deduction
upon issuance.
This Prospectus provides the information a prospective investor ought to
know before investing and should be retained for future reference. A Statement
of Additional Information has been filed with the Securities and Exchange
Commission (the "SEC") dated _______ ___, 1998, which is incorporated herein by
reference and can be obtained without charge by calling the Fund at the phone
number listed above. The SEC maintains a Web Site (http://www/sec.gov) that
contains the Statement of Additional Information, material incorporated by
reference, and other information regarding registrants that file electronically
with the SEC.
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.
<PAGE>
TABLE OF CONTENTS
<PAGE>
SUMMARY OF FEES AND EXPENSES
The following summary is provided to assist you in understanding the
various costs and expenses a shareholder in the Fund could bear directly and
indirectly. Annual operating expenses are shown as a percentage of average daily
net assets. Because shares of the Fund were not offered prior to the date of
this prospectus, annual operating expenses of the Fund are based on estimated
expenses. Shareholder transaction expenses for the Fund are expressed as a
percentage of the public offering price, cost per transaction or as otherwise
noted. The Example should not be considered a representation of future Fund
performance or expenses, both of which may vary.
Shareholder Transaction Expenses
Maximum sales charge on purchases................................... 0%
Maximum deferred sales charge imposed on redemption ................ 0%
Maximum sales charge imposed on dividend reinvestment .............. 0%
Redemption Fees .................................................... 0%
Account Closing Fee ................................................ $10
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fee ..................................................... 1.00%
12b-1 Fee .......................................................... .25%
Other Expenses,* (including Transfer Agency
and Accounting Services Fees)....................................... .50%
Total Fund Operating Expenses ...................................... 1.75%
*Other expenses are based on estimated amounts for the current fiscal year.
A $10.00 wire fee will be charged on wire purchases of less than $1,000.
HYPOTHETICAL EXAMPLE OF EFFECT ON FUND EXPENSES
You would pay the following expenses on a $1,000 investment if, for each
year for the next three years, Fund expenses are as described above and annual
return is 5%.
1 YEAR 3 YEARS
------ -------
Assuming a complete redemption at end of period $28 $65
Assuming no redemption at end of period $18 $55
<PAGE>
THE MICHIGAN HERITAGE FUND
--------------------------
Financial Highlights
--------------------
(Selected data for a share of capital stock outstanding through each period)
----------------------------------------------------------------------------
For the period
July 27, 1997
(commencement
of Investment
operations) to
December 31,
1997
--------------
Net asset value, beginning of period $ 10.00
-------
Income from investment operations:
Net investment income (.04)
Net realized and unrealized gain
on investments 0.18
-------
Total from investment operations 0.14
-------
Less Distributions to shareholders:
Net realized gain on investments sold --
-------
Total distributions --
-------
Net asset value, end of period $ 10.14
=======
Total investment return 1.40%
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 303
Ratio of expenses to average net assets** 2.18%*
Ratio of net investment income to average net assets** -0.94%*
Portfolio turnover rate 0.00%
* Ratios for period of less than one year are annualized.
** Net investment income is net of expenses reimbursements and fee waivers
$1.52 share Had such reimbursements not been made, the annualized expense
ratio would have been 34.48% and the annualized net investment income ratio
would have been (35.73%).
See notes to financial statements.
<PAGE>
THE FUND
The Michigan Heritage Fund (the "Fund") was organized as a series of
Declaration Fund (the "Trust") on February 19, 1997, and commenced operations on
July 8, 1997. This Prospectus offers shares of the No-Load Class of the Fund.
Each share represents an undivided, proportionate interest in the Fund. The
investment advisor to the Fund is Dickinson Asset Management, Inc. (the
"Advisor").
INVESTMENT OBJECTIVES
The Fund's investment objective is long-term growth through capital
appreciation. The Fund seeks to achieve this goal mainly by investing in a
diversified portfolio of companies that have their principal offices located in
Michigan or out-of-state companies that have a corporate division or subsidiary
employing 300 or more persons or which derive $1,000,000 or more in revenue from
goods either produced or sold in Michigan or from investments made or services
performed therein (hereafter "Michigan Companies"). There can be no guarantee
the investment objective of the Fund will be achieved. The Fund's investment
objective may not be changed without shareholder approval.
The Fund's Advisor believes that Michigan is positioned to provide
publicly-traded companies and their shareholders significant opportunities for
growth. Due to its central location among the largest markets in the U.S. and
Canada, Michigan offers businesses access to half of the population and personal
income of both countries. Michigan's own sizable consumer market of 9.3 million
had an average per capita income of approximately $23,915 in 1996. Long known as
a leader in manufacturing, Michigan's large industrial market generated a demand
for products and services of more than $170 billion in 1992. In 1996, Michigan
was ranked #1 of states having the most companies listed in the Top 20 of the
Fortune 500 in this it was tied with New York. While the State's economy still
benefits from its strong ties to the automobile industry, the economy continues
to diversify. The State has one of the most advanced telecommunications
infrastructures in the nation. Michigan presently has one of the largest fibre
optic cable networks in the nation. Virtually every city and town is connected
through fiber optic networks. Also, Michigan has the greatest number of internet
connections in the Midwest - 90% of Michigan's population can dial the Internet
via a local phone call. International trade is assuming increasing importance in
Michigan's economy. Commercial airports, the Great Lakes and St. Lawrence Seaway
give the state easy access to world markets and the State was the nation's 4th
largest exporter in 1996. While already one of the world's largest trading
relationships, the U.S. - Canadian Free Trade Agreement has spurred even greater
activity between Canada and the U.S. and, correspondingly, between Canada and
Michigan. This summary does not purport to be complete and is based upon
information derived from publicly available documents.
The Advisor believes that the Fund will provide a positive influence on the
Michigan economy by stimulating investor interest and awareness in Michigan
companies.
INVESTMENT POLICIES
In pursuit of its investment objective, the Fund will invest at least 65
percent of the value of its total assets in the following types of securities
issued by Michigan Companies: common stocks, preferred stocks, securities
convertible into common and preferred stocks, and American Depository Receipts
(ADRs) traded on a U.S. stock exchange.
The Fund may invest up to 35 percent of the value of its total assets in
the securities of other issuers, such as common stocks, preferred stocks;
investment-grade corporate bonds and notes; high quality short-term debt
securities such as commercial paper, bankers' acceptances, certificates of
deposit, repurchase agreements; obligations insured or guaranteed by the United
States Government and its agencies, and instrumentalities; demand and time
deposits of domestic banks and United States branches and subsidiaries of
foreign banks, and money market funds.
The Fund will not engage in direct investment in real estate. The fund may
invest in Real Estate Investment Trusts (REITS) that are traded on one of the
principal U.S. stock exchanges.
The Fund will invest in a diverse group of companies with varying degrees
of name recognition. The portfolio will include companies in a wide range of
industries, from basic consumer goods and autos to high-tech services.
Investments are based primarily on fundamental analysis. While technical factors
will be considered, the main investment criteria will focus on an evaluation of
revenues, earnings, debt, capitalization, quality of management, level of
insider ownership, changing market conditions, past performance and future
expectations. The Fund will strive to invest in companies that have well defined
business plans and long-term operating strategies designed to increase
shareholder value. The Fund will not concentrate its investments in one
industry; however, it may invest up to 25% of the value of its' assets in one
industry. This concentration policy may not be changed without shareholder
approval.
When evaluating a Michigan-based company, a member of the Advisor's
portfolio management or research staff may conduct an in-person visit to the
company whenever such a visit is judged appropriate, may meet with the company's
management, and evaluate its operations. The staff member will also attempt to
interview a cross section of the company's employees, customers, suppliers and
competitors. The Advisor believes that this "hands on" approach to investing
will enable it to learn of any developing trends in such companies.
The Fund does not propose to engage in short-term trading. However, it may,
from time to time, sell a security without regard to the length of time it has
been held. The fund does not expect that its' portfolio turnover rate will
exceed 75% for its' first fiscal year. High portfolio turnover rates increase
transaction costs and the possibility of realizing taxable capital gains.
INVESTING DEFENSIVELY
On those occasions when, in the opinion of the Fund's Advisor, market
conditions warrant a temporary defensive approach, the Fund may invest more than
35 percent of its total assets in short-term obligations, including the
following: securities issued or guaranteed by the U.S. government, commercial
paper, bankers acceptances and securities issued by money market funds. During
intervals when the Fund has adopted a temporary defensive position then to the
extent that investments are made for defensive purposes, they will not be made
in pursuance of the Fund's investment objective.
The Fund may, from time to time, engage in repurchase agreements which are
secured by U.S. Government obligations that qualify as eligible investments of
the Fund. Under the terms of the typical repurchase agreement, a person sells
securities to the Fund and agrees to repurchase the securities at the Fund's
cost plus interest within a specified time period (normally one day). The
arrangement results in a fixed rate of return that is not subject to market
fluctuations during the period that the underlying security is held by the Fund.
Repurchase agreements involve certain risks, including seller's default on its
obligation to repurchase or seller's bankruptcy. The Fund will not enter into
repurchase agreements of more than seven (7) days duration.
RISKS
The principal risk factor associated with an investment in the Fund is that
the market value of the portfolio's securities may decrease and result in a
decrease in the value of a shareholder's investment.
The Fund's portfolio may include smaller companies that are not nationally
recognized and companies that ordinarily pay no dividends or interest. The price
of the stocks of such companies are generally more volatile than those of larger
or more mature companies. Additionally, the securities of such companies are
generally more likely to be negatively affected by adverse economic and/or
market conditions, and are generally less liquid.
Due to the geographic limitation of 65% if the Fund's assets, such assets
may be subject to greater risk of loss from economic, political or other
developments (e.g., natural disasters) having an unfavorable impact upon
businesses located in Michigan than similar funds whose investments are
geographically more diverse (i.e. the Fund may be less diversified than other
funds with similar investment objectives but no such geographic limitation).
There can be no assurance that the economy of Michigan or the companies
headquartered or operating in Michigan will grow in the future.
Since the Fund will be mainly investing in a diversified portfolio of
companies that have their headquarters in the State of Michigan, or companies
based elsewhere that have significant operations in Michigan, Fund investments
can be significantly affected by business trends and the economic health of
Michigan. The following is a brief description of certain factors affecting the
Michigan Heritage Fund. The summary does not purport to be complete and is based
upon information derived from publicly available documents.
SPECIAL FACTORS AFFECTING INVESTMENTS IN MICHIGAN COMPANIES
Home to the "Big Three" automobile manufacturers, Michigan's automobile
industry has historically played a prominent role in the State's economy. As of
1995, 48.7% of all manufacturing in the State was auto related, 1 in 14 Michigan
employees worked for the "Big Three", and $1 in $6 paid for labor was paid by
the "Big Three". In addition, 11.2% of Michigan employees are employed by
businesses related in some manner to the automobile industry.
Due to the cyclical nature of the automobile industry, Michigan and
consequently a shareholder of The Michigan Heritage Fund, could be adversely
affected by any economic downturn or recession. Also, any negative event or news
item relating to the automobile industry, may have an adverse affect on the
value of a shareholder's investment in the Fund.
HOW TO PURCHASE SHARES
Fund Shares of the No-Load Class are sold on a continuous basis, and you
may invest any amount you choose, as often as you wish, subject to a minimum
initial investment of $1,000 and subsequent minimum investments of $100. Shares
of the Fund are purchased at their net asset value per share next determined
after the order is received and accepted by the Fund's transfer agent.
When opening an account, it is important that you provide the transfer
agent with your correct taxpayer identification number (social security or
employer identification number).
If you are investing in this Fund for the first time, you will need to set
up an account. You may make a direct initial investment by completing and
signing the investment application which accompanies this Prospectus and mailing
it, together with a check or money order made payable to:
The Michigan Heritage Fund
Declaration Service Company
P.O. Box 844,
Conshohocken, Pennsylvania 19428-0844
BY MAIL: When making subsequent investments by mail, enclose your check
with the return remittance portion of the confirmation of your previous
investment or indicate on your check or a separate piece of paper your name,
address and account number and mail to the address set forth above. Third party
checks will not be accepted, and the Fund reserves the right to refuse to accept
second party checks.
BY WIRE: You may make your initial or subsequent investments in the Fund by
wiring funds. To do so, call the Investor Services Department at 1-800-___-____
for wiring instructions.
BY AUTOMATIC INVESTMENT PLAN: Once your account is open, you may make
investments automatically by completing the automatic investment plan form
authorizing the Fund to draw on your bank account regularly by check for as
little as $100 per month beginning within thirty (30) days after the account is
opened. You should inquire at your bank whether it will honor debits through the
Automated Clearing House ("ACH"). You may change the date or amount of your
investment any time by written instruction received by the Fund at least five
business days before the change is to become effective.
To assure proper receipt, please be sure your bank includes the Fund name
and the account number that has been assigned to you. If you are opening a new
account, please complete the Account Registration Form and mail it to the "New
Account" address above after completing your wire arrangement. Note: Federal
Funds wire purchase orders will be accepted only when the Fund and Custodian
Bank are open for business.
FUNDS CREDITED TO THE FUND'S ACCOUNT BY 4:00 PM (EASTERN TIME) WILL BE
APPLIED TO PURCHASE SHARES ON THAT DAY. There are no wire fees charged by the
Fund for purchases of $1,000 or more. A $10 wire fee will be charged by the Fund
on wire purchases of less than $1,000. Your bank may also charge wire fees for
this service.
ADDITIONAL INFORMATION ABOUT PURCHASES
PURCHASE POLICIES:
o Investments must be received and accepted in the transfer agent's
offices on a business day before 4:00 PM Eastern Time to be credited
to your account that day and to receive that day's share price.
Otherwise, your investment will be credited to your account on the
next business day and you will receive that day's share price.
o The maximum single investment permitted is $250 thousand. Any
individual order for more than $250 thousand must be pre-approved by
the Advisor prior to making the investment or it will be rejected.
o The Transfer Agent and the Fund are not responsible for any delays
that occur in wiring funds, including delays in processing by the
investor's bank.
o The Fund reserves the right to reject an investment for any reason.
HOW TO REDEEM SHARES
You may redeem any or all of your shares at will. THE FUND REDEEMS SHARES
AT THE NET ASSET VALUE THEREOF NEXT DETERMINED AFTER IT HAS RECEIVED AND
ACCEPTED A REDEMPTION REQUEST; HOWEVER THE REDEMPTION PROCEEDS WILL NOT BE PAID
UNTIL SUCH TIME AS THE REDEMPTION REQUEST IS RECEIVED IN PROPER ORDER.
Redemption requests must be received prior to the time that the net asset value
per share is next determined (generally 4:00 PM Eastern Time on each day that
the New York Stock Exchange is open for trading )to obtain the date of receipt
net asset value.
BY MAIL: A written request for redemption in proper order must be sent to
Declaration Service Company, P.O. Box 844, Conshohocken, Pennsylvania
19428-0844. For express or registered mail, your request should be addressed to
Declaration Service Company, 555 North Lane, Suite 6160, Conshohocken,
Pennsylvania 19428. "Proper order" requires delivery to the Transfer Agent of:
(1) a written redemption request signed by each registered owner in
the exact names in which the account is registered, and including the
account number and the number of shares or the dollar amount to be
redeemed;
(2) a signature guarantee when required (see "Signature Guarantee"
page ____);and
(3) such additional documents required to evidence the authority of
the persons requesting redemption on behalf of corporations, or as
executors, trustees and other fiduciaries. Redemption proceeds will not be
paid until all documents, in satisfactory form, have been received by the
Transfer Agent. (See "Additional Information About Redemptions" below on
page ____.)
BY TELEPHONE: Redemptions may be made by telephone, provided you have
completed the Telephone Redemption Authorization section of the purchase
application. Upon proper authority and instruction, redemption proceeds will be
wired to the bank account set forth on the account registration or, for amounts
$5,000 or less, redemptions will be mailed to the address on the account
registration. There will be a charge for the bank wire. Neither the Fund nor the
Transfer Agent will be responsible for acting upon instructions reasonably
believed by them to be genuine. The Fund and/or its Transfer Agent will,
however, employ reasonable procedures to confirm that instructions communicated
by telephone are genuine (such as requiring some form of personal
identification, providing written confirmations, and the tape recording of
conversations). If the Fund or its Transfer Agent do not employ reasonable
procedures, they may be liable for losses due to unauthorized or fraudulent
transactions.
SPECIAL REDEMPTION ARRANGEMENTS
Special arrangements may be made by institutional investors, or on behalf
of accounts established by brokers, advisors, banks or similar institutions, to
have redemption proceeds transferred by wire to pre-established accounts upon
telephone instructions. For further information call the Fund at 1-800-___-____.
SIGNATURE GUARANTEE
A signature guarantee is required for all redemptions greater than $5,000
or where the redemption proceeds are to be paid to another person or sent to an
address other than the one of record. A signature guarantee verifies the
authenticity of your signature. The guarantor must be an eligible guarantor. In
order to be eligible, the guarantor must be a participant in a STAMP program ( a
Securities Transfer Agents Medallion Program). You may call the Transfer Agent
at 1-___- ____ to determine whether the entity that will guarantee the
signature is an eligible guarantor.
REDEMPTION PROCEEDS MAY BE SENT TO YOU:
BY MAIL: If your redemption check is to be mailed, it will usually be
mailed to you within 48 hours of receipt of the redemption request. The Fund
reserves the right to hold redemption proceeds for up to seven days. If the
shares to be redeemed were purchased by check, the redemption proceeds will not
be mailed to you until the check has cleared. You may avoid this inconvenience
by investing by bank wire. Redemption checks may also be delayed if you have
changed your address within the last 30 days. Please notify the Fund, promptly,
in writing, of any change of address.
BY WIRE: You may authorize the Fund to transmit redemption proceeds by wire
provided you send written instructions with a signature guarantee at the time of
redemption or have completed the banking information portion of the Telephone
Redemption Authorization on the purchase application. Your redemption proceeds
will usually be sent on the first business day following redemption. However,
the Fund reserves the right to hold redemption proceeds for up to seven days. If
the shares to be redeemed were purchased by check, the redemption proceeds will
not be wired until the check has cleared, which may take up to seven days. There
is a $10 charge to cover the wire, which is deducted from redemption proceeds.
ADDITIONAL INFORMATION ABOUT REDEMPTIONS
(1) The share redemption price may be more or less than your cost of the
shares being redeemed, depending on the per share net asset value next
determined after your request is received.
(2) A request to redeem shares in an IRA or similar retirement account must
be accompanied by an IRS W4-P and must state a reason for withdrawal, as
specified by the IRS. Proceeds from the redemption of shares from a retirement
account may be subject to withholding tax.
(3) Excessive purchases and redemptions of Fund shares has an adverse
impact on effective portfolio management as well as upon Fund expenses. The Fund
has reserved the right to refuse investments from shareholders who engage in
such transactions.
ACCOUNT CLOSING FEE
In order to reduce Fund expenses, an account closing fee of $10 will be
assessed against those shareholders who redeem all of the shares in their Fund
account and direct that redemption proceeds be directed to them by mail or wire.
This charge is payable directly to the Fund's Transfer Agent which, in turn,
will reduce its charges to the Fund by an equal amount.
The purpose of the charge is to allocate to redeeming shareholders a more
equitable portion of the Transfer Agent's fee, including the cost of tax
reporting, which is based upon the number of shareholder accounts. When a
shareholder closes an account, the Fund must continue to carry the account on
its books, maintain the account records and complete year-end tax reporting.
With no assets, the account cannot pay its own expenses and imposes an unfair
burden on remaining shareholders.
SMALL ACCOUNTS
Fund accounts which fall, for any reason other than market fluctuation,
below $500 at any time during a month will be subject to a small account charge
of $5 for that month, which is deducted the first business day following the end
of each month. The charge is payable directly to the Fund's Transfer Agent
which, in turn, will reduce its charges to the Fund by an equal amount. The
purpose of the charge is to allocate the cost of maintaining shareholder
accounts more equitably among shareholders.
Active automatic investment plan, UGMA/UTMA, and retirement plan accounts
will not be subject to the small account charge.
In order to reduce expenses, the Fund may redeem all of the shares in any
shareholder account (other than an active automatic investment plan, UGMA/UTMA
and retirement plan accounts), if, for a period of more than three months, the
account has a net value of $500 or less and the reduction in its value is not
due to market action. If the Fund elects to close such accounts, it will notify
shareholders whose accounts are below the minimum of its intention to do so, and
will provide those shareholders with an opportunity to increase the value of
their accounts by investing a sufficient amount to bring the value of their
accounts up to an amount greater than $500 within ninety (90) days of the date
of the notice. No account closing fee will be charged to those investors whose
accounts are closed under the mandatory redemption provision.
SHAREHOLDER SERVICES
Declaration Service Company, P.O. Box 844, Conshohocken, PA 19428-0844,
acts as transfer, shareholder servicing, and dividend paying agent for all Fund
accounts. Simply write or call the Investor Information Department at
1-800-___-____ for prompt service on any questions about your account.
CONFIRMATION STATEMENTS
Shareholders normally will receive a confirmation statement after each
transaction showing the activity in the account, and an annual statement showing
all transactions for the calendar year just completed.
OTHER SERVICES
The Fund has available a number of plans and services to meet the special
needs of certain investors. Plans available include, but are not limited to:
(1) payroll deduction plans, including military allotments;
(2) custodial accounts for minors;
(3) a flexible, systematic withdrawal plan; and
(4) various retirement plans such as IRA, 403(b)(7), and employer-adopted,
401(k) defined benefit and defined contribution plans.
There is an annual charge for each retirement plan fund account with
respect to which a service provider acts as custodian. If this charge is not
paid separately prior to the last business day of a calendar year or prior to a
total redemption, it will be deducted from the shareholder's account.
Application forms and brochures describing these plans and services can be
obtained from the Transfer Agent by calling 1-800-___-____.
RULE 12b-1 DISTRIBUTION PLAN
A plan of distribution has been adopted under Rule 12b-1 of the Investment
Company Act of 1940 for the Fund. The plan provides the Fund may pay an annual
fee of up to 0.25% of the Fund's average net assets (1/12 of 0.25% monthly) for
certain services which are primarily intended to result in the distribution of
Fund shares. Such services include advertising, compensation of persons engaged
in the sale of Fund shares, distribution of sales materials including the cost
of preparing, printing and mailing such sales materials, sales representations
and promotions and payments to brokers and others who are engaged in the
distribution of Fund shares and who administer the accounts of shareholders. See
"12b-1 Plan of Distribution" in Statement of Additional Information.
VALUING FUND SHARES
The value of an individual share in the Fund (the net asset value) is
calculated by dividing the total value of the Fund's investments and other
assets (including accrued income), less any liabilities (including estimated
accrued expenses), by the number of shares outstanding, rounded to the nearest
cent. Net asset value per share is determined as of the close of the New York
Stock Exchange (4:00 PM, Eastern Time) on each day that the Exchange is open for
business, and on any other day on which there is sufficient trading in the
Fund's securities to materially affect the net asset value. The net asset value
per share of the Fund will fluctuate.
Securities which are traded on any exchange or on the NASDAQ over-the
counter market are valued at the last quoted sale price. Lacking a last sale
price, a security is valued at its last bid price except when, in the Advisor's
opinion, the last bid price does not accurately reflect the current value of the
security. All other securities for which over-the-counter market quotations are
readily available are valued at their last bid price. When market quotations are
not readily available, when the Advisor determines the last bid price does not
accurately reflect the current value and when restricted securities are being
valued, such securities are valued as determined in good faith by the Advisor,
subject to review of the Board of Trustees of the Trust.
DISTRIBUTION AND TAXES
As a shareholder you are entitled to your share of the Fund's distributed
net income and any gains realized on its investments. The Funds intends to
qualify as a "regulated investment company" for federal income tax purposes and
intends to distribute substantially all of its net investment income and net
capital gains to shareholders at least once a year or more often, if necessary,
to avoid paying corporate income and excise taxes. Dividend and capital gains
distributions will have tax consequences you should know about.
DIVIDEND AND CAPITAL GAIN DISTRIBUTIONS
The Fund's net investment income from dividends and interest is distributed
to you at the end of the calendar year as dividends. Short-term capital gains
(if any) are distributed at the end of the calendar year and are included in net
investment income.
Net realized long-term capital gains (if any) are distributed at the end of
the calendar year as capital gain distributions. Before they are paid or
distributed, net investment income and net long-term capital gains are included
in the value of each share. After they are paid and distributed, the value of
each share drops by the per-share amount of the distribution (If your dividends
and distributions are reinvested, the total value of your holdings will not
change).
REINVESTMENTS
Dividends and capital gain distributions are automatically reinvested in
additional shares of the Fund, unless you request the Fund, in writing or by
phone, to pay dividends and distributions to you in cash.
The reinvestment price is the net asset value at the close of business on
the day the dividend or distribution is paid. Your statement will confirm the
amount invested and the number of shares purchased.
If you choose to receive your dividends and distributions in cash, you will
receive cash payments only for those dividends or distributions declared after
your request has been processed.
TAXES
Dividends and distributions are subject to federal income tax and also may
be subject to state and local taxes. Dividends and distributions are taxable in
the year in which the Fund pays them regardless of whether you receive them in
cash or they are reinvested in additional shares.
Each January, you will receive a tax statement showing the kind and total
amount of all dividends and distributions you received during the previous year.
You must report dividends and distributions on your tax returns, even if they
are reinvested in additional shares.
"Buying a dividend" creates a tax liability. "Buying a dividend" means
buying shares shortly before a dividend or a capital gain distribution is
declared and paid on Fund shares. The amount of the dividend or distribution
that you receive is fully taxable to you even though such dividend or
distribution is only a return of capital.
Redemptions proceeds may be subject to tax. If the redemption value of your
Fund shares is greater than their cost, the difference is a capital gain. Your
gain may be either short-term or long term.
IMPORTANT: The foregoing tax information is a brief and selective summary
of certain federal tax rules that apply to the Fund. Tax matters are highly
individual and complex, and you should consult a qualified tax advisor about
your personal situation.
MANAGEMENT OF THE FUND
TRUSTEES
The Fund is a series of the Declaration Fund (the "Trust"), an open-end,
diversified, management investment company organized as a Pennsylvania business
trust. The Trust's headquarters are at 555 North Lane, Suite 6160, Conshohocken,
Pennsylvania 17428-0844. The business and affairs of the Trust and of the
separate series (including The Michigan Heritage Fund) within the Trust are
managed by the Trust's Board of Trustees. The Trustees establish trust policies,
and have certain fiduciary duties and obligations to the Trust and the separate
series and their shareholders under the laws of the State of Pennsylvania and
the applicable federal securities laws. Currently, the Trust is offering shares
in two series: Declaration Cash Account and The Michigan Heritage Fund.
THE INVESTMENT ADVISOR
Dickinson Asset Management, Inc. (the "Advisor"), 301 MAC Avenue, Suite
120, East Lansing, Michigan 48823, under a written investment advisory agreement
with the Trust, furnishes investment advisory and management services to the
Fund. The Advisor is a Michigan corporation and has been registered as an
investment advisor with the U.S. Securities and Exchange Commission ("SEC") and
the State of Michigan since September 1996. Prior to this date, this Firm was a
sole proprietorship duly registered with the SEC and the State of Michigan in
April 1995.
Mr. C. David Dickinson, the Fund's portfolio manager, is the principal
owner of and controls the Advisor and is responsible for the day-to-day
investment management of the Fund. Mr. Dickinson has in excess of thirteen years
of experience in the financial services industry, including eight years as a
Registered Representative in the brokerage business, and two years as Principal
of a Registered Investment Advisory Firm. Shareholders should understand that
while Mr. Dickinson has extensive experience advising clients as to their
investment strategies and managing portfolios of common stock, the Fund has no
operating history and managing a mutual fund portfolio is a new position for Mr.
Dickinson. Dickinson Asset Management, Inc. has been Investment Advisor to the
Fund since inception.
The Advisor furnishes an investment program for the Fund, determines,
subject to the overall supervision and review of the Board of Trustees of the
Trust, what investments should be purchased, sold and held, and makes changes on
behalf of the Trust in the investments of the Fund. The Advisory Agreement with
the Trust provides for the Fund to pay the Advisor a monthly management fee
equal to an annual rate of 1.00% of the Fund's average daily net assets.
THE ADMINISTRATOR
Declaration Service Company, 555 North Lane, Suite 6160, Conshohocken, PA
19428-0844 ("DSC") serves as the Fund's Administrator in addition to serving as
the Fund's transfer agent, shareholder servicing agent, and dividend disbursing
agent.
DSC is responsible for determining the daily net asset value per share and
maintaining the general accounting records of the Fund.
THE DISTRIBUTOR
Declaration Distributors, Inc., 555 North Lane, Suite 6160, Conshohocken,
PA 19428-0844 ("DDI" or "Distributor"), an affiliate of DSC, is the Fund's share
distributor. DDI acts as sales agent in states where designated agents are
required. DDI reviews and files all advertising and promotional materials, and
monitors and reports to the Board of Trustees on Fund distribution plans.
The Administration, Transfer Agent and Shareholder Services, Accounting
Services, and the Distribution agreements provide for the Fund to pay DSC and
DDI respectively annual fees, payable monthly, for providing the services called
for by the agreements.
GENERAL INFORMATION
SHAREHOLDER RIGHTS
The shares of the Fund, both of the No-Load Class and Class A, represent an
interest in the Fund's assets only and in the event of liquidation, each share
of the Fund would have its aliquot right to the distribution of Fund assets as
every other share of the Fund.
No annual or regular meeting of shareholders is required; however, the
Trustees may call meetings to take action on matters which require a shareholder
vote and other matters as to which Trustees determine a shareholder vote is
necessary or desirable. Subject to Section 16(a) of the Investment Company Act
of 1940, the Trustees may elect their own successors and may appoint Trustees to
fill vacancies, including vacancies caused by an increase in the number of
trustees by action of the Board of Trustees.
As a shareholder, you have voting rights with respect to the management and
operation of the Fund and its policies. You together with the shareholders of
the other series of Declaration Fund are also entitled to vote upon matters
which affect or concern Declaration Fund. You are also entitled to vote as a
class, exclusively, on matters which affect only your class. You are entitled to
one vote for each whole share, and fractional votes for any fractional shares
held. Shares of the Fund do not have cumulative voting rights. The Fund's shares
are fully paid and non-assessable, have no pre-emptive or subscription rights,
and are fully transferable, with no conversion rights.
The Fund issues another Class of shares which invest in the same portfolio
as the No-Load Class and such Class may have different sales charges and other
expenses which may affect performance. Investors may call 1-800-________ to
obtain more information concerning the other Class. Investors may also obtain
information concerning the other Class through their sales representative or
securities broker which is offering or making available to them the securities
offered in the prospectus.
PERFORMANCE INFORMATION
From time to time, in advertisements or in reports to shareholders or
prospective shareholders, the Fund may compare its performance, in terms of its
total return, to that of other mutual funds with similar investment objectives
and to stock or other indices. For example, the Fund may compare its performance
to rankings prepared by Lipper Analytical Services, Inc. ("Lipper"), a widely
recognized independent service which monitors the performance of mutual funds,
to Morningstar's Mutual Fund Values, or to the Consumer Price Index. Performance
information and rankings as reported in Changing Times, Business Week,
Institutional Investor, the Wall Street Journal, Mutual Fund Forecaster, No-Load
Investor, Money, Forbes, Fortune and Barrons may also be used in comparing
performance of the Fund. Performance comparisons shall not be considered as
representative of the future performance of the Fund.
The Fund's average annual total return is computed by determining the
average annual compounded rate of return for a specified period that, if applied
to a hypothetical $1,000 initial investment, would produce the redeemable value
of that investment at the end of the period, assuming reinvestment of all
dividends and distributions and with recognition of all recurring charges. The
Fund may also utilize a total return for differing periods computed in the same
manner but without annualizing the total return.
The standard total return results may not take into account recurring and
non-recurring charges for optional services which only certain shareholders
elect and which involve nominal fees such as a fee for small balances and
redemptions. These fees have the effect of reducing the actual return realized
by shareholders.
MICHIGAN HERITAGE FUND
INVESTMENT ADVISOR
Dickinson Asset Management, Inc.
301 MAC Avenue, Suite 120
East Lansing, Michigan 48823
ADMINISTRATOR & TRANSFER AGENT
Declaration Service Company
555 North Lane, Suite 6160
Conshohocken, PA 19428
DISTRIBUTOR
Declaration Distributors, Inc.
555 North Lane, Suite 6160
Conshohocken, PA 19428
CUSTODIAN BANK
Star Bank, N.A.
425 Walnut Street
M.L. 6118
Cincinnati, Ohio 45202
INDEPENDENT ACCOUNTANTS
Sanville & Company
1514 Old York Road
Abington, PA 19001
Be sure to retain this prospectus. It contains valuable information.
No person has been authorized to give any information or to make any
representations not contained in this Prospectus, or the Fund's Statement of
Additional Information incorporated herein by reference, in connection with the
offering made by this Prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized by the Fund.
This Prospectus does not constitute an offering by the Fund in any jurisdiction
in which such offering may not lawfully be made.
<PAGE>
THE MICHIGAN HERITAGE FUND
Series of The Declaration Fund
THE MICHIGAN HERITAGE FUND
301 MAC Avenue
Suite 120
East Lansing, MI 48823
1-800-___-____
(INFORMATION, SHAREHOLDER SERVICES AND REQUESTS)
PROSPECTUS
_______ ___, 1998
This Prospectus relates to the Class A Shares issued with respect to the
Michigan Heritage Fund.
The Michigan Heritage Fund's objective is long-term growth through capital
appreciation. The Fund seeks to achieve this goal mainly by investing in a
diversified portfolio of companies that have headquarters in the State of
Michigan or companies based elsewhere that have significant operations (as
defined by the Fund's Advisor) in the State of Michigan. There can be no
guarantee the investment objective of the Fund will be achieved.
This Prospectus provides the information a prospective investor ought to
know before investing and should be retained for future reference. A Statement
of Additional Information has been filed with the Securities and Exchange
Commission (the "SEC") dated _______ ___, 1998, which is incorporated herein by
reference and can be obtained without charge by calling the Fund at the phone
number listed above. The SEC maintains a Web Site (http://www/sec.gov) that
contains the Statement of Additional Information, material incorporated by
reference, and other information regarding registrants that file electronically
with the SEC.
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.
<PAGE>
TABLE OF CONTENTS
<PAGE>
SUMMARY OF FEES AND EXPENSES
The following summary is provided to assist you in understanding the
various costs and expenses a shareholder in the Fund could bear directly and
indirectly. Annual operating expenses are shown as a percentage of average daily
net assets. Because shares of the Fund were not offered prior to the date of
this prospectus, annual operating expenses of the Fund are based on estimated
expenses. Shareholder transaction expenses for the Fund are expressed as a
percentage of the public offering price, cost per transaction or as otherwise
noted. The Example should not be considered a representation of future Fund
performance or expenses, both of which may vary.
Shareholder Transaction Expenses
Maximum sales charge on purchases................................... 5.25%
Maximum deferred sales charge imposed on redemption ................ 0%
Maximum sales charge imposed on dividend reinvestment .............. 0%
Redemption Fees .................................................... 0%
Account Closing Fee ................................................ $10
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fee ..................................................... 1.00%
12b-1 Fee .......................................................... .25%
Other Expenses,* (including Transfer Agency
and Accounting Services Fees)....................................... .50%
Total Fund Operating Expenses ...................................... 1.75%
*Other expenses are based on estimated amounts for the current fiscal year.
A $10.00 wire fee will be charged on wire purchases of less than $1,000.
HYPOTHETICAL EXAMPLE OF EFFECT ON FUND EXPENSES
You would pay the following expenses on a $1,000 investment if, for each
year for the next three years, Fund expenses are as described above and annual
return is 5%.
1 YEAR 3 YEARS
------ -------
Assuming a complete redemption at end of period $28 $65
Assuming no redemption at end of period $18 $55
<PAGE>
THE MICHIGAN HERITAGE FUND
--------------------------
Financial Highlights
--------------------
(Selected data for a share of capital stock outstanding through each period)
----------------------------------------------------------------------------
For the period
July 27, 1997
(commencement
of Investment
operations) to
December 31,
1997
--------------
Net asset value, beginning of period $ 10.00
-------
Income from investment operations:
Net investment income (.04)
Net realized and unrealized gain
on investments 0.18
-------
Total from investment operations 0.14
-------
Less Distributions to shareholders:
Net realized gain on investments sold --
-------
Total distributions --
-------
Net asset value, end of period $ 10.14
=======
Total investment return 1.40%
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 303
Ratio of expenses to average net assets** 2.18%*
Ratio of net investment income to average net assets** -0.94%*
Portfolio turnover rate 0.00%
* Ratios for period of less than one year are annualized.
** Net investment income is net of expenses reimbursements and fee waivers
$1.52 share Had such reimbursements not been made, the annualized expense
ratio would have been 34.48% and the annualized net investment income ratio
would have been (35.73%).
See notes to financial statements.
<PAGE>
THE FUND
The Michigan Heritage Fund (the "Fund") was organized as a series of
Declaration Fund (the "Trust") on February 19, 1997, and commenced operations on
July 8, 1997. This Prospectus offers Class A Shares of the Fund. Each share
represents an undivided, proportionate interest in the Fund. The investment
advisor to the Fund is Dickinson Asset Management, Inc. (the "Advisor").
INVESTMENT OBJECTIVES
The Fund's investment objective is long-term growth through capital
appreciation. The Fund seeks to achieve this goal mainly by investing in a
diversified portfolio of companies that have their principal offices located in
Michigan or out-of-state companies that have a corporate division or subsidiary
employing 300 or more persons or which derive $1,000,000 or more in revenue from
goods either produced or sold in Michigan or from investments made or services
performed therein (hereafter "Michigan Companies"). There can be no guarantee
the investment objective of the Fund will be achieved. The Fund's investment
objective may not be changed without shareholder approval.
The Fund's Advisor believes that Michigan is positioned to provide
publicly-traded companies and their shareholders significant opportunities for
growth. Due to its central location among the largest markets in the U.S. and
Canada, Michigan offers businesses access to half of the population and personal
income of both countries. Michigan's own sizable consumer market of 9.3 million
had an average per capita income of approximately $23,915 in 1996. Long known as
a leader in manufacturing, Michigan's large industrial market generated a demand
for products and services of more than $170 billion in 1992. In 1996, Michigan
was ranked #1 of states having the most companies listed in the Top 20 of the
Fortune 500 in this it was tied with New York. While the State's economy still
benefits from its strong ties to the automobile industry, the economy continues
to diversify. The State has one of the most advanced telecommunications
infrastructures in the nation. Michigan presently has one of the largest fibre
optic cable networks in the nation. Virtually every city and town is connected
through fiber optic networks. Also, Michigan has the greatest number of internet
connections in the Midwest - 90% of Michigan's population can dial the Internet
via a local phone call. International trade is assuming increasing importance in
Michigan's economy. Commercial airports, the Great Lakes and St. Lawrence Seaway
give the state easy access to world markets and the State was the nation's 4th
largest exporter in 1996. While already one of the world's largest trading
relationships, the U.S. - Canadian Free Trade Agreement has spurred even greater
activity between Canada and the U.S. and, correspondingly, between Canada and
Michigan. This summary does not purport to be complete and is based upon
information derived from publicly available documents.
The Advisor believes that the Fund will provide a positive influence on the
Michigan economy by stimulating investor interest and awareness in Michigan
companies.
INVESTMENT POLICIES
In pursuit of its investment objective, the Fund will invest at least 65
percent of the value of its total assets in the following types of securities
issued by Michigan Companies: common stocks, preferred stocks, securities
convertible into common and preferred stocks, and American Depository Receipts
(ADRs) traded on a U.S. stock exchange.
The Fund may invest up to 35 percent of the value of its total assets in
the securities of other issuers, such as common stocks, preferred stocks;
investment-grade corporate bonds and notes; high quality short-term debt
securities such as commercial paper, bankers' acceptances, certificates of
deposit, repurchase agreements; obligations insured or guaranteed by the United
States Government and its agencies, and instrumentalities; demand and time
deposits of domestic banks and United States branches and subsidiaries of
foreign banks, and money market funds.
The Fund will not engage in direct investment in real estate. The fund may
invest in Real Estate Investment Trusts (REITS) that are traded on one of the
principal U.S. stock exchanges.
The Fund will invest in a diverse group of companies with varying degrees
of name recognition. The portfolio will include companies in a wide range of
industries, from basic consumer goods and autos to high-tech services.
Investments are based primarily on fundamental analysis. While technical factors
will be considered, the main investment criteria will focus on an evaluation of
revenues, earnings, debt, capitalization, quality of management, level of
insider ownership, changing market conditions, past performance and future
expectations. The Fund will strive to invest in companies that have well defined
business plans and long-term operating strategies designed to increase
shareholder value. The Fund will not concentrate its investments in one
industry; however, it may invest up to 25% of the value of its' assets in one
industry. This concentration policy may not be changed without shareholder
approval.
When evaluating a Michigan-based company, a member of the Advisor's
portfolio management or research staff may conduct an in-person visit to the
company whenever such a visit is judged appropriate, may meet with the company's
management, and evaluate its operations. The staff member will also attempt to
interview a cross section of the company's employees, customers, suppliers and
competitors. The Advisor believes that this "hands on" approach to investing
will enable it to learn of any developing trends in such companies.
The Fund does not propose to engage in short-term trading. However, it may,
from time to time, sell a security without regard to the length of time it has
been held. The fund does not expect that its' portfolio turnover rate will
exceed 75% for its' first fiscal year. High portfolio turnover rates increase
transaction costs and the possibility of realizing taxable capital gains.
INVESTING DEFENSIVELY
On those occasions when, in the opinion of the Fund's Advisor, market
conditions warrant a temporary defensive approach, the Fund may invest more than
35 percent of its total assets in short-term obligations, including the
following: securities issued or guaranteed by the U.S. government, commercial
paper, bankers acceptances and securities issued by money market funds. During
intervals when the Fund has adopted a temporary defensive position then to the
extent that investments are made for defensive purposes, they will not be made
in pursuance of the Fund's investment objective.
The Fund may, from time to time, engage in repurchase agreements which are
secured by U.S. Government obligations that qualify as eligible investments of
the Fund. Under the terms of the typical repurchase agreement, a person sells
securities to the Fund and agrees to repurchase the securities at the Fund's
cost plus interest within a specified time period (normally one day). The
arrangement results in a fixed rate of return that is not subject to market
fluctuations during the period that the underlying security is held by the Fund.
Repurchase agreements involve certain risks, including seller's default on its
obligation to repurchase or seller's bankruptcy. The Fund will not enter into
repurchase agreements of more than seven (7) days duration.
RISKS
The principal risk factor associated with an investment in the Fund is that
the market value of the portfolio's securities may decrease and result in a
decrease in the value of a shareholder's investment.
The Fund's portfolio may include smaller companies that are not nationally
recognized and companies that ordinarily pay no dividends or interest. The price
of the stocks of such companies are generally more volatile than those of larger
or more mature companies. Additionally, the securities of such companies are
generally more likely to be negatively affected by adverse economic and/or
market conditions, and are generally less liquid.
Due to the geographic limitation of 65% if the Fund's assets, such assets
may be subject to greater risk of loss from economic, political or other
developments (e.g., natural disasters) having an unfavorable impact upon
businesses located in Michigan than similar funds whose investments are
geographically more diverse (i.e. the Fund may be less diversified than other
funds with similar investment objectives but no such geographic limitation).
There can be no assurance that the economy of Michigan or the companies
headquartered or operating in Michigan will grow in the future.
Since the Fund will be mainly investing in a diversified portfolio of
companies that have their headquarters in the State of Michigan, or companies
based elsewhere that have significant operations in Michigan, Fund investments
can be significantly affected by business trends and the economic health of
Michigan. The following is a brief description of certain factors affecting the
Michigan Heritage Fund. The summary does not purport to be complete and is based
upon information derived from publicly available documents.
SPECIAL FACTORS AFFECTING INVESTMENTS IN MICHIGAN COMPANIES
Home to the "Big Three" automobile manufacturers, Michigan's automobile
industry has historically played a prominent role in the State's economy. As of
1995, 48.7% of all manufacturing in the State was auto related, 1 in 14 Michigan
employees worked for the "Big Three", and $1 in $6 paid for labor was paid by
the "Big Three". In addition, 11.2% of Michigan employees are employed by
businesses related in some manner to the automobile industry.
Due to the cyclical nature of the automobile industry, Michigan and
consequently a shareholder of The Michigan Heritage Fund, could be adversely
affected by any economic downturn or recession. Also, any negative event or news
item relating to the automobile industry, may have an adverse affect on the
value of a shareholder's investment in the Fund.
HOW TO PURCHASE SHARES
Class A Shares of the Fund are sold on a continuous basis, and you may
invest any amount you choose, as often as you wish, subject to a minimum initial
investment of $1,000 and subsequent minimum investments of $100. Shares of the
Fund are purchased at their public offering price which is their net asset value
next determined after an order is received and accepted by the transfer agent
plus a sales charge. The selling price is calculated as follows:
<TABLE>
<CAPTION>
Selling Price As
Percentage of Public Payable to
Dollar Amount Invested Offering Price Selling Institution Distributor
---------------------- -------------- ------------------- -----------
<S> <C> <C> <C>
Up to $50,000 5.25% 4.75% 0.50%
$50,000 but less than $250,000 4.00% 3.50% 0.50%
$250,000 but less than $500,000 3.00% 2.50% 0.50%
$500,000 and above 2.25% 1.75% 0.50%
</TABLE>
When opening an account, it is important that you provide the transfer
agent with your correct taxpayer identification number (social security or
employer identification number).
If you are investing in this Fund for the first time, you will need to set
up an account. You may make a direct initial investment by completing and
signing the investment application which accompanies this Prospectus and mailing
it, together with a check or money order made payable to:
The Michigan Heritage Fund
Declaration Service Company
P.O. Box 844,
Conshohocken, Pennsylvania 19428-0844
To determine the applicable sales charge, the net amount being invested is
added to the value of the outstanding shares then owned by the investor.
Investors must be careful when making subsequent investment payments to include
their exact account number, otherwise, the investment may be treated as an
initial investment.
BY MAIL: When making subsequent investments by mail, enclose your check
with the return remittance portion of the confirmation of your previous
investment or indicate on your check or a separate piece of paper your name,
address and account number and mail to the address set forth above. Third party
checks will not be accepted, and the Fund reserves the right to refuse to accept
second party checks.
BY WIRE: You may make your initial or subsequent investments in the Fund by
wiring funds. To do so, call the Investor Services Department at 1-800-___-____
for wiring instructions.
BY AUTOMATIC INVESTMENT PLAN: Once your account is open, you may make
investments automatically by completing the automatic investment plan form
authorizing the Fund to draw on your bank account regularly by check for as
little as $100 per month beginning within thirty (30) days after the account is
opened. You should inquire at your bank whether it will honor debits through the
Automated Clearing House ("ACH"). You may change the date or amount of your
investment any time by written instruction received by the Fund at least five
business days before the change is to become effective.
To assure proper receipt, please be sure your bank includes the Fund name
and the account number that has been assigned to you. If you are opening a new
account, please complete the Account Registration Form and mail it to the "New
Account" address above after completing your wire arrangement. Note: Federal
Funds wire purchase orders will be accepted only when the Fund and Custodian
Bank are open for business.
FUNDS CREDITED TO THE FUND'S ACCOUNT BY 4:00 PM (EASTERN TIME) WILL BE
APPLIED TO PURCHASE SHARES ON THAT DAY. There are no wire fees charged by the
Fund for purchases of $1,000 or more. A $10 wire fee will be charged by the Fund
on wire purchases of less than $1,000. Your bank may also charge wire fees for
this service.
ADDITIONAL INFORMATION ABOUT PURCHASES
PURCHASE POLICIES:
o Investments must be received and accepted in the transfer agent's
offices on a business day before 4:00 PM Eastern Time to be credited
to your account that day and to receive that day's share price.
Otherwise, your investment will be credited to your account on the
next business day and you will receive that day's share price.
o The maximum single investment permitted is $250 thousand. Any
individual order for more than $250 thousand must be pre-approved by
the Advisor prior to making the investment or it will be rejected.
o The Transfer Agent and the Fund are not responsible for any delays
that occur in wiring funds, including delays in processing by the
investor's bank.
o The Fund reserves the right to reject an investment for any reason.
HOW TO REDEEM SHARES
You may redeem any or all of your shares at will. THE FUND REDEEMS SHARES
AT THE NET ASSET VALUE THEREOF NEXT DETERMINED AFTER IT HAS RECEIVED AND
ACCEPTED A REDEMPTION REQUEST; HOWEVER THE REDEMPTION PROCEEDS WILL NOT BE PAID
UNTIL SUCH TIME AS THE REDEMPTION REQUEST IS RECEIVED IN PROPER ORDER.
Redemption requests must be received prior to the time that the net asset value
per share is next determined (generally 4:00 PM Eastern Time on each day that
the New York Stock Exchange is open for trading )to obtain the date of receipt
net asset value.
BY MAIL: A written request for redemption in proper order must be sent to
Declaration Service Company, P.O. Box 844, Conshohocken, Pennsylvania
19428-0844. For express or registered mail, your request should be addressed to
Declaration Service Company, 555 North Lane, Suite 6160, Conshohocken,
Pennsylvania 19428. "Proper order" requires delivery to the Transfer Agent of:
(1) a written redemption request signed by each registered owner in
the exact names in which the account is registered, and including the
account number and the number of shares or the dollar amount to be
redeemed;
(2) a signature guarantee when required (see "Signature Guarantee"
page ____);and
(3) such additional documents required to evidence the authority of
the persons requesting redemption on behalf of corporations, or as
executors, trustees and other fiduciaries. Redemption proceeds will not be
paid until all documents, in satisfactory form, have been received by the
Transfer Agent. (See "Additional Information About Redemptions" below on
page ____.)
BY TELEPHONE: Redemptions may be made by telephone, provided you have
completed the Telephone Redemption Authorization section of the purchase
application. Upon proper authority and instruction, redemption proceeds will be
wired to the bank account set forth on the account registration or, for amounts
$5,000 or less, redemptions will be mailed to the address on the account
registration. There will be a charge for the bank wire. Neither the Fund nor the
Transfer Agent will be responsible for acting upon instructions reasonably
believed by them to be genuine. The Fund and/or its Transfer Agent will,
however, employ reasonable procedures to confirm that instructions communicated
by telephone are genuine (such as requiring some form of personal
identification, providing written confirmations, and the tape recording of
conversations). If the Fund or its Transfer Agent do not employ reasonable
procedures, they may be liable for losses due to unauthorized or fraudulent
transactions.
SPECIAL REDEMPTION ARRANGEMENTS
Special arrangements may be made by institutional investors, or on behalf
of accounts established by brokers, advisors, banks or similar institutions, to
have redemption proceeds transferred by wire to pre-established accounts upon
telephone instructions. For further information call the Fund at 1-800-___-____.
SIGNATURE GUARANTEE
A signature guarantee is required for all redemptions greater than $5,000
or where the redemption proceeds are to be paid to another person or sent to an
address other than the one of record. A signature guarantee verifies the
authenticity of your signature. The guarantor must be an eligible guarantor. In
order to be eligible, the guarantor must be a participant in a STAMP program ( a
Securities Transfer Agents Medallion Program). You may call the Transfer Agent
at 1-800-___- ____ to determine whether the entity that will guarantee the
signature is an eligible guarantor.
REDEMPTION PROCEEDS MAY BE SENT TO YOU:
BY MAIL: If your redemption check is to be mailed, it will usually be
mailed to you within 48 hours of receipt of the redemption request. The Fund
reserves the right to hold redemption proceeds for up to seven days. If the
shares to be redeemed were purchased by check, the redemption proceeds will not
be mailed to you until the check has cleared. You may avoid this inconvenience
by investing by bank wire. Redemption checks may also be delayed if you have
changed your address within the last 30 days. Please notify the Fund, promptly,
in writing, of any change of address.
BY WIRE: You may authorize the Fund to transmit redemption proceeds by wire
provided you send written instructions with a signature guarantee at the time of
redemption or have completed the banking information portion of the Telephone
Redemption Authorization on the purchase application. Your redemption proceeds
will usually be sent on the first business day following redemption. However,
the Fund reserves the right to hold redemption proceeds for up to seven days. If
the shares to be redeemed were purchased by check, the redemption proceeds will
not be wired until the check has cleared, which may take up to seven days. There
is a $10 charge to cover the wire, which is deducted from redemption proceeds.
ADDITIONAL INFORMATION ABOUT REDEMPTIONS
(1) The share redemption price may be more or less than your cost of the
shares being redeemed, depending on the per share net asset value next
determined after your request is received.
(2) A request to redeem shares in an IRA or similar retirement account must
be accompanied by an IRS W4-P and must state a reason for withdrawal, as
specified by the IRS. Proceeds from the redemption of shares from a retirement
account may be subject to withholding tax.
(3) Excessive purchases and redemptions of Fund shares has an adverse
impact on effective portfolio management as well as upon Fund expenses. The Fund
has reserved the right to refuse investments from shareholders who engage in
such transactions.
ACCOUNT CLOSING FEE
In order to reduce Fund expenses, an account closing fee of $10 will be
assessed against those shareholders who redeem all of the shares in their Fund
account and direct that redemption proceeds be directed to them by mail or wire.
This charge is payable directly to the Fund's Transfer Agent which, in turn,
will reduce its charges to the Fund by an equal amount.
The purpose of the charge is to allocate to redeeming shareholders a more
equitable portion of the Transfer Agent's fee, including the cost of tax
reporting, which is based upon the number of shareholder accounts. When a
shareholder closes an account, the Fund must continue to carry the account on
its books, maintain the account records and complete year-end tax reporting.
With no assets, the account cannot pay its own expenses and imposes an unfair
burden on remaining shareholders.
SMALL ACCOUNTS
Fund accounts which fall, for any reason other than market fluctuation,
below $500 at any time during a month will be subject to a small account charge
of $5 for that month, which is deducted the first business day following the end
of each month. The charge is payable directly to the Fund's Transfer Agent
which, in turn, will reduce its charges to the Fund by an equal amount. The
purpose of the charge is to allocate the cost of maintaining shareholder
accounts more equitably among shareholders.
Active automatic investment plan, UGMA/UTMA, and retirement plan accounts
will not be subject to the small account charge.
In order to reduce expenses, the Fund may redeem all of the shares in any
shareholder account (other than an active automatic investment plan, UGMA/UTMA
and retirement plan accounts), if, for a period of more than three months, the
account has a net value of $500 or less and the reduction in its value is not
due to market action. If the Fund elects to close such accounts, it will notify
shareholders whose accounts are below the minimum of its intention to do so, and
will provide those shareholders with an opportunity to increase the value of
their accounts by investing a sufficient amount to bring the value of their
accounts up to an amount greater than $500 within ninety (90) days of the date
of the notice. No account closing fee will be charged to those investors whose
accounts are closed under the mandatory redemption provision.
SHAREHOLDER SERVICES
Declaration Service Company, P.O. Box 844, Conshohocken, PA 19428-0844,
acts as transfer, shareholder servicing, and dividend paying agent for all Fund
accounts. Simply write or call the Investor Information Department at
1-800-___-____ for prompt service on any questions about your account.
CONFIRMATION STATEMENTS
Shareholders normally will receive a confirmation statement after each
transaction showing the activity in the account, and an annual statement showing
all transactions for the calendar year just completed.
OTHER SERVICES
The Fund has available a number of plans and services to meet the special
needs of certain investors. Plans available include, but are not limited to:
(1) payroll deduction plans, including military allotments;
(2) custodial accounts for minors;
(3) a flexible, systematic withdrawal plan; and
(4) various retirement plans such as IRA, 403(b)(7), and employer-adopted,
401(k) defined benefit and defined contribution plans.
There is an annual charge for each retirement plan fund account with
respect to which a service provider acts as custodian. If this charge is not
paid separately prior to the last business day of a calendar year or prior to a
total redemption, it will be deducted from the shareholder's account.
Application forms and brochures describing these plans and services can be
obtained from the Transfer Agent by calling 1-800-___-____.
RULE 12b-1 DISTRIBUTION PLAN
A plan of distribution has been adopted under Rule 12b-1 of the Investment
Company Act of 1940 for the Fund. The plan provides the Fund may pay an annual
fee of up to 0.25% of the Fund's average net assets (1/12 of 0.25% monthly) for
certain services which are primarily intended to result in the distribution of
Fund shares. Such services include advertising, compensation of persons engaged
in the sale of Fund shares, distribution of sales materials including the cost
of preparing, printing and mailing such sales materials, sales representations
and promotions and payments to brokers and others who are engaged in the
distribution of Fund shares and who administer the accounts of shareholders. See
"12b-1 Plan of Distribution" in Statement of Additional Information.
VALUING FUND SHARES
The value of an individual share in the Fund (the net asset value) is
calculated by dividing the total value of the Fund's investments and other
assets (including accrued income), less any liabilities (including estimated
accrued expenses), by the number of shares outstanding, rounded to the nearest
cent. Net asset value per share is determined as of the close of the New York
Stock Exchange (4:00 PM, Eastern Time) on each day that the Exchange is open for
business, and on any other day on which there is sufficient trading in the
Fund's securities to materially affect the net asset value. The net asset value
per share of the Fund will fluctuate.
Securities which are traded on any exchange or on the NASDAQ over-the
counter market are valued at the last quoted sale price. Lacking a last sale
price, a security is valued at its last bid price except when, in the Advisor's
opinion, the last bid price does not accurately reflect the current value of the
security. All other securities for which over-the-counter market quotations are
readily available are valued at their last bid price. When market quotations are
not readily available, when the Advisor determines the last bid price does not
accurately reflect the current value and when restricted securities are being
valued, such securities are valued as determined in good faith by the Advisor,
subject to review of the Board of Trustees of the Trust.
DISTRIBUTION AND TAXES
As a shareholder you are entitled to your share of the Fund's distributed
net income and any gains realized on its investments. The Funds intends to
qualify as a "regulated investment company" for federal income tax purposes and
intends to distribute substantially all of its net investment income and net
capital gains to shareholders at least once a year or more ofter, if necessary,
and to avoid paying corporate income and excise taxes. Dividend and capital
gains distributions will have tax consequences you should know about.
DIVIDEND AND CAPITAL GAIN DISTRIBUTIONS
The Fund's net investment income from dividends and interest is distributed
to you at the end of the calendar year as dividends. Short-term capital gains
(if any) are distributed at the end of the calendar year and are included in net
investment income.
Net realized long-term capital gains (if any) are distributed at the end of
the calendar year as capital gain distributions. Before they are paid or
distributed, net investment income and net long-term capital gains are included
in the value of each share. After they are paid and distributed, the value of
each share drops by the per-share amount of the distribution (If your dividends
and distributions are reinvested, the total value of your holdings will not
change).
REINVESTMENTS
Dividends and capital gain distributions are automatically reinvested in
additional shares of the Fund, unless you request the Fund, in writing or by
phone, to pay dividends and distributions to you in cash.
The reinvestment price is the net asset value at the close of business on
the day the dividend or distribution is paid. Your statement will confirm the
amount invested and the number of shares purchased.
If you choose to receive your dividends and distributions in cash, you will
receive cash payments only for those dividends or distributions declared after
your request has been processed.
TAXES
Dividends and distributions are subject to federal income tax and also may
be subject to state and local taxes. Dividends and distributions are taxable in
the year in which the Fund pays them regardless of whether you receive them in
cash or they are reinvested in additional shares.
Each January, you will receive a tax statement showing the kind and total
amount of all dividends and distributions you received during the previous year.
You must report dividends and distributions on your tax returns, even if they
are reinvested in additional shares.
"Buying a dividend" creates a tax liability. "Buying a dividend" means
buying shares shortly before a dividend or a capital gain distribution is
declared and paid on Fund shares. The amount of the dividend or distribution
that you receive is fully taxable to you even though such dividend or
distribution is only a return of capital.
Redemptions proceeds may be subject to tax. If the redemption value of your
Fund shares is greater than their cost, the difference is a capital gain. Your
gain may be either short-term or long term.
IMPORTANT: The foregoing tax information is a brief and selective summary
of certain federal tax rules that apply to the Fund. Tax matters are highly
individual and complex, and you should consult a qualified tax advisor about
your personal situation.
MANAGEMENT OF THE FUND
TRUSTEES
The Fund is a series of the Declaration Fund (the "Trust"), an open-end,
diversified, management investment company organized as a Pennsylvania business
trust. The Trust's headquarters are at 555 North Lane, Suite 6160, Conshohocken,
Pennsylvania 17428-0844. The business and affairs of the Trust and of the
separate series (including The Michigan Heritage Fund) within the Trust are
managed by the Trust's Board of Trustees. The Trustees establish trust policies,
and have certain fiduciary duties and obligations to the Trust and the separate
series and their shareholders under the laws of the State of Pennsylvania and
the applicable federal securities laws. Currently, the Trust is offering shares
in two series: Declaration Cash Account and The Michigan Heritage Fund.
THE INVESTMENT ADVISOR
Dickinson Asset Management, Inc. (the "Advisor"), 301 MAC Avenue, Suite
120, East Lansing, Michigan 48823, under a written investment advisory agreement
with the Trust, furnishes investment advisory and management services to the
Fund. The Advisor is a Michigan corporation and has been registered as an
investment advisor with the U.S. Securities and Exchange Commission ("SEC") and
the State of Michigan since September 1996. Prior to this date, this Firm was a
sole proprietorship duly registered with the SEC and the State of Michigan in
April 1995.
Mr. C. David Dickinson, the Fund's portfolio manager, is the principal
owner of and controls the Advisor and is responsible for the day-to-day
investment management of the Fund. Mr. Dickinson has in excess of thirteen years
of experience in the financial services industry, including eight years as a
Registered Representative in the brokerage business, and two years as Principal
of a Registered Investment Advisory Firm. Shareholders should understand that
while Mr. Dickinson has extensive experience advising clients as to their
investment strategies and managing portfolios of common stock, the Fund has no
operating history and managing a mutual fund portfolio is a new position for Mr.
Dickinson. Dickinson Asset Management, Inc. has been Investment Advisor to the
Fund since inception.
The Advisor furnishes an investment program for the Fund, determines,
subject to the overall supervision and review of the Board of Trustees of the
Trust, what investments should be purchased, sold and held, and makes changes on
behalf of the Trust in the investments of the Fund. The Advisory Agreement with
the Trust provides for the Fund to pay the Advisor a monthly management fee
equal to an annual rate of 1.00% of the Fund's average daily net assets.
THE ADMINISTRATOR
Declaration Service Company, 555 North Lane, Suite 6160, Conshohocken, PA
19428-0844 ("DSC") serves as the Fund's Administrator in addition to serving as
the Fund's transfer agent, shareholder servicing agent, and dividend disbursing
agent.
DSC is responsible for determining the daily net asset value per share and
maintaining the general accounting records of the Fund.
THE DISTRIBUTOR
Declaration Distributors, Inc., 555 North Lane, Suite 6160, Conshohocken,
PA 19428-0844 ("DDI" or "Distributor"), an affiliate of DSC, is the Fund's share
distributor. DDI acts as sales agent in states where designated agents are
required. DDI reviews and files all advertising and promotional materials, and
monitors and reports to the Board of Trustees on Fund distribution plans.
The Administration, Transfer Agent and Shareholder Services, Accounting
Services, and the Distribution agreements provide for the Fund to pay DSC and
DDI respectively annual fees, payable monthly, for providing the services called
for by the agreements.
GENERAL INFORMATION
SHAREHOLDER RIGHTS
The shares of the Fund, both of the No-Load Class and Class A, represent an
interest in the Fund's assets only and in the event of liquidation, each share
of the Fund would have its aliquot right to the distribution of Fund assets as
every other share of the Fund.
No annual or regular meeting of shareholders is required; however, the
Trustees may call meetings to take action on matters which require a shareholder
vote and other matters as to which Trustees determine a shareholder vote is
necessary or desirable. Subject to Section 16(a) of the Investment Company Act
of 1940, the Trustees may elect their own successors and may appoint Trustees to
fill vacancies, including vacancies caused by an increase in the number of
trustees by action of the Board of Trustees.
As a shareholder, you have voting rights with respect to the management and
operation of the Fund and its policies. You together with the shareholders of
the other series of Declaration Fund are also entitled to vote upon matters
which affect or concern Declaration Fund. You are also entitled to vote as a
class, exclusively, on matters which affect only your class. You are entitled to
one vote for each whole share, and fractional votes for any fractional shares
held. Shares of the Fund do not have cumulative voting rights. The Fund's shares
are fully paid and non-assessable, have no pre-emptive or subscription rights,
and are fully transferable, with no conversion rights.
The Fund issues another Class of shares which invest in the same portfolio
as the Class A shares and such Class may have different sales charges and other
expenses which may affect performance. Investors may call 1-800-________ to
obtain more information concerning the other Class. Investors may also obtain
information concerning the other Class through their sales representative or
securities broker which is offering or making available to them the securities
offered in the prospectus.
PERFORMANCE INFORMATION
From time to time, in advertisements or in reports to shareholders or
prospective shareholders, the Fund may compare its performance, in terms of its
total return, to that of other mutual funds with similar investment objectives
and to stock or other indices. For example, the Fund may compare its performance
to rankings prepared by Lipper Analytical Services, Inc. ("Lipper"), a widely
recognized independent service which monitors the performance of mutual funds,
to Morningstar's Mutual Fund Values, or to the Consumer Price Index. Performance
information and rankings as reported in Changing Times, Business Week,
Institutional Investor, the Wall Street Journal, Mutual Fund Forecaster, No-Load
Investor, Money, Forbes, Fortune and Barrons may also be used in comparing
performance of the Fund. Performance comparisons shall not be considered as
representative of the future performance of the Fund.
The Fund's average annual total return is computed by determining the
average annual compounded rate of return for a specified period that, if applied
to a hypothetical $1,000 initial investment, would produce the redeemable value
of that investment at the end of the period, assuming reinvestment of all
dividends and distributions and with recognition of all recurring charges. The
Fund may also utilize a total return for differing periods computed in the same
manner but without annualizing the total return.
The standard total return results may not take into account recurring and
non-recurring charges for optional services which only certain shareholders
elect and which involve nominal fees such as a fee for small balances and
redemptions. These fees have the effect of reducing the actual return realized
by shareholders.
MICHIGAN HERITAGE FUND
INVESTMENT ADVISOR
Dickinson Asset Management, Inc.
301 MAC Avenue, Suite 120
East Lansing, Michigan 48823
ADMINISTRATOR & TRANSFER AGENT
Declaration Service Company
555 North Lane, Suite 6160
Conshohocken, PA 19428
DISTRIBUTOR
Declaration Distributors, Inc.
555 North Lane, Suite 6160
Conshohocken, PA 19428
CUSTODIAN BANK
Star Bank, N.A.
425 Walnut Street
M.L. 6118
Cincinnati, Ohio 45202
INDEPENDENT ACCOUNTANTS
Sanville & Company
1514 Old York Road
Abington, PA 19001
Be sure to retain this prospectus. It contains valuable information.
No person has been authorized to give any information or to make any
representations not contained in this Prospectus, or the Fund's Statement of
Additional Information incorporated herein by reference, in connection with the
offering made by this Prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized by the Fund.
This Prospectus does not constitute an offering by the Fund in any jurisdiction
in which such offering may not lawfully be made.
<PAGE>
PART B: STATEMENT OF ADDITIONAL INFORMATION
THE MICHIGAN HERITAGE FUND
A SERIES OF THE DECLARATION FUND
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information is not a Prospectus but should be
read in conjunction with the Fund's Prospectus dated _______ ___, 1998 (the
"Prospectus") which may be obtained from Declaration Service Company ("DSC" or
the "Administrator"), P.O. Box 844, Conshohocken, Pennsylvania 19428-0844.
THE DATE OF THIS STATEMENT OF ADDITIONAL INFORMATION IS
_______ ___, 1998
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
GENERAL INFORMATION .................................... 3
INVESTMENT OBJECTIVES AND POLICIES ..................... 3
INVESTMENT LIMITATIONS ................................. 3
PORTFOLIO TRANSACTIONS ................................. 5
MANAGEMENT OF THE FUND ................................. 6
INVESTMENT ADVISORY SERVICES ........................... 7
ADMINISTRATOR SERVICES ................................. 8
TRANSFER AGENCY AND OTHER SERVICES ..................... 9
RULE 12b-1 DISTRIBUTION PLAN .......................... 9
ADDITIONAL INFORMATION ON REDEMPTIONS .................. 10
CALCULATION OF PERFORMANCE DATA ........................ 10
TAX STATUS ............................................. 11
CUSTODIAN .............................................. 12
INDEPENDENT ACCOUNTANTS ................................ 12
2
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GENERAL INFORMATION
The Michigan Heritage Fund ("the Fund") was organized as a series of
Declaration Fund (the "Trust") on February 10, 1997. The Trust is an open-end,
diversified, management investment company, organized as a Pennsylvania Business
Trust. The Board of Trustees of the Trust has approved the issuance of Fund
shares in two classes, the No Load Class and Class A.
Shareholder meetings will be held when required by the Investment Company
Act of 1940, as amended, (the "1940 Act").
On any matter submitted to shareholders, the holder of each share is
entitled to one vote per share (with proportionate voting for fractional
shares). Shares do not have cumulative voting rights, which means that in
situations in which shareholders elect Trustees, holders of more than 50% of the
shares voting for the election of Trustees can elect 100% of the Trust's
Trustees, and the holders of less than 50% of the shares voting for the election
of Trustees will not be able to elect any person as a Trustee.
INVESTMENT OBJECTIVES AND POLICIES
The following information supplements the discussion of the investment
objectives and policies of the Fund in the Fund's Prospectus.
INVESTMENT LIMITATIONS
Fundamental Limitations. The investment limitations described below have
been adopted by the Trust with respect to the Fund and are fundamental; i.e.,
they may not be changed without the affirmative vote of a majority of the
outstanding shares of the Fund. As used in the Prospectus and this Statement of
Additional Information, the term "majority" of the outstanding shares of the
Fund means the lesser of (1) 67% or more of the outstanding shares of the Fund
present at a meeting, if the holders of more than 50% of the outstanding shares
of the Fund are present or represented at such meeting; or (2) more than 50% of
the outstanding shares of the Fund. Other investment limitations which may be
changed by the Board of Trustees without the approval of shareholders to the
extent permitted by applicable law, regulation or regulatory policy are
considered non-fundamental (See "Non-Fundamental Limitations," below).
3
<PAGE>
1. Borrowing Money. The Fund will not borrow money, except (a) from a bank,
provided that immediately after such borrowing there is an asset icoverage of
300% for all borrowings of the Fund; or (b) from a bank or other persons for
temporary purposes only, provided that such temporary borrowings are in an
amount not exceeding 5% of the Fund's total assets at the time when the
borrowing is made. This limitation does not preclude the Fund from entering into
reverse repurchase transactions, provided that the Fund has an asset coverage of
300% for all borrowings and repurchase commitments of the Fund pursuant to
reverse repurchase transactions.
2. Senior Securities. Senior securities will not be issued with respect to
the Fund. This limitation is not applicable to activities that may be deemed to
involve the issuance or sale of a senior security by the Fund, provided that the
Fund's engagement in such activities is (a) consistent with or permitted by the
1940 Act as amended, the rules and regulations promulgated thereunder or
interpretations of the Securities and Exchange Commission ("SEC") or its staff
and (b) as described in the Prospectus and this Statement of Additional
Information.
3. Underwriting. The Fund will not act as underwriter of securities issued
by other persons. This limitation is not applicable to the extent that, in
connection with the disposition of portfolio securities (including restricted
securities), the Fund may be deemed an underwriter under certain federal
securities laws.
4. Real Estate. The Fund will not purchase or sell real estate. This
limitation is not applicable to investments in marketable securities which are
secured by or represent interests in real estate. This limitation does not
preclude the Fund from investing in mortgage-related securities or investing in
companies engaged in the real estate business or that have a significant portion
of their assets in real estate (including real estate investment trusts).
5. Commodities. The Fund will not purchase or sell commodities unless
acquired as a result of ownership of securities or other investments. This
limitation does not preclude the Fund from purchasing or selling options or
futures contracts, from investing in securities or other instruments backed by
commodities or from investing in companies which are engaged in a commodities
business or have a significant portion of their assets in commodities.
6. Loans. The Fund will not make loans to other persons, except (a) by
loaning portfolio securities, (b) by engaging in repurchase agreements, or (c)
by purchasing non publicly offered debt securities. For purposes of this
limitation, the term "loans" shall not include the purchase of a portion of an
issue of publicly distributed bonds, debentures or other securities.
4
<PAGE>
With respect to the percentages adopted by the Fund as maximum limitations
on its investment policies and limitations, an excess above the fixed percentage
will not be a violation of the policy or limitation unless the excess results
immediately and directly from the acquisition of any security or the action
taken. This paragraph does not apply to the borrowing policy set forth in
paragraph 1 above.
Notwithstanding any of the foregoing limitations, any investment company,
whether organized as a trust, association or corporation, or a personal holding
company, may be merged or consolidated with or acquired by the Fund, provided
that if such merger, consolidation or acquisition results in an investment in
the securities of any issuer prohibited by said limitations, the Trust shall,
within ninety days after the consummation of such merger, consolidation or
acquisition, dispose of all of the securities of such issuer so acquired or such
portion thereof as shall bring the total investment therein within the
limitations imposed by said paragraphs above as of the date of consummation.
Non-Fundamental Limitations. The following limitations have been adopted
with respect to the Fund and are Non-Fundamental.
1. Pledging. The Fund will not mortgage, pledge, hypothecate or in any
manner transfer, as security for indebtedness, any assets of the Fund except as
may be necessary in connection with borrowings described above. Margin deposits,
security interests, liens and collateral arrangements with respect to
transactions involving options, futures contracts, short sales and other
permitted investments and techniques are not deemed to be a mortgage, pledge or
hypothecation of assets for purposes of this limitation.
2. Borrowing. The Fund will not purchase any security while borrowings
(including reverse repurchase agreements) representing more than 5% of its total
assets are outstanding.
3. Short Sales. The Fund will not effect short sales of securities unless
it owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short.
4. Options. The Fund will not purchase or sell puts, calls, options,
straddles or futures contracts.
5. Illiquid Investments. The Fund will not invest in securities for which
there are legal or contractual restrictions on resale or other illiquid
securities.
PORTFOLIO TRANSACTIONS
Subject to such policies as may be established, from time to time, by the
Board of Trustees of the Trust, the Advisor is responsible for portfolio
decisions concerning the Fund and placing the Fund's portfolio transactions. In
placing portfolio transactions, the Advisor seeks the best qualitative execution
for the Fund, taking into account such factors as price (including the
applicable brokerage commission or dealer spread), the execution capability,
financial responsibility and responsiveness of the broker or dealer and the
brokerage and research services provided by the broker or dealer. The Advisor
generally seeks favorable prices and commission rates that are reasonable in
relation to the benefits received.
The Advisor is specifically authorized to select brokers or dealers who
also provide brokerage and research services respecting the Fund and/or the
other accounts over which the Advisor exercises investment discretion and to pay
such brokers or dealers a commission in excess of the commission another broker
or dealer would charge if the Advisor determines, in good faith, that the
commission is reasonable in relation to the value of the brokerage and research
services provided. The determination may be viewed in terms of a particular
transaction or the Advisor's overall responsibilities with respect to the Fund
and to other accounts over which it exercises investment discretion.
5
<PAGE>
Research services include supplemental research, securities and economic
analyses, statistical services and information with respect to the availability
of securities or purchasers or sellers of securities and analyses of reports
concerning performance of accounts. The research services and other information
furnished by effecting securities transactions on behalf of the Fund may also be
used by the Advisor in servicing all of its accounts. Similarly, research and
information provided by brokers or dealers serving other clients may be useful
to the Advisor in connection with its services to the Fund. Although research
services and other information are useful to the Fund and the Advisor, it is not
possible to place a dollar value on the research and other information received.
It is the opinion of the Board of Trustees and the Advisor that the review and
study of the research and other information will not reduce the overall cost to
the Advisor of performing its duties to the Fund under the Agreement.
While it is not practicable and in the best interests of the Fund to
solicit competitive bids for commission rates on each portfolio transaction,
consideration is regularly given to posted commission rates as well as other
information concerning the level of commissions charged on comparable
transactions by qualified brokers.
Over-the-counter transactions will be placed either directly with principal
market makers or with broker-dealers, if the same or a better price, including
commissions and executions, is available. Fixed income securities are normally
purchased directly from the issuer, an underwriter or a market maker. Purchases
include a concession paid by the issuer to the underwriter and the purchase
price paid to a market maker may include the spread between the bid and asked
prices.
To the extent that the same security is sought on behalf of the Fund and
another of the Advisor's clients at about the same time, a securities position
as large as is desired may not be available and the Fund may have to pay a
higher price for the security. Similarly, the Advisor on behalf of the Fund may
not be able to obtain as large an execution of an order to sell or as high a
price for any particular portfolio security if the other client desires to sell
the same portfolio security at the same time. On the other hand, if the same
securities are bought or sold at the same time by more than one client, the
resulting participation in volume transactions could produce better executions
on behalf of the Fund. In the event that more than one client wants to purchase
or sell the same security on a given date, the purchases and sales will normally
be made by random client selection.
MANAGEMENT OF THE FUND
The Trustees and Officers of the Trust, and their principal occupations are
set forth below.
Authur S. Filean
Age 59
Trustee
Mr. Filean is a Trustee of Declaration Trust. Mr. Filean has served as a
Trustee of Declaration Fund during the period from December 8, 1988 to the
present. From 1983 to 1990, Mr. Filean served as a Second Vice President of
Principal Mutual Life Insurance Company. From 1976 to the present, he has served
as Secretary of the mutual funds making up the Princor Mutual Fund Group: he is
currently Vice President and Secretary of each of the Princor Funds. From
1981-1986 he served as President, Treasurer and Director of Princor Financial
Services Corporation (a principal underwriter and dealer for mutual funds).
6
<PAGE>
Stephen B. Tily, III
Age 60
Chairman of the Board, President and Trustee
Mr. Tily is a Trustee of Declaration Fund. Mr. Tily has served as a Trustee
of Declaration Trust during the period from September, 1988 to the present. He
served as President of Declaration Fund from December, 1988 to December, 1997.
From 1983 to December, 1988 he served as Vice President of Declaration Trust.
From 1983 to August 1997, he served as Chairman of the Board of Directors and
Secretary of Declaration Investment Advisors, Inc., (the investment manager of
Declaration Cash Account, a series of Declaration Trust) and as Chairman of the
Board of Declaration Holdings, Inc. (the then parent company of Declaration
Investment Advisors, Inc.). From 1981 to January 1, 1992, Mr. Tily served as
President, Chief Executive Officer and a Director of Delaware Charter Guarantee
& Trust Company. He became Chairman and Chief Executive officer of Delaware
Charter Guarantee & Trust Company on January 1, 1992. From 1977 to 1981 he
served as Chief Operating Officer and a Director of that Company. Effective
December 31, 1993, Mr. Tily terminated his relationship with Delaware Charter
Guarantee and Trust Company.
Thomas S. Stewart, II
Age 59
Trustee
Mr. Stewart became a Trustee of Declaration Trust in 1994. Prior to his
retirement, Mr. Steward acted as Chairman of Provident Capital Management Inc.
and Advanced Investment Management, Inc. (investment management firms) during
the period from 1986 until 1994. During the period, 1986-1989, Mr. Stewart
served as Executive Vice President of Provident National Bank, Philadelphia,
Pennsylvania and as Manager of the Bank's Trust Division. He was formerly
Chairman of both the Executive Committee and the Asset Management Committee of
the Trust and Investment Management Division of the American Bankers
Association, President of the Corporate Fiduciaries Association of Philadelphia,
and a Director of Philadelphia Financial Analysts, Inc.
Terence P. Smith
Age 51
President
Mr. Smith has served as President of Declaration Trust since December,
1997. From September, 1988 to the present, Mr. Smith has served as President,
and Chief Operating Officer of the companies of the Declaration Group. From
August, 1997 to the present, he serves as a Director of Declaration Holdings,
Inc. and of each of the constituent companies of the Declaration Group of
Companies. From September, 1987 to September, 1988 he served as Vice
President-Operations of Declaration Holdings, Inc. (the then parent company of
Declaration Fund). From 1984 to 1987 Mr. Smith was Executive Vice President of
Review Management Corp. (investment manager for the former Over-The-Counter
Securities Group, Inc. and the distributor of its shares.) From 1981 to 1984 he
served on the tax and audit staff of the Philadelphia office of Peat Marwick
Main & Co. (international accounting firm). Mr. Smith is a certified public
accountant.
* This Trustee may be deemed an "interested person" of the Trust as defined in
the Investment Company Act of 1940.
INVESTMENT ADVISORY SERVICES
Dickinson Asset Management, Inc. an investment management firm (the
"Advisor"), pursuant to a written Advisory Agreement, provides investment
advisory and management services to the Fund. It will compensate any trustees
and officers of the Trust who are also employees, officers and directors of the
Advisor or its affiliates.
7
<PAGE>
The Advisory Agreement was approved by the Board of Trustees of the Trust
(including by a majority of the non-interested Trustees) at a meeting held on
February 27, 1997 and by the Fund's sole shareholder on the same day. The
Advisory Agreement will continue in effect until February 19, 1999 and, from
year to year thereafter, as long as it is approved at least annually either (i)
by a vote of a majority of the outstanding voting securities of the Fund or by
the Board of Trustees of the Trust, including by a vote of a majority of the
Trustees who are not parties to the Advisory Agreement or interested persons of
any party thereto, cast in person at a meeting called for the purpose of voting
on such approval. The Advisory Agreement may be terminated on 60 days' written
notice by either party and will terminate automatically if it is assigned.
C. David Dickinson is the President, Secretary/Treasurer and the sole
Director of Dickinson Asset Management, Inc. He owns a majority of the Company's
outstanding voting securities. The only other person owning more than 5% of the
Company's outstanding voting securities is Lee J. Hammond, who owns 6%.
The Advisor may also act as an investment advisor or administrator to other
persons, entities and corporations, including other investment companies.
For more information, see "Management of the Fund" in the Prospectus.
ADMINISTRATOR SERVICES
Declaration Service Company ("DSC" or "Administrator") provides day-to-day
administrative services to the Fund. As described in the Fund's Prospectus, the
Administrator will provide the Fund with office space, facilities and simple
business equipment, and will generally administer the Fund's business affairs
and provide the services of executive and clerical personnel for administering
the affairs of the Fund. It will compensate any Trustees and officers of the
Trust who are also employees, officers and directors of the Administrator or its
affiliates.
The Board of Trustees of the Trust (including a majority of the
non-interested Trustees) approved the Administration Agreement, dated February
19, 1997, with DSC. The terms of the Administration Agreement provide that it
will continue initially for two years, and from year to year thereafter as long
as it is approved at least annually by a vote of a majority of the Board of
Trustees of the Trust. The Administration Agreement may be terminated on 90
days' written notice by either party prior to commencement of a renewal date and
will terminate automatically if it is assigned.
8
<PAGE>
For more information, see "Management of the Fund" in the Prospectus.
The Trust pays out of the assets of the Fund all other expenses for the
Fund's operations and activities. The expenses borne by the Fund include the
charges and expenses of any transfer agents and dividend disbursing agents,
custodian fees, legal and auditors' expenses, bookkeeping and accounting
expenses, brokerage commissions for portfolio transactions, taxes, if any, the
administrative fee, extraordinary expenses, expenses of issuing and redeeming
shares, expenses of shareholder and trustee meetings, expenses for preparing,
printing and mailing proxy statements, reports and other communications to
shareholders, expenses of registering and qualifying shares for sale,
typesetting of prospectuses and periodic reports and expenses of mailing them to
current shareholders, fidelity bond premiums, cost of maintaining the books and
records of the Fund, and any other charges and fees not specifically enumerated.
TRANSFER AGENCY AND OTHER SERVICES
In addition to the services performed for the Fund under the Administration
Agreement, DSC provides transfer agent and dividend disbursement agent services
pursuant to the Transfer Agency and Shareholder Services Agreement, as described
in the Fund's Prospectus under Management of the Fund. In addition, bookkeeping
and accounting services are also provided. The Board of Trustees approved the
Transfer Agency and Accounting Services Agreement, effective February 19, 1997,
with the same duration and termination provisions as the Administration
Agreement.
RULE 12b-1 DISTRIBUTION PLAN
As described under the caption "12b-1 Fee" in the Fund's Prospectus, on
February 19, 1997 the Trustees approved The Distribution Plan adopted pursuant
to Rule 12b-1 under the 1940 Act (the "Distribution Plan"). The Distribution
Plan allows the Fund to pay for or reimburse expenditures in connection with
sales and promotional services related to the distribution of Fund shares,
including personal services provided to prospective and existing Fund
shareholders, which includes the cost of printing and distribution of prospectus
and promotional materials; making slides and charts for presentations; assisting
shareholders and prospective investors in understanding and dealing with the
Fund; and travel and out-of-pocket expenses (e.g., copy and long distance
telephone charges) related thereto.
Expenses which the Fund incurs pursuant to the Distribution Plan are
reviewed quarterly by the Board of Trustees. On an annual basis the Distribution
Plan is reviewed by the Board of Trustees as a whole, and the Trustees who are
not interested persons as that term is defined in the 1940 Act, and who have no
direct or indirect financial interest in the operation of the Distribution Plan
("Qualified Trustees"). In their review of the Distribution Plan, the Board of
Trustees, as a whole, and the Qualified Trustees determine whether, in their
reasonable business judgment and in light of their fiduciary duties under state
law and under Section 36(a) and (b) of the 1940 Act, there is a reasonable
likelihood that the Distribution Plan will benefit the Fund and its
shareholders. The Distribution Plan may be terminated at any time by vote of a
majority of the Qualified Trustees, or by vote of a majority of the outstanding
shares of the Fund.
The provisions of the Plan are severable for each Class of shares. The
Trustees must make a finding for each Class that the Plan represents a
reasonable likelihood of benefit to the Fund and its shareholders. Further,
shareholder approval by the outstanding voting securities of each Class is
required when Rule 12b-1 requires approval by a majority of the outstanding
voting securities.
DISTRIBUTION AGREEMENT
On February 19, 1997, in light of and subject to the Distribution Plan, the
Fund entered into a Distribution Agreement with Declaration Distributors, Inc.
("DDI"), an affiliate of DSC as described in the Fund's Prospectus under
Management of the Fund. The terms of the Distribution Agreement provide that it
will continue for an initial period of two years and from year to year
thereafter as long as it is approved at least annually both (i) by a vote of a
majority of the Board of Trustees of the Trust, and including a majority of the
Trustees who are not parties to the Distribution Agreement or interested persons
of any party thereto, cast in person at a meeting called for the purpose of
voting on such approval. The Distribution Agreement may be terminated on 60
days' written notice by either party and will terminate automatically if it is
assigned.
ALLOCATION OF EXPENSES
Those of the above described expenses which relate to the distribution of
the shares of a Class or the services provided to that Class shall be allocated
and paid by that Class; other expenses shall be allocated among different
classes in different amounts to the extent that they are incurred by one Class
in a different amount or reflect differences in the amount or kinds of services
that different Classes receive, and expenses that are not assigned or assignable
to a specific Class shall be allocated based on net assets.
9
<PAGE>
ADDITIONAL INFORMATION ON REDEMPTIONS
SUSPENSION OF REDEMPTION PRIVILEGES
The Fund may suspend redemption privileges or postpone the date of payment
upon redemption for up to seven days, except during any period (1) when the New
York Stock Exchange is closed, other than for customary weekend and holiday
closing, or trading on the Exchange is restricted as determined by the
Securities and Exchange Commission ("SEC"), (2) when an emergency exists, as
defined by the SEC, which makes it not reasonably practicable to dispose of the
Fund's securities it or not reasonably practicable to fairly determine the value
of the Fund's assets, or (3) as the SEC may otherwise permit.
CALCULATION OF PERFORMANCE DATA
TOTAL RETURN
The Fund may advertise performance in terms of average annual total return
for 1, 5 and 10 year periods, or for such lesser periods as the Fund has been in
existence. Average annual total return is computed by finding the average annual
compounded rates of return over the periods that would equate the initial amount
invested to the ending redeemable value according to the following formula:
P(1 + T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years (exponential number)
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1, 5 or 10 year
periods at the end of the year or period;
The calculation assumes all charges are deducted from the initial $1,000
payment and assumes all dividends and distributions by the Fund are reinvested
at the price stated in the Prospectus on the reinvestment dates during the
period, and includes all recurring fees that are charged to all shareholder
accounts.
NONSTANDARDIZED TOTAL RETURN
The Fund may provide the above described standard total return results for
a period which ends as of not earlier than the most recent calendar quarter end
and which begins either twelve months before or at the time of commencement of
the Fund's operations. In addition, nonstandardized total return results may be
provided with respect to the Fund for differing periods, such as for the most
recent six month period. Such nonstandardized total return is computed as
otherwise described under "Total Return" except that no annualization is made.
The Fund's investment performance will vary depending upon market
conditions, the composition of the Fund's portfolio and operating expenses of
the Fund. These factors and possible differences in the methods and time periods
used in calculating non-standardized investment performance should be considered
when comparing the Fund's performance to those of other investment companies or
investment vehicles. The risks associated with the Fund's investment objective,
policies and techniques should also be considered. At any time in the future,
investment performance may be higher or lower than past performance, and there
can be no assurance that any performance will continue.
From time to time, in advertisements, sales literature and information
furnished to present or prospective shareholders, the performance of the Fund
may be compared to mutual funds with similar investment objectives.
10
<PAGE>
In addition, the performance of the Fund may be compared to other groups of
mutual funds tracked by any widely used independent research firm which ranks
mutual funds by overall performance, investment objectives and assets.
For more information, see "Performance Information" in the prospectus.
TAX STATUS
TAXATION OF THE FUND
As stated in its Prospectus, it is the intention to qualify the Fund as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"). Accordingly, the Fund will not be liable for
federal income taxes on its taxable net investment income and capital gain net
income that are distributed to shareholders, provided that at least 90% of the
Fund's net investment income and net short-term capital gain for the taxable
year is distributed.
To qualify as a regulated investment company, the Fund must, among other
things, (a) derive in each taxable year at least 90% of its gross income from
dividends, interest, payments with respect to securities loans, gains from the
sale or other disposition of stock, securities or foreign currencies, or other
income derived with respect to its business of investing in such stock,
securities or currencies (the "90% test"); and (b) satisfy certain
diversification requirements at the close of each quarter of the Fund's taxable
year. It is anticipated that the Advisor may be required to adjust the
composition of the Fund's portfolio at the end of each quarter in order to
qualify as a regulated investment company.
The Code imposes a non-deductible 4% excise tax on a regulated investment
company that fails to distribute during each calendar year an amount equal to
the sum of (1) at least 98% of its ordinary income for the calendar year, (2) at
least 98% of its net capital gains for the twelve-month period ending on October
31 of the calendar year and (3) any portion (not taxable to the Fund) of the
respective balance from the preceding calendar year. The Fund intends to make
such distributions as are necessary to avoid imposition of this excise tax.
TAXATION OF THE SHAREHOLDER
Taxable distributions generally are included in a shareholder's gross
income for the tax year in which they are received. However, dividends declared
in October, November or December of a particular year and made payable to
shareholders of record in such a month will be deemed to have been received on
December 31, if dividend is paid during the following January. To the extent net
investment income of the Fund arises from dividends on domestic common or
preferred stock, some of the Fund's distributions may qualify for the 70%
corporate dividends-received deduction. All Shareholders will be notified
annually regarding the tax status of distributions received from the Fund.
Distributions by the Fund will result in a reduction in the net asset value
of the Fund's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, such distribution nevertheless would be taxable to the
shareholder as ordinary income or long-term capital gain, even though, from an
investment standpoint, it may constitute a partial return of capital. In
particular, investors should be careful to consider the tax implications of
buying shares of the Fund just prior to a distribution. The price of such shares
purchased at that time includes the amount of any forthcoming distribution.
Those investors purchasing the Fund's shares just prior to a distribution may
receive a return of investment upon distribution which will nevertheless be
taxable to them.
11
<PAGE>
A shareholder of the Fund should be aware that a redemption of shares is a
taxable event and, accordingly, a capital gain or loss may be recognized. If a
shareholder of the Fund receives a distribution taxable as long-term capital
gain with respect to shares of the Fund and redeems or exchanges shares before
he has held them for more than six months, any loss on the redemption or
exchange (not otherwise disallowed as attributable to an exempt-interest
dividend) will be treated as long-term capital loss to the extent of the long
term capital gain recognized.
OTHER TAX CONSIDERATIONS
Distributions to shareholders may be subject to additional state, local and
non-U.S. taxes, depending on each shareholder's particular tax situation.
Shareholders subject to tax in certain states may be exempt from state income
tax on Fund distributions to the extent such distributions are derived from
interest on direct obligations of the United States Government. Shareholders are
advised to consult their own tax advisers with respect to the particular tax
consequences to them of an investment in shares of the Fund.
CUSTODIAN
Star Bank, N.A. serves as Custodian of The Michigan Heritage Fund's assets.
The Custodian acts as the depository of the Fund's assets, safekeeps its
portfolio securities, collects all income and other payments with respect
thereto, disburses funds at the Fund's request and maintains records in
connection with its duties.
INDEPENDENT ACCOUNTANTS
Sanville & Company, 1514 Old York Road, Abington, PA 19001, has been
selected as independent accountants for Declaration Fund for the fiscal year
ending December 31, 1998. Sanville & Company performs an annual audit of the
Fund's financial statements and provides financial, tax and accounting
consulting services as requested.
12
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Shareholders and
Board of Trustees of the
Michigan Heritage Fund
We have audited the accompanying statement of assets and liabilities assets
of The Michigan Heritage Fund including the schedule of investments as of
December 31, 1997, and the related statements of operations, and the financial
highlights for the period July 27, 1997 (commencement of investment operations)
to December 31, 1997. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights 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 financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1997, by correspondence with
the custodian. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements, schedule, and financial
highlights referred to above present fairly, in all material respects, the
financial position of The Michigan Heritage Fund as of December 31, 1997, the
results of its operations and the changes in net assets, and the financial
highlights for the period July 27, 1997 (commencement of investment operations)
to December 31, 1997, in conformity with generally accepted accounting
principles.
Abington, Pennsylvania
February 13, 1998 Certified Public Accountants
<PAGE>
THE MICHIGAN HERITAGE FUND
--------------------------
Schedule of Investments
-----------------------
December 31, 1997
-----------------
COMMON STOCKS Shares Value
-------- -------
BASIC INDUSTRIES (4.7%)
- -----------------------
Dow Chemical Co. 85 $ 8,628
Rouge Industries, Inc. Cl A* 470 5,699
--------
14,327
--------
HEALTH CARE (14.8%)
- -------------------
Novartis A.G., ADR* 100 8,125
Pharmacia & Upjohn, Inc.* 220 8,058
Perrigo Co.* 985 13,174
Neogen Corp.* 700 7,963
Stryker Corp. 200 7,450
--------
44,770
--------
MANUFACTURING (24.1%)
- ---------------------
Whirlpool Corp. 125 6,875
Ford Motor Co. 170 8,277
General Motors Corp. 120 7,275
Gentex Corp.* 320 8,600
SPX Corp.* 134 9,246
Champion Enterprises, Inc.* 420 8,636
Phillip Morris Cos., Inc. 180 8,156
United Technologies Corp. 97 7,063
Raytheon Co.* 8 378
Masco Corp. 175 8,903
--------
73,409
--------
TECHNOLOGY (5.4%)
- -----------------
Intel Corp.* 105 7,376
Perceptron Inc.* 420 9,083
--------
16,459
--------
ENERGY (12.4%)
- --------------
Williams Cos., Inc. 330 9,364
Ultramar Diamond Shamrock Corp.* 250 7,969
CMS Energy Corp. 220 9,694
MCN Energy Group, Inc. 260 10,498
--------
37,525
--------
See notes to financial statements.
<PAGE>
THE MICHIGAN HERITAGE FUND
--------------------------
Schedule of Investments
-----------------------
December 31, 1997
-----------------
COMMON STOCKS (CONTINUED) Shares Value
-------- -------
FINANCIAL (9.6%)
- ----------------
Capitol Bancorp Ltd. 385 11,839
Old Kent Financial Corp. 240 9,510
Taubman Centers, Inc. 600 7,800
--------
29,149
SERVICES (15.7%)
- ----------------
LCI International Inc.* 307 9,440
Worldcom, Inc.* 225 6,806
Kelly Services Inc. Cl A 210 6,300
Arbor Drugs Inc. 450 8,325
Borders Group, Inc.* 283 8,861
Dayton Hudson Corp.* 115 7,763
--------
47,495
LEISURE/AMUSEMENT (4.3%)
- ------------------------
Penske Motorsports Inc.* 525 13,059
--------
Total Common Stocks (91.0%) 276,193
(Cost $270,133)
Other assets - Net (9.0%) 26,844
--------
NET ASSETS (100%) $303,037
========
* Non - Income Producing.
See notes to financial statements.
<PAGE>
THE MICHIGAN HERITAGE FUND
--------------------------
Statement of Assets and Liabilities
-----------------------------------
December 31, 1997
-----------------
ASSETS
Investment in securities, at current value (cost $270,130) $ 276,190
Cash 29,579
Receivables:
Dividends 336
Due from Advisor 17,614
Prepaid insurance 310
---------
Total assets 324,029
LIABILITIES
Accounts payable and accrued expenses 20,992
---------
Total liabilities 20,992
---------
NET ASSETS $ 303,037
=========
Net assets consist of:
Paid-in capital $ 298,290
Accumulated net realized gain from investments 10
Net unrealized appreciation on investments 6,060
Accumulated net investment loss (1,324)
---------
NET ASSETS (for 29,880 shares outstanding) $ 303,037
=========
NET ASSET VALUE PER SHARE $ 10.14
=========
See notes to financial statements.
<PAGE>
THE MICHIGAN HERIGATE FUND
--------------------------
Statement of Operations
-----------------------
For the period July 27, 1997 (commencement of investment operations) to
-----------------------------------------------------------------------
December 31, 1997
-----------------
INVESTMENT INCOME
Dividend income $ 1,116
Interest Income 639
--------
Total Income 1,754
--------
EXPENSES
Investment advisory fees (Note 2) 854
Administrative fees 18,804
Accounting service fees 9,402
Transfer agent fees 7,694
Registration fees 749
Custodian fees 1,538
Legal fees 2,137
Audit fees 5,199
Trustees' fees and expenses 157
12 B-1 Fees 213
Insurance expense 8
Miscellaneous 1,992
--------
Total expenses before reimbursement 48,747
Expense reimbursement by advisor (Note 2) (45,669)
--------
Net expenses 3,078
--------
NET INVESTMENT INCOME (1,324)
--------
NET REALIZED AND UNREALIZED GAIN FROM INVESTMENTS:
Net realized gain on investments 10
Net change in unrealized appreciation of investments 6,060
--------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 6,070
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 4,746
========
See notes to financial statements.
<PAGE>
THE MICHIGAN HERITAGE FUND
--------------------------
Statement of Changes in Net Assets
----------------------------------
For the period July 27, 1997 (commencement of operations) to
------------------------------------------------------------
December 31, 1997
-----------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment loss $ (1,324)
Net realized gain from investments 10
Net change in unrealized appreciation
of investments 6,061
---------
Net increase in net assets resulting
from operations 4,747
---------
From capital share transactions* 298,290
---------
Net increase in net assets 303,037
Net assets at beginning of period --
---------
Net assets at end of period $ 303,037
=========
* Analysis of fund share transactions
Shares Amount
------ --------
Share Sold 29,880 $298,290
Reinvestment of dividends -- --
Shares Redeemed -- --
------ --------
Net increase 29,880 $298,290
====== ========
See notes to financial statements.
<PAGE>
THE MICHIGAN HERITAGE FUND
--------------------------
Financial Highlights
--------------------
(Selected data for a share of capital stock outstanding through each period)
----------------------------------------------------------------------------
For the period
July 27, 1997
(commencement
of Investment
operations) to
December 31,
1997
--------------
Net asset value, beginning of period $ 10.00
-------
Income from investment operations:
Net investment income (.04)
Net realized and unrealized gain
on investments 0.18
-------
Total from investment operations 0.14
-------
Less Distributions to shareholders:
Net realized gain on investments sold --
-------
Total distributions --
-------
Net asset value, end of period $ 10.14
=======
Total investment return 1.40%
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 303
Ratio of expenses to average net assets** 2.18%*
Ratio of net investment income to average net assets** -0.94%*
Portfolio turnover rate 0.00%
* Ratios for period of less than one year are annualized.
** Net investment income is net of expenses reimbursements and fee waivers
$1.52 share Had such reimbursements not been made, the annualized expense
ratio would have been 34.48% and the annualized net investment income ratio
would have been (35.73%).
See notes to financial statements.
<PAGE>
THE MICHIGAN HERTIAGE FUND
--------------------------
Notes to Financial Statements
-----------------------------
December 31, 1997
-----------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNT POLICIES
Organization: The Michigan Heritage Fund is a newly organized, diversified
investment company that consists of one portfolio (the "Fund") and is a
series of The Declaration Fund, a Pennsylvania business trust. The Fund is
registered under the Investment Company Act of 1940. The policies described
below are followed consistently by the Fund in the preparation of its
financial statements in conformity with generally accepted accounting
principles for regulated investment companies.
The following is a summary of accounting policies followed by the Fund.
Security Valuation: Securities are valued at the last reported sales price,
in the case of securities where there is no reported last sale, the closing
bid price. Securities for which market quotations are not readily available
are valued at their fair values as determined in good faith by or under the
supervision of the Company's Board of Trustees in accordance with methods
have been authorized by the Board. Short term debt obligations with with
maturities of 60 days or less are valued at amortized cost which
approximates market value.
Security Transactions and Investment Income: Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Realized gains and losses on security transactions are determined on the
identified cost bases. Dividend income is recorded on the ex-dividend date
Interest income is determined on the accrual basis. Discount on fixed
income securities is amortized.
Dividends and Distributions to Shareholders: The Fund records all dividends
and distributions payable to shareholders on the ex-dividend date.
Federal Income Taxes: It is the Fund's intention to qualify as a regulated
investment company and distribute all of its taxable income. Accordingly,
no provision for federal income taxes is required in the financial
statements.
Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those
estimates.
2. MANAGEMENT FEE
Under the terms of the investment management agreement, the Adviser has
agreed to provide the Fund investment management services and be
responsible for the day to day operations of the fund. The Advisor will
receive a fee, for the performance of its services at an annual rate of 1%
of the average daily net assets. The fee will be accrued daily and paid
monthly. The Advisor had agreed to limit the Fund's expenses to 3.50% of
the Fund's average daily net assets. The actual expense ratio for the
period ended December 31, 1997 was 2.18%. The Advisor reimbursed the Fund
and waived fees and expenses totaling $45,669 for the period ended December
31, 1997.
<PAGE>
THE MICHIGAN HERTIAGE FUND
--------------------------
Notes to Financial Statements
-----------------------------
December 31, 1997
-----------------
3. INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term
securities) for the period ended December 31, 1997 were $270,130 and $0,
respectively.
At December 31, 1997 net unrealized appreciation for Federal income tax
purposes aggregated $6,060 of which $20,444 related to unrealized
appreciation and $14,384 related to unrealized depreciation. The cost of
investments at December 31, 1997 for Federal income tax purposes was
$270,130.
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements in Prospectus of Declaration Fund/
The Michigan Heritage Fund
Financial Highlights - Period 7/27/97 (Commencement of
Investment Operations) to 12/31/97
(b) Financial Statements in Statement of Additional Information
which relate to Declaration Fund/The Michigan Heritage Fund
Statement of Assets and Liabilities - December 31, 1997
Statement of Operations - December 31, 1997
Statement of Changes in Net Assets - For the period July 27,
1997 (Commencement of Operations) to December 31, 1997
Notes to Financial Statements - December 31, 1997
Schedule of Investments - December 31, 1997
(c) Exhibits: Exhibit No.:
(1) Copies of the Charter as now in effect;
Copy of Declaration of Trust, as amended 1(H)
(2) Copies of the existing bylaws or instruments
corresponding thereto:
Copy of Bylaws, as amended. 2(H)
(3) Copies of any voting trust agreement with none
respect to more than 5 percent of any class
of equity securities of the Registrant.
(4) Specimen of copy of each security issued by
the Registrant, including copies of all constituent
instruments, defining the rights of the holders
of such securities and copies of each security
being registered;
Copy of Share Certificate 4(A)
(5) Copies of all investment advisory contracts
relating to the management of the Assets of the
Registrant;
Copy of Investment Management Agreement 5a.1(C)
between the Registrant and Declaration Investment
Advisors, Inc. dated December 8, 1988
Amendment No. 1 to Agreement dated May 15, 1990 5a.2(J)
Copy of Advisory Agreement between the Registrant 5b(H)
with respect to The Michigan Heritage Fund and
Dickinson Asset Management, Inc. dated
February 19, 1997.
(6) Copies of each underwriting or distribution contract
between the Registrant and a principal underwriter,
and specimens of copies of all agreements between
principal underwriters and dealers.
Copy of Agreement Pursuant to Plan of Distribution 6a(J)
between the Registrant with respect to Delcaration
Cash Account and Declaration Distributors, Inc.
dated April 22, 1992.
Copy of Distribution Agreement between the 6b.1(H)
Registrant with respect to The Michigan
Heritage Fund and Declaration Distributors,
Inc. dated February 19, 1997.
Copy of Amendment No. 1 to Distribution Agreement 6b.2(J)
dated December 19, 1997.
(7) Copies of all bonus, profit sharing, pension or other none
similar arrangements wholly or partly for the benefit
of directors or officers of the Registrant in their
capacity as such; any such plan that is not set forth in
a formal document, furnish a reasonably detailed
description thereof.
(8) Copies of all custodian agreements and depository
contracts under section 17(f) of the 1940 Act with
respect to securities and similar investments;
Copy of Custodian Agreement, dated February 26, 8a.1(D)
1990, between the Registrant with respect to
Declaration Cash Account and CoreStates Bank,
N.A., (formerly Philadelphia National Bank)
Form of Amendment to Custodian Agreement 8a.2(G)
Copy of Custodian Agreement, dated July 8, 8b(J)
1997 between the Registrant with respect to The
Michigan Heritage Fund and Star Bank, N.A.
Compensation Schedule 8b.1
(9) Copies of all material contracts not made in the
ordinary course of business which are to be
performed in whole or in part at or after the date
of the filing of the Registration Statement;
Copy of Transfer Agency and Shareholder 9a.1(D)
Service Agreement dated January 1, 1989 between
Registrant with respect to Declaration Cash
Account and Declaration Service Company
Copy of Amendment No. 1 to Transfer Agency 9a.2(G)
Agreement dated May 15, 1990 with respect
to Declaration Cash Account.
Copy of Transfer Agency and Service 9b(I)
Agreement Dated February 19, 1997 between
the Registrant for The Michigan Heritage
Fund and Declaration Service Company.
Copy of Accounting Services Agreement 9c(I)
dated February 19, 1997 between the
Registrant with respect to The Michigan Heritage
Fund and Declaration Service Company.
Copy of Administration Agreement dated 9d(I)
February 19, 1997 between the Registrant
with respect to The Michigan Heritage Fund and
Declaration Service Company.
(10) An opinion and consent of counsel as to the
legality of the securities being registered,
indicating whether they will, when sold,
be legally issued, fully paid and non-assessable;
Copy of opinion and consent of counsel
attached as an Exhibit to Rule 24f-2 Notice
filed by Registrant on February 28, 1997 relating
to Declaration Cash Account and incorporated herein
by reference.
Copy of opinion and consent of counsel 10a(J)
relating to The Michigan Heritage Fund
Copy of Opinion of Sanville and Company 10b.1
Independant Public Accountants dated
February 13, 1998
Copy of Consent of Sanville and Company 10b.2
(11) Copies of any other opinions, appraisals. None
(12) All financial statements omitted from Item 23. None
(13) Copies of any agreements or understandings made None
in consideration for providing the initial
capital between and among the Registrant, the
Underwriter, advisor, promoter, or initial
stockholders and written assurances from
promoters or initial stockholders that their
purchases were made for investment purposes
without any present intention of redeeming
or reselling.
(14) Copies of model plan used in the establishment of None
any retirement plan in conjunction with which
Registrant offers its securities, any instructions
thereto and any other documents making up the
model plan. Such form(s) should disclose the costs
and fees charged in connection therewith.
(15) Copies of any plan entered into by Registrant pursuant
to Rule 12b-1 under the 1940 Act, which describes all
material aspects of the financing of distribution
of Registrant's shares, and any agreements with any
person relating to implementation of such plan;
Copy of Plan of Distribution adopted by 15a.1(C)
Registrant dated December 8, 1988 relating to
Declaration Cash Account.
Copy of Amendment to Plan of Distribution dated 15a.2(F)
May 15, 1990.
Copy of Distribution Plan of The Michigan 15b.1(I)
Heritage Fund pursuant to Rule 12b-1 dated
February 27, 1997
Copy of Amendment No. 1 to Distribution Plan 15b.2(J)
dated December 19, 1997.
(16) Schedule for compensation of each performance
quotation provided in the Registration Statement
in response to Item 22 (which need not be audited);
Computations of a $1,000 Hypothetical Investment 16a(I)
Declaration Fund - The Michigan Heritage Fund
series;
(17) A Financial Data Schedule meeting the Ex.27
requirements of Rule 485 under the Securities
Act of 1933
(18) Copies of any plan entered into pursuant to
Rule 18f-3 under the 1940 Act
Plan of Michigan Heritage Fund for the Issuance 18(J)
of Shares in Classes
(A) This Exhibit formed part of Post-Effective Amendment No. 1 that was filed
with the Commission on March 3, 1982.
(C) This Exhibit formed part of Post-Effective Amendment No. 13 that was filed
with the Commission on March 20, 1989.
(D) This Exhibit formed part of Post-Effective Amendment No. 15 that was filed
with the Commission on March 1, 1990.
(F) This Exhibit formed part of Post-Effective Amendment No. 17 that was filed
with the Commission on February 15, 1991.
(G) This Exhibit formed part of Post-Effective Amendment No. 19 that was filed
with the Commission on April 30, 1992.
(H) This Exhibit formed part of Post-Effective Amendment No. 26 that was filed
with the Commission on February 29, 1997.
(I) This Exhibit formed part of Post-Effective Amendment No. 27 that was filed
with the Commission on March 11, 1997.
(J) This Exhibit formed part of Post Effective Amendment No. 28 that was filed
with the Commission on January 14, 1998.
Item 25. Persons Controlled by or Under Common Control with Registrant
Item 26. Number of Holders of Securities
Number of Record Holders
Title of Class As of December 31, 1997
---------------- ------------------------
Common Capital Stock
The Michigan Heritage Fund Series
a) The No-Load Class 72
b) Class A None
Item 27. Trustee Liability and Indemnification
Liability to third parties for any act, omission or obligation of a
Trustee when acting in such capacity shall extend to the whole trust estate or
so much thereof as may be necessary to discharge such liability but personal
liability shall not attach to the Trustee or the beneficiaries of the Trust for
any such act, omission or liability. The provisions of Subchapter B of Chapter 5
of the Pennsylvania Business Corporation Law (relating to indemnification and
corporate directors' liability) shall be applicable to the Trustees of the
Trust.
Indemnification of Trustees and Officers and Insurance
(a) The Trust shall have the power to purchase and maintain insurance
on behalf of any person who is or was a Trustee or officer of the Trust, or is
or was serving at the request of the Trust as a director, officer, employee or
agent of a corporation, partnership, joint venture, trust or other enterprise
against any liability asserted agonist him and incurred by him in any such
capacity, or arising out of this status as such, whether or not the Trust would
have the power to indemnify him against such liability under the provisions of
this Section.
(b) No indemnification or other protection shall be made or given to
any Trustee or officer of the Trust against any liability to the Trust or to its
Shareholders (i) to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office or (ii) which would violate the provisions
of Section 17(h) or (i) of the Act as those provisions may be amended from time
to time, together with the Rules and Regulations of the Commission adopted
thereunder.
Item 28. Business and Other Connections of Investment Advisor
Dickinson Asset Management, Inc. 301 MAC Avenue, East Lansing,
Michigan 48823 serves as investment manager to The Michigan Heritage Fund and
that is its primary occupation, currently. Reference is made to page ____ of the
Statement of Additional Information for a listing of the principal officers and
directors of Dickinson Asset Management, Inc.
Item 29. Principal Underwriters
Declaration Distributors, Inc. serves as Principal Underwriter of
Delaration Fund with respect to Declaration Cash Account series and Michigan
Heritage Fund series pursuant to written Agreements dated, respectively, April
22, 1992 and February 19, 1997.
Item 30. Location of Accounts and Records
The records of Declaration Fund and those with respect to Declaration Cash
Account and those with respect to Michigan Heritage Fund are maintained at 555
North Lane, Suite 6160, Conshohocken, Pennsylvania except for those relating to
the custodianship of the assets of Declaration Cash Account which are located at
CoreStates Bank, N.A., 1339 Chestnut Street, Philadelphia, PA 19101 and of the
assets of Michigan Heritage Fund which are located at Star Bank, N.A., 425
Walnut Street, M.L. 8118, Cincinnati, Ohio 45202.
Item 31. Management Services
Item 32. Undertakings
(a) Registrant agrees that the Trustees of Declaration Fund will
promptly call a meeting of shareholders for the purpose of acting upon the
question of removal of a trustee or trustees, when requested in writing to do so
by the record holders of not less than 10% of the outstanding shares.
(b) The Fund undertakes to furnish to each person to whom a prospectus
is delivered with a copy of the Fund's latest annual report to shareholders upon
request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, and has duly caused this Post-Effective Amendment No. 29 to
its Registration Statement under the Investment Company Act of 1940, to be
signed on its behalf of the Undersigned, thereunto duly authorized, in
Conshohocken, Pennsylvania on the 6th day of March 1998.
DECLARATION FUND
BY: /s/ Terence P. Smith
-----------------------------
President
As required by the Securities Act of 1933, this registration statement has
been signed by the following persons in the capacities and on the dates
indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Stephen B. Tily, III
- -------------------------- Trustee March 6, 1998
Stephen B. Tily, III
/s/ Arthur S. Filean
- -------------------------- Trustee March 6, 1998
Arthur S. Filean
/s/ Thomas S. Stewart
- -------------------------- Trustee March 6, 1998
Thomas S. Stewart
/s/ Terence P. Smith
- -------------------------- President March 6, 1998
Terence P. Smith
Star Bank, N.A.
Proposed Domestic Custody Fee Schedule for the Michigan Heritage Fund
Star Bank, N.A., as Custodian, will receive monthly compensation for services
according to the terms of the following Schedule:
I. Portfolio Transaction Fees:
---------------------------
(a) For each repurchase agreement transaction $7.00
(b) For each portfolio transaction processed through
DTC or Federal Reserve $9.00
(c) For each portfolio transaction processed through
our New York custodian $25.00
(d) For each GNMA/Amortized Security Purchase $16.00
(e) For each GNMA Prin/Int Paydown, GNMA Sales $8.00
(f) For each option/future contract written,
exercised or expired $40.00
(g) For each Cedel/Euro clear transaction $80.00
(h) For each Disbursement (Fund expenses only) $5.00
A transaction is a purchase/sale of a security, free receipt/free delivery
(excludes initial conversion), maturity, tender or exchange:
II. Market Value Fee
----------------
Based upon an annual rate of: Million
-------
.000120 (1.20 Basis Points) on First $75
.0001 (1.0 Basis Point) on Next $100
.000075 (.75 Basis Points) on Balance
III. Monthly Minimum Fee-Per Fund $300.00
----------------------------
IV. Out-of-Pocket Expenses
----------------------
The only out-of-pocket expenses charged to your account will be shipping
fees or transfer fees
V. IRA Documents
-------------
Per Shareholder/year to hold each IRA Document $8.00
VI. Earnings Credits
----------------
On a monthly basis any earnings credits generated from uninvested custody
balances will be applied against any cash management service fees
generated. Earnings credits are based on a Cost of Funds Tiered Earnings
Credit Rate.
<PAGE>
Star Bank
Proposed Cash Management Fee Schedule for the Michigan Heritage Fund
Services Unit Cost($) Monthly Cost ($)
- -------- ------------ ----------------
D.D.A. Account Maintenance 14.00
Deposits .399
Deposited Items .109
Checks Paid .159
Balance Reporting - P.C. Access 50.00
ACH Transaction .095
ACH Monthly Maintenance 40.00
Controlled Disbursement (1st account) 110.00
Each additional account 25.00
Deposited Items Returned 6.00
International Items Returned 10.00
NSF Returned Checks 25.00
Stop Payments 22.00
Data Transmission per account 110.00
Data Capture* .10
Drafts Cleared .179
Lockbox Maintenance** 55.00
Lockbox items Processed
with copy of check .32
without copy of check .26
Checks Printed .20
Positive Pay .06
Issued Items .015
Wires Incoming
Domestic 10.00
International 10.00
Wires Outgoing
Domestic
Repetitive 12.00
Non-Repetitive 13.00
International
Repetitive 35.00
Non-Repetitive 40.00
PC - Initiated Wires:
Domestic
Repetitive 9.00
Non-Repetitive 9.00
International
Repetitive 25.00
Non-Repetitive 25.00
*** Uncollected Charge Star Bank Prime Rate as of first of month plus 4%
* Price can vary depending upon what information needs to be captured
** With the use lockbox, the collected balance in the demand deposit account
will be significantly increased and therefore earnings to offset cash
management service fees will be maximized.
*** Fees for uncollected balances are figured on the monthly average of all
combined accounts
**** Other available cash management services are priced separately.
Revised 10/31/95
INDEPENDENT AUDITOR'S REPORT
To the Shareholders and
Board of Trustees of the
Michigan Heritage Fund
We have audited the accompanying statement of assets and liabilities assets
of The Michigan Heritage Fund including the schedule of investments as of
December 31, 1997, and the related statements of operations, and the financial
highlights for the period July 27, 1997 (commencement of investment operations)
to December 31, 1997. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights 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 financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1997, by correspondence with
the custodian. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements, schedule, and financial
highlights referred to above present fairly, in all material respects, the
financial position of The Michigan Heritage Fund as of December 31, 1997, the
results of its operations and the changes in net assets, and the financial
highlights for the period July 27, 1997 (commencement of investment operations)
to December 31, 1997, in conformity with generally accepted accounting
principles.
Abington, Pennsylvania
February 13, 1998 Certified Public Accountants
EXHIBIT - 10b.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the use of our report, dated February 13, 1998, on the annual
financial statements and financial highlights of the Declaration Fund - The
Michigan Heritage Fund, which is included in Part A and Part B in Post Effective
Amendment No. 29 to Registration Statement under the Securities Act of 1933 and
included in the Prospectus and Statement of Additional Information, as
specified, and to the reference made to us under the capiton "Independent
Auditors" in the Statement of Additional Information.
Abington Pennsylvalia /s/Sanville & Company
March 2, 1998 Certified Public Accountants
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<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> Michigan Heritage Fund
<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-27-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 270,130
<INVESTMENTS-AT-VALUE> 276,190
<RECEIVABLES> 17,950
<ASSETS-OTHER> 29,888
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 324,028
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<OTHER-ITEMS-LIABILITIES> 20,992
<TOTAL-LIABILITIES> 20,992
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 29,829
<SHARES-COMMON-STOCK> 29,880
<SHARES-COMMON-PRIOR> 0
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<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 10
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6,060
<NET-ASSETS> 3,030,366
<DIVIDEND-INCOME> 1,116
<INTEREST-INCOME> 639
<OTHER-INCOME> 0
<EXPENSES-NET> 3,078
<NET-INVESTMENT-INCOME> (1,324)
<REALIZED-GAINS-CURRENT> 10
<APPREC-INCREASE-CURRENT> 6,060
<NET-CHANGE-FROM-OPS> 4,746
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 29,880
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 303,936
<ACCUMULATED-NII-PRIOR> 0
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<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 854
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<GROSS-EXPENSE> 48,747
<AVERAGE-NET-ASSETS> 222,518
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> (.04)
<PER-SHARE-GAIN-APPREC> .11
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.14
<EXPENSE-RATIO> 2.14
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>