SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/X/ Preliminary proxy statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
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(Name of Registrant as Specified in Its Charter)
DECLARATION FUND
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
NOT APPLICABLE
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IMPORTANT NEWS FOR MICHIGAN HERITAGE FUND SHAREHOLDERS
WHILE WE ENCOURAGE YOU TO READ THE FULL TEXT OF THE ENCLOSED PROXY STATEMENT,
HERE'S A BRIEF OVERVIEW OF THE SOLE MATTER TO BE VOTED UPON.
Q & A ABOUT THE ENCLOSED PROXY MATERIALS
Q. WHAT IS HAPPENING?
A. Dickinson Asset Management, Inc. ("DAMCO"), resigned as investment adviser
to the Michigan Heritage Fund (the "Fund"), effective February 15, 1999.
The Board of Trustees of the Fund diligently searched for a new adviser to
take the place of DAMCO, but due to the small size of the Fund and the
restrictive nature of its investment policies, the Board was unable to find
a suitable replacement adviser. As a result, after fully considering all
options available to the Fund, the Board concluded that it would be in the
best interests of the shareholders to close the Fund, wind up the Fund's
affairs, and distribute the net assets of the Fund to its shareholders.
Q. WHY AM I BEING ASKED TO VOTE TO CLOSE THE FUND?
A. The Fund is a series of the Declaration Fund (the "Trust"). The Trust is an
open-end management investment company organized under the laws of the
state of Pennsylvania. The Trust is governed by a Declaration of Trust and
by-laws. According to the Trust's Declaration of Trust, whenever the Board
votes to close a fund series that has outstanding shareholders, a majority
of the shareholders of the fund to be closed must approve the board's
decision.
Q. HOW WILL THESE CHANGES AFFECT ME AS A FUND SHAREHOLDER?
A. If you vote to close the Fund, the Board will set a date for closure, and
all outstanding debts and expenses of the Fund through that date will be
paid. The Fund will then calculate net asset value per share by dividing
the total cash remaining in the Fund by the number of outstanding shares.
Your shares will be redeemed at the calculated net asset value and the
proceeds sent to you. You will also receive a statement from the Fund
informing you of the details of your distribution; specifically interest,
capital gains, return of capital etc. Once the assets of the Fund have been
distributed, the Trust will file the necessary documents with the
Securities and Exchange Commission and the State of Pennsylvania
terminating the existence of the Fund.
<PAGE>
Q. ARE THERE ANY OUTSTANDING CLAIMS IN FAVOR OF THE FUND WHICH WILL NOT BE
RESOLVED PRIOR TO THE FUND'S CLOSING?
A. Yes. When DAMCO resigned as investment adviser to the Fund, it owed the
Fund approximately $67,000 in unreimbursed expenses that it had previously
agreed to reimburse. DAMCO is disputing the validity of the claim, and the
board is considering its options with respect to collecting the claim.
Q. WHAT IS THE STATUS OF THE CLAIM AGAINST DAMCO?
A At this time, the status of the Fund's claim against DAMCO is unclear. The
Trust is attempting to determine DAMCO's financial status and its ability
to satisfy a judgement against it. If the Fund successfully recovers some
or all of its claim against DAMCO, that amount will be distributed to all
shareholders of the Fund on a pro rata basis. There can be no assurance
that the Fund will be successful in its attempts to recover the disputed
amounts.
Q. HOW DO THE BOARD MEMBERS OF MY FUND SUGGEST THAT I VOTE?
A. After careful consideration, the Board members of the Fund, including the
independent members, recommend that you vote "Yes" to close the Fund and
distribute all the net assets of the Fund to the shareholders.
Q. WHAT HAPPENS IF THE SHAREHOLDERS OF THE FUND DO NOT VOTE TO CLOSE THE FUND?
A. Since October 1, 1999, the Fund's service providers have voluntarily
refrained from charging their normal and necessary fees to the Fund,
pending a resolution of the Fund's investment adviser situation. Those
service fees average approximately $9,000 per month. If the Shareholders
vote not to close the Fund, the Fund will go back into its normal operating
mode and the Fund's service providers will again begin charging fees for
their services. Please be aware that these fees will have a substantial
negative impact on your investment. Without an investment adviser to
actively invest the Fund's assets, and because the Fund is so small, these
expenses will likely exceed any earnings in the Fund. The result will
likely be that your investment will erode in value over time.
Q. DO ALL OF THE SHAREHOLDERS HAVE TO VOTE TO CLOSE THE FUND?
A. No. A simple majority of the outstanding shares of the Fund have to vote to
close the Fund.
Q. WHO IS PAYING THE COST OF THE SHAREHOLDER MEETING AND THIS PROXY
SOLICITATION?
A. The Trust is paying the costs of the Fund's shareholder meeting and proxy
solicitation.
<PAGE>
Q. WHOM DO I CALL FOR MORE INFORMATION?
A. Please call Shareholder Services at 1-800-353-3553
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ABOUT THE BALLOT
Shown below is the ballot that you will use to vote on the matter described
above and hereafter in these proxy materials.
1. Approve the Board's decision to close the Fund, wind up its affairs, and
distribute all of the Fund's net assets to the Fund's shareholders. To
approve closing the Fund, choose "Yes". To keep the Fund open, choose "No".
To refrain from voting, choose "Abstain".
Yes No Abstain
/ / / / / /
Signature(s) (All registered owners of accounts shown to the left must sign. If
signing for a corporation, estate or trust, please indicate your capacity or
title.)
X
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Signature Date
X
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Signature Date
PLEASE VOTE TODAY!
Please vote on the issue using blue or black ink to mark an X in one of the
three boxes provided on each ballot. Mark the Item Yes, No or Abstain. Then
sign, date and return your ballot in the accompanying postage-paid envelope. All
registered owners of an account, as shown in the address on the ballot, must
sign the ballot. If you are signing for a corporation, trust or estate, please
indicate your title or position.
THANK YOU FOR MAILING YOUR BALLOT PROMPTLY!
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<PAGE>
Declaration Fund
555 North Lane, Suite 6160
Conshohocken, PA 19428
TELEPHONE 1-800-353-3553 May 4, 1999
Dear Shareholder:
As you read in the Questions and Answers (Q & A) on page 1, the Adviser to
your Fund has resigned and the Board has voted to close the Fund.
We're sending this proxy statement to you because your vote is required in
order to close the Fund.
Since the Fund has no Adviser, it will be extremely difficult, if not
impossible, for the Fund to continue to operate according to its prospectus. It
will also be highly impractical, as well as irresponsible, for the Fund to
attract new investors. As a result, the continuing expenses of the Fund will be
borne by you, which WILL ERODE THE VALUE OF YOUR INVESTMENT OVER TIME.
As you review these materials, please keep in mind that your Board has made
every effort to protect your interests in the Fund. The Board recently
liquidated all securities in the Fund and converted the Fund's assets to cash.
This cash is now invested in money market instruments on a daily basis, so there
is little danger of loss to your investment resulting from a sudden decline in
the market. The Board is exploring its options with respect to its claim against
DAMCO. If it appears likely that the Trust can recover some or all of its claim
from DAMCO, it will proceed accordingly, and if successful , will distribute any
recovery to all shareholders of the Fund.
The Board diligently searched for a new adviser to your Fund, but could not
find an acceptable adviser that was willing to assume that responsibility. As a
result, the Board concluded that the best way to protect and preserve
shareholder assets was to close the Fund.
Your Board of Trustees has approved the closure of the Fund and recommends
that you vote "Yes" on the enclosed ballot. I encourage you to vote in favor of
the proposal. Please read the enclosed materials carefully before you vote on
these proposal. The materials explain in detail the reasons for the change being
proposed to you by this proxy.
PLEASE VOTE NOW TO HELP SAVE THE COST OF ADDITIONAL SOLICITATIONS.
As always, we thank you for your confidence and support.
Sincerely,
/s/ Stephen B. Tily
Chairman, Board of Trustees
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<PAGE>
DECLARATION FUND
555 North Lane, Suite 6160
Conshohocken, PA 19428
TELEPHONE 1-800-353-3553
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
JUNE 4, 1999 AND PROXY STATEMENT
May 14, 1999
To the Shareholders:
You are invited to attend a special meeting of shareholders of the Michigan
Heritage Fund (the "Fund"), a series of the Declaration Fund (the "Trust"):
The meeting will be held at 555 North Lane, Suite 6160, Conshohocken,
Pennsylvania 19428 on Friday, June 4, 1999 at 10:00 a.m., Eastern time, for the
following purposes and to transact such other business as may properly come
before the meeting or any adjournment of the meeting:
1. To approve the closure of the Fund, the winding up of its affairs, and the
distribution of the Fund's net assets to all shareholders of record
entitled to receive such proceeds.
The Board of Trustees of your Fund has selected the close of business on April
30, 1999 as the record date for the determination of shareholders of the Fund
entitled to notice of and to vote at the meeting. Shareholders are entitled to
one vote for each share held.
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PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD. SIGN, DATE
AND RETURN IT IN THE ENVELOPE PROVIDED. TO SAVE THE COST OF ADDITIONAL
SOLICITATIONS, PLEASE MAIL YOUR PROXY PROMPTLY.
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The accompanying proxy is solicited by the Board of Trustees (the "Board") of
the Declaration Fund for voting at the special meeting of shareholders to be
held on Friday, June 4, 1999, and at any and all adjournments thereof (the
"Meeting"). This proxy statement was first mailed to shareholders on or about
May 17, 1999.
THE SERIES FUNDS. Declaration Fund ("Declaration" or the "Trust") is a "series
company" that issues various series of shares. (Each series also is sometimes
described herein as a "Fund.") Each series has its own investment objective and
policies and operates independently for purposes of investments, dividends and
redemptions.
<PAGE>
The series of Declaration include:
Declaration Money Market Fund
Declaration Cash
The VanderPal Income and Growth Fund
The Michigan Heritage Fund
Shares of each Fund represent a proportionate interest in that Fund.
The item to be approved pursuant to this proxy only affects the shareholders of
the Michigan Heritage Fund (the "Fund"). The Fund has two classes of shares;
No-load and Class B shares. This proxy contains only one Item for shareholder
approval, and all shareholders from both share classes are entitled to vote. The
Board of Trustees of your Fund recommends that you vote "Yes" to close the
Fund.. The vote required to approve the Fund's closure is described under the
section of this proxy statement entitled "Miscellaneous."
The Board of Trustees has fixed the close of business on February 15, 1999 as
the record date for the determination of shareholders entitled to notice of and
to vote at the Meeting. As of April 30, 1999, the Fund had ____________ Shares
issued and outstanding.
ITEM 1. CLOSURE OF THE MICHIGAN HERITAGE FUND.
BACKGROUND
The Michigan Heritage Fund was established as a series of the Trust and declared
effective by the Securities and Exchange Commission on July 8, 1997. The Board
of Trustees entered into an investment advisory agreement with Dickinson Asset
Management, Inc. ("DAMCO") to provide investment advisory services to the Fund
prior to the Fund becoming effective. DAMCO has been the adviser to the Fund
since the Fund's inception.
Pursuant to the terms of the Investment Advisory Agreement between the Trust and
DAMCO, DAMCO agreed to waive receipt of some or all of its advisory fees if the
Fund's ordinary operating expense ratios exceeded 1.75%. Subsequent to the Fund
becoming effective, DAMCO gave written instructions to the Fund's transfer
agent, Declaration Service Company, to bill all expenses in excess of 3.5% to
DAMCO. Since the Fund's inception on July 8, 1997, DAMCO waived receipt of all
of its fees under the Investment Advisory Agreement.
Pursuant to DAMCO's instructions, the Fund's transfer agent billed all expenses
in excess of 3.5% to DAMCO, and until August, 1998, DAMCO reimbursed the Fund
for such expenses.
An adviser reimbursing fund expenses is a common practice for new funds. Until a
new fund grows to a certain size and becomes self-sustaining, normal expenses
incurred by the Fund in the course of its operations will often have a very
detrimental effect on the Fund's total return performance. Advisers to new funds
will absorb these "excess" expenses in order to hold down a fund's expense ratio
and enhance the Fund's investment performance.
On or about December 15, 1998, DAMCO tendered its resignation as investment
adviser to the Fund. At the time of DAMCO's resignation, there was approximately
$67,000 in accrued expenses to be reimbursed by DAMCO. In its resignation
letter, DAMCO disavowed any responsibility for the outstanding amount.
1
<PAGE>
The Board of Trustees of the Fund met on December 16, 1998 to consider DAMCO's
resignation, the amounts due from DAMCO, and their effect on the Fund. At the
meeting , the Board considered its options with respect to the Fund and its
obligations to the Fund's shareholders. After fully considering its options with
respect to the Fund, the Board issued the following directives to Fund
management:
1. Until further notice, there were to be no new subscriptions accepted for
Fund shares.
2. Management was directed to immediately begin a search for a new adviser to
the Fund to replace DAMCO.
3. Counsel to the Fund was directed to contact counsel for DAMCO to press the
Fund's claim for reimbursement of all outstanding expenses owed by DAMCO.
4. Declaration Service Company ("DSC"), the Fund's transfer agent and fund
accountant, was directed to adjust the net asset value of the Fund's shares
to reflect the uncollected amounts upon the occurrence of the first of the
following events: (1) Any Fund shareholder requested a redemption of
shares, (2) Fund Management reported to the Board that a search for a new
adviser was unsuccessful, (3) Close of business on December 31, 1998, the
Fund's fiscal year-end.
On December 24, 1998, DSC received a redemption request from one of the Fund's
shareholders. Pursuant to Board orders, DSC adjusted the Fund's net asset value
downward to reflect the uncollected expenses, and paid the redemption request.
On or about December 29, 1998, management reported to the Board that all
attempts to find a replacement adviser had failed.
On January 13, 1999, the Board held a special meeting to discuss its options
with respect to the Fund. At that meeting, the Board was informed that the
Fund's net asset value had been adjusted as a result of a redemption request.
Management reported that it had been unsuccessful in finding a new adviser.
Counsel to the Fund reported that there had been no progress in recovering
payment from DAMCO.
The Fund's fiscal year ended on December 31, 1999. As a result of the adjustment
to the Fund's books, on December 24, 1999, the Net Asset value of each share of
the Fund was immediately reduced by approximately 14%, going from $__ per share
to $__ per share. At fiscal year-end, each share of the Fund experienced a
calendar year loss of $103 per share, and a net loss including prior year carry
forwards of $93 per share. Accordingly, your shares experienced capital losses
for calendar year 1998. Such losses may be deductible on your taxes. The Fund's
unaudited financial statements for its fiscal year ending on December 31, 1998
are attached to this Proxy as Exhibit B. Audited financial statements reflecting
the Fund's closure and final financial status will be provided to each
shareholder after the Fund is wound up.
2
<PAGE>
BOARD OF TRUSTEES RECOMMENDATION
After fully discussing its options with respect to the Fund, at its special
meeting on January 13, 1999 the Board of Trustees unanimously voted to close the
Fund and to recommend closure to the Fund's shareholders.
For information about the Board's deliberations and the reasons for its
recommendation, please see "Board of Trustees Evaluation" near the end of this
Item 1.
The Board recommends that shareholders vote "Yes" to close the Fund and
distribute the net assets of the Fund to all shareholders of record.
BOARD OF TRUSTEES EVALUATION
At a regular meeting of the Board on January 13, 1999, the Board discussed its
options with respect to the resignation of DAMCO, previously communicated to the
Board. Having previously directed management of the Trust to search for a new
Advisor, the Board received a report from management that a search for a new
adviser had been unsuccessful. Management informed the Board that management had
approached several established investment advisory firms, but because of the
Fund's lack of asset strength, its very narrow investment objectives, and the
existence of a large expense balance which would negatively affect the Fund's
performance, each adviser had declined to go forward. Management recommended
that the Board close the Fund.
The Board next considered whether it would be advisable to continue the Fund
without an outside adviser. Management and the Fund's independent auditors
presented a report to the Board on the likely consequences of the Fund remaining
open under the current circumstances. The Board learned that, as of October 30,
1998, Declaration Service Company ("DSC"), the Fund's transfer agent, and
Declaration Distributors, Inc. ("DDI"), the Fund's principal underwriter, had
ceased charging servicing fees to the Fund out of concern over the large unpaid
balance owing to the Fund by DAMCO.
The Board was informed that, if the Fund remained open, DDI and DSC would have
to begin charging fees again to cover the costs of their services to the Fund.
As a result, the Fund's expense ratio would increase dramatically. Management
informed the board that those fees were approximately $9000 per month.
At the same time, without an investment adviser, the Board would have to manage
the assets of the Fund. The Board agreed that it did not have the expertise to
manage a portfolio of Michigan-based securities. Accordingly, if the Board
managed the Fund's assets, it would be limited to investing in money market
securities only. The Board learned that, by investing the Fund's cash assets
exclusively in money market securities, the earnings of the Fund would not equal
the ongoing expenses incurred by the Fund. As a result, the Fund's assets would
be negatively impacted and eventually, entirely depleted. Further, investing
exclusively in money market securities would be a violation of the Fund's
fundamental investment policy. After full discussion, it was decided that such
an option would not be in the best interests of the Fund's shareholders.
The Board then considered the steps necessary to close the Fund. Counsel to the
Fund and the Fund's independent auditor, Sanville and Company, informed the
Board of its responsibilities and requirements for closing the Fund. The Board
was informed that certain information and documents must be filed under both
state and federal law in order to close a mutual fund. In addition, the Trust's
governing documents required a consenting vote of shareholders in any fund to be
closed.
3
<PAGE>
In addition, counsel to the Fund and the independent Trustees prepared and
distributed an analysis of the Board's fiduciary obligations. The Trustees
discussed the recommendations of management and reviewed their fiduciary
obligations. There was extended discussion of, and questioning about, the Fund's
future options and the ability of the Trust to continue the Fund without an
outside investment adviser. As a result of their investigation and discussions,
at its meeting on January 13, 1999, the Board voted to close the Fund and to
recommend closure to the shareholders of the Fund for their approval.
During its deliberations, the Board used outside assistance in its analysis of
the Fund's financial status and other aspects of the Fund to help evaluate the
potential effects of various Board actions upon the Fund and the Trust.
Throughout the review process the independent Trustees had the assistance of
legal counsel. The Board reviewed draft financial reports pertaining to the
Fund, and received reports from management concerning the effects on the Fund's
NAV resulting from the uncollected debt.
As part of its effort to preserve the assets of the Fund until such time as the
Fund's affairs were wound up and its assets distributed, the Board sent written
notice to DAMCO, instructing it to liquidate all outstanding assets of the Fund
and convert all Fund assets to cash. DSC was directed to contact the Fund's
custodian and direct the custodian to invest the Fund's cash in overnight,
interest-bearing deposits only until further notice. The Board undertook these
actions in order to preserve the assets of the Fund and to remove from the Fund
any risk of asset loss due to market declines.
As a result of their investigation and consideration of the Fund's status and
the options available to the Fund, at its meeting on January 13, 1999, the Board
voted to close the Fund, wind up its affairs, and distribute the net assets of
the Fund to all shareholders of record, and to recommend its decision to the
shareholders of the Fund for their approval.
The Board of Declaration recommends that shareholders of the Fund vote "Yes" to
approve the Fund's closure.
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OTHER INFORMATION
MISCELLANEOUS
The cost of preparing, printing and mailing the enclosed proxy, accompanying
notice and proxy statement and all other costs in connection with solicitation
of proxies will be paid by the Trust, including any additional solicitation made
by letter, telephone or telegraph. At present, the Trust estimates that the
total cost of this proxy will be approximately $5,000. In the event that
additional solicitations are required, those costs will increase. In addition to
solicitation by mail, certain officers and representatives of the Trust, and
certain financial services firms and their representatives, who will receive no
extra compensation for their services, may solicit proxies by telephone,
telegram or personally. In addition, the Trust may retain a firm to solicit
proxies on behalf of the Board, the fee for which will be borne by the party
incurring the expense.
A COPY OF YOUR FUND'S ANNUAL REPORT AND ANY MORE RECENT SEMI-ANNUAL REPORT ARE
AVAILABLE WITHOUT CHARGE UPON REQUEST BY WRITING TO DECLARATION FUND, P.O. BOX
844, CONSHOHOCKEN, PA 19428-0844, OR BY CALLING 1-800-353-3553.
PROPOSALS OF SHAREHOLDERS
As a Pennsylvania Business Trust, Declaration Fund is not required to hold
annual shareholder meetings, but will hold special meetings as required or
deemed desirable. Since the Trust does not hold regular meetings of
shareholders, the anticipated date of the next shareholders meeting cannot be
provided. Any shareholder proposal that may properly be included in the proxy
solicitation material for a special shareholder meeting must be received by the
Trust no later than four months prior to the date when proxy statements are
mailed to shareholders.
4
<PAGE>
OTHER MATTERS TO COME BEFORE THE MEETING
The Board of Trustees of Declaration Fund is not aware of any matters that will
be presented for action at the Meeting other than the matters set forth herein.
Should any other matters requiring a vote of shareholders arise, the proxy in
the accompanying form will confer upon the person or persons entitled to vote
the shares represented by such proxy the discretionary authority to vote the
shares as to any such other matters in accordance with their best judgment in
the interest of the Trust.
VOTING, QUORUM
Each share of the Fund is entitled to one vote on each matter submitted to a
vote of the holders of those shares of the Fund at the Meeting; no shares have
cumulative voting rights.
Each valid proxy will be voted in accordance with the instructions on the proxy
and as the persons named in the proxy determine on such other business as may
come before the Meeting. If no instructions are given, the proxy will be voted
YES on the proxy. Shareholders who execute proxies may revoke them at any time
before they are voted, either by writing to Declaration or in person at the time
of the Meeting. Proxies given by telephone or electronically transmitted
instruments may be counted if obtained pursuant to procedures designed to verify
that such instructions have been authorized.
The only Item to be voted on by this proxy requires the affirmative vote of a
"majority of the outstanding voting securities" of the Fund. The term "majority
of the outstanding voting securities" as defined in the 1940 Act means: the
affirmative vote of the lesser of (1) 67% of the voting securities of the Fund
present at the meeting if more than 50% of the outstanding shares of the Fund
are present in person or by proxy or (2) more than 50% of the outstanding shares
of the Fund.
The Declaration of Trust and By-Laws of Declaration provide that the presence at
a shareholder meeting in person or by proxy of at least 33.3% of the shares of a
series constitutes a quorum for that series. Thus, the meeting for a particular
series could not take place on its scheduled date if less than 33.3% of the
shares of that series were represented. If, by the time scheduled for the
meeting, a quorum of shareholders of a series is not present or if a quorum is
present but sufficient votes in favor of any of the items are not received, the
persons named as proxies may propose one or more adjournments of the meeting for
that series to permit further soliciting of proxies from its shareholders. Any
such adjournment will require the affirmative vote of a majority of the shares
of the series as to which the meeting is being adjourned present (in person or
by proxy) at the session of the meeting to be adjourned. The persons named as
proxies will vote in favor of any such adjournment if they determine that such
adjournment and additional solicitation are reasonable and in the interest of
the respective series' shareholders.
In tallying shareholder votes, abstentions and "broker non-votes" (i.e., shares
held by brokers or nominees as to which (I) instructions have not been received
from the beneficial owners or persons entitled to vote and (ii) the broker or
nominee does not have discretionary voting power on a particular matter) will be
counted for purposes of determining whether a quorum is present for purposes of
convening the Meeting. Abstentions and broker non-votes will not be counted as
"votes cast" and will have no effect on the result of the vote. The Board of
Trustees of Declaration recommends a YES vote on the Item before the Fund's
shareholders.
PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY. NO POSTAGE IS
REQUIRED IF MAILED IN THE UNITED STATES.
By order of the Board of Trustees,
Stephen B. Tily
Chairman, Board of Trustees
5
<PAGE>
EXHIBIT A
HOLDERS OF MORE THAN
5% OF THE FUND'S SHARES
NAME AND ADDRESS % OWNERSHIP # SHARES SHARE CLASS
- ---------------- ----------- -------- -----------
<PAGE>
EXHIBIT B
FINANCIAL STATEMENTS
THE MICHIGAN HERITAGE FUND
Statement of Assets and Liabilities
December 31, 1998
(Unaudited)
ASSETS
Investments in Securities, at current value (cost $379,800) $ 420,094
Cash 16,565
Receivables:
Dividends and interest 368
Fund shares sold 570
Prepaid expenses 6
---------
Total Assets 437,603
LIABILITIES
Distribution fees 1,232
Accounts payable and accrued expenses 29,184
---------
Total Liabilities 30,416
NET ASSETS $ 407,187
=========
Net Assets consist of:
Paid-in capital $ 366,986
Accumulated net realized gain from investments (93)
Net unrealized appreciation on investments 40,294
---------
NET ASSETS $ 407,187
=========
NET ASSET VALUE
No-Load: Net Assets $ 359,865
Shares Outstanding 39,089
Net Asset Value, Offering and Redemption
Price per Share $ 9.21
=========
Class A: Net Assets $ 47,322
Shares Outstanding 5,476
Net Asset Value, Offering and Redemption
Price per Share($8.64-.9475) $ 9.12
=========
See notes to financial statements
<PAGE>
THE MICHIGAN HERITAGE FUND
Statement of Operations
Year Ended December 31, 1998
(Unaudited)
INVESTMENT INCOME
Dividend Income $ 5,496
Total Income $ 5,496
---------
EXPENSES
Investment Advisory Fees (Note 2) 4,043
Administrative Fees 48,096
Accounting Service Fees 28,980
Transfer Agent Fees 17,854
Registration Fees 1,752
Custodian Fees 3,599
Legal Fees 5,001
Trustee's Fees and Expenses 26
Distribution Fees- No-Load Class 972
Distribution Fees- Class A 47
Insurance Expense 303
Miscellaneous 4,959
---------
Total Expenses before reimbursement 127,797
Expense reimbursement by Adviser (Note 2) $ (44,530)
---------
Net Expenses $ 83,267
---------
NET INVESTMENT LOSS $ (77,771)
---------
NET REALIZED AND UNREALIZED GAIN FROM INVESTMENTS:
Net realized loss on investments (103)
Net change in unrealized appreciation of investments $ 34,234
---------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS $ 34,131
---------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (43,640)
=========
See notes to financial statements
<PAGE>
THE MICHIGAN HERITAGE FUND
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
For the Year Ended
December 31, 1998 For the Period Ended
Unaudited December 31, 1997(1)
--------- --------------------
Increase (decrease) in net assets from operations
<S> <C> <C>
Net investment loss $ (77,771) $ (1,324)
Net realized gain (loss) from investments (103) 10
Net change in unrealized appreciation of
Investments $ 34,234 6,061
-------------------------------
Net increase (decrease) in net assets resulting
From operations $ (43,640) $ 4,747
-------------------------------
From Capital Share transactions* $ 147,790 $ 298,290
-------------------------------
Net increase in net assets 104,150 303,037
Net assets at beginning of period $ 303,037 $ --
-------------------------------
Net assets at end of period $ 407,187 $ 303,037
===============================
<CAPTION>
*Analysis of fund share transactions
For the Year Ended
No-Load Shares December 31, 1998 (Unaudited)
---------------------------------------------------
No-Load Class A(2)
------- ----------
Shares Amount Shares Amount
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Shares Sold 12,951 $ 124,516 5,852 $ 54,853
Shares Redeemed (2,794) $ (28,093) (376) $ (3,485)
--------- --------- --------- ---------
Net Increase 10,157 $ 96,423 5,476 $ 51,368
========= =========
Shares Outstanding:
Beginning of Period 29,880 0
-------------------------------------
End of Period 40,037 5,476
=====================================
<CAPTION>
For the Period
July 27, 1997
(Commencement of Investment
Operations) to
December 31, 1997
-----------------------
No-Load
-------
Shares Amount
------ ------
<S> <C> <C>
Shares Sold 29,880 $ 298,290
-----------------------
Net Increase 29,880 $ 298,290
=======================
</TABLE>
(1) Commenced operations on July 27, 1997
(2) Commenced operations on March 27, 1998
See notes to financial statements
<PAGE>
THE MICHIGAN HERITAGE FUND
Financial Highlights
(Selected data for a share of capital stock outstanding through each period)
<TABLE>
<CAPTION>
NO-LOAD CLASS A
------- -------
For the Period
For the Period March 27, 1998
For the Year July 27, 1997 (commencement
Ended (commencement of operations) to
December 31, 1998 of operations) to December 31,
(Unaudited) December 31, 1997 1998 (Unaudited)
---------------- ---------------- --------------
<S> <C> <C> <C>
Net Asset Value, beginning of period $ 10.14 $ 10.00 $ 10.00
Income from investment operations :
Net investment loss (1.72) (0.04) (1.64)
Net realized and unrealized gain
On investments 0.79 0.18 0.28
------- ------- -------
Total from investment operations (0.93) 0.14 (1.36)
------- ------- -------
Net Asset Value, end of period $ 9.21 $ 10.14 $ 8.64
======= ======= =======
Total Investment Return 1.40% 1.40% 1.80%
Ratios/Supplemental Data:
Net Assets, end of period (000's) $ 360 $ 303 $ 47
Ratio of expenses to average net assets 18.79% 2.18% 50.31%*
(after expense reimbursements)
Ratio of expenses to average net assets 28.83% 34.48% 77.41%*
(before expense reimbursements)
Ratio of net investment loss to average net assets (17.55)% (0.94)% (49.96)%*
(after expense reimbursements)
Ratio of net investment loss to average net assets (27.59)% (35.73)% (74.07)%*
(before expense reimbursements)
Portfolio turnover rate 4.84% 0.00% 4.84%
</TABLE>
*Ratios for periods of less than one year are annualized.
<PAGE>
THE MICHIGAN HERITAGE FUND
Notes to Financial Statements
December 31, 1998
1. Organization and Significant Accounting 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.
Shares of the Fund have been divided into classes with respect to which the
Trustees have adopted allocation plans regarding expenses specifically
attributable to a particular class of shares. No-Load shares are sold at
net asset value without sales commissions or redemptions fees. Class A
shares are sold at net asset value and are subject to a front-end sales
load.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the Fund. The policies are in conformity with generally
accepted accounting principles.
Security Valuation: Securities are valued at the last reported sales price,
in the case of securities where there is no last reported sales price, 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 board of Trustees in accordance with methods
that have been authorized by the Board. Short term debt obligations 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 basis. 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.
<PAGE>
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.
3. Management Fee
Under the terms of the management agreement, the Adviser had agreed to
provide the Fund investment management services and be responsible for the
day to day operations of the Fund. The Adviser received a fee, for the
performance of its services, at an annual rate of 1.00% of the Fund's
average daily net assets. The fee was accrued daily and paid monthly. For
the period January 1 through December 14, 1998, the Adviser had agreed to
limit the Fund's expenses to 3.5% of the Fund's average daily net assets.
On December 14, 1998, the Adviser sent notice of its resignation from the
agreement, disavowing responsibility for owing the Fund $67,814 in
unreimbursed expenses. Prior to the resignation, the Adviser had reimbursed
the Fund and waived fees and expenses totaling $44,530 for the year ended
December 31, 1998. The Board of Trustees of the Fund met on December 16,
1998 and accepted the Adviser's resignation effective February 14, 1999.
During the Board Meeting on December 16, 1998, the board directed the
Fund's accounting and transfer agent to closely monitor Fund activity, not
accept new or additional subscriptions for fund shares, and to continue to
calculate the daily net asset value assuming the amount due the Fund would
be collected either from the Adviser or form a new adviser. The Board
directed that this policy be continued until one of three occurrences; the
receipt of a fund share redemption request, the appointment of a new
investment adviser, or the end of the Fund's fiscal year on December 31,
1998. On December 24, 1998, upon receipt of a redemption request, the
amount owed the Fund was charged against the assets of the Fund in order to
accurately calculate the net asset value for the Fund.
4. Investment Transactions
Purchases and sales of investment securities (excluding short term
securities) for the year ended December 31, 1998 were $128,284 and $18,155
respectively.
At December 31, 1998, net unrealized appreciation for federal income tax
purposes aggregated $40,294, of which $91,324 related to unrealized
appreciation and $51,030 related to unrealized depreciation. The cost of
investments at December 31, 1998 for federal income tax purposes was
$379,800.
<PAGE>
5. Subsequent Events
From the period December 16, 1998 through February 14, 1999, the Board of
Trustees attempted to obtain the services of a qualified investment adviser
as a replacement for Dickinson Asset management, Inc. Having had no
success, on January 13 ,1999 the board directed Dickinson to liquidate all
assets to cash in preparation for a potential closing of the Fund. On
February 19, 1999, the board determined it was in the best interests of the
shareholders to close the Fund and distribute the net assets of the Fund to
the remaining shareholders. On February 19, 1999, a preliminary proxy was
filed with the U.S. Securities and Exchange Commission to request
shareholder approval to close the Fund and distribute the remaining assets.
On May 4, 1999, an amended preliminary proxy was filed with the U.S.
Securities and Exchange Commission to request shareholder approval to close
the Fund and distribute the remaining assets
<PAGE>
This Proxy is Solicited by the Board of Trustees of the Trust, who
recommend that you vote "Yes" on the sole issue before you.
Thank you for mailing your ballot promptly!
We appreciate your continuing support and look forward to serving
your future investment needs.
DECLARATION FUND
1. Approve the Board's decision to close the Fund, wind up its affairs, and
distribute all of the Fund's net assets to the Fund's shareholders. To
approve closing the Fund, choose "Yes". To keep the Fund open, choose "No".
To refrain from voting, choose "Abstain".
Yes No Abstain
/ / / / / /
Signature(s) (All registered owners of accounts shown to the left must sign. If
signing for a corporation, estate or trust, please indicate your capacity or
title.)
X
- --------------------------------------------------------------------------------
Signature Date
X
- --------------------------------------------------------------------------------
Signature Date
PLEASE VOTE TODAY!
Please vote on the issue using blue or black ink to mark an X in one of the
three boxes provided on each ballot. On all Items, mark - Yes, No or Abstain.
Then sign, date and return your ballot in the accompanying postage-paid
envelope. All registered owners of an account, as shown in the address on the
ballot, must sign the ballot. If you are signing for a corporation, trust or
estate, please indicate your title or position.
THANK YOU FOR MAILING YOUR BALLOT PROMPTLY!
Your vote is needed! Please vote on the reverse side of this form and sign in
the space provided. Return your completed proxy in the enclosed envelope today.
You may receive additional proxies for your other accounts with the Fund. These
are not duplicates; you should sign and return each proxy card in order for your
votes to be counted. Please return them as soon as possible to help save the
cost of additional mailings.
The signers of this proxy hereby appoint David F. Ganley and Paul L. Giorgio,
and each of them, attorneys and proxies, with power of substitution in each, to
vote all shares for the signers at the special meeting of shareholders to be
held March 15, 1999, and at any adjournments thereof, as specified herein, and
in accordance with their best judgement, on any other business that may properly
come before this meeting. If no specification is made herein, all shares will be
voted "Yes" in favor of the proposal set forth on this proxy. The proxy is
solicited by the Board of Declaration which recommends that you vote "Yes" on
this single Item.
