<PAGE>
As filed with the Securities and Exchange Commission on April 28, 1998
Securities Act registration 33-37668
Investment Company Act file 811-6212
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Post-Effective Amendment No. 9 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 11 [X]
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UNIVERSAL CAPITAL INVESTMENT TRUST
(Registrant)
100 South Wacker, Suite 2100
Chicago, Illinois 60606
Telephone number: 312-782-1515
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Andrew J. Goodwin, III David A. Sturms
Graver, Bokhof, Goodwin & Sullivan Vedder, Price, Kaufman & Kammholz
Suite 2100 222 North LaSalle Street, Suite 2600
100 South Wacker Drive Chicago, Illinois 60601-1003
Chicago, Illinois 60606
(Agents for service)
It is proposed that this filing will become effective:
X immediately upon filing pursuant to paragraph(b)
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on (date) pursuant to rule paragraph(b)
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60 days after filing pursuant to rule paragraph(a)(1)
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on January 28, 1997 pursuant to rule paragraph(a)(1)
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75 days after filing pursuant to paragraph (a)(2)
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on (date) pursuant to paragraph (a)(2) of rule 485
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<PAGE>
UNIVERSAL CAPITAL INVESTMENT TRUST
CROSS REFERENCE SHEET
(Pursuant to Rule 481 showing the location in the Prospectus of the
responses to the Items of Part A of Form N-1A).
<TABLE>
<CAPTION>
Item No. on Form N-1A Caption or Subheading in Prospectus
--------------------- -----------------------------------
<S> <C>
1. Cover Page Cover Page
2. Synopsis Expense Information; Highlights
3. Condensed Financial Information Financial Highlights; Performance
Information
4. General Description of Registrant The Trust and Its Shares;
Investment Objective and Policies
5. Management of the Fund Management of the Fund; Rear Cover;
Expense Information; Portfolio
Transactions
5A. Management's Discussion of Fund Performance Information
Performance
6. Capital Stock and Other Securities The Trust and Its Shares;
Shareholder Services; Dividends and
Distributions; Taxes
7. Purchase of Securities Being How to Purchase Shares; Management
Offered of the Fund; Rear Cover
8. Redemption or Repurchase How to Redeem Shares
9. Legal Proceedings Not Applicable
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART B -
INFORMATION REQUIRED IN STATEMENT OF ADDITIONAL INFORMATION
<S> <C>
10. Cover Page Cover Page
11. Table of Contents Cover Page
12. General Information and History General Information
13. Investment Objectives and Policies Investment Objective; Investment
Practices; Investment Restrictions
14. Management of the Fund Management
15. Control Persons and Principal Management
Holders of Securities
16. Investment Advisory and Other Investment Advisory Services; Fund
Services Accounting Services; Distribution
Plan; Custodian; Independent
Auditors; Transfer Agent
17. Brokerage Allocation and Other Portfolio Transactions
Policies
18. Capital Stock and Other Securities Not Applicable
19. Purchase, Redemption and Pricing of Purchasing and Redeeming Shares;
Securities Being Offered Financial Statements
20. Tax Status Taxation
21. Underwriters Distributor
22. Calculation of Performance Data Performance Information
23. Financial Statements Financial Statements
</TABLE>
<PAGE>
INVESTMENT ADVISER
Graver, Bokhof, Goodwin & Sullivan, L.P.
100 South Wacker Drive, Suite 2100
Chicago, Illinois 60606-4005
(800) 969-9676
DISTRIBUTOR
Dreher & Associates, Inc.
One Oakbrook Terrace, Suite 708
Oakbrook Terrace, Illinois 60181-4793
(630) 932-3000
CUSTODIAN
UMB Bank, n.a.
P.O. Box 419226
Kansas City, Missouri 64141
TRANSFER AGENT
Sunstone Investor Services, LLC
207 East Buffalo Street, Suite 315
Milwaukee, Wisconsin 53202
LEGAL COUNSEL
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street, Suite 2600
Chicago, Illinois 60801
INDEPENDENT AUDITORS
Ernst & Young LLP
233 South Wacker Drive
Chicago, Illinois 60606
NO DEALER, SALESMAN OR ANY OTHER PERSON IS AUTHORIZED, IN CONNECTION WITH THE
OFFER CONTAINED IN THIS PROSPECTUS, TO ACT AS AGENT FOR UNIVERSAL CAPITAL GROWTH
FUND, NOR IS ANY PERSON AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR IN SUPPLEMENTARY INFORMATION
OR IN SUPPLEMENTAL SALES MATERIAL AUTHORIZED BY UNIVERSAL CAPITAL GROWTH FUND
AND NO PERSON IS ENTITLED TO RELY UPON ANY INFORMATION OR REPRESENTATION NOT
CONTAINED HEREIN OR THEREIN.
UNIVERSAL CAPITAL
GROWTH FUND
PROSPECTUS
APRIL 28, 1998
<PAGE>
UNIVERSAL CAPITAL GROWTH FUND
Universal Capital Growth Fund (the "Fund"), a series of Universal Capital
Investment Trust (the "Trust"), is a fully-managed, diversified, open-end
mutual fund. The Fund's investment objective is to maximize capital
appreciation primarily through investment in common stocks of companies which
the Fund's investment adviser, Graver, Bokhof, Goodwin & Sullivan, L.P.,
believes have potential to increase earnings and are either undervalued or
fairly valued.
This Prospectus, which should be read and retained for future reference, sets
forth concisely the information an investor should consider before investing in
the Fund. A Statement of Additional Information containing further information
about the Fund has been filed with the Securities and Exchange Commission and
may be obtained without charge by calling or writing the Fund at the telephone
number or address listed below. The Statement of Additional Information bears
the same date as this Prospectus and (together with any supplements thereto) is
incorporated by reference into this Prospectus.
UNIVERSAL CAPITAL GROWTH FUND
100 SOUTH WACKER DRIVE, SUITE 2100
CHICAGO, ILLINOIS 60606-4005
(800) 969-9676
TABLE OF CONTENTS
Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Expense Information . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Investment Objective and Policies . . . . . . . . . . . . . . . . . . . .5
Investment Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Investment Restrictions. . . . . . . . . . . . . . . . . . . . . . . . . .7
How to Purchase Shares . . . . . . . . . . . . . . . . . . . . . . . . . .7
How to Redeem Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Shareholder Services . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Dividends and Distributions. . . . . . . . . . . . . . . . . . . . . . . 13
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Management of the Fund . . . . . . . . . . . . . . . . . . . . . . . . . 14
Performance Information . . . . . . . . . . . . . . . . . . . . . . . . 15
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . . 17
The Trust and Its Shares . . . . . . . . . . . . . . . . . . . . . . . . 17
Appendix - Letter of Intent . . . . . . . . . . . . . . . . . . . . . . 19
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.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SECURITIES IN ANY STATE
TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER IN SUCH STATE.
The date of this Prospectus is April 28, 1998
<PAGE>
HIGHLIGHTS
INVESTMENT OBJECTIVE
The investment objective of Universal Capital Growth Fund (the "Fund") is to
maximize capital appreciation primarily through investment in common stocks of
companies which the Fund's investment adviser, Graver, Bokhof, Goodwin &
Sullivan, L.P. (the "Adviser"), believes have potential to increase earnings and
are either undervalued or fairly valued. There can be no assurance that the Fund
will achieve its objective.
INVESTMENT RISKS
The Fund is designed for long-term investors who can accept the fluctuations
in portfolio value and other risks associated with seeking to maximize
capital appreciation through investment in securities. The Fund invests in
both large and small companies. Investments in small, and often newer
companies involve greater risk than is customarily associated with more
established companies. See "Investment Risks" and "Investment Objective and
Policies" for a more complete description of the risks of investing in the
Fund.
DIVIDENDS AND CAPITAL GAINS
All dividends from net investment income and net realized capital gains, if any,
are paid to shareholders by the Fund at least annually. Distributions are
automatically reinvested in additional shares at net asset value (without a
sales charge) unless payment in cash has been requested. See "Dividends and
Distributions."
PURCHASING SHARES
Shares of the Fund are sold with a front-end sales charge of 5.5% of the
offering price, with reduced sales charges on larger investments. Shareholders
of the Fund prior to August 15, 1997 are permitted to purchase shares of the
Fund in accordance with the Fund's previous front-end sales commission schedule.
There is no sales charge on purchases of $500,000 or more or on reinvestment of
distributions. See "How to Purchase Shares."
MINIMUM INVESTMENTS
The Fund's minimum account size is generally $1,000. Each subsequent investment
must be $50 or more except for reinvestment of distributions. There is no
minimum account size for retirement plans. See "How to Purchase Shares."
REDEMPTION PRICE
Shares are redeemed at current net asset value, without charge. See "How to
Redeem Shares."
EXPENSES OF THE FUND
The Fund pays a monthly advisory fee at the annual rate of 1% of the first $250
million of the Fund's average daily net assets. See "Management of the Fund -
The Adviser and Distributor." The Fund also pays the distributor monthly fees at
annual rates aggregating 0.50% of the Fund's average daily net assets for
shareholder servicing and for services in distributing Fund shares. See
"Management of the Fund - Distribution Plan."
INVESTMENT ADVISER
Graver, Bokhof, Goodwin & Sullivan, L.P.
100 South Wacker Drive, Suite 2100
Chicago, Illinois 60606-4005
(800) 969-9676
DISTRIBUTOR
Dreher & Associates, Inc.
One Oakbrook Terrace, Suite 708
Oakbrook Terrace, Illinois 60181-4793
(630) 932-3000
2
<PAGE>
EXPENSE INFORMATION
<TABLE>
<CAPTION>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering price) . . . . . 5.50%
Maximum Sales Load Imposed on Reinvested Dividends. . . . . . . . . . . . . . . . . . None
Deferred Sales Load . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None
Redemption Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Advisory and Management Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.00%
12b-1 Fees (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.50%
Other Expenses (after expense reimbursements) (a) . . . . . . . . . . . . . . . . . . 0.50%
-----
Total Fund Operating Expenses (after expense reimbursements) (a). . . . . . . . . . . 2.00%
-----
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</TABLE>
(a) Takes into account the Adviser's voluntary undertaking to limit the
Fund's annual ordinary operating expenses to 2% of the Fund's average
daily net assets through December 31, 1998. "Other Expenses" and
"Total Fund Operating Expenses" for the year ended September 30, 1997
would have been 1.00% and 2.50% respectively, without such limitation.
You must pay the cost (currently $15) for payment of redemption
proceeds by wire.
(b) Includes a distribution fee of 0.25% and a service fee of 0.25%, all
or a portion of which may be paid to brokers for continuing services
to be provided to shareholders of the Fund. Long-term shareholders
may, as a result of the Fund's distribution plan, pay more than the
economic equivalent of the maximum front-end sales charge. See
"Management of the Fund - Distribution Plan."
EXAMPLE: You would pay the following expenses on a $1,000 investment, assuming a
5% annual return and redemption at the end of each time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C>
$74 $114 $157 $275
</TABLE>
The purpose of the foregoing table is to assist an investor in understanding the
various costs and expenses that an investor in the Fund may bear directly or
indirectly. The example assumes that the percentage amounts listed under Annual
Fund Operating Expenses remain the same through each of the periods, all income
dividends and capital gains distributions are reinvested in additional shares of
the Fund, and the Fund's net assets remain constant. The example is not a
representation of past or future expenses or investment performance. Reduced
sales charges apply to purchases of $50,000 or more. See "How to Purchase
Shares."
3
<PAGE>
FINANCIAL HIGHLIGHTS
The table below shows the results of the Fund's operations for a share
outstanding throughout each fiscal year ended September 30, and has been audited
by Ernst & Young LLP, the Fund's independent auditors. This table should be read
in conjunction with the Fund's annual report which may be obtained at no charge
by writing to the Fund.
<TABLE>
<CAPTION>
1997(d) 1996 1995 1994 1993 1992 1991(c)
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period . . $ 14.99 $ 16.28 $ 12.47 $ 12.27 $ 11.38 $ 11.16 $ 10.00
Income from investment operations:
Net investment income (loss)(a) . . (0.08) (0.10) (0.10) (0.13) (0.04) 0.11 0.07
Net realized and unrealized
gain on investments . . . . . . . . 4.97 1.14 4.54 0.96 1.39 0.37 1.09
------- ------- ------- ------- ------- ------- -------
Total from investment operations . . . . 4.89 1.04 4.44 0.83 1.35 0.48 1.16
Less distribution to shareholder from:
Net investment income . . . . . . . - - - - (0.11) (0.07) -
Realized gains on investments . . . (1.79) (2.33) (0.63) (0.63) (0.35) (0.19) -
------- ------- ------- ------- ------- ------- -------
Total distributions to shareholders. . . (1.79) (2.33) (0.63) (0.63) (0.46) (0.26) -
Net asset value, end of year . . . . . . $ 18.09 $ 14.99 $ 16.28 $ 12.47 $ 12.27 $ 11.38 $ 11.16
------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- -------
TOTAL RETURN (b) . . . . . . . . . . . . 36.2% 7.4% 37.9% 7.5% 12.2% 4.3% 11.6%
Net assets, end of year (in 000s). . . . $12,994 $11,124 $ 8,149 $ 4,969 $ 4,892 $ 4,715 $ 3,031
Ratio of net expenses to average
net assets (a). . . . . . . . . . . 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%*
Ratio of net investment income (loss)
to average net assets (a) . . . . . (0.50)% (0.70)% (0.80)% (1.10)% (0.40)% 1.20% 1.30%*
Portfolio turnover rate. . . . . . . . . 49% 262% 158% 189% 186% 111% 126%*
Average commission rate per share. . . . $0.0457 $0.0208 N/A N/A N/A N/A N/A
</TABLE>
* Annualized
(a) After reimbursement and waiver of expenses by the Adviser of 0.50%, 0.35%,
0.70%, 1.10%, 0.90%, 1.20% and 1.30% of average net assets for 1997, 1996,
1995, 1994, 1993, 1992 and 1991, respectively.
(b) Total return is not annualized for periods less than a full year and does
not reflect the effect of any sales charges.
(c) For the period January 22, 1991 (commencement of operations) through
September 30, 1991.
(d) On August 15, 1997, the Adviser changed to Graver, Bokhof, Goodwin &
Sullivan, L.P. from Integrated Financial Services, Inc.
Note: Per share data for 1997, 1996, 1995, 1994 and 1993 was determined based on
average shares outstanding.
4
<PAGE>
INVESTMENT OBJECTIVE
AND POLICIES
INVESTMENT OBJECTIVE
The investment objective of the Fund is to maximize capital appreciation. The
realization of current income is not normally a consideration in the selection
of securities for investment and the Fund is not designed for investors seeking
income rather than capital appreciation. There can be no assurance that the Fund
will achieve its objective. The Fund's investment objective may not be changed
without shareholder approval.
TYPES OF SECURITIES
The Fund seeks capital appreciation primarily through investment in common
stocks which the Adviser believes have potential to increase earnings and are
either undervalued or fairly valued relative to earnings or potential earnings
growth.
The Fund ordinarily invests on a long-term basis. However, from time to time,
the Fund may invest on a short-term basis, or may sell within a few months
securities purchased on a long-term basis because of the possibility of rapid
security price fluctuations or a change in the circumstances of a particular
company or industry or general market or economic conditions.
The Fund may invest in companies of all size capitalizations.
Large-capitalization companies (with total stock market capitalizations of $1
billion or more) selected by the Adviser will typically have demonstrated
increasing sales and earnings and may have leadership positions in the
markets in which they compete. Small-capitalization companies may have recent
favorable trends in revenue and earnings growth due to a product or service
that offers the opportunity for substantial future growth in a specialized
market. The Adviser believes that while investment in smaller companies
offers the potential for substantial capital appreciation, there is greater
risk and volatility associated with the securities of small companies. The
allocation of investments between large- and small-capitalization companies
may vary greatly from time to time based on the Adviser's analysis of
economic and market conditions.
The Fund expects that, under normal market conditions, at least 75% of the
Fund's assets will be invested in common stocks of companies with potential to
increase earnings. Subject to that limitation, the Fund may also invest in
securities that the Adviser believes offer an opportunity for capital
appreciation for reasons other than earnings growth.
The Fund also may invest in securities of unseasoned issuers, convertible
securities (such as convertible bonds and convertible preferred stocks),
warrants, options on securities, index options, financial futures contracts and
foreign securities and at times may lend its portfolio securities. The Fund
expects that no more than 5% of its net assets would be placed at risk in
connection with any one category of such investments. A more thorough
description of these investment practices and a discussion of their associated
risks are contained in the Statement of Additional Information.
The Fund may invest in short-term, interest-bearing securities, U.S. government
securities, corporate debt securities, preferred stocks, certificates of deposit
of commercial banks and repurchase agreements. Some of these investments may be
medium- or long-term investment grade obligations (rated in one of the four
highest categories by a nationally recognized rating agency) which, in the
judgment of the Adviser, have the greatest potential for a high current return
or capital appreciation. Securities rated in the fourth highest category are
considered to have speculative
5
<PAGE>
characteristics. Under normal market conditions, the Fund will limit its
investment in short-term, interest-bearing securities to 25% of its net assets.
When the Adviser believes that prevailing market conditions indicate that a
temporary defensive position is warranted, the Fund may invest 100% of its
assets in short-term, interest-bearing securities. While the Fund maintains a
temporary defensive position, investment income may be expected to be higher
than if the Fund were invested in common stocks and may constitute a large
portion of the return of the Fund. Moreover, during any such period, the Fund
probably will not participate in market advances or declines to the extent that
it would if it were fully invested in common stocks.
The Fund may sell short securities the Fund owns or has the right to acquire
without further consideration, a technique called selling short "against the
box." Short sales against the box may protect the Fund against the risk of
losses in the value of its portfolio securities because any subsequent
unrealized losses with respect to such securities should be wholly or partially
offset by a corresponding gain in the short position. However, any subsequent
gains in such securities should be wholly or partially offset by a corresponding
loss in the short position. Short sales against the box may be used to lock in a
gain on a security when, for tax reasons or otherwise, the Adviser does not want
to sell the security. The Fund currently does not expect that more than 40% of
the Fund's total assets would be subject to short sales against the box. For a
more complete explanation, please refer to the Statement of Additional
Information.
INVESTMENT RISKS
All investments, including those in mutual funds, have risks. No investment is
suitable for all investors.
The Fund is designed for long-term investors who can accept the fluctuations in
portfolio value and other risks associated with seeking to maximize capital
appreciation through investment in securities. There can be no guarantee that
the Fund will achieve its objective.
The Fund diversifies its securities holdings to reduce risk. Although risk
cannot be eliminated, diversification reduces the impact of any single
investment. The Fund may invest in both large and small companies. Investments
in small, and often newer, companies involve greater risk than is customarily
associated with more established companies. Smaller and newer companies often
have limited product lines, markets, management personnel, research and/or
financial resources. The securities of small companies, which may be thinly
capitalized, may have more limited marketability and be subject to more abrupt
or erratic market movements than securities of larger companies or the market
averages in general.
Any investment by the Fund in medium- or long-term, interest-bearing obligations
has the risk of principal fluctuation due to changing interest rates and the
ability of the issuer to repay the obligation at maturity. Certain risk factors
are also associated with other investment practices of the Fund (none of which
are expected to involve more than 5% of the Fund's assets), including investing
in debt securities and securities of unseasoned issuers, engaging in futures and
options transactions, and investing in foreign securities. Risk factors specific
to those practices are explained more fully in the Statement of Additional
Information. Although the Fund does not purchase securities with a view to rapid
turnover, there are no limitations on the length of time portfolio securities
must be held. The Fund's portfolio turnover rate for the fiscal year ended
6
<PAGE>
September 30, 1997 was 49.2%. The Fund's annual portfolio turnover rate will
vary from year to year; a high rate of portfolio turnover (I.E., over 100%)
results in increased transaction expenses and the realization of capital gains
and losses. Please refer to the Statement of Additional Information for a more
complete explanation.
INVESTMENT RESTRICTIONS
In pursuing its investment objective, the Fund will not:
1. as to 75% of its assets, invest more than 5% of its total assets, taken at
market value at the time of a particular purchase, in the securities of any
one issuer, except that this restriction does not apply to securities
issued or guaranteed by the U.S. government or its agencies or
instrumentalities;
2. acquire more than 10%, taken at the time of a particular purchase, of the
outstanding voting securities of any issuer;
3. invest in a security if more than 25% of its total assets (taken at market
value at the time of a particular purchase) would be invested in the
securities of issuers in any particular industry, except that this
restriction does not apply to securities issued or guaranteed by the U.S.
government or its agencies or instrumentalities;
4. borrow, except that the Fund may borrow up to 5% of its total assets, taken
at market value at the time of such borrowing, as a temporary measure for
extraordinary purposes, but not to increase portfolio income (reverse
repurchase agreements shall be considered borrowings for purposes of this
restriction) nor enter into transactions in options; or,
5. purchase illiquid securities or securities of issuers (other than issuers
of Federal agency obligations) which, including their predecessors, have
been in operation for less than three years, if by reason of such purchase
the value of the Fund's aggregate investment in such securities would
exceed 5% of its total assets.
These are fundamental restrictions that cannot be changed without the approval
of a "majority of the outstanding" voting securities of the Fund, as defined in
the Investment Company Act of 1940 (the "1940 Act"). All of the Fund's
investment restrictions are described in the Statement of Additional
Information.
HOW TO PURCHASE SHARES
A Purchase Application is included with this Prospectus. A completed and signed
Purchase Application is required for each new account opened, regardless of the
method chosen for purchasing shares. Redemptions will not be permitted until a
completed Purchase Application is on file and funds have been collected from the
check used to purchase shares.
The Fund's minimum investment is generally $1,000. Each subsequent investment
must be $50 or more, except for reinvestment of dividends and capital gains
distributions. There is no minimum investment for retirement plans. See
"Shareholder Services - Retirement Plans." These minimums may be changed at any
time. The Fund reserves the right to reject any order for the purchase of its
shares in whole or in part, and to suspend the sale of its shares to the public
in response to conditions in the securities markets or otherwise. The Fund will
not issue share certificates representing shares. Any special purchase method or
privilege, including
7
<PAGE>
but not limited to the Automatic Investment Plan, Sales Commission Waiver,
Rights of Accumulation or Letter of Intent, may be terminated or modified at any
time without notice to shareholders.
METHODS OF PURCHASE
Shares of the Fund may be purchased from Dreher & Associates, Inc. ("Dreher"),
the Fund's distributor, or from selected broker/dealers that have signed selling
agreements with Dreher. Investments in the Fund may be made either by check or
by wire. Please call the Fund at (800) 537-3446.
BY CHECK: Checks should be made payable to "Universal Capital Growth Fund" and
mailed with the completed and signed Purchase Application to an authorized
investment dealer or directly to:
Universal Capital Growth Fund
P.O. Box 1591
Milwaukee, WI 53201-1591
All checks should be drawn on U.S. banks in U.S. dollars in order to avoid fees
and delays. A charge (currently $23) may be imposed if any check submitted for
investment does not clear. In addition, the investor may be responsible for any
related loss incurred by the Fund.
PURCHASES BY EXISTING SHAREHOLDERS
If a shareholder's account with the Fund is already established and an
investment dealer is recorded for such account, subsequent orders for shares may
be either mailed directly to Universal Capital Growth Fund at the address shown
above, or purchased through the shareholder's own authorized investment dealer.
A check made payable to "Universal Capital Growth Fund" should be enclosed with
information identifying the shareholder and the shareholder's account number.
AUTOMATIC INVESTMENT PLAN
Shares may be purchased by automatic monthly transfer of funds ($50 minimum per
month) from a shareholder's checking, bank money market, NOW account, or savings
account by electronic transfer through the Fund's Automatic Investment Plan.
Through the Automatic Investment Plan, the bank account designated by the
shareholder will be debited two business days prior to the date selected for the
purchase.
To sign up for the Plan, new investors in the Fund should complete the Automatic
Investment Plan section in the Fund's Purchase Application and attach a voided
check to the Application. Existing shareholders of the Fund may sign up for the
Plan by calling the Fund or an authorized broker/dealer for a separate Automatic
Investment Plan Application.
Only an account at a domestic financial institution which is an Automated
Clearing House member may be used for the Automatic Investment Plan.
Participation in the Automatic Investment Plan may be changed or terminated only
upon written notice, which will be effective within 5 business days after
receipt of the notice by the Fund from the distributor or an authorized
broker/dealer. The Fund may modify or terminate the Automatic Investment Plan at
any time or charge a service fee, although no such fee currently is
contemplated. A charge (currently $23) may be imposed if an electronic transfer
does not clear. Normal sales commissions apply to the purchase of shares through
the Automatic Investment Plan.
OFFERING PRICE
Except as otherwise described below under "Sales Commission Waiver," shares of
the Fund are offered at the public offering price, which is the net asset value
per share next determined after a properly
8
<PAGE>
completed order is received by the Fund, plus a sales commission. Orders
received after the close of regular session trading on the New York Stock
Exchange (ordinarily 3:00 p.m., Chicago time) will be processed the next
business day. The table below shows the sales commission at various investment
levels.
SALES COMMISSION TABLE
<TABLE>
<CAPTION>
Paid by the Investor
--------------------
% of
Offering
As a % of Price
As a % of Net Retained by
Offering Amount Selling
Investment Price Invested Dealer
- ---------- ----- -------- ------
<S> <C> <C> <C>
Less than $50,000. . . . . . . . . 5.50% 5.82% 4.75%
$50,000 but less
than $100,000 . . . . . . . . . 4.50% 4.71% 3.75%
$100,000 but less
than $200,000 . . . . . . . . . 3.50% 3.63% 2.75%
$200,000 but less
than $350,000 . . . . . . . . . 2.50% 2.56% 2.00%
$350,000 but less
than $500,000 . . . . . . . . . 1.50% 1.52% 1.00%
$500,000
and over. . . . . . . . . . . . NONE NONE NONE
</TABLE>
However, shareholders of the Fund prior to August 15, 1997 will be permitted to
purchase shares of the Fund in accordance with the Fund's previous front-end
sales commission schedule which follows:
<TABLE>
<CAPTION>
Paid by the Investor % of
-------------------- Offering
As a % of Price
As a % of Net Retained by
Offering Amount Selling
Investment Price Invested Dealer
- ---------- ----- -------- ------
<S> <C> <C> <C>
Less than
$100,00 . . . . . . . . . . . . 1.50% 1.52% 1.50%
$100,000 but less
than $250,000 . . . . . . . . . 1.00% 1.01% 1.00%
$250,000
or more . . . . . . . . . . . . NONE NONE NONE
</TABLE>
Under certain circumstances, Dreher may reallow up to the entire sales
commission to dealers. Dealers who receive 90% or more of the sales commission
are deemed to be underwriters under the Securities Act of 1933. Dreher may from
time to time conduct promotional campaigns in which incentives would be offered
to dealers who meet or exceed stated target sales of shares of the Fund. The
cost of any such promotional campaign, including any incentives offered, would
be borne entirely by Dreher and would have no effect on either the public
offering price of Fund shares or the percentage of the public offering price
retained by the selling dealer. The cost of any such promotional campaign is not
intended to be among the items for which the distributor receives compensation
under the Fund's Distribution Plan. See "Management of the Fund - Distribution
Plan." At various times Dreher may also implement programs under which Dreher
will reallow, to all dealers or to dealers that meet uniformly applied targets
for sales of shares of the Fund, an amount not exceeding the total applicable
sales charges on the sales generated by the dealer at the public offering price
during such programs.
SALES COMMISSION WAIVER
The following persons or entities may purchase shares of the Fund at net asset
value without payment of any sales commission: (a) employees and registered
representatives of Dreher and its affiliates or broker/dealers with selling
group agreements with Dreher; (b) spouses and minor children of such persons;
(c) trustees of the Fund; (d) investment advisory clients of the Adviser; (e)
any trust, pension, profit sharing, or other benefit plan account for the
benefit of any person listed in (a), (b), (c) or (d) above; (f) companies
exchanging shares with the Fund pursuant to a merger, acquisition or exchange
offer; and (g) clients of registered investment advisers and certified financial
planners who in each case either pay
9
<PAGE>
a fee for financial planning, investment advisory or asset management
services, or receive such services in connection with the establishment of an
investment account for which a comprehensive "wrap fee" charge is imposed.
An investor may purchase shares of the Fund at net asset value, without a
sales commission, by certifying (on a form available from Dreher) that the
amount invested represents the proceeds of redemption, within the preceding
60 days, of shares of another mutual fund as to which the investor paid a
sales commission.
Dividends and distributions paid by the Fund are reinvested in shares of the
Fund at net asset value without the payment of any sales commission, or an
investor may elect to receive dividends and distributions in cash. See
"Dividends and Distributions."
RIGHTS OF ACCUMULATION
The reduced sales charges and offering prices set forth in the "Sales
Commission Table" may apply to subsequent purchases aggregated pursuant to a
right of accumulation privilege. With the right of accumulation privilege,
investors are permitted to purchase additional shares at the reduced sales
charge and public offering price applicable to the total of (a) the dollar
amount then being purchased, plus (b) an amount equal to the then current
maximum offering price of the aggregate holdings of shares of the Fund owned
by the investor, the investor's spouse, children of the investor or spouse
for whom the investor or spouse is custodian of such investment, Individual
Retirement Account ("IRA") or other qualified plan of the investor or the
investor's spouse, or any revocable trust of which the grantor and principal
beneficiary is the investor or the investor's spouse. Although no sales
charge or a reduced sales charge may be applicable to a subsequent purchase,
no refund of a sales charge previously paid will be made by reason of
subsequent purchases. Shareholders desiring to receive the benefit of such
right must, at the time of each purchase, give Dreher sufficient information
to permit confirmation of qualification. See the Purchase Application
enclosed with this Prospectus for additional details.
LETTER OF INTENT
An investor intending to make additional investments in Fund shares may
qualify for reduced sales commissions by electing on the Purchase Application
to purchase pursuant to a Letter of Intent. The sales commission on each
investment then is computed at the rate that would apply to the intended
aggregate investment over a thirteen-month period. The provisions applicable
to a Letter of Intent are set out in an appendix to this Prospectus.
NET ASSET VALUE
The net asset value per share of the Fund is determined as of the close of
regular session trading on the New York Stock Exchange (ordinarily 3:00 p.m.,
Chicago time) each day that exchange is open for trading by dividing the
value of all securities and other assets of the Fund, less its liabilities,
by the number of shares of the Fund outstanding.
Securities held by the Fund are valued on the basis of market valuation.
Securities and other assets for which market values are not readily available
are valued at a fair value as determined in good faith by a method the board
of trustees believes represents a fair value. For a more complete
explanation, please refer to the Statement of Additional Information.
HOW TO REDEEM SHARES
Shares of the Fund will be redeemed at the net asset value next determined after
receipt of a redemption
10
<PAGE>
request in good form on any day the New York Stock Exchange is open for
trading. Requests received after the close of regular session trading on the
New York Stock Exchange for that day (ordinarily 3:00 p.m., Chicago time)
will be processed the next business day.
The redemption price per share may be more or less than the shareholder's
cost, depending upon the value of the Fund's investment securities at the
time of redemption. The Fund imposes no redemption fee, although a
shareholder must pay a charge for payment of redemption proceeds by wire. An
authorized dealer may charge a fee for processing a redemption request on
behalf of a shareholder. Redemption of Fund shares is a taxable transaction.
PLEASE TELEPHONE THE FUND IF YOU HAVE ANY QUESTIONS ABOUT REQUIREMENTS FOR A
REDEMPTION BEFORE SUBMITTING A REQUEST. You may not cancel or revoke your
redemption request once your instructions have been received in good form by
Sunstone Investor Services, LLC. Any special redemption method or privilege,
including but not limited to the Systematic Withdrawal Plan and Expedited
Redemption, may be terminated or modified at any time without notice to
shareholders.
REDEMPTION BY MAIL
A written request for redemption (and a properly endorsed share certificate,
if issued) must be received by the Fund to constitute a valid redemption
request.
The redemption request must:
1. specify the number of shares or dollar amount to be redeemed, if less than
all shares are to be redeemed;
2. be signed by all owners exactly as their names appear on the account; and
3. include a signature guarantee for each signature on the redemption request.
A signature guarantee may be obtained from Dreher & Associates, Inc., a
securities firm that is a member of the New York Stock Exchange, or a bank,
savings bank, credit union, savings and loan association or other entity
that is authorized by applicable state law to guarantee signatures. A
NOTARY PUBLIC IS NOT AN ACCEPTABLE SIGNATURE GUARANTOR.
In the case of shares held by a corporation, the redemption request must be
signed in the name of the corporation by an officer whose title must be
stated, and a certified bylaw provision or resolution of the board of
directors authorizing the officer to so act may be required. In the case of a
trust or partnership, the signature must include the name of the registered
shareholder and the title of the person signing on its behalf. Under certain
circumstances, before shares can be redeemed, additional documents may be
required in order to verify the authority of the person seeking to redeem.
SYSTEMATIC WITHDRAWAL PLAN
Shareholders may request that the Fund redeem shares monthly or quarterly in
specified dollar amounts. For example, a shareholder might request that
enough shares be redeemed to pay $200 per month.
Investors may initiate the Systematic Withdrawal Plan for a non-IRA account
with an initial investment of $25,000 or more, or at any time after the
initial investment if the value of the investor's account is $25,000 or more.
An IRA account must have a balance of at least $10,000 to begin a Systematic
Withdrawal Plan. The minimum periodic withdrawal amount is $100. Withdrawal
proceeds are likely to exceed dividends and distributions paid on
11
<PAGE>
shares in the account and therefore may deplete and eventually exhaust the
account. The periodic payments are proceeds of redemption and are taxable as
such. A shareholder normally should not purchase shares while participating
in the Systematic Withdrawal Plan if the additional investment would be
subject to a sales charge.
EXPEDITED REDEMPTION
A shareholder may have redemption proceeds of at least $5,000 wired directly
to a domestic commercial bank account or brokerage account that the
shareholder has previously designated. Normally, such payments will be
transmitted no later than the second business day following receipt of your
written redemption request (provided redemptions may be made under the
general criteria set forth below). A service charge (currently $15) for
payment of redemption proceeds by wire will be deducted from the proceeds.
The service charge will not be changed without 30-days prior written notice
to shareholders.
GENERAL
When a redemption request is made shortly after a purchase made by check, the
Fund will withhold payment until the check has cleared, which may take up to
15 days. A shareholder may avoid this delay by purchasing shares in such a
way that the Fund receives immediate payment for the purchase, such as by
wire transfer of funds or payment by a certified or cashier's check. The Fund
may suspend the right of redemption under certain extraordinary circumstances
in accordance with the rules of the Securities and Exchange Commission. Due
to the relatively high cost of handling small accounts, the Fund reserves the
right, upon 60-days written notice, to redeem, at net asset value, the shares
of any shareholder (other than a retirement plan) whose account with the Fund
which is more than 12 months old has a value of less than $500, unless the
reduction in value to less than $500 was the result of market fluctuation.
Retirement plan accounts are not subject to this minimum account value
requirement. See "Shareholder Services-Retirement Plans."
Shareholders may redeem shares and later reinvest the proceeds into the Fund
at the then current net asset value (without payment of a new sales
commission) provided that the reinvestment is made within 6 months of the
redemption. This redemption-reinvestment privilege is limited to two
reinvestments per person per calendar year. This limit helps keep the Fund's
asset base stable and reduces administrative expenses. For purposes of the
two reinvestment limit, accounts under common ownership or control, including
accounts with the same taxpayer identification number, will be aggregated.
The Fund reserves the right to terminate or modify this reinvestment
privilege in the future. If you sell at a loss and reinvest within 91 days,
the loss attributable to any sales charge must be deferred for the
shareholder's tax purposes.
SHAREHOLDER SERVICES
Inquiries regarding the Fund should be addressed to Universal Capital Growth
Fund, P.O. Box 1591, Milwaukee, Wisconsin 53201-1591. Telephone inquiries may
be made at (800) 537-3446 or through your broker.
SHAREHOLDER ACCOUNTS
Each shareholder of the Fund receives quarterly account statements showing
transactions in shares of the Fund and the total account balance of Fund
shares. A confirmation will be sent to the shareholder upon purchase,
redemption, dividend reinvestment and change of shareholder address.
12
<PAGE>
RETIREMENT PLANS
Through its custodian, UMB Bank, n.a. (the "Custodian"), the Fund offers
qualified retirement plans for adoption by individuals and employers
(including, but not necessarily limited to IRAs and SEP IRAs). A master IRA
plan and information regarding plan administration, fees and other details
are available from Dreher and authorized broker/dealers. The Fund's minimum
investment and minimum account value requirements do not apply to retirement
plan accounts.
DIVIDENDS AND DISTRIBUTIONS
Shareholders may receive two kinds of distributions from the Fund: dividends
and capital gains. All dividends and capital gains distributions are paid in
the form of additional shares credited to the shareholder's account at the
net asset value per share next computed after the dividend or distribution is
payable to shareholders (without a sales charge) unless the shareholder
requested on the Purchase Application or in writing that distributions be
made in cash. All dividends from net investment income and net realized
short-term and long-term capital gains, if any, are paid to shareholders by
the Fund at least annually. The Fund will not change the way in which
shareholders may reinvest dividends and distributions without giving
shareholders at least 30-days written notice.
If two consecutive dividend checks from the Fund are returned as
undeliverable, the undelivered dividends will be invested in additional
shares of the Fund at the current net asset value and the account will be
designated as a dividend reinvestment account.
TAXES
The Fund intends to continue to qualify as a "regulated investment company"
under Subchapter M of the Internal Revenue Code, and thus not be subject to
federal income taxes on amounts which it distributes to shareholders.
You may realize a capital gain or capital loss when you redeem (sell) shares.
The federal tax treatment may depend on how long you owned the shares and on
your individual tax position. You may be subject to state and local taxes on
your investment in the Fund, depending on the laws of your home state and
locality.
Dividends and distributions paid by the Fund are subject to taxation as of
the date of payment, except that distributions declared in October, November
or December to shareholders of record in one of those months will be treated
as received by shareholders on December 31 of the year they are declared,
provided they are paid prior to February 1 of the next year.
You will be advised annually as to the source of your distributions for tax
purposes. If you are not subject to income taxation, you will not be required
to pay tax on amounts distributed to you.
The Fund is currently required by law to withhold 31% of reportable payments
(which may include redemptions, capital gains distributions and other taxable
distributions, if any) paid to any non-exempt shareholder who has failed to
certify to the Fund that the social security or taxpayer identification
number provided to the Fund is correct and that the shareholder is not
subject to backup withholding. Please refer to the Statement of Additional
Information for a more complete explanation.
13
<PAGE>
MANAGEMENT OF THE FUND
THE TRUSTEES
The board of trustees of Universal Capital Investment Trust has overall
responsibility for the conduct of the affairs of the Fund. The trustees serve
indefinite terms of unlimited duration. The trustees may appoint their own
successors, provided at least two-thirds of the trustees, after such
appointment, have been elected by the shareholders. A trustee may be removed
with or without cause upon the written declaration of a majority of the
trustees or by the declaration in writing or vote of two-thirds of the
Trust's outstanding shares.
THE ADVISER, ADMINISTRATOR AND DISTRIBUTOR
The Fund's investments are managed by the Adviser, Graver, Bokhof, Goodwin &
Sullivan, L.P. The Adviser is a registered investment adviser whose
predecessor firm was founded in 1981. The firm is owned by its principals,
who also have ownership interests in three other advisory firms. The combined
assets under management for the affiliated firms exceed $1 billion, with
investment management provided to both institutional and individual clients.
All investment decisions for the Fund are made by an investment committee,
and no person is primarily responsible for making recommendations to that
committee.
The Fund is the only mutual fund for which the Adviser acts as investment
adviser. The Adviser has no previous experience in managing a mutual fund.
Subject to the overall authority of the board of trustees, the Adviser
furnishes continuous investment supervision and management to the Fund under
a management agreement and also furnishes office space, equipment and
management personnel. For these services the Adviser receives from the Fund a
fee accrued daily and paid monthly at the annual rate of 1.0% of the first
$250 million of the Fund's average daily net assets and 0.75% of average
daily net assets in excess of $250 million. These rates are higher than those
paid by most other mutual funds.
The management agreement also provides that the total annual expenses of the
Fund, exclusive of taxes, interest, extraordinary litigation expenses and
brokers' commissions and other charges relating to the purchase and sale of
securities but including fees paid to the Adviser and fees paid pursuant to
the Distribution Plan, shall not exceed the limits, if any, prescribed by any
state regulatory authority, and the Adviser has agreed to reimburse the Fund
for any such expenses in excess of such limits. In addition, the Adviser has
voluntarily undertaken to limit the ordinary operating expenses of the Fund
to 2.0% of the Fund's average daily net assets through December 31, 1998.
Subject to those expense limitations, the Fund pays all of its operating
expenses not specifically assumed by the Adviser.
The Adviser has entered into an Administration Agreement with Sunstone
Financial Group, Inc. (the "Administrator"). The Administrator provides
administrative services which include clerical, compliance, regulatory and
other services. For these services, the Adviser, not the Fund, pays a fee to
the Administrator based upon the average daily net assets of the Fund. The
fee is computed daily and payable monthly at the annual rate beginning at
0.17% and decreasing as the assets of the Fund reach certain levels. The
minimum annual fee is $20,000 for fiscal 1998, $30,000 for fiscal 1999 and
$45,000 for fiscal 2000.
Dreher & Associates, Inc. ("Dreher"), serves as the Fund's Distributor. Dreher
was formed in 1980. Dreher receives compensation pursuant to the Fund's
Distribution Plan.
14
<PAGE>
DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the 1940 Act whereby the Fund pays to Dreher an annual service fee of
0.25% and an annual sales compensation fee of 0.25%, both accrued daily and paid
monthly and based on the Fund's daily net assets. In return, Dreher bears all
expenses incurred in the distribution and promotion of the Fund's shares,
including the printing of prospectuses and reports used for sales purposes,
advertisements, expenses of preparation and printing of sales literature, and
other distribution related expenses, including service fees, at an annual rate
of up to 0.25% and distribution fees for ongoing services by the broker to the
shareholder of up to an additional 0.25% of average net assets, paid to
broker/dealers who have executed selling group agreements with Dreher. The
expenses incurred by Dreher may be more or less than the distribution fees paid
to Dreher by the Fund. Expenses incurred by Dreher in excess of distribution
fees paid to Dreher by the Fund are not carried forward to future fiscal years.
YEAR 2000
An issue has emerged in the investment company industry and for the economy
overall regarding how existing application software programs and operating
systems can accommodate the date value for the year 2000. Many existing
application software products in the marketplace were designed only to
accommodate a two digit date position which represents the year (E.G., '95 is
stored on the system and represents the year 1995). As a result, the year 1999
(I.E., '99) could be the maximum date value these systems will be able to
accurately process. The Fund is in the process of working with the Adviser and
other service providers to assure that the Fund is prepared for the year 2000.
The Fund has been notified by the Adviser and other service providers that they
believe that the Fund will be year 2000 compliant. Nevertheless, the inability
of the Adviser and other service providers to successfully address year 2000
issues could result in interruptions in the Fund's business and have a material
adverse effect on the Fund's operations.
PERFORMANCE INFORMATION
The Fund may from time to time include figures indicating the Fund's total
return or average annual total return in advertisements or reports to
stockholders or prospective investors. Average annual total return and total
return figures represent the increase (or decrease) in the value of an
investment in the Fund over a specified period. Both calculations assume that
all income dividends and capital gain distributions during the period are
reinvested at net asset value in additional Fund shares. Quotations of the
average annual total return may reflect the deduction of the maximum sales
charge and a proportional share of Fund expenses on an annual basis. The
results, which are annualized, represent an average annual compounded rate of
return on a hypothetical investment in the Fund over a period of 1, 5 and 10
years ending on the most recent calendar quarter (but not for a period greater
than the life of the Fund). Quotations of total return, which are not
annualized, represent historical earnings and asset value fluctuations. Total
return figures used in advertisements or sales literature will not usually
reflect the deduction of the maximum sales charges which, if deducted, would
reduce the Fund's total return. Total return is based on past performance and is
not a guarantee of future results.
Performance information for the Fund may be compared in reports and promotional
literature to: (a) the S&P 500, the Russell 2000, the Value Line Index, the Dow
Jones Industrial Average, New York Stock Exchange Composite Index, the Nasdaq
15
<PAGE>
Composite Index or other appropriate unmanaged indices of performance of various
types of investments, so that investors may compare the Fund's results with
those of indices widely regarded by investors as representative of the
securities markets in general; (b) other groups of mutual funds tracked by
Lipper Analytical Services, Inc., Morningstar, Inc., Value Line Publishing,
Inc., Micropal Data, Inc. or CDA Investment Technologies, Inc.; and (c) the
Consumer Price Index (measure of inflation) to assess the real rate of return
from an investment in the Fund. Unmanaged indices may assume the reinvestment of
dividends but generally do not reflect deductions for administrative and
management costs and expenses. Performance information for the Fund reflects
only the performance of a hypothetical investment in the Fund during the
particular time period on which the calculations are based.
Performance information should be considered in light of the Fund's investment
objective and policies, the types and quality of the Fund's portfolio
investments, market conditions during the particular time period and operating
expenses. Such information should not be considered as a representation of the
Fund's future performance. For a description of the methods used to determine
the Fund's average annual total return and total return, see "Performance
Information" in the Statement of Additional Information.
The following line graph indicates the growth of a $10,000 investment made in
the Fund on January 22, 1991 (commencement of operations). The accompanying
table details the total return of the Fund over certain periods.
[GRAPH]
Universal Capital Growth Fund
Graph Plot Points
<TABLE>
<CAPTION>
Date Universal Capital Growth Fund S&P 500 Stock Index
<S> <C> <C>
1/22/91 9,451.80 10,000.00
9/30/91 10,548.21 11,983.75
9/30/92 11,000.61 13,307.97
9/30/93 12,337.45 15,038.25
9/30/94 13,257.32 15,592.47
9/30/95 18,277.96 20,230.40
9/30/96 19,630.60 24,343.67
9/30/97 26,745.47 34,190.28
3/31/98 90,836.37 40,077.89
</TABLE>
This chart assumes an initial gross investment of $10,000 made on 1/22/91
(commencement). Returns shown include the reinvestment of all dividends. Past
performance is not predictive of future performance. Investment return and
principal value will fluctuate, so that your shares, when redeemed, may be worth
more or less than original cost. The Fund's performance graph includes deduction
of the 5.5% front-end load. The S&P 500 Stock Index is an unmanaged, but
commonly used, measure of common stock total return performance.
16
<PAGE>
TOTAL RETURN
September 30, 1997
<TABLE>
<CAPTION>
PAST PAST PAST SINCE INCEPTION
QUARTER 9 MONTHS 1 YEAR 3 YEARS 5 YEARS 1/22/91
------- -------- ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Universal Capital Growth Fund (1) . . . 9.4% 29.6% 36.2% 26.4% 19.4% 16.9%
Universal Capital Growth Fund (2) . . . 3.4% 22.5% 28.8% 24.0% 18.1% 15.8%
S&P 500 Stock Index . . . . . . . . . . 7.5% 29.7% 40.5% 29.9% 20.8% 20.3%
</TABLE>
(1) Without the effect of the 5.5% sales load.
(2) With the effect of the 5.5% sales load.
Returns, except for the quarter and 9 months, represent average annual returns.
All returns include the reinvestment of dividends. Investment performance
reflects fee waivers in effect; in the absence of fee waivers, total return
would be reduced. Graver, Bokhof, Goodwin & Sullivan, L.P. assumed management of
the Fund on August 15, 1997.
PORTFOLIO TRANSACTIONS
Consistent with the Fund's policy of obtaining the best combination of net price
and execution on portfolio transactions, the trustees have determined that
portfolio transactions for the Fund may be executed through Dreher if, in the
judgment of the Adviser, the use of Dreher is likely to result in a combination
of net price and execution at least as favorable to the Fund as that available
from other qualified brokers and if, in such transactions, Dreher charges the
Fund commission rates consistent with those charged by Dreher to comparable
unaffiliated customers in similar transactions.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. and subject to seeking the most favorable combination
of net price and execution available and such other policies as the trustees may
determine, the Adviser may consider sales of shares of the Fund as a factor
in the selection of broker/dealers to execute portfolio transactions for the
Fund.
THE TRUST AND ITS SHARES
The Fund is a series of Universal Capital Investment Trust, a Massachusetts
business trust organized on October 18, 1990, and is an open-end, diversified
management investment company.
SHARES
Under the terms of the Declaration of Trust, the Trust may issue an unlimited
number of shares of beneficial interest without par value in one or more series
(funds). While only shares of a single series (the Fund) are presently being
offered, the Trustees may authorize the issuance of additional funds if deemed
desirable, each with its own investment objective, policies and restrictions.
All shares issued will be fully paid and non-assessable.
The Fund's shares are entitled to participate pro rata in any dividends and
other distributions declared by the Trust's board of trustees with respect to
shares of the Fund. All shares of the Fund have equal rights in the event of
liquidation of the Fund.
17
<PAGE>
Under Massachusetts law, the shareholders of the Trust may, under certain
circumstances, be held personally liable for the Trust's obligations. However,
the Trust's Declaration of Trust disclaims liability of the shareholders,
trustees, and officers of the Trust for acts or obligations of a fund, which are
binding only on the assets and property of the fund. The Declaration of Trust
requires that notice of such disclaimer be given in each agreement, obligation,
or contract entered into or executed by the Trust or the board of trustees. The
Declaration of Trust provides for indemnification out of the Fund's assets of
all losses and expenses of any Fund shareholder held personally liable for the
Fund's obligations. Thus, the risk of a shareholder incurring financial loss on
account of shareholder liability is remote, since it is limited to circumstances
in which the disclaimer is inoperative and the Fund itself is unable to meet its
obligations.
VOTING RIGHTS
Each share has one vote and fractional shares have fractional votes. As a
business trust, the Trust is not required to hold annual shareholder meetings.
However, special meetings may be called (including by the holders of at least
10% of the Fund's outstanding shares) for purposes such as electing or removing
trustees, changing fundamental policies or approving an investment advisory
agreement. On any matters submitted to a vote of shareholders, shares are voted
by individual series and not in the aggregate, except when voting in the
aggregate is required by the 1940 Act or other applicable law. Shares of the
Fund are not entitled to vote on any matter not affecting the Fund. All shares
of the Trust vote together in the election of trustees.
18
<PAGE>
APPENDIX - LETTER OF INTENT
By checking "Letter of Intent" on the Purchase Application and signing the
Purchase Application, a shareholder agrees to the following:
1. ESCROW PROVISIONS. Out of the shareholder's initial purchase (or subsequent
purchases if necessary) 5% of the specified dollar amount of the Letter will be
held in escrow in the shareholder's account. All dividends and capital gains
distributions on the escrowed shares will be paid directly to the shareholder or
credited to his account.
2. COMPLETION. When the shareholder's total purchases made at offering prices
pursuant to this Letter plus his Accumulation Credit equal the amount specified
on the face of this Letter, the escrowed shares will be released.
3. RETROACTIVE PRICE ADJUSTMENT. If the shareholder's total purchases through
the dealer pursuant to this Letter plus the shareholder's Accumulation Credit
exceed the specified amount of this Letter and an equal amount which would
qualify for a further quantity discount, a retroactive price adjustment will be
made as of the expiration date of this Letter by the Distributor and the dealer
for all purchases made pursuant to this Letter to reflect such further quantity
discount. The resulting difference in offering price will be applied to the
purchase of additional shares for the shareholder's account at the offering
price then applicable to a single purchase of the dollar amount of his total
purchases hereunder. As part of such adjustment, dealer shall return to the
Distributor the excess of commission previously allowed or paid to the dealer
over that which would be applicable to the actual amount of the shareholder's
aggregate purchases. Such adjustment does not apply to the sales charge
applicable to the shares valued in the shareholder's Accumulation Credit. If at
the time of such adjustment a broker/dealer other than the dealer is purchasing
shares for the shareholder's account, the adjustment will be made only with
respect to those shares purchased through such broker/dealer.
4. NON-COMPLETION. The shareholder makes no commitment to purchase additional
shares. However, if total purchases pursuant to this Letter plus the
Accumulation Credit are less than the specified amount of this Letter, an
appropriate number of the escrowed shares will be redeemed in order to realize
an amount equal to the difference in the dollar amount of sales charges actually
paid and the amount of sales charges that the shareholder would have paid on
those aggregate purchases if the total of such purchases had been made at a
single time. Any escrowed shares remaining after redemption as provided in this
paragraph, together with any excess cash proceeds of the redeemed shares, will
be credited to the shareholder's account. The shareholder hereby consents to the
redemption of any or all escrowed shares as described in this paragraph.
19
<PAGE>
Statement of Additional Information
UNIVERSAL CAPITAL GROWTH FUND
April 27, 1998
A series of Universal Capital Investment Trust
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100 South Wacker Drive, Suite 2100
Chicago, Illinois 60606
(800) 969-9676
This Statement of Additional Information relates to Universal Capital Growth
Fund (the "Fund"), a series of Universal Capital Investment Trust (the "Trust").
It is not a prospectus, but provides information that should be read in
conjunction with the Fund's Prospectus dated April 28, 1998 and any supplements
to the Prospectus, and the Fund's Annual Report for the year ended September 30,
1997, a copy of which accompanies this Statement of Additional Information.
The Prospectus and additional copies of the Annual Report may be obtained
without charge by writing or telephoning the Fund at the address or telephone
number set forth above.
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Investment Objective . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Investment Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Investment Restrictions. . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Investment Advisory Services . . . . . . . . . . . . . . . . . . . . . . . . 12
Distributor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Distribution Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Purchasing and Redeeming Shares. . . . . . . . . . . . . . . . . . . . . . . 15
Performance Information. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Custodian. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Transfer Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Fund Accounting Services . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Legal Counsel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Appendix A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-1
</TABLE>
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B-1
<PAGE>
GENERAL INFORMATION
Universal Capital Growth Fund began operations on January 22, 1991. The Fund is
a series of Universal Capital Investment Trust.
INVESTMENT OBJECTIVE
The Fund's investment objective is to maximize capital appreciation. The
realization of current income is not normally a consideration in the selection
of securities for investment and the Fund is not designed for investors seeking
income rather than capital appreciation. There can be no assurance that the
Fund will achieve its objective. The Fund's objective may not be changed
without shareholder approval.
INVESTMENT PRACTICES
The following policies and limitations supplement those set forth in the
Prospectus. Whenever an investment policy or limitation states a maximum
percentage of the Fund's assets that may be invested in any security or other
asset or sets forth a policy regarding quality standards, such standard or
percentage limitation shall be determined immediately after and as a result of
the Fund's acquisition of such security or other asset. Accordingly, any later
increase or decrease resulting from a change in values, net assets or other
circumstances will not be considered when determining whether the investment
complies with the Fund's investment policies and limitations.
DEBT SECURITIES
As described in the Prospectus, the Fund may make substantial temporary
investments in fixed-income obligations provided they are of investment-grade
quality. For this purpose investment-grade obligations are considered to be
those which are rated Baa or higher by Moody's Investors Service, Inc. or BBB or
higher by Standard & Poor's Corporation. Securities rated in the lowest of the
investment grade categories are considered to have speculative characteristics.
It is currently anticipated that investments in debt securities will not exceed
5% of the Fund's total assets.
WARRANTS
The Fund may invest up to 5% of the value of its net assets at the time of
purchase in warrants (not including those acquired in units or attached to other
securities), including up to 2% of the value of its net assets in warrants not
listed on the New York or American stock exchanges. A warrant is a right to
purchase common stock at a specific price (usually at a premium above the market
value of the underlying common stock at time of issuance) during a specified
period of time. A warrant may have a life ranging from less than a year to
twenty years or longer, but a warrant becomes worthless unless it is exercised
or sold before expiration. In addition, if the market price of the common stock
does not exceed the warrant's exercise price during the life of the warrant, the
warrant will expire worthless. Warrants have no voting rights, pay no dividends
and have no rights with respect to the assets of the corporation issuing them.
The percentage increase or decrease in the value of a warrant may tend to be
greater than the percentage increase or decrease in the value of the underlying
common stock.
FOREIGN SECURITIES
The Fund may invest up to 5% of its net assets in foreign securities. For the
purpose of calculating the 5% limitation, foreign securities do not include
American Depository Receipts (ADRs) or securities guaranteed by a United States
person. ADRs are receipts typically issued by an American bank or trust company
evidencing ownership of the underlying securities. All foreign securities
acquired by the Fund will be listed on a stock exchange. It is currently
anticipated that investments in foreign securities will not exceed 5% of the
Fund's total assets.
B-2
<PAGE>
Investment in foreign securities may entail a greater degree of risk (including
risks relating to exchange rate fluctuations, tax provisions, or expropriation
of assets) than does investment in securities of domestic issuers. Investors
should understand and consider carefully the risks involved in foreign
investing. Investing in foreign securities, which are generally denominated in
foreign currencies, and utilization of forward foreign currency exchange
contracts involve certain considerations comprising both risks and opportunities
not typically associated with investing in U.S. securities. These
considerations include: fluctuations in exchange rates of foreign currencies;
possible imposition of exchange control regulation or currency restrictions that
would prevent cash from being brought back to the United States; less public
information with respect to issuers of securities; less governmental supervision
of stock exchanges, securities brokers, and issuers of securities; lack of
uniform accounting, auditing, and financial reporting standards; lack of uniform
settlement periods and trading practices; less liquidity and frequently greater
price volatility in foreign markets than in the United States; possible
imposition of foreign taxes; possible investment in securities of companies in
developing as well as developed countries; and sometimes less advantageous
legal, operational, and financial protections applicable to foreign
sub-custodial arrangements.
Although the Fund intends to invest in companies and governments of countries
having stable political environments, there is the possibility of expropriation
or confiscatory taxation, seizure or nationalization of foreign bank deposits or
other assets, establishment of exchange controls, the adoption of foreign
government restrictions, or other adverse political, social or diplomatic
developments that could affect investment in these nations.
To the extent positions in portfolio securities are denominated in foreign
currencies, the Fund's investment performance is affected by the strength or
weakness of the U.S. dollar against these currencies. For example, if the
dollar falls in value relative to the Japanese yen, the dollar value of a
Japanese stock held in the portfolio will rise even though the price of the
stock remains unchanged. Conversely, if the dollar rises in value relative to
the yen, the dollar value of the Japanese stock will fall.
OPTIONS AND FUTURES
In order to provide additional revenue, or to hedge against changes in security
prices or interest rates, the Fund may purchase and write (sell) both call
options and put options on securities and on indexes and may enter into interest
rate and index futures contracts and options on such futures contracts. It is
currently anticipated that investments in options and futures will not exceed 5%
of the Fund's total assets.
OPTIONS. An option on a security (or index) is a contract that gives the
holder, in return for a premium, the right to buy (call) from or sell (put) to
the option seller (writer) the security (or the cash value of the index)
underlying the option at a designated price during the term of the option
(normally not exceeding nine months). The Fund may write a call option only if
the option is "covered" by the Fund's holding a position, in the underlying
security or otherwise, which would allow immediate satisfaction of its
obligation. Prior to exercise or expiration, an option may be closed out by an
offsetting purchase or sale of an option of the same series.
The Fund may write puts only if they are "secured." A put is "secured" if the
Fund (i) maintains in a segregated account with the custodian cash or U.S.
Government securities or other appropriate high-grade debt obligations with a
value equal to the exercise price or (ii) holds a put on the same underlying
security at an equal or greater exercise price. When the Fund writes a put, it
receives a premium and gives the purchaser of the put the right to sell the
underlying security to the Fund at the exercise price at any time during the
option period. The Fund may purchase a put on the underlying security to effect
a "closing purchase transaction," except in those circumstances, which are
believed by the Adviser to be rare, when it is unable to do so.
B-3
<PAGE>
There are several risks associated with transactions in options on securities
and on indexes. For example, there are significant differences between the
securities and options markets that could result in an imperfect correlation
between these markets, causing a given transaction not to achieve its
objectives. A decision as to whether, when, and how to use options involves the
exercise of skill and judgment, and even a well-conceived transaction may be
unsuccessful to some degree because of market behavior or unexpected events.
There can be no assurance that a liquid market will exist when the Fund seeks to
close out an option position. If the Fund were unable to close out an option
that it had purchased on a security, it would have to exercise the option in
order to realize any profit or the option would expire and become worthless. If
the Fund were unable to close out a covered call option that it had written on a
security, it would not be able to sell the underlying security unless the option
expired without exercise. As the writer of a covered call option, the Fund
foregoes, during the option's life, the opportunity to profit from increases in
the market value of the security covering the call option above the sum of the
premium and the exercise price of the call.
If trading were suspended in an option purchased or written by the Fund, the
Fund would not be able to close out the option. If restrictions on exercise
were imposed, the Fund might be unable to exercise an option it had purchased.
Except to the extent that a call option on an index written by the Fund is
covered by an option on the same index purchased by the Fund, movements in the
index may result in a loss to the Fund; however, such losses may be mitigated by
changes in the value of the Fund's securities during the period the option was
outstanding.
The Fund will only enter into options that are standardized and traded on a U.S.
exchange or board of trade, or similar entity, or quoted on NASDAQ. When the
Fund writes an over-the-counter option, there is no assurance that the Fund will
be able to enter into a closing purchase transaction. It may not always be
possible for the Fund to negotiate a closing purchase transaction with the same
dealer for the same exercise price and expiration date as the option which the
Fund previously had written. Although the Fund may choose to purchase an option
from a different dealer, the Fund would also be subject to the additional credit
risk of such dealer. If the Fund as a writer of a covered call option is unable
to effect a closing purchase transaction, it will not be able to sell the
underlying security until the option expires or until it delivers the underlying
security upon exercise. It is the position of the staff of the Securities and
Exchange Commission that over-the-counter options are illiquid securities.
FUTURES. The Fund may also engage in futures transactions. An interest rate
futures contract provides for the future sale by one party and purchase by
another party of a specified quantity of a financial instrument (such as U.S.
Treasury bonds) at a specified price and time. A futures contract on a index is
an agreement pursuant to which the parties agree to take or make delivery of an
amount of cash equal to the difference between the value of the index at the
close of the last trading day of the contract and the price at which the futures
contract was originally written. A futures contract may be satisfied by
delivery or purchase, as the case may be, of the instrument or by payment of the
change in the cash value of the index. More commonly, a futures contract is
closed out prior to delivery by entering into an offsetting transaction in a
matching futures contract.
The Fund may also purchase and write call and put options on futures contracts
("futures options"). A futures option gives the holder the right, in return for
the premium paid, to assume a long position (call) or short position (put) in a
futures contract at a specified exercise price prior to the expiration of the
option. Upon exercise of a call option, the holder acquires a long position in
the futures contract and the writer is assigned the opposite short position. In
the case of a put option, the opposite is true. Prior to exercise or
expiration, a futures option may be closed out by an offsetting purchase or sale
of a futures option of the same series.
The Fund will limit its use of futures contracts and futures options to hedging
transactions to the extent required to do so by regulatory authorities. For
example, the Fund might use futures contracts to hedge
B-4
<PAGE>
against fluctuations in the general level of stock prices or anticipated changes
in interest rates that might adversely affect either the value of the Fund's
securities or the price of the securities that the Fund intends to purchase.
The Fund's hedging may include sales of futures contracts as an offset against
the effect of expected declines in stock prices or increases in interest rates
and purchases of futures contracts as an offset against the effect of expected
increases in stock prices or declines in interest rates.
There are several risks associated with the use of futures contracts and futures
options for hedging purposes. There can be no guarantee that there will be a
correlation between price movements in the hedging vehicle and the portfolio
securities being hedged. Successful hedging depends on the Adviser's ability to
predict correctly changes in the level and the direction of stock prices,
interest rates, and other market factors. An incorrect prediction could result
in a loss on both the hedged securities in the Fund's portfolio and the hedging
vehicle so that the Fund's return might have been better had hedging not been
attempted. In addition, because of the low margin deposits required, futures
trading involves a high degree of leverage.(1) As a result, a relatively small
price movement in a futures contract may result in immediate and substantial
loss, or gain, to the investor. A purchase or sale of a futures contract may
result in losses in excess of the amount of the margin deposit. However, in the
absence of the ability to hedge, the Fund might have taken portfolio actions in
anticipation of the same events with similar investment results but, presumably,
at greater transaction costs.
There can be no assurance that a liquid market will exist at a time when the
Fund seeks to close out a futures contract or a futures option position. This
may prevent the Fund from liquidating an unfavorable position and the Fund would
be exposed to possible loss on the position during the interval of inability to
close and would continue to be required to meet margin requirements until the
position is closed. In addition, certain of these instruments are relatively
new and without a significant trading history. As a result, there is no
assurance that an active secondary market will develop or continue to exist.
The Fund will only enter into futures contracts or futures options that are
standardized and traded on a U.S. exchange or board of trade, or similar entity,
or quoted on an automated quotation system. The Fund will not enter into a
futures contract or purchase a futures option if immediately thereafter the
initial margin deposits for futures contracts held by the Fund plus premiums
paid by it for open futures option positions, less the amount by which any such
positions are "in-the-money,"(2) would exceed 5% of the Fund's net assets.
PORTFOLIO TURNOVER
Although the Fund does not purchase securities with a view to rapid turnover,
there are no limitations on the length of time that portfolio securities must be
held. Portfolio turnover can occur for a number of reasons, including general
conditions in the securities markets, more favorable investment opportunities in
other securities, or other factors relating to the desirability of holding or
changing a portfolio investment. The Fund's portfolio turnover rate for the
fiscal year ended September 30, 1997 was 49.2%. This is significantly less than
the portfolio turnover rate of 262.1% incurred in the fiscal year ended
- ----------------------------
(1) "Margin" is the fraction of the value of the contract that the Fund
must actually deposit in order to invest in a futures contract. The
use of margin creates "leverage," which provides an opportunity for
greater total return but correspondingly increases the risk of loss.
The margin deposit requirement applicable to futures contracts is
generally only 10% or less of the value of the contract. For
comparison, the margin deposit requirement applicable to securities is
generally 50%. The Fund does not purchase securities on margin.
(2) A call option is "in-the-money" if it can be exercised at a price less
than the current trading price of the underlying security. A put
option is "in-the-money" if it can be exercised at a price greater
than the current trading price of the underlying security.
B-5
<PAGE>
September 30, 1996. During fiscal 1996, James A. Dreher, who was co-manager of
the Fund's portfolio, became the Fund's sole portfolio manager. Also during
fiscal 1996, net assets increased 43% due to net new shareholder investments
into the Fund. Finally, during fiscal 1996, the Adviser was responding to
market changes and anticipated market changes and was structuring the Fund's
portfolio accordingly. The Fund's annual portfolio turnover rate will vary from
year to year; a high rate of portfolio turnover (i.e. over 100%) results in
increased transaction expense, which must be borne by the Fund. High portfolio
turnover may also result in the realization of capital gains or losses and, to
the extent net short-term capital gains are realized, any distributions
resulting from such gains will be considered ordinary income for Federal income
tax purposes. See "Investment Risks" and "Dividends and Distributions" in the
Prospectus.
SHORT SALES
The Fund may sell securities short "against the box," that is: (1) enter into
short sales of securities that it currently owns or has the right to acquire
through the conversion or exchange of other securities that it owns; and (2)
enter into arrangements with the broker-dealers through which such securities
are sold short to receive income with respect to the proceeds of short sales
during the period the Fund's short positions remain open. The Fund may make
short sales of securities only if at all times when a short position is open the
Fund owns an equal amount of such securities or securities convertible into or
exchangeable for, without payment of any further consideration, securities of
the same issue as, and equal in amount to, the securities sold short.
In a short sale against the box, the Fund does not deliver from its portfolio
the securities sold and does not receive immediately the proceeds from the short
sale. Instead, the Fund borrows the securities sold short from a broker-dealer
through which the short sale is executed, and the broker-dealer delivers such
securities, on behalf of the Fund, to the purchaser of such securities. Such
broker-dealer is entitled to retain the proceeds from the short sale until the
Fund delivers to such broker-dealer the securities sold short. In addition, the
Fund is required to pay to the broker-dealer the amount of any dividends paid on
shares sold short. Finally, to secure its obligation to deliver to such
broker-dealer the securities sold short, the Fund must deposit and continuously
maintain in a separate account with the Fund's custodian an equivalent amount of
the securities sold short or securities convertible into or exchangeable for
such securities without the payment of additional consideration. The Fund is
said to have a short position in the securities sold until it delivers to the
broker-dealer the securities sold, at which time the Fund receives the proceeds
of the sale. The Fund may close out a short position by purchasing on the open
market and delivering to the broker-dealer an equal amount of the securities
sold short, rather than by delivering portfolio securities.
Short sales may protect the Fund against the risk of losses in the value of its
portfolio securities because any unrealized losses with respect to such
portfolio securities should be wholly or partially offset by a corresponding
gain in the short position. However, any potential gains in such portfolio
securities should be wholly or partially offset by a corresponding loss in the
short position. The extent to which such gains or losses are offset will depend
upon the amount of securities sold short relative to the amount the Fund owns,
either directly or indirectly, and, in the case where the Fund owns convertible
securities, changes in the conversion premium.
Short sale transactions of the Fund involve certain risks. If the price of the
security sold short increases between the time of the short sale and the time
the Fund replaces the borrowed security, the Fund will incur a loss and if the
price declines during this period, the Fund will realize a short-term capital
gain. Any realized short-term capital gain will be decreased, and any incurred
loss increased, by the amount of transaction costs and any premium, dividend or
interest which the Fund may have to pay in connection with such short sale. In
determining the number of shares to be sold short against the Fund's position in
the convertible securities, the anticipated fluctuation in the conversion
premiums is considered. The Fund will also incur transaction costs in
connection with short sales. Certain provisions of the Internal Revenue Code
may limit the degree to which the Fund is able to enter into short sales. See
"Taxation."
B-6
<PAGE>
The Fund does not currently expect that more than 40% of the Fund's total assets
would be involved in short sales against the box.
REPURCHASE AGREEMENTS
As part of its strategy for the temporary investment of cash, the Fund may enter
into "repurchase agreements" or "reverse repurchase agreements" pertaining to
U.S. Government securities with member banks of the Federal Reserve System or
primary dealers (as designated by the Federal Reserve Bank of New York) in such
securities. A repurchase agreement arises when the Fund purchases a security
and simultaneously agrees to resell it to the vendor at an agreed upon future
date. The resale price is greater than the purchase price, reflecting an agreed
upon market rate of return that is effective for the period of time the Fund
holds the security and that is not related to the coupon rate on the purchased
security. Such agreements generally have maturities of no more than seven days
and could be used to permit the Fund to earn interest on assets awaiting
long-term investment. The Fund requires continuous maintenance by the custodian
for the Fund's account in the Federal Reserve/Treasury Book Entry System of
collateral in an amount equal to, or in excess of, the market value of the
securities that are the subject of a repurchase agreement. The Fund does not
intend to invest in repurchase agreements maturing in more than seven days,
which are considered illiquid securities.
REVERSE REPURCHASE AGREEMENTS
In a reverse repurchase agreement, the Fund temporarily transfers possession of
an instrument to another party, such as a bank or broker-dealer, in return for
cash. At the same time, the Fund agrees to repurchase the instrument at an
agreed upon time (normally within seven days) and price, including interest
payment. At all times that a reverse repurchase agreement is outstanding, the
Fund will maintain cash and liquid securities in a segregated account at its
custodian bank with a value at least equal to its obligation under the
agreement. Securities and other assets held in the segregated account may not
be sold while the reverse repurchase agreement is outstanding, unless other
suitable assets are substituted. Reverse repurchase agreements are included in
the Fund's fundamental limitations regarding borrowings, and may only be entered
into for temporary or emergency purposes.
LENDING PORTFOLIO SECURITIES
In order to generate additional income, the Fund may from time to time lend
securities from its portfolio with a value not exceeding 5% of its net assets,
to brokers, dealers and financial institutions such as banks and trust companies
for which it will receive collateral in cash, U.S. Government securities or
irrevocable letters of credit that will be maintained in an amount equal to at
least 100% of the current market value of the loaned securities. Cash
collateral will be invested in short term securities, which will increase the
current income of the Fund. Such loans will be terminable at any time. The
Fund will have the right to regain record ownership of loaned securities to
exercise beneficial rights such as voting rights and rights to interest or other
distributions. The Fund may pay reasonable fees to persons unaffiliated with
the Fund for services in arranging such loans. The lending of portfolio
securities exposes the Fund to the risk of failure by the borrower to return the
securities involved in such transactions, in which event the Fund may incur a
loss. In an effort to reduce that risk, the Adviser will monitor the
creditworthiness of the firms to which the Fund lends portfolio securities.
INVESTMENT RESTRICTIONS
The Fund operates under the following investment restrictions. The Fund may not
(except as indicated):
(i) as to 75% of its assets, invest more than 5% of its total assets, taken at
market value at the time of a particular purchase, in the securities of any one
issuer, except that this restriction does not apply to securities issued or
guaranteed by the U. S. Government or its agencies or instrumentalities;
B-7
<PAGE>
(ii) acquire more than 10%, taken at the time of a particular purchase, of the
outstanding voting securities of any one issuer;
(iii) act as an underwriter of securities, except insofar as it may be deemed
an underwriter for purposes of the Securities Act of 1933 on disposition of
securities acquired subject to legal or contractual restrictions on resale;
(iv) purchase or sell real estate (although it may purchase securities secured
by real estate or interests therein, or securities issued by companies which
invest in real estate or interests therein), commodities or commodity contracts
(except that it may enter into futures and options on futures);(3)
(v) make loans, but this restriction shall not prevent the Fund from (a)
investing in debt obligations, (b) investing in repurchase agreements or (c)
lending portfolio securities;
(vi) borrow, except that the Fund may (a) borrow up to 5% of its total assets,
taken at market value at the time of such borrowing, as a temporary measure for
extraordinary purposes, but not to increase portfolio income (reverse repurchase
agreements shall be considered borrowings for purposes of this restriction) and
(b) enter into transactions in options;
(vii) invest in a security if more than 25% of its total assets (taken at
market value at the time of a particular purchase) would be invested in the
securities of issuers in any particular industry, except that this restriction
does not apply to securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities;
(viii) issue any senior security; or
(ix) purchase illiquid securities or securities of issuers (other than issuers
of Federal agency obligations) which, including their predecessors, have been in
operation for less than three years, if by reason of such purchase the value of
the Fund's aggregate investment in such securities would exceed 5% of its total
assets.
Restrictions (i) through (ix) are fundamental policies and may not be changed
without the approval of a "majority" of the outstanding shares of the Fund,
which for this purpose means the approval of the lesser of (a) more than 50% of
the outstanding voting securities of the Fund or (b) 67% or more of the
outstanding shares if the holders of more than 50% of the outstanding shares of
the Fund are present or represented at the meeting by proxy.
In addition to the fundamental restrictions listed above, the Fund may not:
(a) invest in interests in oil, gas, or other mineral exploration or
development programs or puts, calls, straddles, spreads, or any combination
thereof (except that the Fund may enter into transactions in options, futures
and options on futures);
(b) invest in shares of other investment companies except in connection with a
merger, consolidation or acquisition of assets, or in the open market involving
no commission or profit to a sponsor or dealer (other than the usual and
customary broker's commission);(4)
- -------------------------------
(3) In addition, as long as Fund shares are qualified for sale in Texas,
the Fund will not invest in interests in real estate limited
partnerships.
(4) The Fund does not currently intend to invest in the shares of other
investment companies.
B-8
<PAGE>
(c) invest in companies for the purpose of exercising control or management;
(d) purchase securities on margin (except for use of such short-term credits as
are necessary for the clearance of transactions, including transactions in
options, futures and options on futures), or participate on a joint or a joint
and several basis in any trading account in securities, except in connection
with transactions in options, futures and options on futures;
(e) make short sales of securities unless the Fund owns an equal amount of such
securities, or owns securities that are convertible or exchangeable, without
payment of further consideration, into an equal amount of such securities;
(f) purchase or hold securities of an issuer if 5% of the securities of such
issuer are owned by those officers, directors, or trustees of the Trust or of
its investment adviser who each own beneficially more than 1/2 of 1% of the
securities of that issuer;
(g) mortgage, pledge, or hypothecate in excess of 5% of the Fund's total assets
(taken at cost), except as may be necessary in connection with options, futures,
and options on futures;
(h) invest more than 5% of the Fund's net assets (valued at time of purchase)
in warrants, other than those acquired in units or attached to other
securities;(5)
(i) write an option on a security unless the option is issued by the Options
Clearing Corporation, an exchange or similar entity; or buy or sell an option on
a security unless the option is offered through the facilities of a recognized
securities association or listed on a recognized exchange or similar entity;
(j) buy or sell a futures contract, or an option on a futures contract, unless
the futures contract or the option on the futures contract is offered through
the facilities of a recognized securities association or listed on a recognized
exchange or similar entity;
(k) invest more than 5% of its total assets in securities of issuers which the
Fund is restricted from selling to the public without registration under the
Securities Act of 1933 (6); or
(l) invest more than 5% of its net assets (valued at time of purchase) in
securities of foreign issuers (other than securities represented by American
Depository Receipts (ADRs) and securities guaranteed by a U.S. person).
Restrictions (a) through (l) may be changed by the board of trustees without
shareholder approval.
- -----------------------------
(5) In addition, as long as Fund shares are qualified for sale in Texas,
the Fund will not invest more than 2% of its net assets in warrants
not listed on the New York or American stock exchanges.
(6) The Fund does not currently intend to invest in restricted securities.
B-9
<PAGE>
MANAGEMENT
TRUSTEES AND OFFICERS
Set forth below is information about the trustees and officers of the Trust.
<TABLE>
<CAPTION>
Name, Date of Birth Position(s) Principal Occupation(s)
and Business Address with Trust During Past Five Years
- -------------------- ----------- -----------------------
<S> <C> <C>
Andrew J. Goodwin, III (1), DOB 10/22/43 Trustee and President General Partner of GBGS since 1991;
100 South Wacker Drive, Suite 2100 Managing Director of Garzarelli
Chicago, IL 60606 Investment Management, LLC since
1995; Treasurer and Secretary of The
Garzarelli Funds since 1997.
Keith Pinsoneault, DOB 10/25/47 Vice President, Secretary and Treasurer Managing Director of the Adviser since
100 South Wacker Drive, Suite 2100 1997; Chief Operating Officer and
Chicago, IL 60606 Director of Capital Markets for Rodman
& Renshaw from 1994 through 1996;
Senior Portfolio Manager for Harris,
Bretall, Sullivan & Smith from 1992
through 1994.
William J. Breen (2), DOB 11/18/37 Trustee Principal, Financial Computer Services
Disciplined Investment Advisers and Disciplined Investment Advisors,
1800 Sherman Avenue, Suite 209 Inc. since 1972; Professor of Finance,
Evanston, IL 60201 Northwestern University since 1974.
Robert F. Seebeck (2), DOB 5/19/26 Trustee Retired; formerly, Managing Director of
523 Sherdian Road Russell Reynolds Associates, Inc.,
Kenilworth, IL 60043 August, 1974 through December, 1996.
Alan L. Zable (2), DOB 10/28/36 Trustee Consultant since January 1, 1995;
270 Indiana Street president and sole shareholder of
Elmhurst, Illinois 60126 CAZCO, Inc. (hair salon business);
prior thereto, Senior Vice President
and Treasurer, Midwest Stock Exchange,
Incorporated.
</TABLE>
(1) Mr. Goodwin is an "interested person" of the Trust as defined in the
Investment Company Act of 1940 (the "1940 Act") and is member of the
executive committee of the board of trustees which has
B-10
<PAGE>
authority during intervals between meetings of the board of trustees to
exercise the powers of the board.
(2) Messrs. Breen, Seebeck and Zable are members of the audit and nominating
committee of the board of trustees, which makes recommendations regarding
the selection of the Trust's independent auditors and meets with
representatives of the independent auditors to determine the scope and
review the results of each audit.
The following table indicates the fees earned during the fiscal year ended
September 30, 1997 by the trustees and officers of the Trust:
<TABLE>
<CAPTION>
Name Aggregate Compensation Total Compensation
and Position to be Paid by Company From Company
------------ --------------------- ------------
<S> <C> <C>
Richard H. Burgess* - -
Trustee
Patricia M. Ellington* - -
Trustee
Dennis J. Hiffman* $250.00 $250.00
Trustee
Harold D. McAninch* $750.00 $750.00
Trustee
Alan L. Zable $1,000.00 $1,000.00
Trustee
James A. Dreher* - -
Chairman
Linda M. Kozak* - -
Secretary and Treasurer
William J. Breen $250.00 $250.00
Trustee
Robert F. Seebeck $250.00 $250.00
Trustee
Andrew J. Goodwin - -
President, Trustee
Keith Pinsoneault - -
Vice President, Secretary,
and Treasurer
</TABLE>
*Officer and/or Trustee until August 15, 1997.
B-11
<PAGE>
For each meeting of the Board of Trustees attended, Messrs. Breen, Seebeck and
Zable received a fee of $250.00.
At September 30, 1997, the trustees and officers of the Trust owned beneficially
4,076 shares of the Fund, or 0.6% of the Fund's outstanding shares. As of
September 30, 1997, no person was known by the Fund to own beneficially 5% or
more of the outstanding shares of the Fund.
INVESTMENT ADVISORY SERVICES
Management and investment advisory services are provided to the Fund by Graver,
Bokhof, Goodwin & Sullivan, LP (the "Adviser") pursuant to an Investment
Advisory Agreement (the "Agreement") dated August 15, 1997. See the
prospectus - "Management of the Fund--The Adviser and Distributor." The Fund
pays the Adviser a fee accrued daily and paid monthly at the annual rate of
1.00% of the first $250 million of the Fund's average daily net assets and .75%
of the Fund's average daily net assets in excess of $250 million. Prior to
August 15, 1997, the Fund paid the former investment adviser, Integrated
Financial Services, Inc., an advisory fee at the same rate it pays to the
Adviser.
The Agreement will remain in effect until March 31, 1999, and from year to year
thereafter so long as such continuation is approved at least annually by (1) the
board of trustees or the vote of a majority of the outstanding voting securities
of the Fund, and (2) a majority of the trustees who are not interested persons
of any party to the Agreement, cast in person at a meeting called for the
purpose of voting on such approval. The Agreement may be terminated at any
time, without penalty, by either the Trust or the Adviser upon sixty days'
written notice, and is automatically terminated in the event of its assignment
as defined in the 1940 Act.
EXPENSES
Subject to the expense limitations described below, the Fund pays all its own
operating expenses that are not specifically assumed by the Adviser, including
(i) fees of the investment adviser; (ii) interest, taxes and any governmental
filing fees; (iii) compensation and expenses of the trustees, other than those
who are interested persons of the Trust, the investment adviser or the
distributor; (iv) legal, audit, custodial, fund accounting and transfer agency
fees and expenses; (v) fees and expenses related to the organization of the Fund
and registration and qualification of the Fund and its shares under federal and
state securities laws; (vi) expenses of printing and mailing reports, notices
and proxy material to shareholders, and expenses incidental to meetings of
shareholders; (vii) expenses of preparing prospectuses and of printing and
distributing them to existing shareholders; (viii) insurance premiums; (ix)
litigation and indemnification expenses and other extraordinary expenses not
incurred in the normal course of the business of the Trust; (x) distribution
expenses pursuant to the Distribution Plan; and (xi) brokerage commissions and
other transaction-related costs.
The Adviser has agreed to reimburse the Fund to the extent that the total annual
expenses of the Fund, exclusive of taxes, interest, brokers' commissions and
other charges related to the purchase and sale of securities and extraordinary
litigation expenses, exceed the limits, if any, prescribed by any state
regulatory authority. In addition, the Adviser has voluntarily undertaken to
reimburse the Fund for any annual operating expenses in excess of 2% of the
Fund's average net assets through December 31, 1998.
During the period from August 15, 1997 to September 30, 1997, the Fund paid
advisory fees of $16,427 to the Adviser, but the Adviser waived fees or
reimbursed expenses of $11,870 pursuant to the expense limitation undertaking.
During the period from October 1, 1996 to August 14, 1997, the Fund paid
advisory fees of $96,460 to Integrated Financial Services, Inc. ("IFS"), the
previous investment adviser. During the period from October 1, 1996 to August
14, 1997, IFS waived fees or reimbursed expenses of $39,469 pursuant to the
B-12
<PAGE>
expense limitation undertaking. During the fiscal years ended September 30,
1996 and 1995, the Fund paid IFS advisory fees of $102,176 and $59,467
respectively, but IFS waived fees or reimbursed expenses aggregating $35,431 and
$39,545 respectively, pursuant to the expense limitation undertaking.
Pursuant to the Agreement, the Adviser serves as the manager and investment
adviser for the Fund. The Adviser and Sunstone Financial Group, Inc. (the
"Administrator") entered into an agreement pursuant to which the Administrator
shall provide on behalf of the Adviser certain administration services for the
Fund. The Administrator and its affiliates provide administration, transfer
agency, distribution and fund accounting services to other investment companies.
Under the Administration Agreement dated October 1, 1997 (the "Administration
Agreement"), the Administrator has agreed to provide office space, facilities,
equipment and personnel, compile data for and prepare with respect to the Fund
timely Notices to the Commission required pursuant to Rule 24f-2 under the Act
and semi-annual reports on Form N-SAR; prepare and file all federal income and
excise tax returns and state income tax returns (and such other required tax
filings as may be agreed to by the parties) other than those required to be made
by the Fund's custodian or transfer agent subject to review and approval of the
Trust and the Trustee's independent accountants; prepare compliance filings
relating to the registration of the securities of the Fund pursuant to state
securities laws with the advice of Fund's counsel; determine the expense
accruals of the Fund; prepare financial statements for the Annual and
Semi-Annual Reports required pursuant to Section 30(d) under the Act; review the
Registration Statement for the Funds (on Form N-1A or any replacement therefor)
and any amendments thereto, and proxy materials; prepare, monitor and cause all
appropriate expenses to be paid from Fund assets on proper authorization from
the Fund; assist in the acquisition of the Fund's fidelity bond required by the
Act, monitor the amount of the bond and make the necessary Commission filings
related thereto; check the Fund's compliance with the policies and limitations
relating to portfolio investments as set forth in the Prospectus, Statement of
Additional Information and monitor each Fund's status as a regulated investment
company under Subchapter M of the Internal Revenue Code, as amended; maintain,
and/or coordinate with the other service providers the maintenance of, the
accounts, books and other documents required pursuant to Rule 31a-1(a) and (b)
under the Act; and generally assist in each Fund's administrative operations.
The Administrator receives a fee from the Adviser for its services as
administrator and expenses assumed pursuant to the Administration Agreement,
equal to the lesser of a fee calculated daily and paid periodically, beginning
at the annual rate of seventeen one-hundredths of one percent (.17%) and
decreasing as the assets of the Fund reaches certain levels. The minimum annual
fee is $20,000, $30,000 and $45,000 for the fiscal years ending September 30,
1998, 1999 and 2000, respectively.
Unless sooner terminated as provided therein, the Administration Agreement will
continue in effect until September 30, 1998. The Administration Agreement
thereafter shall be renewed automatically for successive one-year terms, unless
earlier terminated. The Administration Agreement is terminable after the
initial term, on not less than 60 days' notice by the Adviser or by the
Administrator.
The Administration Agreement provides that the Administrator shall not be liable
for any error of judgment or mistake of law or any loss suffered by the Fund in
connection with the matters to which the Administration Agreement relates,
except a loss resulting from willful misfeasance, bad faith, or gross negligence
in the performance of its duties, or from the reckless disregard by the
Administrator of its obligations and duties thereunder.
DISTRIBUTOR
Dreher & Associates, Inc. ("Dreher"), a broker-dealer owned by Mr. James Dreher
and Mr. Richard Burgess, serves as distributor for the Fund, subject to change
by a majority of the "non-interested" trustees at any time. Dreher is located
at One Oakbrook Terrace, Suite 708, Oakbrook Terrace, Illinois
B-13
<PAGE>
60181. Dreher is responsible for all purchases, sales, redemptions and other
transfers of shares of the Fund without any charge to the Fund except the fees
paid to Dreher under the Distribution Plan. Dreher is also responsible for all
expenses incurred in connection with its performance of services for the Fund,
including, but not limited to, personnel, office space and equipment, telephone,
postage and stationery expenses. Dreher receives commissions from sales of
shares of the Fund which amounts are not expenses of the Fund but represent
sales commissions added to the net asset value of shares purchased from the
Fund.
Dreher has the exclusive right to distribute shares of the Fund in a continuous
offering through affiliated and unaffiliated dealers. The obligation of Dreher
is an agency or "best efforts" arrangement, which does not obligate Dreher to
sell any stated number of shares.
During the fiscal years ended September 30, 1997, 1996 and 1995, Dreher received
and retained commissions of $4,215, $33,145 and $48,040 respectively.
Dreher also receives brokerage commissions for executing portfolio transactions
on behalf of the Fund. See "Portfolio Transactions."
DISTRIBUTION PLAN
The Trust has adopted a plan pursuant to rule 12b-1 under the Investment Company
Act of 1940 (the "Plan"), whereby the Fund pays to Dreher & Associates, Inc.,
the Fund's distributor ("Dreher"), fees accrued daily and paid monthly at the
aggregate annual rate of .50% of the Fund's average daily net assets, consisting
of a service fee of .25% of average daily net assets and additional sales
compensation of .25% of average daily net assets.
From the payments made by the Fund to Dreher, Dreher pays service fees and
additional sales compensation to brokers that have signed selling group
agreements with Dreher and thereby participate in the distribution of Fund
shares and provide services to Fund shareholders. Payments to selling group
members are made at the same rates as the payments from the Fund to Dreher - a
service fee of .25% of the average daily net assets of the accounts for which
the selling group member performs shareholder servicing and .25% of the average
daily net asset value of those accounts as additional sales compensation.
The board of trustees of the Trust has determined that a continuous cash flow
resulting from the sale of new shares is necessary and appropriate to meet
redemptions and to take advantage of buying opportunities without having to make
unwarranted liquidations of portfolio securities. The board also considered
that continuing growth in the size of the Fund would be in the best interests of
shareholders because increased size would allow the Fund to realize certain
economies of scale in its operations and would likely reduce the proportionate
share of expenses borne by each shareholder. The board of trustees therefore
determined that it would benefit the Fund to have monies available for the
direct distribution and service activities of Dreher, as the Fund's distributor,
in promoting the continuous sale of the Fund's shares. The trustees, including
the non-interested trustees, concluded, in the exercise of their reasonable
business judgment and in light of their fiduciary duties, that there is a
reasonable likelihood that the Plan will benefit the Fund and its shareholders.
The Plan has been approved by the board of trustees, including all of the
trustees who are not interested persons as defined in the 1940 Act. The Plan
must be approved annually by the board of trustees, including a majority of the
trustees who are non-interested persons of the Fund and who have no direct or
indirect financial interest in the operation of the Plan ("non-interested
trustees"), by a vote cast in person at a meeting called for that purpose. So
long as the Plan is in effect, it is required that the selection and nomination
of non-interested trustees be done by non-interested trustees. The Plan may be
terminated at any time, without penalty, by either a majority vote of such
trustees or by vote of a majority of the Fund's
B-14
<PAGE>
outstanding shares, and shall terminate automatically in the event of any act
that terminates the distribution agreement with Dreher. Any agreement related
to the Plan, including any distribution or service agreement, may be terminated
in the same manner, except that such termination must be on not more than sixty
days' written notice to any other party to such agreement. Any such related
agreement shall terminate automatically in the event of any act that terminates
the Plan or the distribution agreement with Dreher, or in the event of any act
that constitutes the assignment of any such related agreement. Any distributor,
dealer or institution may also terminate its distribution or service agreement
at any time upon written notice.
Neither the Plan nor any distribution or service agreement may be amended to
increase materially the amount spent for distribution or service expenses or in
any other material way without approval by a majority of the outstanding shares
of the Fund, and all such material amendments to the Plan or any distribution or
service agreement must also be approved by a majority of the trustees of the
Trust, including a majority of the non-interested trustees, by a vote cast in
person at a meeting called for the purpose of voting on any such amendment.
Dreher is required to report in writing to the board of trustees at least
quarterly on the amounts and purpose of any payments made under the Plan and any
distribution or service agreement and the amount of expenses incurred by Dreher
under the Plan, and, to furnish the board with such other information as may
reasonably be requested in order to enable the board to make an informed
determination of whether the Plan should be continued.
During the year ended September 30, 1997, the Fund made payments to Dreher
pursuant to the Plan, and Dreher paid expenses in connection with the
distribution of Fund shares as shown below:
<TABLE>
<S> <C>
Distribution fees paid by Fund to Dreher: $56,444
Distribution expenses incurred by Dreher:
Fees reallowed to brokers $33,866
Employee Compensation 1,710
Printing - Quarterly reports to brokers 1,421
Printing - Prospectus 6,968
Other marketing expenses 5,160
-------
Total Expenses $49,125
-------
-------
</TABLE>
PURCHASING AND REDEEMING SHARES
Purchases and redemptions are discussed in the Fund's prospectus under the
headings "How to Purchase Shares" and "How to Redeem Shares." All of that
information is incorporated herein by reference.
NET ASSET VALUE. For purposes of this computation, portfolio securities,
including options, that are traded on a national securities exchange or in the
over-the-counter market are valued at the last current reported sales price, or
lacking any current reported sale on that day, at the mean of the most recently
quoted bid and asked prices. Each outstanding futures contract is valued at the
official settlement price for the contract on the exchange on which the contract
is traded, except that if the market price of the contract has increased or
decreased by the maximum amount permitted on the valuation date ("up or down the
limit"), the contract is valued at a fair value as described below. Short-term
obligations with maturities of 60 days or less are valued at amortized cost.
B-15
<PAGE>
When market quotations are not readily available for the Fund's securities, such
securities are valued at a fair value following procedures approved by the board
of trustees. These procedures include determining fair value on the basis of
valuations furnished by pricing services approved by the board of trustees,
which include market transactions for comparable securities and various
relationships between securities which are generally recognized by institutional
traders, as well as on the basis of appraisals received from a pricing service
using a computerized matrix system, or appraisals derived from information
concerning the securities or similar securities received from recognized dealers
in those securities.
The Fund's net asset value is determined only on days on which the New York
Stock Exchange is open for trading. That Exchange is regularly closed on
Saturdays and Sundays and on New Year's Day, the third Monday in February, Good
Friday, the last Monday in May, Independence Day, Labor Day, Thanksgiving and
Christmas. If one of these holidays falls on a Saturday or Sunday, the Exchange
will be closed on the preceding Friday or the following Monday, respectively.
REDEMPTION IN KIND. The Fund has elected to be governed by Rule 18f-1 under the
Investment Company Act of 1940 pursuant to which it is obligated to redeem
shares solely in cash up to the lesser of $250,000 or 1% of the net asset value
of the Fund during any 90-day period for any one shareholder. Redemptions in
excess of these amounts will normally be paid in cash, but may be paid wholly or
partly by a distribution in kind of securities.
PERFORMANCE INFORMATION
From time to time the Fund may quote total return figures. "Total Return" for a
period is the percentage change in value during a period of an investment in
Fund shares, including the value of shares acquired through reinvestment of all
dividends and capital gains distributions. Total Return may also be described
as the cumulative percentage change in value, assuming reinvestment of all
dividends and distributions. "Average Annual Total Return" is the average
annual compounded rate of change in value represented by the Total Return for
the period.
Average Annual Total Return will be computed as follows:
n
ERV = P(1+T)
Where: P = a hypothetical initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
investment made at the beginning of the period, at the
end of the period (or fractional portion thereof)
The figures quoted will assume reinvestment of all dividends and distributions.
Quotations of Average Annual Total Return will take into account the effect of
any sales charge on the amount available for investment or redemption, at the
maximum rate in effect on the date of the quotation; quotations of Total Return
will indicate whether or not the effect of the sales charge is included. Income
taxes payable by shareholders will not be taken into account. For example,
Average Annual Total Return and Total Return for the Fund for various periods
ended September 30, 1997 are shown below:
B-16
<PAGE>
<TABLE>
<CAPTION>
Total Return Total Return
Average Annual with without
Period Total Return Sales Charge Sales Charge
- ------ ------------ ------------ ------------
<S> <C> <C> <C>
1 year . . . . . . . . . . . . 28.8% 28.8% 36.2%
5 years . . . . . . . . . . . 18.1% 129.8% 143.1%
Life of fund . . . . . . . . . 16.6% 171.6% 187.4%
(beginning January 22, 1991)
</TABLE>
The performance of the Fund is a result of conditions in the securities markets,
portfolio management, and operating expenses. Although information such as
yield and total return is useful in reviewing the Fund's performance and in
providing some basis for comparison with other investment alternatives, it
should not be used for comparison with other investments using different
reinvestment assumptions or time periods.
In advertising and sales literature, the Fund's performance may be compared with
that of market indices and other mutual funds. The Fund might also use
comparative performance as computed in a ranking determined by Lipper Analytical
Services, Inc. ("Lipper"), an independent service that monitors the performance
of over 2,000 mutual funds, or that of another service.
In advertising and sales literature, the performance of the Fund may be compared
with that of other mutual funds, indexes or averages of other mutual funds,
indexes of related financial assets or data, and other competing investment and
deposit products available from or through other financial institutions. The
composition of these indexes or averages differs from that of the Fund.
Comparison of the Fund to an alternative investment should consider differences
in features and expected performance.
All of the indexes and averages noted below will be obtained from the indicated
sources or reporting services, which the Fund generally believes to be accurate.
The Fund may also note its mention in newspapers, magazines, or other media from
time to time. However, the Fund assumes no responsibility for the accuracy of
such data.
The Fund may compare its performance to the Consumer Price Index (All Urban), a
widely recognized measure of inflation. The performance of the Fund may also be
compared to the following indexes or averages:
Dow-Jones Industrial Average New York Stock Exchange Composite
Standard & Poor's 500 Stock Index Index
Standard & Poor's 400 Industrials American Stock Exchange Composite
Wilshire 5000 Index
(These indexes are widely recognized NASDAQ Composite
indicators of general U.S. stock market NASDAQ Industrials
results.) (These indexes generally reflect the
performance of stocks traded in the
indicated markets.)
In addition, the Fund may compare its performance to:
Value Line Index
(Widely recognized indicator of the
performance of small- and medium-
sized company stocks.)
B-17
<PAGE>
Lipper Capital Appreciation Fund Average
Lipper Growth Funds Average
Lipper Small Company Growth Funds Average
Lipper General Equity Funds Average
Lipper Equity Funds Average
Lipper Small Company Growth Fund Index
Lipper Small Company Growth Fund Index reflects the net asset value weighted
total return of the largest thirty growth funds as calculated and published by
Lipper.
The Lipper averages are unweighted averages of total return performance of
mutual funds as classified, calculated and published by Lipper. The Fund may
also use comparative performance as computed in a ranking by Lipper or category
averages and rankings provided by another independent service. Should Lipper or
another service reclassify the Fund to a different category or develop (and
place the Fund into) a new category, the Fund may compare its performance or
ranking against other funds in the newly assigned category, as published by the
service. Moreover, the Fund may compare its performance or ranking against all
funds tracked by Lipper or another independent service.
To illustrate the historical returns on various types of financial assets, the
Fund may use historical data provided by Ibbotson Associates, Inc. ("Ibbotson"),
a Chicago-based investment firm. Ibbotson constructs (or obtains) very
long-term (since 1926) total return data (including, for example, total return
indexes, total return percentages, average annual total returns and standard
deviations of such returns) for the following asset types:
Common stocks
Small company stocks
Long-term corporate bonds
Long-term government bonds
Intermediate-term government bonds
U.S. Treasury bills
Consumer Price Index
PORTFOLIO TRANSACTIONS
See "Management of the Fund - The Adviser and Distributors" and "Portfolio
Transactions" in the Prospectus.
Portfolio transactions on behalf of the Fund effected on stock exchanges involve
the payment of negotiated brokerage commissions. There is generally no stated
commission in the case of securities traded in the over-the-counter markets, but
the price paid by the Fund usually includes an undisclosed dealer commission or
mark-up. In underwritten offerings, the price paid by the Fund includes a
disclosed, fixed commission or discount retained by the underwriter or dealer.
In executing portfolio transactions, the Adviser uses its best efforts to obtain
for the Fund the most favorable price and execution available. In seeking the
most favorable price and execution, the Adviser considers all factors it deems
relevant, including price, the size of the transaction, the nature of the market
for the security, the amount of commission, the timing of the transaction taking
into account market prices and trends, the execution capability of the
broker-dealer and the quality of service rendered by the broker-dealer in other
transactions.
The trustees have determined that portfolio transactions for the Fund may be
executed through Dreher if, in the judgment of the Adviser, the use of Dreher is
likely to result in prices and execution at least as favorable to the Fund as
those available from other qualified brokers and if, in such transactions,
Dreher
B-18
<PAGE>
charges the Fund commission rates consistent with those charged by Dreher to
comparable unaffiliated customers in similar transactions. The board of
trustees, including a majority of the trustees who are not "interested"
trustees, has adopted procedures that are reasonably designed to provide that
any commissions, fees or other remuneration paid to Dreher are consistent with
the foregoing standard. The Fund will not effect principal transactions with
Dreher. It is expected that all or a significant portion of the Fund's
portfolio transactions will be executed through Dreher. In executing portfolio
transactions through Dreher, the Fund will be subject to, and intends fully to
comply with, section 17(e) of the Investment Company Act of 1940 and the rules
thereunder.
During the years ended September 30, 1997, 1996 and 1995, the Fund paid
brokerage commissions on purchases and sales of securities (not including the
gross underwriting spread on securities purchased in underwritten offerings) of
$11,132, $31,168 and $14,032, respectively of which $10,412, $31,168 and
$14,032, respectively was paid to Dreher. Of the brokerage commissions paid by
the Fund for the year ended September 30, 1997, 94% were paid to Dreher in
connection with transactions involving securities having a market value of 96%
of the total market value of securities on which the Fund paid commissions. For
a discussion of the factors related to the decrease in the total amount of
commissions paid, see "INVESTMENT PRACTICES-Portfolio Turnover" in this
Statement of Additional Information.
TAXATION
The following is only a summary of certain tax considerations affecting the Fund
and its shareholders. No attempt is made to present a detailed explanation of
the tax treatment of the Fund or its shareholders, and the discussion here is
not intended as a substitute for careful tax planning. Investors are urged to
consult their tax advisers with specific reference to their own tax situations.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY. The Fund intends to continue
to qualify, as it did in its last fiscal year, as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). As a regulated investment company, the Fund will be exempt from
Federal income tax on its net investment income and capital gains that it
distributes to shareholders, provided that it distributes at least 90% of its
investment company taxable income (net investment income and the excess of net
short-term capital gain over net long-term capital loss) for the year (the
"Distribution Requirement") and satisfies certain other requirements of the Code
described below. Distributions of investment company taxable income made during
the taxable year or, under certain specified circumstances, after the close of
the taxable year will satisfy the Distribution Requirement.
In addition to satisfaction of the Distribution Requirement, the Fund must
derive at least 90% of its gross income from dividends, interest, certain
payments with respect to securities loans, gains from the sale or other
disposition of stock or securities and other income derived with respect to its
business of investing in such stock or securities (the "Income Requirement).
In addition, the Fund must diversify its holdings so that, at the close of each
quarter of its taxable year, at least 50% of the value of its assets consists of
cash and cash items, U.S. Government securities, securities of other regulated
investment companies, and securities of other issuers (as to which the Fund has
not invested more than 5% of the value of its total assets in securities of such
issuer and as to which the Fund does not hold more than 10% of the outstanding
voting securities of such issuer), and no more than 25% of the value of its
total assets may be invested in the securities of any one issuer (other than
U.S. Government securities and securities of other regulated investment
companies), or of two or more issuers which the Fund controls and which are
engaged in the same or similar trades or businesses (the "Diversification
Requirement"). This Diversification Requirement is in addition to the
diversification standard the Fund must meet under fundamental investment
restriction (i). See "Investment Restrictions."
B-19
<PAGE>
The Fund's option and hedging activities are subject to special provisions of
the Code that may, among other things, limit the use of losses of the Fund and
affect the holding period of the securities held by the Fund and the nature of
the income realized by the Fund. These provisions may also require the Fund to
mark-to-market some of the positions in its portfolio (i.e., treat them as if
they were closed out), which may cause the Fund to recognize income without the
cash to distribute such income. The Fund and its shareholders may recognize
taxable income as a result of the Fund's hedging activities, a portion of which
may be treated as long-term capital gains. The Fund will monitor its
transactions and may make certain tax elections in order to mitigate the effect
of these rules and prevent disqualification of the Fund as a regulated
investment company.
TAXATION OF DISTRIBUTIONS. The Fund distributes substantially all of its net
investment income and net short-term capital gains for any taxable (i.e.,
fiscal) year. Distributions will be taxable to shareholders as described below,
regardless of whether such distributions are paid in cash or are reinvested in
shares. Shareholders receiving a distribution from the Fund in the form of
additional shares will generally be treated as receiving a taxable distribution
in an amount equal to the fair market value of the shares received on the
distribution date and will take a tax basis for such shares equivalent to the
amount deemed to have been distributed to them. The Fund intends to distribute
to shareholders its excess of net long-term capital gain over net short-term
capital loss ("net capital gain") for each taxable year as a capital gain
dividend. A capital gain dividend will be taxable to shareholders as long-term
capital gain, regardless of the length of time the shareholder has held his
shares, whether the net capital gain distributed by the Fund was recognized
prior to the date on which a shareholder acquired shares and whether the
distribution was paid in cash or reinvested in shares. The aggregate amount of
distributions designated by the Fund as capital gain dividends may not exceed
the net capital gain of the Fund for any taxable year, determined by excluding
any net capital loss or net long-term capital loss attributable to transactions
occurring after October 31 of such year and by treating any such loss as if it
arose on the first day of the following taxable year.
Dividends (whether received in cash or reinvested in shares) will generally be
subject to taxation when received. Dividends declared in October, November or
December of any year accruing to shareholders of record on a specified date in
such a month, however, will be deemed to have been received by the shareholders
and paid by the Fund on December 31 of such year, if such dividends are paid
during January of the following year.
The Fund is required in certain cases to withhold and remit to the United States
Treasury 31% of dividends paid to any shareholder (1) who has provided either an
incorrect tax identification number or no number at all, (2) who is subject to
backup withholding by the Internal Revenue Service for failure to report the
receipt of interest or dividend income properly, or (3) who has failed to
certify to the Fund that such shareholder is not subject to backup withholding
or that such shareholder is an "exempt recipient."
Shareholders will be advised annually as to the U.S. Federal income tax
consequences of distributions made during the year.
CORPORATE INVESTORS. In the case of corporate shareholders, a portion of Fund
distributions (other than capital gain dividends) for any taxable year generally
is expected to qualify for the 70% dividends received deduction for regular
Federal income tax purposes to the extent of the gross amount of eligible
dividends received by the Fund for the year with respect to stock, unless such
stock is held for 45 days or less during the 90-day period that begins 45 days
before the stock becomes ex-dividend with respect to the dividend (or 90 days or
less during the 180-day period that begins 90 days before the stock becomes
ex-dividend with respect to the dividend in the case of certain preferred
stock). Legislation has been introduced from time to time to reduce the
percentage of dividends entitled to the dividends received deduction; however,
it is not known whether Congress will consider any such legislation in the near
future. The Fund's investment policies may affect the availability of the
dividends received deduction with respect to dividends paid on certain stocks in
the Fund's portfolio. For example, the holding period of any dividend paying
stock will not be deemed to include period in which the Fund holds a put option
B-20
<PAGE>
on, has contracted to sell, or has made but not closed a short sale of,
"substantially identical" stock or securities. Convertible bonds or convertible
preferred stock may be deemed "substantially identical" to common stock for
purposes of this rule. The Fund will provide a statement annually to
shareholders of the amount of dividends eligible for the dividends received
deduction.
Corporate investors should also note that although the dividends received
deduction is available to reduce regular corporate Federal income tax liability,
any amount so deducted may increase the tax base upon which the corporate
alternative minimum tax and environmental tax is imposed.
CUSTODIAN
United Missouri Bank, N.A. is the custodian for the Trust. It is responsible
for holding all cash and securities of the Fund, directly or through a book
entry system, delivering and receiving payment for securities sold by the Fund,
receiving and paying for securities purchased by the Fund, collecting income
from investments of the Fund and performing other duties, all as directed by
authorized persons of the Trust. The custodian does not exercise any
supervisory functions in such matters as the purchase and sale of securities by
the Fund, payment of dividends or payment of expenses of the Fund.
TRANSFER AGENT
Sunstone Investor Services, LLC ("SIS") is the Fund's transfer agent and
dividend disbursing agent. SIS records all sales, transfers and redemptions of
shares of the Fund, disburses dividends of the Fund and performs other
recordkeeping functions. SIS is responsible for all personnel, office space and
equipment expenses related to the performance of these services for the Fund.
The Fund pays all other out-of-pocket expenses, including postage, mailing and
stationery expenses.
FUND ACCOUNTING SERVICES
United Missouri Bank, N.A. ("UMB"), the Fund's custodian, provides financial and
accounting services, including portfolio accounting and calculation of the
Fund's net asset value per share, preparation of financial statements and
creation and maintenance of the related books and records. UMB furnishes, at
its own expense, the personnel and facilities necessary to perform its duties.
UMB receives from the Fund (a) a base fee of $600 per month and (b) a fee
accrued daily and paid monthly at the annual rate of .03% of the Fund's average
daily net assets up to and including $100 million, .02% of average daily net
assets in excess of $100 million, but not more than $350 million, .01% of
average daily net assets in excess of $350 million, but not more than $1
billion, and .005% of average daily net assets in excess of $1 billion. For the
fiscal years ended September 30, 1997, 1996 and 1995, fees paid by the Fund for
financial and accounting services totaled $12,100, $14,043 and $11,654
respectively.
INDEPENDENT AUDITORS
Ernst & Young LLP, Sears Tower, 233 South Wacker Drive, Chicago, Illinois 60606,
audits and reports on the Fund's annual financial statements, reviews certain
regulatory reports and the Fund's Federal income tax returns, and performs other
professional accounting, tax and advisory services when engaged to do so by the
Fund.
LEGAL COUNSEL
Vedder, Price, Kaufman & Kammholz, 222 North LaSalle Street, Suite 2600,
Chicago, Illinois 60601, provides legal services to the Fund, including
assisting in regulatory and general corporate issues of the Fund.
B-21
<PAGE>
FINANCIAL STATEMENTS
The Fund's annual report to shareholders for the year ended September 30, 1997,
a copy of which accompanies this statement of additional information, contains
financial statements, notes thereto, supplementary information entitled
"Financial Highlights" and a report of independent auditors, all of which (but
no other part of the annual report) is incorporated herein by reference.
B-22
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Trustees and Shareholders
Universal Capital Growth Fund
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Universal Capital Growth Fund as of September
30, 1997, the related statement of operations for the year then ended and
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the fiscal years since 1993. 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 audits.
We conducted our audits 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 and financial
highlights 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 investments owned as of
September 30, 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 audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Universal Capital Growth Fund at September 30, 1997, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the fiscal years since 1993, in conformity with generally accepted accounting
principles.
Chicago, Illinois
November 1, 1997
<PAGE>
UNIVERSAL CAPITAL GROWTH FUND
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
SHARES VALUE
------ ------
<S> <C> <C> <C>
COMMON STOCKS - 95.95%
AEROSPACE - 3.35%
Boeing Company (The) 8,000 $435,500
AUTOMOTIVE PARTS AND EQUIPMENT - 1.14%
Borg Warner Automotive, Inc. 2,600 147,875
BANKS - 4.14%
First Chicago NBD Corporation 3,500 263,375
Wells Fargo & Company 1,000 275,000
-----------
538,375
BIOTECHNOLOGY - 1.66%
Amgen, Inc. * 4,500 215,718
COMPUTERS - 6.09%
Compaq Computer Corporation * 2,500 186,875
Hewlett-Packard Company 2,600 180,863
International Business Machines
Corporation 4,000 423,750
-----------
791,488
COMPUTER PERIPHERAL EQUIPMENT - 2.25%
Cisco Systems, Inc. * 4,000 292,250
COMPUTER SOFTWARE - 6.27%
Complete Business Solutions, Inc. * 10,000 285,000
Microsoft Corporation * 4,000 529,250
-----------
814,250
CONSUMER PRODUCTS - 6.49%
Brunswick Corporation 7,500 264,375
Gillette Company (The) 3,500 302,094
Procter & Gamble Company (The) 4,000 276,250
-----------
842,719
DIVERSIFIED MANUFACTURING - 3.76%
Kuhlman Corporation 8,000 288,000
Thermo Electron Corporation * 5,000 200,000
-----------
488,000
<PAGE>
<CAPTION>
UNIVERSAL CAPITAL GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 1997
SHARES VALUE
------ ------
<S> <C> <C> <C>
ELECTRICAL EQUIPMENT - 1.05%
General Electric Company 2,000 136,125
ELECTRONIC PRODUCTS AND COMPONENTS - 10.51%
American Power Conversion Corporation * 5,000 140,625
Analog Devices, Inc. * 6,666 223,311
Cognex Corporation * 8,000 263,000
Intel Corporation 8,000 738,500
-----------
1,365,436
ENERGY - 3.36%
Falcon Drilling Company, Inc. * 5,000 176,563
Halliburton Company 5,000 260,000
-----------
436,563
FINANCE AND FINANCIAL SERVICES - 12.46%
Charles Schwab Corporation (The) 10,800 386,100
Fannie Mae 5,500 258,500
Merrill Lynch & Company, Inc. 10,000 741,875
Paine Webber Group Inc. 5,000 232,813
-----------
1,619,288
FOOD AND BEVERAGE - 3.96%
H. J. Heinz Company 5,000 230,937
PepsiCo, Inc. 7,000 283,938
-----------
514,875
HEALTH/PHARMACEUTICALS - 13.78%
Abbott Laboratories 4,500 287,719
Eli Lilly and Company 3,000 361,312
Johnson & Johnson 5,000 288,125
Merck & Co., Inc. 3,600 359,775
Schering-Plough Corporation 9,600 494,400
-----------
1,791,331
HEALTH/SUPPLIES - 2.89%
Medtronic, Inc. 8,000 376,000
<PAGE>
<CAPTION>
UNIVERSAL CAPITAL GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 1997
SHARES VALUE
------ ------
<S> <C> <C> <C>
INSURANCE - 5.37%
Horace Mann Educators Corporation 5,000 280,625
MBIA Inc. 1,500 188,156
USF&G Corporation 10,000 229,375
-----------
698,156
RAILROADS - 1.49%
Burlington Northern Santa Fe Corporation 2,000 193,250
RETAIL - 1.97%
Walgreen Co. 10,000 256,250
TELECOMMUNICATIONS - 3.96%
Tellabs, Inc. * 10,000 515,000
-----------
TOTAL COMMON STOCKS (COST $8,498,282) 12,468,449
-----------
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------- ------
<S> <C> <C> <C>
REPURCHASE AGREEMENT - 3.08%
UMB Bank, n.a., 5.05%,
dated 9/30/97, repurchase
price $400,166, maturing
10/03/97, collateralized $400,000 400,000
by U.S. Treasury Notes, , 8.875%, -----------
maturing 2/15/99
TOTAL REPURCHASE AGREEMENTS 400,000
(COST $400,000) ------------
------------
TOTAL INVESTMENTS - 99.03%
(COST $8,898,282) 12,868,449
CASH AND OTHER ASSETS
LESS LIABILITIES - 0.97% 126,026
-----------
NET ASSETS - 100.00% $12,994,475
-----------
-----------
</TABLE>
<PAGE>
UNIVERSAL CAPITAL GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments at value (cost $8,898,282) $12,868,449
Cash 153,047
Receivables for shares issued 1,022
Dividends receivable 10,489
Prepaid expenses 13,092
-----------
Total Assets 13,046,099
-----------
LIABILITIES:
Payable to Adviser 16,081
Payable for shares redeemed 5,231
Other accrued expenses 30,312
-----------
Total Liabilities 51,624
-----------
NET ASSETS $12,994,475
-----------
-----------
NET ASSETS CONSIST OF:
Paid in capital $8,671,949
Accumulated net realized gain
on investments 352,359
Unrealized net appreciation
on investments 3,970,167
-----------
TOTAL NET ASSETS $12,994,475
-----------
-----------
NET ASSET VALUE PER SHARE
($12,994,475 DIVIDED BY 718,215
SHARES OUTSTANDING) $18.09
-----------
-----------
MAXIMUM OFFERING PRICE PER SHARE
(net asset value, plus 5.8% of net
asset value or 5.5% of offering price) $19.14
-----------
-----------
</TABLE>
See notes to financial statements.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Dividend income $107,466
Interest income 63,948
-----------
171,414
-----------
EXPENSES:
Investment advisory fees 112,887
12b-1 fees 56,444
Legal fees 34,000
Audit fees 19,996
Federal and state registration fees 13,500
Reports to shareholders 13,000
Fund accounting fees 12,100
Transfer agent fees and expenses 11,800
Custody fees 4,900
Trustees' fees 2,750
Other 1,455
-----------
Total expenses before waiver 282,832
Waiver of fees (57,057)
-----------
Net expenses 225,775
-----------
Net investment loss (54,361)
-----------
REALIZED AND UNREALIZED GAINS:
Net realized gain on investments 405,187
Change in unrealized appreciation
on investments 3,159,044
-----------
Net gain on investments 3,564,231
-----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $3,509,870
-----------
-----------
</TABLE>
See notes to financial statements.
<PAGE>
UNIVERSAL CAPITAL GROWTH FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
------------------ ------------------
<S> <C> <C>
OPERATIONS:
Net investment loss $ (54,361) $ (68,812)
Net realized gain on investments 405,187 1,302,945
Change in unrealized appreciation on
investments 3,159,044 (499,880)
---------- -----------
Net increase in net assets resulting from
operations 3,509,870 734,253
---------- -----------
DISTRIBUTIONS:
Net realized gains (1,185,143) (1,269,948)
---------- -----------
CAPITAL SHARE TRANSACTIONS :
Proceeds from 54,442 and 202,722
shares issued, respectively 888,007 3,008,775
Net asset value of 82,871 and 90,601 shares
issued to holders in reinvestment of
dividends, respectively 1,150,243 1,268,410
Cost of 161,216 and 51,688 shares
redeemed, respectively (2,492,100) (766,538)
---------- -----------
Net increase (decrease) from capital
transactions (453,850) 3,510,647
---------- -----------
TOTAL INCREASE IN NET ASSETS 1,870,877 2,974,952
NET ASSETS:
Beginning of year 11,123,598 8,148,646
---------- -----------
End of year $12,994,475 $11,123,598
---------- -----------
---------- -----------
</TABLE>
See notes to the financial statements.
<PAGE>
UNIVERSAL CAPITAL GROWTH FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1997(c) 1996 1995 1994 1993
------- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $14.99 $16.28 $12.47 $12.27 $11.38
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss (0.08) (0.10) (0.10) (0.13) (0.04)
Net realized and unrealized gains on
investments 4.97 1.14 4.54 0.96 1.39
----- ----- ----- ------ ------
TOTAL FROM INVESTMENT OPERATIONS 4.89 1.04 4.44 0.83 1.35
----- ----- ----- ------ ------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income - - - - 0.11
Net realized gains (1.79) (2.33) (0.63) (0.63) 0.35
----- ----- ----- ------ ------
Total distributions to shareholders (1.79) (2.33) (0.63) (0.63) 0.46
NET ASSET VALUE, END OF YEAR $18.09 $14.99 $16.28 $12.47 $13.19
----- ----- ----- ------ ------
----- ----- ----- ------ ------
TOTAL RETURN (b) 36.24% 7.40% 37.87% 7.46% 12.15%
SUPPLEMENTAL DATA AND RATIOS:
Ratio of net expenses to average
net assets (a) 2.00% 2.00% 2.00% 2.00% 2.00%
Ratio of net investment loss to
average net assets (a) (0.5)% (0.7)% (0.8)% (1.1)% (0.4)%
Portfolio turnover rate 49.2% 262.1% 157.6% 188.7% 186.3%
Average commission rate per share $0.0457 $0.0208 N/A N/A N/A
Net assets, end of year (in 000's) $12,994 $11,124 $8,149 $4,969 $4,892
</TABLE>
(a) After reimbursement and waiver of advisor fees and earnings credits of the
custodian of 0.50%, 0.35%, 0.7%, 1.1%, and 0.9% of average net assets for
1997, 1996, 1995, 1994, and 1993.
(b) The total return calculation does not reflect the sales load imposed on the
purchase of shares.
(c) On August 15, 1997, the advisor changed to Graver, Bokhof, Goodwin &
Sullivan from Integrated Financial Services, Inc.
See notes to the financial statements.
<PAGE>
UNIVERSAL CAPITAL GROWTH FUND
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION. Universal Capital Investment Trust (the "Trust") is a
Massachusetts business trust organized on October 18, 1990. The Trust is
registered under the Investment Company Act of 1940 (the "1940 Act") as a
diversified, open-end investment company. Universal Capital Growth Fund (the
"Fund"), the only series of the Trust currently offered, commenced selling
shares of beneficial interest to the public on January 22, 1991 (commencement of
operations).
INVESTMENT VALUATION. Investments are stated at value. Investments traded on a
securities exchange or in the over-the-counter market are valued at the last
current sale price as of the time of valuation or, lacking any current reported
sale on that day, at the mean between the most recent bid and asked quotations.
Investments for which quotations are not readily available and securities for
which the valuation methods described above do not produce a value reflective of
the fair value of the securities are valued at a fair value as determined in
good faith by the board of trustees or a committee thereof.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME. Investment transactions are
recorded on the trade date (the day the order to buy or sell is executed).
Dividend income is recorded on the ex-dividend date and interest income is
recorded on the accrual basis. Realized gains and losses from investment
transactions are reported on an identified cost basis.
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 amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
FEDERAL INCOME TAXES AND DIVIDENDS TO SHAREHOLDERS. It is the Fund's policy to
comply with the special provisions of the Internal Revenue Code available to
regulated investment companies and, in the manner provided therein, to
distribute all of its taxable income, as well as any net realized gain on sales
of investments. Such provisions were complied with and therefore no provision
for federal income taxes is required.
The character of distributions made during the year from net investment income
of net realized gains may differ from the characterization for federal income
tax purposes due to differences in the recognition of income, expense or gain
items for financial statement and tax purposes. Where appropriate,
reclassifications between net asset accounts are made for such differences that
are permanent in nature. Accordingly, at September 30, 1997, the Fund reduced
paid in capital by $54,175 and offset accumulated net realized gain on
investments by $186 for the current year's net investment loss.
REPURCHASE AGREEMENTS. The Fund may invest in repurchase agreements. All
repurchase agreements are fully collateralized by U.S. Treasury securities. All
collateral is held through the Fund's custodian bank and is monitored daily by
the Fund to ensure that its market value exceeds the carrying value of the
repurchase agreement.
2. TRANSACTIONS WITH AFFILIATES
Pursuant to an investment advisory agreement, beginning August 15, 1997, with
Graver, Bokhof, Goodwin & Sullivan ("Advisor"), the Fund pays an investment
advisory fee at the annual rate of 1.0% of the first $250 million of the Fund's
average daily net assets and .75% of the Fund's average daily net assets in
excess of $250 million. During the period from August 15, 1997 to September 30,
1997, the Fund incurred investment advisory fees of $16,427 under this
agreement.
The agreement provides for the waiver or reimbursement of expenses from the
Advisor should the Fund's normal operating expenses exceed the most restrictive
applicable state expense limitation. The Advisor also has agreed to limit the
Fund's annual operating expenses to 2.00% of average daily net assets through
December 31, 1998. During the period from August 15, 1997 to September 30,
1997, the Advisor waived or reimbursed $11,870 of its investment advisory fee.
Prior to August 15, 1997, the investment advisor was Integrated Financial
Services, Inc. ("IFS"). The Fund paid an investment advisory fee at the annual
rate of 1.0% of the first $250 million of the Fund's average daily net assets
and .75% of the Fund's average daily net assets in excess of $250 million.
During the period from October 1, 1996 to August 14, 1997, the Fund incurred
investment advisory fees of $96,460 under this agreement.
IFS agreed to limit the Fund's annual operating expenses to 2.00% of average
daily net assets. During the period from October 1, 1996 to August 14, 1997,
IFS waived or reimbursed $39,469 of its investment advisory fee.
While serving as distributor, Dreher & Associates, Inc. ("Distributor") assumed
all expenses of personnel, office space, office facilities and equipment
incidental to such service. The Trust has adopted a Distribution Plan pursuant
to Rule 12b-1 under the 1940 Act whereby the Fund pays the Distributor a monthly
service fee of .25% and a monthly sales compensation fee of .25%, based on the
Fund's average daily net assets. In return, the Distributor bears all expenses
incurred in the distribution and promotion of the Fund's shares. During the
year ended September 30, 1997, the Fund incurred distribution fees of $56,444.
The Distributor received commissions of $4,215 from sale of the Fund's shares
during the year ended September 30, 1997, all of which was paid to brokers
affiliated with the Fund.
Portfolio transactions for the Fund have been executed through the Distributor,
consistent with the Fund's policy
<PAGE>
UNIVERSAL CAPITAL GROWTH FUND
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
of obtaining best price and execution. During the year ended September 30,
1997, the Fund paid brokerage commissions to the Distributor on purchases and
sales of securities in the amount of $10,412. It is the management's opinion
that commission rates charged to the Fund by the Distributor are consistent with
those charged to comparable unaffiliated customers in similar transactions.
Pursuant to a custody agreement with UMB Bank, n.a. ("UMB"), the Fund pays
custody fees to UMB. In connection with that agreement, UMB issued $5,718 of
earning credits to the Fund.
3. INVESTMENTS
Purchases and sales of investments, other than short-term obligations, were
$5,568,555 and $4,853,575 respectively, for the year ended September 30, 1997.
The cost basis of investments for federal income tax purposes at September 30,
1997 was $8,901,175. At September 30, 1997, on a tax basis, gross unrealized
appreciation was $4,010,552, gross unrealized depreciation was $43,278 and net
unrealized appreciation was $3,967,274.
- -------------------------------------------------------------------------------
FEDERAL TAX STATUS
OF 1997 DIVIDENDS
INCOME AND CAPITAL GAIN DIVIDENDS PAID TO YOU, WHETHER RECEIVED IN CASH OR
REINVESTED IN SHARES, MUST BE INCLUDED IN YOUR FEDERAL INCOME TAX RETURN AND
MUST BE REPORTED BY THE FUND TO THE INTERNAL REVENUE SERVICE IN ACCORDANCE WITH
U.S. TREASURY DEPARTMENT REGULATIONS.
NONE OF THE DIVIDENDS PAID BY THE FUND QUALIFY FOR THE 70% DIVIDENDS RECEIVED
DEDUCTION AVAILABLE TO CERTAIN CORPORATE SHAREHOLDERS.
- -------------------------------------------------------------------------------
INVESTMENT ADVISOR
Graver, Bokhof, Goodwin & Sullivan
100 South Wacker Drive, Suite 2100
Chicago, Illinois 60606
DISTRIBUTOR
Dreher & Associates, Inc.
One Oakbrook Terrace, Suite 708
Chicago, Illinois 60181
CUSTODIAN
UMB Bank, n.a.
P.O. Box 419226
Kansas City, Missouri 64141
TRANSFER AGENT
Jones & Babson
BMA Tower
700 Karnes Blvd., 12th Floor
Kansas City, Missouri 64108
COUNSEL
Vedder, Price, Kaufman & Kammholz
Chicago, Illinois
INDEPENDENT AUDITORS
Ernst & Young LLP
Chicago, Illinois
<PAGE>
APPENDIX A
COMMERCIAL PAPER RATINGS
A Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days. The following summarizes the rating categories used by Standard &
Poor's for commercial paper in which the Fund may invest:
"A-1" - Issue's degree of safety regarding timely payment is strong. Those
issues determined to possess extremely strong safety characteristics are denoted
"A-1+."
"A-2" - Issue's capacity for timely payment is satisfactory. However, the
relative degree of safety is not as high as for issues designated "A-1."
Moody's commercial paper ratings are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of 9 months. The following summarizes the rating categories used by
Moody's for commercial paper in which the Funds may invest:
"Prime-1" - Issuer or related supporting institutions are considered to
have a superior capacity for repayment of short-term promissory obligations.
Prime-1 repayment capacity will normally be evidenced by the following
capacities: leading market positions in well-established industries; high rates
of return on funds employed; conservative capitalization structures with
moderate reliance on debt and ample asset protection; broad margins in earning
coverage of fixed financial charges and high internal cash generation; and
well-established access to a range of financial markets and assured sources of
alternate liquidity.
"Prime-2" - Issuer or related supporting institutions are considered to
have a strong capacity for repayment of short-term promissory obligations. This
will normally be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternative liquidity is
maintained.
The three rating categories of Duff & Phelps for investment grade
commercial paper are "Duff 1," "Duff 2" and "Duff 3." Duff & Phelps employs
three designations, "Duff 1+," "Duff 1" and "Duff 1-," within the highest rating
category. The following summarizes the rating categories used by Duff & Phelps
for commercial paper in which the Fund may invest:
"Duff 1+" - Debt possesses highest certainty of timely payment. Short-term
liquidity, including internal operating factors and/or access to alternative
sources of funds, is outstanding, and safety is just below risk-free U.S.
Treasury short-term obligations.
"Duff 1" - Debt possesses very high certainty of timely payment. Liquidity
factors are excellent and supported by good fundamental protection factors.
Risk factors are minor.
A-1
<PAGE>
"Duff 1-" - Debt possesses high certainty of timely payment. Liquidity
factors are strong and supported by good fundamental protection factors. Risk
factors are very small.
"Duff 2" - Debt possesses good certainty of timely payment. Liquidity
factors and company fundamentals are sound. Although ongoing funding need may
enlarge total financing requirements, access to capital markets is good.
Fitch short-term ratings apply to debt obligations that are payable on
demand or have original maturities of up to three years. The highest rating
category of Fitch for short-term obligations is "F-1." Fitch employs two
designations, "F-1+" and "F-1," within the highest category. The following
summarizes the rating categories used by Fitch for short-term obligations in
which the Funds may invest:
"F-1+" - Securities possess exceptionally strong credit quality. Issues
assigned this rating are regarded as having the strongest degree of assurance
for timely payment.
"F-1" - Securities possess very strong credit quality. Issues assigned
this rating reflect an assurance of timely payment only slightly less in degree
than issues rated "F-1+."
Fitch may also use the symbol "LOC" with its short-term ratings to indicate that
the rating is based upon a letter of credit issued by a commercial bank.
Thomson BankWatch short-term ratings assess the likelihood of an untimely
or incomplete payment of principal or interest of unsubordinated instruments
having a maturity of one year or less which are issued by a bank holding company
or an entity within the holding company structure. The following summarizes the
ratings used by Thomson BankWatch in which the Fund may invest:
"TBW-1" - This designation represents Thomson BankWatch's highest rating
category and indicates a very high degree of likelihood that principal and
interest will be paid on a timely basis.
"TBW-2" - this designation indicates that while the degree of safety
regarding timely payment of principal and interest is strong, the relative
degree of safety is not as high as for issues rated "TBW-1."
A-2
<PAGE>
IBCA assesses the investment quality of unsecured debt with an original
maturity of less than one year which is issued by bank holding companies and
their principal bank subsidiaries. The following summarizes the rating
categories used by IBCA for short-term debt ratings in which the Fund may
invest:
"A1" - Obligations are supported by the highest capacity for timely
repayment. Where issues possess a particularly strong credit feature, a rating
of A1+ is assigned.
"A2" - Obligations are supported by a good capacity for timely repayment.
CORPORATE LONG-TERM INVESTMENT GRADE DEBT RATINGS
STANDARD & POOR'S INVESTMENT GRADE DEBT RATINGS
A Standard & Poor's corporate or municipal debt rating is a current
assessment of the creditworthiness of an obligor with respect to a specific
obligation. This assessment may take into consideration obligors such as
guarantors, insurers, or lessees. The debt rating is not a recommendation to
purchase, sell, or hold a security, inasmuch as it does not comment as to market
price or suitability for a particular investor.
The ratings are based on current information furnished by the issuer or
obtained by S&P from other sources it considers reliable. S&P does not perform
an audit in connection with any rating and may, on occasion, rely on unaudited
financial information. The ratings may be changed, suspended, or withdrawn as a
result of changes in, or unavailability of, such information, or for other
circumstances.
The ratings are based, in varying degrees, on the following considerations:
1. Likelihood of default - capacity and willingness of the obligor
as to the timely payment of interest and repayment of principal
in accordance with the terms of the obligation.
2. Nature of and provisions of the obligation.
3. Protection afforded by, and relative position of, the obligation
in the event of bankruptcy, reorganization, or other arrangement
under the laws of bankruptcy and other laws affecting creditors'
rights.
A-3
<PAGE>
AAA - Debt rated 'AAA' has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely strong.
AA - Debt rated 'AA' has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A - Debt rated 'A' has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
BBB - Debt rated 'BBB' is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
MOODY'S LONG-TERM INVESTMENT GRADE DEBT RATINGS
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risk appear somewhat larger than in Aaa
securities.
A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment some time in the future.
Baa - Bonds which are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
A-4
<PAGE>
FITCH INVESTORS SERVICE, INC. INVESTMENT GRADE BOND RATINGS
Fitch investment grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The ratings
represent Fitch's assessment of the issuer's ability to meet the obligations of
a specific debt issue or class of debt in a timely manner.
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the issuer's
future financial strength and credit quality.
Fitch ratings do not reflect any credit enhancement that may be provided by
insurance policies or financial guaranties unless otherwise indicated.
Bonds that have the same rating are of similar but not necessarily
identical credit quality since the rating categories do not fully reflect small
differences in the degrees of credit risk.
Fitch ratings are not recommendations to buy, sell, or hold any security.
Ratings do not comment on the adequacy of market price, the suitability of any
security for a particular investor, or the tax-exempt nature of taxability of
payments made in respect of any security.
Fitch ratings are based on information obtained from issuers, other
obligors, underwriters, their experts, and other sources Fitch believes to be
reliable. Fitch does not audit or verify the truth or accuracy of such
information. Ratings may be changed, suspended, or withdrawn as a result of
changes in, or the unavailability of, information or for other reasons.
AAA Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated 'AAA.'
Because bonds rated in the 'AAA' and 'AA' categories are not
significantly vulnerable to foreseeable future developments,
short-term debt of the issuers is generally rated 'F-1+.'
A Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes
in economic conditions and circumstances than bonds with higher
ratings.
BBB Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on
these bonds, and therefore impair timely
A-5
<PAGE>
payment. The likelihood that the ratings of these bonds will fall
below investment grade is higher than for bonds with higher ratings.
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the issuer's
future financial strength.
Bonds that have the same rating are of similar but not necessarily
identical credit quality since the rating categories cannot fully reflect the
differences in the degrees of credit risk. Moreover, the character of the risk
factor varies from industry to industry and between corporate, health care and
municipal obligations.
DUFF & PHELPS, INC. LONG-TERM INVESTMENT GRADE DEBT RATINGS
These ratings represent a summary opinion of the issuer's long-term
fundamental quality. Rating determination is based on qualitative and
quantitative factors which may vary according to the basic economic and
financial characteristics of each industry and each issuer. Important
considerations are vulnerability to economic cycles as well as risks related to
such factors as competition, government action, regulation, technological
obsolescence, demand shifts, cost structure, and management depth and expertise.
The projected viability of the obligor at the trough of the cycle is a critical
determination.
Each rating also takes into account the legal form of the security (e.g.,
first mortgage bonds, subordinated debt, preferred stock, etc.). The extent of
rating dispersion among the various classes of securities is determined by
several factors including relative weightings of the different security classes
in the capital structure, the overall credit strength of the issuer, and the
nature of covenant protection. Review of indenture restrictions is important to
the analysis of a company's operating and financial constraints.
A-6
<PAGE>
The Credit Rating Committee formally reviews all ratings once per quarter
(more frequently, if necessary). Ratings of 'BBB-' and higher fall within the
definition of investment grade securities, as defined by bank and insurance
supervisory authorities.
RATING DEFINITION
SCALE
- ------------------------------------------------------------------
AAA Highest credit quality. The risk factors
are negligible, being only slightly more
than for risk-free U.S. Treasury debt.
- ------------------------------------------------------------------
AA+ High credit quality. Protection factors
AA are strong. Risk is modest, but may vary
AA- slightly from time to time because of
economic conditions.
- ------------------------------------------------------------------
A+ Protection factors are average but
A adequate. However, risk factors are more
A- variable and greater in periods of economic
areas.
- ------------------------------------------------------------------
BBB+ Below average protection factors, but still
BBB considered sufficient for prudent
BBB- investment. Considerable volatility in
risk during economic cycles.
- ------------------------------------------------------------------
A-7
<PAGE>
PART C OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS:
(i) Financial statements included in Part A of this registration
statement: Financial Highlights.
(ii) Financial statements included in Part B of this registration
statement:
UNIVERSAL CAPITAL GROWTH FUND (Incorporated by reference
from registrant's annual report to shareholders for the year
ended September 30, 1997; a copy of that report is attached
hereto but, except for those portions incorporated by
reference, is furnished for the information of the
Commission and is not deemed to be filed as part of this
registration statement):
Report of independent auditors
Portfolio of investments - September 30, 1997
Statement of assets and liabilities - September 30, 1997
Statement of operations for the year ended
September 30, 1997
Statement of Changes in Net Assets for the years ended
September 30, 1997 and 1996
Financial Highlights
Notes to financial statements
Schedules II, III, IV and V are omitted as the required
information is not present.
Schedule I has been omitted as the required information is
presented in the Portfolio of Investments at September 30,
1997.
(b) EXHIBITS:
1.1 Agreement and Declaration of Trust(1)
1.2 Amendment no. 1 to Agreement and Declaration of Trust(1)
2 Bylaws, as amended(1)
3 None
4 Form of share certificate for series designated Universal
Capital Growth Fund(1)
5 Investment Advisory Agreement with Graver, Bokhof, Goodwin &
Sullivan(2)
6.1 Distribution Agreement with Dreher & Associates, Inc.(1)
6.2 Form of Selling Group Agreement(1)
C-1
<PAGE>
7 None
8 Custody Agreement with UMB Bank, n.a.(1)
9.1 Transfer Agency Agreement with Jones & Babson, Inc.(1)
9.2 Fund Accounting Agreement with UMB Bank, n.a.(1)
9.3 Administration Agreement with Sunstone Financial Group,
Inc.(2)
9.4 (EX- 99.B9) Transfer Agency Agreement with Sunstone Investor Services, LLC
10 Opinion of Goodwin, Procter & Hoar dated January 16, 1991(1)
11 (EX-99.B11) Consent of Independent Auditors
12 None
13.1 Subscription Agreement(1)
13.2 Organizational Expense Agreement(1)
14 Universal Capital Investment Trust Individual Retirement
Account Prototype Plan, disclosure statement, and application,
as amended and restated April 19, 1994(1)
15 Distribution (12b-1) Plan(1)
16 Schedule for Computation of Performance Quotations(1)
17 (EX-27.1) Financial Data Schedule
18 None
19 Account application(1)
(EX-485.b) 485(b) letter
(1)Previously filed. Incorporated by reference to the exhibit of the same
number filed with Post-Effective Amendment No. 6, Registration No. 33-37668,
effective January 31, 1996.
(2)Previously filed. Incorporated by reference to the exhibit of the same
number filed with Post-Effective Amendment No. 8, Registration No. 33-37668,
effective January 28, 1998.
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
The registrant does not consider that there are any persons directly
or indirectly controlling, controlled by, or under common control with, the
registrant within the meaning of this item. The information in the prospectus
under the captions "Management of the Fund - The Adviser and Distributor" and in
the Statement of Additional Information under the caption "Management" is
incorporated by reference.
C-2
<PAGE>
Item 26. NUMBER OF HOLDERS OF SECURITIES
As of April 1, 1998, there were 683 record holders of the series of
registrant's shares designated Universal Capital Growth Fund.
Item 27. INDEMNIFICATION
Article VI of the agreement and declaration of trust of registrant
(exhibit 1 to the registrant's registration statement on form N-1A, no.
33-37668, which is incorporated herein by reference) provides that the Trust
shall indemnify (from the assets of the Sub-Trust or Sub-Trusts in question)
each of its Trustees and officers (including persons who serve at the Trust's
request as directors, officers or trustees of another organization in which the
Trust has any interest as a shareholder, creditor or otherwise [hereinafter
referred to as a "Covered Person"]) against all liabilities, including but not
limited to amounts paid in satisfaction of judgments, in compromise or as fines
and penalties, and expenses, including reasonable accountants' and counsel fees,
incurred by any Covered Person in connection with the defense or disposition of
any action, suit or other proceeding, whether civil or criminal, before any
court or administrative or legislative body, in which such Covered Person may be
or may have been involved as a party or otherwise or with which such person may
be or may have been threatened, while in office or thereafter, by reason of
being or having been such a Trustee or officer, director or trustee, except with
respect to any matter as to which it has been determined in one of the manners
described below, that such covered Person (i) did not act in good faith in the
reasonable belief that such Covered Person's action was in or not opposed to the
best interests of the Trust or (ii) had acted with willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of such Covered Person's office (either and both of the conduct
described in (i) and (ii) being referred to hereafter as "Disabling Conduct").
A determination that the Covered Person is not entitled to
indemnification due to Disabling Conduct may be made by (i) a final decision on
the merits by a court or other body before whom the proceeding was brought that
the person to be indemnified was not liable by reason of Disabling Conduct, (ii)
dismissal of a court action or an administrative proceeding against a Covered
Person for insufficiency of evidence of Disabling Conduct, or (iii) a reasonable
determination, based upon a review of the facts, that the indemnitee was not
liable by reason of Disabling Conduct by (a) a vote of a majority of a quorum of
Trustees who are neither "interested persons" of the Trust as defined in section
2(a)(19) of the Investment Company Act of 1940 nor parties to the proceeding, or
(b) an independent legal counsel in a written opinion. Expenses, including
accountants' and counsel fees so incurred by any such Covered Person (but
excluding amounts paid in satisfaction of judgments, in compromise or as fines
or penalties), may be paid from time to time in advance of the final disposition
of any such action, suit or proceeding, provided that the Covered Person shall
have undertaken to repay the amounts so paid to the Sub-Trust in question if it
is ultimately determined that indemnification of such expenses is not authorized
under this Article VI and (i) the Covered Person shall have provided security
for such undertaking, (ii) the Trust shall be insured against losses arising by
reason of any lawful advances, or (iii) a majority of a quorum of the
disinterested Trustees who are not a party to the proceeding, or an independent
legal counsel in a written opinion, shall have determined, based on a review of
readily available facts (as opposed to a full trial-type inquiry), that there is
reason to believe that the Covered Party ultimately will be found entitled to
indemnification.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a trustee, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by
C-3
<PAGE>
such trustee, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
The information in the prospectus in the first two paragraphs under
the caption "Management of the Fund -- The Adviser and Distributor" is
incorporated by reference. Neither the Adviser nor any of its directors or
officers has been engaged for its or his own account in any other business,
profession, vocation or employment of a substantial nature in the past two
fiscal years.
Item 29. PRINCIPAL UNDERWRITERS
(a) None.
<TABLE>
<CAPTION>
(b) Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
------------------ --------------------- ---------------------
<S> <C> <C>
James A. Dreher President N/A
One Oakbrook Terrace
Suite 708
Oakbrook Terrace, Illinois
60181
Patricia M. Ellington Vice President/ N/A
One Oakbrook Terrace Operations
Suite 708
Oakbrook Terrace, Illinois
60181
Linda M. Kozak Secretary/Treasurer N/A
One Oakbrook Terrace
Suite 708
Oakbrook Terrace, Illinois
60181
</TABLE>
(c) Not applicable
Item 30. LOCATION OF ACCOUNTS AND RECORDS
As to records of the Distributor:
Linda M. Kozak
Integrated Financial Services, Inc.
One Oakbrook Terrace, Suite 708
Oakbrook Terrace, Illinois 60181
As to records of the Custodian and Fund Accountant:
UMB Bank, n.a.
P.O. Box 419226
Kansas City, Missouri 64141
Attn: Lori Judd
C-4
<PAGE>
As to records of the Administrator:
Sunstone Financial Group, Inc.
207 East Buffalo Street, Suite 400
Milwaukee, Wisconsin 53202
As to the record of the Transfer Agent:
Sunstone Investor Services, LLC
207 East Buffalo Street, Suite 315
Milwaukee, WI 53202
Item 31. MANAGEMENT SERVICES
None
Item 32. UNDERTAKINGS
(a) Not applicable
(b) Not applicable
(c) The Registrant undertakes to furnish to each person to whom a
Prospectus is delivered, a copy of its latest Annual Report to
Shareholders, upon request and without charge.
C-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this amendment
to its registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in Chicago, Illinois on April 28, 1998.
UNIVERSAL CAPITAL INVESTMENT TRUST
By: /S/ Andrew J. Goodwin, III
---------------------------------
Andrew J. Goodwin, III, President
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the registration statement has been signed below by the following persons in
the capacities and on the dates indicated.
Name Title Date
- ---- ----- ----
/S/ Andrew J. Goodwin, III President and Trustee 4-28-98
- -------------------------- (principal executive officer) ---------
Andrew J. Goodwin, III
/S/ Keith Pinsoneault Vice President, Secretary, & Treasurer 4-28-98
- -------------------------- ---------
Keith Pinsoneault
/S/ William J. Breen Trustee 4-28-98
- -------------------------- ---------
William J. Breen
/S/ Robert F. Seebeck Trustee 4-28-98
- -------------------------- ---------
Robert F. Seebeck
/S/ Alan L. Zable Trustee 4-28-98
- -------------------------- ---------
Alan L. Zable
<PAGE>
EXHIBIT INDEX
Exhibit
- -------
1.1 Agreement and Declaration of Trust(1)
1.2 Amendment no. 1 to Agreement and Declaration of Trust(1)
2 Bylaws, as amended(1)
3 None
4 Form of share certificate for series designated Universal
Capital Growth(1)
5 Investment Advisory Agreement with Graver, Bokhof, Goodwin &
Sullivan(2)
6.1 Distribution Agreement with Dreher & Associates, Inc.(1)
6.2 Form of Selling Group Agreement(1)
7 None
8 Custody Agreement with UMB Bank n.a.(1)
9.1 Transfer Agency Agreement with Jones & Babson, Inc(1)
9.2 Fund Accounting Agreement with UMB Bank, n.a.(1)
9.3 Administration Agreement with Sunstone Financial Group,
Inc.(2)
9.4 (EX-99.B9) Transfer Agency Agreement with Sunstone Investor Services,
LLC
10 Opinion of Goodwin, Proctor & Hoar dated January 16, 1991(1)
11 (EX-99.B11) Consent of Independent Auditors
12 None
13.1 Subscription Agreement(1)
13.2 Organizational Expense Agreement(1)
14 Universal Capital Investment Trust Individual Retirement
Account Prototype Plan, Disclosure Statement, and
Application, as amended and restated April 19, 1994(1)
<PAGE>
15 Distribution (12-b1) Plan(1)
16 Schedule for Computation of Performance Quotations(1)
17 (EX-27.1) Financial Data Schedule
18 None
19 Account Application(1)
(EX-485.b) 485(b) letter
(1)Previously filed. Incorporated by reference to the exhibit of the same
number filed with Post-Effective Amendment No. 6 Registration No. 33-37668,
effective January 31 1996.
(2)Previously filed. Incorporated by reference to the exhibit of the same
number filed with Post-Effective Amendment No. 8, Registration No. 33-37668,
effective January 28, 1998.
<PAGE>
TRANSFER AGENCY AGREEMENT
THIS AGREEMENT is made as of this 27 day of April, 1998, by and Universal
Capital Investment Trust, a Massachusetts business trust (the "Trust"), and
Sunstone Investor Services, LLC, a Wisconsin limited liability company
("Sunstone").
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end management investment company and is
authorized to issue shares of beneficial interests ("Shares") in separate series
with each such series representing the interests in a separate portfolio of
securities and other assets;
WHEREAS, the Trust desires to retain Sunstone to render the transfer agency
and other services contemplated hereby with respect to each of the investment
portfolios of the Trust as are listed on Schedule A hereto and any additional
investment portfolios the Trust and Sunstone may agree upon and include on
Schedule A as such Schedule may be amended from time to time (such investment
portfolios and any additional investment portfolios are individually referred to
as a "Fund" and collectively the "Funds"), and Sunstone is willing to render
such services.
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto, intending to be legally bound, do
hereby agree as follows:
ARTICLE I
APPOINTMENT OF TRANSFER AGENT
A. APPOINTMENT.
1. The Trust hereby constitutes and appoints Sunstone as transfer
agent and dividend disbursing agent of all the Shares of the Funds during the
period of this Agreement, and Sunstone hereby accepts such appointment as
transfer agent and dividend disbursing agent and agrees to perform the duties
thereof as hereinafter set forth.
2. Sunstone shall perform the transfer agent and dividend disbursing
agent services described on Schedule B hereto. To the extent that the Trust
requests Sunstone to perform any additional services in a manner not consistent
with Sunstone's usual processing procedures, Sunstone and the Trust shall
mutually agree as to the services to be accomplished, the manner of
accomplishment and the compensation to which Sunstone shall be entitled with
respect thereto.
3. Sunstone may, in its discretion, appoint in writing other parties
qualified to perform transfer agency and shareholder services approved by the
Trust (individually, a "Sub-transfer Agent") to carry out some or all of its
responsibilities under this Agreement with respect to a Fund; provided, however,
that unless the Trust shall enter into a written agreement with such
Sub-transfer Agent, the
1
<PAGE>
Sub-transfer Agent shall be the agent of Sunstone and not the agent of the Trust
or such Fund and, in such event Sunstone shall be fully responsible for the acts
or omissions of such Sub-transfer Agent and shall not be relieved of any of its
responsibilities hereunder by the appointment of such Sub-transfer Agent.
4. Sunstone shall have no duties or responsibilities whatsoever
hereunder except such duties and responsibilities as are specifically set forth
in this Agreement, and no covenant or obligation shall be implied in this
Agreement against Sunstone.
B. DOCUMENTS/RECORDS.
1. In connection with such appointment, the Trust shall deliver or
cause to be delivered the following documents to Sunstone:
a) A copy of the Agreement and Declaration of Trust and By-laws
of the Trust and all amendments thereto, and a copy of the resolutions of the
Board of Trustees of the Trust appointing Sunstone and authorizing the execution
of this Transfer Agency Agreement on behalf of the Funds, each certified by the
Secretary of the Trust;
b) A certificate signed by the President and Secretary of the
Trust specifying: the number of authorized Shares and the number of such
authorized Shares issued and currently outstanding, if any; the names and
specimen signatures of the officers of the Trust authorized to sign written
stock certificates, and the individuals authorized to provide oral instructions
and to sign written instructions and requests on behalf of the Trust
(hereinafter referred to as "Authorized Person(s)"), and to change the persons
authorized to provide such instructions from time to time, it being understood
Sunstone shall not be held to have notice of any change in the authority of any
Authorized Person until receipt of written notice thereof from the Trust;
c) In the event the Trust issues Share certificates, specimen
Share certificates for each Fund in the form approved by the Board of Trustees
of the Trust (and in a format compatible with Sunstone's operating system),
together with a certificate signed by the Secretary of the Trust as to such
approval;
d) Copies of the Trust's Registration Statement, as amended to
date, and the most recently filed Post-Effective Amendment thereto, filed by the
Trust with the Securities and Exchange Commission under the Securities Act of
1933, as amended (the "1933 Act"), and under the 1940 Act, as amended, together
with any applications filed in connection therewith; and
e) Opinion of counsel for the Trust with respect to the Trust's
organization and existence under the laws of its state of organization, the
validity of the authorized and outstanding Shares, whether such Shares are fully
paid and non-assessable and the status of such Shares under the Securities Act
of 1933, as amended, and any other applicable federal law or regulation (i.e.,
if subject to registration, that they have been registered and that the
Registration Statement has become effective or, if exempt, the specific grounds
therefor.)
2
<PAGE>
2. The Trust agrees to deliver or to cause to be delivered to
Sunstone in Milwaukee, Wisconsin, at the Trust's expense, all of its shareholder
account records relating to the Funds in a format acceptable to Sunstone and all
such other documents, records and information as Sunstone may reasonably request
in order for Sunstone to perform its services hereunder.
ARTICLE II
COMPENSATION & EXPENSES
A. COMPENSATION. In consideration for its services hereunder as transfer
agent and dividend disbursing agent, each Fund will pay to Sunstone such
compensation as set forth in Schedule C.
B. EXPENSES. The Trust on behalf of each Fund also agrees to promptly
reimburse Sunstone for all out-of-pocket expenses or disbursements incurred by
Sunstone in connection with the performance of services under this Agreement
including, but not limited to, expenses for postage, express delivery services,
freight charges, envelopes, checks, drafts, forms (continuous or otherwise),
specially requested reports and statements, bank account service fees and
charges, telephone calls, telegraphs, stationery supplies, outside printing and
mailing firms, magnetic tapes, reels or cartridges (if sent to a Fund or to a
third party at the Trust's request) and magnetic tape handling charges, on-site
and off-site record storage, media for storage of records (e.g., microfilm,
microfiche, optical platters, computer tapes and disks), computer equipment
installed at the Trust's request at the Trust's or a third party's premises,
telecommunications equipment, telephone/telecommunication lines between the
Trust and its agents, on one hand, and Sunstone on the other, proxy soliciting,
processing and/or tabulating costs, transmission of statement data for remote
printing or processing, and transaction fees to the extent any of the foregoing
are paid by Sunstone.
C. PAYMENT PROCEDURES.
1. Amounts due hereunder shall be due and paid by the Trust on
behalf of the respective Fund on or before the fifteenth (15th) day after the
date of the statement therefor (the "Due Date"). Service fees are billed
monthly, and out-of-pocket expenses are billed as incurred (unless prepayment is
requested by Sunstone). If requested by Sunstone, postage and other
out-of-pocket expenses are payable in advance, and in the event requested,
postage is due at least seven days prior to the anticipated mail date. In the
event Sunstone requests advance payment, Sunstone shall not be obligated to
incur such expenses or perform the related service(s) until payment is received.
Sunstone may, at its option, arrange to have various service providers submit
invoices directly to the Trust for payment of out-of-pocket expenses
reimbursable hereunder. The Trust is aware that its failure to pay all amounts
in a timely fashion so that they will be received by Sunstone on or before the
Due Date will give rise to costs to Sunstone not contemplated by this Agreement,
including but not limited to carrying, processing and accounting charges.
Accordingly, in the event that any amounts due hereunder are not received by
Sunstone by the Due Date, the Trust shall pay a late charge equal to one and
one-half percent (1.5%) per month or the maximum amount permitted by law,
whichever is less. In addition, the Trust shall pay reasonable attorney's fees
and court costs of Sunstone if any amounts
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due Sunstone are collected by or through an attorney. The parties hereby agree
that such late charge represents a fair and reasonable computation of the costs
incurred by reason of late payment or payment of amounts not properly due.
Acceptance of such late charge shall in no event constitute a waiver of the
Fund's default or prevent the non-defaulting party from exercising any other
rights and remedies available to it.
2. In the event that any charges are disputed, the Trust shall, on
or before the Due Date, pay all undisputed amounts due hereunder and notify
Sunstone in writing of any disputed charges for out-of-pocket expenses which it
is disputing in good faith. Payment for such disputed charges shall be due on
or before the close of the fifth (5th) business day after the day on which
Sunstone provides to the Trust documentation which an objective observer would
agree reasonably supports the disputed charges (the "Revised Due Date"). Late
charges shall not begin to accrue as to charges disputed in good faith until the
first day after the Revised Due Date.
ARTICLE III
PROCESSING AND PROCEDURES
A. ISSUANCE, REDEMPTION AND TRANSFER OF SHARES
1. Sunstone acknowledges that it has received a copy of the Trust's
Prospectus (as hereinafter defined), which Prospectus describes how sales and
redemptions of shares of each Fund shall be made and Sunstone agrees to accept
purchase orders and redemption requests with respect to Fund shares on each Fund
Business Day in accordance with such Prospectus. "Fund Business Day" shall be
deemed to be each day on which the New York Stock Exchange is open for trading,
and "Prospectus" shall mean the last Trust prospectus actually received by
Sunstone from the Trust with respect to which the Trust has indicated a
registration statement under the 1933 Act has become effective, including the
Statement of Additional Information, incorporated by reference therein.
2. On each Fund Business Day Sunstone shall, as of the time at which
the net asset value of a Fund is computed, issue to and redeem from the accounts
specified in a purchase order or redemption request, which in accordance with
the Prospectus is effective on such day, the appropriate number of full and
fractional Shares based on the net asset value per Share of such Fund specified
in an advice received on such Fund Business Day from or on behalf of the Fund.
3. Upon the issuance of any Shares in accordance with this
Agreement, Sunstone shall not be responsible for the payment of any original
issue or other taxes required to be paid by the Trust in connection with such
issuance of any Shares.
4. Sunstone shall not be required to issue any Shares after it has
received from an Authorized Person or from an appropriate federal or state
authority written notification that the sale of Shares has been suspended or
discontinued, and Sunstone shall be entitled to rely upon such written
notification.
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5. Upon receipt of a redemption request and monies paid to it by the
Custodian in connection with a redemption of Shares, Sunstone shall cancel the
redeemed Shares and after making appropriate deduction for any withholding of
taxes required of it by applicable law, make payment in accordance with the
Trust's redemption and payment procedures described in the Prospectus.
6. (a) Except as otherwise provided in sub-paragraph (b) of this
paragraph, Shares will be transferred or redeemed upon presentation to Sunstone
of Share certificates, if any, or instructions properly endorsed for transfer,
exchange or redemption, accompanied by such documents as Sunstone deems
necessary to evidence the authority of the person making such transfer or
redemption, and bearing satisfactory evidence of the payment of stock transfer
taxes. Sunstone reserves the right to refuse to transfer or redeem Shares until
it is satisfied that the endorsement on the stock certificate, if any, or
instructions is valid and genuine, and for that purpose it will require, unless
otherwise instructed by an Authorized Person or except as provided in
sub-paragraph (b) of this paragraph, a guarantee of signature by an "Eligible
Guarantor Institution" as that term is defined by SEC Rule 17Ad-15. Sunstone
also reserves the right to refuse to transfer or redeem Shares until it is
satisfied that the requested transfer or redemption is legally authorized, and
it shall incur no liability for the refusal, in good faith, to make transfers or
redemptions which Sunstone, in its judgment, deems improper or unauthorized, or
until it is satisfied that there is no basis to any claims adverse to such
transfer or redemption. Sunstone may, in effecting transfers and redemptions of
Shares, rely upon those provisions of the Uniform Act for the Simplification of
Fiduciary Security Transfers or the Uniform Commercial Code, as the same may be
amended from time to time, applicable to the transfer in question, and the Trust
shall indemnify Sunstone for any act done or omitted by it in good faith in
reliance upon such laws.
(b) Notwithstanding the foregoing or any other provision
contained in this Agreement to the contrary, Sunstone shall be fully protected
by the Trust in not requiring any instruments, documents, assurances,
endorsements or guarantees, including, without limitation, any signature
guarantees, in connection with a redemption, exchange or transfer, of Shares
whenever Sunstone reasonably believes that requiring the same would be
inconsistent with the transfer and redemption procedures as described in the
Prospectus.
7. Notwithstanding any provision contained in this Agreement to the
contrary, Sunstone shall not be required or expected to require, as a condition
to any transfer or redemption of any Shares pursuant to a computer tape or
electronic data transmission, any documents to evidence the authority of the
person requesting the transfer or redemption and/or the payment of any stock
transfer taxes, and shall be fully protected in acting in accordance with the
applicable provisions of this Article IV.
8. In connection with each purchase and each redemption of Shares,
Sunstone shall send such statements as are prescribed by the Federal securities
laws applicable to transfer agents or as described in the Prospectus. If the
Prospectus indicates that certificates for Shares are available and if
specifically requested in writing by any shareholder, or if otherwise required
hereunder, Sunstone will countersign, issue and mail to such shareholder at the
address set forth in the records of Sunstone a Share certificate for any full
Share requested.
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9. On each Fund Business Day Sunstone shall supply the Trust with a
statement specifying with respect to the immediately preceding Fund Business
Day: the total number of Shares of each Fund (including fractional Shares)
issued and outstanding at the opening of business on such day; the total number
of Shares of each Fund sold on such day; the total number of Shares of each Fund
and the dollar amount redeemed from Shareholders by Sunstone on such day; and
the total number of Shares of each Fund issued and outstanding.
10. Procedures for effecting purchase, redemption or transfer
transactions accepted from investors by telephone or other methods shall be
established by mutual agreement between the Trust and Sunstone consistent with
the terms of the Prospectus. Sunstone upon notice to the Trust may establish
such additional procedures, rules and regulations governing the transfer or
registration of Share certificates, if any, or the purchase, redemption or
transfer of Shares, as it may deem advisable and consistent with the Prospectus
and such rules and regulations generally adopted by mutual fund transfer agents.
Sunstone shall not be liable, and shall be held harmless by the Trust, for its
actions or omissions which are consistent with the foregoing procedures.
B. DIVIDENDS AND DISTRIBUTIONS.
1. The Trust shall furnish to Sunstone a copy of a resolution of its
Board of Trustees, certified by an Authorized Person, either (i) setting forth
the date of the declaration of a dividend or distribution, the date of accrual
or payment, as the case may be, thereof, the record date as of which
shareholders entitled to payment, or accrual, as the case may be, shall be
determined, the amount per Share of such dividend or distribution, the payment
date on which all previously accrued and unpaid dividends are to be paid, and
the total amount, if any, payable to Sunstone on such payment date, or (ii)
authorizing the declaration of dividends and distributions on a daily or other
periodic basis and authorizing Sunstone to rely on a certificate of an
Authorized Person setting forth the information described in subsection (i) of
this paragraph.
2. In connection with a reinvestment of a dividend or distribution
of Shares of a Fund, Sunstone shall as of each Fund Business Day, as specified
in a certificate or resolution described in paragraph 1, issue Shares of the
Fund based on the net asset value per Share of such Fund specified in an advice
received from or on behalf of the Fund on such Fund Business Day.
3. Upon the mail date specified in such certificate or resolution,
as the case may be, the Trust shall, in the case of a cash dividend or
distribution, cause the Custodian to deposit in an account in the name of
Sunstone as agent for the Trust, an amount of cash, if any, sufficient for
Sunstone to make the payment, as of the mail date, specified in such Certificate
or resolution, as the case may be, to the Shareholders who were of record on the
record date. Sunstone will, upon receipt of any such cash, make payment of such
cash dividends or distributions to the shareholders of record as of the record
date. Sunstone shall not be liable for any improper payments made in good faith
and in accordance with a certificate or resolution described in the preceding
paragraph. If Sunstone shall not receive from the Custodian sufficient cash to
make payments of any cash dividend or distribution to all shareholders of a Fund
as of the record date, Sunstone shall, upon notifying the Trust, withhold
payment to all shareholders of record as of the record date until sufficient
cash is provided to Sunstone.
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4. It is understood that Sunstone in its capacity as transfer agent
and dividend disbursing agent shall in no way be responsible for the
determination of the rate or form of dividends or capital gain distributions due
to the shareholders pursuant to the terms of this Agreement. It is further
understood that Sunstone shall file with the Internal Revenue Service and
shareholders such appropriate federal tax forms concerning the payment of
dividend and capital gain distributions but shall in no way be responsible for
the collection or withholding of taxes due on such dividends or distributions
due to shareholders, except and only to the extent, required by applicable law.
C. AUTHORIZATION AND ISSUANCE OF SHARES; RECAPITALIZATION OR CAPITAL
ADJUSTMENT.
1. Prior to the effective date of any increase or decrease in the
total number of Shares authorized to be issued, or the issuance of any
additional Shares of a Fund pursuant to stock dividends, stock splits,
recapitalizations, capital adjustments or similar transactions, the Trust agrees
to deliver to Sunstone such documents, certificates, reports and legal opinions
as Sunstone may reasonably request.
2. In the event the Trust issues Share certificates, Sunstone may
issue new Share certificates in place of certificates represented to have been
lost, stolen, or destroyed upon receiving written instructions from the
shareholder accompanied by proof of an indemnity or surety bond issued by a
recognized insurance institution specified by the Trust or Sunstone. If
Sunstone receives written notification from the shareholder or broker dealer
that the certificate issued was never received, and such notification is made
within 30 days of the date of issuance, Sunstone may reissue the certificate
without requiring a surety bond. Sunstone may also reissue certificates which
are represented as lost, stolen, or destroyed without requiring a surety bond
provided that the notification is in writing and accompanied by an
indemnification signed on behalf of a member firm of the New York Stock Exchange
and signed by an officer of said firm with the signature guaranteed.
Notwithstanding the foregoing, Sunstone will reissue a certificate upon written
authorization from an Authorized Person.
D. RECORDS.
1. Sunstone shall keep such records as are specified in Schedule D
hereto in the form and manner, and for such period, as it may deem advisable and
is agreeable to the Trust but not inconsistent with the rules and regulations of
appropriate government authorities, in particular Rules 31a-2 and 31a-3 under
the 1940 Act. Sunstone may deliver to the Trust from time to time at Sunstone's
discretion, for safekeeping or disposition by the Trust in accordance with law,
such records, papers and documents accumulated in the execution of its duties as
such transfer agent, as Sunstone may deem expedient, other than those which
Sunstone is itself required to maintain pursuant to applicable laws and
regulations. The Trust shall assume all responsibility for any failure
thereafter to produce any record, paper, canceled Share certificate, or other
document so returned, if and when required. To the extent required by Section
31 of the 1940 Act and the rules and regulations thereunder, the records
specified in Schedule D hereto maintained by Sunstone, which have not been
previously delivered to the Trust pursuant to the foregoing provisions of this
paragraph, shall be considered to be the property of the Trust, shall be made
available upon request for
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inspection by the officers, employees, and auditors of the Trust, and shall be
delivered to the Trust promptly upon request and in any event upon the date of
termination of this Agreement, in the form and manner kept by Sunstone on such
date of termination or such earlier date as may be requested by the Trust.
2. Sunstone agrees to keep all records and other information
relative to the Trust and its shareholders confidential. In case of any
requests or demands for the inspection of the shareholder records of the Trust,
Sunstone will endeavor to notify the Trust promptly and to secure instructions
from an officer as to such inspection. Sunstone reserves the right, however, to
exhibit the shareholder records to any person whenever it receives advice from
its counsel that there is a reasonable likelihood that Sunstone will be held
liable for the failure to exhibit the shareholder records to such person;
provided, however, that in connection with any such disclosure Sunstone shall
promptly notify the Trust that such disclosure has been made or is to be made.
Notwithstanding the foregoing, Sunstone may disclose information when requested
by a shareholder concerning an account as to which such shareholder claims a
legal or beneficial interest or when requested by the Trust, the shareholder or
the dealer of record as to such account.
ARTICLE IV
CONCERNING THE TRUST
A. REPRESENTATIONS. The Trust represents and warrants to Sunstone that:
(a) It is a business trust duly organized and existing under the laws
of the State of Massachusetts, it is empowered under applicable laws and by its
Declaration of Trust and By-Laws to enter into and perform this Agreement, and
all requisite corporate proceedings have been taken to authorize it to enter
into and perform this Agreement.
(b) It is an investment company registered under the 1940 Act.
(c) A registration statement under the 1933 Act with respect to the
Shares is effective. The Trust shall notify Sunstone if such registration
statement or any state securities registrations have been terminated, lapse or a
stop order has been entered with respect to the Shares.
B. COVENANTS.
1. The Trust or its agent upon instructions from the Trust will
provide to Sunstone copies of all amendments to its Agreement and Declaration of
Trust and By-laws made after the date of this Agreement. If requested by
Sunstone, each copy of the Agreement and Declaration of Trust and copies of all
amendments thereto shall be certified by the Secretary of the Trust. Each copy
of the By-Laws and copies of all amendments thereto, and copies of resolutions
of the Board of Trustees, shall be certified by the Secretary of the Trust, if
requested by Sunstone.
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2. The Trust shall deliver to Sunstone the Trust's currently
effective Prospectus and, for purposes of this Agreement, Sunstone shall not be
deemed to have notice of any information contained in such Prospectus until a
reasonable time after it is actually received by Sunstone.
3. All requisite steps will be taken by the Trust from time to time
when and as necessary to register the Trust's shares for sale in all states in
which the Trust's shares shall at the time be offered for sale and require
registration. If at any time the Trust receives notice of any stop order or
other proceeding in any such state affecting such registration or the sale of
Trust's shares, or of any stop order or other proceeding under the federal
securities laws affecting the sale of the Trust's shares, the Trust will give
prompt notice thereof to Sunstone.
4. The Trust will comply with all applicable requirements of the
1933 Act, the Securities Exchange Act of 1934, as amended, the 1940 Act, blue
sky laws, and any other applicable laws, rules and regulations.
5. The Trust agrees that prior to effecting any change in the
Prospectus which would increase or alter the duties and obligations of Sunstone
hereunder, it shall advise Sunstone of such proposed change at least 30 days
prior to the intended date of the same, and shall proceed with such change only
if it shall have received the written consent of Sunstone thereto, which shall
not be unreasonably withheld.
ARTICLE V
CONCERNING THE TRANSFER AGENT
A. REPRESENTATIONS. Sunstone represents and warrants to the Trust that:
(a) It is a limited liability company duly organized and existing
under the laws of the State of Wisconsin, is empowered under applicable law and
by its Articles of Organization and Operating Agreement to enter into and
perform this Agreement, and all requisite proceedings have been taken to
authorize it to enter into and perform this Agreement.
(b) It is duly registered as a transfer agent under Section 17A of
the Securities Exchange Act of 1934, as amended, to the extent required.
Sunstone shall promptly give written notice to the Trust in the event that its
registration is revoked or a proceeding is commenced that could result in such
revocation.
(c) Sunstone represents that its proprietary systems will be Year
2000 compliant in all material respects with regard to the services to be
provided herein and shall monitor the Year 2000 compliance status of its
software vendors.
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B. LIMITATION OF LIABILITY; INDEMNIFICATION.
1. Sunstone shall use its reasonable care and act in good faith in
providing its services to ensure the accuracy of all services performed under
this Agreement, but shall not be liable for any loss or damage, including
counsel fees, resulting from its actions or omissions to act or otherwise, in
the absence of its bad faith, willful misfeasance, gross negligence or reckless
disregard of its duties under this agreement. Sunstone shall not be liable in
acting upon any writing or document reasonably believed by it to be genuine and
to have been signed or made by an Authorized Person or verbal instructions which
the individual receiving the instructions on behalf of Sunstone reasonably
believes in good faith to have been given by an Authorized Person, and Sunstone
shall not be held to have any notice of any change of authority of any person
until receipt of written notice thereof from the Trust or such person.
2. The Trust agrees to indemnify and hold harmless Sunstone, its
employees, agents, members, officers and nominees from and against any and all
claims, demands, actions and suits, whether groundless or otherwise, and from
and against any and all judgments, liabilities, losses, damages, costs, charges,
counsel fees and other expenses of every nature and character arising out of or
in any way relating to Sunstone's actions taken or nonactions with respect to
the performance of services under this Agreement or based, if applicable, upon
reliance on information, records, instructions (oral or written) or requests
given or made to Sunstone by the Trust, its officers, trustees, agents or
representatives, or resulting from a breach by the Trust of any representation,
covenant or warranty contained in this Agreement; provided that this
indemnification shall not apply to actions or omissions of Sunstone in cases of
its own willful misfeasance or gross negligence, and further provided that prior
to confessing any claim against it which may be the subject of this
indemnification, Sunstone shall give the Trust written notice of and reasonable
opportunity to defend against said claim in its own name or in the name of
Sunstone. The indemnity and defense provisions provided hereunder shall
indefinitely survive the termination of this Agreement.
3. Sunstone shall indemnify and hold harmless the Trust, its
officers, trustees, employees and agents from and against any and all claims,
demands, actions and suits, whether groundless or otherwise, and from and
against any and all judgments, liabilities, losses, damages, costs, charges,
counsel fees and other expenses of every nature and character that the Trust may
sustain or incur or that may be asserted against the Trust by any person as a
result of Sunstone's gross negligence or willful misfeasance in the performance
of its duties or obligations under this Agreement, or resulting from a breach by
Sunstone of any representation or warranty contained in this Agreement; provided
that this indemnification shall not apply to actions or omissions of the Trust
in cases of its own willful misfeasance or gross negligence, and further
provided that prior to confessing any claim against it which may be the subject
of this indemnification, the Trust shall give Sunstone written notice of and
reasonable opportunity to defend against said claim in its own name or in the
name of the Trust. The indemnity and defense provisions provided hereunder
shall indefinitely survive the termination of this Agreement.
4. Sunstone assumes no responsibility hereunder, and shall not be
liable, for any damage, loss of data, errors, delay or any other loss whatsoever
caused by events beyond its
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reasonable control. Sunstone will, however, take all reasonable steps to
minimize service interruptions for any period that such interruption continues
beyond Sunstone's control.
5. In no event and under no circumstances shall either party to this
agreement be liable to anyone, including, without limitation to the other party,
for punitive damages for any act or failure to act under any provision of this
agreement even if advised of the possibility thereof.
6. At any time Sunstone may request instructions and/or receive
directions from an Authorized Person with respect to any matter arising in
connection with Sunstone's duties and obligations under this Agreement, and
Sunstone shall not be liable for any action taken or permitted by it in good
faith in accordance with such instructions or directions. Such request for
instructions by Sunstone may set forth any action proposed to be taken or
omitted by Sunstone with respect to its duties or obligations under this
Agreement and the date on and/or which such action shall be taken. Sunstone
shall not be liable for any action taken or omitted in accordance with a
proposal included in any such request on or after the date specified therein
unless, prior to taking or omitting any such action, Sunstone has received
instructions in response to such application specifying the action to be taken
or omitted. Sunstone may consult counsel of the Trust, or upon notice to and
consent of the Trust, its own counsel, at the expense of the Trust and shall be
fully protected with respect to anything done or omitted by it in good faith in
accordance with the advice or opinion of counsel to the Trust or its own
counsel.
7. Notwithstanding any of the provisions of this Agreement, Sunstone
shall be under no duty or obligation under this Agreement to inquire into, and
shall not be liable for:
(a) The legality of the issue or sale of any Shares, the
sufficiency of the amount to be received therefor, or the authority of the
Trust, as the case may be, to request such sale or issuance;
(b) The legality of a transfer or exchange of Shares, or of a
redemption of any Shares, the propriety of the amount to be paid therefor, or
the authority of the Trust, as the case may be, to request such transfer or
redemption;
(c) The legality of the declaration of any dividend by the
Trust, or the legality of the issue of any Shares in payment of any stock
dividend, or the legality of any Recapitalization or readjustment of Shares.
ARTICLE VI
TERM
1. Unless sooner terminated as provided for herein, this Agreement
shall remain in full force and effect for a period of one year from the date
hereof, and thereafter shall automatically extend for additional, successive
twelve (12) month terms unless earlier terminated as provided below.
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2. Either of the parties hereto may terminate this Agreement by
giving to the other party a notice in writing specifying the date of such
termination, which shall be not less than sixty (60) days after the date of
receipt of such notice. In the event such notice is given by the Trust, it
shall be accompanied by a copy of a resolution of the Board of Trustees of the
Trust, certified by the Secretary or any Assistant Secretary, electing to
terminate this Agreement and designating the successor transfer agent or
transfer agents. In the event such notice is given by Sunstone, the Trust shall
on or before the termination date, deliver to Sunstone a copy of a resolution of
its Board of Trustees certified by the Secretary or any Assistant Secretary
designating a successor transfer agent or transfer agents. In the absence of
such designation by the Trust, the Trust shall upon the date specified in the
notice of termination of this Agreement and delivery of the records maintained
hereunder, be deemed to be its own transfer agent and Sunstone shall thereby be
relieved of all duties and responsibilities pursuant to this Agreement. Fees
and out-of-pocket expenses incurred by Sunstone, but unpaid by the Trust upon
such termination, shall be immediately due and payable upon and notwithstanding
such termination.
3. In the event this Agreement is terminated as provided herein,
Sunstone, upon the written request of the Trust, shall deliver the records of
the Trust to the Trust or its successor transfer agent in the form maintained by
Sunstone. The Trust shall be responsible to Sunstone for all out-of-pocket
expenses and for the reasonable costs and expenses associated with the
preparation and delivery of such media in the form and manner maintained by
Sunstone, including: (a) transportation of forms and other Trust materials used
in connection with the processing of Trust transactions by Sunstone; and (b)
transportation of Trust records and files in the possession of Sunstone. To the
extent the Trust requests, and Sunstone agrees to, any custom programming in
connection with the preparation of such media or the preparation and delivery of
materials in a form different than maintained by Sunstone, the Trust shall be
responsible for all costs and expenses of Sunstone associated therewith.
Sunstone shall not reduce the level of service provided to the Trust following
notice of termination by the Trust.
ARTICLE VII
MISCELLANEOUS
A. NOTICES. Any notice required or to be permitted to be given by either
party to the other shall be in writing and shall be deemed to have been given
when sent by registered or certified mail, postage prepaid, return receipt
requested, as follows: Notice to Sunstone shall be sent to Sunstone Investor
Services, LLC, 207 East Buffalo Street, Suite 400, Milwaukee, WI, 53202,
Attention: Miriam M. Allison, and notice to the Trust shall be sent to Universal
Capital Investment Trust, 100 South Wacker Drive, Suite 2100, Chicago, IL,
60606-4002, Attention: Andrew J. Goodwin III.
B. AMENDMENTS/ASSIGNMENTS.
1. This Agreement may not be amended or modified in any manner
except by a written agreement executed by both parties with the formality of
this Agreement.
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2. This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns. This Agreement
shall not be assignable by either party without the written consent of the other
party except that Sunstone may assign this Agreement to an affiliate with
advance written notice to the Trust.
C. WISCONSIN LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Wisconsin (except as to paragraph H
below which shall be construed in accordance with Massachusetts law). If any
part, term or provision of this Agreement is determined by the courts or any
regulatory authority having jurisdiction over the issue to be illegal, in
conflict with any law or otherwise invalid, the remaining portion or portions
shall be considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the Agreement
did not contain the particular part, term or provision held to be illegal or
invalid.
D. COUNTERPARTS. This Agreement may be executed in any number of
counterparts each of which shall be deemed to be an original; but such
counterparts shall, together, constitute only one instrument.
E. PRIOR TRANSFER AGENT(S). Sunstone will endeavor to assist in
resolving shareholder inquiries and errors relating to the period during which
prior transfer agents acted as such for the Trust. Any such inquiries or errors
which cannot be expediently resolved by Sunstone will be referred to the Trust.
F. NON-EXCLUSIVE; OTHER AGREEMENTS. The services of Sunstone hereunder
are not deemed exclusive and Sunstone shall be free to render similar services
to others. Except as specifically provided herein, this Agreement does not in
any way affect any other agreements entered into among the parties hereto and
any actions taken or omitted by any party hereunder shall not affect any rights
or obligations of any other party hereunder.
G. CAPTIONS. The captions in the Agreement are included for convenience
of reference only, and in no way define or delimit any of the provisions hereof
or otherwise affect their construction or effect.
H. MISCELLANEOUS. This Agreement is executed by or on behalf of the
Trust and the obligations hereunder are not binding upon any of the Trustees,
officers or shareholders of the Trust individually but are binding only upon the
Funds to which such obligations pertain and the assets and property of such
Funds.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective corporate officer, thereunto duly authorized and
their respective corporate seals to be hereunto affixed, as the day and year
first above written.
SUNSTONE INVESTOR SERVICES, LLC UNIVERSAL CAPITAL
INVESTMENT TRUST
By: /s/ Miriam M. Allison By: /s/ Andrew J. Goodwin, III
-------------------------------- ----------------------------------
(Signature) (Signature)
Miriam M. Allison Andrew J. Goodwin, III
-------------------------------- ----------------------------------
(Name) (Name)
President President
-------------------------------- ----------------------------------
(Title) (Title)
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SCHEDULE A
TO THE
TRANSFER AGENT AGREEMENT
BY AND BETWEEN
UNIVERSAL CAPITAL INVESTMENT TRUST
AND
SUNSTONE INVESTOR SERVICES, LLC
NAME OF FUNDS
-------------
UNIVERSAL CAPITAL GROWTH FUND
15
<PAGE>
SCHEDULE B
TO THE
TRANSFER AGENT AGREEMENT
BY AND BETWEEN
UNIVERSAL CAPITAL INVESTMENT TRUST
AND
SUNSTONE INVESTOR SERVICES, LLC
- - MAINTENANCE OF SHAREHOLDER ACCOUNTS
X Maintain records for each shareholder account;
X Scan account documents for electronic storage;
X Record changes to shareholder account information;
X Maintain account documentation files for each shareholder; and
X Establish and maintain retirement plan accounts.
- - SHAREHOLDER SERVICING AND SHAREHOLDER TRANSACTIONS
X Respond to written and telephone (recorded lines) inquiries from
shareholders for information about their accounts;
X Process shareholder purchase and redemption orders, including those of
automatic investment and systematic withdrawal plans;
X Set up account information, including address, dividend options,
taxpayer identification numbers and wire instructions;
X Issue transaction confirmations;
X Process transfers and exchanges;
X Process dividend payments by check, wire or ACH or purchase new shares
through dividend reinvestment; and
X Issue customer statements.
- - COMPLIANCE REPORTING AND PROXY PROCESSING
X Provide required reports to the Securities and Exchange Commission,
the National Association of Securities Dealers and the states in which
each fund is registered;
X Prepare and distribute to the Internal Revenue Service required
Internal Revenue Service forms 1099, 1042, 5498 and 945 relating to
earned income and capital gains;
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<PAGE>
X Issue tax withholding reports to the Internal Revenue Service; and
X Mail, process and tabulate proxies.
- - DEALER/LOAD PROCESSING (IF APPLICABLE)
X Provide dealer access through NSCC's FundSERV;
X Calculate fees due under 12b-1 plans for distribution and marketing
expenses; and
X Issue periodic statements for broker/dealers and interested parties.
- - TELEPHONE SERVICE REPRESENTATIVES ON-LINE ACCESS
X Respond to shareholder or dealer inquiries related to:
- Account registration;
- Share balances;
- Account options;
- Dividend and capital gain distribution status;
- Withholding status;
- Transaction dates and types;
- Shares traded;
- External account number;
- Address;
- Customer or account type;
- Dealer, branch and rep information;
- Dollars available/not available in the account;
- Shares purchased/redeemed today;
- Dividend accrual, current dividend period; and
- Market value of shares.
- - STANDARD REPORTS
X Shareholder base analysis (monthly)
17
<PAGE>
X New account listing (weekly)
X Purchases, redemptions, exchanges (monthly)
X Servicing summary (quarterly)
X Rule 12b-1 reports (quarterly)
OTHER SERVICE FEATURES
In addition to the standard features listed above, Sunstone's system offers
additional features to meet specialized needs.
- - SPECIALIZED NEEDS
X 12b-1 fee calculations
X Multiple account look-up options
X Cross-fund account queries
X Cross-account queries
X Consolidated statements
X Duplicate statements to third parties
X Cross-fund dividend reinvestment
X Fund-level processing options
X Correspondence system capabilities
18
<PAGE>
SCHEDULE C
TO THE
TRANSFER AGENT AGREEMENT
BY AND BETWEEN
UNIVERSAL CAPITAL INVESTMENT TRUST
AND
SUNSTONE INVESTOR SERVICES, LLC
FEE SCHEDULE
- - BASE FEES
- For the first 12 months of the Agreement, the base fee is $10,000
exclusive of a $2,000 conversion fee.
- Subsequent to the first year of the Agreement, the following base fee
schedule is effective:
<TABLE>
<CAPTION>
ANNUAL
SHAREHOLDER
ACCOUNT FEE MINIMUM ANNUAL FEE PER
TYPE OF FUND OPEN/CLOSED FUND
- -----------------------------------------------------------------------------
<S> <C> <C>
Equity,
Fixed Income and
Balanced $18.50/$3.00 $12,000
Money Market and
Daily Accrual and
Fixed Income $22.00/$3.00 $20,000
</TABLE>
The base fee assumes a single class of shares, with a multi-load
structure availability of automatic investment plans and systematic
withdrawal plans, quarterly or less frequent dividend distributions
for equity funds, monthly dividends on fixed income and money market
funds, annual capital gains distributions, and includes all standard
reports.
- - ADDITIONAL FEES TO BE ADDED TO BASE FEE (EFFECTIVE FOR THE ENTIRE TERM OF
THE AGREEMENT)
<TABLE>
<CAPTION>
TYPE OF SERVICE OF ANNUAL SHAREHOLDER MINIMUM ANNUAL FEE
FUND FUNCTION ACCOUNT FEE PER FUND
- --------------------------------------------------------------------------------
<S> <C> <C>
Multiple class --- 25% of base fee minimum
(per class)
</TABLE>
19
<PAGE>
- - ONE-TIME SET-UP FEES (EFFECTIVE FOR THE ENTIRE TERM OF THE AGREEMENT)
<TABLE>
<CAPTION>
<S> <C>
New funds set up (per fund) $2,000
NSCC Fund/SERV and Networking set-up (per fund group) 2,500
Remote access set-up (per location) 500
Voice Response Unit (VRU) set-up 2,000
- - ACCOUNT MAINTENANCE AND PROCESSING FEES (EFFECTIVE FOR THE ENTIRE TERM OF
THE AGREEMENT)
(per occurrence)
<CAPTION>
<S> <C>
Initial account set-up charge $3.00
Omnibus account transaction $2.50
Certificate issuance $4.00
Locating lost shareholders $8.00
- - OUT-OF-POCKET EXPENSES (EFFECTIVE FOR THE ENTIRE TERM OF THE AGREEMENT)
<CAPTION>
<S> <C>
Per statement confirmation and check processing $0.25
Per tax form processing $0.15
Per label printing for proxy or marketing purposes $0.05
Production of ad hoc reports starting at $100
Bulk mailings/insert handling charge
- 1 insert $0.06
- 2 - 3 inserts $0.08
- 4 or more inserts as quoted
Bank account service fees and any other bank charges at cost
Statement paper, check stock, envelopes, tax forms at cost
Postage and express delivery charges at cost
Telephone and long distance charges at cost
Fax charges at cost
P.O. box rental at cost
800-phone number at cost
Inventory and records storage at cost
Fund/SERV charges at cost
Monthly remote access user charges
- -First user and password $250
- Additional users and passwords (each) $100
Remote access line charge at cost
20
<PAGE>
- - ADDITIONAL FEES (EFFECTIVE FOR THE ENTIRE TERM OF THE AGREEMENT)
(which may be passed on to shareholders)
<CAPTION>
<S> <C>
Outgoing wire fee varies by bank
Account transcripts older than 2 years $5.00
(per year, per fund)
Non-sufficient funds varies by bank
IRA/SEP/SIMPLE/403(b) processing
- Annual maintenance or custodial fee (per account) $15.00
- Account termination (transfer or rollover) $15.00
</TABLE>
- - CUSTOM PROGRAMMING
Additional fees may apply for special programming to meet your servicing
requirements or to create custom reports.
21
<PAGE>
SCHEDULE D
TO THE
TRANSFER AGENT AGREEMENT
BY AND BETWEEN
UNIVERSAL CAPITAL INVESTMENT TRUST
AND
SUNSTONE INVESTOR SERVICES, LLC
RECORDS MAINTAINED BY SUNSTONE
Account applications
Canceled certificates plus stock powers and supporting documents
Checks including check registers, reconciliation records, any adjustment records
and tax withholding documentation
Indemnity bonds for replacement of lost or missing stock certificates and checks
Liquidation, redemption, withdrawal and transfer requests including stock
powers, signature guarantees and any supporting documentation
Shareholder correspondence
Shareholder transaction records
Share transaction history of the Funds
Proxy records for shareholder meetings
Tax reports Sunstone sends to shareholders and the Internal Revenue Service
22
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" and "Independent Auditors" and to the use of our report dated
November 1, 1997 in the Registration Statement (Form N-1A) of Universal Capital
Investment Trust Fund and its incorporation by reference in the related
Prospectus of Universal Capital Growth Fund, filed with the Securities and
Exchange Commission in the Post-Effective Amendment No. 9 to the Registration
Statement under the Securities Act of 1933 (File No. 33-37668) and in this
Amendment No. 11 to the Registration Statement under the Investment Company Act
of 1940 (File No. 811-6212).
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Chicago, Illinois
April 27, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1997
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 8,898,282
<INVESTMENTS-AT-VALUE> 12,868,449
<RECEIVABLES> 11,511
<ASSETS-OTHER> 166,139
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 13,046,099
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 51,624
<TOTAL-LIABILITIES> 51,624
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 8,671,949
<SHARES-COMMON-STOCK> 718,215
<SHARES-COMMON-PRIOR> 742,118
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 352,359
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,970,167
<NET-ASSETS> 12,994,475
<DIVIDEND-INCOME> 107,466
<INTEREST-INCOME> 63,948
<OTHER-INCOME> 0
<EXPENSES-NET> 225,775
<NET-INVESTMENT-INCOME> 54,361
<REALIZED-GAINS-CURRENT> 405,187
<APPREC-INCREASE-CURRENT> 3,159,044
<NET-CHANGE-FROM-OPS> 3,564,231
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 1,185,143
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 54,442
<NUMBER-OF-SHARES-REDEEMED> 161,216
<SHARES-REINVESTED> 82,871
<NET-CHANGE-IN-ASSETS> 1,870,877
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1,132,501
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 112,887
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 282,832
<AVERAGE-NET-ASSETS> 11,304,261
<PER-SHARE-NAV-BEGIN> 14.99
<PER-SHARE-NII> (.08)
<PER-SHARE-GAIN-APPREC> 4.97
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 1.79
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.09
<EXPENSE-RATIO> 2.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
