File Nos. 33-83132 and 811-8718
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
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Pre-Effective Amendment No. ____
Post-Effective Amendment No. 11 X
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
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Amendment No. 12 X
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(Check appropriate box or boxes)
IPS FUNDS
1225 Weisgarber Road, Suite S-380, Knoxville, Tennessee 37909
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: 865.524.1676
Gregory D'Amico, 1225 Weisgarber Road, Suite S-380, Knoxville, TN 37909
(Name and Address of Agent for Service)
With copy to: Reinaldo Pascual, Esq., Kilpatrick Stockton LLP, 1100 Peachtree
Street, Suite 2800, Atlanta, Georgia 30309
Release Date: March 29, 2000
It is proposed that this filing will become effective:
<TABLE>
<C> <S> <C> <S>
immediately upon filing pursuant to paragraph (b) X on March 29, 2000 pursuant to paragraph (b) of
- ------ ----- Rule 485
- ------ 60 days after filing pursuant to paragraph (a) ----- on (date) pursuant to paragraph (a) of Rule 485
- ------ 75 days after filing pursuant to paragraph (a)(2) ----- on (date) pursuant to paragraph (a)(2) of Rule 485
</TABLE>
The Registrant hereby registers an indefinite number of securities under Rule
24f-2 of the Investment Company Act of 1940.
<PAGE>
IPS FUNDS
CROSS REFERENCE SHEET
FORM N-1A
IPS MILLENNIUM FUND/IPS NEW FRONTIER FUND PROSPECTUS AND STATEMENT OF
ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
ITEM SECTION IN PROSPECTUS
<S> <C>
1.................. Cover Pages
2.................. Summary of Principal Investment Objective and Strategies; Principal Risks of
Investing in the Funds
3.................. Fees and Expenses of the Fund
4.................. Additional Information About the Funds' Investment Objectives and Strategies
5.................. Financial Highlights
6.................. Management and Administration
7.................. Valuation of Shares; Buying Fund Shares; Redeeming Your Shares; Distributions;
Federal Taxes
8.................. None
9.................. Financial Highlights
ITEM SECTION IN STATEMENT OF ADDITIONAL INFORMATION
10................. Cover Page; Table of Contents
11................. General Information and History
12................. General Information and History; U.S. Government Securities; Repurchase
Agreements; Investment Restrictions; Temporary Defensive Positions; Portfolio
Turnover
13................. Trust Trustees and Officers
14................. Trust Trustees and Officers
15................. The Investment Advisor and Underwriter; Transfer Agent; Custodian; Independent
Accountants
16................. Fund Transactions and Brokerage
17................. Capital Stock and Other Securities; Exchange Privilege; Automatic Monthly
Exchange; Systematic Withdrawals; Retirement Plans
18................. Purchase of Shares; Telephone Purchases by Securities Firms; Net Asset Value
19................. Dividends, Distributions and Taxes
20................. The Investment Advisor and Underwriter
21................. Performance
22................. Financial Statements
</TABLE>
<PAGE>
IPS FUNDS
A FAMILY OF NO-LOAD FUNDS
TABLE OF CONTENTS
IPS MILLENNIUM FUND
Summary Of Principal Investment IPS NEW FRONTIER FUND
Objectives and Strategies................ 2
Principal Risks of Investing in the
Funds.................................... 3
Past Performance............................ 4 PROSPECTUS
Fees and Expenses of the Funds.............. 6 March 29, 2000
Financial Highlights........................ 7
Additional Information About the Funds'
Investment Objectives and Strategies ....... 9
Year 2000 .................................. 11
Valuation Of Shares......................... 11 Managed By
Buying Fund Shares.......................... 12
Redeeming Your Shares....................... 13 IPS ADVISORY, INC.
Additional Information About Purchases, 1225 Weisgarber Road.
Sales and Exchanges......................... 13 Suite S-380
Distributions............................... 14 Knoxville, TN 37909
Federal Taxes............................... 14
Management and Administration............... 15
The IPS Funds (the "Trust") consists of two separate funds. This
Prospectus includes important information about two of these funds, the IPS
Millennium Fund and the IPS New Frontier Fund (the "Funds") that you should know
before investing. You should read the Prospectus and keep it for future
reference.
For questions about investing in the Funds or for
Shareholder Services: 800.249.6927
Applications: Non-Ira, IRA
______________________________________________________________________________
| |
| These securities have not been approved or disapproved by the Securities and |
| Exchange Commission or any state securities commission nor has the Securities|
| and Exchange Commission or any state securities commission passed upon the |
| accuracy or adequacy of this prospectus. Any representation to the contrary |
| is a criminal offense. |
|______________________________________________________________________________|
<PAGE>
SUMMARY OF PRINCIPAL INVESTMENT OBJECTIVES AND STRATEGIES
IPS MILLENNIUM FUND
INVESTMENT OBJECTIVES
The Fund's primary investment objective is long-term capital growth. The Fund's
secondary objective is dividend income. The Fund's investment objectives may be
changed without shareholder approval.
INVESTMENT STRATEGY
The Fund uses a blended growth and income investment strategy. The Fund is a
growth and income fund that invests in domestic common stocks, balancing its
investments between:
o pure growth stocks, such as telecommunications and Internet
companies, and
o stocks that pay high dividends, such as electric and gas
utilities, real estate investment trusts, and dividend-paying
bank stocks
The Fund may invest in companies of any size, small, medium or large, but will
typically avoid very small companies (micro-caps) under approximately $250
million in market value. The Fund's investment decisions are largely based on
identifying companies likely to benefit from, or contribute to, fundamental new
directions in technology at any given time, and on research using the concept of
Economic Value Added (EVA)(TM), developed by Stern, Stewart & Co., to measure a
company's operating efficiency. EVA also measures the return on a company's
invested capital to determine how effectively a company is using its capital
investments.
IPS NEW FRONTIER FUND
INVESTMENT OBJECTIVES
The Fund's primary objective is growth of capital. The Fund's investment
objectives may be changed without shareholder approval.
INVESTMENT STRATEGY
The Fund uses a growth investment strategy. The Fund invests primarily in
domestic common stock of growth companies using new technologies that are
creating fundamental change in the economy. The Fund also will invest
opportunistically in other types of companies when management cannot find
suitable investment opportunities in companies using new technology. The Fund
will use a value approach focused on the following:
o companies that have suffered declines due to temporary market,
industry, or company factors; and
o companies that are undervalued due to deregulation or other reasons
The Fund may invest in companies of any size, small, medium or large, but will
typically avoid very small companies (micro-caps) under approximately $250
million in market value. Like the Millennium Fund, the Fund's investment
decisions are largely based on identifying companies likely to benefit from, or
contribute to, fundamental new directions in technology at any given time and
research using EVA. Unlike the Millennium Fund, though, the New Frontier Fund is
a "non-diversified" fund that invests in a relatively small number of stocks
(typically 20 or so stocks), and does not try to invest in dividend-paying
companies. Because the Fund invests in so few stocks, and stocks in its
portfolio do not typically pay dividends, the Fund's performance may be
substantially affected by an increase or decrease in any one stock in its
portfolio.
-2-
<PAGE>
PRINCIPAL RISKS OF INVESTING IN THE FUNDS
All investments carry risks, and investments in the Funds are no exception. You
may lose money on your investment in either Fund. No investment strategy works
all the time, and investors should expect that there will be extended periods
when either or both Funds' investment philosophies and strategies will not be
aligned with where the overall stock market, or particularly large segments of
the market (i.e., large vs. small or growth vs. value companies), are going.
The principal risks of investing in either of the Funds are:
o MARKET RISK - Stock prices are volatile. In a declining stock market, stock
prices for all companies may decline, regardless of any one particular
company's own unique prospects. In a recession or in a bear market, most
stock mutual funds will likely lose money, day after day, week after week,
month after month, until the recession or bear market is over. Since the
stock market typically enters a bear market every 3-4 years, investors
should understand that the Funds' value will decline from time to time.
o INTEREST RATE RISK - Increases in interest rates typically lower the
present value of a company's future earnings stream. Since the market price
of a stock changes continuously based upon investors' collective
perceptions of future earnings, stock prices will generally decline when
investors anticipate or experience rising interest rates.
o BUSINESS RISK - From time to time, a particular set of circumstances may
affect a particular industry or certain companies within the industry,
while having little or no impact on other industries or other companies
within the industry. For instance, some technology industry companies rely
heavily on one type of technology. When this technology becomes outdated,
too expensive, or is not favored in the market, companies that rely on the
technology may rapidly become unprofitable. However, companies outside of
the industry or those within the industry who do not rely on the technology
may not be affected at all.
o SMALL COMPANY RISK - Stocks of smaller companies may have more risks than
those of larger companies. In general, they have less experienced
management teams, serve smaller markets, and find it more difficult to
obtain financing for growth or potential development than larger companies.
Due to these and other factors, small companies may be more susceptible to
market downturns, and their stock prices may be more volatile.
o MARKET VALUATION RISK - Some companies that are growing very fast have
unreasonable valuations by traditional valuation techniques. Since these
companies' stock prices do not reflect the usual relationships between
price and corporate earnings or income, their stocks tend to be
extraordinarily volatile and speculative.
o POLITICAL RISK - Regulation or deregulation of particular industries can
have a material impact on the value of companies within the affected
industry. For example, during the past two years, the electric and gas
utility sectors of the economy have been moving towards deregulation and
open price competition. In this new environment, some companies will make a
successful transition into, and prosper under deregulation, and other
companies will mismanage the process and do poorly.
Because the New Frontier Fund is a pure growth fund (it does not attempt to
balance its growth stock investments with dividend-paying stocks) and it invests
in a relatively small number of stocks, the Fund is more susceptible to the
risks above than the Millennium Fund. In addition, the New Frontier Fund is
subject to the following additional risks:
o NON-DIVERSIFIED FUND RISK - In general, a non-diversified fund owns fewer
stocks than other mutual funds. This means that a large loss in an
individual stock causes a much larger loss in the fund's value than it
would in a fund that owns a larger number of companies.
-3-
<PAGE>
PAST PERFORMANCE
IPS MILLENNIUM FUND
-------------------
The bar chart and tables below provide an indication of the risks of investing
in the Millennium Fund by showing changes in the Fund's performance from year to
year and by showing how the Fund's average annual returns for 1 year and since
inception compare to those of a broad-based securities market index.
[GRAPHIC APPEARS HERE] REGARDING 1996, 1997, 1998 AND 1999
----------------------------------------
| Annual total returns as of 12/31 |
| ================================ |
| |
| 118.80% |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| 40.3% | |
| | | |
| | | |
| | | |
| 24.1% | | |
| | 21.4% | | |
| | | | | |
----------------------------------------
96 97 98 99
BEST QUARTER: Q4 '99 +52.79%
WORST QUARTER: Q3 '98 - 6.52%
================================================================================
Average annual total return as of 12/31/99*
1 Year Life of Fund
________________________________________________________________________________
Millennium Fund 118.80% 42.14%
S&P 500 Composite 19.53% 27.46%
Value Line Arithmetic 10.56% 19.47%
________________________________________________________________________________
* The table compares the Fund's performance over time to that of the S&P 500
and the Value Line Arithmetic Composite Index ("VLA"). The S&P 500 is a
widely-recognized, capitalization-weighted, unmanaged index of 500 large
U.S. companies chosen for market size, liquidity and industry group
representation. The VLA is an arithmetically averaged index of
approximately 1,700 U.S. stocks of all different sizes that is more
broadly-based than the S&P 500. The Fund's advisor believes that an
equally-weighted index like the VLA that includes large-, mid- and
small-capitalization stocks is more appropriate as a performance proxy for
its investment strategy than is a narrower, large company,
capitalization-weighted index such as the S&P 500 and other
similarly-calculated popular stock market indexes.
-4-
<PAGE>
PAST PERFORMANCE
IPS NEW FRONTIER FUND
The bar chart and tables below provide an indication of the risks of investing
in the New Frontier Fund by showing changes in the Fund's performance from year
to year and by showing how the Fund's average annual returns for 1 year and
since inception compare to those of a broad-based securities market index.
[GRAPHIC APPEARS HERE] REGARDING 1999
---------------------------------------
| Annual total returns as of 12/31 |
| ================================ |
| |
| 182.09% |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
---------------------------------------
99
BEST QUARTER: Q4 99 +120.26%
WORST QUARTER: Q3 98 - 1.92%
================================================================================
Average annual total return as of 12/31/99*
1 Year Life of Fund
________________________________________________________________________________
NEW FRONTIER FUND 182.09% 138.00%
S&P 500 COMPOSITE 19.53% 22,57%
VALUE LINE ARITHMETIC 10.56% 9.78%
________________________________________________________________________________
* The table compares the Fund's performance over time to that of the S&P 500
and the Value Line Arithmetic Composite Index ("VLA"). The S&P 500 is a
widely-recognized, capitalization-weighted, unmanaged index of 500 large
U.S. companies chosen for market size, liquidity and industry group
representation. The VLA is an arithmetically averaged index of
approximately 1,700 U.S. stocks of all different sizes that is more
broadly-based than the S&P 500. The Fund's advisor believes that an
equally-weighted index like the VLA that includes large-, mid- and
small-capitalization stocks is more appropriate as a performance proxy for
its investment strategy than is a narrower, large company,
capitalization-weighted index such as the S&P 500 and other
similarly-calculated popular stock market indexes.
-5-
<PAGE>
FEES AND EXPENSES OF THE FUND
We designed this table to help you understand the costs to shareholders in the
Fund. We based the expense information on expenses from the last fiscal year for
each Fund. Actual expenses may be different from those shown. This table
describes the fees and expenses that you may pay if you buy and hold shares of
the Funds.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
Millennium Fund New Frontier Fund
--------------- -----------------
<S> <C> <C>
Maximum sales load on purchases............................. None None
Maximum sales load on reinvested dividends.................. None None
Deferred sales load......................................... None None
Redemption fees............................................. None<F1> None<F1>
Exchange fees............................................... None None
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from assets)
Millennium Fund New Frontier Fund
Management fees............................................. 1.39%<F2> 1.40%<F2>
12b-1 expenses.............................................. None None
Other expenses.............................................. None None
Total Fund operating expenses............................... 1.39%<F2> 1.40%<F2>
<FN>
<F1> The Fund's Custodian charges a $10 fee for each wire redemption.
<F2> The Fund's total operating expenses equal the management fees paid to the
Advisor because the Advisor pays all of the Fund operating expenses.
</FN>
</TABLE>
Example
This example is intended to help you compare the cost of investing in the Funds
with the cost of investing in other mutual funds. The example assumes that you
invest $10,000 in either of the Funds for the time periods indicated, and then
redeem all of your shares at the end of those periods. The example also assumes
that your investment has a 5% return each year, and that the Funds' operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
1 year 3 years 5 years 10 years
------ ------- ------- --------
$140 $440 $770 $1680
The Funds are part of a no-load fund family, so you do not pay any sales charge
or commission when you buy or sell shares. If you buy or sell shares through a
broker, you may be charged a fee by the broker, but not by us. Also, neither
Fund has a 12b-1 Plan. Unlike most other mutual funds, you do not pay additional
fees for transfer agency, pricing, custodial, auditing or legal services. You
also don't pay any additional general administrative or other operating
expenses. Instead, the Advisor for each Fund pays out of its management fees all
of the expenses of the Fund except brokerage, taxes, interest and extraordinary
expenses.
-6-
<PAGE>
FINANCIAL HIGHLIGHTS
IPS MILLENNIUM FUND. The financial highlights table is intended to help you
understand the Millennium Fund's financial performance since the Fund began
operations January 3, 1995. The financial highlights describe the fund's
performance for the fiscal periods shown. "Total return" shows how much your
investment in the Fund earned (or lost) during each period, assuming you had
reinvested all dividends and capital gains distributions. The information for
the fiscal year ended November 30, 1999 has been audited by McCurdy & Associates
CPA's, Inc., whose report along with the Fund's financial statements are
included in the Fund's annual report, a copy of which is available without
charge from the Fund. Information for the fiscal years ended November 30, 1998,
1997, 1996 and for the period ended November 30, 1995 were audited by Cherry,
Bekaert & Holland, LLP.
IPS Millennium Fund
-------------------
Financial Highlights, Selected Per Share Data and Ratios
(PER SHARE DATA)
----------------
<TABLE>
<CAPTION>
Period Ended <F2>
For the Years Ended November 30, Nov. 30,
------------------------------- -------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA:
Net Value - beginning of period $27.53 $22.31 $18.86 $14.99 $12.00
INCOME FROM INVESTMENT
OPERATIONS
Net Investment income (0.03) 0.04 (0.05) 0.02 0.12
Net realized and unrealized gain
(loss) on investments 28.45 5.18 3.58 3.97 2.98
------- ------ ------ ------ ------
TOTAL INCOME (LOSS) FROM
INVESTMENT OPERATIONS 28.42 5.22 3.53 3.99 3.10
LESS DISTRIBUTIONS:
Dividends from net investment
income (0.02) 0.00 0.00 (0.04) (0.11)
Distributions from net realized
gains on investments (0.00) (0.00) (0.08) (0.08) 0.00
------- ------ ------ ------ ------
Total distributions $ (0.02) $(0.00) $(0.08) $(0.12) $(0.11)
------- ------ ------ ------ ------
NET ASSET VALUE:
End of period $55.93 $27.53 $22.31 $18.86 $14.99
======= ====== ====== ====== ======
Total return 103.23% 23.40% 18.72% 26.62% 25.83% <F1>
RATIOS:
Net assets, end of period (thousands) $132,331 $24,501 $11,684 $5,613 $1,626
Ratio of expenses to average net
assets 1.39% 1.40% 1.40% 1.40% 1.40%
Ratio of expenses to average net
assets before reimbursement 1.39% 1.42% 1.43% 1.50% 1.70% <F1>
Ratio of net income to average net
assets (0.07%) 0.17% (0.23%) 0.08% 1.00%
Ratio of net income to average net
assets before reimbursement (0.07%) 0.19% (0.19%) 0.18% 1.37%
Portfolio turnover rate 51.74% 87.99% 33.17% 55.17% 26.00%
<FN>
<F1> Annualized
<F2> January 3, 1995 was commencement of operations
</FN>
</TABLE>
-7-
<PAGE>
IPS NEW FRONTIER FUND. The financial highlights table is intended to help you
understand the New Frontier Fund's financial performance since the Fund began
operations August 3, 1998. The financial highlights describe the fund's
performance for the fiscal periods shown. "Total return" shows how much your
investment in the Fund earned (or lost) during each period, assuming you had
reinvested all dividends and capital gains distributions. The information for
the fiscal year ended November 30, 1999 has been audited by McCurdy & Associates
CPA's, Inc., whose report along with the Fund's financial statements are
included in the Fund's annual report, a copy of which is available without
charge from the Fund. Information for the period ended November 30, 1998 was
audited by Cherry, Bekaert & Holland, LLP.
IPS New Frontier Fund
---------------------
Financial Highlights, Selected Per Share Data and Ratios
(PER SHARE DATA)
<TABLE>
<CAPTION>
For the Year Ended For the period August 3,
------------------ ------------------------
November 30, 1998 to November 30,
------------ --------------------
1999 1998
---- ----
<S> <C> <C>
SELECTED PER SHARE DATA:
Net Value - geginning of period $12.60 $12.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment income (0.03) 0.03
Net realized and unrealized gain (loss) on
investments 16.84 0.57
------ ------
TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS
LESS DISTRIBUTIONS: 16.81 0.60
Dividends from net investment income (0.02) 0.00
------ ------
NET ASSET VALUE:
End of period $29.39 $12.60
====== ======
Total return 133.37% 5.00% (a)
RATIOS:
Net assets, end of period (thousands) $5,697 $606
Ratio of expenses to average net assets 1.40% 1.40% (a)
Ratio of net income to average net assets (.13%) 0.27%
Portfolio turnover rate 217.50% 15.48%
(a) Annualized
</TABLE>
-8-
<PAGE>
ADDITIONAL INFORMATION ABOUT THE FUNDS' INVESTMENT OBJECTIVES AND STRATEGIES
IPS MILLENNIUM FUND
INVESTMENT OBJECTIVES
The primary investment objective of the Millennium Fund is long-term growth of
capital. Its secondary objective is dividend income. The Fund's investment
objectives may be changed without shareholder approval.
INVESTMENT STRATEGY
The Fund uses a blended growth and income strategy. The Fund seeks to achieve
growth using only U.S. stocks, and by balancing investment in pure growth stocks
such as telecommunications and Internet companies, with stocks that pay high
dividends, such as electric and gas utilities, real estate investment trust, and
dividend-paying bank stocks. You can think of this as a "Barbell Strategy." On
one end of the barbell are high growth companies with no dividends, and on the
other end are low growth companies with high dividends. In between is a small
amount of Fund assets invested in moderate growth, moderate dividend companies.
The amount invested in the two ends of the barbell are constantly adjusted to
achieve the Fund's investment objectives. Pure high growth stocks can be more
volatile than the overall market. We use high dividend companies to reduce that
volatility, not to generate income for shareholders. Thus, the Fund is not a
pure growth fund, but pursues a blended strategy of growth and income stocks.
To choose stocks for the Fund, we try to identify companies likely to benefit
from, or contribute to, fundamental new directions in technology at any given
time. We determine technological directions based on our review of research
materials, including but not limited to, historical treatises, scientific
literature, industry, government and academic white papers, industry and sector
analyses and research reports, individual company analyses and research reports,
news analysts, daily and monthly financial press and other sources. We then
invest in companies we believe have the best chance of benefiting from these
changes to add long-term value for shareholders. In making our determinations,
we attempt to identify companies with a high rate of sales growth that are
creating value more rapidly than their competitors or the overall economy. We
will not attempt to time the stock market, and expect to remain fully invested
during all normal up and down market cycles.
In making our decisions, we typically consider research that uses the concept of
Economic Value Added (EVA)(TM) developed by Stern, Stewart & Co., as a measure
of companies' operating and capital efficiency. EVA adjusts a company's
financial statements for distortions caused by GAAP accounting, and measures
whether management is earning a return on invested capital that is higher than
their weighted cost of capital, without which management cannot add value. The
Fund may buy companies of any size, but the Advisor normally avoids very small
companies (micro-caps) under approximately $250 million in market value. The
Fund will invest most of its assets in U.S. stocks, and the remainder in money
market securities.
TEMPORARY DEFENSIVE POSITIONS. The Fund may, from time to time, take temporary
defensive positions that are inconsistent with the Fund's principal investment
strategies in an attempt to respond to adverse market, economic, political or
other conditions. During such an unusual crisis, the Fund may hold up to 100% of
its portfolio in money market and U.S. Government securities. When the Fund
takes a temporary defensive position, the Fund may not be able to achieve its
investment objective.
<TABLE>
<S> <C>
_______________________________
| | PORTFOLIO TURNOVER. Although the Fund's strategy emphasizes longer-term
| "PORTFOLIO TURNOVER" is a | investments that typically result in Portfolio Turnover less than 75%,
| ratio that indicates how | the Fund may, from time to time, have a higher Portfolio Turnover when the
| often the securities in a | Adviser's implementation of the Fund's investment strategy or a temporary
| mutual fund's portfolio | defensive position results in frequent trading. Since each trade by the Fund
| change during a year's time. | costs the Fund a brokerage commission, high Portfolio Turnover may have a
| Higher numbers indicate a | significant adverse impact on the Fund's performance. In addition, because
| greater number of changes, | sales of securities in the Fund's portfolio may result in taxable gain or
| and lower numbers indicate | loss, high Portfolio Turnover may result in significant tax consequences
| a smaller number of changes. | for shareholders.
|_______________________________|
</TABLE>
-9-
<PAGE>
IPS NEW FRONTIER FUND
INVESTMENT OBJECTIVE
The New Frontier Fund's investment objective is growth of capital. The Fund's
investment objective may be changed without shareholder approval.
INVESTMENT STRATEGY
The Fund's strategy is growth of capital using a value investment approach. As
with the Millennium Fund, our approach is to identify companies likely to
benefit from, or contribute to, fundamental new directions in technology at any
given time. We determine technological directions based on our review of
research materials, including but not limited to, historical treatises,
scientific literature, industry, government and academic white papers, industry
and sector analyses and research reports, individual company analyses and
research reports, news analysts, daily and monthly financial press and other
sources. We will then identify companies we believe have the best chance of
benefiting from these changes to add long-term value for shareholders. These
companies should have a high rate of sales growth, and be able to create value
more rapidly than their competitors or the overall economy.
We typically buy stocks of U.S. companies that are mostly in high tech sectors
(i.e., telecommunications, Internet stocks, software, etc.), and that have
suffered major declines in value that are clearly due to temporary market,
industry or company factors, without any change in the underlying, long-term
fundamentals, or that we feel are highly undervalued for other reasons, such as
deregulation. The Fund also will invest opportunistically in other types of
companies when management cannot find suitable investment opportunities in new
technology.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
| WHAT IS A NON-DIVERSIFIED FUND? |
| <S> | <C>
| Most mutual funds elect to be "diversified" funds that, as to 75% of | Unlike the Millennium Fund, the New
| their assets, cannot invest more than 5% of their assets in any one | Frontier Fund is a non-diversified fund.
| security at any given time. A non-diversified fund is not subject | This means we can hold larger positions
| to this limitation, and so it can hold a relatively small number of | in one individual company and own fewer
| securities in its portfolio. Even a non-diversified fund has to have | stocks than most mutual funds in our
| some diversification for tax purposes, though. Under the tax code, | portfolio. Thus, diversification will not
| all mutual funds are required, at the end of each quarter of the taxable | be as high as it is in most mutual funds,
| year, to have (i) at least 50% of the market value of the Fund's total | due to concentration among a smaller
| assets be invested in cash, U.S. Government securities, the securities | number of securities, each making up a
| of other regulated investment companies, and other securities, limited | larger portion of the fund's portfolio
| with respect to any one issuer limited for the purposes of this | of investments.
| calculation to an amount not greater than 5% of the value of the Fund's |
| total assets, and (ii) not more than 25% of the value of its total |
| assets be invested in the securities of any one issuer (other than U.S. |
| Government securities or the securities of other regulated investment |
| companies). |
---------------------------------------------------------------------------
</TABLE>
We do not attempt to time the stock market, and expect to remain fully invested
during all normal times, including all normal up and down market cycles. The
Fund may buy stocks of any size company, although we normally will avoid very
small companies (micro-caps) under approximately $250 million in market value.
The Fund will invest most of its assets in U.S. stocks, and the remainder in
money market securities.
TEMPORARY DEFENSIVE POSITIONS. The Fund may, from time to time, take temporary
defensive positions that are inconsistent with the Fund's principal investment
strategies in an attempt to respond to adverse market, economic, political or
other conditions. During such an unusual crisis, the Fund may hold up to 100% of
its portfolio in money market and U.S. Government securities. When the Fund
takes a temporary defensive position, the Fund may not be able to achieve its
investment objective.
PORTFOLIO TURNOVER. The Fund typically holds investments in its portfolio only
until those investments reach what the Fund believes is a fair valuation level.
This strategy results in high Portfolio Turnover, typically between 125-150%.
Since each trade by the Fund costs the Fund a brokerage commission, high
Portfolio Turnover may have a significant adverse impact on the Fund's
performance. In addition, because each sale of securities in the Fund's
portfolio may result in taxable gain or loss, high Portfolio Turnover may result
in significant tax consequences for shareholders.
-10-
<PAGE>
YEAR 2000
The Funds did not experience any material disruptions in operations or
activities as a result of the so-called "Y2K Problem," and did not incur
material expenses in correcting perceived or suspected Y2K problems. The Funds
are not aware that any of their service providers have experienced any material
disruptions in their operations or activities. However, the Funds and their
service providers depend on their computer systems to conduct their businesses,
and although the Funds do not expect to encounter any such problems in the
foreseeable future, the Funds continue to monitor their computer operations for
signs or indications of such a problem.
Of course, the Funds cannot insulate themselves from Y2K-related problems
completely. It is possible that if latent "Year 2000" problems are incurred by
the Funds, the Funds' portfolio companies, or any of the Funds' service
providers, such problems could have a negative impact on the Funds' future
operations and financial performance, and could prevent the Funds from properly
handling securities investments, trades, pricing, or the processing of purchases
and sales of Fund shares. Furthermore, the Year 2000 problem may impact other
entities with which the Funds transact business and the Funds cannot predict the
effect of the Year 2000 problem on such entities or the resulting effect on the
Funds.
VALUATION OF SHARES
The Funds' share prices are determined based upon net asset value (NAV). The
Funds calculate NAV at approximately 4:00 p.m., New York time, each day that the
New York Stock Exchange is open for trading. The NAV per share of each Fund is
determined by dividing the total value of the applicable Fund's investments and
other assets less any liabilities by its number of outstanding shares.
Equity securities listed on a national securities exchange or quoted on the
NASDAQ National Market System are valued at the last sale price on the day the
valuation is made or, if no sale is reported, at the latest bid price.
Valuations of variable and fixed income securities are supplied by independent
pricing services approved by IPS's Board of Trustees. Other assets and
securities for which no quotations are readily available are valued at fair
value as determined in good faith by or under the direction of IPS's Board of
Trustees. Securities with maturities of sixty (60) days or less are valued at
amortized cost.
-11-
<PAGE>
BUYING FUND SHARES
To invest, you may purchase shares directly from each Fund by sending your check
in the amount of your investment, made out to the appropriate Fund, to:
MUTUAL FUND SERVICES
ATTN: IPS FUNDS
P.O. BOX 14967
CINCINNATI, OHIO 45250-0967
You may also invest in either Fund through any broker-dealer authorized by the
Fund to accept on its behalf purchase and redemption orders, rather than
investing directly. These authorized broker-dealers are also authorized to
designate intermediaries to accept such orders. Since a broker-dealer may charge
you fees for purchasing or redeeming shares other than those described in this
Prospectus, ask your broker-dealer about his or her fees before investing.
For direct purchases, your order will be priced at the next NAV after your order
is received in good order. For purchases of shares through a broker, orders are
deemed to have been received by the Fund when the order is received in good
order by the broker, and are executed at the next determined NAV after such
receipt by the broker or the broker's authorized designee.
Your investment must meet the minimum investment requirements in the chart
below. All investments must be in U.S. dollars. Third-party checks cannot be
accepted. Your bank may also wire money to the Custodian. Please call
800.249.6927 for wiring instructions.
<TABLE>
<CAPTION>
---------------------------------------------------------
TRADITIONAL IRA*: | MINIMUM INVESTMENTS |
<S> |<C> <C> <C> |
Assets grow tax-deferred and contributions may be | |
deductible. Withdrawals and distributions are taxable in | Initial Additional |
the year made. | ------- ---------- |
SPOUSAL IRA: | |
An IRA in the name of a non-woroking spoouse by a working | Regular Accounts $2,500 $100 |
spoouse. | |
ROTH IRA: | Automatic investment |
An IRA with tax free growth of assets and distributions, if | plans (regular or IRA) $ 100 $100 |
certain conditions are met. Contributions are not | |
deductible. | IRAs (Spousal, Roth, |
EDUCATION IRA: | all but Education IRAs) $1,000 $100 |
An IRA with tax-free growth of assets and distributions, if | |
used to pay qualified educational expenses. Contributions | Education IRAs $ 500 N/A |
are not deductible. ---------------------------------------------------------
</TABLE>
* IRA stands for "Individual Retirement Account." IRAs are special types of
accounts that offer different tax advantages. You should consult your tax
professional to help decide which is right for you.
-12-
<PAGE>
REDEEMING YOUR SHARES
To redeem your shares, send a letter of instruction to the Transfer Agent with
your name, account number and the amount you wish to redeem. Mail the redemption
request to:
Mutual Fund Services
Attn: IPS Funds
P.O. Box 14967
Cinncinatti, Ohio 45250-0967
We will buy back (redeem), without charge, your shares at the current NAV on the
day we receive a your request for redemption in good order. If you request sales
proceeds via wire redemption, we will charge your account $10.
<TABLE>
- --------------------------------------------------
|<C> | <S>
| | A signature guarantee is required for any withdrawal which is over
| A SIGNATURE GUARANTEE helps protect against | $50,000, or which is mailed to another address or person that is not
| fraud. You can obtain one from most banks | the address or person of record.
| or securities dealers, but not from a notary |
| public. For joint accounts, each signature |
| must be guaranteed. Please call us to ensure | If you invested in one of the Funds through a broker-dealer authorized
| that your signature guarantee will be | to accept purchase orders on the Fund's behalf, then you will need to
| processed correctly. | contact the broker-dealer or its authorized designee to redeem your shares.
| | For redemptions of shares through a broker-dealer, orders are deemed to
- -------------------------------------------------- have been received by the Fund when the order is received in good order by
the broker-dealer or the broker-dealer's authorized designee, and are executed
at the next determined NAV after such receipt. Since a broker-dealer may charge
you fees for purchasing or redeeming shares other than those described in this
Prospectus, ask your broker-dealer about his or her fees before investing.
</TABLE>
ADDITIONAL INFORMATION ABOUT PURCHASES, SALES, AND EXCHANGES
SMALL ACCOUNTS. Due to the high costs of maintaining small accounts, either Fund
may ask that you increase your Fund balance if your account with the Fund falls
below $2,000. If the account remains under $2,000 after 30 days, the Fund may
close your account and send you the proceeds.
EXCHANGES. Each Fund permits you to exchange your Fund's shares for shares in
the other Fund, without charge, if the fund being acquired offers its shares for
sale in your state. The Funds' exchange opportunities include one-time exchanges
as well as automatic periodic exchanges. Exchange requests should be sent in
writing to the Transfer Agent, signed by each registered owner (signature
guarantees are necessary for any exchange of over $50,000). If the exchange
request satisfies the requirements for a redemption, the exchange will be based
on the NAVs of the shares involved, determined at the end of the day on which
the request is received. Before requesting an exchange, you should review a
current Prospectus for the new fund you will acquire to be sure you fully
understand the investment objectives and portfolio of the new fund.
SYSTEMATIC WITHDRAWALS. If your account's value is more than $10,000, you may be
eligible for our Systematic Withdrawal Program that allows you to withdraw a
fixed amount from your account each month or calendar quarter. Each withdrawal
must be $250 or more, and you should note that a withdrawal involves a
redemption of shares that may result in a gain or loss for federal income tax
purposes. Please contact us for more information about the Systematic Withdrawal
Program
TELEPHONE PURCHASES BY SECURITIES FIRMS. Brokerage firms that are NASD members
may telephone the Transfer Agent at 800.249.6927 and buy shares for investors
who have investments in either Fund through the brokerage firm's account with
the applicable Fund. By electing telephone purchase privileges, NASD member
firms, on behalf of themselves and their clients, agree that neither the Funds,
the Underwriter nor the Transfer Agent shall be liable for following telephone
instructions reasonably believed to be genuine. To be sure telephone
instructions are genuine, the Funds and their agents send written confirmations
of transactions to the broker that initiated the telephone purchase. As a result
of these and other policies, the NASD member firms may bear the risk of any loss
-13-
<PAGE>
in the event of such a transaction. However, if the Transfer Agent or a Fund
fails to follow these established procedures, they may be liable. Each Fund may
modify or terminate these telephone privileges at any time.
MISCELLANEOUS. Each Fund reserves the right to:
* refuse to accept any request to purchase shares of the Fund for any reason;
* refuse any redemption or exchange request involving recently purchased
shares until the check for the recently purchased shares has cleared;
* change or discontinue its exchange privileges, or temporarily suspend these
privileges during unusual market conditions;
* delay mailing redemption proceeds for up to seven days (most redemption
proceeds are mailed within three days after receipt of a request); or
* process any redemption request that exceeds $250,000 or 1% of the Fund's
assets (whichever is less) by paying the redemption proceeds in portfolio
securities rather than cash (typically referred to as "redemption in
kind").
DISTRIBUTIONS
Each Fund typically distributes its net investment income two times per year,
usually in October and December. Each Fund distributes its net long-term capital
gains once per year, usually in December. Unless you instruct us otherwise, your
distributions will be reinvested automatically in additional shares (or
fractions thereof) of the applicable Fund.
FEDERAL TAXES
Distributions to shareholders are taxable to most investors (unless your
investment is an IRA or other tax advantaged account). The tax status of any
distribution is the same regardless of how long you have been in the fund and
whether you reinvest your distributions or receive them in cash.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
| TAXABILITY OF DISTRIBUTIONS |
| --------------------------- |
<S> | <C> <C> <C> |
The table to the right can provide a | Tax rate for Tax rate for |
guide for your potential tax liability | Type of distribution 15% bracket 28% bracket or above |
when selling or exchanging fund shares. | -------------------- ----------- -------------------- |
| |
"Short-term capital gains" applies to | INCOME DIVIDENDS ORDINARY INCOME RATE ORDINARY INCOME RATE |
fund shares sold up to 12 months after | |
buying them. "Long-term capital | SHORT-TERM CAPITAL GAINS ORDINARY INCOME RATE ORDINARY INCOME RATE |
gains" applies to shares held for more | |
than 12 months. | LONG-TERM CAPITAL GAINS 10% 20% |
| |
---------------------------------------------------------------------------------
</TABLE>
An exchange of one Fund's shares for the other Fund will be treated as a sale of
the Fund's shares and any gain on the transaction may be subject to federal
income tax. Because everyone's tax situation is unique, be sure to consult your
tax adviser about federal, state and local tax consequences.
-14-
<PAGE>
MANAGEMENT AND ADMINISTRATION
THE INVESTMENT ADVISOR
IPS Advisory, Inc. serves as the Advisor who manages the investments, business
affairs, and provides investment research for each Fund. The Advisor also
furnishes advice and recommendations to each Fund regarding securities to be
purchased and sold, and manages the investments of the Funds, subject to the
oversight of the Funds' Board of Trustees. The Advisor's principal office is
located at 1225 Weisgarber Road, Suite S-380, Knoxville, TN 37909.
Each Fund pays the Advisor a monthly fee based on the following schedule:
ANNUALIZED PERCENTAGE OF
AVERAGE DAILY NET ASSETS ASSET LEVEL
------------------------ -----------
1.40% 0 - $100,000,000
1.15% $100,000,001-$250,000,000
0.90% $250,000,001+
The Advisor is controlled by Greg D'Amico, President, and Robert Loest, Ph.D.,
CFA, Chief Executive Officer. Mr. D'Amico and Mr. Loest both have extensive
experience in equities analysis, having managed investment portfolios for
individual clients, including corporations and retirement plans, on a full time
basis since 1986. They have managed the Funds' portfolios since their inception.
BOARD OF TRUSTEES
The Funds are members of the IPS Funds, an open-end management investment
company organized as an Ohio business trust on August 10, 1994. The Board of
Trustees of the Trust supervises the operations of each Fund according to
applicable state and federal law, and is responsible for the overall management
of the Funds' business affairs.
-15-
<PAGE>
Additional information about the Funds' INVESTMENT ADVISOR:
investments is available in the Funds' IPS Advisory Inc.
annual and semi-annual reports to 1225 Weisgarber Road
shareholders. In the Funds' annual Suite S-380
reports, you will find a discussion of Knoxville, Tennessee 37909
the market conditions and investment 865.524.1676 in Knoxville
strategies that significantly affected 800.232.9142
the Funds' performance during its last
fiscal year. BOARD OF TRUSTEES:
Greg D'Amico, President
Also, a Statement of Additional Robert Loest, CFA
Information about the Funds has been Woodrow Henderson, J.D.
filed with the Securities and Exchange Veenita Bisaria, CFA
Commission. This Statement (which is Bill Stegall
incorporated in its entirety by reference
in this Prospectus) contains more detailed CUSTODIAN AND TRANSFER AGENT:
information about the Funds. The Provident Bank
One East Fourth Street
The Fund's annual and semi-annual reports Cincinnati, Ohio 45202
and the Funds' Statement of Additional
Information are available without charge INDEPENDENT AUDITOR:
upon written request to IPS Advisory, Inc., McCurdy'& Associates CPA's, Inc.
1225 Weisgarber Road, Suite S-380, Knoxville, 27955 Clemens Road
TN 37909 or by calling us at 800-249-6927. Westlake, Ohio 44145
You can also review or obtain copies of LEGAL COUNSEL:
these reports by visiting the Securities Kilpatrick Stockton LLP
and Exchange Commission's Public Reference 1100 Peachtree Street
Room in Washington, D.C. or by sending your Atlanta, Georgia 30309
request and a duplicating fee to the Public
Reference Room Section of the Commission,
Washington, DC 20549-6009. Information on
the operation of the Public Reference Room
may be obtained by calling the Commission at
1-800-SEC-0330.
Reports and other information about the Funds
can also be viewed online on the Commission's
Internet site at http://www.sec.gov.
IPS Funds Investment Act File Number:
811-08718
<PAGE>
IPS MILLENNIUM FUND AND IPS NEW FRONTIER FUND
PART B
STATEMENT OF ADDITIONAL INFORMATION
March 29, 2000
IPS Funds (the "Trust") was organized as an Ohio business trust on August 10,
1994, and commenced operations on January 3, 1995. The Trust currently offers
two Funds representing separate Fund of investments.
Two of the series of the IPS Funds, both of which are described in detail in the
Fund's prospectus dated March 29, 2000 (the "Prospectus") and this Statement of
Additional Information (the "Funds"), are the IPS Millennium Fund, a diversified
fund (the "Millennium Fund") and the IPS New Frontier Fund, a non-diversified
fund (the "New Frontier Fund"). IPS Advisory, Inc. (the "Advisor") serves as
investment advisor to the Funds. Each of the Funds is managed separately and has
its own investment objectives and policies designed to meet its investment
goals. Investments in the Funds involve risk, and there can be no assurance that
either Fund will achieve its investment objectives.
This Statement of Additional Information incorporates information by reference
from the Millennium Fund's and the New Frontier Fund's Annual Reports to
Shareholders for the fiscal year ended November 30, 1999. These reports also
accompany this Statement of Additional Information. Additional copies are
available, without charge, by calling the Fund.
This Statement of Additional Information is not a prospectus, but should be read
in conjunction with the current Prospectus for the Funds dated March 29, 2000.
The Prospectus may be obtained by writing to the Trust at the following address:
IPS FUNDS, 1225 WEISGARBER ROAD,
SUITE S-380, KNOXVILLE, TN 37909
Shareholder Services: 800.249.6927
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
General Information and History.................................................................. 1
Investment Objective, Strategies and Risks....................................................... 1
U.S. Government Securities....................................................................... 1
Repurchase Agreements............................................................................ 1
Temporary Defensive Positions.................................................................... 3
Portfolio Turnover............................................................................... 3
Investment Restrictions.......................................................................... 3
Fundamental................................................................................... 3
Borrowing Money............................................................................. 4
Senior Securities........................................................................... 4
Underwriting................................................................................ 4
Real Estate................................................................................. 4
Commodities................................................................................. 4
Loans....................................................................................... 4
Concentration............................................................................... 4
Non-Fundamental............................................................................... 4
Pledging.................................................................................... 4
Borrowing................................................................................... 5
Margin Purchases............................................................................ 5
Short Sales................................................................................. 5
Options..................................................................................... 5
Illiquid Investments........................................................................ 5
Trust Trustees and Officers...................................................................... 5
The Investment Advisor and Distribution of Fund Shares........................................... 6
Transfer Agent................................................................................... 7
Custodian........................................................................................ 7
Independent Accountants.......................................................................... 7
Fund Transactions and Brokerage.................................................................. 8
Capital Stock and Other Securities............................................................... 9
Purchase and Redemption of Shares................................................................ 10
Telephone Purchases by Securities Firms.......................................................... 10
Exchange Privilege............................................................................... 10
Automatic Monthly Exchange....................................................................... 11
Systematic Withdrawals........................................................................... 11
Retirement Plans................................................................................. 11
Net Asset Value.................................................................................. 11
Dividends, Distributions and Taxes............................................................... 12
Performance...................................................................................... 13
Financial Statements............................................................................. 14
</TABLE>
<PAGE>
-21-
GENERAL INFORMATION AND HISTORY
IPS Funds (the "Trust") was organized as an Ohio business trust on August 10,
1994, and commenced operations on January 3, 1995. The Trust is an open-end
management company that currently offers two funds representing separate
portfolios of investments. The Funds, both of which are described in detail in
the Funds' Prospectus and this Statement of Additional Information, are the IPS
Millennium Fund, a diversified fund (the "Millennium Fund") and the IPS New
Frontier Fund, a non-diversified fund (the "New Frontier Fund"). IPS Advisory,
Inc. (the "Advisor") serves as investment advisor to the Funds.
Each of the Funds is managed separately and has its own investment objectives
and policies designed to meet its investment goals. Investments in the Funds
involve risk, and there can be no assurance that any of the Funds will achieve
their investment objectives.
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
Reference is made to "Summary Of Principal Investment Objectives and
Strategies", "Principal Risks of Investing in the Funds", and "Additional
Information About The Funds' Investment Objectives And Strategies" in the Funds'
Prospectus for more information about the Fund's investment objectives,
strategies and risks.
GENERAL INVESTMENT RISKS
All investments in securities and other financial instruments involve a degree
of risk of financial loss. No assurance can be given that each Fund's investment
programs will be successful. In particular, investors and potential investors
should carefully review the descriptions of the types of investments each Fund
may make and the Principal Risks described in the Prospectus, and the more
detailed descriptions of some of the risks of each Fund below.
LACK OF DIVERSIFICATION
From time to time, the Advisor may believe that concentrated investment in the
securities of a particular issuer, select companies in a particular industry or
select companies in a sector within a particular industry presents either Fund
with an attractive potential for profit. For example, if the Advisor determines
that growth prospects and opportunities to profit from anticipated price
movements in the securities of a particular technology company, select companies
in the technology industry or select companies within a sector of the technology
industry represent an attractive investment opportunity for either Fund at a
given time, then it may seek to concentrate a Fund's assets or a significant
portion of that Fund's assets in the same. While any concentration of a Fund's
investments will be made with the expectation of generating enhanced returns, a
concentration of Fund investments exposes a Fund to additional risk.
Each Fund may or may not have a diversified portfolio of investments at any
given time, and may have large amounts of assets invested in a very small number
of companies or industries or types of investments from time to time. Such lack
of diversification substantially increases market risks and the risk of loss
associated with an investment in either Fund, because a substantial loss with
respect to any particular investment of a Fund when the Fund has a
nondiversified portfolio will have a substantial negative impact on the
aggregate value of that Fund's portfolio.
EQUITY SECURITIES
Prices of equity securities in which each Fund invests may fluctuate in response
to many factors, including, but not limited to, the activities of the individual
companies whose securities each Fund owns, general market and economic
conditions, interest rates, and specific industry changes. Such price
fluctuations subject each Fund to potential losses. In addition, regardless of
any one company's particular prospects, a declining stock market may produce a
decline in prices for equity securities for all companies in the market, which
could also result in losses for either Fund. Market declines may continue for an
indefinite period of time, and investors should understand that from time to
time during temporary or extended bear markets, the value of equity securities
in such market declines.
-1-
<PAGE>
INVESTMENTS IN SMALL-CAP COMPANIES
Each Fund may invest a significant portion of its assets in securities of
companies with small market capitalizations. Certain small-cap companies may
offer greater potential for capital appreciation than larger companies. However,
investors should note that this potential for greater capital appreciation is
accompanied by a substantial risk of loss and that, by their very nature,
investments in small-cap companies tend to be very volatile and speculative.
Small-cap companies may have a small share of the market for their products or
services, their businesses may be limited to regional markets, or they may
provide goods and services for a limited market. For example, they may be
developing or marketing new products or services for markets which are not yet
established or may never become established or may have or develop only a
regional market for products or services and thus be affected by local or
regional market conditions. In addition, small-cap companies may lack depth of
management or they may be unable to generate funds necessary for growth or
potential development, either internally or through external financing on
favorable terms. Such companies may also be insignificant enough in their
industries and be subject to or become subject to intense competition from
larger companies. Due to these and other factors, each Fund's investments in
small-cap companies may suffer significant losses. Further, there is typically a
smaller market for the securities of a small-cap company than for securities of
a large company. Therefore, investments in small-cap companies may be less
liquid and subject to significant price declines that result in losses for
either Fund.
COMPANIES WITH UNUSUAL VALUATIONS BASED ON MANY TRADITIONAL METHODS
The market prices of securities of companies that are growing very quickly
and/or the securities of companies that investors believe are addressing large
potential markets (such as Internet-related businesses) that may not yet have
been realized may reflect unreasonable valuations by traditional valuation
techniques. Many of these types of companies have a low level of revenues
relative to their market capitalization, and many are not yet profitable.
Since the prices of the securities of these companies do not reflect the usual
relationships between price and corporate revenues, income or profits,
investments in their securities are accompanied by a substantial risk of loss
because of the their volatility and speculative nature. Numerous factors may
cause the prices of these securities to fall precipitously, which may cause each
Fund to sustain substantial losses on any investments in such companies. These
factors include, but are not limited to, market participants evaluating these
securities using more traditional valuation techniques, investors taking less
interest in these securities, a general downturn in the market for these
securities, or adverse changes in market participants' expectations regarding
the potential markets, revenues, income or profitability for these types of
companies.
U.S. GOVERNMENT SECURITIES
Each Fund may invest in U.S. government securities. U.S. government securities
may be backed by the credit of the government as a whole or only by the issuing
agency. U.S. Treasury bonds, notes, and bills and some agency securities, such
as those issued by the Federal Housing Administration and the Government
National Mortgage Association (GNMA), are backed by the full faith and credit of
the U.S. government as to payment of principal and interest and are the highest
quality government securities. Other securities issued by U.S. government
agencies or instrumentalities, such as securities issued by the Federal Home
Loan Banks and the Federal Home Loan Mortgage Corporation, are supported only by
the credit of the agency that issued them, and not by the U.S. government.
Securities issued by the Federal Farm Credit System, the Federal Land Banks, and
the Federal National Mortgage Association (FNMA) are supported by the agency's
right to borrow money from the U.S. Treasury under certain circumstances, but
are not backed by the full faith and credit of the U.S. government.
REPURCHASE AGREEMENTS
Each Fund may invest in repurchase agreements. A repurchase agreement is a short
term investment in which the purchaser (i.e., a Fund) acquires ownership of a
U.S. Government security and the seller agrees to repurchase the security at a
future time at a set price, thereby determining the yield during the purchaser's
holding period. Any repurchase transaction in which either Fund engages will
require full collateralization of the seller's obligation during the entire term
-2-
<PAGE>
of the repurchase agreement. In the event of a bankruptcy or other default of
the seller, the Fund could experience both delays in liquidating the underlying
security and losses in value. However, each Fund intends to enter into
repurchase agreements only with the Fund's Custodian, other banks with assets of
$1 billion or more, and registered securities dealers determined by the Advisor
(subject to review by the Board of Trustees) to be creditworthy.
TEMPORARY DEFENSIVE POSITIONS
Either Fund may, from time to time, take temporary defensive positions that are
inconsistent with the Fund's principal investment strategies in an attempt to
respond to adverse market, economic, political or other conditions. When a Fund
takes a temporary defensive position, the Fund may not be able to achieve its
investment objective.
PORTFOLIO TURNOVER
Although the Millennium Fund's investment strategy emphasizes long-term
investment that typically results in Portfolio Turnover less than 75%, the Fund
may, from time to time, have higher Portfolio Turnover when the Adviser's
implementation of the Fund's investment strategy or a temporary defensive
position results in frequent trading. The New Frontier Fund has an investment
strategy that typically results in more frequent Portfolio Turnover, typically
between 125-150%. Since each trade by the Fund costs the Fund a brokerage
commission, high Portfolio Turnover may have a significant adverse impact on the
Fund's performance. In addition, because each sale of securities in the Fund's
portfolio may result in taxable gain or loss, high Portfolio Turnover may result
in significant tax consequences for shareholders.
"Portfolio Turnover" is a ratio that indicates how often the securities in a
mutual fund's portfolio change during a year's time. Higher numbers indicate a
greater number of changes, and lower numbers indicate a smaller number of
changes. Since each fund transaction costs the fund a brokerage commission, high
Portfolio Turnover may have a significant adverse impact on a fund's
performance. In addition, because each sale of securities in a fund's portfolio
may result in taxable gain or loss to shareholders, high Portfolio Turnover may
result in significant tax consequences for shareholders. You should consult your
tax professional regarding the potential tax impact of Portfolio Turnover in
your particular circumstances.
INVESTMENT RESTRICTIONS
FUNDAMENTAL INVESTMENT RESTRICTIONS
The investment limitations described below have been adopted by each Fund as
indicated and are fundamental ("Fundamental"), i.e., they may not be changed as
to a Fund without the affirmative vote of a majority of the outstanding shares
of the applicable Fund. As used in the Prospectus and this Statement of
Additional Information, the term "majority" of the outstanding shares of the
applicable Fund means the lesser of (1) 67% or more of the outstanding shares of
the Fund present at a meeting, if the holders of more than 50% of the
outstanding shares of the Fund are present or represented at such meeting; or
(2) more than 50% of the outstanding shares of the Fund. Other investment
practices which may be changed on behalf of a Fund by the Board of Trustees
without the approval of shareholders to the extent permitted by applicable law,
regulation or regulatory policy are considered non-fundamental
("Non-Fundamental").
The following policies have been adopted as Fundamental by both the Millennium
Fund and the New Frontier Fund:
1. BORROWING MONEY. The Fund will not borrow money, except (a) from a bank,
provided that immediately after such borrowing there is an asset coverage of
300% for all borrowings of the Fund; or (b) from a bank or other persons for
temporary purposes only, provided that such temporary borrowings are in an
amount not exceeding 5% of the Fund's total assets at the time when the
borrowing is made. This limitation does not preclude the Fund from entering into
reverse repurchase transactions, provided that the Fund has an asset coverage of
300% for all borrowings and repurchase commitments of the Fund pursuant to
reverse repurchase transactions.
-3-
<PAGE>
2. SENIOR SECURITIES. The Fund will not issue senior securities. This limitation
is not applicable to activities that may be deemed to involve the issuance or
sale of a senior security by the Fund, provided that the Fund's engagement in
such activities is (a) consistent with or permitted by the Investment Company
Act of 1940, as amended, the rules and regulations promulgated thereunder or
interpretations of the Securities and Exchange Commission or its staff and (b)
as described in the Prospectus and this Statement of Additional Information.
3. Underwriting. The Fund will not act as underwriter of securities issued by
other persons. This limitation is not applicable to the extent that, in
connection with the disposition of portfolio securities (including restricted
securities), the Fund may be deemed an underwriter under certain federal
securities laws.
4. REAL ESTATE. The Fund will not purchase or sell real estate. This limitation
is not applicable to investments in marketable securities which are secured by
or represent interests in real estate. This limitation does not preclude the
Fund from investing in mortgage-backed securities or investing in companies
engaged in the real estate business.
5. COMMODITIES. The Fund will not purchase or sell commodities unless acquired
as a result of ownership of securities or other investments.
6. LOANS. The Fund will not make loans to other persons, except (a) by loaning
portfolio securities, (b) by engaging in repurchase agreements, or (c) by
purchasing nonpublicly offered debt securities. For purposes of this limitation,
the term "loans" shall not include the purchase of a portion of an issue of
publicly distributed bonds, debentures or other securities.
7. CONCENTRATION. The Fund will not invest 25% or more of its total assets in
a particular industry. This limitation is not applicable to investments in
obligations issued or guaranteed by the U.S. government, its agencies and
instrumentalities or repurchase agreements with respect thereto.
With respect to the percentages adopted by a Fund as maximum limitations on its
investment policies and limitations, an excess above the fixed percentage due to
growth will not be a violation of the policy or limitation unless the excess
results immediately and directly from the acquisition of any security or the
action taken. This paragraph does not apply to the borrowing policy set forth in
paragraph 1 above.
Notwithstanding any of the foregoing limitations, any investment company,
whether organized as a trust, association or corporation, or a personal holding
company, may be merged or consolidated with or acquired by the Fund, provided
that if such merger, consolidation or acquisition results in an investment in
the securities of any issuer prohibited by said paragraphs, the Fund shall,
within ninety days after the consummation of such merger, consolidation or
acquisition, dispose of all of the securities of such issuer so acquired or such
portion thereof as shall bring the total investment therein within the
limitations imposed by said paragraphs above as of the date of consummation.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS
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The following policies have been adopted by each Fund as Non-Fundamental (see
"Investment Restrictions-Fundamental Investment Restrictions" above):
1. PLEDGING. The Fund will not mortgage, pledge, hypothecate or in any manner
transfer, as security for indebtedness, any assets of the Fund except as may be
necessary in connection with borrowings described in limitation (1) above.
Margin deposits, security interests, liens and collateral arrangements with
respect to transactions involving options, futures contracts, short sales and
other permitted investments and techniques are not deemed to be a mortgage,
pledge or hypothecation of assets for purposes of this limitation.
2. BORROWING. The Fund will not enter into reverse repurchase agreements. The
Fund will not purchase any security while borrowings (including reverse
repurchase agreements) representing more than 5% of its total assets are
outstanding.
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3. MARGIN PURCHASES. The Fund will not purchase securities or evidences of
interest thereon on "margin." This limitation is not applicable to short term
credit obtained by the Fund for the clearance of purchases and sales or
redemption of securities, or to arrangements with respect to transactions
involving permitted investments and techniques.
4. SHORT SALES. The Fund will not effect short sales of securities unless it
owns or has the right to obtain securities equivalent in kind and amount to the
securities sold short.
5. OPTIONS. The Fund will not purchase or sell put or call options.
6. ILLIQUID INVESTMENTS. The Fund will not invest more than 15% of its net
assets in securities for which there are legal or contractual restrictions on
resale and other illiquid securities.
TRUST TRUSTEES AND OFFICERS
BOARD OF TRUSTEES
The Funds are members of the IPS Funds, an open-end management investment
company organized as an Ohio business trust on August 10, 1994. The Board of
Trustees of the Trust supervises the operations of each Fund according to
applicable state and federal law, and is responsible for the overall management
of the Funds' business affairs.
The Trustees and executive officers of the Trust and their principal occupations
during the last five years are set forth below. Each Trustee who is an
"interested person" of the Trust, as defined in the Investment Company Act of
1940, is indicated by an asterisk.
NAME (AGE) AND ADDRESS, POSITIONS HELD
*GREG D'AMICO (36), 1225 Weisgarber Road, Suite S-380, Knoxville, TN 37909,
President, Chief Financial Officer, Treasurer and Trustee. Mr. D'Amico is also
President of IPS Advisory, Inc., and a portfolio manager for individually
managed accounts.
*ROBERT LOEST (56), 1225 Weisgarber Road, Suite S-380, Knoxville, TN 37909, Vice
President, Secretary and Trustee. Mr. Loest is also Chief Executive Officer of
IPS Advisory, Inc., and a senior portfolio manager and research analyst for
individually managed accounts. Mr. Loest is a Chartered Financial Analyst and
has a Ph.D. in Biology.
WOODROW HENDERSOn (42), 6504 Clary Lane, Knoxville, TN 37919, Trustee. Mr.
Henderson is also Director of Planned Giving for the University of Tennessee at
Knoxville.
VEENITA BISARIA (39), 12416 Fort West Drive, Knoxville, TN 37922, Trustee. Ms.
Bisaria has been a financial analyst for the Tennessee Valley Authority since
February 1, 1997. Prior to that time she was Director of Business Planning at
Lockheed Martin Energy Systems, and is a Chartered Financial Analyst (CFA).
BILLY WAYNE STEGALL, JR. (43), P.O. Box 10661, Knoxville, TN 37939, Trustee. Mr.
Stegall has been an account executive at Colony Life & Accident since June 1,
1995. Prior to that time, he was a teacher of history and economics at Austin
East High School in Knoxville, Tennessee.
Pursuant to the terms of its Management Agreements with the Trust, the Adviser
pays all of the fees and expenses of the Trustees. Each Trustee who is not
affiliated with the Adviser receives an annual retainer of $100, plus $50 for
each Board meeting attended. During the fiscal year ended November 30, 1999,
each Trustee not related to the Advisor received aggregate compensation of
$1,000.
As of February 29, 2000, Charles Schwab & Co., Inc. (Schwab) is a record-holder
of 51.59% of the Millennium Fund's outstanding shares. Schwab's address is 101
Montgomery Street, San Francisco, California 94104.
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As of February 29, 2000, the Trustees and Officers of the Trust, as a group,
beneficially owned .15% of the outstanding shares of the Millennium Fund.
As of February 29, 2000, the Trustees and Officers of the Trust, as a group,
beneficially owned 1.11% of the outstanding shares of the New Frontier Fund.
Code of Ethics. The Funds and the Advisor have adopted a code of ethics that
applies to their respective officers, directors and employees. Personnel
subject to the code of ethics may invest in securities, including those held by
the Fund, subject to insider trading and other restrictions in the code.
THE INVESTMENT ADVISOR AND DISTRIBUTION OF FUND SHARES
INVESTMENT ADVISOR. IPS Advisory, Inc. (the "Advisor"), 1225 Weisgarber Road,
Suite S-380, Knoxville, TN 37909, serves as the investment advisor for each Fund
pursuant to separate agreements (collectively, the "Management Agreements").
Greg D'Amico and Robert Loest are control persons of the Advisor, and may be
deemed to be affiliates of the Advisor due to their ownership of its shares and
their positions as directors and officers of the Advisor. Mr. D'Amico and Mr.
Loest each own 50% of the Advisor. Because of such affiliation, they may receive
benefits from the management fees paid to the Advisor. Pursuant to the
Management Agreements with each Fund, the Advisor manages the Funds' business
affairs, and furnishes advice and recommendations to each Fund regarding
securities to be purchased and sold by the Fund.
The Advisor is staffed by experienced investment professionals with extensive
experience in company analysis, and who have been officers of IPS since 1986.
Analysis is performed in-house for all core portfolio companies, using a variety
of proprietary, fundamental analytical methods.
Under the terms of each respective Management Agreement, the Advisor manages the
investments of the Funds, subject to approval of the Board of Trustees of the
Trust, and pays all of the expenses of the Funds except brokerage, taxes,
interest and extraordinary expenses. As compensation for its management services
and agreement to pay the Funds' expenses pursuant to each respective Management
Agreement, the Millennium Fund is obligated to pay the Advisor a fee computed
and accrued daily and paid monthly at an annual rate of 1.40% of its average
daily net assets up to and including $100,000,000, 1.15% of such assets from
$100,000,001 up to and including $250,000,000, and .90% of such assets in excess
of $250,000,001.
For the period from December 1, 1995 through November 30, 1996, the Millennium
Fund paid fees of $47,950 to the Adviser. For the period from December 1, 1996
through November 30, 1997, the Millennium Fund paid fees of $112,787 to the
Advisor. For the period from December 1, 1997 through November 30, 1998, the
Millennium Fund paid fees of $237,948 to the Advisor. For the period from
December 1, 1998 through November 30, 1999, the Millenium Fund paid fees of
$798,431 to the Advisor For the period from August 1, 1998 through November 30,
1998, the New Frontier Fund paid fees of $2,067 to the Advisor. For the period
from December 1, 1998 through November 30, 1999, the New Frontier Fund paid fees
of $28,048 to the Advisor.
The Advisor retains the rights to use the names "IPS," "Millennium" and "New
Frontier" in connection with another investment company or business enterprise
with which the Advisor is or may become associated. The Fund's right to use the
names "IPS," "Millennium," and "New Frontier" automatically ceases thirty days
after termination of the applicable Management Agreement(s) and may be withdrawn
by the Advisor on thirty days' written notice.
The Advisor may make payments to banks or other financial institutions that
provide shareholder services and administer shareholder accounts. The
Glass-Steagall Act prohibits banks from engaging in the business of
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underwriting, selling or distributing securities. Although the scope of this
prohibition under the Glass-Steagall Act has not been clearly defined by the
courts or appropriate regulatory agencies, management of the Funds believes that
the Glass-Steagall Act should not preclude a bank from providing such services.
However, state securities laws on this issue may differ from the interpretations
of federal law expressed herein and banks and financial institutions may be
required to register as dealers pursuant to state law. If a bank were prohibited
from continuing to perform all or a part of such services, management of the
Funds believes that there would be no material impact on either Fund or its
shareholders. Banks may charge their customers fees for offering these services
to the extent permitted by applicable regulatory authorities, and the overall
return to those shareholders availing themselves of the bank services will be
lower than to those shareholders who do not. The Funds may from time to time
purchase securities issued by banks which provide such services; however, in
selecting investments for a Fund, no preference will be shown for such
securities.
DISTRIBUTION OF FUND SHARES. The Funds offer their shares to the public on a
continuous basis. For information on the purchase and redemption of Fund shares,
see "Purchase and Redemption of Shares" below.
TRANSFER AGENT
The Provident Bank, One East Fourth Street, Cincinnati, Ohio 45202, is the
Transfer Agent for each Fund. The Transfer Agent performs shareholder service
functions such as maintaining the records of each shareholder's account,
answering shareholders' inquiries concerning their accounts, processing purchase
and redemptions of each Fund's shares, acting as dividend and distribution
disbursing agent and performing other accounting and shareholder service
functions.
CUSTODIAN
The Provident Bank, One East Fourth Street, Cincinnati, Ohio 45202, is the
Custodian of each Fund's investments. The Custodian acts as each Fund's
depository, safekeeps its portfolio securities, collects all income and other
payments with respect thereto, disburses funds at the Fund's request and
maintains records in connection with its duties.
INDEPENDENT ACCOUNTANTS
The independent accounting firm for each Fund is McCurdy & Associates CPA's,
Inc., 27955 Clemens Road, Westlake, Ohio 44145. McCurdy & Associates performs an
annual audit of each Fund's financial statements and provides financial, tax and
accounting consulting services as requested.
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FUND TRANSACTIONS AND BROKERAGE
Subject to policies established by the Board of Trustees of the Trust on behalf
of each Fund, the Advisor is responsible for the Funds' investment decisions and
the placing of the Funds' investment transactions.
In placing portfolio transactions, the Advisor seeks the best qualitative
execution for each Fund, taking into account such factors as price (including
the applicable brokerage commission or dealer spread), the execution capability,
financial responsibility and responsiveness of the broker or dealer and the
brokerage and research services provided by the broker or dealer. The Advisor
generally seeks favorable prices and commission rates that are reasonable in
relation to the benefits received.
The Advisor is specifically authorized to select brokers or dealers who also
provide brokerage and research services to either Fund and/or the other accounts
over which the Advisor exercises investment discretion and to pay such brokers
or dealers a commission in excess of the commission another broker or dealer
would charge if the Advisor determines in good faith that the commission is
reasonable in relation to the value of the brokerage and research services
provided. The determination may be viewed in terms of a particular transaction
or the Advisor's overall responsibilities with respect to either Fund and to
other accounts over which it exercises investment discretion.
Research services include supplemental research, securities and economic
analyses, statistical services and information with respect to the availability
of securities or purchasers or sellers of securities and analyses of reports
concerning performance of accounts. The research services and other information
furnished by brokers through whom the Fund effects securities transactions may
also be used by principals of the Advisor in servicing all of their accounts.
Similarly, research and information provided by brokers or dealers serving other
clients may be useful to principals of the Advisor in connection with the
Advisor's services to each Fund. Although research services and other
information are useful to each Fund and the Advisor, it is not possible to place
a dollar value on the research and other information received. It is the opinion
of the Board of Trustees and the Advisor that the review and study of the
research and other information will not reduce the overall cost to the Advisor
of performing its duties to each Fund under each respective Management
Agreement. While the Funds do not deem it practicable and in their respective
best interests to solicit competitive bids for commission rates on each
transaction, consideration is regularly given to posted commission rates as well
as other information concerning the level of commissions charged on comparable
transactions by qualified brokers.
Neither Fund has an obligation to deal with any broker or dealer in the
execution of its transactions.
Transactions in the over-the-counter market can be placed directly with market
makers who act as principals for their own account and include mark-ups in the
prices charged for over-the-counter securities. Transactions in the
over-the-counter market can also be placed with broker-dealers who act as agents
and charge brokerage commissions for effecting over-the-counter transactions.
The Funds may place over-the-counter transactions either directly with principal
market makers, or with broker-dealers if that is consistent with the Advisor's
obligation to obtain best qualitative execution. Under the Investment Company
Act of 1940, persons who may be deemed to be affiliated with the Advisor are
prohibited from dealing with either Fund as a principal in the purchase and sale
of securities.
To the extent that either Fund and another of the Advisor's clients seek to
acquire the same security at about the same time, the applicable Fund may not be
able to acquire as large a position in such security as it desires or it may
have to pay a higher price for the security. Similarly, the Fund may not be able
to obtain as large an execution of an order to sell or as high a price for any
particular portfolio security if the other client desires to sell the same
portfolio security at the same time. On the other hand, if the same securities
are bought or sold at the same time by more than one client, the resulting
participation in volume transactions could produce better executions for the
applicable Fund. In the event that more than one client wants to purchase or
sell the same security on a given date, the purchases and sales will normally be
allocated on a random selection basis.
Until the Funds terminated their agreements with their former underwriter,
Securities Services Network, Inc., 9041 Executive Park Drive, Suite 500,
Knoxville, TN 37923 ("SSN"), the Funds were permitted under such agreements to
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use SSN for brokerage if such transactions would not be unfair or unreasonable
to the respective Fund's shareholders, and the commissions were paid solely for
the execution of trades and not for any other services. In determining the
commissions to be paid to SSN, it was the policy of each Fund that such
commissions would, in the judgment of the Fund's Board of Trustees, be (a) at
least as favorable to the Fund as those which would be charged by other
qualified brokers having comparable execution capability, and (b) at least as
favorable to the Fund as commissions contemporaneously charged by the SSN on
comparable transactions for its most favored unaffiliated customers, except for
customers of SSN considered by a majority of the Trust's disinterested Trustees
not to be comparable to the Fund. The disinterested Trustees from time to time
reviewed, among other things, information relating to the commissions charged by
SSN to each Fund and its other customers, and rates and other information
concerning the commissions charged by other qualified brokers. Neither former
underwriting agreement provided for a reduction of the Advisor's fee by the
amount of any profits earned by SSN from brokerage commissions generated from
portfolio transactions of the Fund.
For the fiscal years ended November 30, 1997, November 30, 1998 and November 30,
1999, the Millennium Fund paid brokerage commissions of $10,332, $51,268 and
$410, respectively, to Securities Service Network, Inc. for effecting Millennium
Fund commission transactions. The commissions paid to Securities Service
Network, Inc. for Millennium for the fiscal year ended November 30, 1999
represented .2% of the Fund's commissions. For the fiscal years ended November
30, 1998 and November 30, 1999, the New Frontier Fund paid brokerage commissions
of $1,560 and $1,590, respectively, to Securities Service Network, Inc. for
effecting New Frontier Fund commission transactions. The commissions paid to
Securities Service Network, Inc. for the fiscal year ended November 30, 1999
represented 13.3% of the Fund's commissions.
CAPITAL STOCK AND OTHER SECURITIES
Each share of a Fund represents an equal proportionate interest in the assets
and liabilities belonging to that Fund with each other share of that series and
is entitled to such dividends and distributions out of income belonging to the
series as are declared by the Trustees. The shares do not have cumulative voting
rights or any preemptive or conversion rights, and the Trustees have the
authority from time to time to divide or combine the shares of any series into a
greater or lesser number of shares of that series so long as the proportionate
beneficial interest in the assets belonging to that series and the rights of
shares of any other series are in no way affected. In case of any liquidation of
a series, the holders of shares of the series being liquidated will be entitled
to receive as a class a distribution out of the assets, net of the liabilities,
belonging to that series. Expenses attributable to any series are borne by that
series. Any general expenses of the Trust not readily identifiable as belonging
to a particular series are allocated by or under the direction of the Trustees
in such manner as the Trustees determine to be fair and equitable. No
shareholder is liable to further calls or to assessment by the Trust without his
or her express consent.
If at least ten shareholders (the "Petitioning Shareholders") wish to obtain
signatures to request a meeting for the purpose of voting upon removal of any
Trustee of the Trust, they may make a written application to the Trust
requesting to communicate with other shareholders. The Petitioning Shareholders
must hold in the aggregate at least 1% of the shares then outstanding or shares
then having a net asset value of $25,000, whichever is less, and each
Petitioning Shareholder must have been a shareholder for at least six months
prior to the date of the application. The application must be accompanied by the
form of communication which the shareholders wish to transmit. Within five
business days after receipt of the application, the Trust will (a) provide the
Petitioning Shareholders with access to a list of the names and addresses of all
shareholders of the Trust; or (b) inform the Petitioning Shareholders of the
approximate number of shareholders and the estimated costs of mailing such
communication, and undertake such mailing promptly after tender by the
Petitioning Shareholders to the Trust of the material to be mailed and the
reasonable expenses of such mailing. The Trustees will promptly call a meeting
for the purpose of voting upon the question of removal of any Trustee when
requested in writing to do so by the record holders of not less than 10% of the
outstanding shares.
Upon sixty days prior written notice to shareholders, the Funds may make
redemption payments in whole or in part in securities or other property if the
Trustees determine that existing conditions make cash payments undesirable. For
other information concerning the purchase and redemption of shares of the Funds,
see "How to Purchase Shares of the Funds" and "How to Redeem or Sell Shares of
the Funds" in the Prospectus. For a description of the methods used to determine
the share price and value of the Funds' assets, see "Net Asset Value" in the
Prospectus.
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PURCHASE AND REDEMPTION OF SHARES
Reference is made to "Buying Fund Shares," "Redeeming Fund Shares" and
"Additional Information About Purchases, Sales, and Exchanges" in the Prospectus
for more information concerning how to purchase and redeem shares.
For purposes of the purchase and redemption of shares as provided in the Funds'
Prospectus, "good order" means that the purchase or redemption order, as
applicable, includes the following:
1. The account number (if applicable) and the particular Fund's name.
2. The amount of the transaction (specified in dollars or shares).
3. Signatures of all owners exactly as they are registered on the account.
4. Any required signature guarantees (if applicable).
5. Other supporting legal documents that might be required, in cases of
estates, corporations, trusts, and certain other accounts.
TELEPHONE PURCHASES BY SECURITIES FIRMS
Brokerage firms that are NASD members may telephone the Transfer Agent at
800.249.6927 and buy shares for investors who have investments in either Fund
through the brokerage firm's account with the applicable Fund. By electing
telephone purchase privileges, NASD member firms, on behalf of themselves and
their clients, agree that neither the Funds, the Underwriter nor the Transfer
Agent shall be liable for following telephone instructions reasonably believed
to be genuine. To be sure telephone instructions are genuine, the Funds and
their agents send written confirmations of transactions to the broker that
initiated the telephone purchase. As a result of these and other policies, the
NASD member firms may bear the risk of any loss in the event of such a
transaction. However, if the Transfer Agent or a Fund fails to follow these
established procedures, they may be liable. Each Fund may modify or terminate
these telephone privileges at any time.
EXCHANGE PRIVILEGE
Investors in either Fund may exchange their shares for shares of the other Fund.
There is no charge for such exchanges. This offer is only good for residents of
states in which the shares of the Fund being acquired are registered for sale.
Before making an exchange, investors should review a current Prospectus for
information on the new fund they are switching to. Don't switch unless you fully
understand the differences in the investment objectives and portfolios of the
funds.
You may send an exchange request in writing sent to the Transfer Agent, signed
by each registered owner exactly as the shares are registered. You must get a
signature guarantee for any exchange of over $50,000. You can do this at any
bank or financial institution. The signature guarantee is used to protect
shareholders from the possibility of a fraudulent request. An exchange order
must satisfy the requirements for a redemption. (See "Redemption of Shares"). If
the exchange request is in proper order, the exchange will be based on the NAVs
of the shares involved, determined at the end of the day on which the request is
received. Whenever you exchange shares of one Fund for shares of another Fund,
the exchange is treated for federal income tax purposes as a sale (unless your
account is tax-exempt). Therefore, you will probably have a taxable gain or
loss. The Funds may, upon 60 days' notice to shareholders, impose reasonable
fees and restrictions on exchange among funds, and modify or terminate the
exchange privilege. Except for those limited instances where redemptions of the
fund being exchanged are suspended under Section 22(e) of the 1940 Act, or where
sales of shares of the Fund you are buying into are temporarily stopped, we will
notify you at least 60 days in advance of all such modifications or termination
of the exchange privilege.
AUTOMATIC MONTHLY EXCHANGE
Shareholders of the Funds may automatically exchange a fixed dollar amount of
their shares for shares of the other Fund on a monthly basis. The minimum
monthly exchange is $100. This automatic exchange program may be changed by the
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shareholder at any time by writing the Transfer Agent at least two weeks before
the date the change is to be made. You can get more information about this
service from the Transfer Agent.
Shares may also be sold through a broker authorized by your Fund to redeem its
shares. Such brokers may charge a reasonable fee for their services. Requests
for redemption by telephone will not be accepted.
Each registered owner must sign the written redemption request exactly as the
shares are registered. You must obtain a signature guarantee for any withdrawal
over $50,000, or that is mailed to another address or person different than the
address or person on your account statement. You can get a signature guarantee
from any bank or financial institution. The signature guarantee is to protect
you from fraudulent redemption of your shares.
SYSTEMATIC WITHDRAWALS
You can set up a systematic withdrawal program if your accounts is worth $10,000
or more. This allows investors to withdraw a fixed sum each month or calendar
quarter. The minimum payment to you under the program is $250. Either you or the
Fund may terminate the program at any time without charge or penalty.
Termination will become effective five business days after receipt of your
instructions. Withdrawals under the Systematic Withdrawal Program involves a
sale of shares, and may result in a taxable gain or loss. If you withdraw more
than the dividends credited to your account, it ultimately may be depleted.
RULE 18F-1 ELECTION
The Fund has made an election with the Securities and Exchange Commission to pay
in cash all redemptions requested by any shareholder of record limited in amount
during any 90-day period to the lesser of $250,000 or 1% of the net assets of
the Fund at the beginning of such period. Such commitment is irrevocable without
the prior approval of the Securities and Exchange Commission. Redemptions in
excess of the above limits may be paid in whole or in part, in investment
securities or in cash, as the Board of Directors may deem advisable; however,
payment will be made wholly in cash unless the Board of Directors believes that
economic or market conditions exist which would make such a practice detrimental
to the best interests of the Fund. If redemptions are paid in investment
securities, such securities will be valued as set forth in the Prospectus under
"Valuation of Shares" and a redeeming shareholder would normally incur brokerage
expenses if he converted these securities to cash.
RETIREMENT PLANS
Each Fund offers several tax qualified retirement plans for individuals and
employers. The following plans are available: Traditional Individual Retirement
Accounts (IRAs), Simplified Employee Pension Plans, 403(b) plans, and 401(K)
corporate profit-sharing retirement plans. Contributions to these plans are
tax-deductible and earnings are tax exempt until distributed. Roth IRAs and
Education IRAs are also available. You should not begin a retirement plan before
talking with your financial or tax advisor. To receive all the necessary
information on fees, plan agreements and applications, contact the Advisor at
1225 Weisgarber Road, Suite S-380, Knoxville, TN 37909 or call 800.232.9142.
NET ASSET VALUE
The Funds' share prices are determined based upon net asset value (NAV). The
Funds calculate NAV at approximately 4:00 p.m., New York time, each day that the
New York Stock Exchange is open for trading. The NAV per share of each Fund is
determined by dividing the total value of the applicable Fund's investments and
other assets less any liabilities by its number of outstanding shares. See
"Valuation of Shares" in the Prospectus.
The net asset value is determined at the close of the New York Stock Exchange
each day that the exchange is open. The Exchange is closed on weekends and on
New Years Day, Martin Luther King, Jr. Day, President's Day, Good Friday,
Memorial Day, July 4, Labor Day, Thanksgiving Day, and Christmas each year.
Securities traded on the New York Stock Exchange, the American Stock Exchange,
or the NASDAQ National Market System are valued at the last sale price or the
last bid price if there is no sale. Securities or other assets for which
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quotations are not readily available are valued at fair values determined in
good faith by the Board of Trustees. See "Valuation of Shares" in the
Prospectus.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The following summary is based on current tax laws and regulations, which may be
changed by legislative, judicial or administrative action. No attempt has been
made to present a detailed explanation of the federal, state or local income tax
treatment of the Funds or their shareholders. Accordingly, you are urged to
consult your tax advisers regarding specific questions as to federal, state and
local income taxes.
Each Fund is treated as a separate entity for federal income tax purposes and
each Fund intends to elect to qualify under Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"). Each Fund that so qualifies will not be
subject to federal income tax on the part of its net ordinary income and net
realized capital gains which it distributes to shareholders.
To qualify for special tax treatment afforded investment companies under
Subchapter M, each Fund is required, at the end of each quarter of the taxable
year, to have (i) at least 50% of the market value of the Fund's total assets be
invested in cash, U.S. Government securities, the securities of other regulated
investment companies, and other securities, with such other securities of any
one issuer limited for the purposes of this calculation to an amount not greater
than 5% of the value of the Fund's total assets, and (ii) not more than 25% of
the value of its total assets be invested in the securities of any one issuer
(other than U.S. Government securities or the securities of other regulated
investment companies).
Dividends paid by each Fund from its ordinary income, and distributions of each
Fund's net realized short-term capital gains, are taxable to non-tax-exempt
investors as ordinary income. Ordinary income dividends may be eligible for the
70% dividends received deduction allowed to corporations under the Code, if
certain requirements are met.
Distributions made from each Fund's net realized long-term capital gains are
taxable to shareholders as long-term capital gains regardless of the length of
time the shareholder has owned such shares. Pursuant to the Taxpayer Relief Act
of 1997, different maximum rates of tax are imposed on individuals, estates or
trusts on various transactions giving rise to long-term capital gain. For this
purpose, long-term capital gains are divided into two tax-rate groups: a 20%
group (for capital gains from assets held for more than 18 months) and a 28%
group (for all other long-term capital gain). Each Fund will supply information
to its shareholders to determine the appropriate tax-rate group of its long-term
capital gain distributions.
Upon redemption of shares of either Fund held by a non-tax-exempt investor, such
investor, generally, will realize a capital gain or loss equal to the difference
between the redemption price received by the investor and the adjusted basis of
the shares redeemed. If the redemption is in-kind, capital gain or loss will be
measured by the difference between the fair market value of securities received
and the adjusted basis of the shares redeemed. Such capital gain or loss,
generally, will constitute a short-term capital gain or loss if the redeemed
shares were held for twelve months or less, and long-term capital gain or loss
if the redeemed Fund shares were held for more than twelve months. If, however,
shares of either Fund were redeemed within six months of their purchase by an
investor, and if a capital gain dividend was paid with respect to the applicable
Fund's shares while they were held by the investor, then any loss realized by
the investor will be treated as long-term capital loss to the extent of the
capital gain dividend.
Under certain provisions of the Code, some shareholders may be subject to 31%
withholding on reportable dividends, capital gains distributions and redemption
payments ("back-up withholding"). Generally, shareholders subject to back-up
withholding will be those for whom a taxpayer identification number is not on
file with the applicable Fund or who, to such Fund's knowledge, have furnished
an incorrect number. When establishing an account, an investor must certify
under penalty of perjury that such number is correct and that he is not
otherwise subject to back-up withholding.
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<PAGE>
Dividends paid by each Fund from its ordinary income and distributions of each
Fund's net realized short-term capital gains paid to shareholders who are
non-resident aliens will be subject to a 30% United States withholding tax under
existing provisions of the Code applicable to foreign individuals and entities
unless a reduced rate of withholding or a withholding exemption is provided
under applicable treaty law. Non-resident shareholders are urged to consult
their own tax advisers concerning the applicability of the United States
withholding tax.
The Code requires each regulated investment company to pay a nondeductible 4%
excise tax to the extent the company does not distribute, during each calendar
year, 98% of its ordinary income, determined on a calendar year basis, and 98%
of its capital gains, determined, in general, on an October 31 year-end, plus
any undistributed amount from prior years. Each Fund anticipates that it will
make sufficient timely distributions to avoid imposition of the excise tax. If
either Fund pays a dividend in May which was declared in the previous October,
November or December to shareholders of record on a date in those months, then
such dividend or distribution will be treated for tax purposes as being paid on
December 31 and will be taxable to shareholders as if received on December 31.
The foregoing is a general and abbreviated summary of the applicable provisions
of the Code and Treasury regulations presently in effect. For the complete
provisions, reference should be made to the pertinent Code sections and the
Treasury regulations promulgated thereunder. The Code and these Treasury
regulations are subject to change by legislative or administrative action.
Dividends and capital gains distributions may also be subject to state and local
taxes.
The federal income tax consequences set forth above do not address any
particular tax considerations a shareholder of either Fund might have.
Shareholders are urged to consult their tax advisers as to the particular tax
consequences of the acquisition, ownership and disposition of shares of each
Fund, including the application of state, local and foreign tax laws and
possible future changes in federal tax laws. Foreign investors should consider
applicable foreign taxes in their evaluation of an investment in either Fund.
PERFORMANCE
The average annual total return for each Fund that will be reported by the Trust
will be calculated according to the following formula:
P is a hypothetical initial payment of $1,000
T = average annual total return
P(1+T)n = ERV n = number of years
ERV = ending redeemable value of
hypothetical $1,000 payment made at the
beginning of the 1, 5, or 10 year
periods (or fractional portion thereof)
All total return figures reflect the deduction of a proportional share of the
Fund's expenses on an annual basis, and assume that all dividends and
distributions are reinvested in the Fund when paid.
From time to time, in advertisements, sales literature and information furnished
to present or prospective shareholders, the performance of each Fund may be
compared to indices of broad groups of unmanaged securities considered to be
representative of or similar to the portfolio holdings of the applicable Fund or
considered to be representative of the stock market in general or the fixed
income securities market in general. The Funds may use the Standard & Poor's 500
Stock Index, the Dow Jones Industrial Average, the Value Line Composite Average,
and the NASDAQ Composite Index, as well as other appropriate indexes.
In addition, the performance of each Fund may be compared to other groups of
mutual funds tracked by any widely used independent research firm which ranks
mutual funds by overall performance, investment objectives and assets, such as
Lipper Analytical Services, Inc. or Morningstar, Inc. The objectives, policies,
-13-
<PAGE>
limitations and expenses of other mutual funds in a group may not be the same as
those of the applicable Fund. Performance rankings and ratings reported
periodically in national financial publications such as Barron's may also be
used.
The following table provides the average annual rates of return for the
Millennium Fund from its inception to November 30, 1999:
1 year (December 1, 1998 - November 30, 1999) 103.20%*
2 years (December 1, 1997 - November 30, 1999) 58.33%*
3 years (December 1, 1996 - November 30, 1999) 43.92%*
4 years (December 1, 1995 - November 30, 1999) 38.97%*
Since Inception (January 3, 1995 - November 30, 1999) 37.39%*
* Annualized
The following table provides the cumulative rates of return for the Millennium
Fund from its inception to November 30, 1999:
1 year (December 1, 1998 - November 30, 1999) 160.58%
2 years (December 1, 1997 - November 30, 1998) 70.63%
3 years (December 1, 1996 - November 30, 1998) 83.87%
4 years (December 1, 1995 - November 30, 1999) 298.23%
Since Inception (January 3, 1995 - November 30, 1998) 133.86%
The following table provides the average annual rates of return for the New
Frontier Fund from its inception to November 30, 1999:
1 year (December 1, 1998 - November 30, 1999) 133.25%*
Since Inception (August 3, 1998 - November 30, 1999) 96.61%*
* Annualized
The following table provides the cumulative rates of return for the New Frontier
Fund from its inception to November 30, 1999:
1 year (December 1, 1998 - November 30, 1999) 122.77%
Since Inception (August 3, 1998 - November 30, 1999) 145.31%
FINANCIAL STATEMENTS
The audited financial statements of the Millennium Fund and the New Frontier
Fund are incorporated by reference from the Millennium Fund's and the New
Frontier Fund's Annual Reports to Shareholders for the fiscal year ended
November 30, 1999. A copy of such report is incorporated by reference and
accompanies this Statement of Additional Information. Additional copies are
available, without charge by calling the Fund.
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<PAGE>
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS
(a) (i) Copy of Registrant's Declaration of Trust, which was filed as an
exhibit to Registrant's Registration Statement, is hereby incorporated
by reference.
(ii) Copy of Amendment No. 1 to Registrant's Declaration of Trust, which
was filed as an exhibit to Registrant's Pre- Effective Amendment No.
1, is hereby incorporated by reference.
(iii)Copy of Amendment No. 2 to Registrant's Declaration of Trust, which
was filed as an exhibit to Registrant's Post-Effective Amendment No.
10, is hereby incorporated by reference.
(iv) Copy of Amendment No. 3 to Registrant's Declaration of Trust.*
(b) Copy of Registrant's By-Laws, as amended, which was filed as an exhibit to
Registrant's Pre-Effective Amendment No. 1, is hereby incorporated by
reference.
(c) Voting Trust Agreements - None.
(d) (i) Copy of Registrant's Management Agreement with its Advisor, IPS
Advisory, Inc. regarding the IPS Millennium Fund which was filed as an
exhibit to Registrant's Pre-Effective Amendment No. 1, is hereby
incorporated by reference.
(ii) Form of Registrant's Management Agreement with IPS Advisory, Inc.
regarding the IPS New Frontier Fund which was filed as an exhibit to
Registrant's Post Effective Amendment No. 7, is hereby incorporated by
reference.
(e) None.
(f) Bonus, Profit Sharing, Pension or Similar Contracts for the benefit of
Directors or Officers - None
(g) (i) Copy of Registrant's Agreement with the Custodian, The Provident Bank,
dated November 1, 1994.
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<PAGE>
(ii) Amendment to Registrant's Agreement with the Custodian which was filed
as an exhibit to Registrant's Post Effective Amendment No. 7, is
hereby incorporated by reference.
(h) Transfer Agency Agreement by and between the Trust and Provident Bank.*
(i) Opinion and Consent of Kilpatrick Stockton LLP which was filed with
Registrant's Rule 24f-2 Notice for the fiscal year ended November 30, 1997,
is hereby incorporated by reference.
(j) Consent of McCurdy & Associates CPA's, Inc.*
(k) Financial Statements Omitted from Item 22 - None
(l) Letters of Initial Stockholders, which was filed as an exhibit to
Registrant's Pre-Effective Amendment No. 1, is hereby incorporated by
reference
(m) 12b-1 Distribution Expense Plan - None
(n) Financial Data Schedule
(o) Inapplicable
(p) Code of Ethics*
________________________
* Filed herewith
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE REGISTRANT
None
ITEM 25. INDEMNIFICATION
(a) Article VI of the Registrant's Declaration of Trust provides for
indemnification of officers and Trustees as follows:
SECTION 6.4 INDEMNIFICATION OF TRUSTEES, OFFICERS, ETC. Subject to and
except as otherwise provided in the Securities Act of 1933, as amended, and
the 1940 Act, the Trust shall indemnify each of its Trustees and officers
(including persons who serve at the Trust's request as directors, officers
or trustees of another organization in which the Trust has any interest as
a shareholder, creditor or otherwise (hereinafter referred to as a "Covered
Person") against all liabilities, including but not limited to amounts paid
in satisfaction of judgments, in compromise or as fines and penalties, and
expenses, including reasonable accountants' and counsel fees, incurred by
any Covered Person in connection with the defense or disposition of any
action, suit or other proceeding, whether civil or criminal, before any
court or administrative or legislative body, in which such Covered Person
may be or may have been involved as a party or otherwise or with which such
person may be or may have been threatened, while in office or thereafter,
by reason of being or having been such a Trustee or officer, director or
trustee, and except that no Covered Person shall be indemnified against any
liability to the Trust or its Shareholders to which such Covered Person
would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the
conduct of such Covered Person's office.
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<PAGE>
SECTION 6.5 ADVANCES OF EXPENSES. The Trust shall advance attorneys' fees
or other expenses incurred by a Covered Person in defending a proceeding to
the full extent permitted by the Securities Act of 1933, as amended, the
1940 Act, and Ohio Revised Code Chapter 1707, as amended. In the event any
of these laws conflict with Ohio Revised Code Section 1701.13(E), as
amended, these laws, and not Ohio Revised Code Section 1701.13(E), shall
govern.
SECTION 6.6 INDEMNIFICATION NOT EXCLUSIVE, ETC. The right of
indemnification provided by this Article VI shall not be exclusive of or
affect any other rights to which any such Covered Person may be entitled.
As used in this Article VI, "Covered Person" shall include such person's
heirs, executors and administrators. Nothing contained in this article
shall affect any rights to indemnification to which personnel of the Trust,
other than Trustees and officers, and other persons may be entitled by
contract or otherwise under law, nor the power of the Trust to purchase and
maintain liability insurance on behalf of any such person.
The Registrant may not pay for insurance which protects the Trustees and
officers against liabilities rising from action involving willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of their offices.
(b) The Registrant may maintain a standard mutual fund and investment advisory
professional and directors and officers liability policy. The policy, if
maintained, would provide coverage to the Registrant, its Trustees and
officers, and its Advisor, among others. Coverage under the policy would
include losses by reason of any act, error, omission, misstatement,
misleading statement, neglect or breach of duty.
(c) 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 provisions of Ohio law and the Agreement and
Declaration of the Registrant or the By-Laws of the Registrant, 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 Trust in the successful defense of any
action, suit or proceeding) is asserted by 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.
-17-
<PAGE>
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR
A. IPS Advisory, Inc. (the "Advisor") is a registered investment advisor. It
has engaged in no other business during the past two fiscal years.
B. The following list sets forth the business and other connections of the
Directors and officers of the Advisor during the past two years.
(1) Gregory D'Amico
(a) President and a Director of IPS Advisory, Inc., 1225 Weisgarber Road
Suite S-380, Knoxville, Tennessee 37909.
(b) President, Chief Financial Officer, Treasurer and a Trustee of IPS
Funds, 1225 Weisgarber Road, Suite S-380, Knoxville, Tennessee 37909.
(c) Registered representative of Securities Service Network, Inc., 9041
Executive Park Drive, Knoxville, Tennessee 37923 (until December 31,
1999).
(2) Robert Loest
(a) Chief Executive Officer and a Director of IPS Advisory, Inc., 1225
Weisgarber Road, Suite S-380, Knoxville, Tennessee 37909.
(b) Vice President, Secretary and a Trustee of IPS Funds, 1225 Weisgarber
Road, Suite S-380, Knoxville, Tennessee 37909.
(c) Registered representative of Securities Service Network, Inc., 9041
Executive Park Drive, Suite 500, Knoxville, Tennessee 37923 (until
December 31, 1999).
ITEM 27. PRINCIPAL UNDERWRITERS
The Fund offers its shares without the engagement of a distributor.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
Accounts, books and other documents required to be maintained by Section
31(a) of the Investment Company Act of 1940 and the Rules promulgated thereunder
will be maintained by the Registrant at 1225 Weisgarber Road, Suite S-380,
Knoxville, Tennessee 37909, and/or by The Provident Bank, the Registrant's
Custodian and Transfer Agent, at One East Fourth Street, Cincinnati, Ohio 45202.
-18-
<PAGE>
ITEM 29. MANAGEMENT SERVICES NOT DISCUSSED IN PARTS A OR B
None.
ITEM 30. UNDERTAKINGS
(a) Not Applicable.
(b) The Registrant hereby undertakes to furnish each person to whom a
Prospectus is delivered with a copy of the Registrant's latest annual
report to shareholders, upon request and without charge.
(c) The Registrant hereby undertakes that, within five business days after
receipt of a written application by shareholders holding in the aggregate
at least 1% of the shares then outstanding or shares then having a net
asset value of $25,000, whichever is less, each of whom shall have been a
shareholder for at least six months prior to the date of application
(hereinafter the "Petitioning Shareholders"), requesting to communicate
with other shareholders with a view to obtaining signatures to a request
for a meeting for the purpose of voting upon such removal of any Trustee of
the Registrant, which application shall be accompanied by a form of
communication and request which such Petitioning Shareholders wish to
transmit, Registrant will:
(i) provide such Petitioning Shareholders with access to a list of the
names and addresses of all shareholders of the Registrant; or
(ii) inform such Petitioning Shareholders of the approximate number of
shareholders and the estimated costs of mailing such communication,
and to undertake such mailing promptly after tender by such
Petitioning Shareholders to the Registrant of the material to be
mailed and the reasonable expenses of such mailing.
The Registrant also undertakes to promptly call a meeting for the purpose
of voting upon the question of the removal of any Trustee when requested in
writing to do so by the record holders of not less than 10% of the outstanding
shares of the Trust.
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<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 the Registrant has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Knoxville, State of Tennessee, on the
28th day of March, 2000.
IPS FUNDS
/s/ Greg D'Amico
By: Greg D'Amico, President
<PAGE>
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Gregory D'Amico and Robert Loest, or either of
them, as his true and lawful attorney-in-fact and agent, with full power of
substitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, and all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or either of them, or
their or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Dated as of the 28th day of March, 2000.
/s/ Greg D'Amico
Gregory D'Amico, President,
Chief Financial Officer,
Treasurer
and Trustee
/s/ Robert Loest
Robert Loest, Trustee
/s/ Woodrow Henderson
Woodrow Henderson, Trustee**
/s/ Vanita Bisaria
Vanita Bisaria, Trustee**
/s/ Billy Wayne Stegall
Billy Wayne Stegall, Jr.**
**By: /s/ Greg D'Amico Date: 3/28/2000
Gregory D'Amico
Attorney-in-Fact
J. KENNETH BLACKWELL
SECRETARY OF STATE
EXHIBIT TO AMENDMENT TO
REPORT OF OPERATION OF
BUSINESS TRUST
Amendment to or Amended Business Trust Instrument of
IPS Funds
----------------------------------------------
(name of business trust)
----------------------------------------------
(business trust registration number)
Gregory D'Amico , Trustee of the above named business trust certifies that the
- ----------------
Business Trust Instrument filed as an exhibit to the Report of Operation of a
Business Trust has been amended pursuant to section 1746.07 of the Ohio Revised
Code as follows: (Language below should indicate whether changes are in addition
to provisions of trust instrument or supersede existing provisions. Refer to
trust provisions specifically by number when reporting individual changes or
attach and incorporate by reference amended business trust instrument with
language that it supersedes all existing business trust instruments filed on
behalf of the business trust)
The IPS Funds Declaration of Trust is amended by the addition of the
following Section 4.2B:
SECTION 4.2B. ABOLISHMENT OF THE DYNAMIC STYLE ROTATION FUND SERIES BY
THE BOARD OF TRUSTEES. The Trustees hereby abolish the Series of Shares
designated the "Dynamic Style Rotation Fund."
IN WITNESS WHEREOF, the above named trustee, acting for and on behalf of the
business trust, has subscribed his or her name on 03.06.00 (date)
By: /s/ Gregory D'Amico
---------------------------
(Trustee)
Name: Gregory D'Amico
-------------------------
AN EXECUTED COPY OR A TRUE AND CORRECT COPY OF THIS AMENDMENT TO OR AMENDED
BUSINESS TRUST INSTRUMENT MUST BE ATTACHED AS AN EXHIBIT TO AN AMENDMENT TO
REPORT OF OPERATION OF A BUSINESS TRUST AND CERTIFIED TO BE SUCH BY A TRUSTEE
BEFORE AN OFFICIAL AUTHORIZED TO ADMINISTER OATHS, BEFORE IT CAN BE FILED IN THE
OFFICE OF THE SECRETARY OF STATE.
(Ohio Revised Code Ann. section 1746.04)
<PAGE>
IPS FUNDS
The undersigned, being all of the trustees of IPS Funds (the "Trust"),
do hereby consent to the taking of, and do hereby take, the following actions
pursuant to the Trust's Declaration of Trust (the "Declaration of Trust"):
AMENDMENT NO. 3 TO DECLARATION OF TRUST
WHEREAS, under Sections 4.1 and 7.3 of the IPS Funds' Declaration of
Trust, the Trustees have the authority from time to time to abolish a series or
sub-series of shares in the event that there are no shares outstanding in such
series or sub-series; and
WHEREAS, as of November 30, 1999 there remain no shares outstanding in
the "Dynamic Style Rotation Fund" series of shares (the "DSR Fund") of the
Trust; and
WHEREAS, under Section 4.1 of the Declaration of Trust, the abolishment
or a series of shares is effective upon the execution by a majority of the then
Trustees of an instrument setting forth such abolishment, each such instrument
having the status of an amendment to this Declaration of Trust;
NOW, THEREFORE, BE IT RESOLVED, that the Trustees hereby abolish the
series of shares in the DSR Fund; and
FURTHER RESOLVED, that the amendment to the Declaration of Trust
adopted hereby shall be effective immediately upon the execution of these
resolutions by a majority of the Trustees of the Trust; and
FURTHER RESOLVED, that the Trust's Board of Trustees authorizes,
empowers and directs the officers of the Trust to execute any and all
agreements, instruments, certificates and other documents necessary or advisable
to carry out the intent of the foregoing resolutions, including but not limited
to the filing of Amendment No. 3 to the Declaration of Trust attached hereto as
Exhibit A with the appropriate official of the State of Ohio and the books and
- ---------
minutes of the Trust.
<PAGE>
IN WITNESS WHEREOF, the foregoing resolutions have been executed
effective as of November 30, 1999.
/s/ Greg D'Amico /s/ Robert Loest
- ------------------------------ -----------------------------------
Gregory D. Amico Robert Loest
/s/ Woodrow Henderson /s/ Veenita Bisaria
- ------------------------------ -----------------------------------
Woodrow Henderson Veenita Bisaria
/s/ Billy Wayne Stegall, Jr.
- ------------------------------
Billy Wayne Stegall, Jr.
[PROVIDENT BANK LOGO]
TRANSFER AGENT AND RECORDKEEPING AGREEMENT
------------------------------------------
AGREEMENT made as of the ____ day of March, 2000, by and between IPS
Advisory, Inc. (the "Adviser"), having its principal place of business at 625
South Gay Street, Knoxville, Tennessee, 37902, and THE PROVIDENT BANK
("Provident") having its principal place of business at One East Fourth Street,
Cincinnati, Ohio 45202.
WITNESSETH THAT
WHEREAS, on behalf of the Portfolios the IPS Funds (the "Fund") has
entered into Management Agreements with the Adviser that provide, among other
things, that the Adviser will pay for transfer agency services provided to the
Fund and the Portfolios; and
WHEREAS, the Advisor desires Provident to perform certain services for
the Fund and each of its Portfolios and Provident is willing to perform such
services.
NOW, THEREFORE, in consideration of the mutual covenants herein set
forth, each party agrees as follows:
1. SERVICES - Provident shall perform for the Fund and each Portfolio of the
Fund the Services set forth on Exhibit A, which is attached hereto and made
a part hereof. Provident shall also perform for each Portfolio of the Fund,
any services which it customarily performs in the ordinary course of
business without additional charge for any investment companies for which
Provident acts as transfer agent, dividend disbursing agent or unaffiliated
shareholder servicing and record keeping agent.
Provident shall perform such other services in addition to those set forth
in Exhibit A hereto as the Fund shall request in writing. Any of the
services to be performed hereunder, and the manner in which such services
are to be performed, shall be pursuant to a written agreement signed by the
parties hereto.
Provident will undertake no activity that, in its judgment, will adversely
affect the performance of its obligations to the Fund under this Agreement.
2. FEES - The Adviser shall pay Provident for the Services set forth in
Section 1 of this Agreement in accordance with and in the manner set forth
in Exhibit B which is attached hereto and made a part hereof.
3. EFFECTIVE DATE - This Agreement shall become effective as of the date set
forth above.
4. TERM - This Agreement shall be in effect until terminated in accordance
with Section 16 hereof.
Page 1 of 6
<PAGE>
5. USE OF PROVIDENT'S NAME - The Adviser will not use Provident's name in any
sales literature or other material in a manner not approved by Provident in
writing before such use, unless a similar such use was previously approved.
Notwithstanding the foregoing, Provident hereby consents to all uses of
Provident's name which merely refer in accurate terms to Provident's
appointments hereunder or which are required by the Securities and Exchange
Commission or a state securities commission, and, provided further, that in
no case will such approval be unreasonably withheld or delayed.
6. STANDARD OF CARE - Provident shall not be liable for any error of judgement
or mistake of law or for any loss suffered in connection with the matters
to which this Agreement relates, except for actual losses resulting from
willful misfeasance, bad faith, gross negligence or reckless disregard on
its part in the performance of its duties or obligations under this
Agreement. Provident shall be entitled to rely on and may act upon advice
of counsel (who may be, and upon request of the Fund shall include, counsel
for the Fund) on all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advise.
7. UNCONTROLLABLE EVENTS - Provident shall not be liable for damage, loss of
data, delays or errors occurring by reason of circumstances beyond its
control including, but not limited to, acts of civil or military authority,
national emergencies, fire, flood or catastrophe, acts of God,
insurrection, war, riots or failure of transportation, communication or
power supply. However, Provident shall keep in a separate place back-up
copies of all records required to be maintained pursuant to this Agreement
including tapes or discs necessary to reproduce all such records.
Furthermore, at all times during this Agreement, Provident shall maintain
an arrangement whereby Provident will have a backup computer facility
available for its use in providing the services required hereunder in the
event circumstances beyond Provident's control result in Provident not
being able to process the necessary work at its principal computer
facility. Provident shall, from time to time, upon request provide written
evidence and details of its arrangement for obtaining the use of such a
backup computer facility. Provident shall use reasonable care to minimize
damage, loss of data, delays and errors resulting from an uncontrollable
event, and should such damage, loss of data, delays or errors occur,
Provident shall use its best efforts to mitigate the effects of such
occurrence. Representatives of the Adviser shall be entitled to inspect
Provident's premises and operating capabilities during reasonable business
hours and upon reasonable notice to Provident.
8. INDEMNIFICATION - The Adviser shall indemnify, defend and hold Provident,
its employees and agents harmless against any losses, claims, damages,
judgments, liabilities or expenses (including reasonable counsel fees and
expenses) resulting from (1) transactions which occurred prior to the date
Provident began serving as Transfer Agent to the Fund; (2) action taken or
things done by Provident upon Proper Instructions received in accordance
with Section 9 hereof or upon advice of counsel (which may be counsel for
the Fund), as to anything arising in connection with its performance under
this Agreement; or (3) for any action taken or thing done by Provident in
performing the Services in the absence of willful misfeasance, bad faith,
gross negligence or the reckless disregard of its obligations or duties
Page 2 of 6
<PAGE>
under this Agreement. In the event Provident requests the Adviser to
indemnify, defend or hold it harmless hereunder, Provident shall use its
best efforts to inform the Adviser of the relevant facts concerning the
matter in question. Provident shall use reasonable care to identify and
promptly notify the Adviser concerning any matter which Provident believes
may result in a claim for indemnification against the Adviser, and shall
notify the Adviser within seven days of notice to Provident of the filing
of any suit or other legal action or the institution by a government agency
of any administrative action or investigation against Provident which
involves its duties under this Agreement. The Adviser shall have the
election of defending Provident against any claim which may be the subject
of indemnification or holding harmless hereunder. In the event the Adviser
so elects, it will so notify Provident and thereupon shall take over
defense of the claim and, if so requested by the Adviser, Provident shall
incur no further legal or other expenses related thereto for which it shall
be entitled to indemnity or holding harmless hereunder; provided, however,
that nothing herein contained shall prevent Provident from retaining
counsel to defend any claim at Provident's own expense. Except with the
prior written consent of the Adviser, Provident shall in no event confess
any claim or make any compromise in any matter in which the Adviser will be
asked to indemnify or hold Provident harmless hereunder. In no event shall
Provident be liable for consequential damages, lost profits, or other
special damages, even if Provident has been informed of the possibility of
such damage or loss. Notwithstanding the forgoing, Provident shall be
liable to the Fund for any damage or losses suffered by the Fund as a
result of a delay or negligence on the part of Provident in processing a
purchase or liquidation transaction or in making payment to a shareholder
of the Fund; it being agreed that, without in any way limiting Provident's
liability for other transactions hereunder, such damages shall not be
deemed to be consequential or special.
9. INSTRUCTIONS - Provident shall comply with all Proper Instructions issued
by the Adviser. As used through this Agreement, a "Proper Instruction"
means a writing signed or initialed by one or more person or persons as the
Adviser shall have from time to time authorized. Each such writing shall
set forth the specific transaction or type of transaction involved. Oral
instructions will be deemed to be Proper Instruction if (a) Provident
reasonably believes them to have been given by a person previously
authorized in Proper Instructions to give such instructions with respect to
the transaction involved, and (b) the Adviser or its designee promptly
cause such oral instructions to be confirmed in writing. Proper
Instructions may include communications effected directly between
electro-mechanical or electronic devices provided that the Adviser and
Provident are satisfied that such procedures afford adequate safeguards for
the Fund's assets. Proper Instructions may only be amended in writing.
10. CONFIDENTIALITY - Provident agrees to treat all records and other
information relative to the Adviser, the Fund and the Fund's shareholders
confidentially, and Provident on behalf of itself and its employees agrees
to keep confidential all such information, except, after prior notification
to and approval by the Adviser, which approval shall not be unreasonably
withheld and may not be withheld where Provident may be exposed to civil or
criminal contempt proceedings, when requested to divulge such information
by duly constituted authorities or when so requested by a shareholder of
Page 3 of 6
<PAGE>
the Fund seeking information about his own or an appropriately related
account.
11. REPORTS - Provident will furnish to the Adviser its auditors and such
agents pursuant to Proper Instruction such reports at such times as are
prescribed for the Services on Exhibit A attached hereto.
12. RIGHT OF OWNERSHIP - Provident agrees that all records and other data
received, computed, developed, used and/or stored pursuant to this
Agreement are the exclusive property of the Fund and that all such records
and other data will be furnished without additional charge to the Adviser
in available machine readable data form immediately upon termination of
this Agreement with respect to the Fund for any reason whatsoever.
Furthermore, upon the Adviser's request at any time or times while this
Agreement is in effect, Provident shall deliver to the Adviser at the
Adviser's expense any or all of the data and records held by Provident
pursuant to this Agreement in the form as requested by the Adviser. On the
effective date of termination of this Agreement or, if later, on the date
the Adviser ceases to use Provident's services, Provident will promptly
return to the Adviser any and all records and other data belong to the Fund
free of any claim or retention of rights by Provident.
13. REDEMPTION OF SHARES - The parties hereto agree that Provident shall
process liquidations, redemptions or repurchases of shares of the Fund, as
the agent, in the manner described in the then current prospectus and
statement of additional information for the Fund. Notwithstanding the
foregoing, Provident shall be liable for any losses, damages, claims or
expenses resulting from Provident's failure to obtain the appropriate
signature guarantee with regard to any redemption or transfer processed by
Provident unless Provident is authorized in writing by the Adviser to waive
such a requirement.
14. Representations and warranties of transfer agent - Provident represents and
warrants to the Adviser that the execution and delivery of this Agreement
has been duly and validly authorized. Provident further represents and
warrants that, in carrying out its duties and responsibilities hereunder,
Provident will comply in all respects with the provisions of the 1934 Act,
the Investment Company Act of 1940 (the "1940 Act") and other applicable
federal and state law.
15. SUBCONTRACTING - Provident may subcontract with one or more of its
affiliates or other persons to perform all or part of its obligations
hereunder, provided, however, that, notwithstanding any such subcontract,
Provident shall be fully responsible to the Adviser hereunder.
16. ASSIGNMENT - This Agreement and the rights and duties hereunder shall not
be assignable by Provident or the Adviser except by the specific written
consent of the other party.
17. TERMINATION - This Agreement may be terminated by Provident on not less
than 60 days prior written notice to the Fund and the Adviser or by the
Adviser on not less than 60 days prior written notice to Provident. Upon
Page 4 of 6
<PAGE>
such termination, Provident will use its best efforts to cooperate and
assist in accomplishing a timely, efficient and accurate conversion to the
person or firm which will provide the services described hereunder. This
Agreement may be terminated by the Adviser without the payment of any
penalty, forfeiture, compulsory buyout amount or performance of any other
obligation which could deter termination, provided, however, that for the
purpose of this Section any amount due under Section 2 of this Agreement
which is undisputed is not considered a penalty, forfeiture, compulsory
buyout amount or performance of any other obligation which could deter
termination.
This Agreement may be terminated by the Adviser after written notice to
Provident if there is a material breach or violation of this Agreement or
if Provident fails to perform any of its obligations under this Agreement
and the failure continues for more than thirty (30) days after the Adviser
gives notice of the failure to Provident or bankruptcy or insolvency
proceedings of any nature are instituted by or against Provident.
18. INSURANCE - Provident shall maintain throughout the term of this Agreement
a fidelity bond(s) in an amount in excess of the minimum amount required to
be obtained pursuant to Rule 17g-1 the 1940 Act covering the acts of its
officers, employees or agents in performing any and all of the services
required to be performed hereunder. Provident agrees to promptly notify the
Adviser in writing of any material amendment or cancellation of such
bond(s) and Provident shall at such times as the Adviser may request, but
at least once each year, notify the Fund of any claims made pursuant to
such bond(s).
19. AMENDMENT - This Agreement may be amended at any time by an instrument in
writing executed by Provident and the Adviser or each of their respective
successors, provided that any such amendment will conform to the
requirements set forth in the 1940 Act and the rules and regulations
thereunder.
20. NOTICE - Any notice shall be sufficiently given when sent by registered or
certified mail to a party at the address of such party set forth above or
at such other address as such party may from time to time specify in
writing to the other party.
21. SECTION HEADINGS - Section headings are included for convenience only and
are not to be used to construe or interpret this Agreement.
22. INTERPRETIVE PROVISIONS - In connection with the operation of this
Agreement, Provident and the Adviser may agree from time to time on such
provisions interpretive of or in addition to the provisions of this
Agreement as may in their combined opinions be consistent with the general
tenor of this Agreement. Furthermore, Provident and the Adviser may agree
to add to, delete from or change the services set forth on Exhibit A to
this Agreement. Each such interpretive or additional provision, and each
addition, deletion or change is to be signed by the parties and annexed
hereto, and no such provision, addition, deletion or change shall
contravene any applicable federal or state law or regulation and no such
Page 5 of 6
<PAGE>
provision, addition, deletion or change shall be deemed to be an amendment
of any provision of this Agreement with the exception of Exhibit A hereto.
23. GOVERNING LAW - This Agreement shall be governed by and its provisions
shall be construed in accordance with the Laws of the State of Ohio.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
THE PROVIDENT BANK IPS ADVISORY, INC.
--------------------------- -----------------------------
Name Name
--------------------------- -----------------------------
Title Title
Page 6 of 6
<PAGE>
[PROVIDENT BANK LOGO]
EXHIBIT A - SERVICES
The services provided for in this Agreement shall be performed by
Provident, or any agent appointed by Provident pursuant to Section 14 of this
Agreement, under the name of The Provident Bank (Provident) and this name or any
similar name or logo will not be used by Provident or its agents for any
purposes other than those related to this Agreement or to any other agreement
which Provident may enter into with the Fund or with companies affiliated with
the Fund.
The offices of Provident shall be open to perform the services
pursuant to this Agreement on all days when the Fund is open to transact
business.
Provident will perform all services normally provided to investment
companies such as the Fund and the quality of such services shall be equal to or
better than that provided to the other investment companies serviced by
Provident. With respect to the Fund, by way of illustration, but not limitation,
these services will include:
1. Establishing, maintaining, safeguarding and reporting on shareholder
account information and account histories, (including registration, name
and address recorded in generally accepted form, dealer, representative,
branch, and territory information, mailing address, distribution address,
various codes and specific information relating to (if applicable); level
payments, and for account group reporting for plan accounts and other
accounts grouped for master sub-account reporting).
2. Reconciling the number of outstanding shares of the Fund on a daily basis
with the Fund and the Fund's custodian, promptly correcting any differences
noted.
3. Establishing and maintaining a trade file on behalf of the Fund based on
trade information furnished to the transfer agent by the Fund or its
distributors.
4. Accepting and processing direct cash investments however received and
investing such investments promptly in shareholder accounts.
5. Passing upon the adequacy of documents properly endorsed and guaranteed
submitted by or on behalf of a shareholder to transfer ownership or redeem
shares.
6. Transferring ownership of shares upon the books of each Fund.
7. Redeeming shares and preparing and mailing redemption checks or wire
proceeds as instructed.
8. Preparing and promptly mailing account statements to the shareholder or
such other authorized address and, when appropriate, as instructed by the
Fund, to the dealer or dealer branch, whenever transaction activity
Page 1 of 4
<PAGE>
effecting share balances are posted to the Fund's accounting that is of the
type that should receive such statement.
9. Balancing outstanding shares of record with the custodian prior to each
distribution, and calculating and paying or reinvesting distributions to
shareholders of record and to open trade receivables and free stock upon
proper notification from the Fund as to the amount and character of the
distribution.
10. Processing exchanges of shares of the Fund or Portfolio for another,
calculating proper sales charges and collecting fees as required.
11. Processing level payment liquidations according to plan instructions.
12. Reporting to the Fund and its custodian daily the capital stock activities
and dollar amount of transactions.
13. Promptly answering inquiring from shareholders, dealers, Fund personnel,
and others as requested in accordance with the terms of this Agreement as
to account matters, referring policy or investment matters to the Fund.
14. Mailing reports and special mailings, as directed by the Fund to all
shareholders or selected holders or dealers.
15. Maintaining tax information for each account, deducting amounts where
required and furnishing to the Fund, its shareholders, dealers and, when
appropriate, regulatory bodies, the necessary tax information all in
compliance with the various applicable laws.
16. Maintaining records of account and distribution information for checks and
confirmations returned as undeliverable by the Post Office.
17. Maintaining records and reporting sales information for Blue Sky reporting
purposes.
18. Calculating and processing Fund mergers or stock dividends, as directed by
the Fund.
19. Maintaining all Fund records as outlined in the record and tape retention
schedule delivered by the Fund.
20. Reconciling all investment, distribution and redemption accounts.
21. Providing for the replacement of uncashed distribution or redemption
checks.
22. Maintaining and safeguarding an inventory of unissued blank checks and
other Fund records.
23. Making available to the Fund at their location(s), remote access to
computerized records maintained for the Fund.
Page 2 of 4
<PAGE>
24. Providing space and such technical expertise as may be required to enable
the Fund and its properly authorized auditors, examiners and others
designated by the Fund in writing to properly understand and examine all
books, records, computer files, microfiche and other items maintained
pursuant to this Agreement, and to assist as required in such examination.
25. Mailing prospectuses to existing accounts after a new prospectus has been
issued by the Fund.
26. Maintaining information, performing the necessary research and producing
reports required to comply with all applicable state escheat or abandoned
property laws.
With respect to each Portfolio of the Fund, the Transfer Agent will
produce reports as requested by the Fund including but not limited to the
following:
Shareholder Account Confirmation As required
Redemption Checks When redemption is made
Level payment checks On payment cycle
Distribution checks As required
Name and address labels As requested
1099-DIV, R, B Annually
1042-S Annually
Transaction journals Daily
Record date position control Daily
Daily (monthly) cash proof Monthly
Daily (monthly) share proof Monthly
Daily master control Daily
Blue Sky exceptions Daily
Blue Sky master list Monthly and whenever a new permit is
issued by a state
Page 3 of 4
<PAGE>
Blue Sky sales reports Cycle as designated in advance by
distributor
Account information reports As requested
Cumulative Transaction statement Quarterly and Annually
New account list Monthly
Shareholder master list As requested
Sales by State Monthly
Activities statistics Monthly
Distribution journals As required
Page 4 of 4
<PAGE>
[PROVIDENT BANK LOGO]
EXHIBIT B
Transfer Agent Fee Schedule
Dated: _______________
ACCOUNT MAINTENANCE FEE
- -----------------------
$18.00 per open account (Millennium, New Frontier or Money Market) per year
billed monthly
$9.00 per closed account per year billed monthly*
FUNDSERV & NETWORKING FEE
- -------------------------
$6,000.00 per year billed monthly
$6.00 per year discount per open networked account credited monthly
MINIMUM ANNUAL FEE
- ------------------
$36,000.00 per year billed monthly
* Closed accounts are maintained on file through June of the year following
closing.
ADDITIONAL SERVICES
- -------------------
Extraordinary services, special reports or customized processing may be subject
to additional fees, which will be quoted upon request.
Page 1 of 2
<PAGE>
OUT-OF-POCKET EXPENSES
- ----------------------
The Provident Bank shall be entitled to be reimbursed for all reasonable
out-of-pocket expenses including, but not limited to, the expenses set forth
below:
o Postage and insurance
o Overnight delivery service
o Duplicating charges
o Fax charges
o Out of country or excessive telephone calls
o Hardware, software, telephone charges if inquiry access is requested
o Supplies
o Special 800 number installation expense and monthly usage charges
o Cash Management Service Charges at the Provident Bank's current rates
Checks deposited
Checks returned
Incoming wire transfers
Outgoing wire transfers
ACH items received
ACH items originated
Checks paid
Stop payments
o Any other expense The Provident Bank shall incur at the written direction
of an officer of the Funds or Advisor
FEE ADJUSTMENTS
- ---------------
The fees listed above are guaranteed for the period of one year from the date of
this Agreement Exhibit B. Effective at the commencement of each 12 month period
following year one (1) of this Agreement, Provident reserves the right to
increase, with a minimum of thirty (30) days written notice, all fees in this
Exhibit by a percentage amount equal to the most recent percentage amount
increase of the Consumer Price Index as published by the U. S. Bureau of Labor
Statistics. Fee adjustments for any period shall be limited to a maximum of 10%,
regardless of the percentage increase of the Consumer Price Index.
THE PROVIDENT BANK IPS ADVISORY, INC.
By ______________________________ By ____________________________________
(Name) (Name)
______________________________ ____________________________________
(Title) (Title)
Page 2 of 2
<PAGE>
[PROVIDENT BANK LOGO]
EXHIBIT A - SERVICES
The services provided for in this Agreement shall be performed by
Provident, or any agent appointed by Provident pursuant to Section 14 of this
Agreement, under the name of The Provident Bank (Provident) and this name or any
similar name or logo will not be used by Provident or its agents for any
purposes other than those related to this Agreement or to any other agreement
which Provident may enter into with the Fund or with companies affiliated with
the Fund.
The offices of Provident shall be open to perform the services
pursuant to this Agreement on all days when the Fund is open to transact
business.
Provident will perform all services normally provided to investment
companies such as the Fund and the quality of such services shall be equal to or
better than that provided to the other investment companies serviced by
Provident. With respect to the Fund, by way of illustration, but not limitation,
these services will include:
1. Establishing, maintaining, safeguarding and reporting on shareholder
account information and account histories, (including registration, name
and address recorded in generally accepted form, dealer, representative,
branch, and territory information, mailing address, distribution address,
various codes and specific information relating to (if applicable); level
payments, and for account group reporting for plan accounts and other
accounts grouped for master sub-account reporting).
2. Reconciling the number of outstanding shares of the Fund on a daily basis
with the Fund and the Fund's custodian, promptly correcting any differences
noted.
3. Establishing and maintaining a trade file on behalf of the Fund based on
trade information furnished to the transfer agent by the Fund or its
distributors.
4. Accepting and processing direct cash investments however received and
investing such investments promptly in shareholder accounts.
5. Passing upon the adequacy of documents properly endorsed and guaranteed
submitted by or on behalf of a shareholder to transfer ownership or redeem
shares.
6. Transferring ownership of shares upon the books of each Fund.
7. Redeeming shares and preparing and mailing redemption checks or wire
proceeds as instructed.
8. Preparing and promptly mailing account statements to the shareholder or
such other authorized address and, when appropriate, as instructed by the
Fund, to the dealer or dealer branch, whenever transaction activity
Page 1 of 4
<PAGE>
effecting share balances are posted to the Fund's accounting that is of the
type that should receive such statement.
9. Balancing outstanding shares of record with the custodian prior to each
distribution, and calculating and paying or reinvesting distributions to
shareholders of record and to open trade receivables and free stock upon
proper notification from the Fund as to the amount and character of the
distribution.
10. Processing exchanges of shares of the Fund or Portfolio for another,
calculating proper sales charges and collecting fees as required.
11. Processing level payment liquidations according to plan instructions.
12. Reporting to the Fund and its custodian daily the capital stock activities
and dollar amount of transactions.
13. Promptly answering inquiring from shareholders, dealers, Fund personnel,
and others as requested in accordance with the terms of this Agreement as
to account matters, referring policy or investment matters to the Fund.
14. Mailing reports and special mailings, as directed by the Fund to all
shareholders or selected holders or dealers.
15. Maintaining tax information for each account, deducting amounts where
required and furnishing to the Fund, its shareholders, dealers and, when
appropriate, regulatory bodies, the necessary tax information all in
compliance with the various applicable laws.
16. Maintaining records of account and distribution information for checks and
confirmations returned as undeliverable by the Post Office.
17. Maintaining records and reporting sales information for Blue Sky reporting
purposes.
18. Calculating and processing Fund mergers or stock dividends, as directed by
the Fund.
19. Maintaining all Fund records as outlined in the record and tape retention
schedule delivered by the Fund.
20. Reconciling all investment, distribution and redemption accounts.
21. Providing for the replacement of uncashed distribution or redemption
checks.
22. Maintaining and safeguarding an inventory of unissued blank checks and
other Fund records.
23. Making available to the Fund at their location(s), remote access to
computerized records maintained for the Fund.
Page 2 of 4
<PAGE>
24. Providing space and such technical expertise as may be required to enable
the Fund and its properly authorized auditors, examiners and others
designated by the Fund in writing to properly understand and examine all
books, records, computer files, microfiche and other items maintained
pursuant to this Agreement, and to assist as required in such examination.
25. Mailing prospectuses to existing accounts after a new prospectus has been
issued by the Fund.
26. Maintaining information, performing the necessary research and producing
reports required to comply with all applicable state escheat or abandoned
property laws.
With respect to each Portfolio of the Fund, the Transfer Agent will
produce reports as requested by the Fund including but not limited to the
following:
Shareholder Account Confirmation As required
Redemption Checks When redemption is made
Level payment checks On payment cycle
Distribution checks As required
Name and address labels As requested
1099-DIV, R, B Annually
1042-S Annually
Transaction journals Daily
Record date position control Daily
Daily (monthly) cash proof Monthly
Daily (monthly) share proof Monthly
Daily master control Daily
Blue Sky exceptions Daily
Blue Sky master list Monthly and whenever a new permit is
issued by a state
Page 3 of 4
<PAGE>
Blue Sky sales reports Cycle as designated in advance by
distributor
Account information reports As requested
Cumulative Transaction statement Quarterly and Annually
New account list Monthly
Shareholder master list As requested
Sales by State Monthly
Activities statistics Monthly
Distribution journals As required
Page 4 of 4
<PAGE>
[PROVIDENT BANK LOGO]
EXHIBIT B
Transfer Agent Fee Schedule
Dated: _______________
ACCOUNT MAINTENANCE FEE
- -----------------------
$18.00 per open account (Millennium, New Frontier or Money Market) per year
billed monthly
$9.00 per closed account per year billed monthly*
FUNDSERV & NETWORKING FEE
- -------------------------
$6,000.00 per year billed monthly
$6.00 per year discount per open networked account credited monthly
MINIMUM ANNUAL FEE
- ------------------
$36,000.00 per year billed monthly
* Closed accounts are maintained on file through June of the year following
closing.
ADDITIONAL SERVICES
- -------------------
Extraordinary services, special reports or customized processing may be subject
to additional fees, which will be quoted upon request.
Page 1 of 2
<PAGE>
OUT-OF-POCKET EXPENSES
- ----------------------
The Provident Bank shall be entitled to be reimbursed for all reasonable
out-of-pocket expenses including, but not limited to, the expenses set forth
below:
o Postage and insurance
o Overnight delivery service
o Duplicating charges
o Fax charges
o Out of country or excessive telephone calls
o Hardware, software, telephone charges if inquiry access is requested
o Supplies
o Special 800 number installation expense and monthly usage charges
o Cash Management Service Charges at the Provident Bank's current rates
Checks deposited
Checks returned
Incoming wire transfers
Outgoing wire transfers
ACH items received
ACH items originated
Checks paid
Stop payments
o Any other expense The Provident Bank shall incur at the written direction
of an officer of the Funds or Advisor
FEE ADJUSTMENTS
- ---------------
The fees listed above are guaranteed for the period of one year from the date of
this Agreement Exhibit B. Effective at the commencement of each 12 month period
following year one (1) of this Agreement, Provident reserves the right to
increase, with a minimum of thirty (30) days written notice, all fees in this
Exhibit by a percentage amount equal to the most recent percentage amount
increase of the Consumer Price Index as published by the U. S. Bureau of Labor
Statistics. Fee adjustments for any period shall be limited to a maximum of 10%,
regardless of the percentage increase of the Consumer Price Index.
THE PROVIDENT BANK IPS ADVISORY, INC.
By ______________________________ By ____________________________________
(Name) (Name)
______________________________ ____________________________________
(Title) (Title)
Page 2 of 2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report dated December 8, 1999, for the IPS Millennium Fund and the IPS New
Frontier Fund and to all references to our firm included in or made a part of
this Post-Effective Amendment No. 12 to IPS Fund's Registration Statement on
Form N-1A (file No. 33-83132), including the references to our firm under the
heading Financial Highlights in the Prospectus and heading Accountants in the
Statement of Additional Information.
McCurdy & Associates CPA's, Inc.
Westlake, Ohio
March 7, 2000
CODE OF ETHICS
IPS FUNDS
Section A: Definitions
- -----------------------
1. "Access person" means any trustee, officer or advisory person, as defined
below, of the Trust.
2. "Act" means the Investment Company Act of 1940, as amended.
3. "Advisor" means IPS Advisory, Inc.
4. "Advisory person" means
a. Any employee of the Trust who, in connection with his or her regular
functions or duties, makes, participates in, or obtains information
regarding a purchase or sale of a security by any Fund, or
b. Any employee of the Trust whose functions relate to the making of any
recommendations with respect to the purchase or sale of a security by
any Fund, or
c. Any natural person in a control relationship to the Trust who obtains
information concerning recommendations with regard to the purchase or
sale of a security by any Fund.
5. "Control" means the power to exercise a controlling influence over the
management or policies of a company, unless such power is solely the result
of an official position with such company.
Any person who owns beneficially, either directly or through one or more
controlled companies, more than 25 percent of the voting securities of the
company shall be presumed to control such company. Any person who does not
so own more than 25 percent of the voting securities of any company shall
be presumed not to control such company. A natural person shall be presumed
not to be a controlled person within the meaning of this Code of Ethics.
Any such presumption may be rebutted by evidence, in accordance with
Section 2(a)(9) of the Act.
6. "Fund" means any series of shares of IPS Funds.
7. "Security" means any note, stock, treasury stock, bond, debenture, evidence
of indebtedness, certificate of interest or participation in any profit-
sharing agreement, collateral-trust certificate, pre-organization
certificate or subscription, transferable share, investment contract,
voting-trust certificate, certificate of deposit for a security, fractional
undivided interest in oil, gas or other mineral rights, or, in general, any
interest
<PAGE>
or instrument commonly known as "security," or any certificate of interest
or participation in temporary or interim certificate for, receipt for,
guarantee of, or warrant or right to subscribe to or purchase any of the
foregoing, except that the term "security" shall not include securities
issued by the government of the United States, bankers' acceptances, bank
certificates of deposit, commercial paper and shares of registered open-end
investment companies.
8. "Security held or to be acquired" by any Fund means any security as defined
in this Code which, within the most recent fifteen days
a. Is or has been held by the Fund, or
b. Is being or has been considered by the Fund or its Advisor for
purchase by the Fund; Provided, however, that a security shall not be
deemed to be one which is to be acquired by the Fund or which the Fund
is considering buying or selling if such security is reviewed as part
of a general industrial survey or other broad monitoring of the
securities market.
9. "Trust" means IPS Funds.
10. A security shall be deemed to be one which a Fund is considering buying or
selling when the Fund, any advisory person of the fund, its Advisor, or any
advisory person of its Advisor has taken any affirmative action towards the
acquisition, purchase or sale of that particular security or the
recommendation to do any of the foregoing.
Section B: Reports
- -------------------
1. Every access person of the Trust shall report to the Trust the following
information with respect to transactions in any security in which such
person has, or by reason of such transaction acquires, any direct or
indirect beneficial ownership in the security:
a. The date of the transaction, the title and the number of shares, and
the principal amount of each security involved,
b. The nature of the transaction (i.e. purchase, sale or any other type
of acquisition or disposition),
c. The price at which the transaction was effected, and
d. The name of the broker, dealer or bank with or through whom the
transaction was effected.
2. Said report shall be made no later than 10 days after the end of the
calendar quarter in which the transaction to which the report relates was
effected.
3. Any access person need not make such a report with respect to transactions
effected for any account over which he or she does not have any direct or
indirect influence or control.
-2-