How to Buy Shares
To help the government fight the funding of
terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account. This means that when you open an account, we will ask for your
name, residential address, date of birth, government identification number and other information that will allow us to identify you. We may also ask to see your driver’s license or other identifying documents, and may take additional steps to
verify your identity. If we do not receive these required pieces of information, there may be a delay in processing your investment request, which could subject your investment to market risk. If we are unable to immediately verify your identity,
the Fund may restrict further investment until your identity is verified. However, if we are unable to verify your identity, the Fund reserves the right to close your account without notice and return your investment to you at the NAV determined on
the day in which your account is closed. If we close your account because we are unable to verify your identity, your investment will be subject to market fluctuation, which could result in a loss of a portion of your principal investment.
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The minimum initial investment in the Fund is $2,500 ($1,000 for retirement accounts) and minimum subsequent
investments are $250. The Adviser may, in its sole discretion, waive the minimum investment amounts in connection with investments by individual retirement accounts (IRAs) and in certain other circumstances including, but not limited to, other
qualified plans, automatic investment plans and payroll deductions. The Fund may waive or lower investment minimums for investors who invest in the Fund through an asset-based fee program made available through a financial intermediary. If your
investment is aggregated into an omnibus account established by an investment adviser, broker or other intermediary, the account minimums apply to the omnibus account, not to your individual investment; however, the financial intermediary may also
impose minimum requirements that are different from those set forth in this prospectus. If you purchase or redeem shares through a broker-dealer or another intermediary, you may be charged a fee by that intermediary.
Initial Purchase
By
Mail
- Your initial purchase request must include:
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a completed and signed investment application form; and
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a personal check with name pre-printed (subject to the minimum amount) made payable to the Fund.
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Mail the application and check to:
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U.S. Mail:
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Leeb Focus Fund
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Overnight:
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Leeb Focus Fund
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c/o Huntington Asset Services, Inc.
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c/o Huntington Asset Services, Inc.
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P.O. Box 6110
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2960 North Meridian Street
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Indianapolis, Indiana 46206
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Suite 300
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Indianapolis, Indiana 46208
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By Wire -
You may also purchase shares of the Fund by wiring federal funds from your bank,
which may charge you a fee for doing so. To wire money, you must call Shareholder Services at (866) 400-5332 to obtain instructions on how to set up your account and to obtain an account number.
You must provide a signed application to Huntington Asset Services, Inc., at the above address in order to complete your initial wire purchase. Wire
orders will be accepted only on a day on which the Fund, its custodian and transfer agent are open for business. A wire purchase will not be considered made until the wired money is received and the purchase is accepted by the Fund. The purchase
price per share will be the net asset value next determined after the wire purchase is received by the Fund. Any delays which may occur in wiring money, including delays which may occur in processing by the banks, are not the responsibility of the
Fund or the transfer agent. There is presently no fee for the receipt of wired funds, but the Fund may charge shareholders for this service in the future.
Additional Investments
The minimum for additional investments in the Fund is $250. You may
purchase additional shares of the Fund at any time by mail, wire or automatic investment. Each additional mail purchase request must contain:
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the name on your account(s)
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a check made payable to the Fund
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Checks should be sent to the address listed under the heading “Initial Purchase – By Mail” in this prospectus. To send a bank wire, call Shareholder Services at (866) 400-5332 to
obtain instructions.
Automatic Investment Plan
You may make regular investments in the Fund with an Automatic Investment Plan by completing the appropriate section of the account application or completing a systematic investment plan form with the
proper signature guarantee and attaching a voided personal check. Investments may be made monthly to allow dollar-cost averaging by automatically deducting $100 or more from your bank checking account. You may change the amount of your monthly
purchase at any time. If an Automatic Investment Plan purchase is rejected by your bank, your shareholder account will be charged a fee to defray bank charges.
Tax Sheltered Retirement Plans
Shares of the Fund may be an appropriate investment for
tax-sheltered retirement plans, including: individual retirement plans (IRAs); simplified employee pensions (SEPs); 401(k) plans; qualified corporate pension and profit-sharing plans (for employees); 403(b) plans and other tax-deferred investment
plans (for employees of public school systems and certain types of charitable organizations); and other qualified retirement plans. Please contact Shareholder Services at (866) 400-5332 for information regarding opening an IRA or other
retirement account. Please consult with an attorney or tax adviser regarding these plans. You must pay custodial fees for your IRA by redemption of sufficient shares of the applicable Fund from the IRA unless you pay the fees directly to the IRA
custodian. Call the Fund’s transfer agent about the IRA custodial fees.
Other Purchase Information
The Fund may limit the amount of purchases and refuse to sell shares to any person. If your check or wire does not clear, you will be responsible for any
loss incurred by the Fund. You may be prohibited or restricted from making future purchases in the Fund. Checks must be made payable to the Fund. The Fund and its transfer agent may refuse any purchase order for any reason. Cash, third party checks
(except for properly endorsed IRA rollover checks), counter checks, starter checks, traveler’s checks, money orders (other than money orders issued by a bank), credit card checks, and checks drawn on non-U.S. financial institutions will not be
accepted. Cashier’s checks, bank official checks, and bank money orders may be accepted in amounts greater than $10,000. In such cases, a fifteen (15) business day hold will be applied to the funds (which means that you may not redeem your
shares until the holding period has expired). Cashier’s checks and bank official checks in amounts less than $10,000 will also be accepted for IRA transfers from other financial institutions.
The Fund has authorized certain broker-dealers and other financial institutions (including their designated intermediaries) to accept on its behalf
purchase and sell orders. The Fund is deemed to have received an order when the authorized person or designee accepts the order, and the order is processed at the net asset value next calculated thereafter. It is the responsibility of the
broker-dealer or other financial institution to transmit orders promptly to the Fund’s transfer agent.
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How to Redeem Shares
You may receive redemption payments by check
, ACH
or federal wire transfer. The proceeds may be more or less than the purchase price of your
shares, depending on the market value of the Fund’s securities at the time of your redemption. A wire transfer fee of $15 is charged to defray custodial charges for redemptions paid by wire transfer. This fee is subject to change. Any charges
for wire redemptions will be deducted from your account by redemption of shares. The Fund does not intend to redeem shares in any form except cash. However, if the amount you are redeeming is over the lesser of $250,000 or 1% of the Fund’s net
asset value, the Fund has the right to redeem your shares by giving you the amount that exceeds the lesser of $250,000 or 1% of the Fund’s net asset value in securities instead of cash. In the event that an in-kind distribution is made, a
shareholder may incur additional expenses, such as the payment of brokerage commissions, on the sale or other disposition of the securities received from the Fund. If you redeem your shares through a broker-dealer or other institution, you may be
charged a fee by that institution.
By Mail -
You may redeem any part of your account in the Fund at no charge by mail.
Your request should be addressed to:
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U.S. Mail:
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Leeb Focus Fund
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Overnight:
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Leeb Focus Fund
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c/o Huntington Asset Services, Inc.
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c/o Huntington Asset Services, Inc.
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P.O. Box 6110
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2960 North Meridian St.
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Indianapolis, Indiana 46206
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Suite 300
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Indianapolis, Indiana 46208
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Your request for a redemption must include your letter of instruction, including the Fund name, the account number, the
account name(s), the address, and the dollar amount or number of shares you wish to redeem. Requests to sell shares that are received in good order are processed at the net asset value next calculated after the Fund receives your order in proper
form. To be in proper order, your request must be signed by all registered share owner(s) in the exact name(s) and any special capacity in which they are registered. The Fund may require that signatures be guaranteed if you request the redemption
check be made payable to any person other than the shareholder(s) of record or mailed to an address other than the address of record, or if the mailing address has been changed within 30 days of the redemption request, or in certain other
circumstances, such as to prevent unauthorized account transfers or redemption. The Fund may also require a signature guarantee for redemptions of $25,000 or more. Signature guarantees are for the protection of shareholders. All redemptions
requiring a signature guarantee must utilize a New Technology Medallion stamp, generally available from the bank where you maintain your checking or savings account. You can obtain a signature guarantee from most banks and securities dealers, but
not from a notary public. For joint accounts, both signatures must be guaranteed. Please call Shareholder Services at (866) 400-5332 if you have questions. At the discretion of the Fund or its transfer agent, you may be required to furnish
additional legal documents to insure proper authorization.
By Telephone -
You may redeem any part of your account (up
to $25,000) in the Fund by calling Shareholder Services at (866) 400-5332. You must first complete the Optional Telephone Redemption and Exchange section of the investment application or provide a signed letter of instruction with the proper
signature guarantee stamp to institute this option. The Fund, its transfer agent and custodian are not liable for following redemption instructions communicated by telephone to the extent that they reasonably believe the telephone instructions to be
genuine. However, if they do not employ reasonable procedures to confirm that telephone instructions are genuine, they may be liable for any losses due to unauthorized or fraudulent instructions. Procedures employed may include recording telephone
instructions and requiring a form of personal identification from the caller.
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The Fund or the Transfer Agent may terminate the telephone redemption procedures at any time. During periods
of extreme market activity, it is possible that shareholders may encounter some difficulty in telephoning the Fund, although neither the Fund nor the Transfer Agent have ever experienced difficulties in receiving and in a timely fashion responding
to telephone requests for redemptions. If you are unable to reach the Fund by telephone, you may request redemption by mail.
Fund’s
Policy on Market Timing
The Fund discourages market timing. Market timing is an investment strategy using frequent purchases, redemptions
and/or exchanges in an attempt to profit from short-term market movements. Market timing may result in dilution of the value of the Fund’s shares held by long-term shareholders, disrupt portfolio management and increase Fund expenses for all
shareholders. The Board of Trustees has adopted a policy directing the Fund to reject any purchase order with respect to any investor, a related group of investors or their agent(s), where it detects a pattern of purchases and sales of the
Fund’s shares that indicates market timing or trading that it determines is abusive. This policy generally applies to all shareholders of the Fund. Huntington Asset Services, Inc. performs automated monitoring of short-term trading activity
with respect to the Fund. Instances of suspected short-term trading are investigated by the compliance department. If an instance is deemed a violation of the Fund’s short term trading policies, then the Fund’s adviser is notified and
action, such as suspending future purchases, is taken. A quarterly certification reporting any instances of short-term trading in violation of the Fund’s policies is provided to the Board of Trustees.
The Board of Trustees also has adopted a redemption policy to discourage short-term traders and/or market timers from investing in the Fund. A 2.00%
short-term redemption fee will be assessed by the Fund against investment proceeds in connection with a redemption of shares that were purchased within 60 calendar days of such redemption. Shares received from reinvested distributions or capital
gains are not subject to the redemption fee. After excluding any shares that are associated with reinvested distributions from the redemption fee calculation, the Fund uses a “first-in, first-out” method to determine the 60-day holding
period. Thus, if you bought shares on different days, the shares purchased first will be redeemed first for purposes of determining whether the redemption fee applies. The proceeds collected from redemption fees will be retained by the Fund for the
benefit of existing shareholders.
If you invest in the Fund through a bank, broker-dealer, 401(k) plan, financial adviser or financial
supermarket (“Financial Intermediary”), the Financial Intermediary may, in lieu of charging the redemption fee set forth in this Prospectus, enforce its own market timing policy. “Omnibus accounts” that include multiple customers
of the Financial Intermediary also will be exempt from the redemption fee if the Financial Intermediary does not track and/or process redemption fees. Additionally, the transfer of shares from one retirement account to another, accounts
participating in a wrap fee program and redemptions caused by decisions of
employer-sponsored retirement plans may be exempt from the redemption fee. Redemption fees may be waived for mandatory retirement withdrawals, systematic withdrawals,
redemptions made to pay for various administrative fees and, at the sole discretion of the Adviser, due to changes in an investor’s circumstances, such as death. No exceptions will be granted to persons believed to be “market-timers.”
While the Fund attempts to deter market timing, there is no assurance that the Fund will be able to identify and eliminate all market timers.
For example, certain accounts called “omnibus accounts” include multiple shareholders. Despite the Fund’s efforts to detect and prevent abusive trading activities, it may be difficult to identify such activity in certain omnibus
accounts traded through a Financial Intermediary. Omnibus accounts typically provide the Fund with a net purchase or redemption request on any given day where purchasers of Fund shares and redeemers of Fund shares are netted against one
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another and the identity of individual purchasers and redeemers whose orders are aggregated is not known by the Fund. Consequently, the Fund may not have knowledge of the identity of investors
and their transactions. The netting effect often makes it more difficult to apply redemption fees, and there can be no assurance that the Fund will be able to apply the fee to such accounts in an effective manner. Under a federal rule, the Fund is
required to have an agreement with Financial Intermediaries obligating the Financial Intermediaries to provide, upon the Fund’s request, information regarding their customers and their transactions in the Fund. However, there can be no
guarantee that all excessive, short-term or other abusive trading activities will be detected, even with such an agreement in place. Certain Financial Intermediaries, in particular retirement plan sponsors and administrators, may have less
restrictive policies regarding short-term trading. In addition to the redemption fee, the Fund reserves the right to reject any purchase order for any reason, including purchase orders that it does not think are in the best interest of the Fund or
its shareholders, or if the Fund thinks that trading is abusive. The Fund has not entered into any arrangements with any person to permit frequent purchases and redemptions of Fund shares.
STATEMENT OF ADDITIONAL INFORMATION
April 1, 2013
This Statement of Additional Information
(“SAI”) is not a prospectus. It should be read in conjunction with the Prospectus of the Fund dated
April 1, 2013.
This SAI incorporates by reference the Fund’s Annual Report to Shareholders for the fiscal year
ended November 30,
2012
(“Annual Report”). A free copy of the Prospectus or Annual Report can be obtained by writing the transfer agent at Huntington Asset Services, Inc., 2960 North Meridian Street, Suite 300,
Indianapolis, Indiana 46208, or by calling Shareholder Services at (866) 400-5332.
TA
BLE OF CONTENTS
DESCRIPTION OF THE TRUST AND FUND
The Leeb Focus Fund (the “Fund”) was organized as a diversified series of Unified Series Trust (the “Trust”) on
August 14, 2006. The Trust is an open-end investment company established under the laws of Ohio by an Agreement and Declaration of Trust dated October 17, 2002 (the “Trust Agreement”). The Trust Agreement permits the Trustees to
issue an unlimited number of shares of beneficial interest of separate series without par value. The Fund is one of a series of funds currently authorized by the Trustees. The Trust’s registration statement with respect to the Fund was declared
effective by the Securities and Exchange Commission (“SEC”) on November 21, 2006, and the Fund commenced investment operations on December 26, 2006. The Fund’s investment adviser is Leeb Capital Management, Inc. (the
“Adviser”).
The Fund does not issue share certificates. All shares are held in non-certificate form registered on
the books of the Fund and the Fund’s transfer agent for the account of the shareholder. Each share of a series represents an equal proportionate interest in the assets and liabilities belonging to that series with each other share and is
entitled to such dividends and distributions out of income belonging to that series as are declared by the Trustees. Each share has the same voting and other rights and preferences as any other shares of any series of the Trust with respect to
matters that affect the Trust as a whole. 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.
Any Trustee of the Trust may be removed by vote of the shareholders holding not less than two-thirds of the outstanding shares of the
Trust. The Trust does not hold an annual meeting of shareholders. When matters are submitted to shareholders for a vote, each shareholder is entitled to one vote for each whole share he owns and fractional votes for fractional shares he owns. All
shares of the Fund have equal voting rights and liquidation rights. The Trust Agreement can be amended by the Trustees, except that certain amendments that could adversely affect the rights of shareholders must be approved by the shareholders
affected. All shares of the Fund are subject to involuntary redemption if the Trustees determine to liquidate the Fund. The Fund will provide notice to the shareholders if the Board determines, in its sole judgment, to liquidate the Fund, but the
Fund will not be required to obtain shareholder approval prior to such liquidation. An involuntary liquidation will create a capital gain or a capital loss, which may have tax consequences about which you should consult your tax adviser.
For information concerning the purchase and redemption of shares of the Fund, see “How to Buy Shares” and “How to Redeem
Shares” in the Fund’s Prospectus. For a description of the methods used to determine the share price and value of the Fund’s assets, see “Determination of Net Asset Value” in the Fund’s Prospectus and this SAI.
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The Fund may authorize one or more brokers or other intermediaries (an
“Intermediary”) to receive on its behalf purchase and redemption orders. Such Intermediaries would be authorized to designate others to receive purchase and redemption orders on the Fund’s behalf. The Fund will be deemed to have
received a purchase or redemption order when an authorized Intermediary or, if applicable, its authorized designee, receives the order.
Customer orders will be priced at the Fund’s net asset value next computed after they are received by an authorized Intermediary and accepted by the Fund. The performance of the Fund may be compared
in publications to the performance of various indices and investments for which reliable performance data is available. The performance of the Fund may be compared in publications to averages, performance rankings, or other information prepared by
recognized mutual fund statistical services. The Fund’s annual report contains additional performance information and will be made available to investors upon request and without charge.
ADDITIONAL INFORMATION ABOUT FUND INVESTMENTS AND RISK CONSIDERATIONS
This section contains additional information regarding some of the investments the Fund may make and some of the techniques it may use.
A.
Common Stock and Common Stock Equivalents.
Equity securities in which the Fund may invest include common stock and
common stock equivalents (such as rights and warrants, and convertible securities). Common stock represents an ownership interest in a company. Warrants are options to purchase equity securities at a specified price valid for a specific time period.
Rights are similar to warrants, but normally have a short duration and are distributed by the issuer to its shareholders. Warrants are instruments that entitle the holder to buy underlying equity securities at a specific price for a specific period
of time. A warrant tends to be more volatile than its underlying securities and ceases to have value if it is not exercised prior to its expiration date. In addition, changes in the value of a warrant do not necessarily correspond to changes in the
value of its underlying securities. The prices of common stock and equivalents fluctuate based on, among other things, events specific to their issues and market place, economic and other conditions.
B.
Investment Company Securities.
The Fund may invest in other investment companies, such as money market funds, open-end
and closed-end funds and exchange-traded funds (“ETFs”) whose portfolios primarily consist of equity or debt securities or commodities. The Fund may invest in inverse ETFs, including leveraged ETFs. Inverse ETFs seek to provide investment
results that match a certain percentage of the inverse of the results of a specific index on a daily or monthly basis.
When
the Fund invests in an underlying mutual fund or ETF, the Fund indirectly will bear its proportionate share of any fees and expenses payable directly by the underlying fund. Therefore, the Fund will incur higher expenses, many of which may be
duplicative. In addition, the Fund may be affected by losses of the underlying funds and the level of risk arising from the investment practices of the underlying funds (such as the use of leverage by the funds). The Fund is independent from any of
the underlying funds in which it invests and it has no voice in or control over the investment strategies, policies or decisions of the underlying funds. The Fund’s only option is to liquidate its investment in an underlying fund in the event
of dissatisfaction with the underlying fund. Because the Fund is not required to hold shares of underlying funds for any minimum period, it may be subject to, and may have to pay, short-term redemption fees imposed by the underlying funds.
Shareholders may also incur increased transaction costs as a result of the high portfolio turnover rates in the underlying funds.
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In addition to risks generally associated with investments in investment company securities,
ETFs are subject to the following risks that do not apply to traditional mutual funds: (i) an ETF’s shares may trade at a market price that is above or below their net asset value; (ii) an active trading market for an ETF’s
shares may not develop or be maintained; (iii) the ETF may employ an investment strategy that utilizes high leverage ratios; or (iv) trading of an ETF’s shares may be halted if the listing exchange’s officials deem such action
appropriate, the shares are de-listed from the exchange, or the activation of market-wide “circuit breakers” (which are tied to large decreases in stock prices) halts stock trading generally.
Inverse and leveraged ETFs are subject to additional risks not generally associated with traditional ETFs. To the extent that the Fund
invests in inverse ETFs, the value of the Fund’s investment will decrease when the index underlying the ETF’s benchmark rises, a result that is the opposite from traditional equity or bond funds. The net asset value and market price of
leveraged or inverse ETFs is usually more volatile than the value of the tracked index or of other ETFs that do not use leverage. This is because inverse and leveraged ETFs use investment techniques and financial instruments that may be considered
aggressive, including the use of derivative transactions and short selling techniques. The use of these techniques may cause the inverse or leveraged ETFs to lose more money in market environments that are adverse to their investment strategies than
other funds that do not use such techniques.
To the extent that the Fund invests in ETFs that invest in commodities, it will
be subject to additional risks. Commodities are real assets such as oil, agriculture, livestock, industrial metals, and precious metals such as gold or silver. The values of ETFs that invest in commodities are highly dependent on the prices of the
related commodity. The demand and supply of these commodities may fluctuate widely based on such factors as interest rates, investors’ expectation with respect to the rate of inflation, currency exchange rates, the production and cost levels of
the producing countries and/or forward selling by such producers, global or regional political, economic or financial events, purchases and sales by central banks, and trading activities by hedge funds and other commodity funds. Commodity ETFs may
use derivatives, such as futures, options and swaps, which exposes them to further risks, including counterparty risk (i.e., the risk that the institution on the other side of their trade will default).
To the extent the Fund invests in a sector ETF, the Fund will be subject to the risks associated with that sector. The Fund may invest in
new exchange-traded shares as they become available. Closed-end funds in which the Fund invests may be subject to additional risk. There generally is less public information available about closed-end funds than mutual funds. In addition, the market
price of a closed-end fund’s shares may be affected by its dividend or distribution levels (which are dependent, in part, on expenses), stability of dividends or distributions, general market and economic conditions, and other factors beyond
the control of a closed-end fund. The foregoing factors may result in the market price of the shares of the closed-end fund being greater than, less than, or equal to, the closed-end fund’s net asset value. This means that a closed-end
fund’s shares may trade at a discount to its net asset value.
C.
Foreign Securities.
The Fund may invest
in foreign securities, directly or indirectly by purchasing depository receipts such as American Depositary Receipts (“ADRs”), Global Depositary
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Receipts (“GDRs”) and similar instruments. Generally, ADRs, in registered form, are denominated in U.S. dollars and are designed for use in the U.S. securities markets, while GDRs, in
bearer form, may be denominated in other currencies and are designed for use in multiple foreign securities markets. ADRs are receipts typically issued by a U.S. bank or trust company evidencing ownership of the underlying securities. GDRs are
foreign receipts evidencing a similar arrangement. For purposes of the Fund’s investment policies, ADRs and GDRs are deemed to have the same classification as the underlying securities they represent, except that ADRs and GDRs shall be treated
as indirect foreign investments. For example, an ADR or GDR representing ownership of common stock will be treated as common stock.
ADRs are denominated in U.S. dollars and represent an interest in the right to receive securities of foreign issuers deposited in a U.S. Bank or correspondent bank. ADRs do not eliminate all the risk
inherent in investing in the securities of foreign issuers. However, by investing in ADRs rather than directly in equity securities of foreign issuers, the Fund will avoid currency risks during the settlement period for either purchases or sales.
GDRs are not necessarily denominated in the same currency as the underlying securities which they represent.
Depository
receipt facilities may be established as either “unsponsored” or “sponsored”. While depository receipts issued under these two types of facilities are in some respects similar, there are distinctions between them relating to the
rights and obligations of depository receipt holders and the practices of market participants.
A depository may establish an
unsponsored facility without participation by (or even necessarily the permission of) the issuer of the deposited securities, although typically the depository requests a letter of non-objection from such issuer prior to the establishment of the
facility. Holders of unsponsored depository receipts generally bear all the costs of such facility. The depository usually charges fees upon the deposit and withdrawal of the deposited securities, the conversion of dividends into U.S. dollars, the
disposition of non-cash distributions, and the performance of other services. The depository of an unsponsored facility frequently is under no obligation to pass through voting rights to depository receipt holders in respect of the deposited
securities. In addition, an unsponsored facility is generally not obligated to distribute communications received from the issuer of the deposited securities or to disclose material information about such issuer in the U.S. and there may not be a
correlation between such information and the market value of the depository receipts.
Sponsored depository receipt facilities
are created in generally the same manner as unsponsored facilities, except that the issuer of the deposited securities enters into a deposit agreement with the depository. The deposit agreement sets out the rights and responsibilities of the issuer,
the depository, and the depository receipt holders. With sponsored facilities, the issuer of the deposited securities generally will bear some of the costs relating to the facility (such as dividend payment fees of the depository); although
depository receipt holders continue to bear certain other costs (such as deposit and withdrawal fees). Under the terms of most sponsored arrangements, depositories agree to distribute notices of shareholder meetings and voting instructions, and to
provide shareholder communications and other information to the depository receipt holders at the request of the issuer of the deposited securities.
In addition to ADRs, the Fund may purchase other foreign securities denominated in U.S. dollars and that trade on domestic stock exchanges. As with ADRs, the purchase of dollar-denominated foreign
securities will not eliminate all of the risks associated with investments in the securities of foreign issuers.
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Foreign investments can involve significant risks in addition to the risks inherent in U.S.
investments. Securities of foreign companies may experience more rapid and extreme changes in value than securities of U.S. companies because a limited number of companies represent a small number of industries. Many foreign countries lack uniform
accounting and disclosure standards comparable to those applicable to U.S. companies, and it may be more difficult to obtain reliable information regarding an issuer’s financial condition and operations.
Investing in foreign securities also involves different political and economic risks. Foreign investments may be affected by actions of
foreign governments adverse to the interests of U.S. investors, including the possibility of expropriation or nationalization of assets, confiscatory taxation, restrictions on U.S. investment or on the ability to repatriate assets or convert
currency into U.S. dollars, or other government intervention. There may be a greater possibility of default by foreign governments or foreign government-sponsored enterprises. Investments in foreign countries also involve a risk of local political,
economic or social instability, military action or unrest, or adverse diplomatic developments. There is no assurance that the Adviser will be able to anticipate or counter these potential events and their impacts on the Fund’s share price.
D.
Convertible Securities.
The Fund may invest in convertible securities (i.e., convertible into shares of
common stock). Types of convertible securities include convertible bonds, convertible preferred stocks, exchangeable bonds, and warrants. Convertible securities combine the benefits of higher and more stable income than the underlying common stock
generally provides, with the potential of profiting from an appreciation in the value of the underlying security. While convertible securities generally offer lower interest or dividend yields than non-convertible debt securities of similar quality,
the investor may benefit from the increase in the market price of the underlying common stock. Convertible securities generally offer lower yields than non-convertible fixed income securities of similar quality because of their conversion features
and may decrease in value when interest rates rise. Convertible securities with longer effective maturities are more sensitive to interest rate changes than those with shorter effective maturities.
E.
Real Estate Investment Trusts (REITs).
The Fund may invest in real estate investment trusts (“REITs”).
A REIT is a corporation or business trust that invests substantially all of its assets in interests in real estate. Equity REITs are those which purchase or lease land and buildings and generate income primarily from rental income. Equity REITs may
also realize capital gains (or losses) when selling property that has appreciated (or depreciated) in value. Mortgage REITs are those which invest in real estate mortgages and generate income primarily from interest payments on mortgage loans.
Hybrid REITs generally invest in both real property and mortgages. REITs are generally subject to risks associated with direct ownership of real estate, such as decreases in real estate values or fluctuations in rental income caused by a variety of
factors, including increases in interest rates, increases in property taxes and other operating costs, casualty or condemnation losses, possible environmental liabilities and changes in supply and demand for properties. Risks associated with REIT
investments include the fact that REITs are dependent upon specialized management skills and are not fully diversified. These characteristics subject REITs to the risks associated with financing a limited number of projects. They are also subject to
heavy cash flow dependency, defaults by borrowers and self-liquidation. Additionally, equity REITs may be affected by any changes in the value of the underlying property owned by the trusts, and mortgage REITs may be affected by the quality of any
credit extended.
5
F.
Zero Coupon Bonds.
The Fund may invest in zero coupon bonds. These
securities make no periodic payments of interest, but instead are sold at a discount from their face value. When held to maturity, their entire income, which consists of accretion of discount, comes from the difference between the issue price and
their value at maturity. The amount of the discount rate varies depending on factors including the time remaining until maturity, prevailing interest rates, the security’s liquidity and the issuer’s credit quality. The market value of zero
coupon securities may exhibit greater price volatility than ordinary debt securities because a stripped security will have a longer duration than an ordinary debt security with the same maturity. The Fund’s investments in
pay-in-kind,
delayed and zero coupon bonds may require it to sell certain of its assets to generate sufficient cash to satisfy certain income distribution requirements. These securities may include treasury securities that have had their interest payments
(“coupons”) separated from the underlying principal (“corpus”) by their holder, typically a custodian bank or investment brokerage firm. Once the holder of the security has stripped or separated corpus and coupons, it may sell
each component separately. The principal or corpus is then sold at a deep discount because the buyer receives only the right to receive a future fixed payment on the security and does not receive any rights to periodic interest (cash) payments.
Typically, the coupons are sold separately or grouped with other coupons with like maturity dates and sold bundled in such form. The underlying treasury security is held in book-entry form at the Federal Reserve Bank or, in the case of bearer
securities (i.e., unregistered securities which are owned ostensibly by the bearer or holder thereof), in trust on behalf of the owners thereof. Purchasers of stripped obligations acquire, in effect, discount obligations that are economically
identical to the zero coupon securities that the U. S. Treasury sells itself.
The U.S. Treasury has facilitated transfers of
ownership of zero coupon securities by accounting separately for the beneficial ownership of particular interest coupon and corpus payments on Treasury securities through the Federal Reserve book-entry record keeping system. Under a Federal Reserve
program known as “STRIPS” or “Separate Trading of Registered Interest and Principal of Securities,” the Fund can record its beneficial ownership of the coupon or corpus directly in the book-entry record-keeping system.
G.
U.S. Government Obligations
-
The Fund may invest in
U.S. government obligations. Such
obligations include Treasury bills, Treasury Inflation-Protected Securities (TIPS), certificates of indebtedness, notes and bonds, and issues of other governmental entities. These 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. TIPS are a special type of
treasury note or bond that was created in order to offer bond investors protection from inflation. The value of the TIPS is automatically adjusted to the inflation rate as measured by the Consumer Price Index (“CPI”). If the CPI goes up by
half a percent the value of the bond would go up by half a percent. If the CPI falls, the value of the bond does not fall because the government guarantees that your original investment will stay the same. TIPS decline in value when real interest
rates rise. In certain interest rate environments, such as when real interest rates are rising faster than nominal interest rates, TIPS may experience greater losses than other fixed income securities with similar duration.
6
H.
Bank Debt Instruments
. Bank debt instruments in which the Fund may invest
consist of certificates of deposit, bankers’ acceptances and time deposits issued by national banks and state banks, trust companies and mutual savings banks, or banks or institutions the accounts of which are insured by the Federal Deposit
Insurance Corporation or the Federal Savings and Loan Insurance Corporation. Certificates of deposit are negotiable certificates evidencing the indebtedness of a commercial bank to repay funds deposited with it for a definite period of time (usually
from fourteen days to one year) at a stated or variable interest rate. Bankers’ acceptances are credit instruments evidencing the obligation of a bank to pay a draft which has been drawn on it by a customer, which instruments reflect the
obligation both of the bank and of the drawer to pay the face amount of the instrument upon maturity. Time deposits are non-negotiable deposits maintained in a banking institution for a specified period of time at a stated interest rate. Investments
in time deposits maturing in more than seven days generally are deemed illiquid and, therefore, subject to the limitation on illiquid investments (see “Investment Limitations” below).
I.
Commercial Paper, Short-Term Notes and Other Corporate Obligations.
The Fund may invest a portion of its assets in
commercial paper and short-term notes. Commercial paper consists of unsecured promissory notes issued by corporations. Issues of commercial paper and short-term notes will normally have maturities of less than nine months and fixed rates of
return, although such instruments may have maturities of up to one year.
Commercial paper and short-term notes will consist
of issues rated at the time of purchase “A-2” or higher by Standard & Poor’s Ratings Group (“S&P”), “Prime-1” or “Prime-2” by Moody’s Investors Service, Inc. (“Moody’s”),
or similarly rated by another nationally recognized statistical rating organization or, if unrated, will be determined by the Adviser to be of comparable quality.
Corporate obligations include bonds and notes issued by corporations to finance longer-term credit needs than supported by commercial paper. While such obligations generally have maturities of ten years
or more, the Fund may purchase corporate obligations which have remaining maturities of one year or less from the date of purchase and which are rated “AA” or higher by S&P or “Aa” or higher by Moody’s.
J.
Repurchase Agreements.
The Fund may enter into repurchase agreements with respect to its portfolio securities. Pursuant
to such agreements, the Fund acquires securities from financial institutions such as banks and broker-dealers that are deemed to be creditworthy by the Adviser, subject to the seller’s agreement to repurchase and the Fund’s agreement to
resell such securities at a mutually agreed upon date and price. The repurchase price generally equals the price paid by the Fund plus interest negotiated on the basis of current short-term rates (which may be more or less than the rate on the
underlying portfolio security). Securities subject to repurchase agreements will be held by Huntington Bank, N.A., (the “Custodian”) or in the Federal Reserve/Treasury Book-Entry System or an equivalent foreign system. The seller under a
repurchase agreement will be required to maintain the value of the underlying securities at not less than 102% of the repurchase price under the agreement. If the seller defaults on its repurchase obligation, the Fund will suffer a loss to the
extent that the proceeds from a sale of the underlying securities are less than the repurchase price under the agreement. Bankruptcy or insolvency of such a defaulting seller may cause the Fund’s rights with respect to such securities to be
delayed or limited. Repurchase agreements are considered to be loans under the Investment Company Act of 1940, as amended, (the “1940 Act”).
7
K.
Reverse Repurchase Agreements.
The Fund may also enter into reverse
repurchase agreements. These transactions are similar to borrowing cash. In a reverse repurchase agreement, the Fund transfers possession of a portfolio instrument to another person, such as a financial institution, broker, or dealer, in return for
a percentage of the instrument’s market value in cash, and agrees that on a stipulated date in the future the Fund will repurchase the portfolio instrument by remitting the original consideration plus interest at an agreed upon rate. The use of
reverse repurchase agreements may enable the Fund to avoid selling portfolio instruments at a time when a sale may be deemed to be disadvantageous, but the ability to enter into reverse repurchase agreements does not ensure that the Fund will be
able to avoid selling portfolio instruments at a disadvantageous time.
When effecting reverse repurchase agreements, liquid
assets of the Fund, in a dollar amount sufficient to make payment for the obligations to be purchased, are segregated at the trade date. These securities are marked to market daily and maintained until the transaction is settled.
L.
Exchange-Traded Notes.
The Fund may invest in exchange-traded notes (“ETNs”), which are a type
of unsecured, unsubordinated debt security. ETNs combine certain aspects of bonds and ETFs. Similar to ETFs, ETNs are traded on a major exchange (e.g., the New York Stock Exchange) during normal trading hours.
However, investors can also hold the ETN until maturity. At maturity, the issuer pays to the investor a cash amount equal to principal amount, subject to the day’s index factor. ETN returns are based upon the performance of a market index
minus applicable fees. ETNs do not make periodic coupon payments and provide no principal protection. The value of an ETN may be influenced by time to maturity, level of supply and demand for the ETN, volatility and lack of liquidity in
underlying commodities markets, changes in the applicable interest rates, changes in the issuer’s credit rating and economic, legal, political or geographic events that affect the referenced commodity. The value of the ETN may drop due
to a downgrade in the issuer’s credit rating, despite the underlying index remaining unchanged.
M.
Leveraged or Inverse Exchange-Traded Funds
.
The Fund may invest in leveraged and/or inverse ETFs, including multiple inverse (or ultra-short) ETFs. These ETFs are subject to additional risk not generally associated with
traditional ETFs. Leveraged ETFs seek to multiply the performance of the particular benchmark that is tracked (which may be an index, a currency or other benchmark). Inverse ETFs seek to negatively correlate to the performance of a benchmark.
These ETFs seek to achieve their returns by using various forms of derivative transactions, including by short-selling the underlying index. Ultra-short ETFs seek to multiply the negative return of the tracked index (e.g., twice the inverse return).
As a result, an investment in an inverse ETF will decrease in value when the value of the underlying index rises. For example, an inverse ETF tracking the S&P 500 Index will gain 1% when the S&P falls 1% (if it is an ultra-short ETF that
seeks twice the inverse return, it will gain 2%), and will lose 1% if the S&P 500 gains 1% (if an ultra short ETF that seeks twice the inverse return, it would lose 2%). By investing in ultra-short ETFs and gaining magnified short exposure
to a particular index, the Fund can commit less assets to the investment in the securities represented in the index than would otherwise be required.
Leveraged and inverse ETFs typically determine their inverse return on a day-to-day basis and, as a result, there is no guarantee that the ETF’s actual long-term returns will be equal to the daily
return that the fund seeks to achieve. For example, on a long-term basis (e.g., a period of 6 months
8
or a year), the return of a double inverse ETF may in fact be considerably less than two times the long-term inverse return of the tracked index. Furthermore, because these ETFs achieve
their results by using derivative instruments, they are subject to the risks associated with derivative transactions, including the risk that the value of their derivatives may rise or fall more rapidly than other investments, thereby causing the
ETF to lose money and, consequently, the value of the Fund’s investment to lose value. Derivative instruments also involve the risk that other parties to the derivative contract may fail to meet their obligations, which could cause losses
to the ETF. Short sales in particular are subject to the risk that, if the price of the security sold short increases, the ETF may have to cover its short position at a higher price than the short sale price, resulting in a loss to the leveraged or
inverse ETF and, indirectly, to the Fund. The use of these techniques by the leveraged or inverse ETF will make the Fund’s investment in such ETF more volatile than if the Fund were to invest directly in the securities underlying the tracked
index, or in an ETF that does not use leverage or derivate instruments. However, by investing in an inverse ETF rather than directly purchasing and/or selling derivative instruments, the Fund will limit its potential loss solely to the amount
actually invested in the ETF (that is, the Fund will not lose more than its principal amount). Inverse ETFs may also incur capital gains, some of which may be taxed as ordinary income, thereby, increasing the amounts of the Fund’s taxable
distributions.
N.
Foreign Currency Transactions.
The Fund may invest in underlying funds that conduct
foreign currency exchange transactions either on a spot (i.e., cash) basis at the spot rate prevailing in the foreign exchange market or by entering into a forward foreign currency contract. A forward foreign currency contract (“forward
contract”) involves an obligation to purchase or sell a specific amount of a specific currency at a future date, which may be any fixed number of days (usually less than one year) from the date of the contract agreed upon by the parties, at a
price set at the time of the contract. Forward contracts are considered to be derivatives. Underlying funds may enter into forward contracts in order to “lock in” the exchange rate between the currency it will deliver and the currency it
will receive for the duration of the contract, or to hedge against risks arising from securities that the underlying fund owns or anticipates purchasing, or the U.S. dollar value of interest and dividends paid on those securities. At or before
settlement of a forward currency contract, an underlying fund may either deliver the currency or terminate its contractual obligation to deliver the currency by purchasing an offsetting contract. If the underlying fund makes delivery of the foreign
currency at or before the settlement of a forward contract, it may be required to obtain the currency through the conversion of assets of the underlying fund into the currency.
Foreign currency transactions involve certain costs and risks. For example, an underlying fund incurs foreign exchange expenses in
converting assets from one currency to another. Forward contracts involve a risk of loss if the adviser to the underlying fund is inaccurate in its prediction of currency movements. The projection of short-term currency market movements is extremely
difficult, and the successful execution of a short-term hedging strategy is highly uncertain. The precise matching of forward contract amounts and the value of the securities involved is generally not possible. Accordingly, it may be necessary for
an underlying fund to purchase additional foreign currency if the market value of the security is less than the amount of the foreign currency the underlying fund is obligated to deliver under the forward contract and the decision is made to sell
the security and make delivery of the foreign currency. Although forward contracts can reduce the risk of loss due to a decline in the value of the hedged currencies, they also limit any potential gain that might result from an increase in the value
of the currencies.
There is no systematic reporting of last sale information for foreign currencies, and there is no
regulatory requirement that quotations available through dealers or other market sources be firm or
9
revised on a timely basis. Quotation information available is generally representative of very large transactions in the interbank market. Underlying funds may take positions in options on
foreign currencies in order to hedge against the risk of foreign exchange fluctuation on foreign securities the underlying fund holds in its portfolio or which it intends to purchase.
O.
Publicly-Traded Partnership Interests
.
The Fund may invest in units or other interests issued by limited partnerships
that are listed and traded on U.S. securities exchanges or over-the-counter (“PTP Interests”). Publicly-traded limited partnerships (“PTPs”) generally have two classes of owners, the general partner and limited partners. The
general partner typically owns a majority stake in the PTP and controls its management and operations. Limited partners have a very limited role (if any) in the PTP’s operations and management. The value of the Fund’s investment in PTP
Interests may fluctuate based on prevailing market conditions and the success of the PTP. Risks associated with PTP investments include the fact that the success of a PTP typically is dependent upon its specialized management skills. In addition,
the risks related to a particular PTP investment by the Fund will vary depending on the underlying industries represented in the PTP’s portfolio. For example, the success of a PTP that invests in the oil and gas industries is highly dependent
on oil and gas prices, which can be highly volatile. Moreover, the underlying oil and gas reserves attributable to such PTP may be depleted. Conversely, PTPs that invest in real estate typically are subject to risks similar to those of a REIT
investment. Unlike ownership of common stock of a corporation, the Fund would have limited voting rights and have no ability annually to elect directors in connection with its PTP Interests.
PTPs are generally treated as partnerships for federal income tax purposes. To qualify as such, a PTP must receive at least 90% of its
income from qualifying sources. These qualifying sources generally include activities such as the exploration, development, mining, production, processing, refining, transportation, storage and marketing of mineral or natural resources. As a limited
partner, the Fund generally will be required to include its allocable share of the PTP’s net income in its taxable income, regardless of whether the PTP actually distributes cash to the Fund. The recognition of taxable income by the Fund from
an investment in a PTP without the receipt of cash distributions could adversely affect the Fund’s ability to meet its minimum distribution requirements. In addition, although generally treated as partnership, there is a risk that a PTP could
be re-classified by the Internal Revenue Service as a corporation for federal income tax purposes, as a result of a change in the tax laws or other laws relating to a particular PTP’s business or industry. Such re-classification would have the
effect of reducing the amount of cash available for distribution by the PTP, and causing any such distributions received by the Fund to be taxed as dividend income. Thus, if any of the PTPs owned by the Fund are treated as corporations for tax
purposes, the after-tax return to the Fund with respect to its investment in such PTPs would be materially reduced, which could cause a substantial decline in the value of the Fund’s investment in the PTP.
INVESTMENT LI
MITATIONS
A.
Fundamental
. The investment limitations described below have been adopted by the Trust with respect to the Fund and are fundamental (“Fundamental”),
i.e.
, they may not be
changed without the affirmative vote of a majority of the outstanding shares of the Fund. As used in the Prospectus and this SAI, the term “majority of the outstanding shares” of the Fund means the lesser of (1) 67% or more of the
outstanding shares of the Fund present at a meeting, if the holders of more than 50% of the outstanding shares of the Fund are present or represented at such meeting; or (2) more than 50% of the outstanding shares of the Fund. Other investment
practices which may be changed by the Board of Trustees without the approval of shareholders to the extent permitted by applicable law, regulation or regulatory policy are considered non-fundamental (“Non-Fundamental”).
10
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.
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 consistent
with or permitted by the 1940 Act, the rules and regulations promulgated thereunder or interpretations of the SEC or its staff.
3.
Underwriting
. The Fund will not act as underwriter of securities issued by other persons. This limitation is not applicable to
the extent that, in connection with the disposition of portfolio securities (including restricted securities), the Fund may be deemed an underwriter under certain federal securities laws.
4.
Real Estate
. The Fund will not purchase or sell real estate. This limitation is not applicable to investments in marketable
securities which are secured by or represent interests in real estate. This limitation does not preclude the Fund from investing in mortgage-related securities or investing in companies engaged in the real estate business or that have a significant
portion of their assets in real estate (including real estate investment trusts).
5.
Commodities
. The Fund will not
purchase or sell commodities unless acquired as a result of ownership of securities or other investments. This limitation does not preclude the Fund from purchasing or selling options or futures contracts, including commodities futures contracts,
from investing in securities or other instruments backed by commodities or from investing in companies which are engaged in a commodities business or have a significant portion of their assets in commodities.
6.
Loans
. The Fund will not make loans to other persons, except (a) by loaning portfolio securities, (b) by engaging in
repurchase agreements, or (c) by purchasing 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.
Industry 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.
8.
Fund Diversification
. With respect to 75% of its total assets, the Fund will not purchase securities issued by any one issuer
(other than cash, cash items, securities issued or guaranteed by the government of the United States or its agencies or instrumentalities, or securities of other investment companies) if, as a result at the time of such purchase, more than 5% of the
value of the Fund’s total assets would be invested in the securities of that issuer, or if it would own more than 10% of the outstanding voting securities of that issuer.
11
With respect to the percentages adopted by the Trust as maximum limitations on the
Fund’s investment policies and limitations, an excess above the fixed percentage will not be a violation of the policy or limitation unless the excess results immediately and directly from the acquisition of any security or the action taken.
This paragraph does not apply to the borrowing policy set forth in paragraph 1 above.
Notwithstanding any of the foregoing
limitations, any investment company, whether organized as a trust, association or corporation, or a personal holding company, may be merged or consolidated with or acquired by the Trust, provided that if such merger, consolidation or acquisition
results in an investment in the securities of any issuer prohibited by said paragraphs, the Trust shall, within ninety days after the consummation of such merger, consolidation or acquisition, dispose of all of the securities of such issuer so
acquired or such portion thereof as shall bring the total investment therein within the limitations imposed by said paragraphs above as of the date of consummation.
B.
Non-Fundamental
. The following limitations have been adopted by the Trust with respect to the Fund and are Non-Fundamental (see “Investment Limitations - Fundamental” 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 Fundamental 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 purchase any security while borrowings (including reverse repurchase agreements) representing more
than 5% of its total assets are outstanding.
3.
Illiquid Securities
. The Fund will not purchase illiquid or restricted
securities.
4.
Loans of Portfolio Securities
. The Fund will not make loans of portfolio securities.
THE INVEST
MENT ADVISER
Leeb Capital Management, Inc., 8 West 40
th
Street, 19
th
Floor, New York, New York 10018, acts as investment adviser to the Fund, pursuant to an investment advisory agreement (“Advisory Agreement”) between the Trust and the Adviser. Subject to such policies as the Board may determine, the
Adviser is ultimately responsible for investment decisions for the Fund. Pursuant to the terms of the Advisory Agreement, the Adviser provides the Fund with such investment advice and supervision as it deems necessary, subject to approval of the
Board of Trustees. The Adviser also continuously monitors and maintains the Fund’s investment criteria and determines from time to time what securities shall be purchased or sold by the Fund.
12
As compensation for its management services, the Adviser is entitled to receive an
annual fee of 0.85% of the Fund’s average daily net assets. The Adviser has contractually agreed to waive its management fee and/or reimburse certain operating expenses, but only to the extent necessary so that the Fund’s total annual
operating expenses, excluding brokerage fees and commissions; borrowing costs, such as (a) interest and (b) dividend expenses on securities sold short; any 12b-1 fees; taxes; any indirect expenses, such as acquired fund fees and expenses;
and extraordinary litigation expenses, do not exceed 1.50% of the average daily net assets of the Fund. The contractual agreement with respect to the Fund is in place through June 30,
2014
. Each waiver or reimbursement
of an expense by the Adviser is subject to repayment by the Fund within the three fiscal years following the fiscal year in which the waiver or reimbursement was incurred, provided that the Fund is able to make the repayment without exceeding the
applicable expense limitation as stated above.
The following table describes the advisory fees paid to the Adviser by
the Fund for the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
Advisory
Fees
Accrued
|
|
|
Total Expenses
Reimbursed
and/or Fees
Waived
|
|
|
Net Advisory Fees
Paid
|
|
|
November 30,
2012
|
|
$
|
69,387
|
|
|
$
|
141,511
|
1
|
|
$
|
0
|
|
|
November 30,
2011
|
|
$
|
96,124
|
|
|
$
|
131,905
|
2
|
|
$
|
0
|
|
|
November 30,
2010
|
|
$
|
95,
925
|
|
|
$
|
116,768
|
3
|
|
$
|
0
|
|
|
1
|
Subject to reimbursement by the Fund through November 30,
2015
.
|
|
2
|
Subject to reimbursement by the Fund through November 30,
2014
.
|
|
3
|
Subject to reimbursement by the Fund through November 30,
2013
.
|
A discussion of the factors that the Board of Trustees considered in approving the Fund’s management agreement is contained in the
Fund’s annual report to shareholders for the fiscal year ended November 30,
2012
.
The
Advisory Agreement will continue in effect from year to year only if such continuance is specifically approved at least annually by the Board or by vote of a majority of the Fund’s outstanding voting securities and by a majority of the Trustees
who are not parties to the Advisory Agreement or interested persons of any such party, at a meeting called for the purpose of voting on such Advisory Agreement. The Advisory Agreement provides that the Adviser under such agreement shall not be
liable for any error of judgment or mistake of law or for any loss arising out of any investment or for any act or omission in the execution of portfolio transactions for the Fund, except for willful misfeasance, bad faith or negligence in the
performance of its duties, or by reason of reckless disregard of its obligations and duties thereunder.
The Adviser retains
the right to use the name Leeb in connection with another investment company or business enterprise with which the Adviser is or may become associated. The Trust’s right to use the name Leeb automatically ceases 90 days after termination of the
Agreement and
may be withdrawn by the Adviser on 90 days written notice.
13
The Adviser may pay certain financial institutions (which may include banks, broker-dealers
and other industry professionals) a fee for providing distribution related services and/or for performing certain administrative servicing functions for Fund shareholders to the extent these institutions are allowed to do so by applicable statute,
rule or regulation. These financial institutions 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 Fund may from time to time purchase securities issued by financial institutions that provide such services; however, in selecting investments for the Fund, no preference will be shown
for such securities.
About the Portfolio Managers
Dr. Stephen Leeb,
Eric Remole
, Ms. Yevgeniya (Genia) Turanova, and Gregory Dorsey each provide portfolio management services to the Fund (collectively, the
“Portfolio Managers”). All of the Adviser’s client accounts are managed by the Adviser’s Investment Committee as a team, and not by individual portfolio managers. Dr. Leeb is the
Research Chairman, Mr. Remole is
Chairman of the Investment Committee, and
Ms. Turanova
and Mr. Dorsey are members of the Investment Committee. The following table shows the type and number of other accounts managed by the
Adviser’s Investment Committee (not including the Fund) as of November 30,
2012
. Asset amounts are approximate and have been rounded.
|
|
|
|
|
|
|
|
|
|
|
Portfolio
Managers
|
|
Total Accounts By
Type
|
|
Total Assets By Account
Type
|
|
Number of Accounts by
Type Subject to a
Performance
Fee
|
|
Total Assets By
Account Type Subject
to a Performance Fee
|
|
Stephen Leeb
|
|
Registered Investment Companies: 0
|
|
Registered Investment Companies: N/A
|
|
Registered Investment Companies: N/A
|
|
Registered Investment Companies: N/A
|
|
Eric Remole
|
|
Pooled Investment Vehicles: 0
|
|
Pooled Investment Vehicles: N/A
|
|
Pooled Investment Vehicles: N/A
|
|
Pooled Investment Vehicles: N/A
|
|
|
|
|
|
|
|
Genia Turanova
|
|
|
|
|
|
|
|
|
|
Gregory Dorsey
|
|
Other Accounts:
202
|
|
Other Accounts:
$99,201,244
|
|
Other Accounts:
8
|
|
Other Accounts:
$1,
366,060
|
|
|
|
|
|
|
|
(as members of the Adviser’s Investment Committee)
|
|
|
|
|
|
|
|
|
Compensation
. The Adviser currently pays all Portfolio Managers a base salary as well as a
discretionary bonus which is based on the overall profitability of the firm, determined on a pre-tax basis. Salaries are not based on individual accounts’ performance. The Portfolio Managers are entitled to participate in a company-sponsored
retirement plan commensurate with the other employees of the firm.
Potential Conflicts of Interest
. The Adviser (not
the Portfolio Managers) receives a fee based on the performance of certain individual accounts that the Adviser manages using an investment strategy that is different from the Fund. The performance fee is in addition to a fixed management fee that
the Adviser receives for managing such clients’ portfolio. In contrast, the fees paid by the Fund to the Adviser are not based on the performance results of the Fund. The performance fees may create a potential conflict of interest by providing
an incentive for the Adviser to allocate more volatile stocks
14
with greater capital appreciation opportunity to these other accounts rather than to the Fund, although such risk is minimized as a result of the differing investment strategies between the Fund
and the accounts subject to a performance fee. In addition, the Adviser has adopted policies requiring fair and equitable allocation of appropriate investment opportunities among its client accounts in an attempt to mitigate the risk that Portfolio
Managers may prefer one account over another.
The Portfolio Managers may be presented with potential or actual conflicts of
interest as a result of their day-to-day management responsibilities with respect to other accounts managed by the Adviser. For example, management of these other accounts may result in a Portfolio Manager devoting unequal time and attention to the
management of the Fund and such other accounts. The Adviser continually seeks to manage such competing interests for the time and attention of the Portfolio Managers. Because the Adviser employs the same “focused” investment strategy,
which seeks primarily large cap stocks, on behalf of all of the Adviser’s clients, allocation of investment opportunities among accounts is not a material conflict that the Adviser believes is likely to arise in managing the Fund.
With respect to securities transactions for the Fund, the Adviser determines which broker to use to execute each Fund portfolio
transaction consistent with its duty to seek best execution of the transaction. Whenever possible, the Adviser will combine orders for the purchase and sale of securities on behalf of the Fund with those of other accounts with respect to which the
Adviser has full trading discretion. The Adviser seeks to improve the price, transaction costs, and other aspects of trade execution when orders in the same security are aggregated for multiple clients. The Adviser seeks to ensure fair and equitable
treatment of each of its clients when aggregating and allocating client trades.
Securities Owned in the Fund by
Portfolio Managers
. As of November 30,
2012
, the Portfolio Managers owned shares of the Fund in the following ranges:
|
|
|
|
|
Portfolio Manager
|
|
Dollar Range of Fund
Shares
|
|
Stephen Leeb
|
|
$100,001 - $500,000
|
|
Eric Remole
|
|
None
|
|
Genia Turanova
|
|
None
|
|
Gregory Dorsey
|
|
None
|
TRUSTEES AND
OFFICERS
GENERAL QUALIFICATIONS.
The Board of Trustees supervises the business activities of the Trust. Each Trustee serves as a trustee
until termination of the Trust unless the Trustee dies, resigns, retires, or is removed. The Chairman of the Board and more than 75% of the Trustees are “Independent Trustees,” which means that they are not “interested persons”
(as defined in the 1940 Act) of the Trust or any adviser, sub-adviser or distributor of the Trust.
15
The following table provides information regarding the Independent Trustees.
|
|
|
|
|
Name, Address*, (Age), Position
with Trust**, Term of Position with Trust
|
|
Principal Occupation During Past 5 Years
and Other Directorships
|
|
Gary E. Hippenstiel (Age -
65
)
Chairman of the Audit and Pricing Committees
Independent Trustee, December 2002 to present
|
|
President and founder of Hippenstiel Investment Counsel LLC, a registered investment advisor, since November 2008; Director, Vice President and Chief Investment Officer of Legacy
Trust Company, N.A. from September 1991 to September 2008; Chairman of the investment committee for W.H. Donner Foundation and Donner Canadian Foundation
from June 2005 to September 2011; Chairman of investment committee for the
Diana Davis Spencer Foundation since October 2011; Chairman and Founder, Constitution Education Foundation since February 2011.
|
|
|
|
|
Stephen A. Little (Age
- 66
)
Chairman, December 2004 to present;
Independent
Trustee, December 2002 to present
|
|
President and founder of The Rose, Inc., a registered investment advisor, since April 1993.
|
|
|
|
|
Daniel J. Condon (Age -
62
)
Independent Trustee, December 2002 to present
|
|
CEO of Standard Steel, LLC since August 2011; Director Steel Wheels Acquisition Corp. since August 2011; Director Standard Steel, Inc. since August 2011; President and CEO of
International Crankshaft Inc., an automotive supply manufacturing company, from 2004 to August 2011; Director International Crankshaft, Inc. since 2004; Chairman, SMI Crankshaft LLC, an automotive and truck supplier, from July 2010 to August
2011.
|
|
|
|
|
Ronald C. Tritschler (Age -
60
)
Independent Trustee, January 2007 to present;
Interested Trustee, December 2002 to December 2006
|
|
Chief Executive Officer, Director and Legal Counsel of The Webb Companies, a national real estate company, since 2001; Director of First State Financial since 1998; Director, Vice
President and Legal Counsel of The Traxx Companies, an owner and operator of convenience stores, since 1989.
Chairman, Bluegrass Tomorrow, nonprofit organization.
|
|
|
|
|
Kenneth G.Y. Grant (Age -
63
)
Independent Trustee, May 2008 to present
|
|
Senior Vice President of Global Trust Company since 2008; Senior Vice President of Advisors Charitable Gift Fund since May 2005; Senior Vice President and Chief Officer, Corporate
Development, of Northeast Retirement Services, Inc. since February 2003; Senior Vice President of Savings Banks Employees Retirement Association since February 2003; Director, Lift Up Africa since 2008; Chair Investment Committee since January 2011
and past Chair, Board of Directors of Massachusetts Council of Churches; Member, Presbytery of Boston, Presbyterian Church (U.S.A.) since June 1975.
|
|
*
|
The address for each trustee is 2960 N. Meridian St., Suite 300, Indianapolis, IN 46208.
|
|
**
|
As of the date of this SAI, the Trust currently consists of
19
series.
|
The following table provides information regarding the interested Trustee and the Officers of the Trust.
|
|
|
|
|
Name, Address*, (Age), Position with
Trust,** Term of Position with Trust
|
|
Principal Occupation During Past 5 Years
and Other Directorships
|
|
Nancy V. Kelly (Age -
57
)***
Trustee, November 2007 to present
|
|
Executive Vice President of Huntington National Bank
, the Trust’s custodian, since
December 2001
; Director,
Wedgewood Golf & Country Club since October 2008; Director, Greenlawn Cemetery since October 2007; Director, Directions for Youth and Families, a social service agency, since August 2006.
|
|
|
|
|
John C. Swhear (Age -
51)
Interim President, March 2012 to present;
Senior
Vice President, May 2007 to present
|
|
Vice President of Legal Administration and Compliance for Huntington Asset Services, Inc., the Trust’s administrator, since April 2007; Chief Compliance Officer and Vice
President of Valued Advisers Trust since August 2008; Chief Compliance Officer of Unified Financial Securities, Inc., the Trust’s distributor, since May 2007; Secretary of Huntington Funds
,
April 2010
to February
2012
; President and Chief Executive Officer of Dreman Contrarian Funds, March 2010 to March 2011; Vice President and Acting Chief Executive Officer of Dreman Contrarian Funds, 2007 to March 2010.
|
|
|
|
|
Robert W. Silva (Age -
46
)
Treasurer and Chief Financial Officer, June 2011 to present
|
|
Treasurer of Valued Advisers Trust since February 2013;
Senior Vice President, Fund Administration for Huntington Asset Services, Inc., the Trust’s administrator,
since October 2011, Vice President from September 2010 to October 2011; Treasurer of Huntington Funds since November 2010; Chief Financial Officer and Treasurer of Huntington Strategy Shares since November 2010; Treasurer and Chief Financial Officer
of Dreman Contrarian Funds March 2011 to February 2013; Senior Vice President of Citi Fund Services Ohio, Inc. from September 2007 to September 2010.
|
16
|
|
|
|
|
Lynn E. Wood (Age -
66
)
Chief Compliance Officer, October 2004 to present
|
|
Chief Compliance Officer of Unified Series Trust, since October 2004.
|
|
|
|
|
Tara Pierson (Age -
38
)
Secretary, May 2010 to present
|
|
Employed by Huntington Asset Services, Inc., the Trust’s Administrator, since February, 2000; Assistant Secretary of
Dividend Growth Trust from March 2006 to February 2012.
Assistant Secretary of
the Trust from November 2008 to May 2010.
|
|
*
|
The address for each trustee and officer is 2960 N. Meridian St., Suite 300, Indianapolis, IN 46208.
|
|
**
|
As of the date of this SAI, the Trust consists of 19 series.
|
|
***
|
Ms. Kelly is deemed an interested trustee because she is an officer of an entity that is under common control with Unified Financial Securities, Inc., one of the
Trust’s distributors. The Board has reviewed and approved this arrangement.
|
In addition to the information
provided above, below is a summary of the specific experience, qualifications, attributes or skills of each Trustee and the reason why he or she was selected to serve as Trustee:
Stephen A. Little
– Mr. Little has been an Independent Trustee of the Trust since its inception in 2002, and he currently serves as Chairman of the Board. He previously served as trustee
to three other registered investment companies. In 1993, he founded an investment advisory firm that provides discretionary investment advice and advice on socially responsible investing. Mr. Little previously held NASD Series 6, 7, and 22
licenses. Mr. Little received a B.A. from Wabash College and a M. Div. from Christian Theological Seminary. Prior to completing his education, Mr. Little served in the U.S. Marine Corps. Mr. Little was selected to serve as Trustee of
the Trust based primarily on his experience in the investment management industry.
Gary E. Hippenstiel
–
Mr. Hippenstiel has served as a mutual fund trustee since 1995. He has been an Independent Trustee of the Trust since its inception in 2002, and he currently serves as Chairman of the Audit and Pricing Committees of the Board of Trustees.
He previously served as a trustee to three other registered investment companies and a variable insurance trust. In 2008, Mr. Hippenstiel founded an investment consulting firm and he also serves as Chairman of the investment committee for two
family foundations. Prior to that, he served as Chief Investment Officer of Legacy Trust Company for 17 years, where he was responsible for establishing investment strategies and selecting and monitoring independent managers of trust accounts.
Mr. Hippenstiel received a B.S. in Business Administration and an M.B.A. in Finance from the University of California, Berkeley. Mr. Hippenstiel was selected as Trustee based primarily on his experience in the investment management
industry.
Daniel J. Condon
–
Mr. Condon has been an Independent Trustee of the Trust since its inception
in 2002. He has also served as trustee of three other registered investment companies. From 1990 to 2002, he served as Vice President and General Manager of an international automotive equipment manufacturing company. Since 2002, he has served as
CEO of various multi-national companies. Mr. Condon received a B.S. in Mechanical Engineering from Illinois Institute of Technology and an M.B.A. from Eastern Illinois University. He also received his registered Professional Engineer license.
Mr. Condon was selected as Trustee based on his over
22
years of international business experience.
Ronald C. Tritschler
–
Mr. Tritschler has been a Trustee of the Trust since its inception in 2002. He also has served as trustee
of three other registered investment companies. Since 1989, he has been a director, vice president and general counsel of a company that operates convenience stores. Since 2001, Mr. Tritschler has been CEO, director and general counsel of a
national real estate company. He also is a director of a bank holding company. Mr. Tritschler received a B.A. in Business Administration from Baldwin-Wallace College and his J.D. and M.B.A. from the University of Toledo. Mr. Tritschler was
selected to serve as a Trustee based primarily on his substantial business and legal experience.
17
Kenneth G.Y. Grant
–
Mr. Grant has been an Independent Trustee of the Trust
since 2008. He is a founder of a trust company that offers collective investment trust products to qualified plans. Mr. Grant has over
27
years of executive leadership experience, including experience in management,
business development for financial services firms, strategic planning, and investing. Mr. Grant also has experience developing trust and plan accounting services for institutional investors. He currently serves as a senior executive of a
retirement plan services provider, as senior vice president of a retirement association and as Treasurer of a council of churches. Mr. Grant received his B.A. in Psychology from Syracuse University, his Th.M. in Theology and Ethics from Boston
University, and his M.B.A. from Clark University. Mr. Grant was selected to serve as a Trustee based primarily on his substantial experience in the retirement plan and financial services industry.
Nancy V. Kelly
– Ms. Kelly has been a Trustee of the Trust since 2007. She has served as Regulatory Reform Director of Huntington
National Bank’s Risk Management business segment since March 2012. Prior to that, she served as Chief Administrative Officer of Huntington’s Wealth Advisors, Government Finance, and Home Lending business segment from November 2010 to March
2012, and Executive Vice President of Huntington from December 2001 to November 2010. She is active as a community leader and she serves on the Board of several local organizations, including a youth social services agency. Ms. Kelly was
selected to serve as a Trustee based primarily on her experience in managing securities-related businesses operated by banks and her senior position within Huntington Bank, which is an affiliate of the Trust’s administrator and distributor and
also serves as custodian of certain series of the Trust. Ms. Kelly received a B.S. from Hood College in 1977, and an M.B.A. in 1981 from Xavier University.
Independent Trustees Messrs. Hippenstiel, Tritschler, Condon, and Little each have previous experience serving as trustees to other multi-series trusts, which means that they are familiar with issues
relating to overseeing multiple advisers and multiple funds. Messrs. Hippenstiel, Little, and Grant have experience conducting due diligence on and evaluating investment advisers – Mr. Hippenstiel as the Chief Investment Officer of Legacy
Trust, Mr. Little as the President of a registered investment adviser, and Mr. Grant as an officer of a bank which operated a collective investment trust. This means that they are qualified to review annually each adviser’s
qualifications, including the qualification of Leeb Capital Management, Inc. to serve as adviser to the Fund. Ms. Kelly’s experience as an officer of the Trust’s custodial bank and former supervisor of the Trust’s administrator
provides the Independent Trustees with insight into the operations of the service providers and their day-to-day administration of the Fund.
RISK MANAGEMENT
. As part of its efforts to oversee risk management associated with the Trust, the Board has established the Audit Committee, Pricing Committee, and the Advisory Contract Renewal
Committee as described below:
|
|
•
|
|
The Audit Committee consists of Independent Trustees Messrs. Hippenstiel, Condon, Tritschler and Grant. The Audit Committee is responsible for
overseeing the Trust’s accounting and financial reporting policies and practices, internal controls and, as appropriate, the internal controls of certain service providers; overseeing the quality and objectivity of financial statements and the
independent audits of the financial statements; and acting as a liaison between the independent auditors and the full Board of Trustees. The Audit Committee met four times during the year ended December 31,
2012
.
|
|
|
•
|
|
The Pricing Committee is responsible for reviewing and approving fair valuation determinations. The members of the Pricing Committee are all of
the Trustees, except that
|
18
|
|
any one member of the Pricing Committee constitutes a quorum for purposes of reviewing and approving a fair value. In addition to meetings to approve fair valuations, the Pricing Committee
met four times during the year ended December 31,
2012
.
|
|
|
•
|
|
The Advisory Contract Renewal Committee is responsible for conducting due diligence on the initial approval and subsequent renewals of investment
advisory contracts between the Trust and the advisers and sub-advisers to each series of the Trust, and making a recommendation to the full Board of Trustees regarding approvals and renewals of these contracts. The Committee reviews materials of the
type required by Section 15(c) of the Investment Company Act of 1940, which are provided by the investment advisers and sub-advisers and the Trust’s Administrator. The Committee also conducts interviews of advisers and sub-advisers to the
Trust. The Advisory Contract Renewal Committee is comprised of all of the Trustees, although at least two Independent Trustees are required to establish a quorum. This Committee held four meetings during the year ended December 31,
2012
.
|
Each Committee meets at least quarterly, and reviews reports provided by
administrative service providers, legal counsel and independent accountants. The Committees report directly to the Board of Trustees.
The Independent Trustees have engaged their own independent legal counsel to provide advice on regulatory, compliance and other topics. In addition, the Board has engaged on behalf of the Trust a
full-time Chief Compliance Officer (“CCO”) who is responsible for overseeing compliance risks. He reports to the Board at least quarterly any material compliance items that have arisen, and annually he provides to the Board a comprehensive
compliance report outlining the effectiveness of compliance policies and procedures of the Trust and its service providers. As part of the CCO’s risk oversight function, the CCO seeks to understand the risks inherent in the operations of the
Trust’s series and their advisers and sub-advisers. Periodically the CCO provides reports to the Board that:
|
|
•
|
|
Assess the quality of the information the CCO receives from internal and external sources;
|
|
|
•
|
|
Assess how Trust personnel monitor and evaluate risks;
|
|
|
•
|
|
Assess the quality of the Trust’s risk management procedures and the effectiveness of the Trust’s organizational structure in implementing
those procedures;
|
|
|
•
|
|
Consider feedback from and provide feedback regarding critical risk issues to Trust and administrative and advisory personnel responsible for
implementing risk management programs; and
|
|
|
•
|
|
Consider economic, industry, and regulatory developments, and recommend changes to the Trust’s compliance programs as necessary to meet new
regulations or industry developments.
|
The Trustees meet in-person on a quarterly basis, typically for two
days of meetings. Trustees also participate in special meetings and conference calls as needed. In addition to Board meetings, Trustees also participate in teleconferences each quarter to review and discuss 15(c) materials, and to interview advisers
and sub-advisers whose contracts are up for renewal. Legal counsel to the Trust provides quarterly reports to the Board regarding regulatory developments. On a quarterly basis, the Trustees review and discuss some or all of the following compliance
and risk management reports relating to the series of the Trust:
|
|
(1)
|
Fund Performance/Morningstar Report/Portfolio Manager’s Commentary
|
|
|
(2)
|
Code of Ethics review
|
19
|
|
(4)
|
Distributor Compliance Reports
|
|
|
(5)
|
Timeliness of SEC Filings
|
|
|
(6)
|
Dividends and other Distributions
|
|
|
(7)
|
List of Brokers, Brokerage Commissions Paid
an
Average Commission Rate
|
|
|
(8)
|
Review of 12b-1 Payments
|
|
|
(9)
|
Multiple Class Expense Reports
|
|
|
(10)
|
Anti-Money Laundering/Customer Identification Reports
|
|
|
(11)
|
Administrator and CCO Compliance Reports
|
|
|
(l2)
|
Market Timing Reports
|
The
Board of Trustees has not adopted a formal diversity policy. When soliciting future nominees for Trustee, the Board will make efforts to identify and solicit qualified minorities and women.
On an annual basis, the Trustees conduct an assessment of the Board’s and their individual effectiveness in overseeing the Trust.
Based upon its assessment, the Board determines whether additional risk assessment or monitoring processes are required with respect to the Trust or any of its service providers.
Based on the qualifications of each of the Trust’s Trustees and officers, the risk management practices adopted by the Board,
including a regular review of several compliance and operational reports, and the committee structure adopted by the Board, the Trust believes that its leadership is appropriate.
The following table provides information regarding shares of the Fund and other portfolios of the Trust owned by each Trustee as of
December 31,
2012
.
|
|
|
|
|
|
|
Trustee
|
|
Dollar Range of the Fund’s Shares
|
|
Aggregate Dollar Range of Shares of All
Funds Within the Trust*
|
|
Gary E. Hippenstiel
|
|
None
|
|
None
|
|
Ronald C. Tritschler
|
|
None
|
|
$50,001 - $100,000
|
|
Stephen A. Little
|
|
None
|
|
None
|
|
Daniel J. Condon
|
|
None
|
|
None
|
|
Kenneth G.Y. Grant
|
|
None
|
|
$10,
001 - $50,
000
|
|
Nancy V. Kelly
|
|
None
|
|
None
|
|
*
|
The Trust currently consists of
19
series.
|
Set forth below are estimates of the annual compensation to be paid to the Trustees and officers by the Fund on an individual basis and by the Trust on an aggregate basis. Trustees’ and
officers’ fees and expenses are Trust expenses and the Fund incurs its share of such expenses, which are allocated among the series of the Trust in such manner as the Trustees determine to be fair and equitable.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Independent Trustees
|
|
Aggregate
Compensation
from
the Fund
|
|
|
Pension or
Retirement
Benefits Accrued
As Part of Fund
Expenses
|
|
|
Estimated Annual
Benefits Upon
Retirement
|
|
|
Total Compensation
from
Trust
1
|
|
|
Gary E. Hippenstiel, Trustee and Chairman of the Audit Committee
|
|
$
|
2,
274
|
2
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
43,200
|
|
|
|
|
|
|
|
|
Stephen A. Little, Chairman of the Board
|
|
$
|
2,
274
|
2
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
43,200
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel J. Condon, Trustee
|
|
$
|
1,
|
800
3
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
34,200
|
|
|
|
|
|
|
|
|
Ronald C. Tritschler, Trustee
|
|
$
|
1,
|
800
3
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
34,200
|
|
|
|
|
|
|
|
|
Kenneth G.Y. Grant, Trustee
|
|
$
|
1,
|
800
3
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
34,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interested Trustees and Officers
|
|
Aggregate
Compensation
from
the Fund
|
|
|
Pension or
Retirement
Benefits Accrued
As Part of Fund
Expenses
|
|
|
Estimated Annual
Benefits Upon
Retirement
|
|
|
Total Compensation
from
Trust
1
|
|
|
Nancy V. Kelly, Trustee
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
John C. Swhear, Interim President, Senior Vice President
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
Robert W. Silva, Treasurer and CFO
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
Lynn E. Wood, Chief Compliance Officer
|
|
$
|
6,583
|
4
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
158,000
|
5
|
|
|
|
|
|
|
|
Tara Pierson, Secretary
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
1
|
The Trust
currently consists of
19
series.
|
|
2
|
During the fiscal year ended November 30,
2012
, each Trustee received a total of $
2,023
from the
Fund.
|
|
3
|
During the fiscal year ended November 30,
2012
, each Trustee received a total of $1,
602
from the
Fund.
|
|
4
|
During the fiscal year ended November 30,
2012
, the CCO received a total of $
9,510
from the Fund.
|
|
5
|
This amount does not include the value of benefits provided to the CCO. In addition to the CCO’s salary listed in the table, the CCO is allocated
$25,000 for potential bonus compensation, as well as to pay for the CCO’s expenses in connection with compliance-related activities, including audits of advisers to the series of the Trust, attendance at compliance seminars, etc. These expenses
are allocated to each series of the Trust in such manner as the Trustees determine to be fair and equitable.
|
CONTROL
PERSONS
AND PRINCIPAL HOLDERS OF SECURITIES
A principal shareholder is any person who owns
(either of record or beneficially) 5% or more of the outstanding shares of the Fund. A control person is one who owns, either directly or indirectly, more than 25% of the voting securities of the Fund or acknowledges the existence of such control.
As a controlling shareholder, each of these persons could control the outcome of any proposal submitted to the shareholders for approval, including changes to the Fund’s fundamental policies or the terms of the management agreement with the
Adviser. The Trustees and officers of the Trust, as a group, own no shares of the Fund. As of March
4, 2013
, the following persons were considered to be either a control person or principal shareholder of the Fund:
|
|
|
|
|
|
|
|
|
|
|
Name and Address
|
|
% Ownership
|
|
|
Type of Ownership
|
|
|
Charles Schwab & Co.
101 Montgomery Street
San Francisco, CA 94104
|
|
|
61.84
|
%
|
|
|
Record
|
|
21
PORTFOLIO TURNOVER
The Fund may sell portfolio securities without regard to the length of time they have been held when, in the opinion of the Adviser,
investment considerations warrant such action. The Fund’s portfolio turnover rate is the percentage of its portfolio that is bought and sold to exchange for other securities and is expressed as a percentage of its total assets. A high rate
of portfolio turnover (100% or more) generally leads to higher transaction costs and may result in a greater number of taxable transactions. For the fiscal year ended November 30,
2011, the Fund’s portfolio turnover rate
was 116.66
%, and for the fiscal year ended November
30, 2012, the Fund’s portfolio turnover rate was 88.23
%.
ANTI-MONEY LAUNDERING COMPLIANCE PROGRAM
Customer identification and verification is part of the Fund’s overall obligation to prevent money laundering under
federal law. The Trust has, on behalf of the Fund, adopted an anti-money laundering compliance program designed to prevent the Fund from being used for money laundering or financing of terrorist activities (the “AML Compliance Program”).
The Trust has delegated the responsibility to implement the AML Compliance Program to the Fund’s transfer agent, Huntington Asset Services, Inc., subject to oversight by the Trust’s Chief Compliance Officer and, ultimately, by the Board of
Trustees.
When you open an account with the Fund, the Fund’s transfer agent will request that you provide your name,
physical address, date of birth, Social Security number or tax identification number. You may also be asked for other information that, in the transfer agent’s discretion, will allow the Fund to verify your identity. Entities are also required
to provide additional documentation. This information will be verified to ensure the identity of all persons opening an account with the Fund. The Fund reserves the right to (i) refuse, cancel or rescind any purchase or exchange order,
(ii) freeze any account and/or suspend account activities, or (iii) involuntarily redeem your account in cases of threatening conduct or suspected fraudulent or illegal activity. These actions will be taken when, in the sole discretion of
the Fund’s transfer agent, they are deemed to be in the best interest of the Fund, or in cases where the Fund is requested or compelled to do so by governmental or law enforcement authority.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to policies established by the Board of Trustees of the Trust, the Adviser is responsible for the Fund’s portfolio decisions and the placing of the Fund’s portfolio transactions. In
placing portfolio transactions, the Adviser seeks the best qualitative execution for the Fund, taking into account such factors as price (including the applicable brokerage commission or dealer spread), the execution capability, financial
responsibility and responsiveness of the broker or dealer and the brokerage and research services provided by the broker or dealer. The Adviser generally seeks favorable prices and commission rates that are reasonable in relation to the benefits
received.
The Adviser is specifically authorized to select brokers or dealers who also provide brokerage and research
services to the Fund and/or the other accounts over which the Adviser exercises investment discretion and to pay such brokers or dealers a commission in excess of the commission another broker
22
or dealer would charge if the Adviser 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 Adviser’s overall responsibilities with respect to the Trust 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 the Adviser in servicing all of its accounts. Similarly, research and information provided by brokers or dealers serving other clients may be useful to the Adviser in connection with its services to the Fund. Over-the-counter
transactions will be placed either directly with principal market makers or with broker-dealers, if the same or a better price, including commissions and executions, is available. Fixed income securities are normally purchased directly from the
issuer, an underwriter or a market maker. Purchases include a concession paid by the issuer to the underwriter and the purchase price paid to a market maker may include the spread between the bid and asked prices. For the fiscal year ended
November 30,
2012
, the Fund directed the following Fund brokerage transactions to brokers who provided research services to the Adviser:
|
|
|
|
|
|
|
Brokerage Transactions Directed
|
|
Brokerage Commissions Paid
|
|
|
$
17,717,803
|
|
$
|
12,591
|
|
To the extent that the Fund and another of the Adviser’s clients seek to acquire the same
security at about the same time, the 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 Fund. In the event that more than one client wants to purchase or sell the same security on a given date, the purchases and sales will normally be
made by random client selection.
The following table provides information regarding the amount of brokerage commissions paid
by the Fund for the periods indicated:
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
Brokerage Commissions Paid
|
|
|
November 30, 2010
|
|
$
|
16,302
|
|
|
November 30, 2011
|
|
$
|
20,815
|
|
|
November 30, 2012
|
|
$
|
12,591
|
|
The Trust, the Adviser and the Fund’s Distributor have each adopted a Code of Ethics (the
“Codes”) pursuant to Rule 17j-1 of the 1940 Act, and the Adviser’s Code of Ethics also conforms to Rule 204A-1 under the Investment Advisers Act of 1940. The personnel subject to the Codes are permitted to invest in securities,
including securities that may be purchased or held by the Fund. You may obtain copies of the Codes from the Trust, free of charge, by calling Shareholder Services at (866) 400-5332. You may also obtain copies of the Trust’s Code from
documents filed with SEC and available on the SEC’s web site at www.sec.gov.
23
DISCLOSURE OF PORTFOLIO HOLDINGS
The Fund is required to include a schedule of portfolio holdings in its annual and semi-annual reports to shareholders,
which is sent to shareholders within 60 days of the end of the second and fourth fiscal quarters and which is filed with the SEC on Form N-CSR within 70 days of the end of the second and fourth fiscal quarters. The Fund also is required to file a
schedule of portfolio holdings with the SEC on Form N-Q within 60 days of the end of the first and third fiscal quarters. The Fund must provide a copy of the complete schedule of portfolio holdings as filed with the SEC to any shareholder of the
Fund, upon request, free of charge. This policy is applied uniformly to all shareholders of the Fund without regard to the type of requesting shareholder (i.e., regardless of whether the shareholder is an individual or institutional investor).
The Fund releases portfolio holdings to third party servicing agents on a daily basis in order for those parties to perform
their duties on behalf of the Fund. These third party servicing agents include the Adviser, Distributor, Transfer Agent, Fund Accounting Agent, Administrator and Custodian. The Fund also may disclose portfolio holdings, as needed, to auditors, legal
counsel, proxy voting services (if applicable), printers, pricing services, parties to merger and reorganization agreements and their agents, and prospective or newly hired investment advisers or sub-advisers. The lag between the date of the
information and the date on which the information is disclosed will vary based on the identity of the party to whom the information is disclosed. For instance, the information may be provided to auditors within days of the end of an annual period,
while the information may be given to legal counsel or prospective sub-advisers at any time. This information is disclosed to all such third parties under conditions of confidentiality. “Conditions of confidentiality” include
(i) confidentiality clauses in written agreements, (ii) confidentiality implied by the nature of the relationship (e.g., attorney-client relationship), (iii) confidentiality required by fiduciary or regulatory principles (e.g.,
custody relationships) or (iv) understandings or expectations between the parties that the information will be kept confidential. Third party servicing agents generally are subject to an independent obligation not to trade on confidential
information under their code of ethics and/or as a result of common law precedents; however, the Fund does not require an independent confirmation from the third parties that they will not trade on the confidential information.
Additionally, the Fund may enter into ongoing arrangements to release portfolio holdings to Morningstar, Inc., Lipper, Inc., Bloomberg,
Standard & Poor’s, Thompson Financial and Vickers-Stock (“Rating Agencies”) in order for those organizations to assign a rating or ranking to the Fund. In these instances portfolio holdings will be supplied within
approximately 25 days after the end of the month. The Rating Agencies may make the Fund’s top portfolio holdings available on their websites and may make the Fund’s complete portfolio holdings available to their subscribers for a
fee. Neither the Fund, the Adviser, nor any of their affiliates receive any portion of this fee. Information released to Rating Agencies is not released under conditions of confidentiality nor is it subject to prohibitions on trading based
on the information.
Except as described above, the Fund is prohibited from entering into any arrangements with any person to
make available information about the Fund’s portfolio holdings without the prior authorization of the Chief Compliance Officer and the specific approval of the Board. The Adviser must submit any
24
proposed arrangement pursuant to which the Adviser intends to disclose the Fund’s portfolio holdings to the Board, which will review such arrangement to determine whether the arrangement is
in the best interests of Fund shareholders. Additionally, the Adviser and any affiliated persons of the Adviser are prohibited from receiving compensation or other consideration, for themselves or on behalf of the Fund, as a result of disclosing the
Fund’s portfolio holdings. The Fund will not disclose portfolio holdings as described above to third parties that the Fund knows will use the information for personal securities transactions.
25
PROXY VOTING POLICY
The Trust and the Fund’s Adviser each have adopted proxy voting policies and procedures reasonably designed to ensure that proxies
are voted in shareholders’ best interests. As a brief summary, the Trust’s policy delegates responsibility regarding proxy voting to the Adviser, subject to the Adviser’s proxy voting policy and the supervision of the Board of
Trustees.
The Adviser has adopted its Proxy Voting Policies and Procedures which underscore the Adviser’s concern that
all proxy voting decisions be made in the best interests of the Fund and that the Adviser will act in a prudent and diligent manner intended to enhance the economic value of the assets of the Fund. It is the policy of the Adviser to vote Fund
proxies in the interest of maximizing shareholder value. To that end, the Adviser casts each vote on the Fund’s behalf on a case-by-case basis, taking into consideration the Adviser’s contractual obligations under the Management Agreement,
and other relevant facts and circumstances at the time of the vote. Consideration will be given to both the short- and long-term implications of the proposal to be voted on when considering the optimal vote. The responsibility for administering and
overseeing the Adviser’s proxy voting process lies with the Chief Compliance Officer (“CCO”) and President of the Adviser. The Adviser’s assistant portfolio managers are responsible for voting and recording proxy votes.
Conflict of Interest.
The Trust’s policy provides that, if a conflict of interest between the Adviser or its
affiliates and the Fund arises with respect to any proxy, the Adviser must fully disclose the conflict to the Board of Trustees and vote the proxy in accordance with the Board’s instructions. The Board shall make the proxy voting decision that
in its judgment, after reviewing the recommendation of the Adviser, is most consistent with the Adviser’s proxy voting policies and in the best interests of Fund shareholders. When the Board is required to make a proxy voting decision, only the
Trustees without a conflict of interest with regard to the security in question or the matter to be voted upon shall be permitted to participate in the decision of how the Fund’s vote will be cast.
Review.
The Adviser’s CCO or designee will review the Adviser’s Proxy Policies and update them as necessary.
You may obtain a copy of the Trust’s and the Adviser’s proxy voting policy by calling Shareholder Services
at
(866) 400-5332 or by writing to Huntington Asset Services, Inc., the Fund’s transfer agent, at 2960 N. Meridian Street, Suite 300, Indianapolis, IN 46208, Attn: Unified Series Trust Chief Compliance Officer. A copy of the policies
will be mailed to you within three days of receipt of your request. You also may obtain a copy of the policies from Fund documents filed with the SEC, which are available on the SEC’s web site at
www.sec.gov
. A copy of the votes cast by
the Fund with respect to portfolio securities during the most recent 12-month period ended June 30th will be filed by the Fund with the SEC on Form N-PX. The Fund’s proxy voting record will be available to shareholders free of charge upon
request by calling or writing the Fund as described above or from the SEC’s web site.
DETERMINATION OF
NET ASSET VALUE
The price (net asset value) of the shares of the Fund is determined as of the close of trading (normally
4:00 p.m. Eastern time) on each day the Trust is open for business and on any other day on which there is sufficient trading in the Fund’s securities to materially affect the net asset value. The
26
Trust is open for business on every day on which the New York Stock Exchange (NYSE) is open for trading. The NYSE is closed on Saturdays, Sundays and the following holidays: New Year’s Day,
Martin Luther King, Jr. Day, President’s Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas.
Equity securities generally are valued by using market quotations furnished by a pricing service when the Adviser believes such prices accurately reflect the fair market value of such securities.
Securities that are traded on any stock exchange are generally valued by the pricing service at the last quoted sale price. Lacking a last sale price, an exchange traded security is generally valued by the pricing service at its last bid price.
Securities traded in the NASDAQ over-the-counter market are generally valued by the pricing service at the NASDAQ Official Closing Price. When market quotations are not readily available, when the Adviser determines that the market quotation or the
price provided by the pricing service does not accurately reflect the current market value or when restricted or illiquid securities are being valued, such securities are valued at a fair value as determined by the Adviser in good faith according to
guidelines established by the Board of Trustees. The Fund’s Administrator maintains a pricing review committee which consults with a member of the Board of Trustees’ Pricing Committee when reviewing fair value prices (if any) provided by
the Adviser. Fair valued securities held by the Fund (if any) are reviewed by the Board of Trustees on a quarterly basis.
The
Fund’s net asset value per share is computed by dividing the value of the securities held by the Fund plus any cash or other assets (including interest and dividends accrued but not yet received) minus all liabilities (including accrued
expenses) by the total number of shares in the Fund outstanding at such time.
REDEMPTION IN-KIND
The Fund does not intend to redeem shares in any form except cash. However, if the amount being redeemed is over the
lesser of $250,000 or 1% of the Fund’s net asset value, pursuant to a Rule 18f-1 plan filed by the Trust on behalf of the Fund, the Fund has the right to redeem your shares by giving you the amount that exceeds the lesser of $250,000 or 1% of
the Fund’s net asset value in securities instead of cash. In the event that an in-kind distribution is made, a shareholder may incur additional expenses, such as the payment of brokerage commissions, on the sale or other disposition of the
securities received from the Fund.
STATUS AND TAXATION OF THE FUND
The Fund was organized as a series of a business trust, and intends to continue to qualify for treatment as a regulated investment company
(a “RIC”) under the Internal Revenue Code of 1986, as amended (the “Code”) in each taxable year. There can be no assurance that it actually will so qualify. If the Fund qualifies as a RIC, its dividend and capital gain
distributions generally are subject only to a single level of taxation, to the shareholders. This differs from distributions of a regular business corporation which, in general, are taxed first as taxable income of the distributing corporation, and
then again as dividend income of the shareholder.
If the Fund does qualify as a RIC but (in a particular calendar year)
distributes less than ninety-eight (98%) of its ordinary income and 98.2% of its capital gain net income (as the Code defines each
27
such term), the Fund is subject to an excise tax. The excise tax, if applicable, is four percent (4%) of the excess of the amount required to have been distributed over the amount actually
distributed for the applicable year. If the Fund does not qualify as a RIC, its income will be subject to taxation as a regular business corporation, without reduction by dividends paid to shareholders of the Fund.
To continue to qualify for treatment as a RIC under Subchapter M of the Code, the Fund must, among other requirements:
|
|
•
|
|
Derive at least 90% of its gross income each taxable year from dividends, interest, payments with respect to securities loans, gains from the sale or
other disposition of stock or securities or foreign currencies, and certain other income (including gains from options, futures, or forward contracts derived with respect to the RIC’s business of investing in stock securities, or foreign
currencies) (the “Income Requirement”);
|
|
|
•
|
|
Diversify its investments in securities within certain statutory limits; and
|
|
|
•
|
|
Distribute annually to its shareholders at least
90%
of its investment company taxable income (generally, taxable net
investment income less net capital gain) (the “Distribution Requirement”).
|
Pursuant to the
Regulated Investment Company Modernization Act of 2010 (the “Modernization Act”), if the Fund fails the gross income test for a taxable year, it will nevertheless be considered to have satisfied the test for such year if (i) the Fund
satisfies certain procedural requirements and (ii) the Fund’s failure to satisfy the gross income test is due to reasonable cause and not due to willful neglect. However, in such case, a tax is imposed on the Fund for the taxable year in
which, absent the application of this provision, it would have failed the gross income test equal to the amount by which (i) the Fund’s non-qualifying gross income exceeds (ii) one-ninth of the Fund’s qualifying gross income,
each as determined for purposes of applying the gross income test for such year.
Also pursuant to the Modernization Act, if
the Fund fails the asset diversification test as of the end of a quarter, it will nevertheless be considered to have satisfied the test as of the end of such quarter in the following circumstances. If the Fund’s failure to satisfy the asset
diversification test at the end of the quarter is due to the ownership of assets the total value of which does not exceed the lesser of (i) one percent of the total value of the Fund’s assets at the end of such quarter and
(ii) $10,000,000 (a “de minimis failure”), the Fund will be considered to have satisfied the asset diversification test as of the end of such quarter if, within six months of the last day of the quarter in which the Fund identifies
that it failed the asset diversification test (or such other prescribed time period), the Fund either disposes of assets in order to satisfy the asset diversification test, or otherwise satisfies the asset diversification test.
In the case of a failure to satisfy the asset diversification test at the end of a quarter in a case that does not constitute a de
minimis failure, the Fund will nevertheless be considered to have satisfied the asset diversification test as of the end of such quarter if (i) the Fund satisfies certain procedural requirements; (ii) the Fund’s failure to satisfy the
asset diversification test is due to reasonable cause and not due to willful neglect; and (iii) within six months of the last day of the quarter in which the Fund identifies that it failed the asset diversification test (or such other
prescribed time period), the Fund either disposes of assets in order to satisfy the asset diversification test, or otherwise satisfies the asset diversification test. However, in this case, a tax is imposed on the Fund, at the current rate of 35%,
on the net income generated by the assets that caused the Fund to fail the asset diversification test during the period for which the asset diversification test was not met. However, in all events, such tax will not be less than $50,000.
28
Hedging strategies, to reduce risk in various ways, are subject to
complex rules that determine, for federal income tax purposes, the character and time for recognition of capital gains and losses that the Fund realizes in connection with the hedge. The Fund’s income from derivative instruments, in each case
derived with respect to its business of making investments, should qualify as allowable income for the Fund under the Income Requirement.
The Fund’s realized net
capital gains from securities transactions will be distributed only after reducing such gains by the amount of any available capital loss carryforwards.
Capital
losses incurred in taxable years of the Fund beginning
before December 1,
2011
, generally may be carried forward to offset any capital gains for eight years, after which
any undeducted net capital loss remaining is lost as a deduction.
Capital
losses, if any, incurred by the Fund in taxable years of the Fund beginning on or after December 1, 2011 will have an indefinite carryover period
pursuant to the provisions of the Modernization Act, and must be utilized prior to pre-enactment loss carryforwards. As of November 30,
2012
, the Fund had available
for federal tax purposes an unused
capital loss
carryforward
of $
2,352,944,
which
is available for offset against future taxable net capital gains, which expires
November 30, 2017.
Fund distributions received by your qualified retirement plan, such as a 401(k) plan or IRA, are generally tax-deferred; this means that
you are not required to report Fund distributions on your income tax return when paid to your plan, but, rather, when your plan makes payments to you or your beneficiary. Special rules apply to payouts from Roth and Education IRAs.
The portion of the dividends the Fund pays (other than capital gain distributions) that does not exceed the aggregate dividends it
receives from U.S. corporations will be eligible for the dividends received deduction allowed to corporations; however, dividends received by a corporate shareholder and deducted by it pursuant to the dividends received deduction are generally
subject indirectly to the federal alternative minimum tax.
If you are a non-retirement plan holder, the Fund will send you a
Form 1099 each year that tells you the amount of distributions you received for the prior calendar year, the tax status of those distributions, and a list of reportable sale transactions. Generally, the Fund’s distributions are taxable to you
in the year you received them. However, any dividends that are declared in October, November or December but paid in January are taxable as if received in December of the year they are declared. Investors should be careful to consider the tax
consequences of buying shares shortly before a distribution. The price of shares purchased at that time may reflect the amount of the anticipated distribution. However, any such distribution will be taxable to the purchaser of the shares and may
result in a decline in the share value by the amount of the distribution.
If shares of the Fund are sold at a loss after
being held by a shareholder for six months or less, the loss will be treated as long-term, instead of a short-term, capital loss to the extent of any capital gain distributions received on such shares.
The foregoing is only a summary of some of the important federal income tax considerations affecting the Fund and its shareholders
and is not intended as a substitute for careful tax planning.
Accordingly, prospective investors should consult their own tax advisers for more detailed information regarding the above and for information regarding federal, state, local and
foreign taxes.
29
CUSTODIAN
Huntington National Bank, 41 South High Street, Columbus, Ohio 43215, is Custodian of the Fund’s investments. The Custodian acts as
the 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. A Trustee of the Trust is a
member of the Custodian’s management. The Custodian’s parent company, Huntington Bancshares, Inc., is also the parent company of Huntington Asset Services, Inc. (“Huntington”), the Trust’s transfer agent, fund accountant and
administrator, and of Unified Financial Securities, Inc. (the “Distributor”), the Trust’s distributor. Huntington and the Distributor each operates as a wholly-owned subsidiary of Huntington Bancshares, Inc.
For its custodial services, the Custodian receives a monthly fee from the Fund based on the market value of the assets under custody. The
monthly fee is equal to an annual rate of 0.0125% of the first $75 million of market value; 0.0100% of the next $75 million of market value; and 0.0075% of market value in excess of $150 million. The Custodian also receives various transaction-based
fees. The fees paid to the Custodian by the Fund are subject to a $250 monthly minimum fee per Fund account.
FUND SERVICES
Huntington Asset Services, Inc. (“Huntington”), 2960 N. Meridian St., Suite 300, Indianapolis, IN 46208, acts as the Fund’s transfer agent, fund accountant, and
administrator. Huntington is a wholly-owned subsidiary of Huntington Bancshares, the parent company of the Custodian and the Distributor. Certain officers of the Trust also are officers of Huntington.
Huntington maintains the records of each shareholder’s account, answers shareholders’ inquiries concerning their accounts,
processes purchases and redemptions of the Fund’s shares, act as dividend and distribution disbursing agent, and performs other transfer agent and shareholder service functions. For its services as a transfer agent, Huntington receives a
monthly fee of $1.40 per shareholder account (subject to a minimum monthly fee of $1,500).
In addition, Huntington provides
the Fund with fund accounting services, which includes certain monthly reports, record keeping and other management-related services. For its services as fund accountant, Huntington receives a monthly fee from the Fund equal to an annual rate
of 0.04% of the Fund’s average daily net assets up to $100 million; 0.02% of the Fund’s average daily net assets from $100 million to $250 million; and 0.01% of the Fund’s average daily net assets over $250 million (subject to a
minimum monthly fee of $2,083).
Huntington also provides the Fund with administrative services, including all regulatory
reporting and necessary office equipment, personnel and facilities. For these services, Huntington receives a monthly fee from the Fund equal to an annual rate of 0.09% of the Fund’s average daily net assets up to $100 million; 0.06% of
the Fund’s average daily net assets from $100 million to $250 million; and 0.03% of the Fund’s average daily net assets over $250 million (subject to a minimum monthly fee of $2,500). Huntington also receives a compliance program services
fee of $800 per month from the Fund.
30
The following table provides information regarding transfer agent, fund accounting and
administrative services fees paid by the Fund during the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
Fees Paid for
Transfer Agent
Services
|
|
|
Fees Paid for
Accounting Services
|
|
|
Fees Paid for
Administrative
Services
|
|
|
November 30, 2010
|
|
$
|
44,715
|
|
|
$
|
24,999
|
|
|
$
|
33,583
|
|
|
November 30, 2011
|
|
$
|
48,678
|
|
|
$
|
25,000
|
|
|
$
|
31,542
|
|
|
November 30, 2012
|
|
$
|
45,426
|
|
|
$
|
25,000
|
|
|
$
|
30,375
|
|
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The firm of Cohen Fund Audit Services, Ltd.,
1350 Euclid Avenue
, Suite
800, Cleveland, Ohio
44115
has been selected as Independent Registered Public Accounting Firm for the Fund for the fiscal year ending November 30,
2013
. Cohen Fund Audit Services, Ltd. will perform an annual audit of the Fund’s
financial statements and will provide financial, tax and accounting
services, as requested, in accordance with applicable law and regulations.
DISTRIBUTOR
Unified Financial Securities,
Inc., 2960 North Meridian Street, Suite 300, Indianapolis, Indiana 46208, is the exclusive agent for distribution of shares of the Fund. Certain officers of the Trust are also officers of the Distributor, and a Trustee of the Trust is an officer of
the Custodian, which, together with the Distributor and Huntington, are wholly-owned subsidiaries of Huntington Bancshares. As a result, such persons may be deemed to be affiliates of the Distributor.
The Distributor is obligated to sell the shares of the Fund on a best efforts basis only against purchase orders for the shares. Shares
of the Fund are offered to the public on a continuous basis.
FINANCIAL STATEMENTS
The financial statements and the report of the Independent Registered Public Accounting Firm required to be included in the Statement of
Additional Information with respect to the Fund are incorporated herein by reference to the Fund’s Annual Report to Shareholders for the fiscal year ended November 30,
2012
. You can obtain the Annual Report without
charge by calling Shareholder Services at (866) 400-5332 or upon written request.
31