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 also may 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 net asset value (“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.
The minimum
initial investment in the Fund is $2,500 and minimum subsequent investments are $100. The advisor may, in its sole discretion, waive these minimums in certain circumstances. 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 advisor, 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 choose to purchase or redeem shares directly from the
Fund, you will not incur charges on purchases and redemptions. However, 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
- To be in proper form, 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 completed application and check to:
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U.S. Mail:
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Marathon Value Portfolio
c/o
Huntington Asset Services, Inc.
P.O. Box 6110
Indianapolis, Indiana 46206-6110
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Overnight:
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Marathon Value Portfolio
c/o
Huntington Asset Services, Inc.
2960 North Meridian Street
Suite 300
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 (800) 788-6086 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., the Fund’s transfer agent, 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, 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 will be the net asset value next determined after the wire is received by the Fund. Any delays that 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
You may purchase additional shares of the Fund at
any time (subject to minimum investment requirements) by mail, wire or automatic investment. Each additional mail purchase request must contain:
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-your name
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-the name on your account(s)
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-your account number(s)
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-a check made payable to Marathon Value Portfolio
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Checks should be sent to the Marathon Value Portfolio at the address listed under the heading “How
to Buy Shares – By Mail” in this prospectus. A bank wire should be sent as outlined under the heading “How to Buy Shares – By Wire” in this prospectus.
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.
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Tax Sheltered Retirement Plans
Shares of the Fund may be an appropriate investment medium 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); tax-deferred investment plans (for employees of public school systems and certain types of charitable organizations);
and other qualified retirement plans. You should contact the Fund’s transfer agent for the procedure to open an IRA or SEP plan, as well as more specific information regarding these retirement plan options. Please consult with an attorney or
tax advisor regarding these plans. You must pay custodial fees for your IRA by redemption of sufficient shares of the 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 should 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.
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 Fund 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, you 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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Marathon Value Portfolio
c/o
Huntington Asset Services, Inc.
P.O. Box 6110
Indianapolis, Indiana 46206-6110
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Overnight:
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Marathon Value Portfolio
c/o Huntington Asset Services, Inc.
2960 North
Meridian Street
Suite 300
Indianapolis, Indiana 46208
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Your request for a redemption must include your letter of instruction, including the
Fund’s name, your account number, account name(s), 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 we
receive your order in proper order. 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, if the mailing address has been changed within 30 days of the redemption request, or to
prevent other unauthorized account transfers or redemptions. 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. For joint accounts, both signatures must be guaranteed. Please call Shareholder Services at
(800) 788-6086 if you have questions. At the discretion of the Fund or its transfer agent, a shareholder, prior to redemption, may be required to furnish additional legal documents to insure proper authorization.
By Telephone -
You may redeem any part of your account in the Fund (up to $25,000) by calling Shareholder Services at
(800) 788-6086. You must first complete the optional Telephone Redemption section of the investment application or provide a signed letter of instruction with the proper signature guarantee stamp to institute this option. The Fund, the transfer
agent and the custodian are not liable for following redemption or exchange 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.
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 has 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 a redemption by mail.
Fund 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 Fund 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 that indicates market timing or trading that it determines is abusive. This policy generally applies to all Fund shareholders. The Fund’s adviser performs automated monitoring of
short-term trading activity, if any, in the Fund’s shares. Any instance of suspected short-term trading is investigated by the adviser. If such trades were deemed to be a violation of the Fund’s short-term trading policy, then the Board of
Trustees would be notified and action taken, such as suspending future purchases by the short-term trader. The advisor provides a quarterly certification to the Board of Trustees, confirming that it has monitored Fund shareholders’ trades for
potential short-term trading activity and, if such activity were to be discovered, the Advisor would be required to report such short-term trading to the Board of Trustees.
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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 enforce its own market timing policy.
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 and redeemers of Fund shares are netted against one another and the identities of individual purchasers and redeemers whose
orders are aggregated are not known by the Fund. Consequently, the Fund may not have knowledge of the identity of investors and their transactions. Under a federal rule, the Fund is required to have an agreement with many of its 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. 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
February 28, 2013
This Statement of Additional Information (“SAI”) is not a prospectus. It should be read in conjunction with the Prospectus of
Marathon Value Portfolio dated February 28, 2013. This SAI incorporates by reference the Fund’s Annual Report to Shareholders for the fiscal year ended October 31, 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 (800) 788-6086.
DESCRIPTION OF THE TRUST AND FUND
Marathon Value Portfolio (the “Fund”) was organized as a diversified series of Unified Series Trust (the “Trust”) on
December 18, 2002. 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.
On January 3, 2003, the Fund acquired all of the assets and liabilities of the Marathon Value Portfolio, a series of the AmeriPrime Funds (the “Predecessor Fund”) in a tax-free
reorganization. The Predecessor Fund commenced operations on March 12, 1998. Spectrum Advisory Services, Inc. (the “Advisor”) began providing investment advisory services to the Predecessor Fund on March 28, 2000.
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 of that series and is entitled to such
dividends and distributions out of income belonging to the series as are declared by the Trustees. The shares do not have cumulative voting rights or any preemptive or conversion rights, and the Trustees have the authority from time to time to
divide or combine the shares of any series into a greater or lesser number of shares of that series so long as the proportionate beneficial interest in the assets belonging to that series and the rights of shares of any other series are in no way
affected. In case of any liquidation of a series, the holders of shares of the series being liquidated will be entitled to receive as a class a distribution out of the assets, net of the liabilities, belonging to that series. Expenses attributable
to any series are borne by that series. Any general expenses of the Trust not readily identifiable as belonging to a particular series are allocated by or under the direction of the Trustees in such manner as the Trustees determine to be fair and
equitable. No shareholder is liable to further calls or to assessment by the Trust without his or her express consent.
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. In such event, the Fund will provide notice to shareholders, but the Fund will not be required to obtain shareholder approval prior to such liquidation. An involuntary redemption will create a capital gain or a capital loss, which may have tax
consequences about which you should consult your tax advisor.
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 Prospectus and this SAI.
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The Fund has authorized one or more brokers to receive on its behalf purchase and redemption
orders. Such brokers are authorized to designate other intermediaries 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 broker or, if
applicable, a broker’s 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 broker or the broker’s authorized designee 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 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 a discussion of some of
the investments the Fund may make and some of the techniques it may use.
A.
Common Stock and Equivalents.
The
Fund may invest in common stock and common stock equivalents (such as rights and warrants, and convertible securities), and preferred stock. 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. The Fund may invest up to 5% of its net assets at the time of purchase in each of the following: rights, warrants or
convertible securities.
B.
Exchange-Traded Funds.
Exchange-traded funds (“ETFs”) in which the
Fund may invest include S&P Depositary Receipts (“SPDRs”), inverse index ETFs, Sector ETFs and other exchange-traded products. To the extent the Fund invests in a sector product, the Fund is subject to the risks associated with that
sector. Additionally, the Fund may invest in new exchange-traded shares as they become available. When the Fund invests in ETFs or other investment companies, it will indirectly bear its proportionate share of any fees and expenses payable directly
by the investment company. In connection with its investments in other investment companies, the Fund will incur higher expenses, many of which may be duplicative. For example, shareholders may incur expenses associated with capital gains
distributions by the Fund as well as the underlying funds in which the Fund invests. Shareholders may also incur increased transaction costs as a result of the Fund’s portfolio turnover rate and/or because of high portfolio turnover rates in
underlying funds in which the Fund may invest. The Fund is not required to hold securities for any minimum period and, as a result, may incur short-term redemption fees and increased trading costs. When selecting underlying funds for investment, the
Fund will not be precluded from investing in an underlying fund with a higher than average expense ratio. The Fund is independent from any of the underlying funds in which it invests
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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 fund. For purposes of determining the amount of Fund assets invested in equity and/or fixed income securities, the Fund will consider ETFs that invest primarily in equity securities to be equity securities,
and those that invest primarily in fixed income securities will be deemed fixed income securities.
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).
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 its 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 ETFs will decrease in value when the value of the underlying index rises. For a 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 on 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 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
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investment in such ETF more volatile than if the Fund will 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.
C.
Preferred Stock.
Preferred stock has a preference in liquidation (and, generally dividends) over common stock but is
subordinated in liquidation to debt. As a general rule the market value of preferred stocks with fixed dividend rates and no conversion rights varies inversely with interest rates and perceived credit risk, with the price determined by the dividend
rate. Some preferred stocks are convertible into other securities, (for example, common stock) at a fixed price and ratio or upon the occurrence of certain events. The market price of convertible preferred stocks generally reflects an element of
conversion value. Because many preferred stocks lack a fixed maturity date, these securities generally fluctuate substantially in value when interest rates change; such fluctuations often exceed those of long term bonds of the same issuer. Some
preferred stocks pay an adjustable dividend that may be based on an index, formula, auction procedure or other dividend rate reset mechanism. In the absence of credit deterioration, adjustable rate preferred stocks tend to have more stable market
values than fixed rate preferred stocks. All preferred stocks are also subject to the same types of credit risks of the issuer as corporate bonds. In addition, because preferred stock is junior to debt securities and other obligations of an issuer,
deterioration in the credit rating of the issuer will cause greater changes in the value of a preferred stock than in a more senior debt security with similar yield characteristics. Preferred stocks may be rated by Standard & Poor’s
Corporation (“S&P”) and Moody’s Investors Services, Inc. (“Moody’s”) although there is no minimum rating which a preferred stock must have (and a preferred stock may not be rated) to be an eligible investment for
the Fund. The Advisor expects, however, that generally the preferred stocks in which the Fund invests will be rated at least BBB by S&P or Baa by Moody’s or, if unrated, of comparable quality in the opinion of the Advisor. Moody’s
rating with respect to preferred stocks does not purport to indicate the future status of payments of dividends.
D.
Debt Securities
. The Fund may invest in short- and long-term debt securities, including convertible debt securities. Changes in interest rates will affect the value of the Fund’s investments in debt securities. Increases in interest
rates may cause the value of the Fund’s investments to decline and this decrease in value may not be offset by higher interest income from new investments. Changes in the financial strength of an issuer or changes in the ratings of any
particular security may also affect the value of fixed income securities.
E.
Foreign Securities.
The Fund may
invest up to 15% of its assets in foreign equity and debt securities, measured at the time of purchase. The Fund may invest in foreign securities directly or indirectly through American Depositary Receipts. Foreign investments can involve
significant risks in addition to the risks inherent in U.S. investments. The value of securities denominated in or indexed to foreign currencies, and of dividends and interest from such securities, can change significantly when foreign currencies
strengthen or weaken relative to the U.S. dollar. Foreign securities markets generally have less trading volume and less liquidity than U.S. markets, and prices on some foreign markets can be highly volatile. Many
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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. In addition, the costs of foreign investing, including withholding taxes, brokerage commissions, and custodial costs, generally are higher than for U.S. investments. Investing abroad 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.
In the case of securities of foreign issuers, the interest and dividends paid by foreign issuers may be subject to withholding and other foreign taxes, which may decrease the net return on such
investments as compared to dividends and interest paid to the Fund by domestic issuers, or by the U.S. government.
Foreign
debt securities in which the Fund may invest will include bonds and other debt instruments issued by foreign government (i.e., sovereign debt). Sovereign debt differs from debt obligations issued by private entities in that, generally, remedies for
defaults must be pursued in the courts of the defaulting party. Legal recourse is therefore limited. Political conditions, especially a sovereign entity’s willingness to meet the terms of its debt obligations, are of considerable significance.
A sovereign debtor’s willingness or ability to repay principal and pay interest in a timely manner may be affected by a variety of factors, including among others, its cash flow situation, the extent of its foreign reserves, the availability of
sufficient foreign exchange on the date a payment is due, the relative size of the debt service burden to the economy as a whole, the sovereign debtor’s policy toward principal international lenders and the political constraints to which a
sovereign debtor may be subject. A country whose exports are concentrated in a few commodities could be vulnerable to a decline in the international price of such commodities. Another factor bearing on the ability of a country to repay sovereign
debt is the level of the country’s international reserves. Fluctuations in the level of these reserves can affect the amount of foreign exchange readily available for external debt payments and, thus, could have a bearing on the capacity of the
country to make payments on its sovereign debt. Also, there can be no assurance that the holders of commercial bank loans to the same sovereign entity may not contest payments to the holders of sovereign debt in the event of default under commercial
bank loan agreements.
Foreign markets may also offer less protection to investors than U.S. markets. Foreign issuers,
brokers, and securities markets may be subject to less government supervision. Foreign security trading practices, including those involving the release of assets in advance of payment, may invoke increased risks in the event of a failed trade or
the insolvency of a broker-dealer, and may involve substantial delays. It also may be difficult to enforce legal rights in foreign countries.
The considerations noted above generally are intensified for investments in developing countries. Developing countries may have relatively unstable governments, economies based on only a few industries
and securities markets that trade a small number of securities.
American Depositary Receipts (“ADRs”) and European
Depositary Receipts (“EDRs”) are certificates evidencing ownership of shares of a foreign-based issuer held in trust by a bank
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or similar financial institution. Designed for use in U.S. and European securities markets, respectively, ADRs and EDRs are alternatives to the purchase of the underlying securities in their
national market and currencies. Generally, ADRs, in registered form, are denominated in U.S. dollars and are designed for use in the U.S. securities markets, while EDRs are denominated in European currencies, and are designed to trade on the
European markets. ADRs do not eliminate all 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. For purposes of the Fund’s investment policies, ADRs and EDRs are deemed to have the same classification as the underlying securities they represent, except that ADRs and EDRs shall be treated as
indirect foreign investments. For example, an ADR or EDR representing ownership of common stock will be treated as common stock.
F.
REITs
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The Fund may invest up to 15% of its assets 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. The Fund
generally considers equity REITs to be equity securities, while mortgage REITs and hybrid REITs generally are considered fixed income securities. 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 equity and mortgage 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.
G.
Indexed Securities
.
The Fund may invest up to 5% of its net assets in purchases of securities whose prices are indexed to the prices of other securities, securities indices, or other financial indicators. Indexed securities typically, but
not always, are debt securities or deposits whose value at maturity or coupon rate is determined by reference to a specific instrument or statistic.
The performance of indexed securities depends to a great extent on the performance of the security, or other instrument to which they are indexed, and also may be influenced by interest rate changes in
the U.S. and abroad. At the same time, indexed securities are subject to the credit risks associated with the issuer of the security, and their values may decline substantially if the issuer’s creditworthiness deteriorates. Changes in the
reference instrument may cause the interest rate on an indexed security to be reduced to zero, at which point further adverse changes may lead to a reduction in the principal amount payable on maturity. Indexed securities may also be less liquid
than other types of securities, and may be more volatile than the reference factor. Consistent with the Fund’s policy on illiquid investments, the Fund will only invest in indexed securities to the extent the Advisor determines that such
products are liquid.
6
H.
Convertible Securities
.
A convertible security may be a bond, debenture,
preferred stock or other security that may be converted into or exchanged for a prescribed amount of common stock. The Fund may invest up to 5% of its assets in convertible securities.
I.
Junk Bonds.
The Fund may invest up to 5% of its total assets in junk bonds rated at the time of purchase BB/Ba or lower
by S&P or Moody’s or, unrated, but determined to be of comparable quality by the Advisor. Junk bonds are subject to greater market risk and credit risk, or loss of principal and interest, than higher-rated securities. The capacity of
issuers of lower-rated securities to pay interest and repay principal is more likely to weaken than is that of issuers of higher-rated securities in times of deteriorating economic conditions or rising interest rates. In addition, lower-rated
securities may be more susceptible to real or perceived adverse economic conditions than investment grade securities.
The
market for lower-rated securities may be thinner and less active than that for higher-rated securities, which can adversely affect the prices at which these securities can be sold. To the extent that there is no established secondary market for
lower-rated securities, the Fund may experience difficulty in valuing the securities for the purpose of computing its net asset value. Adverse publicity and investors’ perception about lower-rated securities, whether or not factual, may tend to
impair their market value and liquidity.
Generally, investments in securities in the lower rating categories provide higher
yields but involve greater volatility of price and risk of loss of principal and interest than investments in securities with higher ratings. Securities rated lower than Baa by Moody’s or BBB by S&P are considered speculative. In addition,
lower ratings reflect a greater possibility of an adverse change in the financial conditions affecting the ability of the issuer to make payments of principal and interest. The market price of lower-rated securities generally responds to short term
corporate and market developments to a greater extent than higher-rated securities which react primarily to fluctuations in the general level of interest rates. Lower-rated securities will also be affected by the market’s perception of their
credit quality and the outlook for economic growth.
In the past, economic downturns or rising interest rates have under
certain circumstances caused a higher incidence of default by the issuers of these securities and may do so in the future, especially in the case of highly leveraged issuers. The prices for these securities may be affected by legislative and
regulatory developments. The market for lower-rated securities may be less liquid than the market for higher-rated securities. Furthermore, the liquidity of lower-rated securities may be affected by the market’s perception of their credit
quality. Therefore, judgment may at times play a greater role in valuing these securities than in the case of higher-rated securities, and it also may be more difficult during certain adverse market conditions to sell lower-rated securities at their
fair value to meet redemption requests or to respond to changes in the market.
The Advisor will consider all factors which it
deems appropriate, including ratings, in making investment decisions for the Fund and will attempt to minimize investment risk through conditions and trends. While the Advisor may refer to ratings, it does not rely exclusively on ratings, but makes
its own independent and ongoing review of credit quality.
7
J.
Repurchase Agreements
.
A repurchase agreement is a short-term investment in
which the purchaser (
i.e.
, the Fund) acquires ownership of an obligation issued by the U.S. government or by an agency of the U.S. government (“U.S. Government Obligations”) (which may be of any maturity) and the seller agrees to
repurchase the obligation at a future time at a set price, thereby determining the yield during the purchaser’s holding period (usually not more than seven days from the date of purchase). Any repurchase transaction in which the Fund engages
will require full collateralization of the seller’s obligation during the entire term of the repurchase agreement. In the event of a bankruptcy or other default of the seller, the Fund could experience both delays in liquidating the underlying
security and losses in value. However, the Fund intends to enter into repurchase agreements only with the Fund’s custodian, other banks with assets of $1 billion or more and registered securities dealers determined by the Advisor to be
creditworthy. The Advisor monitors the creditworthiness of the banks and securities dealers with which the Fund engages in repurchase transactions, and the Fund will not invest more than 5% of its net assets in repurchase agreements.
K.
Loans Of Portfolio Securities
.
The Fund may make short- and long-term loans of its portfolio securities. Under the
lending policy authorized by the Board of Trustees and implemented by the Advisor in response to requests of broker-dealers or institutional investors which the Advisor deems qualified, the borrower must agree to maintain collateral, in the form of
cash or U.S. Government Obligations, with the Fund on a daily mark-to-market basis in an amount at least equal to 100% of the value of the loaned securities. The Fund will continue to receive dividends or interest on the loaned securities and may
terminate such loans at any time or reacquire such securities in time to vote on any matter which the Board of Trustees determines to be important. With respect to loans of securities, there is the risk that the borrower may fail to return the
loaned securities or that the borrower may not be able to provide additional collateral.
L.
Short Sales
.
The
Fund may sell a security short in anticipation of a decline in the market value of the security. When the Fund engages in a short sale, it sells a security that it does not own. To complete the transaction, the Fund must borrow the security in order
to deliver it to the buyer. The Fund must replace the borrowed security by purchasing it at the market price at the time of replacement, which may be more or less than the price at which the Fund sold the security. The Fund will incur a loss as a
result of the short sale if the price of the security increases between the date of the short sale and the date on which the Fund replaces the borrowed security. The Fund will realize a profit if the security declines in price between those dates.
Any potential gain is limited to the price at which the Fund sold the security short, and any potential loss is unlimited in size.
In connection with its short sales, the Fund will be required to maintain a segregated account with the Fund’s custodian of cash or high grade liquid assets equal to (i) the greater of the
current market value of the securities sold short or the market value of such securities at the time they were sold short, less (ii) any collateral deposited with its broker (not including the proceeds from the short sales). Depending on
arrangements made with the broker or custodian, the Fund may not receive any payments (including interest) on collateral deposited with the broker or custodian. The Fund will limit its short sales so that no more than 10% of its net assets (less all
its liabilities other than obligations under the short sales) will be deposited as collateral
8
and allocated to the segregated account. However, the segregated account and deposits will not necessarily limit the Fund’s potential loss on a short sale, which is unlimited. The
Fund’s policy with respect to short sales is Non-Fundamental (see Investment Limitations below), and may be changed by the Board of Trustees without the vote of the Fund’s shareholders.
M.
Collateralized Mortgage Obligations (“CMOs”)
.
CMOs are securities that are collateralized by mortgages or
mortgage-backed securities. CMOs are issued with a variety of classes or series, which have different maturities and are often retired in sequence. CMOs may be issued by governmental or non-governmental entities such as banks and other mortgage
lenders. Non-government securities may offer a higher yield but also may be subject to greater price fluctuation than government securities. Investments in CMOs are subject to the same risks as direct investments in the underlying mortgage and
mortgage-backed securities. In addition, in the event of a bankruptcy or other default of an entity who issued the CMO held by the Fund, the Fund could experience both delays in liquidating its position and losses.
N.
Options
.
An option is a contract in which the “holder” (the buyer) pays a certain amount (“premium”)
to the “writer” (the seller) to obtain the right, but not the obligation, to buy from the writer (in a “call”) or sell to the writer (in a “put”) a specific asset at an agreed upon price (“strike price” or
“exercise price”) at or before a certain time (“expiration date”). The holder pays the premium at inception and has no further financial obligation. The holder of an option will benefit from favorable movements in the price of
the underlying asset but is not exposed to corresponding losses due to adverse movements in the value of the underlying asset. The writer of an option will receive fees or premiums but is exposed to losses due to adverse changes in the value of the
underlying asset. The Fund may buy (hold) or write (sell) put and call options on assets, such as securities, currencies, financial commodities, and indexes of debt and equity securities (“underlying assets”) and enter into closing
transactions with respect to such options to terminate an existing position.
Writing put or call options can enable the Fund
to enhance income by reason of the premiums paid by the purchaser of such options. Writing call options serves as a limited short hedge because declines in the value of the hedged investment would be offset to the extent of the premium received for
writing the option. However, if the security appreciates to a price higher than the exercise price of the call option, it can be expected that the option will be exercised and the Fund will be obligated to sell the security at less than its market
value or will be obligated to purchase the security at a price greater than that at which the security must be sold under the option. Writing put options serves as a limited long hedge because decreases in the value of the hedged investment would be
offset to the extent of the premium received for writing the option. However, if the security depreciates to a price lower than the exercise price of the put option, it can be expected that the put option will be exercised and the Fund will be
obligated to purchase the security at more than its market value.
The value of an option position will reflect, among other
things, the historical price volatility of the underlying investment, the current market value of the underlying investment, the time remaining until expiration, the relationship of the exercise price to the market price of the underlying
investment, and general market conditions.
The Fund may effectively terminate its right or obligation under an option by
entering into a closing transaction. For example, the Fund may terminate its obligation under a call or put
9
option that it had written by purchasing an identical call or put option; this is known as a closing purchase transaction. Conversely, the Fund may terminate a position in a put or call option it
had purchased by writing an identical put or call option; this is known as a closing sale transaction. Closing transactions permit the Fund to realize the profit or limit the loss on an option position prior to its exercise or expiration.
The writing and purchasing of options is a highly specialized activity that involves investment techniques and risks
different from those associated with ordinary portfolio securities transactions. Imperfect correlation between the options and securities markets may detract from the effectiveness of the option transaction.
O
.
Variable Rate Debt Instruments
.
The Fund may invest in variable rate debt instruments. Variable rate
securities provide for a periodic adjustment in the interest rate paid on the obligations. The terms of such obligations must provide that interest rates are adjusted periodically based upon an interest rate adjustment index as provided in the
respective obligations. The adjustment intervals may be regular, and range from daily up to annually, or may be based on an event, such as a change in the prime rate.
P.
Asset-Backed and Receivable-Backed Securities
. Asset-backed and receivable-backed securities are undivided fractional interests in pools of consumer loans (unrelated to mortgage loans)
held in a trust. Payments of principal and interest are passed through to certificate holders and are typically supported by some form of credit enhancement, such as a letter of credit, surety bond, limited guaranty or senior/subordination. The
degree of credit enhancement varies, but generally amounts to only a fraction of the asset-backed or receivable-backed security’s par value until exhausted. If the credit enhancement is exhausted, certificate holders may experience losses or
delays in payment if the required payments of principal and interest are not made to the trust with respect to the underlying loans. The value of these securities also may change because of changes in the market’s perception of the
creditworthiness of the servicing agent for the loan pool, the originator of the loans or the financial institution providing the credit enhancement. Asset-backed and receivable-backed securities are ultimately dependent upon payment of consumer
loans by individuals, and the certificate holder generally has no recourse against the entity that originated the loans. The underlying loans are subject to prepayments which shorten the securities’ weighted average life and may lower their
return. As prepayments flow through at par, total returns would be affected by the prepayments: if a security were trading at a premium, its total return would be lowered by prepayments, and if a security were trading at a discount, its total return
would be increased by prepayments.
INVESTMENT LIMITATIONS
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
10
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”).
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 Investment Company Act of 1940, as amended (the “1940 Act”), the rules and regulations promulgated thereunder or interpretations of the Securities and Exchange Commission (“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, 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.
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.
Diversification
. The Fund will not invest in the securities of any issuer if,
11
immediately after such investment, less than 75% of the total assets of the Fund will be invested in cash and cash items (including receivables), government securities, securities of other
investment companies or other securities for the purposes of this calculation limited in respect of any one issuer to an amount (determined immediately after the latest acquisition of securities of the issuer) not greater in value than 5% of the
total assets of the Fund and to not more than 10% of the outstanding voting securities of such issuer.
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. The Fund will not enter into reverse repurchase agreements.
3.
Margin Purchases
. The Fund will not purchase securities or evidences of interest thereon on “margin.” This limitation is not applicable to short-term credit obtained by the Fund for
the clearance of purchases and sales or redemption of securities, or to arrangements with respect to transactions involving options, futures contracts, short sales and other permitted investments and techniques.
4.
Repurchase Agreements
. The Fund will not invest more than 5% of its net assets in repurchase agreements.
5.
Illiquid Investments
. The Fund will not purchase securities for which there are legal or contractual restrictions on resale and
other illiquid securities.
12
INVESTMENT ADVISOR
The Advisor is Spectrum Advisory Services, Inc., 1050 Crown Pointe Parkway, Suite 750, Atlanta, GA 30338. Marc S. Heilweil, President of
the Advisor, is the sole shareholder of the Advisor. Prior to March 28, 2000, Burroughs & Hutchinson, 702 W. Idaho Street, Suite 810, Boise, Idaho 83702 was the Predecessor Fund’s investment advisor.
Under the terms of the management agreement (the “Agreement”), the Advisor is responsible for managing the Fund’s
investments, subject to oversight by the Board of Trustees. As compensation for its management services and agreement to pay the Fund’s expenses, the Fund is obligated to pay the Advisor a fee computed and accrued daily and paid monthly at an
annual rate of 1.25% of the average daily net assets of the Fund. The Advisor has contractually agreed to waive all or a portion of its fee and/or reimburse certain Fund operating expenses, but only to the extent necessary so that the Fund’s
total annual operating expenses, excluding brokerage fees and commissions; any 12b-1 fees, taxes; borrowing costs, such as (a) interest and (b) dividends on securities sold short; any indirect expenses such as expenses incurred by other
investment companies in which the Fund invest; and extraordinary litigation expenses do not exceed 1.25% of average daily net assets. The contractual agreement is in place through February 28, 2014.
The following table describes the advisory fees paid to the Advisor by the Fund for the last three fiscal periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
Advisory Fees
Accrued
|
|
|
Total Expenses
Reimbursed and/or
Fees Waived
|
|
|
Net Advisory Fees
Paid
|
|
|
October 31, 2010
|
|
$
|
422,214
|
|
|
$
|
11,730
|
*
|
|
$
|
410,484
|
|
|
October 31, 2011
|
|
$
|
496,418
|
|
|
$
|
0
|
|
|
$
|
496,418
|
|
|
October 31, 2012
|
|
$
|
583,729
|
|
|
$
|
0
|
|
|
$
|
583,729
|
|
|
*
|
An amount of $5,629 was voluntarily waived by the Adviser. This amount is not subject for recoupment. For the year ended October 31, 2010, pursuant to the expense
cap, the Advisor reimbursed fees of $6,101.
|
The Advisor retains the right to use the name “Spectrum”
in connection with another investment company or business enterprise with which the Advisor is or may become associated. The Trust’s right to use the name “Spectrum” automatically ceases ninety days after termination of the Agreement
and may be withdrawn by the Advisor on ninety days written notice.
The Advisor may make payments to banks or other financial
institutions that provide shareholder services and administer shareholder accounts. If a bank or other financial institution were prohibited from continuing to perform all or a part of such services, management of the Fund believes that there would
be no material impact on the Fund or its shareholders. Banks and other 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 banks and other financial institutions which provide such services; however, in
selecting investments for the Fund, no preference will be shown for such securities.
13
About the Portfolio Manager
Mr. Heilweil, President of the Advisor, serves as the sole Portfolio Manager for the Fund and, as such, is primarily responsible for
making all investment decisions of the Fund (“Portfolio Manager”). As of October 31, 2012, the Portfolio Manager was responsible for the management of the following types of accounts, including the Fund:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Account Type
|
|
Number of
Accounts by
Account
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
|
|
|
Registered Investment Companies
|
|
|
1
|
|
|
$
|
50,374,083
|
|
|
|
0
|
|
|
|
N/A
|
|
|
Pooled Investment Vehicles
|
|
|
0
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
Other Accounts
|
|
|
536
|
|
|
$
|
394,843,212
|
|
|
|
0
|
|
|
|
N/A
|
|
The Portfolio Manager is compensated for his services by the Advisor. For the fiscal year ended
October 31, 2012, the Portfolio Manager’s compensation consisted of a salary, bonus, pension and retirement plans and other compensation arrangements.
As set forth above, the Portfolio Manager provides investment advisory and other services to clients other than the Fund. There may be circumstances under which the Portfolio Manager will cause a separate
account to commit a larger percentage of its assets to an investment opportunity than the percentage of the Fund’s assets that the Portfolio Manager commits to such investment. There also may be circumstances under which the Portfolio Manager
purchases or sells an investment for a separate account and does not purchase or sell the same investment for the Fund, or purchases or sells an investment for the Fund and does not purchase or sell the same investment for the other account.
It is generally the Advisor’s policy that investment decisions for all accounts that the Portfolio Manager manages be
made based on a consideration of their respective investment objectives and policies, and other needs and requirements affecting the accounts and that investment transactions and opportunities be fairly allocated among the Fund and other accounts.
For example, the Advisor has written policies and procedures with respect to allocation of block trades and/or investment opportunities among the Fund and other clients of the Advisor. When feasible, the Portfolio Manager will group or block various
orders to more efficiently execute orders and receive reduced commissions in order to benefit the Fund and other accounts of the Advisor. In the event that more than one client wants to purchase or sell the same security on a given date and limited
quantities are available, the purchases and sales will normally be made on a pro rata average price per share basis.
14
In addition, the Portfolio Manager may also carry on investment activities for his own
account(s) and/or the accounts of immediate family members. Conflicts may arise as a result of the Portfolio Manager’s differing economic interests in respect of such activities, such as with respect to allocating investment opportunities.
Pursuant to the Code of Ethics adopted by each of the Trust and the Advisor, the Portfolio Manager is prohibited from effecting transactions for his personal accounts which are contrary to recommendations being made to the Fund. In addition, the
Portfolio Manager is prohibited from competing with the Fund in connection with such transactions.
As of October 31,
2012, the Portfolio Manager beneficially owned over $1 million in equity securities of the Fund.
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.
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.
|
15
|
*
|
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 24 series.
|
The following table provides information regarding the interested Trustee and the Officers of the Trust.
|
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|
|
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; Vice President, Fund Administration for Huntington Asset Services, Inc., the Trust’s administrator, since September
2010; Treasurer and Chief Financial Officer of Dreman Contrarian Funds since March 2011; Treasurer of Huntington Funds since November 2010; Senior Vice President of Citi Fund Services Ohio, Inc. from September 2007 to September
2010.
|
|
|
|
|
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 24 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
16
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.
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 Chief Administrative Officer of Huntington National Bank’s Wealth Advisors, Government
Finance, and Home Lending business segment since November 2010. Prior to that, she served as 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.
17
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 Spectrum Advisory Services, 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 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.
18
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
|
|
|
(4)
|
Distributor Compliance Reports
|
|
|
(5)
|
Timeliness of SEC Filings
|
|
|
(6)
|
Dividends and other Distributions
|
|
|
(7)
|
List of Brokers, Brokerage Commissions Paid and 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
19
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 Funds and other portfolios of the Trust owned by each Trustee as of
December 31, 2012.
|
|
|
|
|
|
|
Trustee
|
|
Dollar Range of the Funds’ 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 24 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 pro rata share of expenses based on the number of existing series in the Trust. As a result, the amount paid by the Fund will increase or decrease as new series are added or
removed from the Trust.
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Independent Trustees
|
|
Aggregate
Compensation
from
the Funds
|
|
|
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
|
|
$
|
2,000
|
2
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
48,000
|
|
|
Stephen A. Little, Chairman of the Board
|
|
$
|
2,000
|
2
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
48,000
|
|
|
Daniel J. Condon, Trustee
|
|
$
|
1,583
|
3
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
38,000
|
|
|
Ronald C. Tritschler, Trustee
|
|
$
|
1,583
|
3
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
38,000
|
|
|
Kenneth G.Y. Grant, Trustee
|
|
$
|
1,583
|
3
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
38,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interested Trustees and Officers
|
|
Aggregate
Compensation
from
the Funds
|
|
|
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
|
|
$
|
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 24 series.
|
|
2
|
During the fiscal year ended October 31, 2012, each Trustee received a total of $2,023 from the Fund.
|
|
3
|
During the fiscal year ended October 31, 2012, each Trustee received a total of $1,602 from the Fund.
|
|
4
|
During the fiscal year ended October 31, 2012, the CCO received a total of $9,836 from the Advisor.
|
|
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 shared, pro rata, by each series of the Trust.
|
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 Advisor. As of February 1, 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
|
|
|
73.78
|
%
|
|
|
Record
|
|
|
National Financial Services Corp.
1 World Financial Center
New York, NY 10281
|
|
|
11.60
|
%
|
|
|
Record
|
|
21
As of February 1, 2013, the Trustees and officers of the Fund as a group
beneficially did not own any shares of the Fund.
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, and 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 TURNOVER
Although the Fund generally will not invest for short-term trading purposes, portfolio securities may be sold without regard to the length of time they have been held when, in the opinion of the Advisor,
investment considerations warrant such action. The Fund’s portfolio turnover rate is a measure of the Fund’s portfolio activity, and is calculated by dividing the lesser of purchases or sales of securities by the average value of the
portfolio securities held during the period. 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. The Fund’s portfolio turnover rate for the
fiscal years ended October 31, 2011 and 2012 was 15.79% and 12.52%, respectively.
22
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to policies established by the Board of Trustees of the Trust, the Advisor is responsible for the Fund’s portfolio decisions
and the placing of the Fund’s portfolio transactions. In placing portfolio transactions, the Advisor seeks the best qualitative execution for the Fund, taking into account such factors as price (including the applicable brokerage commission or
dealer spread), the execution capability, financial responsibility and responsiveness of the broker or dealer and the brokerage and research services provided by the broker or dealer. The Advisor generally seeks favorable prices and commission rates
that are reasonable in relation to the benefits received.
The Advisor is specifically authorized to select brokers or dealers
who also provide brokerage and research services to the Fund and/or the other accounts over which the Advisor exercises investment discretion and to pay such brokers or dealers a commission in excess of the commission another broker or dealer would
charge if the Advisor determines in good faith that the commission is reasonable in relation to the value of the brokerage and research services provided. The determination may be viewed in terms of a particular transaction or the Advisor’s
overall responsibilities with respect to the 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 Advisor in servicing all of its accounts. Similarly, research and information provided by brokers or dealers serving other clients may be useful to the Advisor in connection with its services to the Fund. It is the opinion of
the Board of Trustees and the Advisor that the review and study of the research and other information will not reduce the overall cost to the Advisor of performing its duties to the Fund under the Agreement. During the fiscal year ended
October 31, 2012, the Advisor did not direct any brokerage commissions to any brokers on the on the basis of research services provided by such brokers to the Fund.
Over-the-counter transactions may be placed with broker-dealers if the Advisor is able to obtain best execution (including commissions and price). Over-the-counter transactions may also be placed directly
with principal market makers. Fixed income securities are normally purchased directly from the issuer, an underwriter or a market maker. Purchases include a concession paid by the issuer to the underwriter and the purchase price paid to a market
maker may include the spread between the bid and asked prices.
To the extent that the Fund and another of the Advisor’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.
23
The following table describes the brokerage commissions paid by the Fund for the last three
fiscal years.
|
|
|
|
|
|
|
Fiscal Year Ended
October 31, 2010
|
|
Fiscal Year Ended
October 31, 2011
|
|
Fiscal Year Ended
October 31, 2012
|
|
$4,842
|
|
$3,819
|
|
$3,160
|
The Trust, the Advisor and the Fund’s Distributor have each adopted a Code of Ethics (the
“Code”) under Rule 17j-1 of the 1940 Act, and the Advisor’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 a copy of the Code from the Trust, the Advisor or the Distributor, free of charge, by calling Shareholder Services at
(800) 788-6086. You may also obtain copies of the Code
from documents filed with SEC and available on the SEC’s web site at www.sec.gov.
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 filed with the Securities and Exchange Commission (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 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 Advisor, 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 advisors or sub-advisors.
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-advisors 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.
24
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 Advisor, nor any of its 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. The Fund also will post information regarding its ten largest portfolio holdings, as well as complete performance data to its website located at www.marathonvalue.com, within approximately 25 days after the end of
the month. The information will remain posted on the website until replaced by the information for the succeeding month. If the website is for some reason inoperable, the information will be supplied no more frequently then quarterly and on a
delayed basis.
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 specific approval of the Board. The Advisor must submit any proposed arrangement pursuant to which the Advisor 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 the Fund’s shareholders. Additionally, the Advisor, and any affiliated persons of the Advisor, 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.
PROXY VOTING POLICY
The Trust and the Fund’s Advisor each have adopted proxy voting policies and procedures
reasonably designed to ensure that proxies are voted in shareholders’ best interests. The Trust’s policy delegates proxy voting to the Advisor, subject to the Advisor’s proxy voting policy and the supervision of the Board of Trustees.
The Advisor’s Proxy Voting Guidelines provide that the Advisor will give substantial weight to the recommendations of management, but the Advisor will not support management proposals that it believes will be detrimental to the shareholder
value. The Advisor’s Guidelines outline specific factors that it will consider in deciding how to vote proxies relating to, among other things, director elections, corporate governance, executive compensation, and social and environmental
issues. For example, the Guidelines provide that the Advisor will vote generally in favor of management’s slate of directors, although it will not vote to re-elect a board that has, in the past, acted to entrench itself and/or management in
office by, among other things, adopting excessive anti-take over measures. The Guidelines also provide that the Advisor generally will vote for management proposals that (a) adopt or add to confidential and independent vote tabulation
practices, (b) seek to increase the number of independent directors serving on a board, and (c) create strong and attractive compensation packages needed to motivate good executives, while at the same time holding management accountable
for the company’s performance. Among other things, the Advisor will generally vote against (a) fair price amendments, (b) creation of various anti-
25
takeover devices such as poison pills and golden parachutes, and (c) proposals that seek to eliminate or limit the rights of shareholders. Under the Trust’s Proxy Voting Policy, if any
potential conflict of interest between the Advisor or its affiliates and the Fund arises with respect to any proxy, the Advisor must disclose the conflict to the Board of Trustees and vote the proxy in accordance with the Board’s instructions.
You may obtain a copy of the Trust’s and the Advisor’s proxy voting policy by calling Shareholder Services at
(800) 788-6086 to request a copy, or by writing to Huntington Asset Services, Inc., the Fund’s transfer agent, at 2960 N. Meridian Street, Suite 300, Indianapolis, IN 46208. A copy of the policies will be mailed to you within three days 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
. The actual voting records relating to portfolio securities during the most recent
12-month period ended June 30 are filed by the Fund with the SEC on Form N-PX. The Fund’s proxy voting record is also 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 at the close of trading (normally 4:00 p.m., Eastern time) on each day
the New York Stock Exchange is open for business (the Exchange is closed on weekends, most federal holidays, and Good Friday). For a description of the methods used to determine the net asset value (share price), see “Determination of Net Asset
Value” in the Prospectus.
Equity securities generally are valued by using market quotations furnished by a pricing
service when the Advisor believes such prices accurately reflect 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 Advisor 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 Advisor in good faith according to guidelines established by the Board of Trustees. The Board of Trustees annually approves the pricing services used by the fund accounting
agent. The fund accounting agent maintains a pricing review committee which consults with an Independent Trustee who is a member of the Pricing Committee as fair valuation issues arise. Fair valued securities held by the Fund (if any) are reviewed
by the Board of Trustees on a quarterly basis.
Fixed income securities generally are valued by using market quotations, but
may be valued on the basis of prices furnished by a pricing service when the Advisor believes such prices accurately reflect the fair market value of such securities. A pricing service utilizes electronic data processing techniques based on yield
spreads relating to securities with similar characteristics to determine prices for normal institutional-size trading units of debt securities without regard to sale or bid prices. If the Advisor decides that a price provided by the pricing service
does not accurately reflect the fair market value of the securities, when prices are not
26
readily available from a pricing service or when restricted or illiquid securities are being valued, securities are valued at fair value as determined in good faith by the Advisor, in conformity
with guidelines adopted by and subject to review of the Board. Short-term investments in fixed income securities with maturities of less than 60 days when acquired, or which subsequently are within 60 days of maturity, are valued by using the
amortized cost method of valuation, which the Board has determined will represent fair value.
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 an election under Rule 18f-1 of the 1940 Act 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. Qualification generally will relieve the Fund of liability for federal income taxes. 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 percent (98%) of its ordinary income and 98.2% of its capital gain net income (as the Code
defines each such term), the Fund is subject to an excise tax. The excise tax, if applicable, is 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:
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•
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Derive at least ninety percent (90%) of its gross income each taxable year from dividends, interest, payments with respect to securities loans,
gains from the sale or other
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27
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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”);
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•
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Diversify its investments in securities within certain statutory limits; and
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•
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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”).
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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.
The Fund’s net realized capital gains from securities transactions will be distributed only after reducing such gains by the
amount of any available capital loss carryforwards. Net capital losses incurred in taxable years of the Fund beginning on or before October 31, 2011 generally may be carried forward to offset any capital gains for eight years, after which any
capital loss remaining is lost as a deduction. As of October 31, 2012, the Fund had no capital loss carryforward available for federal tax purposes. Capital losses, if any, incurred by a Fund in taxable years of the Fund beginning on or after
November 1, 2011 will have an indefinite carryover period pursuant to the provisions of the Modernization Act.
28
The Fund may acquire zero coupon or other securities issued with original issue discount
(including pay-in-kind securities). If it does so, the Fund will have to include in its income its share of the original issue discount that accrues on the securities during the taxable year, even if the Fund receives no corresponding payment on the
securities during the year. Because the Fund annually must distribute (a) 98% of its ordinary income in order to avoid imposition of a 4% excise tax, and (b) 90% of its investment company taxable income, including any original issue
discount, to satisfy the Distribution Requirement, the Fund may be required in a particular year to distribute as a dividend an amount that is greater than the total amount of cash it actually receives. Those distributions would be made from the
Fund’s cash assets, if any, or from the sales of portfolio securities, if necessary. The Fund might realize capital gains or losses from any such sales, which would increase or decrease the Fund’s investment company taxable income and/or
net capital gain (the excess of net long-term capital gain over net short-term capital loss).
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 gains and losses the Fund realizes in connection with the hedge. The Fund’s income from options,
futures, and forward contracts, in each case derived with respect to its business of investing in stock, securities, or foreign currencies, should qualify as allowable income for the Fund under the Income Requirement.
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.
29
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 advisors for more detailed information regarding the above and for information
regarding federal, state, local and foreign taxes.
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. 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. A Trustee of the Trust is a member of management of the Custodian.
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 account.
FUND
SERVICES
Huntington Asset Services, Inc., 2960 North Meridian Street, Suite 300, Indianapolis, Indiana 46208, acts as the
Fund’s transfer agent, fund accountant and administrator. Certain officers of the Trust are members of management and/or employees of Huntington. Huntington is a wholly-owned subsidiary of Huntington Bancshares, Inc., which is also the parent
company of the Fund’s distributor.
Huntington maintains the records of each shareholder’s account, answers
shareholders’ inquiries concerning their accounts, processes purchases and redemptions of the Fund’s shares, acts as dividend and distribution disbursing agent and performs other transfer agent and shareholder service functions. Huntington
receives a monthly fee from the Advisor of $1.25 per shareholder account (subject to various monthly minimum fees, the maximum being $1,250 per month for assets of $10 million or more) for these transfer agency services.
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 Advisor equal to an annual rate of 0.050% of the Fund’s average daily net assets up to $50 million, 0.040% of the Fund’s average
daily net assets from $50 million to $100 million, 0.030% of the Fund’s average daily net assets from $100 million to $150 million, and 0.020% of the Fund’s average daily net assets over $150 million (subject to various monthly minimum
fees, the maximum being $1,667 per month for assets up to $50 million).
30
Huntington also provides the Fund with administrative services, including all regulatory
reporting and necessary office equipment, personnel and facilities. Huntington receives a monthly fee from the Advisor equal to an annual rate of 0.100% of the Fund’s average daily net assets under $50 million, 0.070% of the Fund’s average
daily net assets from $50 million to $100 million, 0.050% of the Fund’s average daily net assets from $100 million to $150 million, and 0.030% of the Fund’s average daily net assets over $150 million (subject to a minimum fee of $2,500 per
month). Huntington also receives a compliance program services fee of $400 per month from the Advisor.
The following table
provides information regarding transfer agent, fund accounting and administrative services fees paid by the Advisor during the last three fiscal periods:
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Fiscal Year Ended
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Fees Paid for
Transfer Agent
Services
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Fees Paid for
Accounting Services
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Fees Paid for
Administrative
Services
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October 31, 2012
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$
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15,415
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$
|
22,739
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$
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46,556
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|
October 31, 2011
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$
|
16,547
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$
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20,239
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$
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39,649
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October 31, 2010
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$
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16,922
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|
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$
|
20,000
|
|
|
$
|
35,929
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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 the Independent
Registered Public Accounting Firm for the Fund for the fiscal year ending October 31, 2013. Cohen Fund Audit Services, Ltd. performs an annual audit of the Fund’s financial statements and will provide financial, tax and accounting services
as requested, in accordance with applicable laws 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. A Trustee of the Trust is a member of management of Huntington National Bank, a subsidiary of Huntington Bancshares, Inc. (the parent of the Distributor), and certain officers of the Trust are officers of the
Distributor. As a result, such persons may be deemed to be affiliates of the Distributor. The Distributor and Huntington are controlled by Huntington Bancshares, Inc.
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 are incorporated herein by reference to the
Fund’s Annual Report to Shareholders for the fiscal year ended October 31, 2012. You can obtain the Annual Report without charge by calling Shareholder Services at (800) 788-6086 or upon written request.
31