1933 Act File No. 33-63743
1940 Act File No. 811-7383
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No. .................
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Post-Effective Amendment No. 3 ................. X
-- -- -- --
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 4 ............................... X
MARKETVEST FUNDS
(formerly, Court Street Funds)
(Exact name of Registrant as Specified in Charter)
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esq., Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
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on pursuant to paragraph (b)
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X 60 days after filing pursuant to paragraph (a) (i)
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on pursuant to paragraph (a) (i)
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75 days after filing pursuant to paragraph (a) (ii)
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on pursuant to paragraph (a) (ii) of Rule 485.
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If appropriate, check the following box:
This post-effective amendment designates a new effective date for a
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previously filed post-effective amendment.
Registrant has filed with the Securities and Exchange Commission a
declaration pursuant to Rule 24f-2 under the Investment Company Act of
1940, and:
X filed the Notice required by that Rule on April 15, 1997; or
- - -
intends to file the Notice required by that Rule on or about
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; or
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during the most recent fiscal year did not sell any securities pursuant
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to
Rule 24f-2 under the Investment Company Act of 1940, and, pursuant to
Rule 24f-2 (b)(2), need not file the Notice.
Copies To:
Matthew G. Maloney, Esquire
Dickstein, Shapiro & Morin, L.L.P.
2101 L Street, N.W.
Washington, D.C. 20037
CROSS-REFERENCE SHEET
This amendment to the Registration Statement of the Marketvest Funds
(formerly, Court Street Funds), which consists of two portfolios: (1)
Marketvest Pennsylvania Intermediate Municipal Bond Fund, and (2)
Marketvest International Equity Fund, is comprised of the following:
PART A. INFORMATION REQUIRED IN A PROSPECTUS.
Prospectus Heading
(Rule 404(c) Cross Reference)
Item 1. Cover Page...............(1-2) Cover Page.
Item 2. Synopsis.................(1-2) Synopsis; (1-2) Risk Factors; (1-
2) Summary of Fund Expenses; (2)
Diversification.
Item 3. Condensed Financial
Information..............(1) Financial Highlights; (1-2)
Performance Information; (1) Performance
Information for Predecessor Common and
Collective Investment Funds; (2)
Performance Information for Predecessor
Collective Investment Fund.
Item 4. General Description of
Registrant...............(1) Investment Objective and Policies of
Each Fund; (2) Investment Objective and
Policies; (1) Pennsylvania Intermediate
Municipal Bond Fund; (1-2) Portfolio
Investments and Strategies; (2)
Additional Considerations of Investing
in Other Investment Companies.
Item 5. Management of the Fund...(1) Marketvest Group of Funds
Information; (1) Management of the
Marketvest Group of Funds; (2)
Management of the Marketvest Funds; (1-
2) Distribution of Shares of the
Fund(s); (1-2) Brokerage Transactions;
(1-2) Expenses of the Fund(s).
Item 6. Capital Stock and Other
Securities...............(1-2) Dividends and Capital Gains; (1-2)
Shareholder Information; (1-2)
Marketvest Funds-Voting Rights; (1-2)
Effect of Banking Laws; (1-2) Tax
Information; (1-2) Federal Income Tax;
(1) Additional Tax Information for
Pennsylvania Intermediate Municipal Bond
Fund.
Item 7. Purchase of Securities Being
Offered..................(1-2) Net Asset Value; (1-2) Investing
in the Fund(s); (1-2) Share Purchases;
(1-2) Minimum Investment Required; (1-2)
What Shares Cost; (1-2) Reducing the
Sales Charge; (1-2) Systematic
Investment Program; (1-2) Exchanging
Securities for Fund Shares; (1-2)
Certificates and Confirmations.
Item 8. Redemption or Repurchase.(1-2) Exchange Privilege; (1-2) Exchange
by Telephone; (1-2) Written Exchange;
(1-2) Redeeming Shares; (1-2) Systematic
Withdrawal Program; (1-2) Accounts with
Low Balances.
Item 9. Pending Legal Proceedings None
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.
Item 10. Cover Page...............(1-2) Cover Page.
Item 11. Table of Contents........(1-2) Table of Contents.
Item 12. General Information and
History..................(1-2) General Information About the
Funds; (1-2) Massachusetts Partnership
Law; (1-2) Economic and Market
Information.
Item 13. Investment Objectives and
Policies.................(1-2) Investment Objective and Policies
of the Funds; (1) Pennsylvania
Investment Risks; (1-2) Investment
Limitations.
Item 14. Management of the Fund...(1-2) Marketvest Funds Management; (1-2)
Trustees' Compensation Table-Marketvest
Funds.
Item 15. Control Persons and Principal
Holders of Securities....(1) Fund Ownership.
Item 16. Investment Advisory and Other
Services.................(1-2) Investment Advisory Services; (1-
2) Other Services.
Item 17. Brokerage Allocation.....(1-2) Brokerage Transactions.
Item 18. Capital Stock and Other
Securities...............Not applicable.
Item 19. Purchase, Redemption and
Pricing of Securities
Being Offered............(1-2) Purchasing Shares; (1-2)
Distribution Plan; (1-2) Determining Net
Asset Value; (1-2) Exchange Privilege;
(1-2) Redeeming Shares.
Item 20. Tax Status...............(1-2) Tax Status.
Item 21. Underwriters.............Not applicable.
Item 22. Calculation of Performance
Data.....................(1-2) Total Return; (1-2) Yield; (1)
Tax-Equivalent Yield; (1-2) Performance
Comparisons; (1-2) Appendix.
Item 23. Financial Statements.....(1-2) To be filed by Amendment.
MARKETVEST GROUP OF FUNDS
COMBINED PROSPECTUS
Marketvest Funds, Inc. which currently consists of three diversified
investment portfolios, and Marketvest Funds, which currently consists of
one non-diversified investment portfolio (each portfolio individually
referred to as a `Fund'' and collectively as the ``Funds'') are open-end,
management investment companies (mutual funds). This combined prospectus
offers investors interests in the following four Funds, each having a
distinct investment objective and policies:
Marketvest Equity Fund;
Marketvest Pennsylvania Intermediate Municipal Bond Fund;
Marketvest Short-Term Bond Fund; and
Marketvest Intermediate U.S. Government Bond Fund.
The shares offered by this prospectus are not deposits or obligations of
any bank, are not endorsed or guaranteed by any bank, and are not insured
by the Federal Deposit Insurance Corporation, the Federal Reserve Board, or
any other government agency. Investment in these shares involves investment
risks, including the possible loss of the principal amount invested.
This combined prospectus contains the information you should read and know
before you invest in any of the Funds. Keep this prospectus for future
reference.
The Funds have also filed a Combined Statement of Additional dated June 30,
1997 with the Securities and Exchange Commission (`SEC''). The information
contained in the Combined Statement of Additional Information is
incorporated by reference into this prospectus. You may request a copy of
the Combined Statement of Additional Information free of charge, obtain
other information, or make inquiries about any of the Funds by writing to
or calling the Funds at 1-800-MKT-VEST (1-800-658-8378). The Combined
Statement of Additional Information, material incorporated by reference
into this document, and other information regarding the Funds is maintained
electronically with the SEC at Internet Web site (http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated June 30, 1997
SYNOPSIS 1
Risk Factors 1
SUMMARY OF FUND EXPENSES 2
FINANCIAL HIGHLIGHTS 3
INVESTMENT OBJECTIVE AND POLICIES OF EACH FUND 4
Equity Fund 4
Pennsylvania Intermediate Municipal Bond Fund 6
Non-Diversification 7
Short-Term Bond Fund 8
Intermediate U.S. Government Bond Fund 8
PORTFOLIO INVESTMENT AND STRATEGIES 8
Investment Risk of Mortgage-Backed and
Asset-Backed Securities 13
MARKETVEST GROUP OF FUND INFORMATION 17
Management of the MarketVest Group
of Funds 17
Distribution of Shares of the Funds 19
Administration of the Funds 20
Brokerage Transactions 20
Expenses of the Funds 20
NET ASSET VALUE 21
INVESTING IN THE FUNDS 21
Share Purchases 21
Minimum Investment Required 21
What Shares Cost 21
Reducing the Sales Charge 22
Systematic Investment Program 23
Exchanging Securities for Fund Shares 23
Certificates and Confirmation 23
Dividends and Capital Gains 24
EXCHANGE PRIVILEGE 24
Exchange by Telephone 24
Written Exchange 25
REDEEMING SHARES 25
Systematic Withdrawal Program 26
Accounts with Low Balances 26
SHAREHOLDER INFORMATION 26
MarketVest Funds, Inc. 26
MarketVest Funds 27
EFFECT OF BANKING LAWS 27
TAX INFORMATION 28
Federal Income Tax 28
Additional Tax Information for Pennsylvania
Intermediate Municipal Bond Fund 28
PERFORMANCE INFORMATION 29
Performance Information for Predecessor
Common and Collective Investment Funds 29
ADDRESSES 33
SYNOPSIS
Marketvest Funds, Inc. (formerly named Court Street Funds, Inc.) was
incorporated under the laws of the State of Maryland pursuant to Articles
of Incorporation dated October 25, 1995, as amended. Marketvest Funds
(formerly named Court Street Funds) was established as a Massachusetts
business trust under a Declaration of Trust dated September 1, 1995, as
amended. Both the Articles of Incorporation and the Declaration of Trust
permit the Funds to offer separate series of shares of common stock and
beneficial interests, respectively, representing interests in separate
portfolios of securities. The shares in any one portfolio may be (but are
not currently) offered in separate classes. The Funds are designed for
individuals and institutions as a convenient means of accumulating
interests in professionally managed portfolios. As of the date of this
prospectus, Marketvest Funds, Inc. is comprised of the following three
portfolios:
oMarketvest Equity Fund (``Equity Fund'')-seeks to provide growth of
principal by investing primarily in the equity securities of high
quality companies;
oMarketvest Short-Term Bond Fund (``Short-Term Bond Fund'')-seeks to
provide current income by investing primarily in investment grade
debt securities, U.S. government securities, and mortgage-backed and
asset-backed securities while maintaining a dollar-weighted average
portfolio maturity of between one to three years; and
oMarketvest Intermediate U.S. Government Bond Fund (``Intermediate
U.S. Government Bond Fund'')-seeks to provide current income by
investing primarily in securities which are issued or guaranteed as
to payment of principal and interest by the U.S. government or U.S.
government agencies or instrumentalities while maintaining a dollar-
weighted average portfolio maturity of between three to ten years.
In addition, as of the date of this prospectus, Marketvest Funds is
comprised of the following portfolio:
oMarketvest Pennsylvania Intermediate Municipal Bond Fund
(``Pennsylvania Intermediate Municipal Bond Fund'')-seeks to provide
current income which is exempt from federal regular income tax and
the personal and corporate income taxes imposed by the Commonwealth
of Pennsylvania by investing primarily in Pennsylvania municipal
securities while maintaining a dollar-weighted average portfolio
maturity of between three to ten years. The Fund may not be a
suitable investment for non-Pennsylvania taxpayers or retirement
plans since it intends to invest in Pennsylvania municipal
securities.
For information on how to purchase shares of any of the Funds, please refer
to `Investing in the Funds.'' A minimum initial investment of $1,000 is
required for each Fund. Subsequent investments must be in amounts of at
least $50. Shares of each Fund are sold at net asset value plus any
applicable sales charge, and are redeemed at net asset value. Information
on redeeming shares may be found under `Redeeming Shares.'' The Funds are
advised by Dauphin Deposit Bank and Trust Company (`Dauphin Deposit'' or
the `Adviser'').
RISK FACTORS
Investors should be aware of the following general considerations: the
market value of fixed-income securities, which constitute a major part of
the investments of some of the Funds, may vary inversely in response to
changes in prevailing interest rates. The foreign securities in which some
Funds may invest may be subject to certain risks in addition to those
inherent in U.S. investments. One or more Funds may make certain
investments and employ certain investment techniques that involve other
risks, including entering into repurchase agreements, lending portfolio
securities and entering into futures contracts and related options as
hedges. These risks and those associated with investing in mortgage-backed
securities, when-issued securities, options and variable rate securities,
and securities which may be considered to be `derivatives'' are described
under the sections `Investment Objective and Policies of Each Fund,''
`Portfolio Investments and Strategies,'' and ``Derivative Contracts and
Securities.''
SUMMARY OF FUND EXPENSES
[To be filed by Amendment]
FINANCIAL HIGHLIGHTS
[To be filed by Amendment]
INVESTMENT OBJECTIVE AND POLICIES OF EACH FUND
The investment objective and policies of each Fund appear below. The
investment objective of a Fund cannot be changed without the approval of
the shareholders of such Fund. While there is no assurance that a Fund will
achieve its investment objective, it endeavors to do so by following the
investment policies described in this prospectus.
Unless indicated otherwise, the investment policies of a Fund may be
changed by the Board of Trustees or the Board of Directors (hereinafter
referred to as `Board Members'') without the approval of the shareholders
of such Fund. Shareholders will be notified before any material change in
these policies becomes effective.
Additional information about investment limitations, strategies that one or
more Funds may employ, and certain investment policies mentioned below,
appears in the `Portfolio Investments and Strategies'' section of this
prospectus and in the Combined Statement of Additional Information.
EQUITY FUND
The investment objective of the Equity Fund is to provide growth of
principal. The Fund pursues its objective by investing primarily in the
equity securities of high quality companies. Emphasis is placed on stocks
where the market price of the stock appears low when compared to present
earnings. The Fund's investment approach is based on the conviction that,
over the long term, the economy will continue to expand and develop and
that this economic growth will be reflected in the growth of the revenues
and earnings of publicly-held corporations. Under normal market conditions,
the Fund intends to invest at least 65% of its total assets in equity
securities of U.S. companies. In most market conditions, the stocks
comprising the Fund's assets will exhibit traditional value
characteristics, such as higher than average sales growth, higher than
average return on equity, low debt to equity ratios, and stocks of
companies with high return on their invested capital.
ACCEPTABLE INVESTMENTS. The securities in which the Fund invests include,
but are not limited to:
oCOMMON STOCKS. The Fund invests primarily in common stocks of
companies selected by the Adviser on the basis of traditional
research techniques, including assessment of earnings and dividend
growth prospects of the companies. In addition, the Fund may invest
in preferred stocks of these companies. Most often, these companies
will be classified as large or mid-cap companies. Factors such as,
but not limited to, product position, market share, potential
earnings growth, asset values, and revenues may be considered by the
Adviser in evaluating common stocks;
oCONVERTIBLE SECURITIES. Convertible securities are fixed income
securities which may be exchanged or converted into a predetermined
number of the issuer's underlying common stock at the option of the
holder during a specified time period. Convertible securities may
take the form of convertible preferred stock, convertible bonds or
debentures, units consisting of ``usable'' bonds and warrants or a
combination of the features of several of these securities. The
investment characteristics of each convertible security vary widely,
which allows convertible securities to be employed for different
investment objectives;
oSECURITIES OF FOREIGN ISSUERS. The Fund may invest in securities of
foreign issuers traded on the New York or American Stock Exchanges
or in the over-the-counter market, including American Depositary
Receipts (``ADRs''). ADRs are receipts typically issued by an
American bank or trust company that evidences ownership of
underlying securities issued by a foreign issuer. ADRs may not
necessarily be denominated in the same currency as the securities
into which they may be converted. Generally, ADRs, in registered
form, are designed for use in U.S. securities markets (see
``Securities of Foreign Issuers'' below);
oFUTURES AND OPTIONS. The Fund may purchase and sell financial and
stock index futures contracts and purchase and sell options on such
futures contracts and on its portfolio securities (see ``Futures and
Options'' below);
oU.S. Government Securities (as defined under ``Portfolio Investments
and Strategies'');
oCorporate Obligations (as defined under ``Portfolio Investments and
Strategies'');
oMortgage-Backed Securities (as defined under ``Portfolio Investments
and Strategies''); and
oMoney Market Instruments (as defined under ``Portfolio Investments
and Strategies'').
SECURITIES OF FOREIGN ISSUERS. There may be certain risks associated with
investing in foreign securities. These include risks of adverse political
and economic developments (including possible governmental seizure or
nationalization of assets), the possible imposition of exchange controls or
other governmental restrictions, less uniformity in accounting and
reporting requirements than applied to U.S. companies, and the possibility
that there will be less information on such securities and their issuers
available to the public. In addition, there are restrictions on foreign
investments in other jurisdictions and there tends to be difficulty in
obtaining judgments from abroad and effecting repatriation of capital
invested abroad. Delays could occur in settlement of foreign transactions,
which could adversely affect shareholder equity. Foreign securities may be
subject to foreign taxes, which reduce yield, and may be less marketable
than comparable U.S. securities. As a matter of practice, the Fund will not
invest in the securities of a foreign issuer if any risk identified above
appears to the Adviser to be substantial.
PENNSYLVANIA INTERMEDIATE MUNICIPAL BOND FUND
The investment objective of the Pennsylvania Intermediate Municipal Bond
Fund is to provide current income which is exempt from federal regular
income tax and the personal and corporate income taxes imposed by the
Commonwealth of Pennsylvania. (Federal regular income tax does not include
the federal individual alternative minimum tax or the federal alternative
minimum tax for corporations.) In addition, shares of the Fund are exempt
from personal property taxes imposed by counties in Pennsylvania to the
extent that the Fund invests in obligations that are exempt from such
taxes. The Fund pursues its investment objective by investing primarily in
Pennsylvania municipal securities. Interest income of the Fund that is
exempt from federal regular income tax and Pennsylvania state personal and
corporate income tax retains its tax-free status when distributed to the
Fund's shareholders. However, income distributed by the Fund may not
necessarily be exempt from state or municipal taxes in states other than
Pennsylvania. Thus, the Fund may not be a suitable investment for non-
Pennsylvania taxpayers or retirement plans. As a matter of investment
policy, which may not be changed without shareholder approval, under normal
market conditions at least 80% of the value of the Fund's net assets will
be invested in Pennsylvania municipal securities. In addition, as a matter
of investment policy that may be changed without shareholder approval, the
Fund will invest its assets so that, under normal circumstances, at least
65% of the value of its total assets will be invested in securities of
Pennsylvania issuers. Up to 20% of the Pennsylvania municipal securities
invested in by the Fund may generate income that is subject to the federal
alternative minimum tax. The Fund will attempt to maintain a dollar-
weighted average portfolio maturity of between three to ten years.
ACCEPTABLE INVESTMENTS. The municipal securities in which the Fund invests
include the following:
oobligations issued by or on behalf of the Commonwealth of
Pennsylvania, its political subdivisions, agencies, or
instrumentalities (i.e., authorities);
odebt obligations of any state, territory, or possession of the
United States, including the District of Columbia, or any political
subdivision of any of these;
ovariable rate demand notes; and
oparticipation, trust, and partnership interests, as described below,
in any of the above obligations;
the interest from which is, in the opinion of bond counsel for the issuers
or in the judgment of the Adviser to the Fund, exempt from both federal
regular income tax and the personal and corporate income taxes imposed by
the Commonwealth of Pennsylvania. It is likely that shareholders who are
subject to alternative minimum tax will be required to include interest
from a portion of the municipal securities owned by the Fund in calculating
the federal individual alternative minimum tax or the federal alternative
minimum tax for corporations.
CHARACTERISTICS. The municipal securities in which the Fund invests are:
orated, at the time of purchase, within the four highest ratings for
municipal securities by a nationally recognized statistical rating
organization (``NRSRO''), such as Moody's Investors Service, Inc.
(``Moody's'') (Aaa, Aa, A, or Baa), Standard & Poor's Ratings Group
(``S&P'') (AAA, AA, A, or BBB), or Fitch Investors Service, Inc.
(``Fitch'') (AAA, AA, A, or BBB); or
oguaranteed at the time of purchase by the U.S. government as to the
payment of principal and interest; or
ofully collateralized by an escrow of U.S. government securities or
other securities acceptable to the Adviser; or
orated at the time of purchase within Moody's highest short-term
municipal obligation rating (MIG1/VMIG1) or Moody's highest
municipal commercial paper rating (PRIME-1) or S&P's highest
municipal commercial paper rating (SP-1); or
ounrated if, at the time of purchase, other municipal securities of
that issuer are rated investment grade by an NRSRO (i.e., Baa or BBB
or better by Moody's, S&P, or Fitch); or
ounrated if determined to be of equivalent quality to one of the
foregoing rating categories by the Adviser.
PARTICIPATION INTERESTS. The Fund may purchase interests in municipal
securities from financial institutions such as commercial and investment
banks, savings associations, and insurance companies. These interests may
take the form of participations, beneficial interests in a trust,
partnership interests or any other form of indirect ownership that allows
the Fund to treat the income from the investment as exempt from federal
income tax. The Fund invests in these participation interests in order to
obtain credit enhancement or demand features that would not be available
through direct ownership of the underlying municipal securities.
MUNICIPAL LEASES. Municipal leases are obligations issued by state and
local governments or authorities to finance the acquisition of equipment
and facilities. They may take the form of a lease, an installment purchase
contract, or a conditional sales contract.
TEMPORARY INVESTMENTS. The Fund normally invests at least 80% of its net
assets in Pennsylvania municipal securities, as described above. Although
the Fund is permitted to invest up to 20% of its net assets in taxable,
temporary investments under normal market conditions, there is no current
intention of generating income subject to federal regular income tax or
Pennsylvania state personal income tax. In addition, from time to time,
when the Adviser determines that market conditions call for a temporary
defensive posture, the Fund may invest up to 100% of its total assets in
short-term tax-exempt or taxable temporary investments. These temporary
investments include: notes issued by or on behalf of municipal or corporate
issuers; obligations issued or guaranteed by the U.S. government, its
agencies, or instrumentalities; other debt securities; commercial paper;
certificates of deposit of banks; shares of other investment companies; and
repurchase agreements.
There are no rating requirements applicable to temporary investments.
However, the Adviser will limit temporary investments to those it considers
to be of comparable quality to the Fund's acceptable investments.
PENNSYLVANIA MUNICIPAL SECURITIES. Pennsylvania municipal securities are
generally issued to finance public works, such as airports, bridges,
housing, hospitals, mass transportation projects, schools, streets, and
water and sewer works. They are also issued to repay outstanding
obligations, to raise funds for general operating expenses, and to make
loans to other public institutions and facilities. Pennsylvania municipal
securities include industrial development bonds issued by or on behalf of
public authorities to provide financing aid to acquire sites or construct
and equip facilities for privately or publicly owned corporations. The
availability of this financing encourages these corporations to locate
within the sponsoring communities and thereby increases local employment.
The two principal classifications of municipal securities are `general
obligation''and ``revenue'' bonds. General obligation bonds are secured by
the issuer's pledge of its full faith and credit and taxing power for the
payment of principal and interest. Revenue bonds do not represent a pledge
of credit or create any debt of or charge against the general revenues of a
municipality or public authority. Interest on and principal of revenue
bonds are payable only from the revenue generated by the facility financed
by the bond or other specified sources of revenue. Industrial development
bonds are typically classified as revenue bonds.
INVESTMENT RISKS. Yields on municipal securities depend on a variety of
factors, including, but not limited to: the general conditions of the
municipal bond market; the size of the particular offering; the maturity of
the obligations; and the rating of the issue. Further, any adverse economic
conditions or developments affecting the Commonwealth of Pennsylvania or
its municipalities could impact the Fund's portfolio. The ability of the
Fund to achieve its investment objective also depends on the continuing
ability of the issuers of Pennsylvania municipal securities and
participation interests, or the guarantors of either, to meet their
obligations for the payment of interest and principal when due. Investing
in Pennsylvania municipal securities which meet the Fund's quality
standards may not be possible if the Commonwealth of Pennsylvania or its
municipalities do not maintain their current credit ratings. In addition,
any Pennsylvania constitutional amendments, legislative measures, executive
orders, administrative regulations, or voter initiatives could result in
adverse consequences affecting Pennsylvania municipal securities.
NON-DIVERSIFICATION. The Fund is a non-diversified investment portfolio. As
such, there is no limit on the percentage of assets which can be invested
in any single issuer, except as noted below. An investment in the Fund,
therefore, will entail greater risk than would exist in a diversified
portfolio of securities because the higher percentage of investment among
fewer issuers may result in greater fluctuation in the total market value
of the Fund's portfolio. Any economic, political, or regulatory
developments affecting the value of the securities in the Fund's portfolio
will have a greater impact on the total value of the portfolio than would
be the case if the portfolio was diversified among more issuers.
The Fund intends to comply with Subchapter M of the Internal Revenue Code.
This undertaking requires that at the end of each quarter of the taxable
year, with regard to at least 50% of the Fund's total assets, no more than
5% of its total assets are invested in the securities of a single issuer;
and beyond that, no more than 25% of its total assets are invested in the
securities of a single issuer.
SHORT-TERM BOND FUND
The investment objective of the Short-Term Bond Fund is to provide current
income. The Fund will invest primarily in investment grade debt securities,
U.S. government securities, and mortgage-backed and asset-backed
securities. In addition, the Fund may invest in taxable municipal
obligations. Under normal market conditions, the Fund will invest at least
65% of its assets in bonds. The Fund will attempt to maintain a dollar-
weighted average portfolio maturity of between one to three years.
ACCEPTABLE INVESTMENTS. The securities in which the Fund invests include,
but are not limited to:
oU.S. Government Securities (as defined under ``Portfolio Investments
and Strategies'');
oCorporate Obligations (as defined under ``Portfolio Investments and
Strategies'');
oMortgage-Backed Securities (as defined under ``Portfolio Investments
and Strategies'');
oAsset-Backed Securities (as defined under ``Portfolio Investments
and Strategies''); and
oMoney Market Instruments (as defined under ``Portfolio Investments
and Strategies'').
INTERMEDIATE U.S. GOVERNMENT BOND FUND
The investment objective of the Intermediate U.S. Government Bond Fund is
to provide current income. Under normal market conditions, the Fund will
invest at least 65% of the value of its total assets in securities which
are issued or guaranteed as to payment of principal and interest by the
U.S. government or U.S. government agencies or instrumentalities. For
purposes of this 65% policy, the Fund will consider CMOs (as defined under
`Portfolio Investments and Strategies'') issued by U.S. government
agencies or instrumentalities to be U.S. government securities. The
remaining 35% of the Fund's assets may be invested in any of the securities
discussed below. In addition, the Fund may invest in taxable municipal
obligations. The Fund will attempt to maintain a dollar-weighted average
portfolio maturity of between three to ten years.
ACCEPTABLE INVESTMENTS. The securities in which the Fund invests include,
but are not limited to:
oU.S. Government Securities (as defined under ``Portfolio Investments
and Strategies'');
oMortgage-Backed Securities (as defined under ``Portfolio Investments
and Strategies'');
oAsset-Backed Securities (as defined under ``Portfolio Investments
and Strategies'');
oCorporate Obligations (as defined under ``Portfolio Investments and
Strategies''); and
oMoney Market Instruments (as defined under ``Portfolio Investments
and Strategies'').
PORTFOLIO INVESTMENTS AND STRATEGIES
FUTURES AND OPTIONS TRANSACTIONS. The Equity Fund and the International
Equity Fund may engage in futures and options transactions as described
below. As a means of reducing fluctuations in the net asset value of their
shares, the Funds may attempt to hedge all or a portion of their respective
portfolios by buying and selling financial and stock index futures
contracts, buying put and call options on portfolio securities and put
options on financial futures contracts, and writing call options on futures
contracts. The Funds may also write covered put and call options on
portfolio securities to attempt to increase their current income or to
hedge a portion of their portfolio investments. The Funds will maintain
their positions in securities, option rights, and segregated cash subject
to puts and calls until the options are exercised, closed, or have expired.
An option position on futures contracts may be closed out over-the-counter
or on a nationally recognized exchange which provides a secondary market
for options of the same series. The Funds purchase and write options only
with investment dealers and other financial institutions (such as
commercial banks or savings associations) deemed creditworthy by the
Adviser.
FUTURES CONTRACTS. The Equity Fund and the International Equity Fund may
purchase and sell financial futures contracts to hedge against the effects
of changes in the value of portfolio securities due to anticipated changes
in interest rates and market conditions without necessarily buying or
selling the securities.
The Funds also may purchase and sell stock index futures to hedge against
changes in prices. The Funds do not intend to engage in futures
transactions for speculative purposes, but may do so to a limited extent as
permitted by exclusions under the Commodities Exchange Act (`Act'').
A futures contract is a firm commitment by two parties: the seller who
agrees to make delivery of the specific type of security called for in the
contract (`going short'') and the buyer who agrees to take delivery of the
security (`going long'') at a certain time in the future. For example, in
the fixed income securities market, prices move inversely to interest
rates. A rise in rates means a drop in price. Conversely, a drop in rates
means a rise in price. In order to hedge its holdings of fixed income
securities against a rise in market interest rates, the Funds could enter
into contracts to deliver securities at a predetermined price (i.e., `go
short') to protect themselves against the possibility that the prices of
their fixed income securities may decline during the Funds' anticipated
holding period. A Fund would `go long'' (agree to purchase securities in
the future at a predetermined price) to hedge against a decline in market
interest rates.
Stock index futures contracts are based on indices that reflect the market
value of common stock of the firms included in the indices. An index
futures contract is an agreement pursuant to which two parties agree to
take or make delivery of an amount of cash equal to the differences between
the value of the index at the close of the last trading day of the contract
and the price at which the index contract was originally written.
`MARGIN'' IN FUTURES TRANSACTIONS. Unlike the purchase or sale of a
security, the Equity Fund and the International Equity Fund do not pay or
receive money upon the purchase or sale of a futures contract. Rather, the
Funds are required to deposit an amount of `initial margin'' in cash or
U.S. Treasury bills with their custodian (or the broker, if legally
permitted). The nature of initial margin in futures transactions is
different from that of margin in securities transactions in that initial
margin in futures transactions does not involve the borrowing of funds by a
Fund to finance the transactions.
Initial margin is in the nature of a performance bond or good faith deposit
on the contract which is returned to a Fund upon termination of the futures
contract, assuming all contractual obligations have been satisfied.
A futures contract held by a Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day the Fund
pays or receives cash, called `variation margin,'' equal to the daily
change in value of the futures contract. This process is known as `marking
to market.''Variation margin does not represent a borrowing or loan by a
Fund but is instead settlement between a Fund and the broker of the amount
one would owe the other if the futures contract expired. In computing its
daily net asset value, a Fund will mark to market its open futures
positions. A Fund is also required to deposit and maintain margin when it
writes call options on futures contracts.
PUT OPTIONS ON FUTURES CONTRACTS. The Equity Fund and the International
Equity Fund may purchase listed put options on financial and stock index
futures contracts to protect portfolio securities against decreases in
value resulting from market factors, such as an anticipated increase in
interest rates. Unlike entering directly into a futures contract, which
requires the purchaser to buy a financial instrument on a set date at a
specified price, the purchase of a put option on a futures contract
entitles (but does not obligate) its purchaser to decide on or before a
future date whether to assume a short position at the specified price.
Generally, if the hedged portfolio securities decrease in value during the
term of an option, the related futures contracts will also decrease in
value and the option will increase in value. In such an event, a Fund will
normally close out its option by selling an identical option. If the hedge
is successful, the proceeds received by a Fund upon the sale of the second
option will be large enough to offset both the premium paid by the Fund for
the original option plus the decrease in value of the hedged securities.
Alternatively, a Fund may exercise its put option to close out the
position. To do so, it would simultaneously enter into a futures contract
of the type underlying the option (for a price less than the strike price
of the option) and exercise the option. The Fund would then deliver the
futures contract in return for payment of the strike price. If a Fund
neither closes out nor exercises an option, the option will expire on the
date provided in the option contract, and only the premium paid for the
contract will be lost.
STOCK INDEX OPTIONS. The Equity Fund and the International Equity Fund may
purchase put options on stock indices listed on national securities
exchanges or traded in the over-the-counter market to protect against
decreases in stock prices. A stock index fluctuates with changes in the
market values of the stocks included in the index.
The effectiveness of purchasing stock index options will depend upon the
extent to which price movements in a Fund's portfolio correlate with price
movements of the stock index selected. Because the value of an index option
depends upon movements in the level of the index rather than the price of a
particular stock, whether a Fund will realize a gain or loss from the
purchase of options on an index depends upon movements in the level of
stock prices in the stock market generally or, in the case of certain
indices, in an industry or market segment, rather than movements in the
price of a particular stock. Accordingly, successful use by a Fund of
options on stock indices will be subject to the ability of the Adviser to
predict correctly movements in the directions of the stock market generally
or of a particular industry. This requires different skills and techniques
than predicting changes in the price of individual stocks.
CALL OPTIONS ON FINANCIAL AND STOCK INDEX FUTURES CONTRACTS. In addition to
purchasing put options on futures, the Equity Fund and the International
Equity Fund may write (sell) listed and over-the-counter call options on
financial and stock index futures contracts (including cash- settled stock
index options) to hedge their respective portfolios against an increase in
market interest rates or a decrease in stock prices. When a Fund writes a
call option on a futures contract, it is undertaking the obligation of
assuming a short futures position (selling a futures contract) at the fixed
strike price at any time during the life of the option if the option is
exercised. As stock prices fall or market interest rates rise, causing the
prices of futures to go down, a Fund's obligation under a call option on a
future (to sell a futures contract) costs less to fulfill, causing the
value of the Fund's call option position to increase.
In other words, as the underlying futures price goes down below the strike
price, the buyer of the option has no reason to exercise the call, so that
a Fund keeps the premium received for the option. This premium can offset,
in whole or part, the drop in value of a Fund's portfolio securities.
Prior to the expiration of a call written by a Fund, or exercise of it by
the buyer, a Fund may close out the option by buying an identical option.
If the hedge is successful, the cost of the second option will be less than
the premium received by a Fund for the initial option. The net premium
income of a Fund will then offset, in whole or part, the decrease in value
of the hedged securities.
A Fund will not maintain open positions in futures contracts it has sold or
call options it has written on futures contracts if, in the aggregate, the
value of the open positions (marked to market) exceeds the current market
value of its securities portfolio plus or minus the unrealized gain or loss
on those open positions, adjusted for the correlation of volatility between
the hedged securities and the futures contracts. If this limitation is
exceeded at any time, a Fund will take prompt action to close out a
sufficient number of open contracts to bring its open futures and options
positions within this limitation.
PURCHASING PUT AND CALL OPTIONS ON PORTFOLIO SECURITIES. The Equity Fund
and the International Equity Fund may purchase put and call options on
portfolio securities and on stock indices to protect against price
movements in particular securities in their respective portfolios. A put
option gives a Fund, in return for a premium, the right (but not the
obligation) to sell the underlying security to the writer (seller) at a
specified price during the term of the option. A call option gives a Fund,
in return for a premium, the right (but not the obligation) to buy the
underlying securities from the seller at a specified price during the term
of the option.
WRITING COVERED PUT AND CALL OPTIONS ON PORTFOLIO SECURITIES. The Equity
Fund and the International Equity Fund may write covered put and call
options on their portfolio securities to generate income and thereby
protect against price movements in particular securities in their
respective portfolios. As the writer of a call option, a Fund has the
obligation upon exercise of the option during the option period to deliver
the underlying security upon payment of the exercise price. When a Fund
writes a put option on a futures contract, it is undertaking to buy a
particular futures contract at a fixed price at any time during a specified
period if the option is exercised.
A Fund may only write call options either on securities held in its
portfolio or on securities which it has the right to obtain without payment
of further consideration (or has segregated cash in the amount of any
additional consideration). In the case of put options, a Fund will
segregate cash, U.S. Treasury obligations or other liquid securities with a
value equal to or greater than the exercise price of the underlying
securities.
OVER-THE-COUNTER OPTIONS. The Equity Fund and the International Equity Fund
may purchase and write over-the-counter options on portfolio securities in
negotiated transactions with the buyers or writers of the options when
options on the portfolio securities held by a Fund are not traded on an
exchange. Over-the-counter options are two-party contracts with price and
terms negotiated between buyer and seller. In contrast, exchange-traded
options are third-party contracts with standardized strike prices and
expiration dates and are purchased from a clearing corporation. Exchange-
traded options have a continuous liquid market while over-the-counter
options may not. The Funds will not buy call options or write put options,
other than to close out open option positions, without further notification
to shareholders.
RISKS. When the Equity Fund and the International Equity Fund use futures
and options on futures as hedging devices, there is a risk that the prices
of the securities subject to the futures contracts may not correlate
perfectly with the prices of the securities in their respective portfolios.
This may cause the futures contract and any related options to react
differently than the portfolio securities to market changes. In addition,
the Adviser could be incorrect in its expectations about the direction or
extent of market factors such as stock price movements. In these events, a
Fund may lose money on the futures contract or option.
It is not certain that a secondary market for positions in futures
contracts or for options will exist at all times. Although the Adviser will
consider liquidity before entering into these transactions, there is no
assurance that a liquid secondary market on an exchange or otherwise will
exist for any particular futures contract or option at any particular time.
A Fund's ability to establish and close out futures and options positions
depends on this secondary market.
The Funds will engage in futures contracts and related options in
conformity with the requirements of the Act, which entitles the Funds to an
exclusion from regulation provided that, among other representations, the
Funds use futures contracts and related options contracts solely for `bona
fide hedging purposes''within the meaning and intent of the Act, and with
respect to positions in futures contracts and related option contracts that
are not for bona fide hedging purposes, the Funds limit the aggregate
initial margin and premiums required to establish such positions to no more
than five percent of the liquidation value of their respective net assets,
after taking into account unrealized profits and unrealized losses on any
such contracts they have entered into and excluding the value of any
options that are `in-the-money'' at the time of purchase. When the Funds
purchase futures contracts, an amount of cash and cash equivalents, equal
to the underlying commodity value of the futures contracts (less any
related margin deposits), will be deposited in a segregated account with
the custodian (or the broker, if legally permitted) to collateralize the
position and thereby insure that the use of such futures contracts are
unleveraged. When the Funds sell futures contracts, they will either own or
have the right to receive the underlying future or security, or will make
deposits to collateralize the position as discussed above.
U.S. GOVERNMENT SECURITIES. The Funds may invest in U.S. government
securities, which generally include direct obligations of the U.S. Treasury
(such as U.S. Treasury bills, notes, and bonds) and obligations (including
mortgage-backed securities, bonds, notes and discount notes) issued or
guaranteed by the following U.S. government agencies or instrumentalities:
Farm Credit System, including the National Bank for Cooperatives, Farm
Credit Banks, and Banks for Cooperatives; Farmers Home Administration;
Federal Home Loan Banks; Federal Home Loan Mortgage Corporation (`Freddie
Mac'); Federal National Mortgage Association (``Fannie Mae''); Government
National Mortgage Association (`Ginnie Mae''); and Student Loan Marketing
Association. These securities are backed by: the full faith and credit of
the U.S. Treasury; the issuer's right to borrow an amount limited to a
specific line of credit from the U.S. Treasury; the discretionary authority
of the U.S. government to purchase certain obligations of agencies or
instrumentalities; or the credit of the agency or instrumentality issuing
the obligations.
Examples of agencies and instrumentalities securities of which are
permissible investments but may not always receive financial support from
the U.S. government are: Farm Credit System, including the National Bank
for Cooperatives, Farm Credit Banks, and Banks for Cooperatives; Federal
Home Loan Banks; Fannie Mae; Student Loan Marketing Association; and
Freddie Mac.
MORTGAGE-BACKED SECURITIES. The Equity Fund, the Short-Term Bond Fund, and
the Intermediate U.S. Government Bond Fund may invest in mortgage-backed
securities rated at the time of purchase investment grade (BBB or Baa or
better) by an NRSRO, or which are of comparable quality in the judgment of
the Adviser. Mortgage-backed securities are securities that directly or
indirectly represent a participation in, or are secured by and payable
from, mortgage loans on real property. There are currently four basic types
of mortgage-backed securities: (i) those issued or guaranteed by the U.S.
government or one of its agencies or instrumentalities, such as Ginnie Mae,
Fannie Mae, and Freddie Mac; (ii) those issued by private issuers that
represent an interest in or are collateralized by mortgage-backed
securities issued or guaranteed by the U.S. government or one of its
agencies or instrumentalities; (iii) those issued by private issuers that
represent an interest in or are collateralized by whole loans or mortgage-
backed securities without a government guarantee but usually having some
form of private credit enhancement; and (iv) privately issued securities
which are collateralized by pools of mortgages in which each mortgage is
guaranteed as to payment of principal and interest by an agency or
instrumentality of the U.S. government.
The privately issued mortgage-related securities provide for a periodic
payment consisting of both interest and/or principal. The interest portion
of these payments will be distributed by a Fund as income, and the capital
portion will be reinvested.
ADJUSTABLE RATE MORTGAGE SECURITIES (`ARMS''). The Equity Fund, the Short-
Term Bond Fund, and the Intermediate U.S. Government Bond Fund may invest
in ARMS. ARMS are pass-through mortgage-backed securities with adjustable
rather than fixed interest rates. The ARMS in which a Fund invests are
issued by Ginnie Mae, Fannie Mae, and Freddie Mac and are actively traded.
The underlying mortgages which collateralize ARMS issued by Ginnie Mae are
fully guaranteed by the Federal Housing Administration or Veterans
Administration, while those collateralizing ARMS issued by Fannie Mae or
Freddie Mac are typically conventional residential mortgages conforming to
strict underwriting size and maturity constraints.
COLLATERALIZED MORTGAGE OBLIGATIONS (`CMOS''). The Equity Fund, the Short-
Term Bond Fund, and the Intermediate U.S. Government Bond Fund may invest
in CMOs. CMOs are debt obligations collateralized by mortgage loans or
mortgage pass-through securities. Typically, CMOs are collateralized by
Ginnie Mae, Fannie Mae or Freddie Mac certificates, but may be
collateralized by whole loans or private pass-through securities. CMOs may
have fixed or floating rates of interest.
A Fund will invest only in CMOs that are rated at the time of purchase
investment grade (BBB or Baa or better) by an NRSRO. A Fund may also invest
in certain CMOs which are issued by private entities such as investment
banking firms and companies related to the construction industry. The CMOs
in which a Fund may invest may be: (i) securities which are collateralized
by pools of mortgages in which each mortgage is guaranteed as to payment of
principal and interest by an agency or instrumentality of the U.S.
government; (ii) securities which are collateralized by pools of mortgages
in which payment of principal and interest is guaranteed by the issuer and
such guarantee is collateralized by U.S. government securities; (iii)
collateralized by pools of mortgages in which payment of principal and
interest is dependent upon the underlying pool of mortgages with no U.S.
government guarantee; or (iv) other securities in which the proceeds of the
issuance are invested in mortgage-backed securities and payment of the
principal and interest is supported by the credit of an agency or
instrumentality of the U.S. government.
REAL ESTATE MORTGAGE INVESTMENT CONDUITS (`REMICS''). The Equity Fund, the
Short-Term Bond Fund, and the Intermediate U.S. Government Bond Fund may
invest in REMICs. REMICs are offerings of multiple class mortgage-backed
securities which qualify and elect treatment as such under provisions of
the Internal Revenue Code. Issuers of REMICs may take several forms, such
as trusts, partnerships, corporations, associations, or segregated pools of
mortgages. Once REMIC status is elected and obtained, the entity is not
subject to federal income taxation. Instead, income is passed through the
entity and is taxed to the person or persons who hold interests in the
REMIC. A REMIC interest must consist of one or more classes of `regular
interests,''some of which may offer adjustable rates of interest, and a
single class of `residual interests.'' To qualify as a REMIC,
substantially all the assets of the entity must be in assets directly or
indirectly secured principally by real property.
ASSET-BACKED SECURITIES. The Short-Term Bond Fund and the Intermediate U.S.
Government Bond Fund may invest in asset-backed securities. Asset-backed
securities have structural characteristics similar to mortgage-backed
securities but have underlying assets that generally are not mortgage loans
or interests in mortgage loans. The Funds may invest in asset-backed
securities rated at the time of purchase investment grade (BBB or Baa or
better) by an NRSRO including, but not limited to, interests in pools of
receivables, such as motor vehicle installment purchase obligations and
credit card receivables, equipment leases, manufactured housing (mobile
home) leases, or home equity loans. These securities may be in the form of
pass-through instruments or asset-backed bonds. The securities are issued
by non-governmental entities and carry no direct or indirect government
guarantee.
INVESTMENT RISKS OF MORTGAGE-BACKED AND ASSET-BACKED SECURITIES.
Mortgage-backed and asset-backed securities generally pay back
principal and interest over the life of the security. At the time a
Fund reinvests the payments and any unscheduled prepayments of
principal received, the Fund may receive a rate of interest which is
actually lower than the rate of interest paid on these securities
(``prepayment risks'). Mortgage-backed and asset-backed securities are
subject to higher prepayment risks than most other types of debt
instruments with prepayment risks because the underlying mortgage loans
or the collateral supporting asset-backed securities may be prepaid
without penalty or premium. Prepayment risks on mortgage-backed
securities tend to increase during periods of declining mortgage
interest rates because many borrowers refinance their mortgages to take
advantage of the more favorable rates. Prepayments on mortgage-backed
securities are also affected by other factors, such as the frequency
with which people sell their homes or elect to make unscheduled
payments on their mortgages. Although asset-backed securities generally
are less likely to experience substantial prepayments than are
mortgage-backed securities, certain factors that affect the rate of
prepayments on mortgage-backed securities also affect the rate of
prepayments on asset-backed securities.
While mortgage-backed securities generally entail less risk of a
decline during periods of rapidly rising interest rates, mortgage-
backed securities may also have less potential for capital appreciation
than other similar investments (e.g., investments with comparable
maturities) because as interest rates decline, the likelihood increases
that mortgages will be prepaid. Furthermore, if mortgage-backed
securities are purchased at a premium, mortgage foreclosures and
unscheduled principal payments may result in some loss of a holder's
principal investment to the extent of the premium paid. Conversely, if
mortgage-backed securities are purchased at a discount, both a
scheduled payment of principal and an unscheduled prepayment of
principal would increase current and total returns and would accelerate
the recognition of income, which would be taxed as ordinary income when
distributed to shareholders.
Asset-backed securities present certain risks that are not presented by
mortgage-backed securities. Primarily, these securities do not have the
benefit of the same security interest in the related collateral. Credit
card receivables are generally unsecured and the debtors are entitled
to the protection of a number of state and federal consumer credit
laws, many of which give such debtors the right to set off certain
amounts owed on the credit cards, thereby reducing the balance due.
Most issuers of asset-backed securities backed by motor vehicle
installment purchase obligations permit the servicer of such
receivables to retain possession of the underlying obligations. If the
servicer sells these obligations to another party, there is a risk that
the purchaser would acquire an interest superior to that of the holders
of the related asset-backed securities. Further, if a vehicle is
registered in one state and is then re-registered because the owner and
obligor moves to another state, such re-registration could defeat the
original security interest in the vehicle in certain cases. In
addition, because of the large number of vehicles involved in a typical
issuance and technical requirements under state laws, the trustee for
the holders of asset-backed securities backed by automobile receivables
may not have a proper security interest in all of the obligations
backing such receivables. Therefore, there is the possibility that
recoveries on repossessed collateral may not, in some cases, be
available to support payments on these securities.
CORPORATE OBLIGATIONS. The Equity Fund, the Short-Term Bond Fund, and the
Intermediate U.S. Government Bond Fund may invest in corporate obligations
including preferred stocks and corporate bonds, notes, and debentures,
which may have floating or fixed rates of interest. Corporate debt
obligations will normally be rated at the time of purchase investment grade
(BBB or Baa or better) by an NRSRO.
FLOATING RATE CORPORATE DEBT OBLIGATIONS. The Equity Fund, the Short-
Term Bond Fund, and the Intermediate U.S. Government Bond Fund expect
to invest in floating rate corporate debt obligations, including
increasing rate securities. Floating rate securities are generally
offered at an initial interest rate which is at or above prevailing
market rates. The interest rate paid on these securities is then reset
periodically (commonly every 90 days) to an increment over some
predetermined interest rate index. Commonly utilized indices include
the three-month Treasury bill rate, the six-month Treasury bill rate,
the one-month or three-month London Interbank Offered Rate (LIBOR), the
prime rate of a bank, the commercial paper rates, or the longer-term
rates on U.S. Treasury securities.
Increasing rate securities, which currently do not make up a
significant share of the market in corporate debt securities, are
generally offered at an initial interest rate which is at or above
prevailing market rates. Interest rates are reset periodically (most
commonly every 90 days) at different levels on a predetermined scale.
These levels of interest are ordinarily set at progressively higher
increments over time. Some increasing rate securities may, by
agreement, revert to a fixed rate status. These securities may also
contain features which allow the issuer the option to convert the
increasing rate of interest to a fixed rate under such terms,
conditions, and limitations as are described in each issue's
prospectus.
FIXED RATE CORPORATE DEBT OBLIGATIONS. The Equity Fund, the Short-Term
Bond Fund, and the Intermediate U.S. Government Bond Fund will also
invest in fixed rate securities, including fixed rate securities with
short-term characteristics. Fixed rate securities with short-term
characteristics are long-term debt obligations but are treated in the
market as having short maturities because call features of the
securities may make them callable within a short period of time. A
fixed rate security with short-term characteristics would include a
fixed income security priced close to call or redemption price or a
fixed income security approaching maturity, where the expectation of
call or redemption is high.
Fixed rate securities tend to exhibit more price volatility during
times of rising or falling interest rates than securities with floating
rates of interest. This is because floating rate securities, as
described above, behave like short-term instruments in that the rate of
interest they pay is subject to periodic adjustments based on a
designated interest rate index. Fixed rate securities pay a fixed rate
of interest and are more sensitive to fluctuating interest rates. In
periods of rising interest rates, the value of a fixed rate security is
likely to fall. Fixed rate securities with short-term characteristics
are not subject to the same price volatility as fixed rate securities
without such characteristics. Therefore, they behave more like floating
rate securities with respect to price volatility.
BANK INSTRUMENTS. The Funds only invest in Bank Instruments either issued
by an institution that has capital, surplus and undivided profits over $100
million or is insured by the Bank Insurance Fund or the Savings Association
Insurance Fund. The Equity Fund, the Short-Term Bond Fund, and the
Intermediate U.S. Government Bond Fund may purchase foreign Bank
Instruments which include Eurodollar Certificates of Deposit (`ECDs''),
Yankee Certificates of Deposit (`Yankee CDs'') and Eurodollar Time
Deposits (`ETDs''). The banks issuing these instruments are not
necessarily subject to the same regulatory requirements that apply to
domestic banks, such as reserve requirements, loan requirements, loan
limitations, examinations, accounting, auditing, and recordkeeping and the
public availability of information.
CREDIT FACILITIES. Demand notes are borrowing arrangements between a
corporation and an institutional lender (such as a Fund) payable upon
demand by either party. The notice period for demand typically ranges from
one to seven days, and the party may demand full or partial payment.
Revolving credit facilities are borrowing arrangements in which the lender
agrees to make loans up to a maximum amount upon demand by the borrower
during a specified term. As the borrower repays the loan, an amount equal
to the repayment may be borrowed again during the term of the facility. A
Fund generally acquires a participation interest in a revolving credit
facility from a bank or other financial institution. The terms of the
participation require a Fund to make a pro rata share of all loans extended
to the borrower and entitles the Fund to a pro rata share of all payments
made by the borrower. Demand notes and revolving credit facilities usually
provide for floating or variable rates of interest.
CREDIT ENHANCEMENT. Certain of the acceptable investments of the Funds may
have been credit enhanced by a guaranty, letter of credit or insurance. Any
bankruptcy, receivership or default of the party providing the credit
enhancement will adversely affect the quality and marketability of the
underlying security.
CREDIT RATINGS. Each Fund may invest in unrated securities if they are
determined to be of comparable quality to the Fund's acceptable rated
investments. If a security is subsequently downgraded below the permissible
investment category for a Fund, the Adviser will determine whether it
continues to be an acceptable investment; if not, the security will be
sold. Bonds rated BBB by S&P or Fitch or Baa by Moody's are investment
grade, but have more speculative characteristics than A-rated bonds.
Changes in economic conditions or other circumstances are more likely to
lead to weakened capacity to make principal and interest payments than
higher rated bonds. A description of the rating categories is contained in
the Appendix to the Combined Statement of Additional Information.
VARIABLE RATE DEMAND NOTES. Each Fund may purchase variable rate demand
notes. Variable rate demand notes are long-term debt instruments that have
variable or floating interest rates and provide the Funds with the right to
tender the security for repurchase at its stated principal amount plus
accrued interest. Such securities typically bear interest at a rate that is
intended to cause the securities to trade at par. The interest rate may
float or be adjusted at regular intervals (ranging from daily to annually),
and is normally based on a published interest rate or interest rate index.
Many variable rate demand notes allow a Fund to demand the repurchase of
the security on not more than seven days prior notice. Other notes only
permit a Fund to tender the security at the time of each interest rate
adjustment or at other fixed intervals. (See `Demand Features.'') Each
Fund treats variable rate demand notes as maturing on the later of the date
of the next interest rate adjustment or the date on which a Fund may next
tender the security for repurchase.
DEMAND FEATURES. Each Fund may acquire securities that are subject to puts
and standby commitments (`demand features'') to purchase the securities at
their principal amount (usually with accrued interest) within a fixed
period (usually seven days) following a demand by a Fund. The demand
feature may be issued by the issuer of the underlying securities, a dealer
in the securities or by another third party, and may not be transferred
separately from the underlying security. A Fund uses these arrangements to
provide the Fund with liquidity and not to protect against changes in the
market value of the underlying securities. The bankruptcy, receivership or
default by the issuer of the demand feature, or a default on the underlying
security or other event that terminates the demand feature before its
exercise, will adversely affect the liquidity of the underlying security.
Demand features that are exercisable even after a payment default on the
underlying security may be treated as a form of credit enhancement.
MONEY MARKET INSTRUMENTS. For temporary defensive purposes (up to 100% of
total assets) and to maintain liquidity (up to 35% of total assets), the
Equity Fund, the Short-Term Bond Fund, and the Intermediate U.S. Government
Bond Fund may invest in U.S. and foreign short-term money market
instruments, including:
commercial paper rated A-1 or A-2 by S&P, Prime-1 or Prime-2 by
Moody's, or F-1 or F-2 by Fitch, and Europaper (dollar-denominated
commercial paper issued outside the United States) rated A-1, A-2,
Prime-1, or Prime-2;
instruments of domestic and foreign banks and savings and loans (such
as certificates of deposit, demand and time deposits, savings shares,
and bankers' acceptances) if they have capital, surplus, and undivided
profits of over $100,000,000, or if the principal amount of the
instrument is insured by the Bank Insurance Fund, which is administered
by the Federal Deposit Insurance Corporation (``FDIC'), or the Savings
Association Insurance Fund, which is also administered by the FDIC.
These instruments may include Eurodollar Certificates of Deposit
(``ECDs'), Yankee Certificates of Deposit (``Yankee CDs''), and
Eurodollar Time Deposits (``ETDs');
obligations of the U.S. government or its agencies or
instrumentalities;
repurchase agreements;
securities of other investment companies; and
other short-term instruments which are not rated but are determined by
the Adviser to be of comparable quality to the other obligations in
which a Fund may invest.
REPURCHASE AGREEMENTS. The securities in which each Fund invests may be
purchased pursuant to repurchase agreements. Repurchase agreements are
arrangements in which banks, broker/dealers, and other recognized financial
institutions sell securities to a Fund and agree at the time of sale to
repurchase them at a mutually agreed upon time and price. To the extent
that the original seller does not repurchase the securities from a Fund,
the Fund could receive less than the repurchase price on any sale of such
securities.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES. Each Fund may invest
in the securities of other investment companies, but will not own more than
3% of the total outstanding voting stock of any investment company, invest
more than 5% of its total assets in any one investment company, or invest
more than 10% of its total assets in investment companies in general. The
Funds will invest in other investment companies primarily for the purpose
of investing short-term cash which has not yet been invested in other
portfolio instruments. It should be noted that investment companies incur
certain expenses such as management fees and, therefore, any investment by
a Fund in shares of another investment company would be subject to such
duplicate expenses. The Adviser will waive its investment advisory fee on
assets invested in securities of open-end investment companies.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. Each Fund may purchase
securities on a when-issued or delayed delivery basis. These transactions
are arrangements in which a Fund purchases securities with payment and
delivery scheduled for a future time. The seller's failure to complete
these transactions may cause a Fund to miss a price or yield considered to
be advantageous. Settlement dates may be a month or more after entering
into these transactions, and the market values of the securities purchased
may vary from the purchase prices.
Accordingly, a Fund may pay more or less than the market value of the
securities on the settlement date.
A Fund may dispose of a commitment prior to settlement if the Adviser deems
it appropriate to do so. In addition, a Fund may enter into transactions to
sell its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at
later dates. A Fund may realize short-term profits or losses upon the sale
of such commitments.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income,
each Fund may lend portfolio securities on a short-term or long-term basis,
to broker/dealers, banks, or other institutional borrowers of securities. A
Fund will only enter into loan arrangements with broker/dealers, banks, or
other institutions which the Adviser has determined are creditworthy under
guidelines established by the Board Members and will receive collateral in
the form of cash or U.S. government securities equal to at least 100% of
the value of the securities loaned at all times. This policy cannot be
changed without the approval of holders of a majority of a Fund's shares.
There is the risk that when lending portfolio securities, the securities
may not be available to a Fund on a timely basis and a Fund may, therefore,
lose the opportunity to sell the securities at a desirable price. In
addition, in the event that a borrower of securities would file for
bankruptcy or become insolvent, disposition of the securities may be
delayed pending court action.
RESTRICTED AND ILLIQUID SECURITIES. The Funds may invest in restricted
securities. Restricted securities are any securities in which a Fund may
otherwise invest pursuant to its investment objective and policies but
which are subject to restrictions on resale under federal securities law.
However, each Fund will limit investments in illiquid securities, including
(where applicable) restricted securities not determined by the Board
Members to be liquid, non-negotiable time deposits, over-the-counter
options, and repurchase agreements providing for settlement in more than
seven days after notice, to 15% of its net assets.
BORROWING MONEY. The Funds will not borrow money directly or through
reverse repurchase agreements (arrangements in which a Fund sells a
portfolio instrument for a percentage of its cash value with an agreement
to buy it back on a set date) or pledge securities except, under certain
circumstances, a Fund may borrow up to one-third of the value of its total
assets and pledge assets as necessary to secure such borrowings. This
policy cannot be changed without the approval of holders of a majority of a
Fund's shares.
DIVERSIFICATION. With respect to 75% of the value of total assets, the
Equity Fund, the Short-Term Bond Fund, and the Intermediate U.S. Government
Bond Fund will not invest more than 5% in securities of any one issuer,
other than cash, cash items or securities issued or guaranteed by the
government of the United States or its agencies or instrumentalities and
repurchase agreements collateralized by U.S. government securities or
acquire more than 10% of the outstanding voting securities of any one
issuer. This policy cannot be changed without the approval of holders of a
majority of a Fund's shares.
DERIVATIVE CONTRACTS AND SECURITIES. The term `derivative'' has
traditionally been applied to certain contracts (including, futures,
forward, option and swap contracts) that `derive'' their value from
changes in the value of an underlying security, currency, commodity or
index. Certain types of securities that incorporate the performance
characteristics of these contracts are also referred to as `derivatives.''
The term has also been applied to securities `derived'' from the cash
flows from underlying securities, mortgages or other obligations.
Derivative contracts and securities can be used to reduce or increase the
volatility of an investment portfolio's total performance. While the
response of certain derivative contracts and securities to market changes
may differ from traditional investments, such as stock and bonds,
derivatives do not necessarily present greater market risks than
traditional investments. The Funds will only use derivative contracts for
the purposes disclosed above in this prospectus section and in the section
entitled `Investment Objective and Policies of Each Fund.'' To the extent
that the Funds invest in securities that could be characterized as
derivatives (such as convertible securities, options, futures contracts,
and mortgage- and asset-backed securities), they will only do so in a
manner consistent with their investment objectives, policies and
limitations.
MARKETVEST GROUP OF FUND INFORMATION
MANAGEMENT OF THE MARKETVEST GROUP OF FUNDS
BOARD MEMBERS. Marketvest Funds, Inc. is managed by a Board of Directors.
Marketvest Funds is managed by a Board of Trustees. The Board Members are
responsible for managing each Fund's business affairs and for exercising
all of the powers of the Funds except those reserved for the shareholders.
INVESTMENT ADVISER. Pursuant to an investment advisory contract with both
Marketvest Funds, Inc. and Marketvest Funds, investment decisions for the
Funds are made by Dauphin Deposit Bank and Trust Company (`Dauphin
Deposit'), the Funds' investment adviser, subject to direction by the
Board Members. The Adviser continually conducts investment research and
supervision for each Fund and is responsible for the purchase or sale of
portfolio instruments, for which it receives an annual advisory fee from
the assets of each Fund.
ADVISORY FEES. The Adviser receives an annual investment advisory fee
at annual rates equal to percentages of the relevant Fund's average net
assets as follows: the Equity Fund-1.00% and the Pennsylvania
Intermediate Municipal Bond Fund, the Short-Term Bond Fund, and the
Intermediate U.S. Government Bond Fund-0.75%. The fee paid by each of
the Funds, while higher than the advisory fee paid generally by other
mutual funds, is comparable to the advisory fees paid by other mutual
funds with similar objectives and policies. The Adviser has undertaken
to reimburse each Fund, up to the amount of the advisory fee, for
operating expenses in excess of limitations established by certain
states. The Adviser may voluntarily choose to waive a portion of its
fee or reimburse the Funds for certain operating expenses, but reserves
the right to terminate such waiver or reimbursement at any time at its
sole discretion.
ADVISER'S BACKGROUND. Dauphin Deposit is a wholly-owned subsidiary of
Dauphin Deposit Corporation (the ``Corporation'), a bank holding
company. Through its subsidiaries and affiliates, the Corporation
provides a comprehensive range of financial services to the public. The
headquarters of both the Corporation and Dauphin Deposit are located at
213 Market Street, Harrisburg, PA 17105. The Board of Directors of the
Corporation has approved the acquisition of the Corporation by First
Maryland Bancorp., a subsidiary of Allied Irish Banks PLC (the
``Acquisition'). As a result, upon consummation of the Acquisition all
existing subsidiaries of the Corporation would become subsidiaries of
First Maryland Bancorp. The closing date of the Acquisition is
tentatively scheduled for the third quarter of 1997 pending approval by
the shareholders of both companies as well as the receipt of various
regulatory approvals and completion of other closing conditions.
The Board of Trustees/Directors of the Funds will be asked to vote on
any changes affecting the Funds as a result of the Acquisition. Under
the provisions of the 1940 Act, completion of the Acquisition would
result in an ``assignment''and therefore automatic termination of
Dauphin Deposit's current investment advisory contract with the Funds
(the ``Termination'). Accordingly, prior to the Acquisition, it is
anticipated that the Trustees/Directors of the Funds would meet to
consider matters relating to the Termination. It is also anticipated
that a Special Meeting of the Funds' shareholders would be held to
seek, among other things, approval of a new investment advisory
contract with Dauphin Deposit or its successor. The following
discussion relating to the Adviser's background is applicable to the
composition of the Corporation and Dauphin Deposit, without giving
effect to the Acquisition.
Dauphin Deposit, and its divisions, Bank of Pennsylvania, Valleybank,
and Farmers Bank, provide banking services through over 100 branch
offices located in a twelve county area in south central Pennsylvania
with regional headquarters in Harrisburg, Hanover, and Reading,
Pennsylvania. Among the services offered to clients are commercial and
consumer lending, time and regular savings and demand deposits, cash
management, credit cards, and personal, corporate, and pension trust
services. Mortgage lending is provided through its affiliate, Eastern
Mortgage Services, Inc. As of December 31, 1996, Dauphin Deposit had
assets in excess of $6 billion.
Dauphin Deposit's Trust and Financial Services Group provides
individuals, businesses, and municipalities with investment, custodial,
and trust services. As of December 31, 1996, the Trust and Financial
Services Group had in excess of $2 billion under active management,
including $1.1 billion as investment adviser to the MarketVest Group of
Funds.
Hopper Soliday and Co., Inc. (``Hopper Soliday'), headquartered in
Lancaster, Pennsylvania, is a wholly-owned subsidiary of the
Corporation. Hopper Soliday's services include municipal finance,
investment banking, securities underwriting, market making,
institutional sales, retail brokerage, and other general securities
businesses permitted for bank holding companies and their non-bank
subsidiaries. Hopper Soliday is a registered broker/dealer and an
affiliate of the Adviser. As such, the Adviser is permitted under
certain limited circumstances (as described further under ``Brokerage
Transactions'') to use Hopper Soliday as a broker to execute portfolio
transactions on behalf of the Funds. As part of its regular banking
operations, Dauphin Deposit may make loans to public companies and
municipalities. Thus, it may be possible, from time to time, for the
Fund to hold or acquire the securities of issuers which are also
lending clients of Dauphin Deposit. Because of the internal controls
maintained by Dauphin Deposit to restrict the flow of non-public
information, Fund investments are typically made without any knowledge
of Dauphin Deposit's or its affiliates' lending relationships with an
issuer; therefore, the lending relationship will not be a factor in the
selection of securities.
The Funds and the Adviser have each adopted strict codes of ethics
governing the conduct of all employees who manage the Funds and their
portfolio securities. These codes recognize that such persons owe a
fiduciary duty to the Funds' shareholders and must place the interests
of the shareholders ahead of the employees' own interest. Among other
things, the codes: require preclearance and periodic reporting of
personal securities transactions; prohibit personal transactions in
securities being purchased or sold, or being considered for purchase or
sale, by the Funds; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than
sixty days. Violations of the codes are subject to review by the Board
Members, and could result in severe penalties imposed by the Funds or
the Adviser.
PORTFOLIO MANAGERS' BACKGROUND. Samuel E. Long is an Equity Specialist
and Vice President of Dauphin Deposit. Mr. Long joined Dauphin Deposit
in November 1985 as Senior Equity Manager. From 1979 to 1985, Mr. Long
was Resident Manager and Vice President of the Harrisburg branch office
of W.H. Newbold's Son and Company, Inc. In this capacity, Mr. Long
achieved the designations of Registered Options Principal, General
Sales Supervisor, as well as Series III-Commodities Representative, and
Series IV-General Securities Representative. From 1974 to 1979,
Mr. Long managed an equity fund as well as employee benefit accounts
for Commonwealth National Bank. From 1969 to 1974, he was a Registered
Investment Representative with Walston and Co. Mr. Long has been the
portfolio manager for the Equity Fund since its inception.
Daryl B. Girton is a Fixed Income Specialist and Vice President of
Dauphin Deposit. He has been the Portfolio Manager of Dauphin Deposit's
Employee Benefit Short Term Bond Fund and Personal Trust U.S.
Government Fund since September of 1994. From 1989 to 1994, Mr. Girton
managed personal trust common funds for Fulton Bank, including a
government income fund, a common stock fund, and an equity income fund.
Mr. Girton graduated from Thiel College with a B.A. in Business
Administration and received an M.B.A. from Shippensburg University.
Mr. Girton is a Chartered Financial Analyst and a member of the
Philadelphia Financial Analysts Society. Mr. Girton has been the
portfolio manager for the Short-Term Bond Fund since its inception.
Cathleen S. Saylor is a Fixed Income Specialist and Vice President of
Dauphin Deposit. Ms. Saylor has been the Manager of Dauphin Deposit's
Personal Trust Municipal Bond Fund (since 1987), Dauphin Deposit's
Employee Benefit Fixed Income Fund (since 1985), and Dauphin Deposit's
Personal Trust Fixed Income Fund (since 1985). She had previously
managed Dauphin Deposit's Employee Benefit Short Term Bond Fund from
1987 to 1994. Ms. Saylor joined Dauphin Deposit in 1974 and is a former
supervisor in the Trust Operations Securities Processing Department.
She attended Harrisburg Area Community College for Business
Administration and is a graduate of the Pennsylvania Bankers'
Association Central Atlantic School of Trust. Ms. Saylor is a Chartered
Financial Analyst and a member of the Baltimore Security Analysts
Society. Ms. Saylor has been the portfolio manager for the Pennsylvania
Intermediate Municipal Bond Fund and the Intermediate U.S. Government
Bond Fund since their inception.
Brett A. Hoffacker is an Equity Specialist and Vice President of
Dauphin Deposit. Mr. Hoffacker has been the Portfolio Manager of
Dauphin Deposit's Personal Trust Equity Fund (since 1994) and Dauphin
Deposit's Employee Benefit Global Equity Fund (since 1994). From 1983
to 1994, Mr. Hoffacker was Manager of the Investment and Employee
Benefit Departments of Farmers Bank and Trust Company, a Division of
Dauphin Deposit. Mr. Hoffacker graduated from the Pennsylvania State
University with a B.A. in Finance and the Pennsylvania Bankers'
Association Central Atlantic School of Trust. Mr. Hoffacker is a
Certified Retirement Plan Specialist and a former registered investment
broker. From 1980 to 1983, Mr. Hoffacker was employed by York Bank and
Trust in Trust Employee Benefits as an account administrator. Mr.
Hoffacker has been the assistant portfolio manager for the Equity Fund
since its inception.
DISTRIBUTION OF SHARES OF THE FUNDS
Edgewood Services, Inc. is the principal distributor for shares of the
Funds. It is a New York corporation organized on October 26, 1993, and is
the principal distributor for a number of investment companies. Edgewood
Services, Inc. is a subsidiary of Federated Investors.
DISTRIBUTION PLAN. Pursuant to the provisions of a distribution plan
adopted in accordance with the Investment Company Act Rule 12b-1 (the
`Plan''), each Fund may pay to Edgewood Services, Inc., the distributor,
an amount computed at an annual rate of up to 0.25% of the average daily
net asset value of that Fund's shares to finance any activity which is
principally intended to result in the sale of that Fund's shares subject to
the Plan.
Certain trust clients of Dauphin Deposit will not be affected by the Plan
because the Plan will not be activated unless and until a separate class of
shares of the Funds (which would not have a Rule 12b-1 plan) is created and
such trust clients' investments in the Funds are converted to such class.
The distributor may, from time to time, and for such periods as it deems
appropriate, voluntarily reduce its compensation under the Plan to the
extent the expenses attributable to the shares exceed such lower expense
limitation as the distributor may, by notice to the Funds, voluntarily
declare to be effective.
The distributor may select financial institutions such as banks,
fiduciaries, custodians for public funds, investment advisers, and
broker/dealers to provide sales and support services as agents for their
clients or customers who beneficially own shares. Financial institutions
will receive fees from the distributor based upon shares owned by their
clients or customers. The schedules of such fees and the basis upon which
such fees will be paid will be determined from time to time by the
distributor.
The Funds' Plan is a compensation type plan. As such, the Funds make no
payments to the distributor except as described above. Therefore, the Funds
do not pay for unreimbursed expenses of the distributor, including amounts
expended by the distributor in excess of amounts received by it from the
Funds, interest, carrying or other financing charges in connection with
excess amounts expended, or the distributor's overhead expenses. However,
the distributor may be able to recover such amounts or may earn a profit
from future payments made by the Funds under the Plan.
The Glass-Steagall Act prohibits a depository institution (such as a
commercial bank or a savings association) from being an underwriter or
distributor of certain securities, including shares of registered open-end
mutual fund companies. The Glass-Steagall Act does not prohibit such a
depository institution from acting as investment adviser or custodian to
such an investment company or from purchasing shares of such a company as
agent for and upon the order of their customer. In the event the Glass-
Steagall Act is deemed to prohibit depository institutions from acting in
the advisory or custodial capacities described above or should Congress
relax current restrictions on depository institutions, the Board Members
will consider appropriate changes in the services.
State securities laws governing the ability of depository institutions to
act as underwriters or distributors of securities may differ from
interpretations given to the Glass-Steagall Act and, therefore, banks and
financial institutions may be required to register as broker/dealers
pursuant to state law.
ADMINISTRATIVE ARRANGEMENTS. The distributor may also pay financial
institutions as directed by the Adviser a fee based upon the average daily
net asset value of shares of their customers invested in each Fund for
providing administrative services. This fee is in addition to the amounts
paid under the Distribution Plan for administrative services, and, if paid,
will be reimbursed by the Adviser and not a Fund.
ADMINISTRATION OF THE FUNDS
ADMINISTRATIVE SERVICES. Federated Administrative Services (`FAS''),
Pittsburgh, Pennsylvania, a subsidiary of Federated Investors, provides the
Funds with the administrative personnel and services necessary to operate
each Fund. Such services include certain legal and accounting services. FAS
receives an annual administrative fee equal to 0.15% of the Funds' average
aggregate daily net assets.
The administrative fee received during any fiscal year shall aggregate at
least $75,000 per Fund. FAS may voluntarily choose to waive a portion of
its fee at any time.
CUSTODIAN. Dauphin Deposit Bank and Trust Company, Harrisburg,
Pennsylvania, is custodian for the securities and cash of the Funds.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the Adviser looks for prompt execution of the order
at a favorable price. In working with dealers, the Adviser will generally
utilize those who are recognized dealers in specific portfolio instruments,
except when a better price and execution of the order can be obtained
elsewhere. In selecting among firms believed to meet these criteria, the
Adviser may give consideration to those firms which have sold or are
selling shares of a Fund. The Adviser makes decisions on portfolio
transactions and selects brokers and dealers subject to review by the Board
Members.
Notwithstanding the foregoing, to the extent consistent with applicable
provisions of the Investment Company Act of 1940, Rule 17e-1, and other
rules and exemptions adopted by the Securities and Exchange Commission (the
`SEC'') under that Act, the Board Members have determined that all orders
for transactions in securities or options on behalf of the Funds may be
placed by Dauphin Deposit with broker/dealers affiliated with Dauphin
Deposit, including Hopper Soliday. The Funds may use Hopper Soliday or
another affiliated broker in a portfolio transaction when Dauphin Deposit
believes that the affiliated broker's charge for the transaction does not
exceed usual and customary levels and is likely to result in price and
execution at least as favorable as those of other qualified unaffiliated
broker/dealers.
EXPENSES OF THE FUNDS
The Funds pay all of their own expenses and their allocable shares of
Marketvest Funds, Inc.'s and Marketvest Funds' expenses. The expenses of
each Fund include, but are not limited to, the cost of: organizing the
Funds and continuing their existence; Board Members' fees; investment
advisory and administrative services; printing prospectuses and other Fund
documents for shareholders; registering the Funds and shares of the Funds;
taxes and commissions; issuing, purchasing, repurchasing, and redeeming
shares; fees for custodians, transfer agents, dividend disbursing agents,
shareholder servicing agents, and registrars; printing, mailing, auditing,
accounting, and legal expenses; reports to shareholders and governmental
agencies; meetings of Board Members and shareholders and proxy
solicitations therefor; distribution fees; insurance premiums; association
membership dues; and such nonrecurring and extraordinary items as may
arise. However, the Adviser may voluntarily reimburse the Funds the amount,
up to the amount of the advisory fee, by which operating expenses exceed
limitations imposed by certain states.
NET ASSET VALUE
Each Fund's net asset value per share fluctuates. It is determined by
dividing the sum of the market value of all securities and other assets,
less liabilities, by the number of shares outstanding.
INVESTING IN THE FUNDS
SHARE PURCHASES
Fund shares are sold on days on which the New York Stock Exchange and the
Federal Reserve Wire System are open for business except on Martin Luther
King Day, Columbus Day, and Veterans' Day. Shares of the Funds may be
purchased through Hopper Soliday or Dauphin Deposit. In connection with the
sale of shares of the Funds, the distributor may from time to time offer
certain items of nominal value to any shareholder or investor. The Funds
reserve the right to reject any purchase request.
To purchase shares of the Funds through Hopper Soliday, call toll free 1-
800-MKT-VEST (1-800-658-8378). Trust and institutional investors should
contact their account officer to make purchase requests through Dauphin
Deposit. Texas residents must purchase shares of the Funds through Edgewood
Services, Inc. at 1-800-618-3573. A purchase request must be received by
Hopper Soliday or Edgewood Services, Inc. before 4:00 p.m. (Eastern time),
and by Dauphin Deposit before 2:00 p.m. (Eastern time), in order for shares
of a Fund to be purchased at that day's net asset value. Purchase requests
through registered broker/dealers must be received by Hopper Soliday before
3:00 p.m. (Eastern time) in order for shares to be purchased at that day's
net asset value. Hopper Soliday and Dauphin Deposit are responsible for
promptly submitting purchase requests and providing proper written
purchasing instructions to a Fund. The order will be placed by Hopper
Soliday or Edgewood Services, Inc. when payment is received. Payment for
shares purchased through Dauphin Deposit must be received on the next
business day after placing the order.
BY CHECK. Purchases of shares by check must be made payable to the Fund and
sent to Hopper Soliday, 1703 Oregon Pike, P.O. Box 4548, Lancaster, PA
17604-4548.
BY WIRE. Shares of the Funds cannot be purchased by Federal Reserve Wire on
Martin Luther King Day, Columbus Day, or Veterans' Day. To purchase shares
by wire, Dauphin Deposit trust and institutional investors should contact
their account officer. All other shareholders should contact Hopper
Soliday.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in a Fund by an investor is $1,000.
Subsequent investments must be in amounts of at least $50. These minimums
may be waived (or lowered) for purchases by the Trust and Financial
Services Group of Dauphin Deposit and its affiliates for fiduciary or
custodial accounts and for certain purchases by employees of Dauphin
Deposit Corporation and its subsidiaries. An institutional investor's
minimum investment will be calculated by combining all accounts it
maintains with the Funds.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received, plus a sales charge, as follows:
Equity Fund:
SALES CHARGE AS ASALES CHARGE AS A
PERCENTAGE OF PUBLICPERCENTAGE OF NET
AMOUNT OF TRANSACTIONS OFFERING PRICE AMOUNT INVESTED
Less than $50,000 4.75% 4.99%
$50,000 but less than $100,000 4.50% 4.71%
$100,000 but less than $250,000 4.00% 4.17%
$250,000 but less than $500,000 3.50% 3.63%
$500,000 or more 3.00% 3.09%
Pennsylvania Intermediate Municipal Bond Fund, Short-Term Bond Fund, and
Intermediate U.S. Government Bond Fund:
SALES CHARGE AS ASALES CHARGE AS A
PERCENTAGE OF PUBLICPERCENTAGE OF NET
AMOUNT OF TRANSACTIONS OFFERING PRICE AMOUNT INVESTED
Less than $100,000 3.50% 3.63%
$100,000 but less than $250,000 3.00% 3.09%
$250,000 but less than $500,000 2.50% 2.56%
$500,000 or more 2.00% 2.04%
The net asset value is determined as of the close of trading (normally 4:00
p.m., Eastern time) on the New York Stock Exchange, Monday through Friday,
except on: (i) days on which there are not sufficient changes in the value
of a Fund's portfolio securities that its net asset value might be
materially affected; (ii) days during which no shares are tendered for
redemption and no orders to purchase shares are received; and (iii) the
following holidays: New Year's Day, Martin Luther King Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Columbus Day,
Veterans' Day, Thanksgiving Day, and Christmas Day.
PURCHASES AT NET ASSET VALUE. Shares of the Funds may be purchased at net
asset value, without a sales charge, by the Trust and Financial Services
Division of Dauphin Deposit and their affiliates for accounts in which the
Trust and Financial Services Division serves in the capacity of Trustee,
Guardian, Attorney-in-fact, Executor, Administrator, Investment Advisor,
Managing Agent, or Custodian under the Uniform Gifts to Minors Act, by
trust companies, by trust departments of other financial institutions, and
by banks and savings and loans (savings associations) for their accounts.
Board Members, emeritus trustees, employees and retired employees of
Marketvest Funds, Inc. and Marketvest Funds, Dauphin Deposit Corporation
and its subsidiaries, including Dauphin Deposit and Hopper Soliday, or
Edgewood Services, Inc. or their affiliates, or any bank or investment
dealer who has a sales agreement with Edgewood Services, Inc. with regard
to the Funds, and their spouses and children under 21, may also buy shares
at net asset value, without a sales charge. However, purchases of Fund
shares at net asset value under brokerage accounts established with Hopper
Soliday may be subject to per-transaction charges. Shareholders should
consult Hopper Soliday for more information about its charges.
SALES CHARGE REALLOWANCE. For sales of shares of a Fund, a dealer will
normally receive up to 85% of the applicable sales charge. For shares sold
with a sales charge, Hopper Soliday will receive 85% of the applicable
sales charge for purchases of shares of the Funds made directly through
Hopper Soliday. The sales charge for shares sold other than through Hopper
Soliday or registered broker/dealers will be retained by the distributor.
However, the distributor will, periodically, uniformly offer to pay to
dealers additional amounts in the form of cash or promotional incentives,
such as reimbursement of certain expenses of qualified employees and their
spouses to attend informational meetings about the Funds or other special
events at recreational-type facilities, or items of material value. Such
payments, all or a portion of which may be paid from the sales charge the
distributor normally retains or any other source available to it, will be
predicated upon the amount of shares of the Funds that are sold by the
dealer.
REDUCING THE SALES CHARGE
The sales charge can be reduced on the purchase of shares through: quantity
discounts and accumulated purchases; signing a 13-month letter of intent;
using the reinvestment privilege; or concurrent purchases.
QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES. As shown in the table above,
larger purchases reduce the sales charge paid. The Funds will combine
purchases made on the same day by the investor, the investor's spouse, and
the investor's children under age 21 when it calculates the sales charge.
If an additional purchase of shares of a Fund is made, each Fund will
consider the previous purchases still invested in any of the Funds. For
example, if a shareholder of the Equity Fund already owns shares having a
current value at the public offering price of $30,000 and purchases $20,000
more at the current public offering price, the sales charge on the
additional purchase according to the schedule now in effect would be 4.50%,
not 4.75%.
To receive the sales charge reduction, Hopper Soliday or the distributor
must be notified by the shareholder in writing or by the shareholder's
financial institution at the time the purchase is made that Fund shares are
already owned or that purchases are being combined. Each Fund will reduce
the sales charge after it confirms the purchases.
LETTER OF INTENT. If a shareholder intends to purchase at least $50,000 of
shares in the Equity Fund or $100,000 of shares in the Pennsylvania
Intermediate Municipal Bond Fund, the Short-Term Bond Fund, and the
Intermediate U.S. Government Bond Fund over the next 13 months, the sales
charge may be reduced by signing a letter of intent to that effect. This
letter of intent includes a provision for a sales charge adjustment
depending on the amount actually purchased within the 13-month period and a
provision for the custodian to hold up to 4.75% (for the Equity Fund) or
3.50% (for the Pennsylvania Intermediate Municipal Bond Fund, the Short-
Term Bond Fund, and the Intermediate U.S. Government Bond Fund) of the
total amount intended to be purchased in escrow (in shares of the Funds)
until such purchase is completed.
The shares held in escrow will be applied to the shareholder's account at
the end of the 13-month period unless the amount specified in the letter of
intent is not purchased. In this event, an appropriate number of escrowed
shares may be redeemed in order to realize the difference in the sales
charge.
This letter of intent will not obligate the shareholder to purchase shares,
but if the shareholder does so, each purchase during the period will be at
the sales charge applicable to the total amount intended to be purchased.
This letter may be dated as of a prior date to include any purchases made
within the past 90 days; however, these previous purchases will not receive
the reduced sales charge.
REINVESTMENT PRIVILEGE. If shares in the Funds have been redeemed, the
shareholder has a one-time right, within 30 days, to reinvest the
redemption proceeds at the next-determined net asset value without any
sales charge. Hopper Soliday or the distributor must be notified by the
shareholder in writing or by the shareholder's financial institution of the
reinvestment in order to eliminate a sales charge. If the shareholder
redeems his or her shares in a Fund, there may be tax consequences.
Shareholders contemplating such transactions should consult their own tax
advisers.
CONCURRENT PURCHASES. For purposes of qualifying for a sales charge
reduction, a shareholder has the privilege of combining concurrent
purchases of two or more Funds in Marketvest Group of Funds, the purchase
price of which includes a sales charge. For example, if a shareholder
concurrently invested $30,000 in shares of the Equity Fund with a sales
charge, and $20,000 in shares of another Fund with a sales charge, the
sales charge would be reduced on the Equity Fund purchase.
To receive this sales charge reduction, Hopper Soliday or the distributor
must be notified by the shareholder in writing or by their financial
institution at the time the concurrent purchases are made. The Funds will
reduce the sales charge after they confirm the purchases.
SYSTEMATIC INVESTMENT PROGRAM
Once a Fund account has been opened, shareholders may add to their
investment on a regular basis in a minimum amount of $50. The minimum
amount of $50 may be waived (or lowered) at times for employees of Dauphin
Deposit. Under this program, funds may be automatically withdrawn
periodically from the shareholder's checking account and invested in Fund
shares at the net asset value next determined after an order is received by
a Fund, plus the applicable sales charge. A shareholder may apply for
participation in this program through Hopper Soliday.
EXCHANGING SECURITIES FOR FUND SHARES
A complete description of how the Funds may accept securities in exchange
for Fund shares is explained in the Funds' Combined Statement of Additional
Information under `Exchanging Securities for Fund Shares.''
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Funds, Federated Shareholder Services Company
maintains a share account for each shareholder. Share certificates will not
be issued.
Detailed confirmations of each purchase or redemption are sent to each
shareholder. In addition, monthly confirmations are sent to report
dividends paid during that month.
DIVIDENDS AND CAPITAL GAINS
With respect to the Equity Fund, dividends are declared and paid monthly.
With respect to the Pennsylvania Intermediate Municipal Bond Fund, Short-
Term Bond Fund, and Intermediate U.S. Government Bond Fund, dividends are
declared daily and paid monthly. Dividends are declared just prior to
determining net asset value. If an order for shares is placed on the
preceding business day, shares purchased by wire begin earning dividends on
the business day wire payment is received by a Fund. If the order for
shares and payment by wire are received on the same day, shares begin
earning dividends on the next business day. Shares purchased by check begin
earning dividends on the business day after the check is converted into
federal funds. Capital gains realized by a Fund, if any, will be
distributed at least once every 12 months. Dividends and capital gains will
be automatically reinvested in additional shares on payment dates at the
ex-dividend date net asset value without a sales charge, unless cash
payments are requested by writing to the Fund.
EXCHANGE PRIVILEGE
Shareholders may exchange shares of one Fund for shares of any of the other
Funds in the Marketvest Group of Funds at net asset value, subject to
certain conditions. In addition, shares of a Fund may be exchanged for
shares of the following funds distributed by Federated Securities Corp.:
Liberty U.S. Government Money Market Trust - a U.S. government money
market fund; and
Pennsylvania Municipal Cash Trust (Institutional Service Shares) - a
Pennsylvania municipal money market fund. Shareholders who exercise
this exchange privilege must exchange shares having a net asset value
of at least $1,000. Prior to any exchange, the shareholder must receive
a copy of the current prospectus of the participating fund into which
an exchange is to be made.
Exchanges are made at net asset value, plus the difference between a Fund's
sales charge already paid and any applicable sales charge on shares of the
fund to be acquired in the exchange.
The exchange privilege is available to shareholders residing in any state
in which the participating fund shares being acquired may legally be sold.
Upon receipt by Federated Shareholder Services Company of proper
instructions and all necessary supporting documents, shares submitted for
exchange will be redeemed at the next determined net asset value. If the
exchanging shareholder does not have an account in the participating fund
whose shares are being acquired, a new account will be established with the
same registration, dividend, and capital gain options as the account from
which shares are exchanged, unless otherwise specified by the shareholder.
In the case where the new account registration is not identical to that of
the existing account, a signature guarantee is required. (See `Redeeming
Shares by Mail.') Exercise of this privilege is treated as a redemption
and a new purchase for federal income tax purposes and, depending on the
circumstances, a short or long-term capital gain or loss may be realized.
The Funds reserve the right to modify or terminate the exchange privilege
at any time. Shareholders would be notified prior to any modification or
termination. Shareholders may obtain further information on the exchange
privilege by calling their Hopper Soliday representative or an authorized
broker.
EXCHANGE BY TELEPHONE
Shareholders may provide instructions for exchanges between participating
funds by calling Hopper Soliday toll-free at 1-800-MKT-VEST (1-800-658-
8378). In addition, investors may exchange shares by calling their
authorized broker directly.
An authorization form permitting the Funds to accept telephone exchange
requests must first be completed. It is recommended that investors request
this privilege at the time of their initial application. If not completed
at the time of initial application, authorization forms and information on
this service can be obtained through a Hopper Soliday representative or
authorized broker. Shares may be exchanged by telephone only between fund
accounts having identical shareholder registrations. Telephone exchange
instructions may be recorded. If reasonable procedures are not followed by
a Fund, it may be liable for losses due to unauthorized or fraudulent
telephone instructions.
Telephone exchange instructions must be received by Hopper Soliday or an
authorized broker and transmitted to Federated Shareholder Services Company
before 3:00 p.m. (Eastern time) for shares to be exchanged the same day.
Shareholders who exchange into shares of the Funds will not receive a
dividend from a Fund on the date of the exchange.
Shareholders of the Funds may have difficulty in making exchanges by
telephone through banks, brokers, and other financial institutions during
times of drastic economic or market changes. If shareholders cannot contact
their Hopper Soliday representative or authorized broker by telephone, it
is recommended that an exchange request be made in writing and sent by mail
for next day delivery.
WRITTEN EXCHANGE
An investor may exchange shares by sending a written request to Hopper
Soliday, 1703 Oregon Pike, P.O. Box 4548, Lancaster, PA 17604-4548. In
addition, trust and institutional investors of Dauphin Deposit wishing to
make an exchange by written request may do so by sending it to their trust
officer, c/o Dauphin Deposit Bank and Trust Company, 213 Market Street,
Harrisburg, PA 17101.
REDEEMING SHARES
Each Fund redeems shares at their net asset value next determined after the
Fund receives the redemption request. Redemptions will be made on days on
which a Fund computes its net asset value. Telephone or written requests
for redemptions must be received in proper form and can be made through
Hopper Soliday or Dauphin Deposit.
BY TELEPHONE. To redeem shares of a Fund through Hopper Soliday, call toll-
free 1-800-MKT-VEST (1-800-658-8378). Trust and institutional investors of
Dauphin Deposit should contact their account officer to make redemption
requests. Shares of a Fund will be redeemed at the net asset value next
determined after a Fund receives the redemption request from Hopper Soliday
or Dauphin Deposit. A redemption request must be received by Hopper Soliday
or Dauphin Deposit before 4:00 p.m. (Eastern time) in order for shares of a
Fund to be redeemed at that day's net asset value. Redemption requests
through registered broker/dealers must be received by Hopper Soliday before
3:00 p.m. (Eastern time) in order for shares to be redeemed at that day's
net asset value. Hopper Soliday and Dauphin Deposit are responsible for
promptly submitting redemption requests and providing proper written
redemption instructions to a Fund. Registered broker/dealers may charge
customary fees and commissions for this service. In no event will proceeds
be sent more than seven days after a proper request for redemption has been
received.
An authorization form permitting a Fund to accept telephone requests must
first be completed. Authorization forms and information on this service are
available from Hopper Soliday or Dauphin Deposit. Telephone redemption
instructions may be recorded. If reasonable procedures are not followed by
a Fund, it may be liable for losses due to unauthorized or fraudulent
telephone instructions. In the event of drastic economic or market changes,
a shareholder may experience difficulty in redeeming by telephone. If such
a case should occur, another method of redemption should be utilized, such
as a written request to Hopper Soliday or Dauphin Deposit.
If, at any time, a Fund shall determine it necessary to terminate or modify
this method of redemption, shareholders would be promptly notified.
BY MAIL. Any shareholder may redeem shares of a Fund by sending a written
request to Hopper Soliday. Trust and institutional investors should send a
written request to Dauphin Deposit. The written request should include the
shareholder's name, the Fund name, the account number, and the share or
dollar amount requested. Shareholders should call Hopper Soliday or Dauphin
Deposit for assistance in redeeming by mail.
SIGNATURES. Shareholders requesting a redemption of any amount to be sent
to an address other than that on record with a Fund, or a redemption
payable other than to the shareholder of record must have signatures on
written redemption requests guaranteed by:
a trust company or commercial bank whose deposits are insured by the
Bank Insurance Fund (``BIF'), which is administered by the Federal
Deposit Insurance Corporation (``FDIC');
a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange; a savings bank or savings association whose deposits are
insured by the Savings Association Insurance Fund (``SAIF'), which is
administered by the FDIC; or any other ``eligible guarantor
institution,'' as defined in the Securities Exchange Act of 1934.
The Funds do not accept signatures guaranteed by a notary public. The Funds
and their transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Funds may elect in the future
to limit eligible signature guarantors to institutions that are members of
a signature guarantee program. The Funds and their transfer agent reserve
the right to amend these standards at any time without notice. Normally, a
check for the proceeds is mailed within one business day, but in no event
more than seven days, after receipt of a proper written redemption request.
SYSTEMATIC WITHDRAWAL PROGRAM
Shareholders who desire to receive payments of a predetermined amount may
take advantage of the Systematic Withdrawal Program. Under this program,
Fund shares are redeemed to provide for periodic withdrawal payments in an
amount directed by the shareholder. Depending upon the amount of the
withdrawal payments, the amount of dividends paid and capital gains
distributions with respect to Fund shares, and the fluctuation of the net
asset value of Fund shares redeemed under this program, redemptions may
reduce, and eventually deplete, the shareholder's investment in a Fund. For
this reason, payments under this program should not be considered as yield
or income on the shareholder's investment in a Fund. To be eligible to
participate in this program, a shareholder must have an account value of at
least $10,000. A shareholder may apply for participation in this program
through Hopper Soliday. Due to the fact that shares are sold with a sales
charge, it is not advisable for shareholders to be purchasing shares while
participating in this program.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, a Fund may
redeem shares in any account and pay the proceeds to the shareholder if the
account balance falls below the required minimum value of $1,000 due to
shareholder redemptions. This requirement does not apply, however, if the
balance falls below $1,000 because of changes in a Fund's net asset value.
Before shares are redeemed to close an account, the shareholder is notified
in writing and allowed 30 days to purchase additional shares to meet the
minimum requirement.
SHAREHOLDER INFORMATION
There is a remote possibility that one Fund may become liable for any
misstatement, inaccuracy or incomplete disclosure in the prospectus about
another Fund.
MARKETVEST FUNDS, INC.
VOTING RIGHTS. Each share of a Fund gives the shareholder one vote in Board
Member elections and other matters submitted to shareholders for vote. All
shares of each Fund in Marketvest Funds, Inc. have equal voting rights,
except that in matters affecting only a particular Fund, only shares of
that Fund are entitled to vote.
As a Maryland corporation, Marketvest Funds, Inc. is not required to hold
annual shareholder meetings. Shareholder approval will be sought only for
certain changes in the operation of Marketvest Funds, Inc. or a Fund and
for the election of Board Members under certain circumstances.
Board Members may be removed by the Board Members or by shareholders at a
special meeting. A special meeting of shareholders shall be called by the
Board Members upon the written request of shareholders owning at least 10%
of the outstanding shares of all series of Marketvest Funds, Inc. entitled
to vote.
[TO BE UPDATED BY AMENDMENT] As of September 3, 1996, Donald & Co.,
nominee account for Dauphin Deposit Bank & Trust Co., Harrisburg,
Pennsylvania, was the owner of record of more than 25% of the outstanding
shares of the designated Fund: 22,966,400 shares (50.69%) of the Equity
Fund; 6,676,014 shares (45.32%) of the Short-Term Bond Fund; 17,171,164
shares (70.30%) of the Intermediate U.S. Government Bond Fund; and
therefore, may, for certain purposes, be deemed to control these Funds and
be able to affect the outcome of certain matters presented for a vote of
shareholders.
[TO BE UPDATED BY AMENDMENT] As of September 3, 1996, Greenco, nominee
account for Dauphin Deposit Bank & Trust Co., Harrisburg, Pennsylvania, was
the owner of record of more than 25% of the outstanding shares of the
designated Fund: 22,190,041 shares (48.97%) of the Equity Fund; 8,056,249
shares (54.68%) of the Short-Term Bond Fund; 7,243,477 shares (29.66%) of
the Intermediate U.S. Government Bond Fund; and therefore, may, for certain
purposes, be deemed to control these Funds and be able to affect the
outcome of certain matters presented for a vote of shareholders.
MARKETVEST FUNDS
VOTING RIGHTS. Each share of a Fund gives the shareholder one vote in Board
Member elections and other matters submitted to shareholders for vote. As a
Massachusetts business trust, Marketvest Funds is not required to hold
annual shareholder meetings. Shareholder approval will be sought only for
certain changes in the operation of Marketvest Funds or a Fund and for the
election of Board Members under certain circumstances. Board Members may be
removed by the Board Members or by shareholders at a special meeting. A
special meeting of the shareholders for this purpose shall be called by the
Board Members upon the written request of shareholders owning at least 10%
of the outstanding shares of all series of Marketvest Funds entitled to
vote.
[TO BE UPDATED BY AMENDMENT] As of September 3, 1996, Donald & Co.,
nominee account for Dauphin Deposit Bank & Trust Co., Harrisburg,
Pennsylvania, owned 22,293,526 shares (99.92%) of the Pennsylvania
Intermediate Municipal Bond Fund; and therefore, may, for certain purposes,
be deemed to control this Fund and be able to affect the outcome of certain
matters presented for a vote of shareholders.
EFFECT OF BANKING LAWS
The Glass-Steagall Act and other banking laws and regulations presently
prohibit a bank holding company registered under the Bank Holding Company
Act of 1956, as amended, or any bank or non-bank affiliate thereof from
sponsoring, organizing, controlling, or distributing the shares of a
registered, open-end investment company continuously engaged in the
issuance of its shares, and prohibit banks generally from underwriting, or
distributing certain types of securities such as shares of a registered
open-end investment company. Such laws and regulations do not prohibit such
a holding company or bank or non-bank affiliate from acting as investment
adviser, transfer agent, or custodian to such an investment company or from
purchasing shares of such a company as agent for and upon the order of
their customer. The Funds' Adviser, Dauphin Deposit, is subject to such
banking laws and regulations. In addition, Dauphin Deposit may enter into
brokerage transactions with Hopper Soliday, which is an affiliate of
Dauphin Deposit (see `Brokerage Transactions'').
Dauphin Deposit believes, based on the advice of its counsel, that it may
perform the investment advisory services for any Fund contemplated by its
advisory agreements with the Funds without violating the Glass-Steagall Act
or other applicable banking laws or regulations. Such counsel has pointed
out, however, that changes in either federal or state statutes and
regulations relating to the permissible activities of banks and their
subsidiaries or affiliates, as well as further judicial or administrative
decisions or interpretations of present or future statutes and regulations,
could prevent Dauphin Deposit from continuing to perform all or a part of
the above services for its customers and/or a Fund. In such event, changes
in the operation of a Fund may occur, including the possible alteration or
termination of any automatic or other Fund share investment and redemption
services then being provided by Dauphin Deposit, and the Board Members
would consider alternative investment advisers and other means of
continuing available investment services.
It is not expected that Fund shareholders would suffer any adverse
financial consequences (if another adviser with equivalent abilities to
Dauphin Deposit is found) as a result of any of these occurrences.
TAX INFORMATION
FEDERAL INCOME TAX
The Funds expect to pay no federal income tax because each Fund intends to
meet requirements of the Internal Revenue Code applicable to regulated
investment companies and to receive the special tax treatment afforded to
such companies. Each Fund will be treated as a single, separate entity for
federal income tax purposes so that income (including capital gains) and
losses realized by a Fund will not be combined for tax purposes with those
realized by any of the other Funds.
With respect to the Equity Fund, the Short-Term Bond Fund, and the
Intermediate U.S. Government Bond Fund, unless otherwise exempt,
shareholders are required to pay federal income tax on any dividends and
other distributions received. This applies whether dividends and
distributions are received in cash or as additional shares. Each Fund will
provide detailed tax information for reporting purposes.
Pennsylvania Personal Property Taxes. With respect to the Equity Fund, the
Short-Term Bond Fund, and the Intermediate U.S. Government Bond Fund,
shares are exempt from personal property taxes imposed by counties and
school districts in Pennsylvania. Shares of the Pennsylvania Intermediate
Municipal Bond Fund are exempt from personal property taxes imposed by
counties and school districts in Pennsylvania to the extent that the Fund
invests in obligations that are exempt from such taxes. Shareholders are
urged to consult their own tax advisers regarding the status of their
accounts under state and local tax laws.
ADDITIONAL TAX INFORMATION FOR PENNSYLVANIA INTERMEDIATE MUNICIPAL BOND
FUND
Shareholders are not required to pay the federal regular income tax on any
dividends received from the Fund that represent net interest on tax-exempt
municipal bonds. However, under the Tax Reform Act of 1986, dividends
representing net interest income earned on some municipal bonds may be
included in calculating the federal individual alternative minimum tax or
the federal alternative minimum tax for corporations.
The alternative minimum tax, up to 28% of alternative minimum taxable
income for individuals and 20% for corporations, applies when it exceeds
the regular tax for the taxable year. Alternative minimum taxable income is
equal to the regular taxable income of the taxpayer increased by certain
`tax preference'' items not included in regular taxable income and reduced
by only a portion of the deductions allowed in the calculation of the
regular tax.
The Tax Reform Act of 1986 treats interest on certain `private activity''
bonds issued after August 7, 1986 as a tax preference item for both
individuals and corporations. Unlike traditional governmental purpose
municipal bonds, which finance roads, schools, libraries, prisons and other
public facilities, private activity bonds provide benefits to private
parties. The Fund may purchase all types of municipal bonds, including
private activity bonds. Thus, should it purchase any such bonds, a portion
of the Fund's dividends may be treated as a tax preference item.
In addition, in the case of a corporate shareholder, dividends of the Fund
which represent interest on municipal bonds will become subject to the 20%
corporate alternative minimum tax because the dividends are included in a
corporation's `adjusted current earnings.'' The corporate alternative
minimum tax treats 75% of the excess of a taxpayer's `adjusted current
earnings''over the taxpayer's alternative minimum taxable income as a tax
preference item. `Adjusted current earnings'' is based upon the concept of
a corporation's `earnings and profits.'' Since ``earnings and profits''
generally includes the full amount of any Fund dividend, and alternative
minimum taxable income does not include the portion of the Fund's dividend
attributable to municipal bonds which are not private activity bonds, the
difference will be included in the calculation of the corporation's
alternative minimum tax.
Shareholders should consult with their tax advisers to determine whether
they are subject to the alternative minimum tax or the corporate
alternative minimum tax and, if so, the tax treatment of dividends paid by
the Fund. Dividends of the Fund representing net interest income earned on
some temporary investments and any realized net short-term gains are taxed
as ordinary income. Distributions representing net long-term capital gains
realized by the Fund, if any, will be taxable as long-term capital gains
regardless of the length of time shareholders have held their shares.
These tax consequences apply whether dividends are received in cash or as
additional shares. Information on the tax status of dividends and
distributions is provided annually.
Pennsylvania Taxes. Under existing Pennsylvania laws, distributions made by
the Fund will not be subject to Pennsylvania income taxes to the extent
that such distributions qualify as exempt-interest dividends under the
Internal Revenue Code and represent (i) interest from obligations of the
Commonwealth of Pennsylvania, or of any municipal corporation, or political
subdivision thereof; or (ii) interest from obligations of the United States
or its possessions.
Conversely, to the extent that distributions made by the Fund are
attributable to other types of obligations, such distributions will be
subject to Pennsylvania income taxes.
Other State and Local Taxes. Income from the Fund is not necessarily free
from taxes in states other than Pennsylvania. State laws differ on this
issue, and shareholders are urged to consult their own tax advisers
regarding the status of their accounts under state and local tax laws.
PERFORMANCE INFORMATION
From time to time, the Funds may advertise total return and yield. In
addition, the Pennsylvania Intermediate Municipal Bond Fund may advertise
tax-equivalent yield.
Total return represents the change, over a specified period of time, in the
value of an investment in a Fund after reinvesting all income and capital
gains distributions. It is calculated by dividing that change by the
initial investment and is expressed as a percentage.
The yield of each Fund is calculated by dividing the net investment income
per share (as defined by the SEC) earned by each Fund over a thirty-day
period by the maximum offering price per share of a Fund on the last day of
the period. This number is then annualized using semi-annual compounding.
The yield does not necessarily reflect income actually earned by each Fund
and, therefore, may not correlate to the dividends or other distributions
paid to shareholders.
The tax-equivalent yield of the Pennsylvania Intermediate Municipal Bond
Fund is calculated similarly to the yield, but is adjusted to reflect the
taxable yield that the Fund would have had to earn to equal its actual
yield, assuming a specific tax rate. The yield and tax-equivalent yield do
not necessarily reflect income actually earned by the Fund and, therefore,
may not correlate to the dividends or other distributions paid to
shareholders.
The performance information normally reflects the effect of the maximum
sales load which, if excluded, would increase the total return and yield.
From time to time, advertisements for the Funds may refer to ratings,
rankings, and other information in certain financial publications and/or
compare the Funds' performance to certain indices.
PERFORMANCE INFORMATION FOR PREDECESSOR COMMON AND COLLECTIVE INVESTMENT
FUNDS
The Equity Fund, the Pennsylvania Intermediate Municipal Bond Fund, the
Short-Term Bond Fund, and the Intermediate U.S. Government Bond Fund
emanate from common and collective investment funds that were or are
currently managed by the Adviser (the `Common and Collective Fund(s)'').
The assets from the Common and Collective Funds were transferred to the
corresponding Fund in connection with each Fund's commencement of
operations.
Set forth below are certain performance data for these Common and
Collective Funds. This information is deemed relevant because the Common
and Collective Funds have been managed using substantially the same
investment objective, policies, and limitations as those used by each of
the corresponding Funds. However, the past performance data shown below is
not necessarily indicative of each Fund's future performance. Each Fund is
actively managed, and its investments will vary from time to time. Each
Fund's investments are not identical to the past portfolio investments of
the Common and Collective Funds. Moreover, the Common and Collective Funds
did not incur expenses that correspond to the advisory, administrative, and
other fees to which each Fund is subject. Accordingly, the performance
information shown below has been adjusted to reflect the anticipated total
expense ratios for each Fund. This adjustment has the effect of lessening
the actual performance for the Common and Collective Funds. Because a sales
load was not imposed on the Common and Collective Funds, the performance
figures shown below have been adjusted to reflect the effect of the maximum
sales load (i.e., 4.75% on the Equity Fund and 3.50% on the Pennsylvania
Intermediate Municipal Bond Fund, the Short-Term Bond Fund, and the
Intermediate U.S. Government Bond Fund, respectively) applicable to certain
purchasers of each Fund. This adjustment further reduces the actual
performance of the Common and Collective Funds. Corresponding performance
figures which do not reflect the sales load are also provided.
AVERAGE ANNUAL TOTAL RETURN
PREDECESSOR COMMON FUNDS FOR THE PERIOD ENDING DECEMBER 31, 1995*
(CORRESPONDING MARKETVEST FUNDS) REFLECTING LOAD
INCEPTION 1 YEAR 3 YEARS5 YEARSSINCE INCEPTION
Personal Trust Equity Fund
Inception:
October 1978
(MARKETVEST EQUITY FUND) 26.88% 12.68% 13.49% 12.81%
Equity Fund for Tax-Exempt Organizations
Inception: March 1984
(MARKETVEST EQUITY FUND) 27.22% 12.44% 14.28% 13.52%
Personal Trust Municipal Bond Fund
Inception: August 1981
(MARKETVEST PENNSYLVANIA INTERMEDIATE
MUNICIPAL BOND FUND) 4.90% 3.09% 4.96% 6.89%
U.S. Government Fixed Income Fund
Inception: July 1989
(MARKETVEST SHORT-TERM BOND FUND)5.38% 3.22% 4.82% 5.35%
Personal Trust Fixed Income Fund
Inception: October 1978
(MARKETVEST INTERMEDIATE U.S.
GOVERNMENT BOND FUND) 9.85% 4.64% 7.06% 9.11%
WITHOUT LOAD
1 YEAR 3 YEARS5 YEARSSINCE INCEPTION
Personal Trust Equity Fund
Inception: October 1978
(MARKETVEST EQUITY FUND) 33.22% 14.52% 14.60%
13.16%
Equity Fund for Tax-Exempt Organizations
Inception: March 1984
(MARKETVEST EOUITY FUND) 33.59% 14.29% 15.40% 14.05%
Personal Trust Municipal Bond Fund
Inception: August 1981
(MARKETVEST PENNSYLVANIA INTERMTEDIATE
MUNICIPAL BOND FUND) 8.76% 4.33% 5.71% 7.18%
U.S. Government Fixed Income Fund
Inception: July 1989
(MARKETVEST SHORT-TERM BOND FUND) 9.21%4.46% 5.55% 5.95%
Personal Trust Fixed Income Fund
Inception: October 1978
(MARKETVEST INTERMEDIATE U.S.
GOVERNMENT BOND FUND) 13.83% 5.91% 7.83% 9.37%
*The Average Annual Total Return for each Common Fund has been adjusted to
reflect each corresponding Fund's anticipated expenses, net of voluntary
waivers.
AVERAGE ANNUAL TOTAL RETURN
PREDECESSOR COLLECTIVE FUNDS FOR THE PERIOD ENDING DECEMBER 31,
1995*
(CORRESPONDING MARKETVEST FUNDS) REFLECTING LOAD
1 YEAR 3 YEARS5 YEARSSINCE INCEPTION
Employee Benefit Equity Fund
Inception: August 1981
(MARKETVEST EQUITY FUND) 27.34% 12.94% 14.89% 15.31%
Employee Benefit Short-Term Fixed Income Fund
Inception: April 1984
(MARKETVEST SHORT-TERM BOND FUND)5.91% 3.73% 5.23% 7.08%
Employee Benefit Fixed Income Fund
Inception: August 1981
(MARKETVEST INTERMEDIATE U.S.
GOVERNMENT BOND FUND) 9.15% 4.24% 6.79% 10.00%
WITHOUT LOAD
1 YEAR 3 YEARS 5 YEARS SINCE
INCEPTION
Employee Benefit Equity Fund
Inception: August 1981
(MARKETVEST EQUITY FUND) 33.69% 14.79% 16.02% 15.44%
Employee Benefit Short-Term Fixed Income Fund
Inception: April 1984
(MARKETVEST SHORT-TERM BOND FUND)9.72% 4.97% 5.97% 7.38%
Employee Benefit Fixed Income Fund
Inception: August 1981
(MARKETVEST INTERMEDIATE U.S.
GOVERNMENT BOND FUND) 13.11% 5.48% 7.56% 10.37%
*The Average Annual Total Return for each Collective Fund has been
adjusted to reflect each corresponding Fund's anticipated expenses, net
of voluntary waivers.
ADDRESSES
Marketvest Equity Fund
Marketvest Pennsylvania Intermediate Municipal Bond Fund
Marketvest Short-Term Bond Fund
Marketvest Intermediate U.S. Government Bond Fund
Federated Investors Tower
Pittsburgh, Pennsylvania
15222-3779
Distributor
Edgewood Services, Inc. Clearing Operations P.O. Box 897
Pittsburgh, Pennsylvania
15230-0897
Investment Adviser
Dauphin Deposit Bank and Trust Company 213 Market Street
Harrisburg, Pennsylvania
17101
Custodian
Dauphin Deposit Bank and Trust Company 213 Market Street
Harrisburg, Pennsylvania 17101
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Portfolio Accounting Services Federated Services Company
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Independent Auditors Ernst & Young LLP
One Oxford Centre
Pittsburgh, Pennsylvania 15219
COMBINED PROSPECTUS FOR
MARKETVEST EQUITY FUND
MARKETVEST PENNSYLVANIA INTERMEDIATE MUNICIPAL BOND FUND
MARKETVEST SHORT-TERM BOND FUND
MARKETVEST INTERMEDIATE U.S. GOVERNMENT BOND FUND
JUNE 1997
Investment Adviser
Edgewood Services, Inc.
Federated Investors Tower
Pittsburgh, PA 15222-3779
Edgewood Services, Inc. is the distributor of the fund
and a subsidiary of Federated Investors.
CUSIP 57061E105
CUSIP 57061E204
CUSIP 57061E303
CUSIP 57061E107
G01560-01 (6/97)
MARKETVEST GROUP OF FUNDS
COMBINED STATEMENT OF ADDITIONAL INFORMATION
This Combined Statement of Additional Information relates to the following
five portfolios (individually, the ``Fund,''or collectively, the ``Funds')
comprising the Marketvest Group of Funds:
o Marketvest Equity Fund;
o Marketvest International Equity Fund;
o Marketvest Pennsylvania Intermediate Municipal Bond Fund;
o Marketvest Short-Term Bond Fund; and
o Marketvest Intermediate U.S. Government Bond Fund.
This Combined Statement of Additional Information should be read with the
combined prospectus of Funds dated June 30, 1997. This Statement is not a -
prospectus itself. To receive a copy of either prospectus, write to the
Funds or call Hopper Soliday and Co., Inc. at 1-800-MKT-VEST (1-800- 658-
8378). Terms used but not defined herein, which are defined in the
prospectuses, are used herein as defined in the prospectuses.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Statement dated June 30, 1997
Cusip 57061D107
Cusip 57061E105
Cusip 57061E204
Cusip 57061E303
Cusip 57061D206
G01560-02 (6/97)
INVESTMENT OBJECTIVE AND POLICIES OF THE FUNDS 1
Convertible Securities 1
Warrants 2
Foreign Securities 2
Foreign Currency Hedging Transactions 2
Pennsylvania Municipal Securities 3
Participation Interests 3
Variable Rate Municipal Securities 4
Municipal Leases 4
WEIGHTED AVERAGE PORTFOLIO MATURITY 4
Adjustable Rate Mortgage Securities 4
Collateralized Mortgage Obligations 5
Real Estate Mortgage Investment Conduits 5
Privately Issued Mortgage-Related Securities 5
Resets of Interest 5
Caps and Floors 6
Swap Agreements 6
Credit Facilities 7
Foreign Bank Instruments 7
When-Issued and Delayed Delivery Transactions 7
Repurchase Agreements 7
Credit Enhancement 7
Restricted and Illiquid Securities 8
Reverse Repurchase Agreements 8
Lending of Portfolio Securities 8
Portfolio Turnover 8
PENNSYLVANIA INVESTMENT RISKS 9
INVESTMENT LIMITATIONS 9
MARKETVEST FUNDS, INC. MANAGEMENT
MARKETVEST FUNDS MANAGEMENT 12
Officers and Board Members 12
Fund Ownership 13
Directors' Compensation Table-
Marketvest Funds, Inc. 14
Trustees' Compensation Table-
Marketvest Funds 15
Trustee Liability 15
INVESTMENT ADVISORY SERVICES 15
Adviser to the Funds 15
Advisory Fees 15
OTHER SERVICES 16
Administration of the Funds 16
Custodian 16
Transfer Agent, Dividend Disbursing Agent, and
Portfolio Accounting Services 16
Independent Auditors 16
BROKERAGE TRANSACTIONS 16
International Equity Fund 17
PURCHASING SHARES 17
Distribution Plan 17
Administrative Arrangements 18
Conversion to Federal Funds 18
Exchanging Securities For Fund Shares 18
DETERMINING NET ASSET VALUE 18
Determining Market Value of Securities 18
Trading in Foreign Securities 19
Valuing Municipal Bonds 19
EXCHANGE PRIVILEGE 19
REDEEMING SHARES 19
Redemption in Kind 19
MASSACHUSETTS PARTNERSHIP LAW 20
TAX STATUS 20
The Funds' Tax Status 20
International Equity Fund 20
Shareholders' Tax Status 21
TOTAL RETURN 21
YIELD 22
TAX-EQUIVALENT YIELD 22
Tax-Equivalency Table 22
PERFORMANCE COMPARISONS 23
Economic and Market Information 25
FINANCIAL STATEMENTS 25
APPENDIX 26
INVESTMENT OBJECTIVE AND POLICIES OF THE FUNDS
The Funds' prospectuses discuss the Funds' investment objectives and the
policies employed to achieve those objectives. The following discussion
supplements the description of the Funds' investment policies in the
prospectuses.
The Funds' respective investment objectives cannot be changed without the
approval of that Fund's shareholders. Unless otherwise indicated, the
investment policies described below may be changed by the Board of Trustees
or the Board of Directors (hereinafter referred to as `Board Members'')
without shareholder approval. Shareholders will be notified before any
material change in these policies becomes effective.
The International Equity Fund seeks to achieve its investment objective by
investing primarily in shares of other investment companies (the
`underlying funds''). To the extent that the International Equity Fund's
assets are invested in underlying funds, its investment experience will
correspond directly with that of its proportionate investment in those
funds. The International Equity Fund may also invest directly in the
securities held by the underlying funds. Because the International Equity
Fund and the underlying funds will have substantially similar investment
experiences and incur similar risks, all further references to the
International Equity Fund hereinafter include the underlying funds unless
otherwise indicated. Although many of the underlying funds have the same or
similar investment policies as the International Equity Fund, they are not
required to do so.
CONVERTIBLE SECURITIES
The Equity Fund and the International Equity Fund may invest in convertible
securities. Convertible bonds and convertible preferred stocks are fixed
income securities that generally retain the investment characteristics of
fixed income securities until they have been converted but also react to
movements in the underlying equity securities. The holder is entitled to
receive the fixed income of a bond or the dividend preference of a
preferred stock until the holder elects to exercise the conversion
privilege. Usable bonds are corporate bonds that can be used, in whole or
in part, customarily at full face value, in lieu of cash to purchase the
issuer's common stock. When owned as part of a unit along with warrants,
which are options to buy the common stock, they function as convertible
bonds, except that the warrants generally will expire before the bond's
maturity. Convertible securities are senior to equity securities and,
therefore, have a claim to assets of the corporation prior to the holders
of common stock in the case of liquidation. However, convertible securities
are generally subordinated to similar nonconvertible securities of the same
company. The interest income and dividends from convertible bonds and
preferred stocks provide a stable stream of income with generally higher
yields than common stocks, but lower than non-convertible securities of
similar quality.
The Funds will exchange or convert the convertible securities held in their
respective portfolios into shares of the underlying common stock in
instances in which, in the Adviser's opinion, the investment
characteristics of the underlying common shares will assist a Fund in
achieving its investment objective. Otherwise, the Funds will hold or trade
the convertible securities. In selecting convertible securities for a Fund,
the Adviser evaluates the investment characteristics of the convertible
security as a fixed income instrument and the investment potential of the
underlying equity security for capital appreciation. In evaluating these
matters with respect to a particular convertible security, the Adviser
considers numerous factors, including the economic and political outlook,
the value of the security relative to other investment alternatives, trends
in the determinants of the issuer's profits, and the issuer's management
capability and practices.
Usable bonds are corporate bonds that can be used in whole or in part,
customarily at full face value, in lieu of cash to purchase the issuer's
common stock. When owned as part of a unit along with warrants, which
entitle the holder to buy the common stock, they function as convertible
bonds, except that the warrants generally will expire before the bonds'
maturity. Convertible securities are senior to equity securities and,
therefore, have a claim to assets of the corporation prior to the holders
of common stock in the case of liquidation. However, convertible securities
are generally subordinated to similar nonconvertible securities of the same
company.
The Funds will exchange or convert the convertible securities held in their
respective portfolios into shares of the underlying common stocks when, in
the Adviser's opinion, the investment characteristics of the underlying
common shares will assist the Funds in achieving their investment
objectives. Otherwise, the Funds will hold or trade the convertible
securities. In selecting convertible securities for the Funds, the Adviser
evaluates the investment characteristics of the convertible security as a
fixed income instrument, and the investment potential of the underlying
equity security for capital appreciation. In evaluating these matters with
respect to a particular convertible security, the Adviser considers
numerous factors, including the economic and political outlook, the value
of the security relative to other investment alternatives, trends in the
determinants of the issuer's profits, and the issuer's management
capability and practices.
WARRANTS
The Equity Fund and the International Equity Fund may invest in warrants.
Warrants provide an option to purchase common stock at a specific price
(usually at a premium above the market value of the optioned common stock
at issuance) valid for a specific period of time. Warrants may have a life
ranging from less than a year to twenty years or may be perpetual. However,
most warrants have expiration dates after which they are worthless. In
addition, if the market price of the common stock does not exceed the
warrant's exercise price during the life of the warrant, the warrant will
expire as worthless. Warrants have no voting rights, pay no dividends, and
have no rights with respect to the assets of the corporation issuing them.
The percentage increase or decrease in the market price of the warrant may
tend to be greater than the percentage increase or decrease in the market
price of the underlying common stock.
FOREIGN SECURITIES
If the International Equity Fund maintains its assets abroad, the Board
Members must consider at least annually whether maintaining the
International Equity Fund's assets with custodians in foreign countries is
consistent with the best interests of the Fund and its shareholders. The
Board Members also must consider the degree of risk involved through the
holding of portfolio securities in domestic and foreign securities
depositories. However, in the absence of willful misfeasance, bad faith or
gross negligence, any losses resulting from the holding of the Funds'
portfolio securities in foreign countries and/or with foreign custodians or
securities depositories will be at the risk of shareholders, unless the
losses are insured. No assurance can be given that the Board Members'
appraisal of the risks will always be correct or that such exchange control
restrictions or political acts of foreign governments might not occur.
Securities that are acquired by the International Equity Fund outside the
United States and that are publicly traded in the United States on a
foreign securities exchange or in a foreign securities market are not
considered by the Fund to be illiquid assets provided that: (i) the Fund
acquires and holds the securities with the intention of reselling the
securities in the foreign trading market, (ii) the Fund reasonably believes
it can readily dispose of the securities in the foreign trading market or
for cash in the United States, or (iii) foreign market and current market
quotations are readily available. Investments may be in securities of
foreign issuers, whether located in developed or undeveloped countries.
Investments in foreign securities where delivery takes place outside the
United States will have to be made in compliance with any applicable U.S.
and foreign currency restrictions and tax laws (including laws imposing
withholding taxes on any dividend or interest income) and laws limiting the
amount and types of foreign investments. Changes of government
administrations or economic or monetary policies in the United States or
abroad, or changed circumstances regarding convertibility or exchange
rates, could result in investment losses for the Fund.
FOREIGN CURRENCY HEDGING TRANSACTIONS
In order to hedge against foreign currency exchange rate risks, the
International Equity Fund may enter into forward foreign currency exchange
contracts and foreign currency futures contracts, as well as purchase put
or call options on foreign currencies, as described below. The Fund may
also conduct its foreign currency exchange transactions on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign currency exchange
market.
The International Equity Fund may enter into forward foreign currency
exchange contracts (`forward contracts'') to attempt to minimize the risk
to the Fund from adverse changes in the relationship between the U.S.
dollar and foreign currencies. A forward contract is an obligation to
purchase or sell a specific currency for an agreed price at a future date
which is individually negotiated and privately traded by currency traders
and their customers. The Fund may enter into a forward contract, for
example, when it enters into a contract for the purchase or sale of a
security denominated in a foreign currency in order to `lock in'' the U.S.
dollar price of the security. In addition, for example, when the Fund
believes that a foreign currency may suffer a substantial decline against
the U.S. dollar, it may enter into a forward contract to sell an amount of
that foreign currency approximating the value of some or all of the Fund's
portfolio securities denominated in such foreign currency, or when the Fund
believes that the U.S. dollar may suffer a substantial decline against a
foreign currency, it may enter into a forward contract to buy that foreign
currency for a fixed dollar amount. This second investment practice is
generally referred to as `cross-hedging.'' Because in connection with the
Fund's forward foreign currency transactions an amount of the Fund's assets
equal to the amount of the purchase will be held aside or segregated to be
used to pay for the commitment, the Fund will always have cash, cash items
or high quality debt securities available sufficient to cover any
commitments under these contracts or to limit any potential risk. The
segregated account will be marked to market on a daily basis. While these
contracts are not presently regulated by the Commodities Futures Trading
Commission (`CFTC''), the CFTC may in the future assert authority to
regulate forward contracts. In such event, the Fund's ability to utilize
forward contracts in the manner set forth above may be restricted. Forward
contracts may limit potential gain from a positive change in the
relationship between the U.S. dollar and foreign currencies. Unanticipated
changes in currency prices may result in poorer overall performance for the
Fund than if it had not engaged in such contracts.
The International Equity Fund may purchase and write put and call options
on foreign currencies for the purpose of protecting against declines in the
dollar value of foreign portfolio securities and against increases in the
dollar cost of foreign securities to be acquired. As is the case with other
kinds of options, however, the writing of an option on foreign currency
will constitute only a partial hedge, up to the amount of the premium
received, and the Fund could be required to purchase or sell foreign
currencies at disadvantageous exchange rates, thereby incurring losses. The
purchase of an option on foreign currency may constitute an effective hedge
against fluctuation in exchange rates, although, in the event of rate
movements adverse to the Fund's position, the Fund may forfeit the entire
amount of the premium plus related transaction costs. Options on foreign
currencies to be written or purchased by the Fund will be traded on U.S.
and foreign exchanges or over-the-counter.
The International Equity Fund may enter into exchange-traded contracts for
the purchase or sale for future delivery of foreign currencies (`foreign
currency futures'). This investment technique will be used only to hedge
against anticipated future changes in exchange rates which otherwise might
adversely affect the value of the Fund's portfolio securities or adversely
affect the prices of securities that the Fund intends to purchase at a
later date. The successful use of foreign currency futures will usually
depend on the ability of the adviser to forecast currency exchange rate
movements correctly. Should exchange rates move in an unexpected manner,
the Fund may not achieve the anticipated benefits of foreign currency
futures or may realize losses.
PENNSYLVANIA MUNICIPAL SECURITIES
The Pennsylvania Intermediate Municipal Bond Fund may invest in
Pennsylvania municipal securities which have the characteristics set forth
in the prospectus.
A Pennsylvania municipal security will be determined by the Fund's Adviser
to meet the quality standards established by the Board Members if it is of
comparable quality to municipal securities within the Fund's rating
requirements. The Board Members consider the creditworthiness of the issuer
of a municipal security, the issuer of a participation interest if the Fund
has the right to demand payment from the issuer of the interest, or the
guarantor of payment by either of those issuers. The Fund is not required
to sell a municipal security if the security's rating is reduced below the
required minimum subsequent to its purchase by the Fund. The Adviser
considers this event, however, in its determination of whether the Fund
should continue to hold the security in its portfolio. If Moody's Investors
Service, Inc., Standard & Poor's Ratings Group or Fitch Investors Service,
Inc. ratings change because of changes in those organizations or in their
rating systems, the Fund will try to use comparable ratings as standards in
accordance with the investment policies described in the Fund's prospectus.
Examples of Pennsylvania municipal securities are:
omunicipal notes and municipal commercial paper;
oserial bonds sold with differing maturity dates;
otax anticipation notes sold to finance working capital needs of
municipalities in anticipation of receiving taxes at a later date;
obond anticipation notes sold prior to the issuance of longer-term
bonds;
opre-refunded municipal bonds; and
ogeneral obligation bonds secured by a municipality pledge of
taxation.
PARTICIPATION INTERESTS
The Pennsylvania Intermediate Municipal Bond Fund may invest in
participation interests. The financial institutions from which the Fund
purchases participation interests frequently provide or secure from other
financial institutions irrevocable letters of credit or guarantees and give
the Fund the right to demand payment of the principal amounts of the
participation interests plus accrued interest on short notice (usually
within seven days). The municipal securities subject to the participation
interests are not limited to the Fund's maximum maturity requirements so
long as the participation interests include the right to demand payment
from the issuers of those interests. By purchasing these participation
interests, the Fund is buying a security meeting the maturity and quality
requirements of the Fund and also is receiving the tax-free benefits of the
underlying securities.
VARIABLE RATE MUNICIPAL SECURITIES
The Pennsylvania Intermediate Municipal Bond Fund may invest in variable
rate municipal securities. Variable interest rates generally reduce changes
in the market value of municipal securities from their original purchase
prices. Accordingly, as interest rates decrease or increase, the potential
for capital appreciation or depreciation is less for variable interest rate
municipal securities than for fixed income obligations. The terms of these
variable rate demand instruments require payment of principal and accrued
interest from the issuer of the municipal obligations, the issuer of the
participation interests, or a guarantor of either issuer.
MUNICIPAL LEASES
The Pennsylvania Intermediate Municipal Bond Fund may invest up to 5% of
its net assets in municipal leases. The Fund may purchase municipal
securities in the form of participation interests which represent undivided
proportional interests in lease payments by a governmental or non-profit
entity. The lease payments and other rights under the lease provide for and
secure the payments on the certificates. Lease obligations may be limited
by municipal charter or the nature of the appropriation for the lease. In
particular, lease obligations may be subject to periodic appropriation. If
the entity does not appropriate funds for future lease payments, the entity
cannot be compelled to make such payments. Furthermore, a lease may provide
that the certificate trustee cannot accelerate lease obligations upon
default. The trustee would only be able to enforce lease payments as they
became due. In the event of default or failure of appropriation, it is
unlikely that the trustee would be able to obtain an acceptable substitute
source of payment.
In determining the liquidity of municipal lease securities, the Fund's
Adviser, under the authority delegated by the Board Members, will base its
determination on the following factors: (a) whether the lease can be
terminated by the lessee: (b) the potential recovery, if any, from a sale
of the leased property upon termination of the lease; (c) the lessee's
general credit strength (e.g., its debt, administrative, economic, and
financial characteristics and prospects); (d) the likelihood that the
lessee will discontinue appropriating funding for the leased property
because the property is no longer deemed essential to its operations (e.g.,
the potential for an `event of non-appropriation''); and (e) any credit
enhancement or legal recourse provided upon an event of non-appropriation
or other termination of the lease.
If the Fund purchases unrated municipal leases, the Board Members will be
responsible for determining, on an ongoing basis, the credit quality of
such leases and the likelihood that such leases will not be canceled.
WEIGHTED AVERAGE PORTFOLIO MATURITY
The Pennsylvania Intermediate Municipal Bond Fund, the Short-Term Bond
Fund, and the Intermediate U.S. Government Bond Fund will determine their
dollar-weighted average portfolio maturity by assigning a `weight'' to each
portfolio security based upon the pro rata market value of such portfolio
security in comparison to the market value of the entire portfolio. The
remaining maturity of each portfolio security is then multiplied by its
weight, and the results are added together to determine the weighted
average maturity of the portfolio. For purposes of calculating its dollar-
weighted average portfolio maturity, each Fund will treat variable and
floating rate instruments as having a remaining maturity commensurate with
the period remaining until the next scheduled adjustment to the
instrument's interest rate.
ADJUSTABLE RATE MORTGAGE SECURITIES (`ARMS'')
The ARMS in which the Equity Fund, the International Equity Fund, the
Short-Term Bond Fund, and the Intermediate U.S. Government Bond Fund invest
will be issued by Government National Mortgage Association, Federal
National Mortgage Association, and Federal Home Loan Mortgage Corporation.
Unlike conventional bonds, ARMS pay back principal over the life of the
ARMS rather than at maturity. Thus, a holder of the ARMS, such as a Fund,
would receive monthly scheduled payments of principal and interest, and may
receive unscheduled principal payments representing prepayments on the
underlying mortgages. At the time that a holder of the ARMS reinvests the
payments and any unscheduled prepayments of principal that it receives, the
holder may receive a rate of interest which is actually lower than the rate
of interest paid on the existing ARMS. As a consequence, ARMS may be a less
effective means of `locking in'' long-term interest rates than other types
of U.S. government securities.
Like other U.S. government securities, the market value of ARMS will
generally vary inversely with changes in market interest rates. Thus, the
market value of ARMS generally declines when interest rates rise and
generally rises when interest rates decline.
While ARMS generally entail less risk of a decline during periods of
rapidly rising rates, ARMS may also have less potential for capital
appreciation than other similar investments (e.g., investments with
comparable maturities) because, as interest rates decline, the likelihood
increases that mortgages will be prepaid. Furthermore, if ARMS are
purchased at a premium, mortgage foreclosures and unscheduled principal
payments may result in some loss of a holder's principal investment to the
extent of the premium paid. Conversely, if ARMS are purchased at a
discount, both a scheduled payment of principal and an unscheduled
prepayment of principal would increase current and total returns and would
accelerate the recognition of income, which would be taxed as ordinary
income when distributed to shareholders.
COLLATERALIZED MORTGAGE OBLIGATIONS (`CMOS'')
The following example illustrates how mortgage cash flows are prioritized
in the case of CMOs. Most of the CMOs in which the Equity Fund, the
International Equity Fund, the Short-Term Bond Fund, and the Intermediate
U.S. Government Bond Fund invests use the same basic structure:
(1)Several classes of securities are issued against a pool of mortgage
collateral. The most common structure contains four classes of securities.
The first three (A, B, and C bonds) pay interest at their stated rates
beginning with the issue date, and the final class (Z bond) typically
receives any excess income from the underlying investments after payments
are made to the other classes and receives no principal or interest
payments until the shorter maturity classes have been retired, but then
receives all remaining principal and interest payments;
(2)The cash flows from the underlying mortgages are applied first to pay
interest and then to retire securities; and
(3)The classes of securities are retired sequentially. All principal
payments are directed first to the shortest-maturity class (or A bond).
When those securities are completely retired, all principal payments are
then directed to the next shortest-maturity security (or B bond). This
process continues until all of the classes have been paid off.
Because the cash flow is distributed sequentially instead of pro rata, as
with pass-through securities, the cash flows and average lives of CMOs are
more predictable, and there is a period of time during which the investors
in the longer-maturity classes receive no principal paydowns. The interest
portion of these payments is distributed by a Fund as income, and the
capital portion is reinvested.
REAL ESTATE MORTGAGE INVESTMENT CONDUITS (`REMICS'')
The Equity Fund, the International Equity Fund, the Short-Term Bond Fund,
and the Intermediate U.S. Government Bond Fund may invest in REMICs. REMICs
are offerings of multiple class mortgage-backed securities which qualify
and elect treatment as such under provisions of the Internal Revenue Code.
Issuers of REMICs may take several forms, such as trusts, partnerships,
corporations, associations, or segregated pools of mortgages. Once REMIC
status is elected and obtained, the entity is not subject to federal income
taxation. Instead, income is passed through the entity and is taxed to the
person or persons who hold interests in the REMIC. A REMIC interest must
consist of one or more classes of `regular interests,'' some of which may
offer adjustable rates of interest, and a single class of `residual
interests.''To qualify as a REMIC, substantially all the assets of the
entity must be in assets directly or indirectly secured principally by real
property.
PRIVATELY ISSUED MORTGAGE-RELATED SECURITIES
The Equity Fund, the International Equity Fund, the Short-Term Bond Fund,
and the Intermediate U.S. Government Bond Fund may invest in privately
issued mortgage-related securities. Privately issued mortgage-related
securities generally represent an ownership interest in federal agency
mortgage pass-through securities such as those issued by Government
National Mortgage Association as well as those issued by nongovernment
related entities. The terms and characteristics of the mortgage instruments
may vary among pass-through mortgage loan pools. The market for such
mortgage-related securities has expanded considerably since its inception.
The size of the primary issuance market and the active participation in the
secondary market by securities dealers and other investors makes
government-related and non-government related pools highly liquid.
RESETS OF INTEREST
The interest rates paid on the ARMS, CMOs, and REMICs in which the Equity
Fund, the International Equity Fund, the Short-Term Bond Fund, and the
Intermediate U.S. Government Bond Fund invests generally are readjusted at
intervals of one year or less to an increment over some predetermined
interest rate index. There are two main categories of indices: those based
on U.S. Treasury securities and those derived from a calculated measure,
such as a cost of funds index or a moving average of mortgage rates.
Commonly utilized indices include the one-year and five-year constant
maturity Treasury Note rates, the three-month Treasury Bill rate, the 180-
day Treasury Bill rate, rates on longer-term Treasury securities, the
National Median Cost of Funds, the one-month or three-month London
Interbank Offered Rate (LIBOR), the prime rate of a specific bank, or
commercial paper rates. Some indices, such as the one-year constant
maturity Treasury Note rate, closely mirror changes in market interest rate
levels.
To the extent that the adjusted interest rate on the mortgage security
reflects current market rates, the market value of an adjustable rate
mortgage security will tend to be less sensitive to interest rate changes
than a fixed rate debt security of the same stated maturity. Hence, ARMS
which use indices that lag changes in market rates should experience
greater price volatility than adjustable rate mortgage securities that
closely mirror the market.
CAPS AND FLOORS
The underlying mortgages which collateralize the ARMS, CMOs, and REMICs in
which the Equity Fund, the International Equity Fund, the Short-Term Bond
Fund, and the Intermediate U.S. Government Bond Fund invests will
frequently have caps and floors which limit the maximum amount by which the
loan rate to the residential borrower may change up or down: (1) per reset
or adjustment interval, and (2) over the life of the loan. Some residential
mortgage loans restrict periodic adjustments by limiting changes in the
borrower's monthly principal and interest payments rather than limiting
interest rate changes. These payment caps may result in negative
amortization.
The value of mortgage securities in which a Fund invests may be affected if
market interest rates rise or fall faster and farther than the allowable
caps or floors on the underlying residential mortgage loans. Additionally,
even though the interest rates on the underlying residential mortgages are
adjustable, amortization and prepayments may occur, thereby causing the
effective maturities of the mortgage securities in which a Fund invests to
be shorter than the maturities stated in the underlying mortgages.
SWAP AGREEMENTS
Among the hedging strategies into which the International Equity Fund may
enter are interest rate, currency and index swaps and the purchase or sale
of related caps, floors, and collars. The Fund expects to enter into these
transactions primarily to preserve a return or spread on a particular
investment or portion of its portfolio, to protect against currency
fluctuations, as a duration management technique or to protect against any
increase in the price of securities the Fund anticipates purchasing at a
later date. The Fund intends to use these transactions as hedges and not as
speculative investments and will not sell interest rate caps or floors
where it does not own securities or other instruments providing the income
stream the Fund may be obligated to pay. Interest rate swaps involve the
exchange by the Fund with another party of their respective commitments to
pay or receive interest, e.g., an exchange of floating rate payments for
fixed rate payments with respect to a notional amount of principal. A
currency swap is an agreement to exchange cash flows on a notional amount
of two or more currencies based on the relative value differential among
them and an index swap is an agreement to swap cash flows on a notional
amount based on changes in the values of the reference indices. The
purchase of a cap entitles the purchaser to receive payments on a notional
principal amount from the party selling such cap to the extent that a
specified index exceeds a predetermined interest rate or amount. The
purchase of a floor entitles the purchaser to receive payments on a
notional principal amount from the party selling such floor to the extent
that a specified index falls below a predetermined interest rate or amount.
A collar is a combination of a cap and a floor that preserves a certain
return within a predetermined range of interest rates or values.
The International Equity Fund will usually enter into swaps on a net basis,
i.e., the two payment streams are netted out in a cash settlement on the
payment date or dates specified in the instrument, with the Fund receiving
or paying, as the case may be, only the net amount of the two payments.
Inasmuch as these swaps, caps, floors, and collars are entered into for
good faith hedging purposes, the Adviser and the Fund believe such
obligations do not constitute senior securities under the 1940 Act, and,
accordingly, will not treat them as being subject to its borrowing
restrictions. There is no minimal acceptable rating for a swap, cap, floor,
or collar to be purchased or held in the Fund's portfolio. If there is a
default by the counterparty, the Fund may have contractual remedies
pursuant to the agreements related to the transaction. The swap market has
grown substantially in recent years with a large number of banks and
investment banking firms acting both as principals and agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid. Caps, floors and collars are more recent innovations for
which standardized documentation has not yet been fully developed and,
accordingly, they are less liquid than swaps.
CREDIT FACILITIES
The Funds may purchase demand notes, which are borrowing arrangements
between a corporation and an institutional lender (such as the Funds)
payable upon demand by either party. The notice period for demand typically
ranges from one to seven days, and the party may demand full or partial
payment.
Revolving credit facilities are borrowing arrangements in which the lender
agrees to make loans up to a maximum amount upon demand by the borrower
during a specified term. As the borrower repays the loan, an amount equal
to the repayment may be borrowed again during the term of the facility. A
Fund generally acquires a participation interest in a revolving credit
facility from a bank or other financial institution. The terms of the
participation require the Fund to make a pro rata share of all loans
extended to the borrower and entitles the Fund to a pro rata share of all
payments made by the borrower. Demand notes and revolving credit facilities
usually provide for floating or variable rates of interest.
FOREIGN BANK INSTRUMENTS
The Equity Fund, the International Equity Fund, the Short-Term Bond Fund,
and the Intermediate U.S. Government Bond Fund may invest in foreign bank
instruments. Eurodollar Certificates of Deposit (`ECDs''), Eurodollar Time
Deposits (`ETDs''), Yankee Certificates of Deposit (``Yankee CDs''), and
Europaper are subject to somewhat different risks than domestic obligations
of domestic issuers. Examples of these risks include international,
economic and political developments, foreign governmental restrictions that
may adversely affect the payment of principal or interest, foreign
withholdings or other taxes on interest income, difficulties in obtaining
or enforcing a judgment against the issuing bank, and the possible impact
of interruptions of the flow of international currency transactions.
Different risks may also exist for ECDs, ETDs, and Yankee CDs because the
banks issuing these instruments, or their domestic or foreign branches, are
not necessarily subject to the same regulatory requirements that apply to
domestic banks, such as reserve requirements, loan requirements, loan
limitations, examinations, accounting, auditing, and recordkeeping and the
public availability of information. These factors will be carefully
considered by a Fund's Adviser in selecting investments for a Fund.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Funds may engage in when-issued and delayed delivery transactions.
These transactions are made to secure what is considered to be an
advantageous price or yield for a Fund. No fees or other expenses, other
than normal transaction costs, are incurred. However, liquid assets of a
Fund sufficient to make payment for the securities to be purchased are
segregated on a Fund`s records at the trade date. These assets are marked
to market daily and are maintained until the transaction has been settled.
REPURCHASE AGREEMENTS
The Funds require their custodian to take possession of the securities
subject to repurchase agreements, and these securities will be marked to
market daily. To the extent that the original seller does not repurchase
the securities from a Fund, the Fund could receive less than the repurchase
price on any sale of such securities. In the event that such a defaulting
seller filed for bankruptcy or became insolvent, disposition of such
securities by a Fund might be delayed pending court action. The Funds
believe that under the regular procedures normally in effect for custody of
a Fund's portfolio securities subject to repurchase agreements, a court of
competent jurisdiction would rule in favor of a Fund and allow retention or
disposition of such securities. A Fund will only enter into repurchase
agreements with banks and other recognized financial institutions, such as
broker/dealers, which are deemed by a Fund's Adviser to be creditworthy
pursuant to guidelines established by the Board Members.
CREDIT ENHANCEMENT
A Fund typically evaluates the credit quality and ratings of credit
enhanced securities based upon the financial condition and ratings of the
party providing the credit enhancement (the `credit enhancer''), rather
than the issuer. However, credit-enhanced securities will not be treated as
having been issued by the credit enhancer for diversification purposes,
unless a Fund has invested more than 10% of its assets in securities
issued, guaranteed or otherwise credit enhanced by the credit enhancer, in
which case the securities will be treated as having been issued by both the
issuer and the credit enhancer. A Fund may have more than 25% of its total
assets invested in securities credit enhanced by banks. Any bankruptcy,
receivership or default of the party providing the credit enhancement will
adversely affect the quality and marketability of the underlying security.
RESTRICTED AND ILLIQUID SECURITIES
The Funds may invest in commercial paper issued in reliance on the
exemption from registration afforded by Section 4(2) of the Securities Act
of 1933 and treats such commercial paper as liquid. Section 4(2) commercial
paper is restricted as to disposition under federal securities law and is
generally sold to institutional investors, such as a Fund, who agree that
they are purchasing the paper for investment purposes and not with a view
to public distribution. Any resale by the purchaser must be in an exempt
transaction. Section 4(2) commercial paper is normally resold to other
institutional investors like the Funds through or with the assistance of
the issuer or investment dealers who make a market in Section 4(2)
commercial paper, thus providing liquidity.
The ability of the Board Members to determine the liquidity of certain
restricted securities is permitted under a Securities and Exchange
Commission (`SEC'') staff position set forth in the adopting release for
Rule 144A under the Securities Act of 1933 (the `Rule''). The Rule is a
non-exclusive safe-harbor for certain secondary market transactions
involving resales of otherwise restricted securities to qualified
institutional buyers without registration of securities under the
Securities Act of 1933. The Rule was expected to further enhance the
liquidity of the secondary market for securities eligible for resale under
the Rule. The Funds believe that the staff of the SEC has left the question
of determining the liquidity of all restricted securities to the Board
Members. The Board Members may consider the following criteria in
determining the liquidity of certain restricted securities:
o the frequency of trades and quotes for the security;
o the number of dealers willing to purchase or sell the security and the
number of other potential buyers;
o dealer undertakings to make a market in the security; and
o the nature of the security and the nature of the marketplace trades.
REVERSE REPURCHASE AGREEMENTS
Each Fund may enter into reverse repurchase agreements. These transactions
are similar to borrowing cash. In a reverse repurchase agreement, a Fund
transfers possession of a portfolio instrument to another person, such as a
financial institution, broker, or dealer, in return for a percentage of the
instrument's market value in cash, and agrees that on a stipulated date in
the future the Fund will repurchase the portfolio instrument by remitting
the original consideration plus interest at an agreed upon rate. The use of
reverse repurchase agreements may enable a Fund to avoid selling portfolio
instruments at a time when a sale may be deemed to be disadvantageous, but
the ability to enter into reverse repurchase agreements does not ensure
that the Fund will be able to avoid selling portfolio instruments at a
disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of a Fund in a
dollar amount sufficient to make payment for the obligations to be
purchased are segregated at the trade date. These securities are marked to
market daily and are maintained until the transaction is settled.
LENDING OF PORTFOLIO SECURITIES
The collateral received when a Fund lends portfolio securities must be
valued daily and, should the market value of the loaned securities
increase, the borrower must furnish additional collateral to the Fund.
During the time portfolio securities are on loan, the borrower pays a Fund
any dividends or interest paid on such securities. Loans are subject to
termination at the option of a Fund or the borrower. A Fund may pay
reasonable administrative and custodial fees in connection with a loan and
may pay a negotiated portion of the interest earned on the cash or
equivalent collateral to the borrower or placing broker.
A Fund would not have the right to vote securities on loan, but would
terminate the loan and regain the right to vote if that were considered
important with respect to the investment.
PORTFOLIO TURNOVER
The Funds will not attempt to set or meet portfolio turnover rates since
any turnover would be incidental to transactions undertaken in an attempt
to achieve the Funds' investment objectives. It is not anticipated that the
portfolio trading engaged in by the Equity Fund, the International Equity
Fund, the Pennsylvania Intermediate Municipal Bond Fund, the Short-Term
Bond Fund, and the Intermediate U.S. Government Bond Fund will result in
its annual rates of portfolio turnover exceeding 75%, 90%, 50%, 90%, and
90%, respectively. However, the underlying funds purchased by the
International Equity Fund may experience much higher portfolio turnover
rates resulting in higher brokerage commissions, and taxable gains or
losses. [TO BE UPDATED BY AMENDMENT] For the period from April 1, 1996
(date of initial public investment) to August 31, 1996, the portfolio
turnover rates for the Equity Fund, the Pennsylvania Intermediate Municipal
Bond Fund, the Short-Term Bond Fund, and the Intermediate U.S. Government
Bond Fund were 18%, 40%, 71%, and 54%, respectively.
PENNSYLVANIA INVESTMENT RISKS
The Pennsylvania Intermediate Municipal Bond Fund invests in obligations of
the Commonwealth of Pennsylvania (the `State'') and obligations of its
political subdivisions, agencies, or instrumentalities which results in the
Fund's performance being subject to risks associated with the overall
conditions present within the State. The following information is a general
summary of the State's financial condition and a brief summary of the
prevailing economic conditions. This information is based on official
statements relating to securities issued by the State that are believed to
be reliable but should not be considered as a complete description of all
relevant information.
Fiscal operations improved gradually since the $1.1 billion deficit in
1991. The deficit was nearly eliminated in 1992 with the addition of
increased taxes. During fiscal 1993, Pennsylvania focused on expenditure
reductions while revenues were stabilized and reserves were increased by
$24 million. Fiscal 1994 saw further improvement in revenues and ended with
a surplus of $336 million. Revenues are expected to increase slightly in
fiscal 1995, but the State has budgeted an increase in appropriations which
will decrease the Budget Stabilization Fund to $4.1 million due to the
projected operating deficit of $297 million. Also, it should be noted that
due to the length and severity of the 1991 recession, coupled with the
structural changes in the industrial landscape, several municipalities have
undergone severe financial stress and are still vulnerable to further
economic cycles.
Historically, the State's economy was largely composed of heavy industry
that was concentrated in steel production, coal and railroads. The reliance
on these industries, especially the steel sector, has declined and the
economy has diversified into services and trade sectors. Presently,
services and trade compose over 50% of the economy. Unemployment in the
State over the past two years has surpassed the national average and
population growth, as in many of the industrial states, has been
motionless.
The debt ratings further demonstrate the overall condition of the State.
The State maintains an A1 rating by Moody's that has been in effect since
1986. Standard & Poor's Ratings Group rates the State AA- since 1985.
The Fund's concentration in securities issued by the State and its
political subdivisions provides a greater level of risk than a fund whose
assets are diversified across numerous states and municipal issuers. The
ability of the State or its municipalities to meet their obligations will
depend on the availability of tax and other revenues; economic, political,
and demographic conditions within the State; and the underlying fiscal
condition of the State, its counties, and its municipalities.
INVESTMENT LIMITATIONS
The following is a list of the Funds' investment limitations. The
underlying funds purchased by the International Equity Fund may be subject
to different investment limitations.
SELLING SHORT AND BUYING ON MARGIN
The Funds will not sell any securities short or purchase any securities
on margin, but may obtain such short-term credits as may be necessary
for clearance of purchases and sales of portfolio securities. With
respect to the Equity Fund and the International Equity Fund, the
deposit or payment by the Funds of initial or variation margin in
connection with futures contracts or related options transactions is
not considered the purchase of a security on margin.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Funds will not issue senior securities, except that each Fund may
borrow money directly or through reverse repurchase agreements in
amounts up to one-third of the value of its total assets, including the
amount borrowed and except to the extent that the Equity Fund and the
International Equity Fund may enter into futures contracts and options.
The Funds will not borrow money or engage in reverse repurchase
agreements for investment leverage, but rather as a temporary,
extraordinary, or emergency measure or to facilitate management of its
portfolio by enabling a Fund to meet redemption requests when the
liquidation of portfolio securities is deemed to be inconvenient or
disadvantageous. A Fund will not purchase any securities while any
borrowings in excess of 5% of its total assets are outstanding.
PLEDGING ASSETS
The Funds will not mortgage, pledge, or hypothecate any assets except
to secure permitted borrowings. For purposes of this limitation, the
following will not be deemed to be pledges (where applicable): margin
deposits for the purchase and sale of financial futures contracts and
related options and segregation or collateral arrangements made in
connection with options activities or the purchase of securities on a
when-issued basis.
DIVERSIFICATION OF INVESTMENTS
With respect to securities comprising 75% of the value of its total
assets, each Fund (with the exception of the International Equity Fund
and Pennsylvania Intermediate Municipal Bond Fund) will not purchase
securities issued by any one issuer (other than cash, cash items, or
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities, and repurchase agreements collateralized by such
securities) if, as a result, more than 5% of the value of its total
assets would be invested in the securities of that issuer, and will not
acquire more than 10% of the outstanding voting securities of any one
issuer.
With respect to securities comprising 75% of the value of its total
assets, the International Equity Fund will not invest more than 5% in
securities of any one issuer (other than cash, cash items, securities
of investment companies or securities issued or guaranteed by the
government of the United States or its agencies or instrumentalities
and repurchase agreements collateralized by such securities) if, as a
result, more than 5% of the value of its total assets would be invested
in the securities of that issuer, and will not acquire more than 10% of
the outstanding voting securities of any one issuer.
UNDERWRITING
The Funds will not underwrite any issue of securities, except as a Fund
may be deemed to be an underwriter under the Securities Act of 1933 in
connection with the sale of securities in accordance with its
investment objective, policies, and limitations.
INVESTING IN REAL ESTATE
The Funds will not purchase or sell real estate, including (with
respect to all Funds except the International Equity Fund) limited
partnership interests, although the Funds may invest in the securities
of issuers whose business involves the purchase or sale of real estate
or in securities which are secured by real estate or interests in real
estate.
INVESTING IN COMMODITIES
The Funds will not purchase or sell commodities, commodity contracts,
or commodity futures contracts except to the extent that the Equity
Fund and the International Equity Fund may engage in transactions
involving financial and stock index futures contracts or options on
such futures contracts, and the International Equity Fund may engage in
foreign currency transactions, invest in options and futures on foreign
currencies, and purchase or sell forward contracts with respect to
foreign currencies and related options.
LENDING CASH OR SECURITIES
The Funds will not lend any of their assets, except portfolio
securities up to one-third of the value of their total assets. This
shall not prevent a Fund from purchasing or holding U.S. government
obligations, money market instruments, variable rate demand notes,
bonds, debentures, notes, certificates of indebtedness, or other debt
securities, entering into repurchase agreements, or engaging in other
transactions where permitted by a Fund's investment objective,
policies, and limitations or Declaration of Trust or Articles of
Incorporation, as applicable.
The Pennsylvania Intermediate Municipal Bond Fund may, however, acquire
publicly or non-publicly issued municipal securities or temporary
investments or enter into repurchase agreements in accordance with its
investment objective, policies, and limitations or its Declaration of
Trust.
CONCENTRATION OF INVESTMENTS
The Equity Fund, the International Equity Fund, the Short-Term Bond
Fund, and the Intermediate U.S. Government Bond Fund will not invest
25% or more of the value of their respective total assets in any one
industry (other than securities issued by the U.S. government, its
agencies or instrumentalities). The International Equity Fund may,
however, invest in investment companies that concentrate their assets
within one industry.
The Pennsylvania Intermediate Municipal Bond Fund will not purchase
securities if, as a result of such purchase, 25% or more of the value
of its total assets would be invested in any one industry or in
industrial development bonds or other securities, the interest upon
which is paid from revenues of similar types of projects. However, the
Fund may invest as temporary investments more than 25% of the value of
its assets in cash or cash items.
The above investment limitations cannot be changed with respect to a Fund
without shareholder approval of a majority of that Fund's shares. The
following investment limitations may be changed by the Board Members
without shareholder approval. Shareholders will be notified before any
material change in these limitations becomes effective.
INVESTING IN ILLIQUID SECURITIES
The Funds will not invest more than 15% of the value of their net
assets in illiquid securities, including, (where applicable),
repurchase agreements providing for settlement in more than seven days
after notice, over-the-counter options, non-negotiable fixed time
deposits with maturities over seven days, and certain restricted
securities not determined by the Board Members to be liquid.
Except with respect to the Funds' policy of borrowing money, if a
percentage limitation is adhered to at the time of investment, a later
increase or decrease in percentage resulting from any change in value or
net assets will not result in a violation of such restriction. The Funds do
not expect to borrow money or pledge securities in excess of 5% of the
value of its total assets in the coming fiscal year. For purposes of its
policies and limitations, the Funds consider certificates of deposit and
demand and time deposits issued by a U.S. branch of a domestic bank or
savings associations having capital, surplus, and undivided profits in
excess of $100,000,000 at the time of investment to be `cash items.''
MARKETVEST FUNDS, INC. MANAGEMENT
MARKETVEST FUNDS MANAGEMENT
OFFICERS AND BOARD MEMBERS
Officers and Directors/Trustees are listed with their addresses,
birthdates, present positions with Marketvest Funds, Inc. and Marketvest
Funds, and principal occupations.
Edward C. Gonzales *
Federated Investors Tower
Pittsburgh, Pennsylvania
Birthdate: October 22, 1930
Chairman, President, Treasurer, and Director of Marketvest Funds, Inc.
Chairman, President, Treasurer, and Trustee of Marketvest Funds
Vice President, Treasurer, and Trustee, Federated Investors; Vice
President, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp., Federated Global Research Corp. and Passport
Research, Ltd.; Executive Vice President and Director, Federated Securities
Corp.; Trustee, Federated Services Company; Chairman, Treasurer, and
Trustee, Federated Administrative Services; Trustee or Director of certain
investment companies distributed, organized, or advised by Federated
Investors and its affiliates (Federated Funds); Executive Vice President,
President, or Trustee of the Federated Funds.
Martin B. Ebbert, Jr.
2301 Hollywood Parkway
York, PA 17403
Birthdate: June 13, 1939
Director of Marketvest Funds, Inc.
Trustee of Marketvest Funds
Retired since December 1995; prior thereto, Senior Vice President,
CoreStates Bank Trust Division; Director of Client Services, CoreStates
Hamilton Bank Trust Division (1990-1995); currently, Director of the York
Country Academy.
Clyde M. McGeary*
248 Willow Avenue
Camp Hill, PA 17011
Birthdate: October 31, 1930
Director of Marketvest Funds, Inc.
Trustee of Marketvest Funds
Retired from service to Commonwealth of Pennsylvania; formerly, Chief,
Division of Arts and Sciences, Pennsylvania Department of Education;
Partner, MCG, McGeary Consulting Group (1987-1992).
George A. Ominski
453 Haverhill Road
Lancaster, PA 17601
Birthdate: August 8, 1938
Director of Marketvest Funds, Inc.,
Trustee of Marketvest Funds
President and Managing Director, Capital Advisors, Inc. (investment
advisory firm) (1982-Present).
Richard Seidel
770 Hedges Lane
Strafford, Pennsylvania
Birthdate: April 20, 1941
Director of Marketvest Funds, Inc.
Trustee of Marketvest Funds
President and Director of Girard Partners, Ltd. (1994 to present);
President and Director of the Fairfield Group, Inc. (1983-1993).
Jeffrey W. Sterling
Federated Investors Tower
Pittsburgh, Pennsylvania
Birthdate: February 5, 1947
Vice President and Assistant Treasurer of Marketvest Funds, Inc. and
Marketvest Funds Vice President, Federated Administrative Services; Vice
President and Assistant Treasurer of some of the Federated Funds.
Victor R. Siclari
Federated Investors Tower
Pittsburgh, Pennsylvania
Birthdate: November 17, 1961
Secretary of Marketvest Funds, Inc. and Marketvest Funds Corporate
Counsel and Vice President, Federated Administrative Services;
Associate of Morrison & Foerster, a law firm, from 1990 to 1992.
*This Director/Trustee is deemed to be an ``interested person''as defined
in the Investment Company Act of 1940, as amended.
FUND OWNERSHIP
Officers and Board Members own less than 1% of the outstanding shares of
each Fund.
[TO BE UPDATED BY AMENDMENT] As of December 16, 1996, the following
shareholders of record owned 5% or more of the outstanding shares of the
Equity Fund: Donald & Co., nominee account for Dauphin Deposit Bank & Trust
Company, Harrisburg, Pennsylvania, owned approximately 22,740,263.95 shares
(49.79%); Greenco, nominee account for Dauphin Deposit Bank & Trust
Company, Harrisburg, Pennsylvania, owned approximately 22,678,441.54 shares
(49.66%).
[TO BE UPDATED BY AMENDMENT] As of December 16, 1996, the following
shareholder of record owned 5% or more of the outstanding shares of the
Pennsylvania Intermediate Municipal Bond Fund: Donald & Company, nominee
account for Dauphin Bank & Trust Company, Harrisburg, Pennsylvania, owned
approximately 22,068,798.66 shares (99.84%).
[TO BE UPDATED BY AMENDMENT] As of December 16, 1996, the following
shareholders of record owned 5% or more of the outstanding shares of the
Short-Term Bond Fund: Donald & Co., nominee account for Dauphin Bank &
Trust Company, Harrisburg, Pennsylvania, owned approximately 6,860,392.55
shares (46.68%); Greenco, nominee account for Dauphin Deposit Bank & Trust
Company, Harrisburg, Pennsylvania, owned approximately 7,792,606.82 shares
(53.02%).
[TO BE UPDATED BY AMENDMENT] As of December 16, 1996, the following
shareholders of record owned approximately 5% or more of the outstanding
shares of the Intermediate U.S. Government Bond Fund: Donald & Co., nominee
account for Dauphin Deposit Bank & Trust Company, Harrisburg, Pennsylvania,
owned approximately 18,148,683.34 shares (71.22%); Greenco, nominee account
for Dauphin Deposit Bank & Trust Company, Harrisburg, Pennsylvania, owned
approximately 7,298,078.58 shares (28.64%).
DIRECTORS' COMPENSATION TABLE-MARKETVEST FUNDS, INC. (THE `CORPORATION'')
<TABLE>
<CAPTION>
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
THE CORPORATION THE CORPORATION*# FROM FUND COMPLEX*
<S> <C> <C>
Edward C. Gonzales
Chairman, President, $0.00 $ 0 for the Corporation and
Treasurer, and Director 1 other investment company in the
Fund Complex
Martin B. Ebbert, Jr.+ $375.00 $500 for the Corporation and
1 other investment company in the
Fund Complex
George D. McKeon $3937.50 $5,250 for the Corporation and
Director 1 other investment company in the
Fund Complex
George A. Ominski+ $375.00 $500 for the Corporation and
Director 1 other investment company in the
Fund Complex
Richard Seidel $5,625.00 $7,500 for the Corporation and
Director 1 other investment company in the
Fund Complex
Clyde M. McGeary+ $5,625.00 $7,500 for the Corporation and
Director 1 other investment company in the
Fund Complex
</TABLE>
*Information is for the fiscal year ended February 28, 1997.
#The aggregate compensation is provided for the Corporation which iscomprised
of three portfolios.
+The date of the organizational meeting of the Board of Directors of the
Corporation, until his death on October 29, 1996. Mr. McGeary
elected as a Director effective March 19, 1996. Messrs. Ebbert and Ominski
became Directors on December 16, 1996.
TRUSTEES' COMPENSATION TABLE-MARKETVEST FUNDS (THE `TRUST'')
<TABLE>
<CAPTION>
Aggregate
Name , Compensation
Position With From Total Compensation Paid
The Trust The Trust*# From Fund Complex*
<S> <C> <C>
Edward C. Gonzales
Chairman, President, $0.00 $ 0 for the Trust and
Treasurer, and Trustee 1 other investment company in the
Fund Complex
Martin B. Ebbert, Jr.+ $125.00 $500 for the Trust and
Trustee 1 other investment company in the
Fund Complex
George D. McKeon $1,325.50 $5,250 for the Trust and
Trustee 1 other investment company in the
Fund Complex
George A. Ominski+ $125.00 $500 for the Trust and
Trustee 1 other investment company in the
Fund Complex
Richard Seidel $1,875.00 $7,500 for the Trust and
Trustee 1 other investment company in the
Fund Complex
Clyde M. McGeary+ $1,875.00 $7,500 for the Trust and
Trustee 1 other investment company in the
Fund Complex
</TABLE>
*Information is for the fiscal year ended February 28, 1997.
#The aggregate compensation is provided for the Trust which is comprised
of two portfolios.
+The date of the organizational meeting of the Board of Trustees of the
Trust, until his death on October 29, 1996. Mr. McGeary was elected as a
Trustee effective March 19, 1996. Messrs. Ebbert and Ominski became
Trustees on December 16, 1996.
TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Board Members will only
be liable for their own willful defaults. If reasonable care has been
exercised in the selection of officers, agents, employees, or investment
advisers, a Trustee shall not be liable for any neglect or wrongdoing of
any such person. However, they are not protected against any liability to
which they would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties involved in
the conduct of their office.
INVESTMENT ADVISORY SERVICES
ADVISER TO THE FUNDS
The Funds' investment adviser is Dauphin Deposit Bank and Trust Company
(`Dauphin Deposit'' or the ``Adviser''). It is a wholly-owned subsidiary of
Dauphin Deposit Corporation.
The Adviser shall not be liable to Marketvest Funds, Inc., Marketvest
Funds, a Fund, or any shareholder of any of the Funds for any losses that
may be sustained in the purchase, holding, or sale of any security, or for
anything done or omitted by it, except acts or omissions involving willful
misfeasance, bad faith, gross negligence, or reckless disregard of the
duties imposed upon it by its contract with the Funds.
ADVISORY FEES
For its advisory services, the Adviser receives an annual investment
advisory fee as described in the prospectus.
[TO BE UPDATED BY AMENDMENT] For the period from April 1, 1996 (date of
initial public investment) to August 31, 1996, the Fund's Adviser earned
fees from the Equity Fund, the Pennsylvania Intermediate Municipal Bond
Fund, the Short-Term Bond Fund, and the Intermediate U.S. Government Bond
Fund in the amounts of $1,490,546, $711,883, $349,666, and $638,837,
respectively, of which $298,109, $142,376, $69,933, and $127,767,
respectively, were voluntarily waived.
OTHER SERVICES
ADMINISTRATION OF THE FUNDS
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Funds for a fee as
described in the prospectus.
[TO BE UPDATED BY AMENDMENT] For the period from April 1, 1996 (date of
initial public investment) to August 31, 1996, Federated Administrative
Services received fees from the Equity Fund, the Pennsylvania Intermediate
Municipal Bond Fund, the Short- Term Bond Fund, and the Intermediate U.S.
Government Bond Fund in the amounts of $170,141, $109,280, $50,827, and
$96,643, respectively.
CUSTODIAN
Under the custodian agreement, Dauphin Deposit Bank and Trust Company holds
each Fund's portfolio securities and keeps all necessary records and
documents relating to its duties. Dauphin Deposit's fees for custody
services are based upon the market value of Fund securities held in custody
plus certain securities transaction charges.
TRANSFER AGENT, DIVIDEND DISBURSING AGENT, AND PORTFOLIO ACCOUNTING
SERVICES
Federated Services Company, Pittsburgh, Pennsylvania, through its
registered transfer agent, Federated Shareholder Services Company, is
transfer agent for shares of the Funds and dividend disbursing agent for
the Funds. Federated Services Company also provides certain accounting and
recordkeeping services with respect to each Fund's portfolio investments.
INDEPENDENT AUDITORS
The independent auditors for the Funds are Ernst & Young LLP, Pittsburgh,
Pennsylvania.
BROKERAGE TRANSACTIONS
The Adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Funds or to the
Adviser and may include: advice as to the advisability of investing in
securities; security analysis and reports; economic studies; industry
studies; receipt of quotations for portfolio evaluations; and similar
services. Research services provided by brokers and dealers may be used by
the Adviser in advising the Funds and other accounts. To the extent that
receipt of these services may supplant services for which the Adviser might
otherwise have paid, it would tend to reduce its expenses. The Adviser
exercises reasonable business judgment in selecting brokers who offer
brokerage and research services to execute securities transactions. They
determine in good faith that commissions charged by such persons are
reasonable in relationship to the value of the brokerage and research
services provided. Although investment decisions for a Fund are made
independently from those of the other accounts managed by the Adviser,
investments of the type a Fund may make may also be made by those other
accounts. When a Fund and one or more other accounts managed by the Adviser
are prepared to invest in, or desire to dispose of, the same security,
available investments or opportunities for sales will be allocated in a
manner believed by the Adviser to be equitable to each. In some cases, this
procedure may adversely affect the price paid or received by a Fund or the
size of the position obtained or disposed of by the Fund. In other cases,
however, it is believed that coordination and the ability to participate in
volume transactions will be to the benefit of the Funds.
The Board Members have determined that portfolio transactions for the Funds
may be executed through Hopper Soliday and other affiliated broker/dealers
if, in the judgment of Dauphin Deposit, the use of Hopper Soliday or an
affiliated broker is likely to result in prices and execution at least as
favorable as those of other qualified broker/dealers and if, in such
transactions, the affiliated broker/dealer charges the Funds a rate
consistent with that charged to comparable unaffiliated customers in
similar transactions. Hopper Soliday will not participate in commissions
from brokerage given by the Equity Fund or the International Equity Fund to
other brokers or dealers. In addition, pursuant to an exemption granted by
the SEC, the Funds may engage in transactions involving certain money
market instruments with Hopper Soliday or particular affiliates acting as
principal. Over-the-counter purchases and sales are transacted directly
with principal market makers except in those cases in which better prices
and executions may be obtained elsewhere.
Under rules adopted by the SEC, Hopper Soliday may not execute transactions
for the Equity Fund or the International Equity Fund on the floor of any
national securities exchange, but may effect transactions for the Equity
Fund or the International Equity Fund by transmitting orders for execution,
providing for clearance and settlement, and arranging for the performance
of those functions by members of the exchange not associated with Hopper
Soliday. Hopper Soliday will be required to pay fees charged by those
persons performing the floor brokerage elements out of the brokerage
compensation it receives from the Equity Fund and the International Equity
Fund. The Equity Fund and the International Equity Fund have been advised
by Hopper Soliday that on most transactions, the floor brokerage generally
constitutes from between three-quarters of a cent and one cent per share,
which may be as high as 20% of the total commissions paid.
INTERNATIONAL EQUITY FUND ONLY
The distributor may assist in the execution of the International Equity
Fund's portfolio transactions to purchase underlying fund shares for which
it may receive distribution payments from the underlying funds or their
underwriters in accordance with the distribution plans of those funds. In
providing execution assistance, the distributor receives orders from the
Adviser; places them with the underlying fund's distributor, transfer agent
or other person, as appropriate; confirms the trade, price and number of
shares purchased; and assures prompt payment by the Fund and proper
completion of the order.
With respect to purchases of load fund shares, the Adviser may direct
substantially all of the International Equity Fund's orders to the
distributor, which may, in its discretion, direct the order to other
broker-dealers in consideration of sales of the Fund's shares.
The distributor may retain brokerage commissions on portfolio transactions
of mutual funds held in the Fund's portfolio, including funds which have a
policy of considering sales of their shares in selecting broker-dealers for
the execution of their portfolio transactions. Payment of brokerage
commissions to the distributor is not a factor considered by the Adviser in
selecting an underlying fund for investment.
Under certain circumstances, a sales charge incurred by the International
Equity Fund in acquiring shares of an underlying fund may not be taken into
account in determining the gain or loss on the disposition of the shares
acquired. If shares are disposed of within 90 days from the date they were
purchased and if shares of a new underlying fund are subsequently acquired
without imposition of a sales charge or imposition of a reduced sales
charge pursuant to a right granted to the Fund to acquire shares without
payment of a sales charge or with the payment of a reduced charge, then the
sales charge paid upon the purchase of the initial shares will be treated
as paid in connection with the acquisition of the new underlying fund's
shares rather than the initial shares.
[TO BE UPDATED BY AMENDMENT] For the period from April 1, 1996 (date of
initial public investment) to August 31, 1996, the Equity Fund, the
Pennsylvania Intermediate Municipal Bond Fund, the Short-Term Bond Fund,
and the Intermediate U.S. Government Bond Fund paid total brokerage
commissions of $156,049, $0, $0, and $0, respectively.
[TO BE UPDATED BY AMENDMENT] For the period from April 1, 1996 (date of
initial public investment) to August 31, 1996, the Equity Fund paid $3,590
in brokerage commissions to Hopper Soliday. These brokerage commissions
represent 2.3% of the aggregate brokerage commissions paid by the Equity
Fund, and 3.2% of the aggregate dollar amount of transactions involving the
payment of brokerage commissions.
PURCHASING SHARES
Except under certain circumstances described in the prospectus, shares of
the Funds are sold at their net asset value plus a sales charge, if any, on
days the New York Stock Exchange and the Federal Reserve Wire System are
open for business. The procedure for purchasing shares of the Funds is
explained in the prospectus under `Investing in the Funds.''
DISTRIBUTION PLAN
With respect to the Funds, Marketvest Funds, Inc. and Marketvest Funds have
each adopted a Plan pursuant to Rule 12b-1 which was promulgated by the
Securities and Exchange Commission pursuant to the Investment Company Act
of 1940, as amended (the `Plan''). Each Plan provides for payment of fees
to the distributor to finance any activity which is principally intended to
result in the sale of a Fund's shares subject to the Plan. Such activities
may include the advertising and marketing of shares of a Fund; preparing,
printing, and distributing prospectuses and sales literature to prospective
shareholders, brokers, or administrators; and implementing and operating
each Plan. Pursuant to each Plan, the distributor may pay fees to brokers
and others for such services.
The Board Members expect that the adoption of a Plan will assist a Fund in
selling a sufficient number of shares so as to allow a Fund to achieve
economic viability. It is also anticipated that an increase in the size of
a Fund will facilitate more efficient portfolio management and thereby
assist a Fund in seeking to achieve its investment objective.
[TO BE UPDATED BY AMENDMENT] For the period from April 1, 1996 (date of
initial public investment) to August 31, 1996, the Equity Fund, the
Pennsylvania Intermediate Municipal Bond Fund, the Short-Term Bond Fund,
and the Intermediate U.S. Government Bond Fund paid no fees pursuant to the
Distribution Plan.
ADMINISTRATIVE ARRANGEMENTS
The administrative services include, but are not limited to, providing
office space, equipment, telephone facilities, and various personnel,
including clerical, supervisory, and computer, as is necessary or
beneficial to establish and maintain shareholders' accounts and records,
process purchase and redemption transactions, process automatic investments
of client account cash balances, answer routine client inquiries regarding
a Fund, assist clients in changing dividend options, account designations,
and addresses, and providing such other services as a Fund may reasonably
request.
CONVERSION TO FEDERAL FUNDS
It is the Funds' policy to be as fully invested as possible so that maximum
interest may be earned. To this end, all payments from shareholders must be
in federal funds or be converted into federal funds. Federated Services
Company acts as the shareholder's agent in depositing checks and converting
them to federal funds.
EXCHANGING SECURITIES FOR FUND SHARES
The Funds may accept securities in exchange for Fund shares. A Fund will
allow such exchanges only upon prior approval of a Fund and a determination
by a Fund and the Adviser that the securities to be exchanged are
acceptable.
Any securities exchanged must meet the investment objective and policies of
a Fund, must have a readily ascertainable market value, and must not be
subject to restrictions on resale. The market value of any securities
exchanged in an initial investment, plus any cash, must be at least
$25,000.
Securities accepted by a Fund will be valued in the same manner as a Fund
values its assets. The basis of the exchange will depend upon the net asset
value of Fund shares on the day the securities are valued. One share of a
Fund will be issued for each equivalent amount of securities accepted.
Any interest earned on the securities prior to the exchange will be
considered in valuing the securities. All interest, dividends, subscription
or other rights attached to the securities become the property of a Fund,
along with the securities.
DETERMINING NET ASSET VALUE
The net asset value generally changes each day. The days on which the net
asset value is calculated by the Funds are described in the prospectus.
With respect to International Equity Fund, dividend income is recorded on
the ex-dividend date, except certain dividends from foreign securities
where the ex-dividend date may have passed, are recorded as soon as the
Fund is informed of the ex-dividend date.
DETERMINING MARKET VALUE OF SECURITIES
Market or fair values of the Equity Fund, the International Equity Fund,
the Short-Term Bond Fund, and the Intermediate U.S. Government Bond Fund's
portfolio securities, other than options, are determined as follows:
o for equity securities, according to the last sale price on a national
securities exchange, if applicable;
o in the absence of recorded sales for listed equity securities,
according to the mean between the last closing bid and asked prices;
o for unlisted equity securities, latest bid prices;
o for bonds and other fixed income securities, as determined by an
independent pricing service;
o for short-term obligations, according to the mean between bid and asked
prices as furnished by an independent pricing service, or for short-term
obligations with remaining maturities of 60 days or less at the time of
purchase, at amortized cost; or
o for all other securities, at fair value as determined in good faith by
the Board Members.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may reflect: institutional trading
in similar groups of securities, yield, quality, coupon rate, maturity,
type of issue, trading characteristics, and other market data.
The Equity Fund and the International Equity Fund will value futures
contracts, options and put options on financial futures at their market
values established by the exchanges at the close of options trading on such
exchanges unless the Board Members determine in good faith that another
method of valuing option positions is necessary.
The underlying funds in which the International Equity Fund may invest
value securities in their portfolios for which market quotations are
readily available at their current market value (generally the last
reported sale price) and all other securities and assets at fair value
pursuant to methods established in good faith by the board of
directors/trustees of the underlying fund.
TRADING IN FOREIGN SECURITIES
Trading in foreign securities may be completed at times which vary from the
closing of the New York Stock Exchange. In computing the net asset value,
the International Equity Fund values foreign securities at the latest
closing price on the exchange on which they are traded immediately prior to
the closing of the New York Stock Exchange. Certain foreign currency
exchange rates may also be determined at the latest rate prior to the
closing of the New York Stock Exchange. Foreign securities quoted in
foreign currencies are translated into U.S. dollars at current rates.
Occasionally, events that affect these values and exchanges rates may occur
between the times at which they are determined and the closing of the New
York Stock Exchange. If such events materially affect the value of
portfolio securities, these securities may be valued at their fair value as
determined in good faith by the Board Members, although the actual
calculation may be done by others.
VALUING MUNICIPAL BONDS
With respect to the Pennsylvania Intermediate Municipal Bond Fund, the
Board Members use an independent pricing service to value municipal bonds.
The independent pricing service takes into consideration yield, stability,
risk, quality, coupon rate, maturity, type of issue, trading
characteristics, special circumstances of a security or trading market, and
any other factors or market data it considers relevant in determining
valuations for normal institutional size trading units of debt securities,
and does not rely exclusively on quoted prices. In addition, the
Pennsylvania Intermediate Municipal Bond Fund values short-term obligations
according to the mean between the bid and asked prices as furnished by an
independent pricing service, or for short-term obligations with remaining
maturities of 60 days or less at the time of purchase, at amortized cost.
EXCHANGE PRIVILEGE
Shareholders of a Fund may exchange shares of that Fund for shares of other
Funds advised by Dauphin Deposit subject to certain conditions. Exchange
procedures are explained in the prospectus under `Exchange Privilege.''
REDEEMING SHARES
Each Fund redeems shares at the next computed net asset value after a Fund
receives the redemption request. Redemption procedures are explained in the
prospectus under `Redeeming Shares.'' Redemption requests cannot be
executed on days on which the New York Stock Exchange is closed or on
federal holidays when wire transfers are restricted.
REDEMPTION IN KIND
Although the Funds intend to redeem shares in cash, they reserve the right
under certain circumstances to pay the redemption price in whole or in part
by a distribution of securities from a Fund's portfolio. To the extent
available, such securities will be readily marketable. Marketvest Funds,
Inc. and Marketvest Funds have elected to be governed by Rule 18f-1 of the
Investment Company Act of 1940, under which the Funds are obligated to
redeem Shares for any one shareholder in cash only up to the lesser of
$250,000 or 1% of a Fund's net asset value during any 90-day period.
Any redemption beyond this amount will also be in cash unless the Board
Members determine that payments should be in kind. In such a case, a Fund
will pay all or a portion of the remainder of the redemption in portfolio
instruments, valued in the same way as a Fund determines net asset value.
The portfolio instruments will be selected in a manner that the Board
Members deem fair and equitable.
Redemption in kind is not as liquid as a cash redemption. If redemption is
made in kind, shareholders receiving their securities and selling them
before their maturity could receive less than the redemption value of their
securities and could incur certain transaction costs.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders of Marketvest Funds may be held
personally liable as partners under Massachusetts law for acts or
obligations of the Marketvest Funds. To protect shareholders, Marketvest
Funds has filed legal documents with Massachusetts that expressly disclaim
the liability of shareholders of a Fund for such acts or obligations of
Marketvest Funds. These documents require notice of this disclaimer to be
given in each agreement, obligation, or instrument Marketvest Funds or its
Board Members enter into or sign on behalf of a Fund.
In the unlikely event a shareholder of a Fund is held personally liable for
Marketvest Funds' obligations, Marketvest Funds is required by the
Declaration of Trust to use its property to indemnify, protect or
compensate the shareholder. On request, Marketvest Funds will defend any
claim made and pay any judgment against a shareholder of a Fund for any act
or obligation of Marketvest Funds. Therefore, financial loss resulting from
liability as a shareholder of a Fund will occur only if Marketvest Funds
cannot meet its obligations to indemnify shareholders and pay judgments
against them from the assets of a Fund.
TAX STATUS
THE FUNDS' TAX STATUS
The Funds will pay no federal income tax because each Fund expects to meet
the requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment
afforded to such companies. To qualify for this treatment, each Fund must,
among other requirements:
o derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;
o derive less than 30% of its gross income from the sale of securities
held less than three months;
o invest in securities within certain statutory limits; and
o distribute to its shareholders at least 90% of its net income earned
during the year.
These requirements may restrict the degree to which a Fund may engage in
short-term trading and certain hedging transactions and may limit the range
of a Fund's investments.
If permitted by its investment policies, a Fund's transactions in futures
contracts, forward contracts, foreign currency transactions, options and
certain other investment and hedging activities are subject to special tax
rules. In a given case, these rules may accelerate income to the Fund,
defer its losses, cause adjustments in the holding periods of the Fund's
assets, convert short-term capital losses into long-term capital losses or
otherwise affect the character of the Fund's income. These rules could
therefore affect the amount, timing and character of distributions to
shareholders. A Fund will endeavor to make any available elections
pertaining to these transactions in a manner believed to be in the best
interest of the Fund and its shareholders.
Any dividends declared by the Fund in October, November or December to
shareholders of record during those months and paid during the following
January are treated, for tax purposes, as if they were received by each
shareholder on December 31 of the year in which they were declared.
INTERNATIONAL EQUITY FUND
Income the International Equity Fund receives from sources within various
foreign countries may be subject to foreign income taxes withheld at the
source. If the Fund has at least 50% of its assets invested in foreign
securities at the end of its taxable year, it may elect to pass through the
foreign tax credit to its shareholders. It is expected that the
International Equity Fund will not have more than 50% of the value of its
total assets at the close of its taxable year invested in foreign
securities, and therefore will not be permitted to make this election and
`pass through'' to its shareholders. Each shareholder's respective pro rata
share of foreign taxes the Fund pays will, therefore, be netted against
their share of the Fund's gross income.
The International Equity Fund may invest in any non-U.S. corporations which
could be treated as passive foreign investment companies (`PFICs''). This
could result in adverse tax consequences upon the disposition of, or the
receipt of `excess distributions'' with respect to, such equity
investments. To the extent the International Equity Fund does invest in
PFICs, it may adopt certain tax strategies to reduce or eliminate the
adverse effects of certain federal tax provisions governing PFIC
investments. Many non-U.S. banks and insurance companies may not be treated
as PFICs if they satisfy certain technical requirements under the Code. To
the extent that the International Equity Fund does invest in foreign
securities which are determined to be PFIC securities and is required to
pay a tax on such investments, a credit for this tax would not be allowed
to be passed through to its shareholders. Therefore, the payment of this
tax would reduce the International Equity Fund's economic return from its
PFIC shares, and excess distributions received with respect to such shares
are treated as ordinary income rather than capital gains.
An underlying fund may inadvertently invest in non-U.S. corporations which
would be treated as Passive Foreign Investment Companies (`PFICs'') or
become a PFIC under the Code. This could result in adverse tax consequences
upon the disposition of, or the receipt of `excess distributions'' with
respect to, such equity investments. To the extent an underlying fund does
invest in PFICs, it may elect to treat the PFIC as a `qualified electing
fund''or mark-to-market its investments in PFICs annually. In either case,
the underlying fund may be required to distribute amounts in excess of its
realized income and gains. To the extent that the underlying fund itself is
required to pay a tax on income or gain from investment in PFICs, the
payment of this tax would reduce the International Equity Fund's economic
return.
SHAREHOLDERS' TAX STATUS
The dividends received deduction for corporations will apply to ordinary
income distributions to the extent the distribution represents amounts that
would qualify for the dividends received deduction to the Equity Fund or
the International Equity Fund, if either Fund were a regular corporation,
and to the extent designated by the Fund as so qualifying. Otherwise, these
dividends and any short-term capital gains are taxable as ordinary income.
No portion of any income dividends paid by the other Funds is eligible for
the dividends received deduction available to corporations. These
dividends, and any short-term capital gains, are taxable as ordinary
income.
CAPITAL GAINS
With respect to the Equity Fund, the Short-Term Bond Fund, the
International Equity Fund, and the Intermediate U.S. Government Bond
Fund, long-term capital gains distributed to shareholders will be
treated as long-term capital gains regardless of how long shareholders
have held shares.
With respect to the Pennsylvania Intermediate Municipal Bond Fund,
capital gains or losses may be realized by the Fund on the sale of
portfolio securities and as a result of discounts from par value on
securities held to maturity. Sales would generally be made because of:
o the availability of higher relative yields;
o differentials in market values;
o new investment opportunities;
o changes in creditworthiness of an issuer; or
o an attempt to preserve gains or limit losses.
Distributions of long-term capital gains are taxed as such, whether
they are taken in cash or reinvested, and regardless of the length of
time the shareholder has owned the shares.
TOTAL RETURN
[TO BE UPDATED BY AMENDMENT] For the period from April 1, 1996 (date of
initial public investment) to August 31, 1996, the cumulative total returns
for the Equity Fund, the Pennsylvania Intermediate Municipal Bond Fund, the
Short-Term Bond Fund, and the Intermediate U.S. Government Bond Fund were
(3.09%), (1.93%), (2.26%), and (2.96%), respectively.
Cumulative total return reflects a Fund's total performance over a specific
period of time. This total return assumes and is reduced by the payment of
the maximum sales charge. Each Fund's total return is representative of
only five months of investment activity since the Funds' date of initial
public investment.
The average annual total return for a Fund is the average compounded rate
of return for a given period that would equate a $1,000 initial investment
to the ending redeemable value of that investment. The ending redeemable
value is computed by multiplying the number of shares owned at the end of
the period by the net asset value per share at the end of the period. The
number of shares owned at the end of the period is based on the number of
shares purchased at the beginning of the period with $1,000, less any
applicable sales load, adjusted over the period by any additional shares,
assuming the monthly reinvestment of all dividends and distributions.
YIELD
[TO BE UPDATED BY AMENDMENT] The yields for the Equity Fund, the
Pennsylvania Intermediate Municipal Bond Fund, the Short-Term Bond Fund,
and the Intermediate U.S. Government Bond Fund for the 30-day period ended
August 31, 1996 were 1.50%, 3.80%, 5.49%, and 5.82%, respectively.
The yield for a Fund is determined by dividing the net investment income
per share (as defined by the SEC) earned by each Fund over a thirty-day
period by the maximum offering price per share of each Fund on the last day
of the period. This value is then annualized using semi-annual compounding.
This means that the amount of income generated during the thirty-day period
is assumed to be generated each month over a twelve-month period and is
reinvested every six months. The yield does not necessarily reflect income
actually earned by a Fund because of certain adjustments required by the
SEC and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in a
Fund, the performance will be reduced for those shareholders paying those
fees.
TAX-EQUIVALENT YIELD
[TO BE UPDATED BY AMENDMENT] The Pennsylvania Intermediate Municipal Bond
Fund's tax-equivalent yield for the thirty-day period ended August 31, 1996
was 6.60%.
[TO BE UPDATED BY AMENDMENT] The tax-equivalent yield for the Pennsylvania
Intermediate Municipal Bond Fund is calculated similarly to the yield, but
is adjusted to reflect the taxable yield that the Fund would have had to
earn to equal its actual yield, assuming the maximum 42.4% combined federal
and state tax rate for individuals, and also assuming that income is 100%
tax-exempt. The Fund will use the `actual earned'' method for determining
the percentage of dividend distributions that is tax-exempt. This
information will be provided in connection with year-end shareholder tax
reporting.
TAX-EQUIVALENCY TABLE
The Pennsylvania Intermediate Municipal Bond Fund may also use a tax-
equivalency table in advertising and sales literature. The interest earned
by the municipal bonds in the Fund's portfolio generally remains free from
federal regular income tax,* and is often free from state and local taxes
as well. As the table on the next page indicates, a `tax-free'' investment
is an attractive choice for investors, particularly in times of narrow
spreads between `tax-free'' and taxable yields. [TO BE UPDATED BY
AMENDMENT]
TAXABLE YIELD EQUIVALENT FOR 1996
STATE OF PENNSYLVANIA
COMBINED FEDERAL AND STATE INCOME TAX BRACKET:
17.80% 30.80% 33.80% 38.80% 42.40%
JOINT $1- $40,101-$96,901-$147,701- Over
RETURN 40,100 96,900 147,700 263,750 $263,750
SINGLE $1- $24,001-$58,151-$121,301- Over
RETURN 24,000 58,150 121,300 263,750 $263,750
TAX-EXEMPT
YIELD TAXABLE YIELD EQUIVALENT
1.50% 1.82% 2.17% 2.27% 2.45% 2.60%
2.00% 2.43% 2.89% 3.02% 3.27% 3.47%
2.50% 3.04% 3.61% 3.78% 4.08% 4.34%
3.00% 3.65% 4.34% 4.53% 4.90% 5.21%
3.50% 4.26% 5.06% 5.29% 5.72% 6.08%
4.00% 4.87% 5.78% 6.04% 6.54% 6.94%
4.50% 5.47% 6.50% 6.80% 7.35% 7.81%
5.00% 6.08% 7.23% 7.55% 8.17% 8.68%
5.50% 6.69% 7.95% 8.31% 8.99% 9.55%
6.00% 7.30% 8.67% 9.06 .80% 10.42%
Note: The maximum marginal tax rate for each bracket was used in
calculating the taxable yield equivalent. Furthermore, additional state and
local taxes paid on comparable taxable investments were not used to
increase federal deductions.
The chart above is for illustrative purposes only. It is not an indicator
of past or future performance of Fund shares.
*Some portion of the Fund's income may be subject to the federal
alternative minimum tax and state and local income taxes.
PERFORMANCE COMPARISONS
Each Fund's performance depends upon such variables as:
o portfolio quality;
o average portfolio maturity;
o type of instruments in which the portfolio is invested;
o changes in interest rates and market value of portfolio securities;
o changes in each Fund's expenses; and
o various other factors.
Each Fund's performance fluctuates on a daily basis largely because net
earnings and the maximum offering price per share fluctuate daily. Both net
earnings and offering price per share are factors in the computation of
yield and total return.
Investors may use financial publications and/or indices to obtain a more
complete view of a Fund's performance. When comparing performance,
investors should consider all relevant factors such as the composition of
any index used, prevailing market conditions, portfolio compositions of
other funds, and methods used to value portfolio securities and compute
offering price. The financial publications and/or indices which a Fund uses
in advertising may include:
o LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund
categories by making comparative calculations using total return. Total
return assumes the reinvestment of all income dividends and capital gains
distributions, if any. From time to time, the Fund will quote its Lipper
ranking in the applicable funds category in advertising and sales
literature.
o STANDARD & POOR'S DAILY STOCK PRICE INDEX OF 500 COMMON STOCKS, a
composite index of common stocks in industry, transportation, and financial
and public utility companies, can be used to compare to the total returns
of funds whose portfolios are invested primarily in common stocks. In
addition, the Standard & Poor's index assumes reinvestments of all
dividends paid by stocks listed on its index. Taxes due on any of these
distributions are not included, nor are brokerage or other fees calculated
in Standard & Poor's figures.
o THE NEW YORK STOCK EXCHANGE COMPOSITE OR COMPONENT INDICES are
unmanaged indices of all industrial, utilities, transportation, and finance
stocks listed on the New York Stock Exchange.
o DOW JONES INDUSTRIAL AVERAGE (``DJIA') represents share prices of
selected large capitalization, well-established blue-chip industrial
corporations as well as public utility and transportation companies. The
DJIA indicates daily changes in the average price of stocks in any of its
categories. It also reports total sales for each group of industries.
o MORNINGSTAR, INC., an independent rating service, is the publisher of
the bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for
two weeks.
o MERRILL LYNCH 1-3 YEAR TREASURY INDEX is an unmanaged index tracking
short-term U.S. government securities between 1 and 2.99 years. The index
is produced by Merrill Lynch, Pierce, Fenner & Smith, Inc.
o LEHMAN BROTHERS INTERMEDIATE GOVERNMENT/CORPORATE BOND INDEX is
comprised of issues which include non-convertible bonds publicly issued by
the U.S. government or its agencies; corporate bonds guaranteed by the U.S.
government and quasi-federal corporations; and publicly issued, fixed rate,
non-convertible domestic bonds of companies in industry, public utilities,
and finance. The average maturity of these bonds is between 1 and 9.9
years.
o LEHMAN BROTHERS INTERMEDIATE GOVERNMENT BOND INDEX is comprised of all
publicly issued, non-convertible domestic debt of the U.S. government, or
any agency thereof, or any quasi-federal corporation. The index also
includes corporate debt guaranteed by the U.S. government. Only notes and
bonds with a minimum outstanding principal of $1 million and a minimum
maturity of one year and maximum maturity of 9.9 years are included.
o LEHMAN BROTHERS GENERAL OBLIGATION MUNICIPAL BOND INDEX is comprised of
state general obligation debt issues. These bonds are rated A or better and
represent a variety of coupon ranges. Index figures are total return
calculated for one, three, and twelve month periods as well as year-to-
date.
o LEHMAN BROTHERS FIVE-YEAR STATE GENERAL OBLIGATION BONDS is an index
comprised of all state general obligation debt issues with maturities
between four and six years. These bonds are rated A or better and represent
a variety of coupon ranges. Index figures are total returns calculated for
one, three, and twelve month periods as well as year- to-date. Total
returns are also calculated as of the index inception, December 31, 1979.
o LEHMAN BROTHERS TEN-YEAR STATE GENERAL OBLIGATION BONDS is an index
comprised on the same issues noted above except that the maturities range
between nine and eleven years. Index figures are total returns calculated
as of the index inception, December 31, 1979.
o LEHMAN BROTHERS 1-3 YEAR GOVERNMENT INDEX is comprised of all publicly
issued, non-convertible domestic debt of the U.S. government, or any agency
thereof, or any quasi-federal corporation. The index also includes
corporate debt guaranteed by the U.S. government. Only notes and bonds with
a minimum maturity of one year and maximum maturity of 2.9 years are
included.
o MORGAN STANLEY EUROPE, AUSTRALIA, AND FAR EAST (EAFE) INDEX is a market
capitalization weighted foreign securities index, which is widely used to
measure the performance of European, Australian, New Zealand and Far
Eastern stock markets. The index covers approximately 1,020 companies drawn
from 18 countries in the above regions. The index values its securities
daily in both U.S. dollars and local currency and calculates total returns
monthly. EAFE U.S. dollar total return is a net dividend figure less
Luxembourg withholding tax. The EAFE is monitored by Capital International,
S.A., Geneva, Switzerland.
Advertising and other promotional literature may include charts, graphs and
other illustrations using the Funds' returns, or returns in general, that
demonstrate basic investment concepts such as tax-deferred compounding,
dollar-cost averaging and systematic investment. In addition, the Funds can
compare their performance, or performance for the types of securities in
which they invest, to a variety of other investments, such as bank savings
accounts, certificates of deposit, and Treasury bills.
Advertisements may quote performance information which does not reflect the
effect of the sales load.
ECONOMIC AND MARKET INFORMATION
Advertising and sales literature for the Funds may include discussions of
economic, financial and political developments and their effect on the
securities market. Such discussions may take the form of commentary on
these developments by Funds' portfolio managers and their views and
analysis on how such developments could affect the Funds. In addition,
advertising and sales literature may quote statistics and give general
information about the mutual fund industry, including the growth of the
industry, from sources such as the Investment Company Institute (`ICI'').
For example, according to the ICI, twenty-seven percent of American
households are pursuing their financial goals through mutual funds. These
investors, as well as businesses and institutions, have entrusted over $3
trillion to the more than 5,500 funds available.
FINANCIAL STATEMENTS
[TO BE UPDATED BY AMENDMENT] The Financial Statements for Marketvest
Equity Fund, Marketvest Pennsylvania Intermediate Municipal Bond Fund,
Marketvest Short-Term Bond Fund, and Marketvest Intermediate U.S.
Government Bond Fund are contained in their Combined Semi-Annual Report for
the period ended August 31, 1996, and are incorporated herein by reference.
(File No. 811-7383).
APPENDIX
STANDARD AND POOR'S RATINGS GROUP MUNICIPAL/CORPORATE BOND RATING
DEFINITIONS
AAA-Debt rated AAA has the highest rating assigned by Standard & Poor's
Ratings Group. Capacity to pay interest and repay principal is extremely
strong.
AA-Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A-Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher rated
categories.
BBB-Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher rated
categories.
NR-Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that Standard &
Poor's Ratings Group does not rate a particular type of obligation as a
matter of policy.
PLUS (+) OR MINUS (-):-The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
MOODY'S INVESTORS SERVICE, INC., MUNICIPAL/CORPORATE BOND RATING
DEFINITIONS
AAA-Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as `gilt edge.'' Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
AA-Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
A-Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium-grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
BAA-Bonds which are rated Baa are considered as medium-grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and, in fact, have speculative characteristics as well.
NR-Not rated by Moody's Investors Service, Inc.
FITCH INVESTORS SERVICE, INC., LONG-TERM DEBT RATING DEFINITIONS
AAA-Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA-Bonds considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated AAA. Because bonds rated in the
AAA and AA categories are not significantly vulnerable to foreseeable
future developments, short-term debt of these issuers is generally rated F-
1+.
A-Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
BBB-Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these
bonds, and therefore, impair timely payment. The likelihood that the
ratings of these bonds will fall below investment grade is higher than for
bonds with higher ratings.
NR-NR indicates that Fitch Investors Service, Inc. does not rate the
specific issue.
STANDARD AND POOR'S RATINGS GROUP COMMERCIAL PAPER RATING DEFINITIONS
A-1-This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted with a plus (+) sign designation.
A-2-Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
MOODY'S INVESTORS SERVICE, INC., COMMERCIAL PAPER RATING DEFINITIONS
P-1-Issuers rated PRIME-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations.
PRIME-1 repayment capacity will normally be evidenced by the following
characteristics:
o Leading market positions in well established industries.
o High rates of return on funds employed.
o Conservative capitalization structures with moderate reliance on debt
and ample asset protection.
o Broad margins in earning coverage of fixed financial charges and high
internal cash generation.
o Well-established access to a range of financial markets and assured
sources of alternate liquidity.
P-2-Issuers rated PRIME-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This
will normally be evidenced by many of the characteristics cited above, but
to a lesser degree. Earnings trends and coverage ratios, while sound, will
be more subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
FITCH INVESTORS SERVICE, INC., SHORT-TERM DEBT RATING DEFINITIONS
F-1+-(Exceptionally Strong Credit Quality). Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1-(Very Strong Credit Quality). Issues assigned this rating reflect an
assurance for timely payment only slightly less in degree than issues rated
F-1+.
F-2-(Good Credit Quality). Issues carrying this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not as
great as for issues assigned F-1+ and F-1 ratings.
PART C. OTHER INFORMATION.
Item 24. Financial Statements and Exhibits:
(a) Financial Statements (1-2) To be filed by Amendment.
(b) Exhibits:
(1) Conformed Copy of Declaration of Trust of the
Registrant (1.);
(i) ..........Conformed copy of Amendment No. 1 to
Declaration of Trust (1.);
(ii)Conformed copy of Amendment No. 2 to Declaration
of Trust (2.);
(iii)Conformed Copy of Amendment No. 3 to Declaration
of Trust;+
(2) Copy of By-Laws of the Registrant (2.);
(3) Not applicable;
(4) Not applicable;
(5) (i) Copy of Investment Advisory Contract of the
Registrant; +
(ii) Conformed Copies of Exhibits A and B to the
Investment Advisory Contract of the Registrant; +
(6) (i)Copy of Distributor's Contract of the Registrant;+
(ii) Conformed Copies of Exhibits A and B to the
Distributor's Contract of the Registrant;+
(7) Not applicable;
(8) Conformed Copy of Custodian Agreement of the
Registrant; +
(9) (i)Conformed Copy of Agreement for Fund Accounting,
Shareholder Recordkeeping, and Custody Services
Procurement of the Registrant, including Exhibit
1; +
(ii)Conformed Copy of Administrative Services
Agreement; +
(iii)Conformed Copy of Amendment No. 1 to Exhbit No. 1
of the Agreement for Fund Accounting, Shareholder
Recordkeeping, and Custody Services Procurement
of the Registrant; +
(iv)Conformed Copy of Assignment of Fund Accounting
Agreement of the Registrant; +
(v)Conformed Copy of Amendment No. 1 to
Administrative Services Agreement of the
Registrant; +
(10) Conformed Copy of Opinion and Consent of Counsel as to
legality of shares being registered (2.);
+ All exhibits have been filed electronically.
(1.) Response is incorporated by reference to Registrant's Initial
Registration Statement on Form N-1A filed October 27, 1995 (File Nos.
33-63743 and 811-7383).
(2.) Response is incorporated by reference to Registrant's Pre-Effective
Registration Amendment No. 1 on Form N-1A filed January 4, 1996 (File
Nos. 33-63743 and 811-7383).
(3.) Response is incorporated by reference to Registrant's Post-Effective
Registration Amendment No. 1 on Form N-1A filed September 30, 1996
(File Nos. 33-63743 and 811-7383).
(11) Not applicable;
(12) Not applicable;
(13) Conformed Copy of Initial Capital
Understanding (2.);
(14) Not applicable;
(15) (i)Conformed Copy of Distribution Plan including
Exhibits A and B thereto; +
(ii)Copy of Rule 12b-1 Agreement and Exhibits A and B
thereto; +
(16) Copy of Schedule for Computation of Fund Performance
Data, Marketvest Pennsylvania Intermediate Municipal
Bond Fund (3.);
(17) Not applicable (Financial Data Schedules);
(18) Not applicable;
(19) Conformed Copy of Power of Attorney (3.);
Item 25. Persons Controlled by or Under Common Control with Registrant:
Not applicable.
Item 26. Number of Holders of Securities:
Number of Record Holders
Title of Class as of April 25, 1997
Shares of beneficial interest
(no par value)
Marketvest International Equity Fund 8
Marketvest Pennsylvania
Intermediate Municipal Bond Fund 26
Item 27. Indemnification: (1.)
Item 28. Business and Other Connections of Investment Adviser:
For a description of the other business of the investment
adviser, see the section entitled `Management of the Marketvest
Funds''in Part A.
The principal executive officers and directors of the Trust's
Investment Adviser are set forth in the following tables. Unless
otherwise noted, the position listed under other Substantial
Business, Profession, Vocation, or Employment is with Dauphin
Deposit Bank and Trust Company.
+ All exhibits have been filed electronically.
(1.) Response is incorporated by reference to Registrant's Initial
Registration Statement on Form N-1A filed October 27, 1995 (File Nos.
33-63743 and 811-7383).
(2.) Response is incorporated by reference to Registrant's Pre-Effective
Registration Amendment No. 1 on Form N-1A filed January 4, 1996 (File
Nos. 33-63743 and 811-7383).
(3.) Response is incorporated by reference to Registrant's Post-Effective
Registration Amendment No. 1 on Form N-1A filed September 30, 1996
(File Nos. 33-63743 and 811-7383).
(1) (2) (3)
Other Substantial
Position with Business, Profession,
Name the Adviser Vocation or Employment
Christopher R. JenningsChairman of the Chairman of the Board
Board, CEO, President and CEO, Dauphin and
Director Deposit Corporation
Paul B. Shannon Vice Chairman and
Chief Credit Policy
Officer
Dennis L. Dinger Senior Executive
Vice President,
Chief Fiscal
and Administrative
Officer and
Assistant Treasurer
Richard B. Brokenshire Executive Vice
President and
Chief Operations
Support Officer
Rick A. Gold Executive Vice
President,
Manager-Trust Group
Henry K. Long, Jr. Executive Vice
President and
Vice Chairman,
Corporate Banking
Group
John G. Coulson Executive Vice
President
and Chief
Information
Officer
Lawrence J. LaMaina, Jr. Vice Chairman Vice Chairman,
Dauphin
of Community Deposit Corporation
Banking and
Director
Craig A. Obeck President,
Southern Division
Michael B. Johnson Senior Vice
President and
Strategic Planning
and Implementation
Officer
Stewart P. McEntee Executive Vice
President and
Deputy Director,
Community Banking
Group - Chief
Marketing Officer
(1) (2) (3)
Other Substantial
Position with Business, Profession,
Name the Adviser Vocation or Employment
Donald. H. Ross Executive Vice
President and
Deputy Director
of Community
Banking Group-
Retail Lending
Robert A. Rupel Executive Vice
President and
President-Eastern
Division
Kenneth H. Sallade Executive Vice
President and
Chief Investment
Officer
David L. Brewin Executive Vice
President and Chief
Human Resources
Officer
Robert S. Jones Executive Vice
President and
Deputy Director
of Community
Banking Group-
Business Banking
Michael D. Zarcone Executive Vice
President and
President -Central
Division
Joseph T. Lysczek, Jr. Senior Vice
President and
Treasurer
James J. Trupp, Jr. Senior Vice
President and
General Auditor
Linda Schroeder Vice President,
Chief Financial
Officer and
Corporate Controller
Jackie Rothchild Senior Vice
President and
Deputy Director,
Comunity Banking
Group - Retail
Delivery Systems
George W. King Executive Vice
President, Corporate
Secretary and
Corporate Counsel
(1) (2) (3)
Other Substantial
Position with Business, Profession,
Name the Adviser Vocation or Employment
J. Edward Beck Director President, Bitreck
Corp.
John R. Buchart Director Retired Chairman of the
Board, H.G. Rotz
Associates, Inc.
Derek C. Hathaway Director President and CEO,
Harsco Corporation
Alfred G. Hemmerich Director Retired President,
Green Hills Management Company
Lee H. Javitch Director Private Investor,
Former Chairman of the Board, Giant
Food Stores, Inc.
William J. King Director Retired former Chairman
of the Board and CEO, Dauphin Deposit
Corporation
Richard E. Jordan, II Director Chairman of the Board,
L.B. Smith, Inc.
William T. Kirchhoff Director Executive Vice
President, Cleveland Brothers
Equipment Company, Inc.
Andrew Maier, II Director President, Maier's
Bakery
Jean D. Seibert Director Partner, Wion, Zulli &
Seibert, Attorneys
R. Champlin Sheridan, Jr. Director Chairman, The
Sheridan Group, Inc.
L. Andrew Zausner, Esq.Director Partner, Dickstein
Shapiro Morin & Oshinsky
LLP
Item 29. Principal Underwriters:
(a)Edgewood Services, Inc. the Distributor for shares of the
Registrant, also acts as principal underwriter for the
following open-end investment companies: Excelsior
Institutional Trust (formerly, UST Master Funds, Inc.),
Excelsior Tax-Exempt Funds, Inc. (formerly, UST Master Tax-
Exempt Funds, Inc.), Excelsior Institutional Trust, FTI
Funds, and Marketvest Funds, Inc.
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant
Lawrence Caracciolo President and Director, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Arthur L. Cherry Director, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
J. Christopher Donahue Director, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Ronald M. Petnuch Vice President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Thomas P. Schmitt Vice President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Newton Heston, III Vice President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Ernest L. Linane Assistant Vice President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
S. Elliott Cohan Secretary, Assistant Secretary
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Thomas J. Ward Assistant Secretary, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Kenneth W. Pegher, Jr. Treasurer, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
(c) Not applicable
Item 30. Location of Accounts and Records:
All accounts and records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and Rules 31a-1 through 31a-3 promulgated
thereunder are maintained at one of the following locations:
Registrant Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Shareholder Services Company Federated Investors Tower
("Transfer Agent and Dividend Pittsburgh, PA 15222-3779
Disbursing Agent")
Federated Services Company Federated Investors Tower
(`Portfolio Accounting Services'') Pittsburgh, PA 15222-3779
Federated Administrative Services Federated Investors Tower
("Administrator") Pittsburgh, PA 15222-3779
Dauphin Deposit Bank and Trust Company 213 Market Street
("Adviser" and `Custodian'') Harrisburg, PA 17101
Item 31. Management Services: Not applicable.
Item 32. Undertakings:
Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of
Trustees and the calling of special shareholder meetings by
shareholders.
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and without charge.
Registrant hereby undertakes to file a post-effective amendment,
using financial statements which need not be certified, within
four to six months from the effective date of Post-Effective
Amendment No. 1.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, MARKETVEST FUNDS (formerly,
COURT STREET FUNDS) has duly caused this Amendment to its Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Pittsburgh and Commonwealth of Pennsylvania, on
the 30th day of April, 1997.
MARKETVEST FUNDS
(formerly, COURT STREET FUNDS)
BY: /s/ Victor R. Siclari
Victor R. Siclari, Secretary
Attorney in Fact for Edward C. Gonzales
April 30, 1997
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to its Registration Statement has been signed below by the
following person in the capacity and on the date indicated:
NAME TITLE DATE
By:/s/ Victor R. Siclari
Victor R. Siclari Attorney In Fact April 30, 1997
SECRETARY For the Persons
Listed Below
NAME TITLE
Edward C. Gonzales* Chairman and Treasurer
(Chief Executive Officer
and Principal Financial and
Accounting Officer) and
Trustee and President
Richard Seidel* Trustee
Clyde M. McGeary* Trustee
* By Power of Attorney
Exhibit No. 1(iii) on Form N-1A
Exhibit No. 3(a) Under Item 601/Reg SK
MARKETVEST FUNDS
Amendment No. 3
DECLARATION OF TRUST
dated September 1, 1995
THIS Declaration of Trust is amended as follows:
DELETE the first paragraph of Section 5 of Article III from the
Declaration of Trust and REPLACE it with the following:
``Section 5. Establishment and Designation of Series
or Class. Without limiting the authority of the Trustees set
forth in Article XII, Section 8, inter alia, to establish and
designate any additional Series or Class or to modify the
rights and preferences of any existing Series or Class, the
Series of the Trust shall be, and are established and
designated as:
Marketvest International Equity Fund
Marketvest Pennsylvania Intermediate Municipal Bond Fund''
The undersigned Secretary of Marketvest Funds hereby certifies that the
above-stated Amendment is a true and correct Amendment to the Declaration
of Trust, as adopted by the Board of Trustees on the 17th day of December,
1996.
WITNESS the due execution hereof this 17th day of December, 1996.
/s/ Victor R. Siclari
Victor R. Siclari
Secretary
Exhibit No. 5(i) on Form N1-A
Exhibit 10 Under Item 601 Reg S/K
MARKETVEST FUNDS
INVESTMENT ADVISORY CONTRACT
This Contract is made this January 1, 1996, between Dauphin Deposit Bank
and Trust Company, a state-chartered bank and trust company having its
principal place of business in Harrisburg, Pennsylvania (the "Adviser"),
and Marketvest
Funds, a Massachusetts business trust having its principal place of
business in Pittsburgh, Pennsylvania (the `Trust'').
WHEREAS the Trust is an open-end management investment company as that
term is defined in the Investment Company Act of 1940, as amended, and
is registered as such with the Securities and Exchange Commission; and
WHEREAS Adviser is engaged in the business off rendering investment
advisory and management services.
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. The Trust hereby appoints Adviser as Investment Adviser for each of the
portfolios ("Funds") of the Trust which executes an exhibit to this
Contract, and Adviser accepts the appointments. Subject to the supervision
of the Trustees of the Trust, Adviser shall provide a continuous investment
program for each of the Funds, including investment research and management
with respect to all securities, investments, cash and cash equivalents in
the Funds. Adviser will determine from time-to-time what securities and
other assets will be purchased, retained or sold by the Funds and will
place the daily orders for the purchase or sale of securities. Adviser
will provide services rendered by it under this Contract in accordance with
each Fund's objectives, policies, and restrictions as stated in the
prospectus and resolutions of the Board of Trustees.
2. Adviser, in its supervision of the investments of each of the Funds,
will be guided by each of the Fund's investment objective and policies and
the provisions and restrictions contained in the Declaration of Trust and
By-Laws of the Trust and as set forth in the Registration Statements and
exhibits as may be on file with the Securities and Exchange Commission.
3. Each Fund shall pay or cause to be paid all of its own expenses and its
allocable share of Trust expenses, including, without limitation, the
expenses of organizing the Trust and continuing its existence; fees and
expenses of Trustees and officers of the Trust; fees for investment
advisory services and administrative personnel and services; expenses
incurred in the distribution of its shares ("Shares"), including expenses
of administrative support services; fees and expenses of preparing and
printing its Registration Statements under the Securities Act of 1933 and
the Investment Company Act of 1940, as amended, and any amendments thereto;
expenses of registering and qualifying the Trust, the Funds, and Shares of
the Funds under federal and state laws and regulations; expenses of
preparing, printing, and distributing prospectuses (and any amendments
thereto) to shareholders; interest expense, taxes, fees, and commissions of
every kind; expenses of issue (including cost of Share certificates),
purchase, repurchase, and redemption of Shares, including expenses
attributable to a program of periodic issue; charges and expenses of
custodians, transfer agents, dividend disbursing agents, shareholder
servicing agents, and registrars; printing and mailing costs, auditing,
accounting, and legal expenses; reports to shareholders and governmental
officers and commissions; expenses of meetings of Trustees and shareholders
and proxy solicitations therefor; insurance expenses; association
membership dues and such nonrecurring items as may arise, including all
losses and liabilities incurred in administering the Trust and the Funds.
Each Fund will also pay its allocable share of such extraordinary expenses
as may arise including expenses incurred in connection with litigation,
proceedings, and claims and the legal obligations of the Trust to indemnify
its officers and Trustees and agents with respect thereto.
4. Each of the Funds shall pay to Adviser, for all services rendered to
each Fund by Adviser hereunder, the fees set forth in the exhibits attached
hereto.
5. The net asset value of each Fund's Shares as used herein will be
calculated to the nearest 1/10th of one cent.
6. The Adviser may from time to time and for such periods as it deems
appropriate reduce its compensation (and, if appropriate, assume expenses
of one or more of the Funds) to the extent that any Fund's expenses exceed
such lower expense limitation as the Adviser may, by notice to the Fund,
voluntarily declare to be effective.
7. This Contract shall begin for each Fund as of the date of execution of
the applicable exhibit and shall continue in effect with respect to each
Fund presently set forth on an exhibit (and any subsequent Funds added
pursuant to an exhibit during the initial term of this Contract) for two
years from the date of this Contract set forth above and thereafter for
successive periods of one year, subject to the provisions for termination
and all of the other terms and conditions hereof if such continuation shall
be specifically approved at least annually by the vote of a majority of the
Trustees of the Trust, including a majority of the Trustees who are not
parties to this Contract or interested persons of any such party cast in
person at a meeting called for that purpose; provided, however, that,
notwithstanding any provision of this Contract, the Contract may be
terminated at any time with respect to a Fund, without payment of any
penalty, by the Adviser, on one hundred twenty (120) days' written notice
to the Trust. If a Fund is added after the first approval by the Trustees
as described above, this Contract will be effective as to that Fund upon
execution of the applicable exhibit and will continue in effect until the
next annual approval of this Contract by the Trustees and thereafter for
successive periods of one year, subject to approval as described above.
8. Notwithstanding any provision in this Contract, it may be terminated at
any time with respect to any Fund, without the payment of any penalty, by
the Trustees of the Trust or by a vote of the shareholders of that Fund on
sixty (60) days' written notice to Adviser.
9. The Trust shall deliver to the Adviser, from time-to-time as available,
copies of the Trust's Form N-8A, N-1A, prospectus, statement of additional
information, Board resolutions approving this Contract, Declaration of
Trust, and By-Laws, and all amendments and supplements thereto.
10. This Contract may not be assigned by Adviser and shall automatically
terminate in the event of any assignment. Adviser may employ or contract
with such other person, persons, corporation, or corporations (including
subadvisers approved by the Board of Trustees and shareholders in
accordance with the provisions of the Act) at its own cost and expense as
it shall determine in order to assist it in carrying out this Contract. In
addition, the Adviser is authorized, subject to prior approval of the Board
of Trustees, to take into account the sale of shares of the Funds in
allocating purchase and sale orders for portfolio securities to brokers and
dealers (including brokers and dealers that are affiliated with the
adviser, any subadviser or the Funds' distributor) in compliance with
applicable law. In no instance, however, will a portfolio security be
purchased from or sold to the Adviser, any subadviser or the Funds'
distributor or affiliated person thereof except to the extent permitted by
the Federal or state securities laws.
11. Adviser will place orders for purchase and sale of portfolio
securities with issuers or broker-dealers and will attempt to obtain best
price or most favorable execution with respect to such orders. In placing
such orders, Adviser will consider the experience, skill, financial
responsibility and administrative efficiency of the broker-dealer involved,
and may select a broker-dealer on a basis other than the lowest commission
rate if deemed appropriate by the Adviser.
12. The Trust recognizes that the Adviser may serve in an investment
advisory capacity with respect to entities in addition to the Fund, and the
Trust hereby agrees that nothing in the Contract shall be deemed to
preclude the Adviser from serving in such capacity.
13. In the absence of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the obligations or duties under this Contract on the
part of Adviser, Adviser shall not be liable to the Trust or to any of the
Funds or to any shareholder for any act or omission in the course of or
connected in any way with rendering services or for any losses that may be
sustained in the purchase, holding, or sale of any security.
14. This Contract may be amended at any time by agreement of the parties
provided that the amendment shall be approved both by the vote of a
majority of the Trustees of the Trust, including a majority of the Trustees
who are not parties to this Contract or interested persons of any such
party to this Contract (other than as Trustees of the Trust) cast in person
at a meeting called for that purpose, and, where required by Section
15(a)(2) of the Act, on behalf of a Fund by a majority of the outstanding
voting securities of such Fund as defined in Section 2(a)(42) of the Act.
15. The Adviser acknowledges that all sales literature for investment
companies (such as the Trust) are subject to strict regulatory oversight.
The Adviser agrees to submit any proposed sales literature for the Trust
(or any Fund) or for itself or its affiliates which mentions the Trust (or
any Fund) to the Trust's distributor for review and filing with the
appropriate regulatory authorities prior to the public release of any such
sales literature, provided, however, that nothing herein shall be construed
so as to create any obligation or duty on the part of the Adviser to
produce sales literature for the Trust (or any Fund). The Trust agrees to
cause its distributor to promptly review all such sales literature to
ensure compliance with relevant requirements, to promptly advise Adviser of
any deficiencies contained in such sales literature, to promptly file
complying sales literature with the relevant authorities, and to cause such
sales literature to be distributed to prospective investors in the Trust.
16. Adviser is hereby expressly put on notice of the limitation of
liability as set forth in Article XI of the Declaration of Trust and agrees
that the obligations pursuant to this Contract of a particular Fund and of
the Trust with respect to that particular Fund be limited solely to the
assets of that particular Fund, and Adviser shall not seek satisfaction of
any such obligation from any other Fund, the shareholders of any Fund, the
Trustees, officers, employees or agents of the Trust, or any of them.
17. This Contract shall be construed in accordance with and governed by
the laws of the Commonwealth of Pennsylvania.
18. This Contract will become binding on the parties hereto upon their
execution of the attached exhibits to this Contract.
Exhibit No. 5(ii) on Form N1-A
Exhibit No. 10 Under Item 601 of Reg S/K
EXHIBIT A
to the
Investment Advisory Contract
MARKETVEST PENNSYLVANIA INTERMEDIATE MUNICIPAL BOND FUND
The following provisions are hereby incorporated and made part of the
Investment Advisory Contract dated January 1, 1996 between Marketvest Funds
and Dauphin Deposit Bank and Trust Company.
For all services rendered by Adviser hereunder, the above-named Fund
of the Trust shall pay to Adviser and Adviser agrees to accept as full
compensation for all services rendered hereunder, an annual investment
advisory fee equal to .75 of 1% of the average daily net assets of the
Fund.
The portion of the fee based upon the average daily net assets of the
Fund shall be accrued daily at the rate of 1/365th of .75 of 1% applied to
the daily net assets of the Fund.
The advisory fee so accrued shall be paid to Adviser monthly.
In consideration of the mutual covenants set forth in the Investment
Advisory Contract dated January 1, 1996 between Marketvest Funds and
Dauphin Deposit Bank and Trust Company, Marketvest Funds executes and
delivers this Exhibit on behalf of the Fund, and with respect to the shares
thereof, set forth above.
Witness the due execution hereof this 1st day of January, 1996.
Attest: DAUPHIN DEPOSIT BANK AND TRUST COMPANY
/s/ George W. King By:/s/ Rick A. Gold
Secretary Executive Vice President
Attest: MARKETVEST FUNDS
/s/ S. Elliott Cohan By:/s/ Jeffrey W. Sterling
Assistant Secretary Vice President
EXHIBIT B
to the
Investment Advisory Contract
MARKETVEST INTERNATIONAL EQUITY FUND
The following provisions are hereby incorporated and made part of the
Investment Advisory Contract dated January 1, 1996 between Marketvest Funds
and Dauphin Deposit Bank and Trust Company.
For all services rendered by Adviser hereunder, the above-named Fund
of the Trust shall pay to Adviser and Adviser agrees to accept as full
compensation for all services rendered hereunder, an annual investment
advisory fee equal to .65 of 1% of the average daily net assets of the
Fund.
The portion of the fee based upon the average daily net assets of the
Fund shall be accrued daily at the rate of 1/365th of .65 of 1% applied to
the daily net assets of the Fund.
The advisory fee so accrued shall be paid to Adviser monthly.
In consideration of the mutual covenants set forth in the Investment
Advisory Contract dated January 1, 1996 between Marketvest Funds and
Dauphin Deposit Bank and Trust Company, Marketvest Funds executes and
delivers this Exhibit on behalf of the Fund, and with respect to the shares
thereof, set forth above.
Witness the due execution hereof this 1st day of January, 1997.
Attest: DAUPHIN DEPOSIT BANK AND TRUST COMPANY
/s/ Bernard V. Kelly, Jr. By: /s/ Rick A. Gold
Assistant Secretary Executive Vice President
Rick A. Gold
Attest: MARKETVEST FUNDS
/s/ Victor R. Siclari By: /s/ Jeffrey W. Sterling
Secretary Vice President
EXHIBIT NO. 6(i) ON FORM N-1A
EXHIBIT NO. 1 UNDER ITEM 601 REG S/K
MARKETVEST FUNDS
DISTRIBUTOR'S CONTRACT
AGREEMENT made this 1st day of January, 1996 by and between
Marketvest Funds (the "Trust"), a Massachusetts business trust, and
EDGEWOOD SERVICES, INC. (`ESI"), a Pennsylvania corporation.
In consideration of the mutual covenants hereinafter contained, it
is hereby agreed by and between the parties hereto as follows:
1. The Trust hereby appoints ESI as its agent to sell and distribute
shares of the Trust which may be offered in one or more series (the
"Funds") consisting of one or more classes (the "Classes") of shares
(the "Shares"), as described and set forth on one or more exhibits
to this Agreement, at the current offering price thereof as
described and set forth in the current Prospectuses of the Trust.
ESI hereby accepts such appointment and agrees to provide such other
services for the Trust, if any, and accept such compensation from
the Trust, if any, as set forth in the applicable exhibits to this
Agreement.
2. The sale of any Shares may be suspended without prior notice
whenever in the judgment of the Trust it is in its best interest to
do so.
3. Neither ESI nor any other person is authorized by the Trust to give
any information or to make any representation relative to any Shares
other than those contained in the Registration Statement,
Prospectuses, or Statements of Additional Information ("SAIs") filed
with the Securities and Exchange Commission, as the same may be
amended from time to time, or in any supplemental information to
said Prospectuses or SAIs approved by the Trust. ESI agrees that any
other information or representations other than those specified
above which it or any dealer or other person who purchases Shares
through ESI may make in connection with the offer or sale of Shares,
shall be made entirely without liability on the part of the Trust.
ESI agrees that in offering or selling Shares as agent of the Trust,
it will, in all respects, duly conform to all applicable state and
federal laws and the rules and regulations of the National
Association of Securities Dealers, Inc., including its Rules of Fair
Practice. ESI will submit to the Trust copies of all sales
literature before using the same and will not use such sales
literature if disapproved by the Trust.
4. This Agreement is effective with respect to each Class as of the
date of execution of the applicable exhibit and shall continue in
effect with respect to each Class presently set forth on an exhibit
and any subsequent Classes added pursuant to an exhibit during the
initial term of this Agreement for one year from the date set forth
above, and thereafter for successive periods of one year if such
continuance is approved at least annually by the Trustees of the
Trust including a majority of the members of the Board of Trustees
of the Trust who are not interested persons of the Trust and have no
direct or indirect financial interest in the operation of any
Distribution Plan relating to the Trust or in any related documents
to such Plan ("Disinterested Trustees") cast in person at a meeting
called for that purpose. If a Class is added after the first annual
approval by the Trustees as described above, this Agreement will be
effective as to that Class upon execution of the applicable exhibit
and will continue in effect until the next annual approval of this
Agreement by the Trustees and thereafter for successive periods of
one year, subject to approval as described above.
5. This Agreement may be terminated with regard to a particular Fund or
Class at any time, without the payment of any penalty, by the vote
of a majority of the Disinterested Trustees or by a majority of the
outstanding voting securities of the particular Fund or Class on not
more than sixty (60) days' written notice to any other party to this
Agreement. This Agreement may be terminated with regard to a
particular Fund or Class by ESI on sixty (60) days' written notice
to the Trust.
6. This Agreement may not be assigned by ESI and shall automatically
terminate in the event of an assignment by ESI as defined in the
Investment Company Act of 1940, as amended, provided, however, that
ESI may at its sole expense employ such other person, persons,
corporation or corporations as it shall determine in order to assist
it in carrying out its duties under this Agreement.
7. ESI shall not be liable to the Trust for anything done or omitted by
it, except acts or omissions involving willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties imposed
by this Agreement.
8. This Agreement may be amended at any time by mutual agreement in
writing of all the parties hereto, provided that such amendment is
approved by the Trustees of the Trust including a majority of the
Disinterested Trustees of the Trust cast in person at a meeting
called for that purpose.
9. This Agreement shall be construed in accordance with and governed by
the laws of the Commonwealth of Pennsylvania.
10. (a) Subject to the conditions set forth below, the Trust agrees to
indemnify and hold harmless ESI and each person, if any, who
controls ESI within the meaning of Section 15 of the Securities
Act of 1933 and Section 20 of the Securities Act of 1934, as
amended, against any and all loss, liability, claim, damage and
expense whatsoever (including but not limited to any and all
expenses whatsoever reasonably incurred in investigating,
preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever) arising out of or based
upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement, any
Prospectuses or SAIs (as from time to time amended and
supplemented) or the omission or alleged omission therefrom of
a material fact required to be stated therein or necessary to
make the statements therein not misleading, unless such
statement or omission was made in reliance upon and in
conformity with written information furnished to the Trust
about ESI by or on behalf of ESI expressly for use in the
Registration Statement, any Prospectuses and SAIs or any
amendment or supplement thereof.
If any action is brought against ESI or any controlling person
thereof with respect to which indemnity may be sought against
the Trust pursuant to the foregoing paragraph, ESI shall
promptly notify the Trust in writing of the institution of such
action and the Trust shall assume the defense of such action,
including the employment of counsel selected by the Trust and
payment of expenses. ESI or any such controlling person thereof
shall have the right to employ separate counsel in any such
case, but the fees and expenses of such counsel shall be at the
expense of ESI or such controlling person unless the employment
of such counsel shall have been authorized in writing by the
Trust in connection with the defense of such action or the
Trust shall not have employed counsel to have charge of the
defense of such action, in any of which events such fees and
expenses shall be borne by the Trust. Anything in this
paragraph to the contrary notwithstanding, the Trust shall not
be liable for any settlement of any such claim of action
effected without its written consent. The Trust agrees promptly
to notify ESI of the commencement of any litigation or
proceedings against the Trust or any of its officers or
Trustees or controlling persons in connection with the issue
and sale of Shares or in connection with the Registration
Statement, Prospectuses, or SAIs.
(b) ESI agrees to indemnify and hold harmless the Trust, each of
its Trustees, each of its officers who have signed the
Registration Statement and each other person, if any, who
controls the Trust within the meaning of Section 15 of the
Securities Act of 1933, but only with respect to statements or
omissions, if any, made in the Registration Statement or any
Prospectus, SAI, or any amendment or supplement thereto in
reliance upon, and in conformity with, information furnished to
the Trust about ESI by or on behalf of ESI expressly for use in
the Registration Statement or any Prospectus, SAI, or any
amendment or supplement thereof. In case any action shall be
brought against the Trust or any other person so indemnified
based on the Registration Statement or any Prospectus, SAI, or
any amendment or supplement thereto, and with respect to which
indemnity may be sought against ESI, ESI shall have the rights
and duties given to the Trust, and the Trust and each other
person so indemnified shall have the rights and duties given to
ESI by the provisions of subsection (a) above.
(c) Nothing herein contained shall be deemed to protect any person
against liability to the Trust or its shareholders to which
such person would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance
of the duties of such person or by reason of the reckless
disregard by such person of the obligations and duties of such
person under this Agreement.
(d) Insofar as indemnification for liabilities may be permitted
pursuant to Section 17 of the Investment Company Act of 1940,
as amended, for Trustees, officers, ESI and controlling persons
of the Trust by the Trust pursuant to this Agreement, the Trust
is aware of the position of the Securities and Exchange
Commission as set forth in the Investment Company Act Release
No. IC-11330. Therefore, the Trust undertakes that in addition
to complying with the applicable provisions of this Agreement,
in the absence of a final decision on the merits by a court or
other body before which the proceeding was brought, that an
indemnification payment will not be made unless in the absence
of such a decision, a reasonable determination based upon
factual review has been made (i) by a majority vote of a quorum
of non-party Disinterested Trustees, or (ii) by independent
legal counsel in a written opinion that the indemnitee was not
liable for an act of willful misfeasance, bad faith, gross
negligence or reckless disregard of duties. The Trust further
undertakes that advancement of expenses incurred in the defense
of a proceeding (upon undertaking for repayment unless it is
ultimately determined that indemnification is appropriate)
against an officer, Trustee, ESI or controlling person of the
Trust will not be made absent the fulfillment of at least one
of the following conditions: (i) the indemnitee provides
security for his undertaking; (ii) the Trust is insured against
losses arising by reason of any lawful advances; or (iii) a
majority of a quorum of non-party Disinterested Trustees or
independent legal counsel in a written opinion makes a factual
determination that there is reason to believe the indemnitee
will be entitled to indemnification.
11. ESI is hereby expressly put on notice of the limitation of liability
as set forth in the Declaration of Trust and agrees that the
obligations assumed by the Trust pursuant to this Agreement shall be
limited in any case to the Trust and its assets and ESI shall not
seek satisfaction of any such obligation from the shareholders of
the Trust, the Trustees, officers, employees or agents of the Trust,
or any of them.
12. If at any time the Shares of any Fund are offered in two or more
Classes, ESI agrees to adopt compliance standards as to when a class
of shares may be sold to particular investors.
13. This Agreement will become binding on the parties hereto upon the
execution of the attached exhibits to the Agreement.
EXHIBIT NO. 6 (ii)ON FORM N-1A
EXHIBIT NO. 1 UNDER ITEM 601 REG S/K
Exhibit A
to the
Distributor's Contract
MARKETVEST FUNDS
MARKETVEST PENNSYLVANIA INTERMEDIATE MUNICIPAL BOND FUND
The following provisions are hereby incorporated and made part of
the Distributor's Contract dated January 1, 1996, between Marketvest
Funds and Edgewood Services, Inc. (`ESI'') with respect to the Class
of shares set forth above.
1. The Trust hereby appoints ESI to engage in activities principally
intended to result in the sale of shares of the above-listed Class
("Shares"). Pursuant to this appointment, ESI is authorized to
select a group of financial institutions ("Financial Institutions")
to sell Shares at the current offering price thereof as described
and set forth in the respective prospectuses of the Trust.
2. During the term of this Agreement, the Trust will pay ESI for
services pursuant to this Agreement, a monthly fee computed at the
annual rate of .25 of 1% of the average aggregate net asset value of
the Shares held during the month. For the month in which this
Agreement becomes effective or terminates, there shall be an
appropriate proration of any fee payable on the basis of the number
of days that the Agreement is in effect during the month.
3. ESI may from time-to-time and for such periods as it deems
appropriate reduce its compensation to the extent any Class'
expenses exceed such lower expense limitation as ESI may, by notice
to the Trust, voluntarily declare to be effective.
4. ESI will enter into separate written agreements with various firms
to provide certain of the services set forth in Paragraph 1 herein.
ESI, in its sole discretion, may pay Financial Institutions a
periodic fee in respect of Shares owned from time to time by their
clients or customers. The schedules of such fees and the basis upon
which such fees will be paid shall be determined from time to time
by ESI in its sole discretion.
5. ESI will prepare reports to the Board of Trustees of the Trust on a
quarterly basis showing amounts expended hereunder including amounts
paid to Financial Institutions and the purpose for such
expenditures.
In consideration of the mutual covenants set forth in the
Distributor's Contract dated January 1, 1996 between Marketvest Funds
and ESI, Marketvest Funds executes and delivers this Exhibit on behalf
of the Marketvest Pennsylvania Intermediate Municipal Bond Fund, and
with respect to the Shares thereof, first set forth in this Exhibit.
Witness the due execution hereof this 1st day of January, 1996.
ATTEST: MARKETVEST FUNDS
/s/ Victor R. Siclari By:/s/ Jeffrey W. Sterling
Secretary Vice President
(SEAL)
ATTEST: EDGEWOOD SERVICES, INC.
/s/ S. Elliott Cohan By:/s/ R. Jeffrey Niss
Secretary Senior Vice President
(SEAL)
Exhibit B
to the
Distributor's Contract
MARKETVEST FUNDS
MARKETVEST INTERNATIONAL EQUITY FUND
The following provisions are hereby incorporated and made part of
the Distributor's Contract dated January 1, 1996, between Marketvest
Funds and Edgewood Services, Inc. (`ESI'') with respect to the Class
of shares set forth above.
1. The Trust hereby appoints ESI to engage in activities principally
intended to result in the sale of shares of the above-listed Class
(``Shares'). Pursuant to this appointment, ESI is authorized to
select a group of financial institutions (``Financial Institutions')
to sell Shares at the current offering price thereof as described
and set forth in the respective prospectuses of the Trust.
2. During the term of this Agreement, the Trust will pay ESI for
services pursuant to this Agreement, a monthly fee computed at the
annual rate of .25 of 1% of the average aggregate net asset value of
the Shares held during the month. For the month in which this
Agreement becomes effective or terminates, there shall be an
appropriate proration of any fee payable on the basis of the number
of days that the Agreement is in effect during the month.
3. ESI may from time-to-time and for such periods as it deems
appropriate reduce its compensation to the extent any Class'
expenses exceed such lower expense limitation as ESI may, by notice
to the Trust, voluntarily declare to be effective.
4. ESI will enter into separate written agreements with various firms
to provide certain of the services set forth in Paragraph 1 herein.
ESI, in its sole discretion, may pay Financial Institutions a
periodic fee in respect of Shares owned from time to time by their
clients or customers. The schedules of such fees and the basis upon
which such fees will be paid shall be determined from time to time
by ESI in its sole discretion.
5. ESI will prepare reports to the Board of Trustees of the Trust on a
quarterly basis showing amounts expended hereunder including amounts
paid to Financial Institutions and the purpose for such
expenditures.
In consideration of the mutual covenants set forth in the
Distributor's Contract dated January 1, 1996 between Marketvest Funds
and ESI, Marketvest Funds executes and delivers this Exhibit on behalf
of the Marketvest International Equity Fund, and with respect to the
Shares thereof, first set forth in this Exhibit.
Witness the due execution hereof this 1st day of January, 1997.
ATTEST: MARKETVEST FUNDS
/s/ Victor R. Siclari By: /s/ Jeffrey W. Sterling
Secretary Vice President
Victor R. Siclari Jeffrey W. Sterling
(SEAL)
ATTEST: EDGEWOOD SERVICES, INC.
/s/ S. Elliott Cohan By:/s/ Newton Heston, III
Secretary Vice President
S. Elliott Cohan Newton Heston, III
(SEAL)
Exhibit 8 on Form N-1A
Exhibit 10 Under Item 601 Reg S/K
CUSTODIAN CONTRACT
BETWEEN
MARKETVEST FUNDS,
AND
DAUPHIN DEPOSIT BANK AND TRUST COMPANY
TABLE OF CONTENTS
Page
1. Employment of Custodian and Property to be Held by It ..1
2. Duties of the Custodian With Respect to Property
of the Funds Held by the Custodian .....................2
2.1 Holding Securities ................................2
2.2 Delivery of Securities ............................2
2.3 Registration of Securities ........................5
2.4 Bank Accounts .....................................6
2.5 Payments for Shares ...............................6
2.6 Availability of Federal Funds .....................6
2.7 Collection of Income ..............................7
2.8 Payment of Fund Moneys ............................8
2.9 Liability for Payment in Advance of
Receipt of Securities Purchased. ..................9
2.10 Payments for Repurchases or Redemptions
of Shares of a Fund ...............................9
2.11 Appointment of Agents ............................10
2.12 Deposit of Fund Assets in Securities System ......10
2.13 Segregated Account ...............................12
2.14 Joint Repurchase Agreements ......................12
2.15 Ownership Certificates for Tax Purposes ..........13
2.16 Proxies ..........................................13
2.17 Communications Relating to Fund Portfolio Securities 13
2.18 Proper Instructions ..............................14
2.19 Actions Permitted Without Express Authority ......14
2.20 Evidence of Authority ............................15
2.21 Notice to Trust by Custodian Regarding Cash
Movement...............15
3. Duties of Custodian with Respect to the Books of Account and Regulatory
Reporting .............................................16
4. Records ...............................................16
5. Opinion of Funds' Independent Public Accountants/Auditors 17
6. Reports to Trust by Independent Public Accountants/Auditors 17
7. Compensation of Custodian .............................18
8. Responsibility of Custodian ...........................18
9. Effective Period, Termination and Amendment ...........20
10.Successor Custodian ...................................21
11.Interpretive and Additional Provisions ................22
12.Pennsylvania Law to Apply .............................22
13.Notices ...............................................22
14.Counterparts ..........................................23
15.Limitations of Liability ..............................23
CUSTODIAN CONTRACT
This Contract between Marketvest Funds, (the "Trust"), a Massachusetts
business trust, on behalf of the portfolios (hereinafter collectively
called the "Funds" and individually referred to as a "Fund") of the Trust,
organized and existing under the laws of the Commonwealth of Massachusetts,
having its principal place of business at Federated Investors Tower,
Pittsburgh, Pennsylvania, 15222-3779, and DAUPHIN DEPOSIT BANK AND TRUST
COMPANY, a state-chartered bank and trust company, having its principal
place of business at 213 Market Street, Harrisburg, Pennsylvania, 17101,
hereinafter called the "Custodian",
WITNESSETH: That in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
The Trust hereby employs the Custodian as the custodian of the assets
of each of the Funds of the Trust. Except as otherwise expressly provided
herein, the securities and other assets of each of the Funds shall be
segregated from the assets of each of the other Funds and from all other
persons and entities. The Trust will deliver to the Custodian all
securities and cash owned by the Funds and all payments of income, payments
of principal or capital distributions received by them with respect to all
securities owned by the Funds from time to time, and the cash consideration
received by them for shares ("Shares") of beneficial interest of the Funds
as may be issued or sold from time to time. The Custodian shall not be
responsible for any property of the Funds held or received by the Funds and
not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Section
2.18), the Custodian shall from time to time employ one or more sub-
custodians upon the terms specified in the Proper Instructions, provided
that the Custodian shall have no more or less responsibility or liability
to the Trust or any of the Funds on account of any actions or omissions of
any sub-custodian so employed than any such sub-custodian has to the
Custodian.
2. Duties of the Custodian With Respect to Property of the Funds Held
by the Custodian
2.1Holding Securities. The Custodian shall hold and physically segregate
for the account of each Fund all non-cash property, including all
securities owned by each Fund, other than securities which are
maintained pursuant to Section 2.12 in a clearing agency which acts as
a securities depository or in a book-entry system authorized by the
U.S. Department of the Treasury, collectively referred to herein as
"Securities System", or securities which are subject to a joint
repurchase agreement with affiliated funds pursuant to Section 2.14.
The Custodian shall maintain records of all receipts, deliveries and
locations of such securities, together with a current inventory
thereof, and shall conduct periodic physical inspections of
certificates representing stocks, bonds and other securities held by it
under this Contract in such manner as the Custodian shall determine
from time to time to be advisable in order to verify the accuracy of
such inventory. With respect to securities held by any agent appointed
pursuant to Section 2.11 hereof, and with respect to securities held by
any sub-custodian appointed pursuant to Section 1 hereof, the Custodian
may rely upon certificates from such agent as to the holdings of such
agent and from such sub-custodian as to the holdings of such sub-
custodian. The Custodian will promptly report to the Trust the results
of such inspections, indicating any shortages or discrepancies
uncovered thereby, and take appropriate action to remedy any such
shortages or discrepancies.
2.2Delivery of Securities. The Custodian shall release and deliver
securities owned by a Fund held by the Custodian or in a Securities
System account of the Custodian only upon receipt of Proper
Instructions, which may be continuing instructions when deemed
appropriate by the parties, and only in the following cases:
(1) Upon sale of such securities for the account of a Fund and receipt
of payment therefor;
(2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Trust;
(3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.12 hereof;
(4) To the depository agent in connection with tender or other similar
offers for portfolio securities of a Fund, in accordance with the
provisions of Section 2.17 hereof;
(5) To the issuer thereof or its agent when such securities are called,
redeemed, retired or otherwise become payable; provided that, in
any such case, the cash or other consideration is to be delivered
to the Custodian;
(6) To the issuer thereof, or its agent, for transfer into the name of
a Fund or into the name of any nominee or nominees of the Custodian
or into the name or nominee name of any agent appointed pursuant to
Section 2.11 or into the name or nominee name of any sub-custodian
appointed pursuant to Section 1; or for exchange for a different
number of bonds, certificates or other evidence representing the
same aggregate face amount or number of units; provided that, in
any such case, the new securities are to be delivered to the
Custodian;
(7) Upon the sale of such securities for the account of a Fund, to the
broker or its clearing agent, against a receipt, for examination in
accordance with "street delivery custom"; provided that in any such
case, the Custodian shall have no responsibility or liability for
any loss arising from the delivery of such securities prior to
receiving payment for such securities except as may arise from the
Custodian's own failure to act in accordance with the standard of
reasonable care or any higher standard of care imposed upon the
Custodian by any applicable law or regulation if such above-stated
standard of reasonable care were not part of this Contract;
(8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of
the securities of the issuer of such securities, or pursuant to
provisions for conversion contained in such securities, or pursuant
to any deposit agreement; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the Custodian;
(9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that, in
any such case, the new securities and cash, if any, are to be
delivered to the Custodian;
(10) For delivery in connection with any loans of portfolio
securities of a Fund, but only against receipt of adequate
collateral in the form of (a) cash, in an amount specified by the
Trust, (b) certificated securities of a description specified by
the Trust, registered in the name of the Fund or in the name of a
nominee of the Custodian referred to in Section 2.3 hereof or in
proper form for transfer, or (c) securities of a description
specified by the Trust, transferred through a Securities System in
accordance with Section 2.12 hereof;
(11) For delivery as security in connection with any borrowings
requiring a pledge of assets by a Fund, but only against receipt of
amounts borrowed, except that in cases where additional collateral
is required to secure a borrowing already made, further securities
may be released for the purpose;
(12) For delivery in accordance with the provisions of any
agreement among the Trust or a Fund, the Custodian and a broker-
dealer registered under the Securities Exchange Act of 1934, as
amended, (the "Exchange Act") and a member of The National
Association of Securities Dealers, Inc. ("NASD"), relating to
compliance with the rules of The Options Clearing Corporation and
of any registered national securities exchange, or of any similar
organization or organizations, regarding escrow or other
arrangements in connection with transactions for a Fund;
(13) For delivery in accordance with the provisions of any
agreement among the Trust or a Fund, the Custodian, and a Futures
Commission Merchant registered under the Commodity Exchange Act,
relating to compliance with the rules of the Commodity Futures
Trading Commission and/or any Contract Market, or any similar
organization or organizations, regarding account deposits in
connection with transaction for a Fund;
(14) Upon receipt of instructions from the transfer agent
("Transfer Agent") for a Fund, for delivery to such Transfer Agent
or to the holders of shares in connection with distributions in
kind, in satisfaction of requests by holders of Shares for
repurchase or redemption; and
(15) For any other proper corporate purpose, but only upon receipt
of, in addition to Proper Instructions, a certified copy of a
resolution of the Trustees on behalf of a Fund signed by an officer
of the Trust and certified by its Secretary or an Assistant
Secretary, specifying the securities to be delivered, setting forth
the purpose for which such delivery is to be made, declaring such
purpose to be a proper corporate purpose, and naming the person or
persons to whom delivery of such securities shall be made.
2.3 Registration of Securities. Securities held by the Custodian
(other than bearer securities) shall be registered in the name of a
particular Fund or in the name of any nominee of the Fund or of any
nominee of the Custodian which nominee shall be assigned exclusively to
the Fund, unless the Trust has authorized in writing the appointment of
a nominee to be used in common with other registered investment
companies affiliated with the Fund, or in the name or nominee name of
any agent appointed pursuant to Section 2.11 or in the name or nominee
name of any sub-custodian appointed pursuant to Section 1. All
securities accepted by the Custodian on behalf of a Fund under the
terms of this Contract shall be in "street name" or other good delivery
form.
2.4 Bank Accounts. The Custodian shall open and maintain a separate
bank account or accounts in the name of each Fund, subject only to
draft or order by the Custodian acting pursuant to the terms of this
Contract, and shall hold in such account or accounts, subject to the
provisions hereof, all cash received by it from or for the account of
each Fund, other than cash maintained in a joint repurchase account
with other affiliated funds pursuant to Section 2.14 of this Contract
or by a particular Fund in a bank account established and used in
accordance with Rule 17f-3 under the Investment Company Act of 1940, as
amended, (the "1940 Act"). Funds held by the Custodian for a Fund may
be deposited by it to its credit as Custodian in the Banking Department
of the Custodian or in such other banks or trust companies as it may in
its discretion deem necessary or desirable; provided, however, that
every such bank or trust company shall be qualified to act as a
custodian under the 1940 Act and that each such bank or trust company
and the funds to be deposited with each such bank or trust company
shall be approved by vote of a majority of the Board of Trustees
("Board") of the Trust. Such funds shall be deposited by the Custodian
in its capacity as Custodian for the Fund and shall be withdrawable by
the Custodian only in that capacity. If requested by the Trust, the
Custodian shall furnish the Trust, not later than twenty (20) days
after the last business day of each month, an internal reconciliation
of the closing balance as of that day in all accounts described in this
section to the balance shown on the daily cash report for that day
rendered to the Trust.
2.5Payments for Shares. The Custodian shall make such arrangements with
the Transfer Agent of each Fund, as will enable the Custodian to
receive the cash consideration due to each Fund and will deposit into
each Fund's account such payments as are received from the Transfer
Agent. The Custodian will provide timely notification to the Trust and
the Transfer Agent of any receipt by it of payments for Shares of the
respective Fund.
2.6Availability of Federal Funds. Upon mutual agreement between the Trust
and the Custodian, the Custodian shall make federal funds available to
the Funds as of specified times agreed upon from time to time by the
Trust and the Custodian in the amount of checks, clearing house funds,
and other non-federal funds received in payment for Shares of the Funds
which are deposited into the Funds' accounts.
2.7Collection of Income.
(1) The Custodian shall collect on a timely basis all income and other
payments with respect to registered securities held hereunder to
which each Fund shall be entitled either by law or pursuant to
custom in the securities business, and shall collect on a timely
basis all income and other payments with respect to bearer
securities if, on the date of payment by the issuer, such
securities are held by the Custodian or its agent thereof and shall
credit such income, as collected, to each Fund's custodian account.
Without limiting the generality of the foregoing, the Custodian
shall detach and present for payment all coupons and other income
items requiring presentation as and when they become due and shall
collect interest when due on securities held hereunder. The
collection of income due the Funds on securities loaned pursuant to
the provisions of Section 2.2 (10) shall be the responsibility of
the Trust. The Custodian will have no duty or responsibility in
connection therewith, other than to provide the Trust with such
information or data as may be necessary to assist the Trust in
arranging for the timely delivery to the Custodian of the income to
which each Fund is properly entitled.
(2) The Trust shall promptly notify the Custodian whenever income due
on securities is not collected in due course and will provide the
Custodian with monthly reports of the status of past due income.
The Trust will furnish the Custodian with a weekly report of
accrued/past due income for the Fund. Once an item is identified
as past due and the Trust has furnished the necessary claim
documentation to the Custodian, the Custodian will then initiate a
claim on behalf of the Trust. The Custodian will furnish the Trust
with a status report monthly unless the parties otherwise agree.
2.8Payment of Fund Moneys. Upon receipt of Proper Instructions, which may
be continuing instructions when deemed appropriate by the parties, the
Custodian shall pay out moneys of each Fund in the following cases
only:
(1) Upon the purchase of securities, futures contracts or options on
futures contracts for the account of a Fund but only (a) against
the delivery of such securities, or evidence of title to futures
contracts, to the Custodian (or any bank, banking firm or trust
company doing business in the United States or abroad which is
qualified under the 1940 Act to act as a custodian and has been
designated by the Custodian as its agent for this purpose)
registered in the name of the Fund or in the name of a nominee of
the Custodian referred to in Section 2.3 hereof or in proper form
for transfer, (b) in the case of a purchase effected through a
Securities System, in accordance with the conditions set forth in
Section 2.12 hereof or (c) in the case of repurchase agreements
entered into between the Trust and any other party, (i) against
delivery of the securities either in certificate form or through an
entry crediting the Custodian's account at the Federal Reserve Bank
with such securities or (ii) against delivery of the receipt
evidencing purchase for the account of the Fund of securities owned
by the Custodian along with written evidence of the agreement by
the Custodian to repurchase such securities from the Fund;
(2) In connection with conversion, exchange or surrender of securities
owned by a Fund as set forth in Section 2.2 hereof;
(3) For the redemption or repurchase of Shares of a Fund issued by the
Trust as set forth in Section 2.10 hereof;
(4) For the payment of any expense or liability incurred by a Fund,
including but not limited to the following payments for the account
of the Fund: interest; taxes; management, accounting, transfer
agent and legal fees; and operating expenses of the Fund, whether
or not such expenses are to be in whole or part capitalized or
treated as deferred expenses;
(5) For the payment of any dividends on Shares of a Fund declared
pursuant to the governing documents of the Trust;
(6) For payment of the amount of dividends received in respect of
securities sold short;
(7) For any other proper purpose, but only upon receipt of, in addition
to Proper Instructions, a certified copy of a resolution of the
Executive Committee of the Trust on behalf of a Fund signed by an
officer of the Trust and certified by its Secretary or an Assistant
Secretary, specifying the amount of such payment, setting forth the
purpose for which such payment is to be made, declaring such
purpose to be a proper purpose, and naming the person or persons to
whom such payment is to be made.
2.9Liability for Payment in Advance of Receipt of Securities Purchased.
In any and every case where payment for purchase of securities for the
account of a Fund is made by the Custodian in advance of receipt of the
securities purchased, in the absence of specific written instructions
from the Trust to so pay in advance, the Custodian shall be absolutely
liable to the Fund for such securities to the same extent as if the
securities had been received by the Custodian.
2.10 Payments for Repurchases or Redemptions of Shares of a Fund. From
such funds as may be available for the purpose of repurchasing or
redeeming Shares of a Fund, but subject to the limitations of the
Declaration of Trust and any applicable votes of the Board of the Trust
pursuant thereto, the Custodian shall, upon receipt of instructions
from the Transfer Agent, make funds available for payment to holders of
shares of such Fund who have delivered to the Transfer Agent a request
for redemption or repurchase of their shares including without
limitation through bank drafts, automated clearinghouse facilities, or
by other means. In connection with the redemption or repurchase of
Shares of the Funds, the Custodian is authorized upon receipt of
instructions from the Transfer Agent to wire funds to or through a
commercial bank designated by the redeeming shareholders.
2.11 Appointment of Agents. The Custodian may at any time or times in
its discretion appoint (and may at any time remove) any other bank or
trust company which is itself qualified under the 1940 Act and any
applicable state law or regulation, to act as a custodian, as its agent
to carry out such of the provisions of this Section 2 as the Custodian
may from time to time direct; provided, however, that the appointment
of any agent shall not relieve the Custodian of its responsibilities or
liabilities hereunder.
2.12 Deposit of Fund Assets in Securities System. The Custodian may
deposit and/or maintain securities owned by the Funds in a clearing
agency registered with the Securities and Exchange Commission ("SEC")
under Section 17A of the Exchange Act, which acts as a securities
depository, or in the book-entry system authorized by the U.S.
Department of the Treasury and certain federal agencies, collectively
referred to herein as "Securities System" in accordance with applicable
Federal Reserve Board and SEC rules and regulations, if any, and
subject to the following provisions:
(1) The Custodian may keep securities of each Fund in a Securities
System provided that such securities are represented in an account
("Account") of the Custodian in the Securities System which shall
not include any assets of the Custodian other than assets held as a
fiduciary, custodian or otherwise for customers;
(2) The records of the Custodian with respect to securities of the
Funds which are maintained in a Securities System shall identify by
book-entry those securities belonging to each Fund;
(3) The Custodian shall pay for securities purchased for the account of
each Fund upon (i) receipt of advice from the Securities System
that such securities have been transferred to the Account, and (ii)
the making of an entry on the records of the Custodian to reflect
such payment and transfer for the account of the Fund. The
Custodian shall transfer securities sold for the account of a Fund
upon (i) receipt of advice from the Securities System that payment
for such securities has been transferred to the Account, and (ii)
the making of an entry on the records of the Custodian to reflect
such transfer and payment for the account of the Fund. Copies of
all advices from the Securities System of transfers of securities
for the account of a Fund shall identify the Fund, be maintained
for the Fund by the Custodian and be provided to the Trust at its
request. Upon request, the Custodian shall furnish the Trust
confirmation of each transfer to or from the account of a Fund in
the form of a written advice or notice and shall furnish to the
Trust copies of daily transaction sheets reflecting each day's
transactions in the Securities System for the account of a Fund.
(4) The Custodian shall provide the Trust with any report obtained by
the Custodian on the Securities System's accounting system,
internal accounting control and procedures for safeguarding
securities deposited in the Securities System;
(5) The Custodian shall have received the initial certificate, required
by Section 9 hereof;
(6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Trust for any loss or damage to a
Fund resulting from use of the Securities System by reason of any
negligence, misfeasance or misconduct of the Custodian or any of
its agents or of any of its or their employees or from failure of
the Custodian or any such agent to enforce effectively such rights
as it may have against the Securities System; at the election of
the Trust, it shall be entitled to be subrogated to the rights of
the Custodian with respect to any claim against the Securities
System or any other person which the Custodian may have as a
consequence of any such loss or damage if and to the extent that a
Fund has not been made whole for any such loss or damage.
(7) The authorization contained in this Section 2.12 shall not relieve
the Custodian from using reasonable care and diligence in making
use of any Securities System.
2.13 Segregated Account. The Custodian shall upon receipt of Proper
Instructions establish and maintain a segregated account or accounts
for and on behalf of each Fund, into which account or accounts may be
transferred cash and/or securities, including securities maintained in
an account by the Custodian pursuant to Section 2.12 hereof, (i) in
accordance with the provisions of any agreement among the Trust, the
Custodian and a broker-dealer registered under the Exchange Act and a
member of the NASD (or any futures commission merchant registered under
the Commodity Exchange Act), relating to compliance with the rules of
The Options Clearing Corporation and of any registered national
securities exchange (or the Commodity Futures Trading Commission or any
registered contract market), or of any similar organization or
organizations, regarding escrow or other arrangements in connection
with transactions for a Fund, (ii) for purpose of segregating cash or
government securities in connection with options purchased, sold or
written for a Fund or commodity futures contracts or options thereon
purchased or sold for a Fund, (iii) for the purpose of compliance by
the Trust or a Fund with the procedures required by any release or
releases of the SEC relating to the maintenance of segregated accounts
by registered investment companies and (iv) for other proper corporate
purposes, but only, in the case of clause (iv), upon receipt of, in
addition to Proper Instructions, a certified copy of a resolution of
the Board or of the Executive Committee signed by an officer of the
Trust and certified by the Secretary or an Assistant Secretary, setting
forth the purpose or purposes of such segregated account and declaring
such purposes to be proper corporate purposes.
2.14 Joint Repurchase Agreements. Upon the receipt of Proper
Instructions, the Custodian shall deposit and/or maintain any assets of
a Fund and any affiliated funds which are subject to joint repurchase
transactions in an account established solely for such transactions for
the Fund and its affiliated funds. For purposes of this Section 2.14,
"affiliated funds" shall include all investment companies and their
portfolios for which subsidiaries or affiliates of Federated Investors
serve as investment advisers, distributors or administrators in
accordance with applicable exemptive orders from the SEC. The
requirements of segregation set forth in Section 2.1 shall be deemed to
be waived with respect to such assets.
2.15 Ownership Certificates for Tax Purposes. The Custodian shall
execute ownership and other certificates and affidavits for all federal
and state tax purposes in connection with receipt of income or other
payments with respect to securities of a Fund held by it and in
connection with transfers of securities.
2.16 Proxies. The Custodian shall, with respect to the securities held
hereunder, cause to be promptly executed by the registered holder of
such securities, if the securities are registered otherwise than in the
name of a Fund or a nominee of a Fund, all proxies, without indication
of the manner in which such proxies are to be voted, and shall promptly
deliver to the Trust such proxies, all proxy soliciting materials and
all notices relating to such securities.
2.17 Communications Relating to Fund Portfolio Securities. The
Custodian shall transmit promptly to the Trust and the investment
adviser of the Trust all written information (including, without
limitation, pendency of calls and maturities of securities and
expirations of rights in connection therewith and notices of exercise
of call and put options written by the Fund and the maturity of futures
contracts purchased or sold by the Fund) received by the Custodian from
issuers of the securities being held for the Fund. With respect to
tender or exchange offers, the Custodian shall transmit promptly to the
Trust and the investment adviser of the Trust all written information
received by the Custodian from issuers of the securities whose tender
or exchange is sought and from the party (or his agents) making the
tender or exchange offer. If the Trust or the investment adviser of
the Trust desires to take action with respect to any tender offer,
exchange offer or any other similar transaction, the Trust shall notify
the Custodian in writing at least three business days prior to the date
on which the Custodian is to take such action. However, the Custodian
shall nevertheless exercise its best efforts to take such action in the
event that notification is received three business days or less prior
to the date on which action is required. For securities which are not
held in nominee name, the Custodian will act as a secondary source of
information and will not be responsible for providing corporate action
notification to the Trust.
2.18 Proper Instructions. Proper Instructions as used throughout this
Section 2 means a writing signed or initialed by one or more person or
persons as the Board shall have from time to time authorized. Each
such writing shall set forth the specific transaction or type of
transaction involved. Oral instructions will be deemed to be Proper
Instructions if (a) the Custodian reasonably believes them to have been
given by a person previously authorized in Proper Instructions to give
such instructions with respect to the transaction involved, and (b) the
Trust promptly causes such oral instructions to be confirmed in
writing. Upon receipt of a certificate of the Secretary or an
Assistant Secretary as to the authorization by the Board of the Trust
accompanied by a detailed description of procedures approved by the
Board, Proper Instructions may include communications effected directly
between electro-mechanical or electronic devices provided that the
Board and the Custodian are satisfied that such procedures afford
adequate safeguards for a Fund's assets.
2.19 Actions Permitted Without Express Authority. The Custodian may in
its discretion, without express authority from the Trust:
(1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this
Contract, provided that all such payments shall be accounted for to
the Trust in such form that it may be allocated to the affected
Fund;
(2) surrender securities in temporary form for securities in definitive
form;
(3) endorse for collection, in the name of a Fund, checks, drafts and
other negotiable instruments; and
(4) in general, attend to all non-discretionary details in connection
with the sale, exchange, substitution, purchase, transfer and other
dealings with the securities and property of each Fund except as
otherwise directed by the Trust.
2.20 Evidence of Authority. The Custodian shall be protected in acting
upon any instructions, notice, request, consent, certificate or other
instrument or paper reasonably believed by it to be genuine and to have
been properly executed on behalf of a Fund. The Custodian may receive
and accept a certified copy of a vote of the Board of the Trust as
conclusive evidence (a) of the authority of any person to act in
accordance with such vote or (b) of any determination of or any action
by the Board pursuant to the Declaration of Trust as described in such
vote, and such vote may be considered as in full force and effect until
receipt by the Custodian of written notice to the contrary.
2.21 Notice to Trust by Custodian Regarding Cash Movement. The
Custodian will provide timely notification to the Trust of any receipt
of cash, income or payments to the Trust and the release of cash or
payment by the Trust.
3. Duties of Custodian With Respect to the Books of Account and Regulatory
Reporting.
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of the Trust to keep the
books of account of each Fund and appointed to report on behalf of each
Fund to the Board, the SEC and other regulatory bodies.
4. Records.
The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as will meet
the obligations of the Trust and the Funds under the 1940 Act (including,
where permitted, by microfiche), with particular attention to Section 31
thereof and Rules 31a-1 and 31a-2 thereunder, and specifically including
identified cost records used for tax purposes. All such records will be
retained by the company for six years from the year of creation, during the
first two years of which, such documents will be in readily accessible
form. At the end of the six year period, such records will either be
turned over to the Trust or destroyed in accordance with Proper
Instructions. All such records shall be the property of the Trust and
shall at all times during the regular business hours of the Custodian be
open for inspection by duly authorized officers, employees or agents of the
Trust and employees and agents of the SEC. In the event of termination of
this Contract, the Custodian will deliver all such records to the Trust, to
a successor Custodian, or to such other person as the Trust may direct.
The Custodian shall supply daily to the Trust a tabulation of securities
owned by a Fund and held by the Custodian and shall, when requested to do
so by the Trust and for such compensation as shall be agreed upon between
the Trust and the Custodian, include certificate numbers in such
tabulations. In addition, the Custodian shall electronically transmit
daily to the Trust information pertaining to security trading and other
investment activity and all other cash activity of a Fund.
5. Opinion of Funds' Independent Public Accountants.
The Custodian shall take all reasonable action, as the Trust may from
time to time request, to obtain from year to year favorable opinions from
each Fund's independent public accountants with respect to its activities
hereunder in connection with the preparation of the Fund's registration
statement, periodic reports, or any other reports to the SEC and with
respect to any other requirements of such Commission.
6. Reports to Trust by Independent Public Accountants.
The Custodian shall provide the Trust, at such times as the Trust may
reasonably require, with reports by independent public accountants for each
Fund on the accounting system, internal accounting control and procedures
for safeguarding securities, futures contracts and options on futures
contracts, including securities deposited and/or maintained in a Securities
System, relating to the services provided by the Custodian for the Fund
under this Contract; such reports shall be of sufficient scope and in
sufficient detail, as may reasonably be required by the Trust, to provide
reasonable assurance that any material inadequacies would be disclosed by
such examination and, if there are no such inadequacies, the reports shall
so state.
7. Compensation of Custodian.
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time
between the Trust and the Custodian.
8. Responsibility of Custodian.
The Custodian shall be held to a standard of reasonable care in
carrying out the provisions of this Contract; provided, however, that the
Custodian shall be held to any higher standard of care which would be
imposed upon the Custodian by any applicable law or regulation if such
above stated standard of reasonable care was not part of this Contract.
The Custodian shall be entitled to rely on and may act upon advice of
counsel (who may be counsel for the Trust) on all matters, and shall be
without liability for any action reasonably taken or omitted pursuant to
such advice, provided that such action is not in violation of applicable
federal or state laws or regulations, and is in good faith. Subject to the
limitations set forth in Section 15 hereof, the Custodian shall be kept
indemnified by the Trust but only from the assets of the Fund involved in
the issue at hand and be without liability for any action taken or not
taken or thing done or not done by it in carrying out the terms and
provisions of this Contract in accordance with the above standards.
In order that the indemnification provisions contained in this
Section 8 shall apply, however, it is understood that if in any case the
Trust may be asked to indemnify or save the Custodian harmless, the Trust
shall be fully and promptly advised of all pertinent facts concerning the
situation in question, and it is further understood that the Custodian will
use all reasonable care to identify and notify the Trust promptly
concerning any situation which presents or appears likely to present the
probability of such a claim for indemnification. The Trust shall have the
option to defend the Custodian against any claim which may be the subject
of this indemnification, and in the event that the Trust so elects it will
so notify the Custodian and thereupon the Trust shall take over complete
defense of the claim, and the Custodian shall in such situation initiate no
further legal or other expenses for which it shall seek indemnification
under this Section. The Trust shall in no case confess any claim or make
any compromise in any case in which the Custodian will be asked to
indemnify the Trust except with the Custodian's prior written consent.
Notwithstanding the foregoing, the responsibility of the Custodian with
respect to redemptions effected by check shall be in accordance with a
separate Agreement entered into between the Custodian and the Trust.
If the Trust requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may,
in the reasonable opinion of the Custodian, result in the Custodian or its
nominee assigned to a Fund being liable for the payment of money or
incurring liability of some other form, the Custodian may request the
Trust, as a prerequisite to requiring the Custodian to take such action, to
provide indemnity to the Custodian in an amount and form satisfactory to
the Custodian.
Subject to the limitations set forth in Section 15 hereof, the Trust
agrees to indemnify and hold harmless the Custodian and its nominee from
and against all taxes, charges, expenses, assessments, claims and
liabilities (including counsel fees) (referred to herein as authorized
charges) incurred or assessed against it or its nominee in connection with
the performance of this Contract, except such as may arise from it or its
nominee's own failure to act in accordance with the standard of reasonable
care or any higher standard of care which would be imposed upon the
Custodian by any applicable law or regulation if such above-stated standard
of reasonable care were not part of this Contract. To secure any
authorized charges and any advances of cash or securities made by the
Custodian to or for the benefit of a Fund for any purpose which results in
the Fund incurring an overdraft at the end of any business day or for
extraordinary or emergency purposes during any business day, the Trust
hereby grants to the Custodian a security interest in and pledges to the
Custodian securities held for the Fund by the Custodian, in an amount not
to exceed 10 percent of the Fund's gross assets, the specific securities to
be designated in writing from time to time by the Trust or the Fund's
investment adviser. Should the Trust fail to make such designation, or
should it instruct the Custodian to make advances exceeding the percentage
amount set forth above and should the Custodian do so, the Trust hereby
agrees that the Custodian shall have a security interest in all securities
or other property purchased for a Fund with the advances by the Custodian,
which securities or property shall be deemed to be pledged to the
Custodian, and the written instructions of the Trust instructing their
purchase shall be considered the requisite description and designation of
the property so pledged for purposes of the requirements of the Uniform
Commercial Code. Should the Trust fail to cause a Fund to repay promptly
any authorized charges or advances of cash or securities, subject to the
provision of the second paragraph of this Section 8 regarding
indemnification, the Custodian shall be entitled to use available cash and
to dispose of pledged securities and property as is necessary to repay any
such advances.
9. Effective Period, Termination and Amendment.
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided,
may be amended at any time by mutual agreement of the parties hereto and
may be terminated by either party by an instrument in writing delivered or
mailed, postage prepaid to the other party, such termination to take effect
not sooner than sixty (60) days after the date of such delivery or mailing;
provided, however that the Custodian shall not act under Section 2.12
hereof in the absence of receipt of an initial certificate of the Secretary
or an Assistant Secretary that the Board of the Trust has approved the
initial use of a particular Securities System as required in each case by
Rule 17f-4 under the 1940 Act; provided further, however, that the Trust
shall not amend or terminate this Contract in contravention of any
applicable federal or state regulations, or any provision of the
Declaration of Trust, and further provided, that the Trust may at any time
by action of its Board (i) substitute another bank or trust company for the
Custodian by giving notice as described above to the Custodian, or (ii)
immediately terminate this Contract in the event of the appointment of a
conservator or receiver for the Custodian by the appropriate banking
regulatory agency or upon the happening of a like event at the direction of
an appropriate regulatory agency or court of competent jurisdiction.
Upon termination of the Contract, the Trust shall pay to the Custodian
such compensation as may be due as of the date of such termination and
shall likewise reimburse the Custodian for its costs, expenses and
disbursements.
10.Successor Custodian.
If a successor custodian shall be appointed by the Board of the Trust,
the Custodian shall, upon termination, deliver to such successor custodian
at the office of the Custodian, duly endorsed and in the form for transfer,
all securities then held by it hereunder for each Fund and shall transfer
to separate accounts of the successor custodian all of each Fund's
securities held in a Securities System.
If no such successor custodian shall be appointed, the Custodian shall,
in like manner, upon receipt of a certified copy of a vote of the Board of
the Trust, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board shall have been delivered to the
Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or
trust company, which is a "bank" as defined in the 1940 Act, of its own
selection, having an aggregate capital, surplus, and undivided profits, as
shown by its last published report, of not less than $100,000,000, all
securities, funds and other properties held by the Custodian and all
instruments held by the Custodian relative thereto and all other property
held by it under this Contract for each Fund and to transfer to separate
accounts of such successor custodian all of each Fund's securities held in
any Securities System. Thereafter, such bank or trust company shall be the
successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Trust to procure the certified copy of the vote referred to
or of the Board to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties
and the provisions of this Contract relating to the duties and obligations
of the Custodian shall remain in full force and effect.
11.Interpretive and Additional Provisions.
In connection with the operation of this Contract, the Custodian and
the Trust may from time to time agree on such provisions interpretive of or
in addition to the provisions of this Contract as may in their joint
opinion be consistent with the general tenor of this Contract. Any such
interpretive or additional provisions shall be in a writing signed by both
parties and shall be annexed hereto, provided that no such interpretive or
additional provisions shall contravene any applicable federal or state
regulations or any provision of the Declaration of Trust. No interpretive
or additional provisions made as provided in the preceding sentence shall
be deemed to be an amendment of this Contract.
12.Pennsylvania Law to Apply.
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of The Commonwealth of Pennsylvania.
13.Notices.
Except as otherwise specifically provided herein, Notices and other
writings delivered or mailed postage prepaid to the Trust at Federated
Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, or to the Custodian
at address for Dauphin Deposit Bank and Trust Company: 213 Market Street,
Harrisburg, Pennsylvania, 17101, Attention: Manager, Manager Trust and
Financial Services, or to such other address as the Trust or the Custodian
may hereafter specify, shall be deemed to have been properly delivered or
given hereunder to the respective address.
14.Counterparts.
This Contract may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original.
15.Limitations of Liability.
The Custodian is expressly put on notice of the limitation of liability
as set forth in Article XI of the Declaration of Trust and agrees that the
obligations and liabilities assumed by the Trust and any Fund pursuant to
this Contract, including, without limitation, any obligation or liability
to indemnify the Custodian pursuant to Section 8 hereof, shall be limited
in any case to the relevant Fund and its assets and that the Custodian
shall not seek satisfaction of any such obligation from the shareholders of
the relevant Fund, from any other Fund or its shareholders or from the
Trustees, Officers, employees or agents of the Trust, or any of them. In
addition, in connection with the discharge and satisfaction of any claim
made by the Custodian against the Trust, for whatever reasons, involving
more than one Fund, the Trust shall have the exclusive right to determine
the appropriate allocations of liability for any such claim between or
among the Funds.
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative
and its seal to be hereunder affixed as of the 1st day of January, 1996.
ATTEST: MARKETVEST FUNDS
/s/ Victor R. Siclari By /s/ Jeffrey W. Sterling
Typed Name; Victor R. Siclari Typed Name: Jeffrey W.
Sterling
Secretary Title: Vice President
ATTEST: DAUPHIN DEPOSIT BANK AND TRUST
COMPANY
/s/ George W. King By /s/ Rick A. Gold
Typed Name: George W. King Typed Name: Rick A. Gold
Secretary Title: Executive Vice President
Exhibit No. 9(i) onForm N-1A
Exhibit No. 10 Under Item 601 Reg S/K
AGREEMENT
FOR
FUND ACCOUNTING,
SHAREHOLDER RECORDKEEPING,
AND
CUSTODY SERVICES PROCUREMENT
AGREEMENT made as of January 1, 1996, by and between those investment
companies listed on Exhibit 1 as may be amended from time to time, having
their principal office and place of business at Federated Investors Tower,
Pittsburgh, PA 15222-3779 (the `Trust''), on behalf of the portfolios
(individually referred to herein as a `Fund'' and collectively as
`Funds'') of the Trust, and FEDERATED SERVICES COMPANY, a Delaware
business trust, having its principal office and place of business at
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779 (the
`Company'').
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the
`1940 Act''), with authorized and issued shares of capital stock or
beneficial interest (`Shares''); and
WHEREAS, the Trust may desire to retain the Company to provide certain
pricing, accounting and recordkeeping services for each of the Funds,
including any classes of shares issued by any Fund (`Classes'') if so
indicated on Exhibit 1, and the Company is willing to furnish such
services; and
WHEREAS, the Trust may desire to appoint the Company as its transfer
agent, dividend disbursing agent if so indicated on Exhibit 1, and agent in
connection with certain other activities, and the Company desires to accept
such appointment; and
WHEREAS, the Trust may desire to appoint the Company as its agent to
select, negotiate and subcontract for custodian services from an approved
list of qualified banks if so indicated on Exhibit 1, and the Company
desires to accept such appointment; and
WHEREAS, from time to time the Trust may desire and may instruct the
Company to subcontract for the performance of certain of its duties and
responsibilities hereunder to State Street Bank and Trust Company or
another agent (the `Agent''); and
WHEREAS, the words Trust and Fund may be used interchangeably for those
investment companies consisting of only one portfolio;
NOW THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, the parties
hereto agree as follows:
SECTION ONE: FUND ACCOUNTING.
ARTICLE 1. APPOINTMENT.
The Trust hereby appoints the Company to provide certain pricing and
accounting services to the Funds, and/or the Classes, for the period and on
the terms set forth in this Agreement. The Company accepts such appointment
and agrees to furnish the services herein set forth in return for the
compensation as provided in Article 3 of this Section.
ARTICLE 2. THE COMPANY'S DUTIES.
Subject to the supervision and control of the Trust's Board of Trustees
or Directors (`Board''), the Company will assist the Trust with regard to
fund accounting for the Trust, and/or the Funds, and/or the Classes, and in
connection therewith undertakes to perform the following specific services;
A. Value the assets of the Funds using: primarily, market quotations,
including the use of matrix pricing, supplied by the independent
pricing services selected by the Company in consultation with the
adviser, or sources selected by the adviser, and reviewed by the
board; secondarily, if a designated pricing service does not provide
a price for a security which the Company believes should be
available by market quotation, the Company may obtain a price by
calling brokers designated by the investment adviser of the fund
holding the security, or if the adviser does not supply the names of
such brokers, the Company will attempt on its own to find brokers to
price those securities; thirdly, for securities for which no market
price is available, the Pricing Committee of the Board will
determine a fair value in good faith. Consistent with Rule 2a-4 of
the 1940 Act, estimates may be used where necessary or appropriate.
The Company's obligations with regard to the prices received from
outside pricing services and designated brokers or other outside
sources, is to exercise reasonable care in the supervision of the
pricing agent. The Company is not the guarantor of the securities
prices received from such agents and the Company is not liable to
the Fund for potential errors in valuing a Fund's assets or
calculating the net asset value per share of such Fund or Class when
the calculations are based upon such prices. All of the above
sources of prices used as described are deemed by the Company to be
authorized sources of security prices. The Company provides daily to
the adviser the securities prices used in calculating the net asset
value of the fund, for its use in preparing exception reports for
those prices on which the adviser has comment. Further, upon receipt
of the exception reports generated by the adviser, the Company
diligently pursues communication regarding exception reports with
the designated pricing agents.
B. Determine the net asset value per share of each Fund and/or Class,
at the time and in the manner from time to time determined by the
Board and as set forth in the Prospectus and Statement of Additional
Information (``Prospectus') of each Fund;
C. Calculate the net income of each of the Funds, if any;
D. Calculate capital gains or losses of each of the Funds resulting
from sale or disposition of assets, if any;
E. Maintain the general ledger and other accounts, books and financial
records of the Trust, including for each Fund, and/or Class, as
required under Section 31(a) of the 1940 Act and the Rules
thereunder in connection with the services provided by the Company;
F. Preserve for the periods prescribed by Rule 31a-2 under the 1940 Act
the records to be maintained by Rule 31a-1 under the 1940 Act in
connection with the services provided by the Company. The Company
further agrees that all such records it maintains for the Trust are
the property of the Trust and further agrees to surrender promptly
to the Trust such records upon the Trust's request;
G. Prepare various reports or other financial documents relating to its
function as Fund Accountant required by federal, state and other
applicable laws and regulations; and
H. Such other similar services as may be reasonably requested by the
Trust.
ARTICLE 3. COMPENSATION AND ALLOCATION OF EXPENSES.
A. The Funds will compensate the Company for its services rendered
pursuant to Section One of this Agreement in accordance with the
fees agreed upon from time to time between the parties hereto. Such
fees do not include out-of-pocket disbursements of the Company for
which the Funds shall reimburse the Company upon receipt of a
separate invoice. Out-of-pocket disbursements shall include, but
shall not be limited to, the items agreed upon between the parties
from time to time.
B. The Fund and/or the Class, and not the Company, shall bear the cost
of: custodial expenses; membership dues in the Investment Company
Institute or any similar organization; transfer agency expenses;
investment advisory expenses; costs of printing and mailing stock
certificates, Prospectuses, reports and notices; administrative
expenses; interest on borrowed money; brokerage commissions; taxes
and fees payable to federal, state and other governmental agencies;
fees of Trustees or Directors of the Trust; independent auditors
expenses; Federated Administrative Services and/or Federated
Administrative Services, Inc. legal and audit department expenses
billed to Federated Services Company for work performed related to
the Trust, the Funds, or the Classes not covered by the
Administrative Services Agreement and requested by the Fund; law
firm expenses; or other expenses not specified in this Article 3
which may be properly payable by the Funds and/or classes.
C. The compensation and out-of-pocket expenses shall be accrued by the
Fund and shall be paid to the Company no less frequently than
monthly, and shall be paid daily upon request of the Company. The
Company will maintain detailed information about the compensation
and out-of-pocket expenses by Fund and Class.
D. Any schedule of compensation agreed to hereunder, as may be adjusted
from time to time, shall be dated and signed by a duly authorized
officer of the Trust and/or the Funds and a duly authorized officer
of the Company.
E. The fee for the period from the effective date of this Agreement
with respect to a Fund or a Class to the end of the initial month
shall be prorated according to the proportion that such period bears
to the full month period. Upon any termination of this Agreement
before the end of any month, the fee for such period shall be
prorated according to the proportion which such period bears to the
full month period. For purposes of determining fees payable to the
Company, the value of the Fund's net assets shall be computed at the
time and in the manner specified in the Fund's Prospectus.
F. The Company, in its sole discretion, may from time to time
subcontract to, employ or associate with itself such person or
persons as the Company may believe to be particularly suited to
assist it in performing services under this Section One. Such person
or persons may be third-party service providers, or they may be
officers and employees who are employed by both the Company and the
Funds. The compensation of such person or persons shall be paid by
the Company and no obligation shall be incurred on behalf of the
Trust, the Funds, or the Classes in such respect.
SECTION TWO: SHAREHOLDER RECORDKEEPING.
ARTICLE 4. TERMS OF APPOINTMENT.
Subject to the terms and conditions set forth in this Agreement, the
Trust hereby appoints the Company to act as, and the Company agrees to act
as, transfer agent and dividend disbursing agent for each Fund's Shares,
and agent in connection with any accumulation, open-account or similar
plans provided to the shareholders of any Fund (`Shareholder(s)''),
including without limitation any periodic investment plan or periodic
withdrawal program.
As used throughout this Agreement, a ``Proper Instruction'' means a
writing signed or initialed by one or more person or persons as the Board
shall have from time to time authorized. Each such writing shall set forth
the specific transaction or type of transaction involved. Oral instructions
will be deemed to be Proper Instructions if (a) the Company reasonably
believes them to have been given by a person previously authorized (and the
Company has not subsequently been notified in writing that the person is
unauthorized) in Proper Instructions to give such instructions with respect
to the transaction involved, and (b) the Trust, or the Fund, and the
Company promptly cause such oral instructions to be confirmed in writing.
Proper Instructions may include communications effected directly between
electro-mechanical or electronic devices provided that the Trust, or the
Fund, and the Company are satisfied that such procedures afford adequate
safeguards for the Fund's assets. Proper Instructions may only be amended
in writing.
ARTICLE 5. DUTIES OF THE COMPANY.
The Company shall perform the following services in accordance with
Proper Instructions as may be provided from time to time by the Trust as to
any Fund:
A. Purchases
(1) The Company shall receive orders and payment for the purchase
of shares and promptly deliver payment and appropriate
documentation therefore to the custodian of the relevant Fund,
(the ``Custodian'). The Company shall notify the Fund and the
Custodian on a daily basis of the total amount of orders and
payments so delivered.
(2) Pursuant to purchase orders and in accordance with the Fund's
current Prospectus, the Company shall compute and issue the
appropriate number of Shares of each Fund and/or Class and hold
such Shares in the appropriate Shareholder accounts.
(3) For certificated Funds and/or Classes, if a Shareholder or its
agent requests a certificate, the Company, as Transfer Agent,
shall countersign and mail by first class mail, a certificate
to the Shareholder at its address as set forth on the transfer
books of the Funds, and/or Classes, subject to any Proper
Instructions regarding the delivery of certificates.
(4) In the event that any check or other order for the purchase of
Shares of the Fund and/or Class is returned unpaid for any
reason, the Company shall debit the Share account of the
Shareholder by the number of Shares that had been credited to
its account upon receipt of the check or other order, promptly
mail a debit advice to the Shareholder, and notify the Fund
and/or Class of its action. In the event that the amount paid
for such Shares exceeds proceeds of the redemption of such
Shares plus the amount of any dividends paid with respect to
such Shares, the Fund and/the Class or its distributor will
reimburse the Company on the amount of such excess.
B. Distribution
(1) Upon notification by the Funds of the declaration of any
distribution to Shareholders, the Company shall act as Dividend
Disbursing Agent for the Funds in accordance with the
provisions of its governing document and the then-current
Prospectus of the Fund. The Company shall prepare and mail or
credit income, capital gain, or any other payments to
Shareholders. As the Dividend Disbursing Agent, the Company
shall, on or before the payment date of any such distribution,
notify the Custodian of the estimated amount required to pay
any portion of said distribution which is payable in cash and
request the Custodian to make available sufficient funds for
the cash amount to be paid out. The Company shall reconcile the
amounts so requested and the amounts actually received with the
Custodian on a daily basis. If a Shareholder is entitled to
receive additional Shares by virtue of any such distribution or
dividend, appropriate credits shall be made to the
Shareholder's account, for certificated Funds and/or Classes,
delivered where requested; and
(2) The Company shall maintain records of account for each Fund and
Class and advise the Trust, each Fund and Class and its
Shareholders as to the foregoing.
C. Redemptions and Transfers
(1) The Company shall receive redemption requests and redemption
directions and, if such redemption requests comply with the
procedures as may be described in the Fund Prospectus or set
forth in Proper Instructions, deliver the appropriate
instructions therefor to the Custodian. The Company shall
notify the Funds on a daily basis of the total amount of
redemption requests processed and monies paid to the Company by
the Custodian for redemptions.
(2) At the appropriate time upon receiving redemption proceeds from
the Custodian with respect to any redemption, the Company shall
pay or cause to be paid the redemption proceeds in the manner
instructed by the redeeming Shareholders, pursuant to
procedures described in the then-current Prospectus of the
Fund.
(3) If any certificate returned for redemption or other request for
redemption does not comply with the procedures for redemption
approved by the Fund, the Company shall promptly notify the
Shareholder of such fact, together with the reason therefor,
and shall effect such redemption at the price applicable to the
date and time of receipt of documents complying with said
procedures.
(4) The Company shall effect transfers of Shares by the registered
owners thereof.
(5) The Company shall identify and process abandoned accounts and
uncashed checks for state escheat requirements on an annual
basis and report such actions to the Fund.
D. Recordkeeping
(1) The Company shall record the issuance of Shares of each Fund,
and/or Class, and maintain pursuant to applicable rules of the
Securities and Exchange Commission (``SEC') a record of the
total number of Shares of the Fund and/or Class which are
authorized, based upon data provided to it by the Fund, and
issued and outstanding. The Company shall also provide the Fund
on a regular basis or upon reasonable request with the total
number of Shares which are authorized and issued and
outstanding, but shall have no obligation when recording the
issuance of Shares, except as otherwise set forth herein, to
monitor the issuance of such Shares or to take cognizance of
any laws relating to the issue or sale of such Shares, which
functions shall be the sole responsibility of the Funds.
(2) The Company shall establish and maintain records pursuant to
applicable rules of the SEC relating to the services to be
performed hereunder in the form and manner as agreed to by the
Trust or the Fund to include a record for each Shareholder's
account of the following:
(a) Name, address and tax identification number (and whether
such number has been certified);
(b) Number of Shares held;
(c) Historical information regarding the account, including
dividends paid and date and price for all transactions;
(d) Any stop or restraining order placed against the account;
(e) Information with respect to withholding in the case of a
foreign account or an account for which withholding is
required by the Internal Revenue Code;
(f) Any dividend reinvestment order, plan application,
dividend address and correspondence relating to the
current maintenance of the account;
(g) Certificate numbers and denominations for any Shareholder
holding certificates;
(h) Any information required in order for the Company to
perform the calculations contemplated or required by this
Agreement.
(3) The Company shall preserve any such records required to be
maintained pursuant to the rules of the SEC for the periods
prescribed in said rules as specifically noted below. Such
record retention shall be at the expense of the Company, and
such records may be inspected by the Fund at reasonable times.
The Company may, at its option at any time, and shall forthwith
upon the Fund's demand, turn over to the Fund and cease to
retain in the Company's files, records and documents created
and maintained by the Company pursuant to this Agreement, which
are no longer needed by the Company in performance of its
services or for its protection. If not so turned over to the
Fund, such records and documents will be retained by the
Company for six years from the year of creation, during the
first two of which such documents will be in readily accessible
form. At the end of the six year period, such records and
documents will either be turned over to the Fund or destroyed
in accordance with Proper Instructions.
E. Confirmations/Reports
(1) The Company shall furnish to the Fund periodically the
following information:
(a) A copy of the transaction register;
(b) Dividend and reinvestment blotters;
(c) The total number of Shares issued and outstanding in each
state for ``blue sky''purposes as determined according to
Proper Instructions delivered from time to time by the
Fund to the Company;
(d) Shareholder lists and statistical information;
(e) Payments to third parties relating to distribution
agreements, allocations of sales loads, redemption fees,
or other transaction- or sales-related payments;
(f) Such other information as may be agreed upon from time to
time.
(2) The Company shall prepare in the appropriate form, file with
the Internal Revenue Service and appropriate state agencies,
and, if required, mail to Shareholders, such notices for
reporting dividends and distributions paid as are required to
be so filed and mailed and shall withhold such sums as are
required to be withheld under applicable federal and state
income tax laws, rules and regulations.
(3) In addition to and not in lieu of the services set forth above,
the Company shall:
(a) Perform all of the customary services of a transfer agent,
dividend disbursing agent and, as relevant, agent in
connection with accumulation, open-account or similar
plans (including without limitation any periodic
investment plan or periodic withdrawal program), including
but not limited to: maintaining all Shareholder accounts,
mailing Shareholder reports and Prospectuses to current
Shareholders, withholding taxes on accounts subject to
back-up or other withholding (including non-resident alien
accounts), preparing and filing reports on U.S. Treasury
Department Form 1099 and other appropriate forms required
with respect to dividends and distributions by federal
authorities for all Shareholders, preparing and mailing
confirmation forms and statements of account to
Shareholders for all purchases and redemptions of Shares
and other conformable transactions in Shareholder
accounts, preparing and mailing activity statements for
Shareholders, and providing Shareholder account
information; and
(b) provide a system which will enable the Fund to monitor the
total number of Shares of each Fund and/or Class sold in
each state (``blue sky reporting'). The Fund shall by
Proper Instructions (i) identify to the Company those
transactions and assets to be treated as exempt from the
blue sky reporting for each state and (ii) verify the
classification of transactions for each state on the
system prior to activation and thereafter monitor the
daily activity for each state. The responsibility of the
Company for each Fund's and/or Class's state blue sky
registration status is limited solely to the recording of
the initial classification of transactions or accounts
with regard to blue sky compliance and the reporting of
such transactions and accounts to the Fund as provided
above.
F. Other Duties
(1) The Company shall answer correspondence from Shareholders
relating to their Share accounts and such other correspondence
as may from time to time be addressed to the Company;
(2) The Company shall prepare Shareholder meeting lists, mail proxy
cards and other material supplied to it by the Fund in
connection with Shareholder Meetings of each Fund; receive,
examine and tabulate returned proxies, and certify the vote of
the Shareholders;
(3) The Company shall establish and maintain facilities and
procedures for safekeeping of stock certificates, check forms
and facsimile signature imprinting devices, if any; and for the
preparation or use, and for keeping account of, such
certificates, forms and devices.
ARTICLE 6. DUTIES OF THE TRUST.
A. Compliance
As required by law, the Trust or Fund assume full responsibility for
the preparation, contents and distribution of their own and/or their
classes' Prospectus and for complying with all applicable
requirements of the Securities Act of 1933, as amended (the ``1933
Act''), the 1940 Act and any laws, rules and regulations of
government authorities having jurisdiction.
B. Share Certificates
The Trust shall supply the Company with a sufficient supply of blank
Share certificates and from time to time shall renew such supply
upon request of the Company. Such blank Share certificates shall be
properly signed, manually or by facsimile, if authorized by the
Trust and shall bear the seal of the Trust or facsimile thereof; and
notwithstanding the death, resignation or removal of any officer of
the Trust authorized to sign certificates, the Company may continue
to countersign certificates which bear the manual or facsimile
signature of such officer until otherwise directed by the Trust.
C. Distributions
The Fund shall promptly inform the Company of the declaration of any
dividend or distribution on account of any Fund's shares.
ARTICLE 7. COMPENSATION AND EXPENSES.
A. Annual Fee
For performance by the Company pursuant to Section Two of this
Agreement, the Trust and/or the Fund agree to pay the Company an
annual maintenance fee for each Shareholder account as agreed upon
between the parties and as may be added to or amended from time to
time. Such fees may be changed from time to time subject to written
agreement between the Trust and the Company. Pursuant to information
in the Fund Prospectus or other information or instructions from the
Fund, the Company may sub-divide any Fund into Classes or other sub-
components for recordkeeping purposes. The Company will charge the
Fund the same fees for each such Class or sub-component the same as
if each were a Fund.
B. Reimbursements
In addition to the fee paid under Article 7A above, the Trust and/or
Fund agree to reimburse the Company for out-of-pocket expenses or
advances incurred by the Company for the items agreed upon between
the parties, as may be added to or amended from time to time. In
addition, any other expenses incurred by the Company at the request
or with the consent of the Trust and/or the Fund, will be reimbursed
by the appropriate Fund.
C. Payment
The compensation and out-of-pocket expenses shall be accrued by the
Fund and shall be paid to the Company no less frequently than
monthly, and shall be paid daily upon request of the Company. The
Company will maintain detailed information about the compensation
and out-of-pocket expenses by Fund and Class.
D. Any schedule of compensation agreed to hereunder, as may be adjusted
from time to time, shall be dated and signed by a duly authorized
officer of the Trust and/or the Funds and a duly authorized officer
of the Company.
ARTICLE 8. ASSIGNMENT OF SHAREHOLDER RECORDKEEPING.
Except as provided below, no right or obligation under this Section Two
may be assigned by either party without the written consent of the other
party.
A. This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
B. The Company may without further consent on the part of the Trust
subcontract for the performance hereof with (A) State Street Bank
and its subsidiary, Boston Financial Data Services, Inc., a
Massachusetts Trust (``BFDS'), which is duly registered as a
transfer agent pursuant to Section 17A(c)(1) of the Securities
Exchange Act of 1934, as amended, or any succeeding statute
(``Section 17A(c)(1)'), or (B) a BFDS subsidiary duly registered as
a transfer agent pursuant to Section 17A(c)(1), or (C) a BFDS
affiliate, or (D) such other provider of services duly registered as
a transfer agent under Section 17A(c)(1) as Company shall select;
provided, however, that the Company shall be as fully responsible to
the Trust for the acts and omissions of any subcontractor as it is
for its own acts and omissions; or
C. The Company shall upon instruction from the Trust subcontract for
the performance hereof with an Agent selected by the Trust, other
than BFDS or a provider of services selected by Company, as
described in (2) above; provided, however, that the Company shall in
no way be responsible to the Trust for the acts and omissions of the
Agent.
SECTION THREE: CUSTODY SERVICES PROCUREMENT.
ARTICLE 9. APPOINTMENT.
The Trust hereby appoints Company as its agent to evaluate and obtain
custody services from a financial institution that (i) meets the criteria
established in Section 17(f) of the 1940 Act and (ii) has been approved by
the Board as eligible for selection by the Company as a custodian (the
`Eligible Custodian''). The Company accepts such appointment.
ARTICLE 10. THE COMPANY AND ITS DUTIES.
Subject to the review, supervision and control of the Board, the Company
shall:
A. evaluate the nature and the quality of the custodial services
provided by the Eligible Custodian;
B. employ the Eligible Custodian to serve on behalf of the Trust as
Custodian of the Trust's assets substantially on the terms set forth
as the form of agreement in Exhibit 2;
C. negotiate and enter into agreements with the Custodians for the
benefit of the Trust, with the Trust as a party to each such
agreement. The Company shall not be a party to any agreement with
any such Custodian;
D. establish procedures to monitor the nature and the quality of the
services provided by the Custodians;
E. continuously monitor the nature and the quality of services provided
by the Custodians; and
F. periodically provide to the Trust (i) written reports on the
activities and services of the Custodians; (ii) the nature and
amount of disbursement made on account of the Trust with respect to
each custodial agreement; and (iii) such other information as the
Board shall reasonably request to enable it to fulfill its duties
and obligations under Sections 17(f) and 36(b) of the 1940 Act and
other duties and obligations thereof.
ARTICLE 11. FEES AND EXPENSES.
A. Annual Fee
For the performance by the Company pursuant to Section Three of this
Agreement, the Trust and/or the Fund agree to pay the Company an
annual fee as agreed upon between the parties.
B. Reimbursements
In addition to the fee paid under Section 11A above, the Trust
and/or Fund agree to reimburse the Company for out-of-pocket
expenses or advances incurred by the Company for the items agreed
upon between the parties, as may be added to or amended from time to
time. In addition, any other expenses incurred by the Company at the
request or with the consent of the Trust and/or the Fund, will be
reimbursed by the appropriate Fund.
C. Payment
The compensation and out-of-pocket expenses shall be accrued by the
Fund and shall be paid to the Company no less frequently than
monthly, and shall be paid daily upon request of the Company. The
Company will maintain detailed information about the compensation
and out-of-pocket expenses by Fund.
D. Any schedule of compensation agreed to hereunder, as may be adjusted
from time to time, shall be dated and signed by a duly authorized
officer of the Trust and/or the Funds and a duly authorized officer
of the Company.
ARTICLE 12. REPRESENTATIONS.
The Company represents and warrants that it has obtained all required
approvals from all government or regulatory authorities necessary to enter
into this arrangement and to provide the services contemplated in Section
Three of this Agreement.
SECTION FOUR: GENERAL PROVISIONS.
ARTICLE 13. DOCUMENTS.
A. In connection with the appointment of the Company under this
Agreement, the Trust shall file with the Company the following
documents:
(1) A copy of the Charter and By-Laws of the Trust and all
amendments thereto;
(2) A copy of the resolution of the Board of the Trust authorizing
this Agreement;
(3) Specimens of all forms of outstanding Share certificates of the
Trust or the Funds in the forms approved by the Board of the
Trust with a certificate of the Secretary of the Trust as to
such approval;
(4) All account application forms and other documents relating to
Shareholders accounts; and
(5) A copy of the current Prospectus for each Fund.
B. The Fund will also furnish from time to time the following
documents:
(1) Each resolution of the Board of the Trust authorizing the
original issuance of each Fund's, and/or Class's Shares;
(2) Each Registration Statement filed with the SEC and amendments
thereof and orders relating thereto in effect with respect to
the sale of Shares of any Fund, and/or Class;
(3) A certified copy of each amendment to the governing document
and the By-Laws of the Trust;
(4) Certified copies of each vote of the Board authorizing officers
to give Proper Instructions to the Custodian and agents for
fund accountant, custody services procurement, and shareholder
recordkeeping or transfer agency services;
(5) Specimens of all new Share certificates representing Shares of
any Fund, accompanied by Board resolutions approving such
forms;
(6) Such other certificates, documents or opinions which the
Company may, in its discretion, deem necessary or appropriate
in the proper performance of its duties; and
(7) Revisions to the Prospectus of each Fund.
ARTICLE 14. REPRESENTATIONS AND WARRANTIES.
A. Representations and Warranties of the Company
The Company represents and warrants to the Trust that:
(1) It is a business trust duly organized and existing and in good
standing under the laws of the State of Delaware.
(2) It is duly qualified to carry on its business in the State of
Pennsylvania.
(3) It is empowered under applicable laws and by its charter and
by-laws to enter into and perform this Agreement.
(4) All requisite corporate proceedings have been taken to
authorize it to enter into and perform its obligations under
this Agreement.
(5) It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement.
(6) It is in compliance with federal securities law requirements
and in good standing as a transfer agent.
B. Representations and Warranties of the Trust
The Trust represents and warrants to the Company that:
(1) It is an investment company duly organized and existing and in
good standing under the laws of its state of organization;
(2) It is empowered under applicable laws and by its Charter and
By-Laws to enter into and perform its obligations under this
Agreement;
(3) All corporate proceedings required by said Charter and By-Laws
have been taken to authorize it to enter into and perform its
obligations under this Agreement;
(4) The Trust is an open-end investment company registered under
the 1940 Act; and
(5) A registration statement under the 1933 Act will be effective,
and appropriate state securities law filings have been made and
will continue to be made, with respect to all Shares of each
Fund being offered for sale.
ARTICLE 15. STANDARD OF CARE AND INDEMNIFICATION.
A. Standard of Care
The Company shall be held to a standard of reasonable care in
carrying out the provisions of this Contract. The Company shall be
entitled to rely on and may act upon advice of counsel (who may be
counsel for the Trust) on all matters, and shall be without
liability for any action reasonably taken or omitted pursuant to
such advice, provided that such action is not in violation of
applicable federal or state laws or regulations, and is in good
faith and without negligence.
B. Indemnification by Trust
The Company shall not be responsible for and the Trust or Fund shall
indemnify and hold the Company, including its officers, directors,
shareholders and their agents employees and affiliates, harmless
against any and all losses, damages, costs, charges, counsel fees,
payments, expenses and liabilities arising out of or attributable
to:
(1) The acts or omissions of any Custodian, Adviser, Sub-adviser or
other party contracted by or approved by the Trust or Fund,
(2) The reliance on or use by the Company or its agents or
subcontractors of information, records and documents in proper
form which
(a) are received by the Company or its agents or
subcontractors and furnished to it by or on behalf of the
Fund, its Shareholders or investors regarding the
purchase, redemption or transfer of Shares and Shareholder
account information;
(b) are received by the Company from independent pricing
services or sources for use in valuing the assets of the
Funds; or
(c) are received by the Company or its agents or
subcontractors from Advisers, Sub-advisers or other third
parties contracted by or approved by the Trust of Fund for
use in the performance of services under this Agreement;
(d) have been prepared and/or maintained by the Fund or its
affiliates or any other person or firm on behalf of the
Trust.
(3) The reliance on, or the carrying out by the Company or its
agents or subcontractors of Proper Instructions of the Trust or
the Fund.
(4) The offer or sale of Shares in violation of any requirement
under the federal securities laws or regulations or the
securities laws or regulations of any state that such Shares be
registered in such state or in violation of any stop order or
other determination or ruling by any federal agency or any
state with respect to the offer or sale of such Shares in such
state.
Provided, however, that the Company shall not be protected by
this Article 15.A. from liability for any act or omission
resulting from the Company's willful misfeasance, bad faith,
negligence or reckless disregard of its duties of failure to
meet the standard of care set forth in 15.A. above.
C. Reliance
At any time the Company may apply to any officer of the Trust or
Fund for instructions, and may consult with legal counsel with
respect to any matter arising in connection with the services to be
performed by the Company under this Agreement, and the Company and
its agents or subcontractors shall not be liable and shall be
indemnified by the Trust or the appropriate Fund for any action
reasonably taken or omitted by it in reliance upon such instructions
or upon the opinion of such counsel provided such action is not in
violation of applicable federal or state laws or regulations. The
Company, its agents and subcontractors shall be protected and
indemnified in recognizing stock certificates which are reasonably
believed to bear the proper manual or facsimile signatures of the
officers of the Trust or the Fund, and the proper countersignature
of any former transfer agent or registrar, or of a co-transfer agent
or co-registrar.
D. Notification
In order that the indemnification provisions contained in this
Article 15 shall apply, upon the assertion of a claim for which
either party may be required to indemnify the other, the party
seeking indemnification shall promptly notify the other party of
such assertion, and shall keep the other party advised with respect
to all developments concerning such claim. The party who may be
required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The
party seeking indemnification shall in no case confess any claim or
make any compromise in any case in which the other party may be
required to indemnify it except with the other party's prior written
consent.
ARTICLE 16. TERMINATION OF AGREEMENT.
This Agreement may be terminated by either party upon one hundred twenty
(120) days written notice to the other. Should the Trust exercise its
rights to terminate, all out-of-pocket expenses associated with the
movement of records and materials will be borne by the Trust or the
appropriate Fund. Additionally, the Company reserves the right to charge
for any other reasonable expenses associated with such termination. The
provisions of Article 15 shall survive the termination of this Agreement.
ARTICLE 17. AMENDMENT.
This Agreement may be amended or modified by a written agreement
executed by both parties.
ARTICLE 18. INTERPRETIVE AND ADDITIONAL PROVISIONS.
In connection with the operation of this Agreement, the Company and the
Trust may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Agreement as may in their joint opinion
be consistent with the general tenor of this Agreement. Any such
interpretive or additional provisions shall be in a writing signed by both
parties and shall be annexed hereto, provided that no such interpretive or
additional provisions shall contravene any applicable federal or state
regulations or any provision of the Charter. No interpretive or additional
provisions made as provided in the preceding sentence shall be deemed to be
an amendment of this Agreement.
ARTICLE 19. GOVERNING LAW.
This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the Commonwealth of Pennsylvania.
ARTICLE 20. NOTICES.
Except as otherwise specifically provided herein, Notices and other
writings delivered or mailed postage prepaid to the Trust at Federated
Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, or to the Company at
Federated Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, or to such
other address as the Trust or the Company may hereafter specify, shall be
deemed to have been properly delivered or given hereunder to the respective
address.
ARTICLE 21. COUNTERPARTS.
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original.
ARTICLE 22. LIMITATIONS OF LIABILITY OF TRUSTEES AND SHAREHOLDERS OF
THE TRUST.
The execution and delivery of this Agreement have been authorized by the
Trustees of the Trust and signed by an authorized officer of the Trust,
acting as such, and neither such authorization by such Trustees nor such
execution and delivery by such officer shall be deemed to have been made by
any of them individually or to impose any liability on any of them
personally, and the obligations of this Agreement are not binding upon any
of the Trustees or Shareholders of the Trust, but bind only the appropriate
property of the Fund, or Class, as provided in the Declaration of Trust.
ARTICLE 23. LIMITATIONS OF LIABILITY OF TRUSTEES AND SHAREHOLDERS OF
THE COMPANY.
The execution and delivery of this Agreement have been authorized by the
Trustees of the Company and signed by an authorized officer of the Company,
acting as such, and neither such authorization by such Trustees nor such
execution and delivery by such officer shall be deemed to have been made by
any of them individually or to impose any liability on any of them
personally, and the obligations of this Agreement are not binding upon any
of the Trustees or Shareholders of the Company, but bind only the property
of the Company as provided in the Declaration of Trust.
ARTICLE 24. ASSIGNMENT.
This Agreement and the rights and duties hereunder shall not be
assignable with respect to the Trust or the Funds by either of the parties
hereto except by the specific written consent of the other party.
ARTICLE 25. MERGER OF AGREEMENT.
This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject
hereof whether oral or written.
ARTICLE 26. SUCCESSOR AGENT.
If a successor agent for the Trust shall be appointed by the Trust, the
Company shall upon termination of this Agreement deliver to such successor
agent at the office of the Company all properties of the Trust held by it
hereunder. If no such successor agent shall be appointed, the Company shall
at its office upon receipt of Proper Instructions deliver such properties
in accordance with such instructions.
In the event that no written order designating a successor agent or
Proper Instructions shall have been delivered to the Company on or before
the date when such termination shall become effective, then the Company
shall have the right to deliver to a bank or trust company, which is a
`bank'' as defined in the 1940 Act, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $2,000,000, all properties held by the
Company under this Agreement. Thereafter, such bank or trust company shall
be the successor of the Company under this Agreement.
ARTICLE 27. FORCE MAJEURE.
The Company shall have no liability for cessation of services hereunder
or any damages resulting therefrom to the Fund as a result of work
stoppage, power or other mechanical failure, natural disaster, governmental
action, communication disruption or other impossibility of performance.
ARTICLE 28. ASSIGNMENT; SUCCESSORS.
This Agreement shall not be assigned by either party without the prior
written consent of the other party, except that either party may assign to
a successor all of or substantially all of its business, or to a party
controlling, controlled by, or under common control with such party.
Nothing in this Article 28 shall prevent the Company from delegating its
responsibilities to another entity to the extent provided herein.
ARTICLE 29. SEVERABILITY.
In the event any provision of this Agreement is held illegal, void or
unenforceable, the balance shall remain in effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement, with
respect to Sections 1, 2 and 4 hereof, to be executed in their names and on
their behalf under their seals by and through their duly authorized
officers, as of the day and year first above written.
ATTEST: FEDERATED SERVICES COMPANY
By:/s/ Thomas J. Ward By:/s/ James J. Dolan
Thomas J. Ward James J. Dolan
Secretary Chairman
ATTEST: MARKETVEST FUNDS
By:/s/ Victor R. Siclari By:/s/ Jeffrey W.
Sterling
Name: Victor R. Siclari Name: Jeffrey W. Sterling
Its: Secretary Its: Vice President
EXHIBIT 1
01/01/96 MARKETVEST FUNDS
01/01/96 Marketvest Pennsylvania Intermediate Municipal Bond Fund
FEDERATED SERVICES COMPANY provides the following services:
Fund Accounting
Shareholder Recordkeeping
Exhibit 9(ii) on Form N-1A
Exhibit 10 Under Item 601 Reg S/K
ELECTRONIC COMMUNICATIONS AND RECORDKEEPING
AGREEMENT
BETWEEN
FEDERATED SERVICES COMPANY
AND
DAUPHIN DEPOSIT BANK AND TRUST COMPANY
AGREEMENT, made this 1st day of January, 1996, between FEDERATED
SHAREHOLDER SERVICES COMPANY on behalf of itself and its affiliates
("Federated"), with offices at Federated Investors Tower, Pittsburgh,
Pennsylvania 15222-3779, and DAUPHIN DEPOSIT BANK AND TRUST COMPANY, on
behalf of itself and its affiliates and subsidiaries (the "Institution"),
with offices at 213 Market Street, Harrisburg, Pennsylvania 17101.
WHEREAS, Institution desires to perform certain services on behalf of
its customers who are or may become Shareholders of mutual funds for which
Federated provides transfer agency services; and
WHEREAS, performance of such services may require access to
Federated's electronic communication and recordkeeping systems or may
require Federated or the Funds to act upon information about Shareholders
(as hereafter defined) or their Accounts (as hereafter defined) supplied by
Institution;
WHEREAS, Federated is willing to provide such access or rely upon such
information as hereinafter provided, subject to the agreement of
Institution to provide indemnification to Federated;
NOW, THEREFORE, in consideration of the mutual promises contained
herein, and for good and valuable consideration, receipt of which is hereby
acknowledged, the parties, intending to be legally bound hereby, agree as
follows:
SECTION 1
CERTAIN DEFINITIONS
SECTION 1.1 Account. "Account" shall mean any shareholder account in
any Fund for which Institution provides services on behalf of its customers
who are or may become shareholders of the Funds.
SECTION 1.2 Authorized Person. "Authorized Person" shall mean each
agent or employee of Institution who is duly authorized to give
Instructions (as such term is defined below at Section 1.3) pursuant to
this Agreement.
SECTION 1.3 Instruction(s). "Instruction(s)" shall mean any
instruction or communication including, but not limited to, an oral or
written instruction or communication, and any such instruction or
communication originated by facsimile indicating that such transmission
originated from Institution, and instructions or communications received
electronically. Instructions may include, but are not limited to, the
following:
(a) communicating account openings through computer terminals located
on the Institution's premises (the "computer terminals"), through
a toll-free telephone number or otherwise;
(b) communicating account closings via the computer terminals,
through a toll-free telephone number or otherwise;
(c) entering purchase transactions through the computer terminals,
through a toll-free telephone number or otherwise;
(d) entering redemption transactions through the computer terminals,
through a toll-free telephone number or otherwise;
(e) electronically transferring and receiving funds for purchasing
and redeeming shares of a Fund, and confirming and reconciling
all such transactions; and
(f) account maintenance activity in Fund accounts.
SECTION 1.4 Shareholder. "Shareholder" shall mean the shareholder of
record of any Account.
SECTION 2
OBLIGATIONS OF INSTITUTION
SECTION 2.1 Authorization by Institution; Confirmation of Oral
Instructions. Institution hereby authorizes Federated to accept, rely upon
and act upon all Instructions received by Federated from or reasonably
believed to be from Institution, all without the delivery by Institution of
written authorization of the Shareholder. Institution authorizes Federated
to accept, rely upon and act upon oral Instructions by any person
identifying himself as an Authorized Person and to tape record such
Instructions. Institution shall confirm all oral Instructions on the same
day as given by facsimile, however, Federated may rely on the oral
Instructions regardless of whether such facsimile is received.
SECTION 2.2 Duties, Functions and Responsibilities. Institution shall
undertake the duties, functions and responsibilities contemplated hereby in
a businesslike and competent manner. Institution shall conduct its
activities under this Agreement in accordance with (a) all applicable laws,
rules and regulations; (b) the then-current registration statements of the
Funds; and (c) industry standards.
SECTION 2.3 Information about Shareholders. Institution shall
provide to Federated, with respect to each Account, the following
information, and any subsequent changes to such information, which
Institution hereby certifies, to the extent of its knowledge, information
and belief, is, and shall remain, true and correct: (a) the full and
complete name of the Shareholder for Internal Revenue Service information
reporting; (b) the Shareholder's address; (c) the Shareholder's Taxpayer
Identification Number or notice of foreign status and applicable backup or
penalty withholding status; and (d) the state or country code of tax
residence of the Shareholder (if different from address). Institution
shall provide Federated with such information in writing or by electronic
transmission and any other medium that Federated reasonably requests.
SECTION 2.4 Reconciling to Fund Records. The book entry records of
the shareholder recordkeeping agent for each Fund shall be determinative
with respect to each Account. In the event Institution maintains records,
e.g. for omnibus accounts, Institution will notify Federated in writing of
any discrepancy between its records and the records of Federated and the
Fund within a reasonable period of time after it becomes aware of such
discrepancy. Notwithstanding anything to the contrary, Institution solely
shall be responsible and liable for any discrepancies between its records
and the records of Federated and the Funds, provided that such discrepancy
is not solely a result of the negligence of Federated or the Funds.
SECTION 2.5 Retirement Accounts To the extent Institution provides
any processing required in connection with acceptance of retirement plan
accounts, including Individual Retirement Accounts ("IRA's") as defined
under section 408 of the Internal Revenue Code, as amended, Institution
agrees to be responsible for all required documentation in connection with
such accounts, specifically including acceptance on behalf of the
retirement plan custodian. Federated hereby authorizes Institution to
provide such authorization in the name of such custodian or trustee.
ARTICLE 3
OBLIGATIONS OF FEDERATED
SECTION 3.1 Acceptance of Instructions. Federated may, for all
Accounts, accept, rely upon and act upon all Instructions received by
Federated from or reasonably believed to be from Institution, all without
the delivery by Institution of written Instructions executed by a
Shareholder.
SECTION 3.2 Reliance by Federated. Federated may conclusively rely
upon any Instructions received by it by any person whom Federated
reasonably believes to be an Authorized Person.
SECTION 3.3 Incomplete or Unclear Instructions. Federated shall not
be required to act on any Instructions that, in its sole determination, are
incomplete or unclear, and may defer action on such Instructions until
Federated has resolved any question to its reasonable satisfaction.
Federated shall notify Institution, by telephone or by facsimile, within
one business day after it fails to act on any Instructions that it has
determined are incomplete or unclear.
SECTION 3.4 Limitation of Access to Federated's Electronic
Communication and Recordkeeping Systems. Federated may limit access to its
electronic communication and recordkeeping systems. Notwithstanding any
such limitation, Federated may act and rely upon all Instructions in any
form received by Federated from or reasonably believed to be from an
Authorized Person.
SECTION 3.5 Processing Instructions and Communications. Federated
shall correctly process any Instructions from Institution and execute the
Institution's Instructions within a reasonable period of time of receipt,
subject to any conditions or restrictions in the currently effective
registration statement of each Fund or other applicable restrictions.
SECTION 3.6 Performance as Transfer Agent. Federated shall perform
all of its obligations properly assigned to it under the Agreement for Fund
Accounting, Shareholder Recordkeeping, and Custody Services Procurement
dated as of January 1, 1996.
ARTICLE 4
WARRANTIES AND REPRESENTATIONS OF INSTITUTION
SECTION 4.1 Organization and Authority. Institution warrants and
represents that it is a Bank and Trust company duly organized in the
Commonwealth of pennsylvania and has the power and authority to conduct its
business. The execution, delivery and performance by Institution of this
Agreement has been duly authorized by all necessary corporate action of
Institution. This Agreement, when executed and delivered, will constitute
the legal, valid and binding obligation of Institution, enforceable against
it in accordance with its terms.
SECTION 4.2 Adequate Facilities. Institution warrants and represents
that it has adequate facilities, equipment, procedures, controls and
skilled personnel to responsibly perform its duties and obligations
hereunder.
SECTION 4.3 Authorization from Shareholders; and Notification to
Shareholders. Institution warrants and represents that:
4.3.1 each Shareholder has authorized Institution to act as
Shareholder's agent and to take any actions contemplated in this
Agreement with respect to each Account of each Shareholder;
4.3.2 Institution shall refrain from issuing Instructions
with respect to a Shareholder's Account immediately upon receipt
of notice that the Shareholder has revoked authorization to give
such Instructions;
4.3.3 all Instructions, including, but not limited to,
changes in registration, transfers, exchanges and liquidations,
will be duly authorized by the Shareholder of such Account and
shall be lawful and not submitted for any improper, inappropriate
or illegal purpose; and
4.3.4 Federated is properly authorized to effect changes in
its or the Funds records upon receipt of Instructions.
SECTION 4.4 Insurance. Institution warrants and represents that
Institution maintains adequate fidelity insurance, errors and omissions
insurance and other insurance coverage appropriate for the Institution's
duties and obligations under this Agreement. Upon written request,
Institution will provide evidence of such insurance coverage and on each
such policy or bond.
SECTION 4.5 Taxpayer Identification. Institution warrants and
represents that each Taxpayer Identification Number or certificate of
foreign status provided by Institution to the Funds and Federated has been
certified, under penalties of perjury, by the Shareholder on the
appropriate Internal Revenue Service form or an acceptable substitute.
Institution agrees that it shall promptly advise the Funds or Federated of
any other matter that may affect the responsibilities of the Funds or
Federated to Shareholders pursuant to the Internal Revenue Code of 1986, as
amended. Institution further agrees that it shall maintain adequate
documentation to verify the foregoing for each Account.
SECTION 4.6 Authority of Authorized Persons. Institution warrants
and represents that:
4.6.1 each Authorized Person set forth on the Certificate has
been duly authorized by a duly elected officer of Institution to
provide Instructions pursuant to this Agreement;
4.6.2 Institution shall adopt, implement and maintain
procedures reasonably designed to ensure the accuracy and
integrity of all Instructions, including, but not limited to,
procedures (i) requiring all Instructions on behalf of
Institution to originate from a specific office (or offices)
designated by Institution; and (ii) limiting the use of each
computer terminal used for transmitting Instructions to
Federated's electronic communication and recordkeeping systems
to Authorized Persons with adequate training and supervision.
Upon Federated's request, Institution shall provide Federated
with copies of its security procedures with respect to the
foregoing and shall use and safeguard any access passwords,
codes, manuals or other information it obtains with respect to
Federated's electronic communication and recordkeeping systems
and the data thereon in a manner consonant with the protection of
its own proprietary business records.
SECTION 4.7 Institution's Financial Condition. Institution
represents and warrants that it shall deliver to Federated its audited
annual report, its quarterly financial reports and such other financial
statements as Federated shall reasonably request which indicate the
Institution's financial condition and, if applicable, net capital ratio.
Institution further represents and warrants that such statements fairly
represent its financial condition and/or net capital ratio on the date of
such statements and that there has been no material adverse change in its
financial condition and/or net capital ratio since that date.
SECTION 4.8 Confidentiality. Institution shall treat as confidential
all data it receives through Federated's electronic communication and
recordkeeping systems, except to the extent required by applicable law,
rule or regulation.
ARTICLE 5
WARRANTIES AND REPRESENTATIONS OF FEDERATED
SECTION 5.1 Organization and Authority. Federated warrants and
represents that it is a business trust duly organized in the State of
Delaware and has the power and authority to conduct its business. The
execution, delivery and performance by Federated of this Agreement has been
duly authorized by all necessary corporate action of Federated. This
Agreement, when executed and delivered, will constitute the legal, valid
and binding obligation of Federated, enforceable against it in accordance
with its terms.
SECTION 5.2 Proper Registration. Federated warrants that it has duly
registered as transfer agent pursuant to the Securities Exchange Act of
1934, that its registration remains in full force and effect, and that it
will take all action required to maintain such registration as a transfer
agent, including, without limitation, making all required filings to the
Securities and Exchange Commission and complying with all rules of the
Securities and Exchange Commission applicable to transfer agents.
SECTION 5.3 Adequate Facilities. Federated warrant and represent
that they have adequate facilities, equipment, procedures, controls and
skilled personnel to perform their duties and obligations hereunder.
SECTION 5.4 Confidentiality. Federated shall treat as confidential
all data they receive from Institution through Federated's electronic
communication and recordkeeping systems, except to the extent required by
applicable law, rule or regulation.
ARTICLE 6
INDEMNIFICATION
SECTION 6.1 Indemnification by Institution. Institution shall
indemnify and hold harmless the Funds, the Funds' custodian, the Funds'
transfer agent, the Funds' underwriter, the Funds' investment adviser,
Federated, each of their affiliated companies, and all of the divisions,
subsidiaries, directors, trustees, officers, agents, subcontractors,
employees and assigns of each of the foregoing (collectively, "Indemnified
Fund Parties"), against and from any and all demands, damages, liabilities,
and losses, or any threatened, pending or completed actions, claims, suits,
complaints, proceedings, or investigations (including reasonable attorneys'
fees and other costs, including all expenses of litigation or arbitration,
judgments, fines or amounts paid in settlement), to which any of them may
be or become subject as a result or arising out of: (a) any action
reasonably taken by Federated in reliance upon the Institution's
Instructions; (b) any act or omission by Institution or its agents which
constitutes negligence, gross negligence, or willful misconduct; (c) any
breach of the Institution's representations or warranties contained in this
Agreement; (d) the Institution's failure to comply with any of the terms of
this Agreement; (e) the failure by Institution to obtain authorization from
a Shareholder to facilitate any transaction through Federated's electronic
communication and recordkeeping systems; and (f) Federated's reasonable
acceptance of and reliance on any Instruction, in accordance with Article 3
of this Agreement without supporting documentation. An Indemnified Fund
Party may make demand for indemnification for any payment, including any
partial payment, made by the Indemnified Fund Party in respect of any and
all demands, damages, liabilities, and losses, or any threatened, pending
or completed actions, claims, suits, complaints, proceedings, or
investigations (including reasonable attorneys fees and other costs,
including all expenses of litigation or arbitration, judgments, fines or
amounts paid in settlement), to which any of them may be or become subject
which give rise to indemnification by Institution under this Agreement. At
the request of any of the Indemnified Fund Parties, Institution shall
provide for an appropriate defense against any circumstances which may give
rise to indemnification by Institution under this Agreement. In no event
shall Institution be liable for demands, damages, liabilities and losses
arising out of failure of its equipment or force majeure. Institution
represents and warrants that at all times it has sufficient financial
resources, whether through a fidelity bond or otherwise, to meet all of its
indemnification obligations arising under this Agreement.
SECTION 6.2 Indemnification by Federated. Federated shall indemnify
and hold harmless Institution, each of the Institution's affiliated
companies, and all of the divisions, subsidiaries, directors, officers,
agents, subcontractors, employees and assigns of each of the foregoing
(collectively, "Indemnified Institution Parties"), against and from any and
all demands, damages, liabilities, and losses, or any threatened, pending
or completed actions, claims, suits, complaints, proceedings, or
investigations (including reasonable attorneys fees and other costs,
including all expenses of litigation or arbitration, judgments, fines or
amounts paid
in settlement) to which any of them may be or become subject as a result or
arising out of: (a) any act or omission by Federated or its agents which
constitutes negligence, gross negligence or willful misconduct; (b) any
breach of Federated's representations or warranties contained in this
Agreement; or (c) Federated's failure to obtain proper Instructions from
Institution; or (d) Federated's failure to comply with any of the terms of
this Agreement. An Indemnified Institution Party may make demand for
indemnification for any payment, including any partial payment, made by the
Indemnified Institution Party in respect of any and all demands, damages,
liabilities, and losses, or any threatened, pending or completed actions,
claims, suits, complaints, proceedings, or investigations (including
reasonable attorneys fees and other costs, including all expenses of
litigation or arbitration, judgments, fines or amounts paid in
settlement), to which any of them may be or become subject which give rise
to indemnification by Institution under this Agreement. At the request of
any of the Indemnified Institution Parties, Federated shall provide for an
appropriate defense against any circumstances which which give rise to
indemnification by Institution under this Agreement. In no event shall
Federated be liable for demands, damages, liabilities and losses arising
out of failure of its equipment or force majeure. Federated represents and
warrants that at all times it has sufficient financial resources, whether
through a fidelity bond or otherwise, to meet all of its indemnification
obligations arising under this Agreement.
SECTION 6.3 Contribution, Cooperation, Good Faith. The parties
recognize that certain circumstances will arise a loss may not be clearly
attributable to one party or the other. The parties agree to cooperate
with each other and to act in good faith in examining the facts of such
situations, and understand that in certain of such situations it will be
appropriate for both the Fund Indemnified Parties and the Indemnified
Institution Parties to contribute to effect a resolution of the matter.
ARTICLE 7
MISCELLANEOUS
SECTION 7.1 Termination. Either party may terminate this Agreement
upon 30 days' written notice to the other party. The obligations of Article
6 shall survive the termination of this Agreement.
SECTION 7.2 Force Majeure. Neither Federated nor Institution shall
have no liability for cessation of services hereunder or any damages
resulting therefrom to Institution as a result of work stoppage, power or
other mechanical failure, natural disaster, governmental action,
communication disruption or other impossibility of performance.
SECTION 7.3 Choice of Law and Venue. This Agreement shall be
governed by, and construed in accordance with, the laws of The Commonwealth
of Pennsylvania, without regard to conflict of law. The venue shall be The
Western District of Pennsylvania.
SECTION 7.4 Assignment. This Agreement may not be transferred or
assigned by either party without the prior written consent of the other
party (other than pursuant to a consolidation, merger, transfer of all or
substantially all the assets or other business combination transaction) and
any purported transfer or assignment without such consent will be void.
SECTION 7.5 Notice. Whenever notice is required under this
Agreement, it shall be given in writing by first class mail, return receipt
requested, to Federated at Federated Investors Tower, Pittsburgh,
Pennsylvania 15222-3779, attention: Vice President, Transfer Agency
Services, Federated Services Company, attention: Tom Schmitt; and to
Dauphin Deposit Bank and Trust Company at 213 Market Street, Harrisburg,
Pennsylvania 17101, attention: Manager- Trust and Financial Services.
SECTION 7.6 Integrity of Data. Institution shall take all reasonable
steps to protect and insure the integrity of the data it transmits into
Federated's electronic communication and recordkeeping systems and to
prevent the damage of records maintained by others, including the Funds or
Federated.
SECTION 7.7 Entire Agreement. This Agreement sets forth the entire
agreement and understanding between the parties as to the subject matter
hereof and supersedes all oral communications and prior writings with
respect thereto, and neither of the parties shall be bound by any
conditions, warranties, or representations with respect to such subject
matter other than as expressly provided herein, or as duly set forth on or
subsequent to the effective date hereof in writing and signed by a proper
and duly authorized representative of the party to be bound thereby.
SECTION 7.8 Attorneys' Fees. If any dispute arising out of this
Agreement is litigated between the parties hereto, the prevailing party
shall be entitled to recover its reasonable attorneys' fees in addition to
any other relief to which it may be entitled.
SECTION 7.9 Waiver of Remedies. A waiver of a breach or a default
under this Agreement shall not be a waiver of any subsequent default.
Failure of either party to enforce compliance with any term or condition of
this Agreement shall not constitute a waiver of such term or condition.
SECTION 7.10 Captions. Captions contained in this Agreement are for
reference purposes only and are not part of this Agreement.
SECTION 7.11 Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed
an original.
SECTION 7.12 Severability. If any provision of this Agreement is
held to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
SECTION 7.13 Amendment. No amendment, modification or waiver in
respect of this Agreement will be effective unless in writing and executed
by each of the parties.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first above written by their respective officers
hereunto duly authorized.
FEDERATED SHAREHOLDER SERVICES COMPANY
By: /s/ R. Jeffrey Niss
Name: R. Jeffrey Niss
Title: President
DAUPHIN DEPOSIT BANK AND TRUST COMPANY
By: /s/ Rick A. Gold
Name: Rick A. Gold
Title: Executive Vice President
Attest: /s/ Bernard Kelly, Jr.
Name: Bernard Kelly, Jr.
Title: Assistant Secretary
SCHEDULE A
CERTIFICATE OF AUTHORIZED INDIVIDUALS
November 14, 1996
NAME, TITLE SIGNATURE, FACSIMILE SIGNATURE
Rose M. Miller, MV Clerk /s/ Rose M. Miller
June Black, Mut Fd Clerk /s/ June V. Black
Pam Matesevac, Mut Fd Clerk /s/ Pam Matesevac
Hawley Gessner, Sec Supv /s/ Hawley A. Gessner
Joyce A. Casey, VP /s/ Joyce A. Casey
The undersigned hereby attest that they are officers of Dauphin Deposit
Bank and Trust Company and are duly authorized to, and do so designate the
aforelisted individuals as Authorized Persons under the Electronic
Communications and Recordkeeping Agreement between Dauphin Deposit Bank and
Trust Company and Federated Shaeholder Services Company this designation to
be effective as of November 14, 1996.
By: /s/ E. Ronald Deshong
Name: E. Ronald Deshong
Title: Senior Vice President
By: /s/ Salvatore F. Marone
Name: Salvatore F. Marone
Title: Vice President
ATTEST:
/s/ Bernard Kelly, Jr.
Assistant Secretary
EXHIBIT NO. 9(ii) ON FORM N-1A
EXHIBIT NO. 10 UNDER ITEM 601 REG S/K
MARKETVEST FUNDS
ADMINISTRATIVE SERVICES AGREEMENT
This Administrative Services Agreement is made as of this 1st day of
January, 1996, between Marketvest Funds, a Massachusetts business trust
(herein called the `Fund''), and Federated Administrative Services, a
Delaware business trust (herein called `FAS'').
WHEREAS, the Fund is a Massachusetts business trust consisting of one or
more portfolios, which operates as an open-end management investment
company and will so register under the Investment Company Act of 1940; and
WHEREAS, the Fund desires to retain FAS as its Administrator to provide it
with Administrative Services (as herein defined), and FAS is willing to
render such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants set
forth herein, the parties hereto agree as follows:
1. Appointment of Administrator. The Fund hereby appoints FAS as
Administrator of the Fund on the terms and conditions set forth in this
Agreement; and FAS hereby accepts such appointment and agrees to perform
the services and duties set forth in Section 2 of this Agreement in
consideration of the compensation provided for in Section 5 hereof.
2. Services and Duties. As Administrator, and subject to the
supervision and control of the Fund's Board of Trustees FAS will provide
facilities, equipment, and personnel to carry out the following
administrative services for operation of the business and affairs of the
Fund and each of its portfolios:
(a) prepare, file, and maintain the Fund's governing documents and
any amendments thereto, including the Declaration of Trust (which has
already been prepared and filed), the By-laws and minutes of meetings of
Trustees and shareholders;
(b) prepare and file with the Securities and Exchange Commission
(`SEC'') and the appropriate state securities authorities the registration
statements for the Fund and the Fund's shares and all amendments thereto,
reports to regulatory authorities and shareholders, prospectuses, proxy
statements, and such other documents all as may be necessary to enable the
Fund to make a continuous offering of its shares;
(c) prepare, negotiate, and administer contracts on behalf of the
Fund with, among others, the Fund's investment adviser, distributor,
custodian, and transfer agent;
(d) supervise the Fund's Fund Accountant in the maintenance of the
Fund's general ledger and in the preparation of the Fund's financial
statements, including oversight of expense accruals and payments, of the
determination of the net asset value of the Fund and of the declaration and
payment of dividends and other distributions to shareholders;
(e) calculate performance data of the Fund for dissemination to
information services covering the investment company industry;
(f) prepare and file the Fund's tax returns;
(g) examine and review the operations of the Fund's custodian and
transfer agent;
(h) coordinate the layout and printing of publicly disseminated
prospectuses and reports;
(i) perform internal audit examinations in accordance with a
charter to be adopted by FAS and the Fund;
(j) assist with the design, development, and operation of the Fund;
(k) provide individuals reasonably acceptable to the Fund's Board
of Trustees for nomination, appointment, or election as officers of the
Fund, who will be responsible for the management of certain of the Fund's
affairs as determined by the Fund's Board of Trustees; and
(l) consult with the Fund and its Board of Trustees on matters
concerning the Fund and its affairs.
The foregoing, along with any additional services that FAS shall agree in
writing to perform for the Fund hereunder, shall hereafter be referred to
as "Administrative Services." Administrative Services shall not include
any duties, functions, or services to be performed for the Fund by the
Fund's investment adviser, distributor, custodian, or transfer agent
pursuant to their respective agreements with the Fund.
3. Records. FAS shall create and maintain all necessary books and
records in accordance with all applicable laws, rules and regulations,
including but not limited to records required by Section 31(a) of the
Investment Company act of 1940 and the rules thereunder, as the same may
be amended from time to time, pertaining to the Administrative Services
performed by it and not otherwise created and maintained by another party
pursuant to contract with the Fund. Where applicable, such records shall
be maintained by FAS for the periods and in the places required by Rule
31a-2 under the 1940 Act. The books and records pertaining to the Trust
which are in the possession of FAS shall be the property of the Fund. The
Fund, or the Fund's authorized representatives, shall have access to such
books and records at all times during FAS's normal business hours. Upon
the reasonable request of the Fund, copies of any such books and records
shall be provided promptly by FAS to the Fund or the Fund's authorized
representatives.
4. Expenses. FAS shall be responsible for expenses incurred in
providing office space, equipment, and personnel as may be necessary or
convenient to provide the Administrative Services to the Fund, including
the compensation of FAS employees who serve as Trustees or officers of the
Fund. The Fund shall be responsible for all other reasonable expenses
incurred by FAS on behalf of the Fund, including without limitation postage
and courier expenses, printing expenses, travel expenses, registration
fees, filing fees, fees of outside counsel and independent auditors,
insurance premiums, fees payable to Trustees who are not FAS employees, and
trade association dues.
5. Compensation. For the Administrative Services provided, the Fund
hereby agrees to pay and FAS hereby agrees to accept as full compensation
for its services rendered hereunder an administrative fee at an annual rate
of .15 of 1% of the average daily net assets of the Fund payable daily.
However, in no event shall the administrative fee received during any year
of this Agreement be less than, or be paid at a rate less than would
aggregate, $75,000, per portfolio having a single class of shares.
6. Responsibility of Administrator.
(a) FAS shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the Fund in connection with the matters to
which this Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the performance
of its duties or from reckless disregard by it of its obligations and
duties under this Agreement. FAS shall be entitled to rely on and may act
upon advice of counsel (who may be counsel for the Fund) on all matters,
and shall be without liability for any action reasonably taken or omitted
in good faith pursuant to such advice. Any person, even though also an
officer, trustee, partner, employee or agent of FAS, who may be or become
an officer, Trustee, employee or agent of the Fund, shall be deemed, when
rendering services to the Fund or acting on any business of the Fund (other
than services or business in connection with the duties of FAS hereunder)
to be rendering such services to or acting solely for the Fund and not as
an officer, trustee, partner, employee or agent or one under the control or
direction of FAS even though paid by FAS.
(b) FAS shall be kept indemnified by the Fund and be without
liability for any action taken or thing done by it in performing the
Administrative Services in accordance with the above standards. In order
that the indemnification provisions contained in this Section 6 shall
apply, however, it is understood that if in any case the Fund may be asked
to indemnify or save FAS harmless, the Fund shall be fully and promptly
advised of all pertinent facts concerning the situation in question, and it
is further understood that FAS will use all reasonable care to identify and
notify the Fund promptly concerning any situation which presents or appears
likely to present the probability of such a claim for indemnification
against the Fund. The Fund shall have the option to defend FAS against any
claim which may be the subject of this indemnification. In the event that
the Fund so elects, it will so notify FAS and thereupon the Fund shall take
over complete defense of the claim, and FAS shall in such situation
initiate no further legal or other expenses for which it shall seek
indemnification under this Section. FAS shall in no case confess any claim
or make any compromise in any case in which the Fund will be asked to
indemnify FAS except with the Fund's written consent.
7. Duration and Termination.
(a) The initial term of this Agreement shall commence on the date
hereof, and extend for a period of three years following the first of the
following events to occur: (i) the first date upon which the aggregate
assets of the Portfolios of the Fund existing on the date of this Agreement
(`Existing Funds'') reach $600 million ("Initial Term"); or (ii) the
second anniversary of the date on which the Funds' initial registration
statement is declared effective by the SEC.
(b) During any term of this Agreement, each time the Fund adds a
new portfolio, an additional term shall commence on the first date upon
which the new portfolio has sufficient average daily net assets such that
FAS will begin to earn a sum not less than its minimum ("annualized")
administrative fee in connection with the new portfolio pursuant to Section
5 of this Agreement ("Additional Term"). Such Additional Term shall extend
to the later to occur of (i) the third anniversary of the commencement of
the Additional Term, or (ii) the expiration of the Initial Term.
(c) During any term of this Agreement, each time the Fund adds a
class of shares to any portfolio, an additional term shall commence on the
later to occur of (i) the first date upon which the relevant portfolio has
sufficient average daily net assets such that FAS will begin to earn a sum
not less than its minimum ("annualized") administrative fee pursuant to
Section 5 of this Agreement, or (ii) the effective date of the registration
statement or post-effective amendment registering the new class of shares
("Class Term"). Such Class Term shall extend to the later to occur of (i)
the third anniversary of the commencement of the Class Term, or (ii) the
expiration of the Initial Term.
(d) Upon the expiration of any term, this Agreement shall be
automatically renewed each year for an additional term of one year, unless
notice of termination has been delivered by either party to the other no
less than one year before the beginning of any such additional term.
8. Amendment. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing
signed by the party against which an enforcement of the change, waiver,
discharge or termination is sought.
9. Limitations of Liability of Trustees or Officers, Employees, Agents
and Shareholders of the Fund. FAS is expressly put on notice of the
limitation of liability as set forth in the Fund's Declaration of Trust and
agrees that the obligations assumed by the Fund pursuant to this Agreement
shall be limited in any case to the Fund and its assets and that FAS shall
not seek satisfaction of any such obligations from the shareholders of the
Fund, the Trustees, Officers, Employees or Agents of the Fund, or any of
them.
10. Limitations of Liability of Trustees and Shareholders of FAS. The
execution and delivery of this Agreement have been authorized by the
Trustees of FAS and signed by an authorized officer of FAS, acting as such,
and neither such authorization by such Trustees nor such execution and
delivery by such officer shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, and the
obligations of this Agreement are not binding upon any of the Trustees or
shareholders of FAS, but bind only the trust property of FAS as provided in
the Declaration of Trust of FAS.
11. Notices. Notices of any kind to be given hereunder shall be in
writing (including facsimile communication) and shall be duly given if
delivered to the Fund, to its investment adviser and to FAS at the
following addresses: Marketvest Funds (Fund), Federated Investors Tower,
1001 Liberty Avenue, Pittsburgh, Pennsylvania 15222-3779; Dauphin Deposit
Bank and Trust Company (Adviser), 213 Market Street, Harrisburg,
Pennsylvania 17101, Attention: Manager of Trust and Financial Services; and
if delivered to FAS at Federated Investors Tower, Pittsburgh, PA 15222-
3779, Attention: President.
12. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court or
regulatory agency decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby. Subject to the provisions of
Section 6, hereof, this Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and shall
be governed by Pennsylvania law; provided, however, that nothing herein
shall be construed in a manner inconsistent with the Investment Company Act
of 1940 or any rule or regulation promulgated by the Securities and
Exchange Commission thereunder.
13. Counterparts. This Agreement may be executed by different parties
on separate counterparts, each of which, when so executed and delivered,
shall be an original, and all such counterparts shall together constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first
above written.
Marketvest Funds
By: /s/ Jeffrey W. Sterling
[Title] Vice President
Attest: /s/ Victor R. Siclari
Secretary
Federated Administrative Services
By: /s/ James J. Dolan
[Title] President
Attest: /s/ Thomas J. Ward
Secretary
Exhibit No. 9(iii) on Form N-1A
Exhibit No. 10 Under Item 601 Reg S/k
AMENDMENT #1 TO EXHIBIT 1
OF
AGREEMENT FOR FUND ACCOUNTING,
SHAREHOLDER RECORDKEEPING, AND
CUSTODY SERVICES PROCUREMENT
This Amendment #1 to Exhibit 1 of the Agreement for Fund Accounting,
Shareholder Recordkeeping, and Custody Services Procurement is made and
entered into as of the 26th day of March, 1997, by and between Marketvest
Funds and Federated Services Company.
WHEREAS, Marketvest Funds entered into an Agreement for Fund
Accounting, Shareholder Recordkeeping, and Custody Services Procurement
with Federated Services Company, dated January 1, 1996; and
WHEREAS, Marketvest Funds and Federated Services Company have agreed
to supplement the Agreement, in certain respects;
NOW, THEREFORE, the parties intending to be legally bound agree as
follows:
1. Exhibit 1 is amended by deleting the Exhibit 1 and replacing it
with the following:
AMENDMENT #1 TO EXHIBIT 1
01/01/96 MARKETVEST FUNDS
01/01/96 Marketvest Pennsylvania Intermediate Municipal Bond Fund
01/01/97 Marketvest International Equity Fund
FEDERATED SERVICES COMPANY provides the following services:
Fund Accounting
Shareholder Recordkeeping
FUND ACCOUNTING
FEE SCHEDULE
MARKETVEST PENNSYLVANIA INTERMEDIATE MUNICIPAL BOND FUND
Annual
First $100 Million 3.0 Basis Points
$100 Million - $300 Million 2.0 Basis Points
$300 Million - $500 Million 1.0 Basis Points
Over $500 Million 0.5 Basis Points
Fund Minimum $39,000
Additional Class of Shares $12,000
(Plus pricing charges and other out-of pocket expenses)
MARKETVEST INTERNATIONAL EQUITY FUND
Annual
First $100 Million 3.0 Basis Points
$100 Million - $300 Million 2.0 Basis Points
$300 Million - $500 Million 1.0 Basis Points
Over $500 Million 0.5 Basis Ponts
Fund Minimum
Up to 15 mutual funds within the Marketvest
International Equity Fund $35,000
More than 15 mutual funds within the
Marketvest International Equity Fund $30,000
Additional Class of Shares $12,000
(Plus pricing charges and other out-of-pocket expenses)
If the Marketvest International Equity Fund invests in `Direct''
international securities, the standard International Portfolio Accounting
and Recordkeeping schedule will be utilized. This schedule is as follows:
Annual
First $100 Million 3.5 Basis Points
$100 Million - $300 Million 2.5 Basis Points
$300 Million - $500 Million 1.5 Basis Points
Over $500 Million 1.0 Basis Points
Fund Minimum $48,000
Additional Class of Shares $12,000
(Plus pricing charges and other out-of-pocket expenses)
Out-of-Pocket Expenses
Out-of-pocket expenses include, but are not limited to, the following:
- -Postage - Forms
(including overnight courier service) - Supplies
- -Statement Stock - Microfiche
- -Envelopes - Computer Access charges
- -Telephones - Client Specific System Enhancements
- -Telecommunication Charges - Access to the Shareholder Recordkeeping
System
(including FAX) - Security Pricing Services
- -Travel - Variable Rate Change Notification Services
- -Duplicating - Paydown Factor Notification Services
FEES* AND EXPENSES
SHAREHOLDER RECORDKEEPING
I.Transfer Agency Services (includes system access and funds control and
reconcilement)
Account Fees*
- Daily dividend fund $16.65
- Non-Daily dividend fund $8.75
- Contingent Deferred Sales Charge
(additional charge for non-daily dividend funds only) $5.00
- Closed Accounts $1.80
II.Transfer Agency Services plus ... Account Activity Processing plus ...
Shareholder Servicing
Account Fees*
- Daily dividend fund $24.65
- Non-Daily dividend fund $16.75
- Contingent Deferred Sales Charge
(additional charge for non-daily dividend funds only) $5.00
- Closed Accounts $1.80
Minimum Fees*
The charge for each fund, class or other subdivision will be the
actual account fees or $12,000, whichever is greater.
* All fees are annualized and will be prorated on a monthly basis for
billing purposes.
Out-of-pocket expenses are not covered by these fees.
SHAREHOLDER RECORDKEEPING
OUT-OF-POCKET EXPENSES SCHEDULE
Out-of-pocket expenses include, but are not limited to, the following:
- -Postage - Duplicating
(including overnight courier service) - Forms
- -Statement Stock - Supplies
- -Envelopes - Microfiche
- -Telephones - Computer Access charges
- -Telecommunication Charges (including - Customized Programming and
Reporting
FAX and Dedicated Line Charges) - Disaster Recovery
- -Travel - Other as Incurred
WITNESS the due execution hereof this 1st day of January, 1997.
Attest: MARKETVEST FUNDS
/s/ Victor R. Siclari /s/ Jeffrey W. Sterling
Secretary Vice President
Attest: FEDERATED SERVICES COMPANY
/s/ S. Elliott Cohan By:/s/ Douglas L. Hein
Assistant Secretary Senior Vice President
Exhibit 9(iv) on Form N-1A
Exhibit No. 10 Under Item 601 Reg S/K
ASSIGNMENT OF THE
FUND ACCOUNTING AGREEMENT
FOR MARKETVEST FUNDS
This Agreement is made as of January 16, 1996.
1. ASSIGNMENT. For good and valuable consideration, Federated Services
Company with principal offices at Federated Investors Tower, Pittsburgh,
Pennsylvania 15222 (`FSERV''), does hereby sell, assign, and transfer to
its affiliate, Federated Administrative Services with principal offices at
Federated Investors Tower, Pittsburgh, Pennsylvania 15222 (`FAS''), all
of its right, duties and obligations under the Fund Accounting Agreement
made by FSERV with Marketvest Funds (the `Trust''), dated JANUARY 1, 1996,
concerning the performance of all fund accounting functions for the Trust
(the 'Contract'').
2. ASSIGNEE ASSUMES DUTIES AND OBLIGATIONS. By the acceptance of this
assignment, FAS assumes the performance of all of FSERV's duties and
obligations under the assigned Contract, and will indemnify and hold FSERV
harmless from any liability or loss resulting from the performance or
nonperformance of these duties and obligations.
3. AUTHORIZATION FOR ASSIGNMENT. This Assignment is authorized under
Article 28 of the Contract, which permits an assignment to another entity
that is controlling, controlled by or under common control with FSERV,
without the written consent of the Corporation.
IN WITNESS WHEREOF, the parties hereto have caused the Agreement to be
executed in their name and on their behalf by and through their duly
authorized officers, as of the day and year first above written.
FEDERATED ADMINISTRATIVE
SERVICES
By: /s/ S. Elliott Cohan
Name: S. Elliott Cohan
Title: Senior Vice President
Attest: /s/ Thomas J. Ward
Thomas J. Ward
Secretary
FEDERATED SERVICES COMPANY
By: /s/ John W. McGonigle
Name: John W. McGonigle
Title: President
Attest: /s/ Thomas J. Ward
Thomas J. Ward
Secretary
Exhibit No. 9(v) on Form N-1A
Exhibit No. 10 Under Item 601 Reg S/K
AMENDMENT NO. 1
to
ADMINISTRATIVE SERVICES AGREEMENTS
for
MARKETVEST FUNDS
and
MARKETVEST FUNDS, INC.
Marketvest Funds and Marketvest Funds, Inc. have each entered into an
Administrative Services Agreement (`Agreement'') with Federated
Administrative Services (`FAS''), dated as of January 1, 1996. Each
Agrereement is hereby amended as follows:
DELETE Section 7(a) and REPLACE with the following:
(a) the initial term of this Agreement shall commence on the date
hereof, and extend for a period of three years following the
first of the following events to occur: (i) the first date upon
which the aggregate assets of the Portfolios of Marketvest Funds
and Marketvest Funds, Inc. existing on the date of this Agreement
(`Existing Funds'') reach $600 million (``Initial Term''); or
(ii) the second anniversary of the date on which the Existing
Funds' initial registration statement is declared effective by
the SEC.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of October 1, 1996.
Attest: MARKETVEST FUNDS
MARKETVEST FUNDS, INC.
/s/ Victor R. Siclari By: /s/ Jeffrey W. Sterling
Victor R. Siclari Jeffrey W. Sterling
Secretary Vice President
Attest: FEDERATED ADMINISTRATIVE SERVICES
/s/ Thomas J. Ward By: /s/ S. Elliott Cohan
Thomas J. Ward S. Elliott Cohan
Secretary Senior Vice President
EXHIBIT NO. 15(i) ON FORM N-1A
EXHIBIT NO. 1 UNDER ITEM 601 REG S/K
MARKETVEST FUNDS
DISTRIBUTION PLAN
This Distribution Plan ("Plan") is adopted as of January 1, 1996,
by the Board of Trustees of Marketvest Funds (the "Trust"), a
Massachusetts business trust with respect to certain classes of shares
("Classes") of the portfolios of the Trust (the "Funds") set forth in
exhibits hereto.
1. This Plan is adopted pursuant to Rule 12b-1 under the Investment
Company Act of 1940, as amended ("Act"), so as to allow the Trust to
make payments as contemplated herein, in conjunction with the
distribution of Classes of the Funds ("Shares").
2. This Plan is designed to finance activities of Edgewood Services,
Inc. (``ESI") principally intended to result in the sale of Shares to
include: (a) providing incentives to financial institutions
("Financial Institutions") to sell Shares; (b) advertising and
marketing of Shares to include preparing, printing and distributing
prospectuses and sales literature to prospective shareholders and
with Financial Institutions; and (c) implementing and operating the
Plan. In compensation for services provided pursuant to this Plan,
ESI will be paid a fee in respect of the following Classes set forth
on the applicable exhibit.
3. Any payment to ESI in accordance with this Plan will be made
pursuant to the "Distributor's Contract" entered into by the Trust
and ESI. Any payments made by ESI to Financial Institutions with
funds received as compensation under this Plan will be made pursuant
to the "Financial Institution Agreement" entered into by ESI and the
Institution.
4. ESI has the right (i) to select, in its sole discretion, the
Financial Institutions to participate in the Plan and (ii) to
terminate without cause and in its sole discretion any Financial
Institution Agreement.
5. Quarterly in each year that this Plan remains in effect, ESI shall
prepare and furnish to the Board of Trustees of the Trust, and the
Board of Trustees shall review, a written report of the amounts
expended under the Plan and the purpose for which such expenditures
were made.
6. This Plan shall become effective with respect to each Class
(i) after approval by majority votes of: (a) the Trust's Board of
Trustees; (b) the members of the Board of the Trust who are not
interested persons of the Trust and have no direct or indirect
financial interest in the operation of the Trust's Plan or in any
related documents to the Plan ("Disinterested Trustees"), cast in
person at a meeting called for the purpose of voting on the Plan;
and (c) the outstanding voting securities of the particular Class ,
as defined in Section 2(a)(42) of the Act and (ii) upon execution of
an exhibit adopting this Plan with respect to such Class.
7. This Plan shall remain in effect with respect to each Class
presently set forth on an exhibit and any subsequent Classes added
pursuant to an exhibit during the initial year of this Plan for the
period of one year from the date set forth above and may be
continued thereafter if this Plan is approved with respect to each
Class at least annually by a majority of the Trust's Board of
Trustees and a majority of the Disinterested Trustees, cast in
person at a meeting called for the purpose of voting on such Plan.
If this Plan is adopted with respect to a Class after the first
annual approval by the Trustees as described above, this Plan will
be effective as to that Class upon execution of the applicable
exhibit pursuant to the provisions of paragraph 6(ii) above and will
continue in effect until the next annual approval of this Plan by
the Trustees and thereafter for successive periods of one year
subject to approval as described above.
8. All material amendments to this Plan must be approved by a vote of
the Board of Trustees of the Trust and of the Disinterested
Trustees, cast in person at a meeting called for the purpose of
voting on it.
9. This Plan may not be amended in order to increase materially the
costs which the Classes may bear for distribution pursuant to the
Plan without being approved by a majority vote of the outstanding
voting securities of the Classes as defined in Section 2(a)(42) of
the Act.
10. This Plan may be terminated with respect to a particular Class at
any time by: (a) a majority vote of the Disinterested Trustees; or
(b) a vote of a majority of the outstanding voting securities of the
particular Class as defined in Section 2(a)(42) of the Act.
11. While this Plan shall be in effect, the selection and nomination of
Disinterested Trustees of the Trust shall be committed to the
discretion of the Disinterested Trustees then in office.
12. All agreements with any person relating to the implementation of
this Plan shall be in writing and any agreement related to this Plan
shall be subject to termination, without penalty, pursuant to the
provisions of Paragraph 10 herein.
13. This Plan shall be construed in accordance with and governed by the
laws of the Commonwealth of Pennsylvania.
EXHIBIT A
to the
Distribution Plan
MARKETVEST FUNDS
MARKETVEST PENNSYLVANIA INTERMEDIATE MUNICIPAL BOND FUND
The following provisions are incorporated and made part of the
Distribution Plan dated January 1, 1996, of Marketvest Funds with
respect to the Class of Shares set forth above.
This Distribution Plan is adopted by Marketvest Funds with respect
to the Class of Shares of the portfolio of the Trust set forth above.
In compensation for the services provided pursuant to this Plan,
ESI will be paid a monthly fee computed at the annual rate of .25 of
1% of the average aggregate net asset value of the Shares of
Marketvest Pennsylvania Intermediate Municipal Bond Fund held during
the month.
Witness the due execution hereof this 1st day of January, 1996.
MARKETVEST FUNDS
By:/s/ Jeffrey W. Sterling
Vice President
EXHIBIT B
to the
Rule 12b-1
Distribution Plan
MARKETVEST FUNDS
MARKETVEST INTERNATIONAL EQUITY FUND
The following provisions are incorporated and made part of the
Distribution Plan dated January 1, 1996, of Marketvest Funds with
respect to the Class of Shares set forth above.
This Distribution Plan is adopted by Marketvest Funds with respect
to the Class of Shares of the portfolio of the Trust set forth above.
In compensation for the services provided pursuant to this Plan,
ESI will be paid a monthly fee computed at the annual rate of .25 of
1% of the average aggregate net asset value of the Shares of
Marketvest International Equity Fund held during the month.
Witness the due execution hereof this 1st day of January, 1997.
MARKETVEST FUNDS
By:/s/ Jeffrey W. Sterling
Jeffrey W. Sterling
Vice President
Exhibit No. 15(ii) on Form N-1A
Exhibit 1 Under Item 601 Reg S/K
RULE 12B-1 AGREEMENT
This Agreement is made between the Financial Institution executing this
Agreement ("Institution") and Edgewood Services, Inc. ("ESI") for the
mutual funds (referred to individually as the "Fund" and collectively as
the "Funds") for which ESI serves as Distributor of shares of beneficial
interest or capital stock ("Shares") and which have adopted a Rule 12b-1
Plan ("Plan") and approved this form of agreement pursuant to Rule 12b-1
under the Investment Company Act of 1940. In consideration of the mutual
covenants hereinafter contained, it is hereby agreed by and between the
parties hereto as follows:
1. ESI hereby appoints Institution to render or cause to be rendered
distribution and sales services to the Funds and their shareholders.
2. The services to be provided under Paragraph 1 may include, but are
not limited to, the following:
(a) providing incentives to financial institutions;
(b) advertising and marketing shares to include preparation,
printing and distributing prospectuses and sales literature to
prospective shareholders and with financial institutions; and
(c) implementing and operating the Plan.
3. During the term of this Agreement, ESI will pay the Institution
fees for each Fund as set forth in a written schedule delivered to the
Institution pursuant to this Agreement. ESI's fee schedule for Institution
may be changed by ESI sending a new fee schedule to Institution pursuant to
Paragraph 12 of this Agreement. For the payment period in which this
Agreement becomes effective or terminates, there shall be an appropriate
proration of the fee on the basis of the number of days that the Rule 12b-1
Agreement is in effect during the quarter.
4. The Institution will not perform or provide any duties which would
cause it to be a fiduciary with respect to plans or accounts governed by
Section 4975 of the Internal Revenue Code, as amended. For purposes of
that Section, the Institution understands that any person who exercises any
discretionary authority or discretionary control with respect to any
individual retirement account or its assets, or who renders investment
advice for a fee, or has any authority or responsibility to do so, or has
any discretionary authority or discretionary responsibility in the
administration of such an account, is a fiduciary.
5. The Institution understands that the Department of Labor views
ERISA as prohibiting fiduciaries of discretionary ERISA assets from
receiving fees or other compensation from funds in which the fiduciary's
discretionary ERISA assets are invested, except to the extent permitted by
PTE 77-3 and PTE 77-4. To date, the Department of Labor has not issued any
exemptive order or advisory opinion that would exempt fiduciaries from this
interpretation. Without specific authorization from the Department of
Labor, fiduciaries should carefully avoid investing discretionary assets in
any fund pursuant to an arrangement where the fiduciary is to be
compensated by the fund for such investment. Receipt of such compensation
could violate ERISA provisions against fiduciary self-dealing and conflict
of interest and could subject the fiduciary to substantial penalties.
2
6. The Institution agrees not to solicit or cause to be solicited
directly, or indirectly at any time in the future, any proxies from the
shareholders of any or all of the Funds in opposition to proxies solicited
by management of the Fund or Funds, unless a court of competent
jurisdiction shall so direct or shall have determined that the conduct of a
majority of the Board of Directors or Trustees of the Fund or Funds
constitutes willful misfeasance, bad faith, gross negligence or reckless
disregard of their duties. This paragraph 6 will survive the term of this
Agreement.
7. With respect to each Fund, this Agreement shall continue in effect
for one year from the date of its execution, and thereafter for successive
periods of one year if the form of this Agreement is approved at least
annually by the Directors or Trustees of the Fund, including a majority of
the members of the Board of Directors or Trustees of the Fund who are not
interested persons of the Fund and have no direct or indirect financial
interest in the operation of the Fund's Plan or in any related documents to
the Plan ("Disinterested Directors or Trustees") cast in person at a
meeting called for that purpose.
8. The termination of this Agreement with respect to any one Fund will
not cause the Agreement's termination with respect to any other Fund.
9. Notwithstanding paragraph 7, this Agreement may be terminated as
follows:
(a) at any time, without the payment of any penalty, by the vote of
a majority of the Disinterested Directors or Trustees of the Fund or
by a vote of a majority of the outstanding voting securities of the
3
Fund as defined in the Investment Company Act of 1940 on not more
than sixty (60) days' written notice to the parties to this
Agreement;
(b) automatically in the event of the Agreement's assignment as
defined in the Investment Company Act of 1940 or upon the
termination of the "Distributor's Contract" between the Fund and
ESI; and
c) by either party to the Agreement without cause by giving the
other party at least sixty (60) days' written notice of its
intention to terminate.
10. The Institution agrees to use its reasonable efforts to obtain any
taxpayer identification number certification from its customers required
under Section 3406 of the Internal Revenue Code, and any applicable
Treasury regulations, and to provide ESI or its designee with timely
written notice of any failure to obtain such taxpayer identification number
certification in order to enable the implementation of any required backup
withholding.
11. This Agreement supersedes any prior service agreements between the
parties for the Funds.
12. This Agreement may be amended by ESI from time to time by the
following procedure. ESI will mail a copy of the amendment to the
Institution's address, as shown below. If the Institution does not object
to the amendment within thirty (30) days after its receipt, the amendment
will become part of the Agreement. The Institution's objection must be in
writing and be received by ESI within such thirty days.
4
13. This Agreement shall be construed in accordance with the Laws of
the Commonwealth of Pennsylvania.
[INSTITUTION]
Address
City State Zip Code
Dated: , 1995 By:
-----------------------------
Authorized Signature
Title
Print Name of Authorized Signature
EDGEWOOD SERVICES, INC.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
5
By:
------------------------------
President
MARKETVEST FUNDS
EXHIBIT A to 12b-1 Agreement with
Edgewood Services, Inc. ("ESI")
Portfolios
ESI will pay Institution fees for the following portfolios (the
"Funds") effective as of the dates set forth below:
Name Date
Marketvest Equity Fund January 1, 1996
Marketvest Intermediate U.S. Government Bond Fund January 1, 1996
Marketvest Short-Term Bond Fund January 1, 1996
6
Administrative Fees
1. During the term of this Agreement, ESI will pay Institution a
quarterly fee in respect of each Fund. This fee will be computed at the
annual rate of .25% of the average net asset value of Shares of Marketvest
Equity Fund, Marketvest Intermediate U.S. Government Bond Fund and
Marketvest Short-Term Bond Fund, held during the quarter in accounts for
which the Institution provides services under this Agreement, so long as
the average net asset value of Shares in each Fund during the quarter
equals or exceeds such minimum amount as ESI shall from time to time
determine and communicate in writing to the Institution, provided that any
change in such minimum amount shall be communicated to the Institution at
least ten days in advance of the first quarterly period for which such
change shall be proposed to be effective.
2. For the quarterly period in which the Agreement becomes effective
or terminates, there shall be an appropriate proration of any fee payable
on the basis of the number of days that the Agreement is in effect during
the quarter.
MARKETVEST FUNDS
EXHIBIT B TO 12B-1 AGREEMENT WITH
EDGEWOOD SERVICES, INC. ("ESI")
Portfolios
7
ESI will pay Institution fees for the following portfolios (the
"Funds") effective as of the dates set forth below:
Name Date
Marketvest International Equity Fund January 1, 1997
Administrative Fees
1. During the term of this Agreement, ESI will pay Institution a
quarterly fee in respect of each Fund. This fee will be computed at the
annual rate of .25% of the average net asset value of Shares of Marketvest
International Equity Fund, held during the quarter in accounts for which
the Institution provides services under this Agreement, so long as the
average net asset value of Shares in each Fund during the quarter equals or
exceeds such minimum amount as ESI shall from time to time determine and
communicate in writing to the Institution, provided that any change in such
minimum amount shall be communicated to the Institution at least ten days
in advance of the first quarterly period for which such change shall be
proposed to be effective.
2. For the quarterly period in which the Agreement becomes effective
or terminates, there shall be an appropriate proration of any fee payable
on the basis of the number of days that the Agreement is in effect during
the quarter.
