1933 Act File No. 33-63757
1940 Act File No. 811-7385
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No. 1 ................. X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 1 ............................... X
MARKETVEST FUNDS, INC.
(formerly, COURT STREET FUNDS, INC.)
(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)
Approximate Date of Proposed Public Offering As soon as possible after
the effectiveness of the Registration
Statement
Pursuant to the provisions of Rule 24f-2 of the Investment Company Act of
1940, Registrant hereby elects to register an indefinite number of shares.
Amendment Pursuant to Rule 473
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission acting pursuant to said Section 8(a),
may determine.
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 Marketplace Funds, Inc.
(formerly, Court Street Funds, Inc.), which consists of three portfolios: (1)
Marketvest Equity Fund, (2) Marketvest Short-Term Bond Fund, and (3)
Marketvest Intermediate U.S. Government Bond Fund, is comprised of the
following:
PART A. INFORMATION REQUIRED IN A PROSPECTUS.
Prospectus Heading
(Rule 404(c) Cross Reference)
Item 1. Cover Page...............(1,2,3) Cover Page.
Item 2. Synopsis.................(1,2,3) Synopsis; (1,2,3) Risk Factors;
(1,2,3) Summary of Fund Expenses.
Item 3. Condensed Financial
Information..............(1,2,3) Performance Information; (1,2,3)
Performance Information for Predecessor
Common and Collective Investment Funds.
Item 4. General Description of
Registrant...............(1,2,3) Investment Objective and Policies
of Each Fund; (1) Equity Fund; (2) Short-
Term Bond Fund; (3) Intermediate U.S.
Government Bond Fund; (1,2,3) Portfolio
Investments and Strategies.
Item 5. Management of the Fund...(1,2,3) Marketvest Group of Funds
Information; (1,2,3) Management of the
Marketvest Group of Funds; (1,2,3)
Distribution of Shares of the Funds;
(1,2,3) Brokerage Transactions; (1,2,3)
Expenses of the Funds.
Item 6. Capital Stock and Other
Securities...............(1,2,3) Dividends and Capital Gains;
(1,2,3) Shareholder Information; (1,2,3)
Marketvest Funds, Inc.-Voting Rights;
(1,2,3) Effect of Banking Laws; (1,2,3) Tax
Information; (1,2,3) Federal Income Tax.
Item 7. Purchase of Securities Being
Offered..................(1,2,3) Net Asset Value; (1,2,3) Investing
in the Funds; (1,2,3) Share Purchases;
(1,2,3) Minimum Investment Required;
(1,2,3) What Shares Cost; (1,2,3) Reducing
the Sales Charge; (1,2,3) Systematic
Investment Program; (1,2,3) Certificates
and Confirmations.
Item 8. Redemption or Repurchase.(1,2,3) Exchange Privilege; (1,2,3)
Exchange by Telephone; (1,2,3) Written
Exchange; (1,2,3) Redeeming Shares; (1,2,3)
Systematic Withdrawal Program; (1,2,3)
Accounts with Low Balances.
Item 9. Pending Legal Proceedings None
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.
Item 10. Cover Page...............(1,2,3) Cover Page.
Item 11. Table of Contents........(1,2,3) Table of Contents.
Item 12. General Information and
History..................(1,2,3) General Information About the
Funds.
Item 13. Investment Objectives and
Policies.................(1,2,3) Investment Objective and Policies
of the Funds; (1,2,3) Investment
Limitations.
Item 14. Management of the Fund...(1,2,3) Marketvest Funds, Inc. Management;
(1,2,3) Directors' Compensation Table-
Marketvest Funds, Inc.
Item 15. Control Persons and Principal
Holders of Securities....(1,2,3) Fund Ownership.
Item 16. Investment Advisory and Other
Services.................(1,2,3) Investment Advisory Services;
(1,2,3) Administrative Services.
Item 17. Brokerage Allocation.....(1,2,3) Brokerage Transactions.
Item 18. Capital Stock and Other
Securities...............Not applicable.
Item 19. Purchase, Redemption and
Pricing of Securities
Being Offered............(1,2,3) Purchasing Shares; (1,2,3)
Determining Net Asset Value; (1,2,3)
Exchange Privilege; (1,2,3) Redeeming
Shares.
Item 20. Tax Status...............(1,2,3) Tax Status.
Item 21. Underwriters.............(1,2,3) Distribution Plan.
Item 22. Calculation of Performance
Data.....................(1,2,3) Total Return; (1,2,3) Yield;
(1,2,3) Performance Comparisons; (1,2,3)
Appendix.
Item 23. Financial Statements.....(Filed in Part A)
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:
o Marketvest Equity Fund;
o Marketvest Pennsylvania Intermediate Municipal Bond Fund;
o Marketvest Short-Term Bond Fund; and
o 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 Information
dated January , 1996, with the Securities and Exchange Commission. 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- - .
--- ----
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
Prospectus dated January , 1996
--
SYNOPSIS 1
RISK FACTORS 1
SUMMARY OF FUND EXPENSES 2
INVESTMENT OBJECTIVE AND POLICIES OF
EACH FUND 4
EQUITY FUND 4
PENNSYLVANIA INTERMEDIATE MUNICIPAL
BOND FUND 7
SHORT-TERM BOND FUND 9
INTERMEDIATE U.S. GOVERNMENT BOND
FUND 10
PORTFOLIO INVESTMENTS AND STRATEGIES 10
MARKETVEST GROUP OF FUNDS
INFORMATION 17
MANAGEMENT OF THE MARKETVEST GROUP OF
FUNDS 17
DISTRIBUTION OF SHARES OF THE FUNDS
19
ADMINISTRATION OF THE FUNDS 19
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 24
CERTIFICATES AND CONFIRMATIONS 24
DIVIDENDS AND CAPITAL GAINS 24
EXCHANGE PRIVILEGE 24
EXCHANGE BY TELEPHONE 25
WRITTEN EXCHANGE 25
REDEEMING SHARES 26
SYSTEMATIC WITHDRAWAL PROGRAM 27
ACCOUNTS WITH LOW BALANCES 27
SHAREHOLDER INFORMATION 27
VOTING RIGHTS 27
MASSACHUSETTS PARTNERSHIP LAW 28
EFFECT OF BANKING LAWS 28
TAX INFORMATION 29
FEDERAL INCOME TAX 29
ADDITIONAL TAX INFORMATION FOR
PENNSYLVANIA INTERMEDIATEMUNICIPAL
BOND FUND 29
PERFORMANCE INFORMATION 30
PERFORMANCE INFORMATION FOR
PREDECESSOR COMMON AND COLLECTIVE
INVESTMENT FUNDS 31
ADDRESSES 33
SYNOPSIS
Marketvest Funds, Inc. (formerly named Court Street Funds, Inc.) was
incorporated under the laws of the State of Maryland on October 25, 1995.
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:
o Marketvest Equity Fund ("Equity Fund")--seeks to provide growth of
principal by investing primarily in the equity securities of high
quality companies;
o Marketvest 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
o Marketvest 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:
o Marketvest 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 are described under "Investment Objective and Policies
of Each Fund" and "Portfolio Investments and Strategies."
SUMMARY OF FUND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
Pennsylvania
Intermediate
Municipal
Equity Fund Bond Fund
Maximum Sales Load Imposed on Purchases (as a
percentage of offering price)........... 4.75% 3.50%
Maximum Sales Load Imposed on Reinvested
Dividends (as a percentage of offering price) None None
Contingent Deferred Sales Charge (as a
percentage of original purchase price or
redemption proceeds, as applicable)..... None None
Redemption Fees (as a percentage of amount
redeemed, if applicable)................ None None
Exchange Fee.............................. None None
ANNUAL FUND OPERATING EXPENSES*
(As a percentage of projected average net assets)
Management Fees (after waiver) (1)........ 0.80% 0.60%
12b-1 Fees (after waiver) (2)............. 0.00% 0.00%
Total Other Expenses...................... 0.20% 0.21%
Total Fund Operating Expenses (after waivers) (3) 1.00% 0.81%
(1) The estimated management fees for the Equity Fund and the
Pennsylvania Intermediate Municipal Bond Fund have been reduced to
reflect the anticipated voluntary waiver of the management fee by the
investment adviser. The adviser can terminate this voluntary waiver at
any time at its sole discretion. With respect to the Equity Fund and
the Pennsylvania Intermediate Municipal Bond Fund, the maximum
management fees are 1.00% and 0.75%, respectively.
(2) As of the date of this prospectus, the Funds are not paying
or accruing 12b-1 fees. The Funds can pay up to 0.25% as a 12b-1 fee to
the distributor. Certain trust clients of Dauphin Deposit Bank and
Trust Company will not be affected by the distribution plan because the
distribution 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)
are created and such clients' investments in the Funds are converted to
such class.
(3) The Total Fund Operating Expenses are estimated to be 1.45%
and 1.21% for the Equity Fund and the Pennsylvania Intermediate
Municipal Bond Fund, respectively, had the Funds paid 12b-1 fees and
absent the voluntary waiver described in Note 1.
*Expenses in this table are estimated based on average expenses expected to be
incurred during the fiscal year ending November 30, 1996. During the course of
this period, expenses may be more or less than the average amount shown.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE VARIOUS
COSTS AND EXPENSES THAT A SHAREHOLDER OF THE FUNDS WILL BEAR, EITHER DIRECTLY OR
INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS AND EXPENSES,
SEE "MARKETVEST GROUP OF FUNDS INFORMATION" AND "INVESTING IN THE FUNDS." WIRE-
TRANSFERRED REDEMPTIONS MAY BE SUBJECT TO ADDITIONAL FEES.
EXAMPLE 1 year 3 years
You would pay the following expenses on
a $1,000 investment assuming (a) 5% annual
return and (b) redemption at the end of each time
period.
Equity Fund ........................ $57 $78
Pennsylvania Intermediate Municipal Bond Fund $43 $60
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES.
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS EXAMPLE IS BASED
ON ESTIMATED DATA FOR THE FISCAL YEAR ENDING NOVEMBER 30, 1996.
SUMMARY OF FUND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
Intermediate
Short-Term U.S. Government
Bond Fund Bond Fund
Maximum Sales Load Imposed on Purchases (as a
percentage of offering price)........... 3.50% 3.50%
Maximum Sales Load Imposed on Reinvested
Dividends (as a percentage of offering price) None None
Contingent Deferred Sales Charge (as a
percentage of original purchase price or
redemption proceeds, as applicable)..... None None
Redemption Fees (as a percentage of amount
redeemed, if applicable)................ None None
Exchange Fee.............................. None None
ANNUAL FUND OPERATING EXPENSES*
(As a percentage of projected average net assets)
Management Fees (after waiver) (1)........ 0.60% 0.60%
12b-1 Fees (after waiver) (2)............. 0.00% 0.00%
Total Other Expenses...................... 0.22% 0.22%
Total Fund Operating Expenses (after waivers) (3) 0.82% 0.82%
(1) The estimated management fees for the Short-Term Bond Fund
and the Intermediate U.S. Government Bond Fund have been reduced to
reflect the anticipated voluntary waiver of the management fee by the
investment adviser. The adviser can terminate this voluntary waiver at
any time at its sole discretion. With respect to the Short-Term Bond
Fund and the Intermediate U.S. Government Bond Fund, the maximum
management fees are 0.75% and 0.75%, respectively.
(2) As of the date of this prospectus, the Funds are not paying
or accruing 12b-1 fees. The Funds can pay up to 0.25% as a 12b-1 fee to
the distributor. Certain trust clients of Dauphin Deposit Bank and
Trust Company will not be affected by the distribution plan because the
distribution 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)
are created and such clients' investments in the Funds are converted to
such class.
(3) The Total Fund Operating Expenses are estimated to be 1.22%
and 1.22% for the Short-Term Bond Fund and the Intermediate U.S.
Government Bond Fund, respectively, had the Funds paid 12b-1 fees and
absent the voluntary waiver described in Note 1.
*Expenses in this table are estimated based on average expenses expected to be
incurred during the fiscal year ending November 30, 1996. During the course of
this period, expenses may be more or less than the average amount shown.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE VARIOUS
COSTS AND EXPENSES THAT A SHAREHOLDER OF THE FUNDS WILL BEAR, EITHER DIRECTLY OR
INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS AND EXPENSES,
SEE "MARKETVEST GROUP OF FUNDS INFORMATION" AND "INVESTING IN THE FUNDS." WIRE-
TRANSFERRED REDEMPTIONS MAY BE SUBJECT TO ADDITIONAL FEES.
EXAMPLE 1 year 3 years
You would pay the following expenses on
a $1,000 investment assuming (a) 5% annual
return and (b) redemption at the end of each time
period.
Short-Term Bond Fund ............... $43 $60
Intermediate U.S. Government Bond Fund $43 $60
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES.
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS EXAMPLE IS BASED
ON ESTIMATED DATA FOR THE FISCAL YEAR ENDING NOVEMBER 30, 1996.
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:
o Common 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;
o Convertible 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;
o Securities 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);
o Options and Futures. 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;
o U.S. Government Securities (as defined under "Portfolio Investments and
Strategies");
o Corporate Obligations (as defined under "Portfolio Investments and
Strategies");
o Mortgage-Backed Securities (as defined under "Portfolio Investments and
Strategies"); and
o Money 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 United States
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:
o obligations issued by or on behalf of the Commonwealth of Pennsylvania,
its political subdivisions, agencies, or instrumentalities (i.e.,
authorities);
o debt obligations of any state, territory, or possession of the United
States, including the District of Columbia, or any political
subdivision of any of these;
o variable rate demand notes; and
o participation, 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:
o rated, 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
o guaranteed at the time of purchase by the U.S. government as to the
payment of principal and interest; or
o fully collateralized by an escrow of U.S. government securities or
other securities acceptable to the Adviser; or
o rated 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
o unrated 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
o unrated 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:
o U.S. Government Securities (as defined under "Portfolio Investments and
Strategies");
o Corporate Obligations (as defined under "Portfolio Investments and
Strategies");
o Mortgage-Backed Securities (as defined under "Portfolio Investments and
Strategies");
o Asset-Backed Securities (as defined under "Portfolio Investments and
Strategies"); and
o Money 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:
o U.S. Government Securities (as defined under "Portfolio Investments and
Strategies");
o Mortgage-Backed Securities (as defined under "Portfolio Investments and
Strategies");
o Asset-Backed Securities (as defined under "Portfolio Investments and
Strategies");
o Corporate Obligations (as defined under "Portfolio Investments and
Strategies"); and
o Money Market Instruments (as defined under "Portfolio Investments and
Strategies").
PORTFOLIO INVESTMENTS AND STRATEGIES
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 Equity
Fund, the Short-Term Bond Fund, and the Intermediate U.S. Government Bond Fund
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:
o 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;
o 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");
o obligations of the U.S. government or its agencies or
instrumentalities;
o repurchase agreements;
o securities of other investment companies; and
o 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 the 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 FUNDS 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.
Dauphin Deposit, and its divisions, Bank of Pennsylvania, Valleybank, and
Farmers Bank, provide banking services through over 100 branch offices
located in a nine county area in south central Pennylvania 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
June 30, 1995, Dauphin Deposit had assets in excess of $5 billion.
Dauphin Deposit's Trust and Financial Services Group provides
individuals, businesses, and municipalities with investment, custodial,
and trust services. As of June 30, 1995, Trust and Financial Services
had in excess of $2 billion under active managment. Although Dauphin
Deposit has not previously served as an investment adviser to a mutual
fund, it has managed, on behalf of its trust clients, eight common and
collective investment funds having a market value in excess of $800
million.
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.
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.
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 one quarter of 1% 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 .15 of 1% 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 Equity Fund will be
placed by Dauphin Deposit with broker/dealers selected by Dauphin Deposit,
including Hopper Soliday and other affiliated brokers. The Equity Fund may use
a Hopper Soliday 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 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- -
--
. 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. The
order will be placed by Hopper Soliday 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
for purchases by the Trust and Financial Services Group of Dauphin Deposit and
its affiliates for fiduciary or custodial accounts. 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 Sales Charge as
a Percentage of a Percentage of
Amount of Transaction Public Offering Price Net
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 Sales Charge as
a Percentage of a Percentage of
Amount of Transaction Public Offering Price Net
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 holds or manages assets, by trust companies,
trust departments of other financial institutions, and by banks and savings and
loans for their own 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.
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:
o quantity discounts and accumulated purchases;
o signing a 13-month letter of intent;
o using the reinvestment privilege; or
o 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 both purchases.
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. 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.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Funds, Federated 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.:
o Federated Liberty U.S. Government Money Market Trust--a U.S. government
money market fund; and
o 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 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- - . 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 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- - . 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:
o 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");
o a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
o a savings bank or savings association whose deposits are insured by
the Savings Association Insurance Fund ("SAIF"), which is administered
by the FDIC; or
o 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
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. 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.
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.
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 agreement 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, as amended, 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, as amended, 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 Securities and Exchange Commission) 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 currently managed by the Adviser
(the "Common and Collective Fund(s)"). It is anticipated that the assets from
each Common (subject to favorable resolution of tax issues) and Collective Fund
will be transferred to the corresponding Fund on or about February 29, 1996 and
March 29, 1996, respectively, in connection with each Fund's commencement of
operations.
Set forth below are certain performance data for the Common and Collective
Funds currently managed by the Funds' Adviser. This information is deemed
relevant because the Common and Collective Funds were 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.
Predecessor Common Funds Average Annual Total Return for the period ending
, 1995*
- ----------
(Corresponding Marketvest Funds) Reflecting Load
Since Inception
1 Year 3 Years 5 Years (Insert Date)
Personal Trust Equity Fund
(MARKETVEST EQUITY FUND) . % . % . % . %
-- - -- - -- - -- -
Equity Fund for Tax-Exempt
Organizations
(MARKETVEST EQUITY FUND) . % . % . % . %
-- - -- - -- - -- -
Municipal Bond Fund
(MARKETVEST PENNSYLVANIA
INTERMEDIATE MUNICIPAL BOND
FUND) . % . % . % . %
-- - -- - -- - -- -
U.S. Government Fixed Income Fund
(MARKETVEST SHORT-TERM
BOND FUND) . % . % . % . %
-- - -- - -- - -- -
Fixed Income Fund
(MARKETVEST INTERMEDIATE U.S.
GOVERNMENT BOND FUND) . % . % . % . %
-- - -- - -- - -- -
Without Load
Since Inception
1 Year 3 Years 5 Years (Insert Date)
Personal Trust Equity Fund
(MARKETVEST EQUITY FUND) . % . % . % . %
-- - -- - -- - -- -
Equity Fund for Tax-Exempt
Organizations
(MARKETVEST EQUITY FUND) . % . % . % . %
-- - -- - -- - -- -
Municipal Bond Fund
(MARKETVEST PENNSYLVANIA
INTERMEDIATE MUNICIPAL BOND
FUND) . % . % . % . %
-- - -- - -- - -- -
U.S. Government Fixed Income Fund
(MARKETVEST SHORT-TERM
BOND FUND) . % . % . % . %
-- - -- - -- - -- -
Fixed Income Fund
(MARKETVEST INTERMEDIATE U.S.
GOVERNMENT BOND FUND) . % . % . % . %
-- - -- - -- - -- -
* The Average Annual Total Return for each Common Fund has been adjusted to
reflect each corresponding Fund's anticipated expenses, net of voluntary
waivers.
Predecessor Collective Funds Average Annual Total Return for the period
ending , 1995*
----------
(Corresponding Marketvest Funds) Reflecting Load
Since Inception
1 Year 3 Years 5 Years (Insert Date)
Employee Benefit Equity Fund
(MARKETVEST EQUITY FUND) . % . % . % . %
-- - -- - -- - -- -
Employee Benefit Short-Term Fixed
Income Fund
(MARKETVEST SHORT-TERM
BOND FUND) . % . % . % . %
-- - -- - -- - -- -
Employee Benefit Fixed Income Fund
(MARKETVEST INTERMEDIATE U.S.
GOVERNMENT BOND FUND) . % . % . % . %
-- - -- - -- - -- -
Without Load
Since Inception
1 Year 3 Years 5 Years (Insert Date)
Employee Benefit Equity Fund
(MARKETVEST EQUITY FUND) . % . % . % . %
-- - -- - -- - -- -
Employee Benefit Short-Term Fixed
Income Fund
(MARKETVEST SHORT-TERM
BOND FUND) . % . % . % . %
-- - -- - -- - -- -
Employee Benefit Fixed Income Fund
(MARKETVEST INTERMEDIATE U.S.
GOVERNMENT BOND FUND) . % . % . % . %
-- - -- - -- - -- -
* The Average Annual Total Return for each Collective Fund has been
adjusted to reflect each corresponding Fund's anticipated expenses, net of
voluntary waivers.
MARKETVEST PENNSYLVANIA INTERMEDIATE MUNICIPAL
BOND FUND
(A PORTFOLIO OF MARKETVEST FUNDS)
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 27, 1995
$ 100,000
------
shares of beneficial interest outstanding $ 100,000
Offering Price and Redemption Proceeds Per Share:
($100,000 10,000 shares of beneficial interest outstanding) $ 10.00
NOTES:
(1) The Trust was established as a Massachusetts business trust under a
Declaration of Trust dated September 1, 1995, and has had no operations
since that date other than those relating to organizational matters,
including the issuance on December 27, 1995, of 10,000 shares at $10.00 per
share to Federated Administrative Services, the Administrator of the Trust.
Organizational expenses estimated at $32,675, were borne initially by the
Administrator. The Fund has agreed to reimburse the Administrator for the
organizational expenses during the five year period following the date the
Fund's registration statement first became effective.
(2) Reference is made to "Management of the Marketvest Group of Funds" (on
pages 18, 19 and 20), "Administration of the Funds" (on page 21), and "Tax
Information" (on pages 31 and 32) in this prospectus for a description of
the investment advisory fee, administrative and other services and federal
tax aspects of the Fund.
MARKETVEST INTERMEDIATE U.S. GOVERNMENT BOND FUND
(A PORTFOLIO OF MARKETVEST FUNDS, INC.)
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 27, 1995
$ 100,000
------
shares of common stock outstanding $ 100,000
Offering Price and Redemption Proceeds Per Share:
($100,000 10,000 shares of common stock outstanding) $ 10.00
NOTES:
(1) The Corporation was incorporated under the laws of the State of Maryland on
October 25, 1995, and has had no operations since that date other than
those relating to organizational matters, including the issuance on
December 27, 1995, of 10,000 shares at $10.00 per share to Federated
Administrative Services, the Administrator of the Corporation.
Organizational expenses estimated at $32,675, were borne initially by the
Administrator. The Fund has agreed to reimburse the Administrator for the
organizational expenses during the five year period following the date the
Fund's registration statement first became effective.
(2) Reference is made to "Management of the Marketvest Group of Funds" (on
pages 18, 19 and 20), "Administration of the Funds" (on page 21), and "Tax
Information" (on pages 31 and 32) in this prospectus for a description of
the investment advisory fee, administrative and other services and federal
tax aspects of the Fund.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Board of Directors, Trustees and Shareholders of
MARKETVEST GROUP OF FUNDS:
We have audited the accompanying statements of assets and liabilities of
Marketvest Intermediate U.S. Government Bond Fund (a portfolio of Marketvest
Funds, Inc.) and Marketvest Pennsylvania Intermediate Municipal Bond Fund (a
portfolio of Marketvest Funds) as of December 27, 1995. These statements of
assets and liabilities are the responsibility of the Fund's management,
respectively. Our responsibility is to express an opinion on these statements of
assets and liabilities based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the statements of assets and liabilities are
free of material misstatements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall statements of asset and liabilities presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the statements of assets and liabilities present fairly, in all
material respects, the net assets of Marketvest Intermediate U.S. Government
Bond Fund and Marketvest Pennsylvania Intermediate Municipal Bond Fund as of
December 27, 1995, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
December 27, 1995
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, Dividend Disbursing Agent, and Portfolio Accounting
Services
Federated Services Company
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Independent Auditors
Ernst & Young LLP One Oxford Centre
Pittsburgh, Pennsylvania 15219
MARKETVEST GROUP OF FUNDS
Combined Prospectus
MARKETVEST FUNDS, INC.
MARKETVEST FUNDS
Open-End Management
Investment Companies
January , 1996
--
PA
EDGEWOOD SERVICES, INC.
Distributor
A subsidiary of FEDERATED INVESTORS
Federated Investors Tower Dauphin Deposit Bank and Trust Company
Pittsburgh, PA 15222-3779 Investment Adviser
CUSIP #s
#######X (date)
MARKETVEST GROUP OF FUNDS
COMBINED STATEMENT OF ADDITIONAL INFORMATION
This Combined Statement of Additional Information relates to the
following four portfolios (individually, the "Fund," or collectively, the
"Funds") comprising the Marketvest Group of Funds:
o Marketvest 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 the Funds dated January , 1996. This
--
Statement is not a prospectus itself. To receive a copy of the prospectus,
write to the Funds or call Hopper Soliday and Co., Inc. at 1-800- - .
--- ----
Terms used but not defined herein, which are defined in the prospectus, are
used herein as defined in the prospectus.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated January , 1996
--
EDGEWOOD SERVICES, INC.
Distributor Dauphin Deposit Bank and Trust Company
A subsidiary of FEDERATED INVESTORS Investment Adviser
INVESTMENT OBJECTIVE AND POLICIES OF
THE FUNDS 5
CONVERTIBLE SECURITIES 5
WARRANTS 6
FUTURES AND OPTIONS TRANSACTIONS 7
FUTURES CONTRACTS 7
"MARGIN" IN FUTURES TRANSACTIONS 8
PUT OPTIONS ON FUTURES CONTRACTS
9
STOCK INDEX OPTIONS 10
CALL OPTIONS ON FINANCIAL AND STOCK
INDEX FUTURES CONTRACTS10
PURCHASING PUT AND CALL OPTIONS ON
PORTFOLIO SECURITIES 11
WRITING COVERED PUT AND CALL OPTIONS
ON PORTFOLIO SECURITIES12
OVER-THE-COUNTER OPTIONS12
RISKS 13
PENNSYLVANIA MUNICIPAL SECURITIES
14
PARTICIPATION INTERESTS15
VARIABLE RATE MUNICIPAL SECURITIES
15
MUNICIPAL LEASES 15
WEIGHTED AVERAGE PORTFOLIO MATURITY
16
ADJUSTABLE RATE MORTGAGE SECURITIES
("ARMS") 17
COLLATERALIZED MORTGAGE OBLIGATIONS
("CMOS") 18
REAL ESTATE MORTGAGE INVESTMENT
CONDUITS ("REMICS") 19
PRIVATELY ISSUED MORTGAGE-RELATED
SECURITIES 19
RESETS OF INTEREST 20
CAPS AND FLOORS 20
FOREIGN BANK INSTRUMENTS21
WHEN-ISSUED AND DELAYED DELIVERY
TRANSACTIONS 21
REPURCHASE AGREEMENTS 22
CREDIT ENHANCEMENT22
RESTRICTED AND ILLIQUID SECURITIES
23
REVERSE REPURCHASE AGREEMENTS 24
LENDING OF PORTFOLIO SECURITIES
24
PORTFOLIO TURNOVER 25
PENNSYLVANIA INVESTMENT RISKS 25
INVESTMENT LIMITATIONS 26
MARKETVEST FUNDS, INC. MANAGEMENT
33
MARKETVEST FUNDS MANAGEMENT 33
OFFICERS AND BOARD MEMBERS 33
FUND OWNERSHIP 35
DIRECTORS' COMPENSATION TABLE--
MARKETVEST FUNDS, INC. (THE
"CORPORATION") 35
TRUSTEES' COMPENSATION TABLE--
MARKETVEST FUNDS (THE "TRUST")
36
TRUSTEE LIABILITY 37
INVESTMENT ADVISORY SERVICES 38
ADVISER TO THE FUNDS 38
ADVISORY FEES 38
OTHER SERVICES 39
ADMINISTRATION OF THE FUNDS 39
CUSTODIAN 39
TRANSFER AGENT, DIVIDEND DISBURSING
AGENT, AND PORTFOLIO ACCOUNTING
SERVICES 39
INDEPENDENT AUDITORS40
BROKERAGE TRANSACTIONS 40
PURCHASING SHARES 41
DISTRIBUTION PLAN 42
ADMINISTRATIVE ARRANGEMENTS 42
CONVERSION TO FEDERAL FUNDS 43
DETERMINING NET ASSET VALUE 43
DETERMINING MARKET VALUE OF
SECURITIES 43
VALUING MUNICIPAL BONDS44
USE OF AMORTIZED COST 44
EXCHANGE PRIVILEGE 45
REDEEMING SHARES 45
REDEMPTION IN KIND 45
MASSACHUSETTS PARTNERSHIP LAW
19
TAX STATUS 46
THE FUNDS' TAX STATUS 46
SHAREHOLDERS' TAX STATUS47
TOTAL RETURN 20
YIELD 48
TAX-EQUIVALENT YIELD 49
TAX-EQUIVALENCY TABLE 49
PERFORMANCE COMPARISONS 51
APPENDIX 54
INVESTMENT OBJECTIVE AND POLICIES OF THE FUNDS
The combined prospectus discusses the objective of each Fund and the policies
employed to achieve those objectives. The following discussion supplements the
description of the Funds' investment policies in the combined prospectus.
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.
CONVERTIBLE SECURITIES
The 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 Fund will exchange or convert the convertible securities held in its
portfolio 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 the Fund in achieving its investment objective. Otherwise,
the Fund will hold or trade the convertible securities. In selecting
convertible securities for the 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.
WARRANTS
The 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. The Fund will not invest more than 5% of its net
assets in warrants. No more than 2% of the Fund's net assets, to be included
within the overall 5% limit on investments in warrants, may be warrants which
are not listed on the New York Stock Exchange or the American Stock Exchange.
Warrants acquired in units or attached to securities may be deemed to be without
value for purposes of this policy.
FUTURES AND OPTIONS TRANSACTIONS
The Equity Fund may engage in futures and options transactions as described
below. As a means of reducing fluctuations in the net asset value of shares of
the Fund, the Fund may attempt to hedge all or a portion of its portfolio 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 Fund may also
write covered put and call options on portfolio securities to attempt to
increase its current income or to hedge a portion of its portfolio investments.
The Fund will maintain its 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 Fund purchases and writes
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 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 Fund also may purchase and sell stock
index futures to hedge against changes in prices. The Fund will not engage in
futures transactions for speculative purposes.
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 Fund could enter into contracts to deliver securities at a
predetermined price (i.e., "go short") to protect itself against the possibility
that the prices of its fixed income securities may decline during the Fund's
anticipated holding period. The 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 does not pay or
receive money upon the purchase or sale of a futures contract. Rather, the Fund
is required to deposit an amount of "initial margin" in cash or U.S. Treasury
bills with its 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 the 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 the Fund upon termination of the futures contract,
assuming all contractual obligations have been satisfied.
A futures contract held by the 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 the Fund but is instead settlement
between the Fund and the broker of the amount one would owe the other if the
futures contract expired. In computing its daily net asset value, the Fund will
mark to market its open futures positions. The 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 may purchase listed put options on financial 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, the Fund will normally close
out its option by selling an identical option. If the hedge is successful, the
proceeds received by the 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, the 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 the 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 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 the 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 the 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 the 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 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 its
portfolio against an increase in market interest rates or a decrease in stock
prices. When the 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, the 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 the Fund keeps
the premium received for the option. This premium can substantially offset the
drop in value of the Fund's portfolio securities.
Prior to the expiration of a call written by the Fund, or exercise of it by the
buyer, the 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 the Fund for the initial option. The net premium income of the Fund
will then substantially offset the decrease in value of the hedged securities.
The 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, the 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 may purchase put and call options on portfolio securities to
protect against price movements in particular securities in its portfolio. A put
option gives the 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 the 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 may also write covered put and call options to generate
income and thereby protect against price movements in particular securities in
the Fund's portfolio. As the writer of a call option, the 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 the 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.
The 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, the Fund will segregate cash or U.S.
Treasury obligations with a value equal to or greater than the exercise price of
the underlying securities.
OVER-THE-COUNTER OPTIONS
The 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 the 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 Fund 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 Fund uses 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 the Fund's portfolio.
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, the 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. The Fund's
ability to establish and close out futures and options positions depends on this
secondary market.
The Fund may not purchase or sell futures contracts or related options if
immediately thereafter the sum of the amount of margin deposits on the Fund's
existing futures positions and premiums paid for related options would exceed 5%
of the market value of the Fund's total assets. When the Fund purchases 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 Fund sells futures
contracts, it 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.
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:
o municipal notes and municipal commercial paper;
o serial bonds sold with differing maturity dates;
o tax anticipation notes sold to finance working capital needs of
municipalities in anticipation of receiving taxes at a later date;
o bond anticipation notes sold prior to the issuance of longer-term bonds;
o pre-refunded municipal bonds; and
o general 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 cancelled.
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 Short-Term Bond Fund, and the
Intermediate U.S. Government Bond Fund invests 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 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 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 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 non-
government 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 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 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.
FOREIGN BANK INSTRUMENTS
The 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. The Funds do not intend to engage in
when-issued and delayed delivery transactions to an extent that would cause the
segregation of more than 20% of the total value of its assets.
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.
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 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%, 50%,
90%, and 90%, 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
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, the deposit or payment by the Fund 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 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 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.
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 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 may
engage in transactions involving financial and stock index futures
contracts or options on such futures contracts.
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 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 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 NEW ISSUERS
The Equity Fund, the Short-Term Bond Fund, and the Intermediate U.S.
Government Bond Fund will not invest more than 5% of the value of their
respective total assets in securities of issuers with records of less than
three years of continuous operations, including the operation of any
predecessor.
The Pennsylvania Intermediate Municipal Bond Fund will not invest more than
5% of the value of its total assets in industrial development bonds where
the principal and interest are the responsibility of companies (or
guarantors, where applicable) with less than three years of continuous
operations, including the operation of any predecessor.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND BOARD
OF DIRECTORS OF THE MARKETVEST FUNDS, INC.
A Fund will not purchase or retain the securities of any issuer if the
officers and Board of Directors of Marketvest Funds, Inc. or its investment
adviser, owning individually more than 1/2 of 1% of the issuer's
securities, together own more than 5% of the issuer's securities.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND BOARD OF
TRUSTEES OF THE MARKETVEST FUNDS
A Fund will not purchase or retain the securities of any issuer if the
officers and Board of Trustees of Marketvest Funds or its investment
adviser, owning individually more than 1/2 of 1% of the issuer's
securities, together own more than 5% of the issuer's securities.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Funds will limit their respective investment in other investment
companies to no more than 3% of the total outstanding voting stock of any
investment company, invest no more than 5% of its total assets in any one
investment company, and invest no more than 10% of its total assets in
investment companies in general. The Funds will purchase securities of
investment companies only in open-market transactions involving only
customary broker's commissions. However, these limitations are not
applicable if the securities are acquired in a merger, consolidation, or
acquisition of assets.
INVESTING IN RESTRICTED SECURITIES
The Funds will not invest more than 10% (5% for the Equity Fund) of the
value of its total assets in securities subject to restrictions on resale
under the Securities Act of 1933, except for commercial paper issued under
Section 4(2) of the Securities Act of 1933 and certain other restricted
securities which meet the criteria for liquidity as established by the
Board Members.
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.
INVESTING IN MINERALS
A Fund will not purchase interests in oil, gas, or other mineral
exploration or development programs or leases, although they may invest in
the securities of issuers which invest in or sponsor such programs.
PURCHASING SECURITIES TO EXERCISE CONTROL
A Fund will not purchase securities of a company for the purpose of
exercising control or management.
INVESTING IN WARRANTS
The Equity Fund will not invest more than 5% of its net assets in warrants.
No more than 2% of the Fund's net assets, to be included within the overall
5% limit on investments in warrants, may be warrants which are not listed
on the New York Stock Exchange or the American Stock Exchange.
ARBITRAGE TRANSACTIONS
The Equity Fund will not enter into transactions for the purpose of
engaging in arbitrage.
INVESTING IN PUT OPTIONS
The Equity Fund will not purchase put options on securities other than put
options on stock indices, unless the securities are held in the Fund's
portfolio and not more than 5% of the value of the Fund's total assets
would be invested in premiums on open put option positions.
WRITING COVERED CALL OPTIONS
The Equity Fund will not write call options on securities unless the
securities are held in the Fund's portfolio or unless the Fund is entitled
to them in deliverable form without further payment or after segregating
cash in the amount of any further payment.
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."
To comply with registration requirements in certain states, the Equity Fund
(1) will limit the aggregate value of the assets underlying covered call options
or put options written by the Fund to not more than 25% of its net assets,
(2) will limit the premiums paid for options purchased by the Fund to 5% of its
net assets, (3) will limit the margin deposits on futures contracts entered into
by the Fund to 5% of its net assets, and (4) does not intend to invest more than
5% of its total assets in puts, calls, straddles, spreads, or any combination
thereof. (If state requirements change, these restrictions may be revised
without shareholder notification.)
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.
George D. McKeon
107 Marlin Drive
Duck, North Carolina
Birthdate: January 11, 1924
Director of Marketvest Funds, Inc.
Trustee of Marketvest Funds
Formerly, Head of Trust and Financial Services, Dauphin Deposit Bank and Trust
Company (retired February 1990).
Gary Mozenter
1180 Gantt Drive
Huntingdon Valley, Pennsylvania
Birthdate: August 30, 1934
Director of Marketvest Funds, Inc.
Trustee of Marketvest Funds
Formerly, Vice Chairman and Partner, Coopers & Lybrand, Philadelphia office
(retired 1994).
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, Federated Investors; 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.
DIRECTORS' COMPENSATION TABLE--MARKETVEST FUNDS, INC. (THE
"CORPORATION")
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
THE CORPORATION THE CORPORATION*# FROM FUND COMPLEX +
Edward C. Gonzales
Chairman, President,
Treasurer, and Director $ 0 $ 0 for the Corporation and
1 other investment company in the Fund Complex
George D. McKeon
Director $5,250 $7,000 for the Corporation and
1 other investment company in the Fund Complex
Gary Mozenter
Director $5,250 $7,000 for the Corporation and
1 other investment company in the Fund Complex
Richard Seidel
Director $5,250 $7,000 for the Corporation and
1 other investment company in the Fund Complex
*Information is estimated for the period from October 27, 1995, the date of the
organizational meeting of the Board of Directors of the Corporation, to November
30, 1996.
#The aggregate compensation is provided for the Corporation which is comprised
of three portfolios.
+The information is provided for the upcoming calendar year.
TRUSTEES' COMPENSATION TABLE--MARKETVEST FUNDS (THE "TRUST")
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
THE TRUST THE TRUST*# FROM FUND COMPLEX +
Edward C. Gonzales
Chairman, President,
Treasurer, and Trustee $ 0 $ 0 for the Trust and
1 other investment company in the Fund Complex
George D. McKeon
Trustee $1,750 $7,000 for the Trust and
1 other investment company in the Fund Complex
Gary Mozenter
Trustee $1,750 $7,000 for the Trust and
1 other investment company in the Fund Complex
Richard Seidel
Trustee $1,750 $7,000 for the Trust and
1 other investment company in the Fund Complex
*Information is estimated for the period from September 22, 1995, the date of
the organizational meeting of the Board of Trustees of the Trust, to November
30, 1996.
#The aggregate compensation is provided for the Trust which is comprised of one
portfolio.
+The information is provided for the upcoming calendar year.
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.
STATE EXPENSE LIMITATIONS
The Adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares are
registered for sale in those states. If a Fund's normal operating expenses
(including the investment advisory fee, but not including brokerage
commissions, interest, taxes, and extraordinary expenses) exceed 2-1/2% per
year of the first $30 million of average net assets, 2% per year of the
next $70 million of average net assets, and 1-1/2% per year of the
remaining average net assets, the Adviser will reimburse a Fund for its
expenses over the limitation.
If a Fund's monthly projected operating expenses exceed this expense
limitation, the investment advisory fee paid will be reduced by the amount
of the excess, subject to an annual adjustment. If the expense limitation
is exceeded, the amount to be reimbursed by the Adviser will be limited, in
any single fiscal year, by the amount of the investment advisory fee.
This arrangement is not part of the advisory contract and may be amended or
rescinded in the future.
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.
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, a subsidiary of Federated
Investors, is transfer agent and dividend disbursing agent for the Funds. It
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 Equity
Fund 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 Equity Fund 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 to other brokers or dealers. In addition, pursuant to
an exemption granted by the SEC, the Equity Fund 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 on the floor of any national securities exchange, but may effect
transactions for the 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. The Equity Fund has 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.
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.
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.
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.
DETERMINING MARKET VALUE OF SECURITIES
Market or fair values of the 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 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.
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.
USE OF AMORTIZED COST
With respect to the Pennsylvania Intermediate Municipal Bond Fund, the Board
Members have decided that the fair value of debt securities authorized to be
purchased by the Fund with remaining maturities of 60 days or less at the time
of purchase shall be their amortized cost value, unless the particular
circumstances of the security indicate otherwise. Under this method, portfolio
instruments and assets are valued at the acquisition cost as adjusted for
amortization of premium or accumulation of discount rather than at current
market value. The Board Members periodically assess this method of valuation
and recommends changes where necessary to assure that the Fund's portfolio
instruments are valued at their fair value as determined in good faith by the
Board Members.
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.
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 if the Equity
Fund were a regular corporation, and to the extent designated by the Equity 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, 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:
othe availability of higher relative yields;
odifferentials in market values;
onew investment opportunities;
ochanges in creditworthiness of an issuer; or
oan 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
The average annual total return for each 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
The yield for each 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
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 effective federal 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 below
indicates, a "tax-free" investment is an attractive choice for investors,
particularly in times of narrow spreads between "tax-free" and taxable yields.
TAXABLE YIELD EQUIVALENT FOR 1995
STATE OF PENNSYLVANIA
COMBINED FEDERAL AND STATE INCOME TAX BRACKET:
17.80% 30.80% 33.80% 38.80% 42.40%
JOINT $1- $39,001- $94,251- $143,601- OVER
RETURN 39,000 94,250 143,600 256,500 256,500
SINGLE $1- $23,351- $56,551- $117,951- OVER
RETURN 23,350 56,550 117,950 256,500 256,500
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% 9.80% 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.
Advertisements and other sales literature for the Funds may quote total
returns which are calculated on non-standardized base periods. These total
returns also represent the historic change in the value of an investment in the
Funds based on monthly reinvestment of dividends over a specified period of
time.
Advertisements may quote performance information which does not reflect the
effect of the sales load.
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 (Filed in Part A)
(b) Exhibits:
(1) Conformed Copy of Articles of Incorporation of the
Registrant; (1.)
(i)Conformed Copy of Amended Articles of Incorporation
of the Registrant; (1.)
(ii)Conformed Copy of Articles of Amendment No. 2 of the
Registrant; +
(2) Copy of By-Laws of the Registrant; +
(3) Not applicable;
(4) Not applicable;
(5) Form of Investment Advisory Contract of the Registrant; +
CUSIP #
Product Code
(6) Form of Distributor's Contract of the Registrant; +
(7) Not applicable;
(8) Form of Custodian Agreement of the Registrant; +
(9) (i)Form of Agreement for Fund Accounting, Shareholder
Recordkeeping, and Custody Services Procurement of
the Registrant; +
(ii)Form of Electronic Communications and Recordkeeping
Agreement; +
(iii)Form of Administrative Services Agreement; +
(10) Conformed Copy of Opinion and Consent of Counsel as to
legality of shares being registered; +
(11) Conformed Copy of Consent of Independent Auditors; +
(12) Not applicable;
(13) Conformed Copy of Initial Capital
Understanding; +
(14) Not applicable;
(15) (i)Conformed Copy of Distribution Plan; +
(ii)Copy of Rule 12b-1 Agreement; +
(16) Not applicable to current filing;
(17) Not applicable to current filing;
(18) Not applicable to current filing;
(19) Conformed Copy of Power of Attorney; +
+ 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-
63757 and 811-7385).
Item 25. Persons Controlled by or Under Common Control with Registrant
As a newly-formed company, all of the outstanding shares of the
Registrant are currently owned by Federated Administrative Services.
Item 26. Number of Holders of Securities:
Number of Record Holders
Title of Class as of December 27, 1995
Shares of capital stock
($0.001 per Share par value)
Marketvest Equity Fund 0
Marketvest Short-Term Bond Fund 0
Marketvest Intermediate U.S.
Government Bond Fund 1
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 "Marketvest Group of Funds Information -
Management of the Marketvest Group of Funds" in Part A.
The principal executive officers and directors of the Corporation'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 Bank
and Trust Company.
(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, and and CEO, Dauphin Director
Deposit Corporation
Paul B. Shannon President, Chief Credit
Policy Officer, and
Director
Dennis L. Dinger Senior Executive Vice
President, Chief Fiscal
and Administrative Officer
and Assistant Treasurer
(1.) Response is incorporated by reference to Registrant's Initial
Registration Statement on Form N-1A filed October 27, 1995 (File Nos. 33-
63757 and 811-7385).
Richard B. Brokenshire Executive Vice President
and COO
Rick A. Gold Executive Vice President,
Manager-Trust and Financial
Services
Lawrence J. LaMaina, Jr. President-Southern Vice
Chairman, Dauphin
Division, Executive Deposit Corporation
Vice President-DDB,
and Director
Stewart P. McEntee Executive Vice President
and Chief Marketing
Officer
Leon S. Myers Executive Vice President
Donald. H. Ross Executive Vice President
and Deputy Director of
Community Banking
Robert A. Rupel President-Eastern Division
and Executive Vice
President-DDB
Kenneth H. Sallade Executive Vice President and
Chief Investment Officer
Michael D. Zarcone President-Central Division
and Executive Vice
President-DDB
Claire D. Flemming Senior Vice President and
Corporate Secretary
Joseph T. Lysczek, Jr. Senior Vice President and
Treasurer
James J. Trupp, Jr. Senior Vice President and
General Auditor
Jackie Rothchild Senior Vice President and
Deputy Director of Comunity
Banking
George W. King Executive Vice President,
Corporate Counsel, and
Secretary
J. Edward Beck, Jr. Director President, Bitreck
Corp.
John R. Buchart Director Retired Chairman of the
Board, H.G. Rotz
Associates, Inc.
James O. Green Director Retired Chairman of the
Board, Green's Dairy, Inc.
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.
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
Robert F. Nation Director President, Penn Harris
Company
Elmer E. Naugle Director Retired Fiscal Officer,
Shippensburg University
Walter F. Raab Director Chairman of the
Executive Committee of the Board of
Directors, AMP Incorporated
Paul C. Raub Director Chairman of the Board,
York Corrugating Co.
Henry W. Rhoads, Esq. Director Rhoads & Sinon,
Attorneys
Jean D. Seibert Director Partner, Wion, Zulli &
Seibert, Attorneys
L. Andrew Zausner, Esq.Director Partner, Dickstein,
Shapiro & Morin
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.
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant
James J. Dolan Trustee and President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
R. Jeffrey Niss Senior Vice President and --
Federated Investors Tower Trustee, Edgewood Services,
Pittsburgh, PA 15222-3779 Inc.
Douglas L. Hein Trustee, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Frank E. Polefrone Trustee, --
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
Charles H. Field Assistant Secretary, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Jeannette Fisher-Garber 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 Services Company Federated Investors Tower
("Transfer Agent, Dividend Pittsburgh, PA 15222-3779
Disbursing Agent and Portfolio
Recordkeeper")
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 file a post-effective amendment,
using financial statements which need not be certified, within four
to six months from the effective date of Registrant's 1933 Act
Registration Statement.
Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of
Directors 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.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, MARKETVEST FUNDS, INC.
(formerly, COURT STREET FUNDS, INC.), 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 4th day of January, 1996.
MARKETVEST FUNDS, INC.
(formerly, COURT STREET FUNDS, INC.)
BY: /s/ Victor R. Siclari
Victor R. Siclari, Secretary
Attorney in Fact for Edward C. Gonzales
January 4, 1996
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 January 4, 1996
SECRETARY For the Persons
Listed Below
NAME TITLE
Edward C. Gonzales* Chairman, President, Treasurer
and Director (Principal Financial
and Accounting Officer)
George D. McKeon* Director
Gary Mozenter* Director
Richard Seidel* Director
Exhibit 11 under Form N-1A
Exhibit 23 under Item 601/Reg. S-K
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Independent Auditors"
and to the use of our report dated December 27, 1995 on the statement of assets
and liabilities in Pre-Effective Amendment Number 1 to the Registration
Statement (Form N-1A No.33-63757) and the related Prospectus of Marketvest
Intermediate U.S. Government Bond Fund (a Portfolio of Marketvest Funds, Inc.).
By:ERNST & YOUNG
Ernst & Young
Pittsburgh, Pennsylvania
EXHIBIT 1 (II) UNDER FORM N-1A
EXHIBIT 3 (A) UNDER ITEM 601/REG. S-K
COURT STREET FUNDS, INC.
ARTICLES OF AMENDMENT NO. 2
COURT STREET FUNDS, INC., a Maryland corporation having its principal
offices in Baltimore, Maryland (hereinafter called the "Corporation"), hereby
certifies:
FIRST: The Amended Articles of Incorporation are hereby amended by
striking Article FIRST and inserting the following in its place:
"FIRST: The name of the corporation is Marketvest
Funds, Inc. ("Corporation")."
SECOND: The Amended Articles of Incorporation are hereby amended by
striking Article FOURTH and inserting the following in its place:
"FOURTH: (a) The Corporation is authorized to issue five
billion (5,000,000,000) shares of common stock,
par value $.0001 per share. The aggregate par
value of all shares which the Corporation is
authorized to issue is Five Hundred Thousand ($500,000).
Subject to the following paragraph, the authorized
shares are classified as one billion
(1,000,000,000) shares of the Marketvest
Equity Fund, one billion (1,000,000,000)
shares of the Marketvest Intermediate U.S.
Government Bond Fund, and one billion (1,000,000,000)
shares of the Marketvest Short-Term Bond Fund. The
remaining two billion (2,000,000,000) shares shall remain
unclassified until action is taken by the
Board of Directors pursuant to the following
paragraph."
THIRD: The foregoing amendment was approved by a majority of the entire
Board of Directors of the Corporation and such amendment is limited to a change
expressly permitted by Section 2-605 of subtitle 6 of title 2 of the Maryland
General Corporation Law to be made without action by the stockholders and the
Corporation is registered as an open-end Company under the Investment Company
Act of 1940, as amended.
FOURTH: The foregoing amendment does not increase the authorized stock of
the Corporation or the aggregate par value thereof.
IN WITNESS WHEREOF, Court Street Funds, Inc. has caused these presents to
be signed in its name and on its behalf by its Vice President and witnessed by
its Secretary on December 4, 1995.
The undersigned, Jeffrey W. Sterling, Vice President of the Corporation,
hereby acknowledges in the name and on behalf of the Corporation the foregoing
Articles of Amendment to be its corporate act and further certifies to the best
of his knowledge, information and belief, that the matters and facts set forth
herein with respect to the authorization and approval hereof are true in all
material respects and that this statement is made under the penalties of
perjury.
ATTEST: COURT STREET FUNDS, INC.
/s/ Victor R. Siclari By /s/ Jeffrey W. Sterling
Victor R. Siclari Jeffrey W. Sterling
Exhibit 2 under Form N-1A
Exhibit 3(b) under Item 601/Reg. S-K
COURT STREET FUNDS, INC.
BY-LAWS
ARTICLE I
MEETING OF SHAREHOLDERS
Section 1. ANNUAL MEETINGS. The Corporation is not required to hold
an annual meeting of shareholders in any year in which the election of
directors is not required to be acted upon under the Investment Company Act
of 1940, as amended.
Section 2. SPECIAL MEETINGS. Special Meetings of Shareholders of the
Company or of a particular Series or Class may be called by the Chairman,
the President or by the Board of Directors; and shall be called by the
Secretary whenever ordered by the Chairman, the Board of Directors, or as
requested in writing by Shareholders entitled to cast at least 10% of the
shares entitled to be cast at the meeting. Such Shareholder request shall
state the purpose of such meeting and the matters proposed to be acted on
thereat, and no other business shall be transacted at any such special
meeting. Unless requested by Shareholders entitled to cast a majority of
all the votes entitled to be cast at the meeting, a special meeting need not
be called to consider any matter which is substantially the same as a matter
voted on at any annual or special meeting of the Shareholders held during
the preceding 12 months.
Section 3. PLACE OF MEETINGS. All meetings of the Shareholders of the
Corporation or a particular Series or Class, shall be held at the office of
the Corporation in Pittsburgh, Pennsylvania, or at such other place within
or without the State of Maryland as may be fixed by the Board of Directors.
Section 4. NOTICE. Not less than ten nor more than ninety days before
the date of every Special Meeting of Shareholders the Secretary or an
Assistant Secretary shall give to each Shareholder of record of the
Corporation or of the relevant Series or Class written notice of such
meeting. Such notice shall be deemed to have been given when mailed to the
Shareholder at his address appearing on the books of the Corporation, which
shall be maintained separately for the shares of each Series or Class.
Notice of a Special Meeting shall state the purpose or purposes for which it
is called and no other business shall be transacted at such Special Meeting.
Section 5. QUORUM. The presence in person or by proxy of holders of
(a) one-half of the shares of stock of the Corporation on all matters
requiring a Majority Shareholder Vote, as defined in the Investment Company
Act of 1940, or (b) one-third of shares of stock of the Corporation on all
other matters permitted by law, in each case, entitled to vote without
regard to class shall constitute a quorum at any meeting of the
shareholders, except with respect to any matter which by law requires the
separate approval of one or more series or class of stock, in which case the
presence in person or by proxy of the holders of one-half or one-third, as
set forth above, of the shares of stock of each series or class entitled to
vote separately on the matter shall constitute a quorum.
In the absence of a quorum at any meeting, a majority of those
Shareholders present in person or by proxy may adjourn the meeting from time
to time to a date not later than 120 days after the original record date
without further notice until a quorum, as above defined, shall be present.
Section 6. ADJOURNED MEETINGS. A meeting of Shareholders convened on
the date for which it was called (including one adjourned to achieve a
quorum as above provided in Section 5 of this Article) may be adjourned from
time to time without further notice other than by announcement to be given
at the meeting to a date not more than 120 days after the record date, and
any business may be transacted at the meeting as originally called.
Section 7. VOTING. At all meetings of Shareholders each Shareholder
shall be entitled to one vote or fraction thereof for each Share or fraction
thereof standing in his name on the books of the Corporation on the date for
the determination of Shareholders entitled to vote at such meeting.
Section 8. PROXIES. Any Shareholder entitled to vote at any meeting
of Shareholders may vote either in person or by proxy, but no proxy which is
dated more than eleven months before the meeting named therein shall be
accepted. Every proxy shall be in writing and signed by the Shareholder or
his duly authorized attorney in fact and dated, but need not be sealed,
witnessed or acknowledged.
Section 9. ACTION BY UNANIMOUS WRITTEN CONSENT OF SHAREHOLDERS. Any
action required or permitted to be taken at any meeting of Shareholders may
be taken without a meeting, if a consent in writing, setting forth such
action, is signed by all the Shareholders entitled to vote on the subject
matter thereof, and any other Shareholders, entitled to notice of a meeting
of stockholders (but not to vote thereat), have waived in writing any rights
which they may have to dissent from such action, and such consent and waiver
are filed with the records of the Corporation.
ARTICLE II
BOARD OF DIRECTORS
Section 1. POWERS. The business and affairs of the Corporation shall
be managed under the direction of its Board of Directors. All powers of the
Corporation may be exercised by or under the authority of the Board of
Directors except as conferred on or reserved to the Shareholders by law, by
the Charter or by these By-Laws.
Section 2. NUMBER, QUALIFICATIONS, MANNER OF ELECTION AND TERM OF
OFFICE. The number of Directors of the Corporation can be changed by a
majority of the entire Board of Directors from time to time to not less than
three or the number of Shareholders, whichever is less, nor more than
twenty. Directors need not be Shareholders. The term of office of a
Director shall not be affected by any decrease in the number of Directors
made by the Board pursuant to the foregoing authorization. Each Director
shall hold office until his resignation or removal and until the election
and qualification of his successor.
Section 3. PLACE OF MEETING. The Board of Directors may hold its
meetings at such place or places within or without the State of Maryland as
the Board or as the person or persons requesting said meeting to be called
may from time to time determine.
Section 4. ANNUAL MEETINGS. The Board of Directors shall meet
annually for the election of Officers and any other business.
Section 5. REGULAR MEETINGS. Regular meetings of the Board of
Directors shall be held at such intervals and on such dates as the Board may
from time to time designate, provided that any Director who is absent when
such designation is made shall be given notice of the designation.
Section 6. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be held at such times and at such places as may be designated
at the call of such meeting. Special meetings shall be called by the
Secretary or any Assistant Secretary at the request of the Chairman, the
President, or any Director. If the Secretary or any Assistant Secretary
when so requested refuses or fails for more than twenty-four hours to call
such meeting, the Chairman, the President or such Director may in the name
of the Secretary call such meeting by giving due notice in the manner
required when notice is given by the Secretary.
Section 7. NOTICE. The Secretary or any Assistant Secretary shall
give, at least two days before the meeting, notice of each meeting of the
Board of Directors, whether Annual, Regular or Special, to each member of
the Board by mail, telegram, telephone or electronic facsimile to his last
known address. It shall not be necessary to state the purpose or business
to be transacted in the notice of any meeting unless otherwise required by
law. Personal attendance at any meeting by a Director other than to protest
the validity of said meeting shall constitute a waiver of the foregoing
requirement of notice. In addition, notice of a meeting need not be given
if a written waiver of notice executed by such Director before or after the
Meeting is filed with the records of the meeting.
Section 8. CONDUCT OF MEETINGS AND BUSINESS. The Board of Directors
may adopt such rules and regulations for the conduct of their meetings and
the management of the affairs of the Corporation as they may deem proper and
not inconsistent with applicable law, the Charter of the Corporation or
these By-Laws.
Section 9. QUORUM. One-third of the entire Board of Directors but not
less than two directors shall constitute a quorum at any meeting of the
Board of Directors unless there is only one director, in which case that one
shall constitute a quorum. The action of a majority of Directors present at
any meeting at which a quorum is present shall be the action of the Board of
Directors unless the concurrence of a greater proportion is required for
such action by applicable law or regulation, the Charter of the Corporation,
or these By-Laws. In the absence of a quorum at any meeting a majority of
Directors present may adjourn the meeting from day to day or for such longer
periods as they may designate until a quorum shall be present. Notice of any
adjourned meeting need not be given other than by announcement at the
meeting.
Section 10. RESIGNATIONS. Any Director of the Corporation may resign
at any time by written notice to the Chairman of the Board of Directors or
to the Secretary of the Corporation. The resignation of any Director shall
take effect at the time specified therein or, if no time is specified, when
received by the Corporation. Unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
Section 11. REMOVAL. At any meeting of Shareholders duly called for
the purpose, any Director may be removed from office by the vote of a
majority of all of the Shares entitled to vote.
Section 12. VACANCIES. Except as otherwise provided by law, any
vacancy occurring in the Board of Directors for any cause other than by
reason of an increase in the number of Directors may be filled by a majority
of the remaining members of the Board of Directors although such majority is
less than a quorum and any vacancy occurring by reason of an increase in the
number of Directors may be filled by action of a majority of the entire
Board of Directors then in office.
Section 13. COMPENSATION OF DIRECTORS. The Directors may receive
compensation for their services as Directors as determined by the Board of
Directors and expenses of attendance at each Meeting. Nothing herein
contained shall be construed to preclude any Director from serving the
Corporation in any other capacity, as an Officer, Agent or otherwise, and
receiving compensation therefor.
Section 14. ACTION BY UNANIMOUS WRITTEN CONSENT OF DIRECTORS. Any
action required or permitted to be taken at any Annual, Regular or Special
Meeting of the Board of Directors may be taken without a meeting if a
written consent to such action is signed by all members of the Board and
such written consent is filed with the minutes of proceedings of the Board.
Section 15. TELEPHONE CONFERENCE. Members of the Board of Directors
or any committee thereof may participate in a meeting of the Board or such
committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can
hear each other at the same time and participation by such means shall
constitute presence in person at the meeting.
ARTICLE III
EXECUTIVE AND OTHER COMMITTEES
Section 1. APPOINTMENT AND TERM OF OFFICE OF EXECUTIVE COMMITTEE. The
Board of Directors may appoint an Executive Committee, which shall consist
of two (2) or more Directors.
Section 2. VACANCIES IN EXECUTIVE COMMITTEE. Vacancies occurring in
the Executive Committee from any cause may be filled by the Board of
Directors.
Section 3. EXECUTIVE COMMITTEE TO REPORT TO BOARD. All action by the
Executive Committee shall be reported to the Board of Directors at its
Meeting next succeeding such action.
Section 4. PROCEDURE OF EXECUTIVE COMMITTEE. The Executive Committee
shall fix its own rules of procedure not inconsistent with these By-Laws or
with any directions of the Board of Directors. It shall meet at such times
and places and upon such notice as shall be provided by such rules or by
resolution of the Board of Directors. The presence of a majority shall
constitute a quorum for the transaction of business, and in every case the
affirmative vote of a majority of the members of the Committee present shall
be necessary for the taking of any action.
Section 5. POWERS OF EXECUTIVE COMMITTEE. During the intervals
between the Meetings of the Board of Directors the Executive Committee,
except as limited by law or by specific directions of the Board of
Directors, shall possess and may exercise all the powers of the Board of
Directors in the management and direction of the business and conduct of the
affairs of the Corporation. Notwithstanding the foregoing, the Executive
Committee shall not have the power to elect or remove Trustees, increase or
decrease the number of Trustees, elect or remove any officer, declare
dividends, issue shares or recommend to shareholders any action requiring
shareholder approval.
Section 6. OTHER COMMITTEES. From time to time the Board of Directors
may appoint any other Committee or Committees which shall have such powers
as shall be specified in the resolution of appointment and may be delegated
by law.
Section 7. COMPENSATION. The members of any duly appointed Committee
shall receive such compensation as from time to time may be fixed by the
Board of Directors and shall be entitled to reimbursement of expenses
incurred in connection with service on any such Committee.
Section 8. ACTION BY UNANIMOUS WRITTEN CONSENT OF EXECUTIVE COMMITTEE
OR OTHER COMMITTEES. Any action required or permitted to be taken at any
meeting of the Executive Committee or any other duly appointed Committee may
be taken without a meeting if written consent to such action is signed by
all Members of such Committee and such written consent is filed with the
minutes of the proceedings of such Committee.
Section 9. ADVISORY BOARD. The Directors may appoint an Advisory
Board to consist in the first instance of not less than three (3) members.
Members of such Advisory Board shall not be Directors or Officers and need
not be Shareholders. Members of the Advisory Board shall hold office for
such period as the Directors may by resolution provide. Any Member of such
Board may resign therefrom by written instrument signed by him which shall
take effect upon delivery to the Directors. The Advisory Board shall have
no legal powers and shall not perform functions of Directors in any manner,
said Board being intended to act merely in an advisory capacity. Such
Advisory Board shall meet at such times and upon such notice as the Board of
Directors may by resolution provide. The compensation of the Members of the
Advisory Board, if any, shall be determined by the Board of Directors.
ARTICLE IV
OFFICERS
Section 1. GENERAL PROVISIONS. The Officers of the Corporation shall
be a President, one or more Vice Presidents, a Treasurer and a Secretary.
The Board of Directors may elect or appoint a Chairman and other Officers or
agents, including one or more Assistant Vice Presidents, one or more
Assistant Secretaries and one or more Assistant Treasurers. The same person
may hold any two offices except those of President and Vice President.
Section 2. ELECTION, TERM OF OFFICE AND QUALIFICATIONS. The Officers
shall be elected annually by the Board of Directors at its Annual Meeting.
Each Officer shall hold office for one year and until the election and
qualification of his successor. Any vacancy in any of the offices may be
filled for the unexpired portion of the term by the Board of Directors at
any Regular or Special Meeting of the Board. The Board of Directors may
elect or appoint additional Officers or agents at any Regular or Special
Meeting of the Board.
Section 3. REMOVAL. Any Officer elected by the Board of Directors may
be removed with or without cause at any time by the Board of Directors. Any
other employee of the Corporation may be removed or dismissed at any time by
the President.
Section 4. RESIGNATIONS. Any Officer may resign at any time by giving
written notice to the Board of Directors. Any such resignation shall take
effect at the time specified therein or, if no time is specified, at the
time of receipt. Unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 5. VACANCIES. A vacancy in any Office because of death,
resignation, removal, disqualification or any other cause shall be filled
for the unexpired portion of the term in the manner prescribed in these By-
Laws for regular election or appointment to such Office.
Section 6. CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the
Board of Directors, if there be a Chairman, shall preside at the meetings of
Shareholders and of the Board of Directors. He shall receive such
information and reports as he may request from the Officers of the
Corporation. He shall counsel and advise the President.
Section 7. PRESIDENT. The President of the Corporation shall be the
chief executive officer of the Corporation. Unless other provisions are
made therefor by the Board or Executive Committee, the President, without
limitation, shall employ and define the duties of all employees of the
Corporation, shall have the power to discharge any such employees, shall
exercise general supervision over the affairs of the Corporation and shall
have the power to sign, in the name of and on behalf of the Corporation,
powers of attorney, proxies, waivers of notice of meeting, consents and
other instruments relating to securities or other property owned by the
Corporation, and may, in the name of and on behalf of the Corporation, take
all such action as the President may deem advisable in entering into
agreements to purchase securities or other property in the ordinary course
of business, and to sign representation letters in the course of buying
securities or other property and shall perform such other duties as may be
assigned to him from time to time by the Board of Directors. In the absence
of the Chairman of the Board of Directors, the President or an officer or
Director appointed by the President, shall preside at all meetings of
Shareholders.
Section 8. VICE PRESIDENT. The Vice President (or if more than one,
the senior Vice President) in the absence of the President shall perform all
duties and may exercise any of the powers of the President subject to the
control of the Board. Each Vice President shall have the power, without
limitation, to sign, in the name of and on behalf of the Corporation, powers
of attorney, proxies, waivers of notice of meeting, consents and other
instruments relating to securities or other property owned by the
Corporation, and may, in the name of and on behalf of the Corporation, take
all such action as the Vice President may deem advisable in entering into
agreements to purchase securities or other property in the ordinary course
of business, and to sign representation letters in the course of buying
securities or other property shall perform such other duties as may be
assigned to him from time to time by the Board of Directors, the Executive
Committee, or the President.
Section 9. SECRETARY. The Secretary shall keep or cause to be kept in
books provided for the purpose the Minutes of the Meetings of the
Shareholders, and of the Board of Directors; shall see that all Notices are
duly given in accordance with the provisions of these By-Laws and as
required by Law; shall be custodian of the records of the Corporation; shall
keep directly or through a transfer agent a register of the post office
address of each Shareholder, and make all proper changes in such register,
retaining and filing his authority for such entries; shall see that the
books, reports, statements, certificates and all other documents and records
required by law are properly kept and filed; and in general shall perform
all duties incident to the Office of Secretary and such other duties as may,
from time to time, be assigned to him by the Board of Directors, the
Executive Committee, or the President.
Section 10. TREASURER. The Treasurer shall have supervision of the
custody of all funds and securities of the Corporation, subject to
applicable law and the determination from time to time of the Board of
Directors. He shall perform such other duties as may be from time to time
assigned to him by the Board of Directors, the Executive Committee, or the
President.
Section 11. ASSISTANT VICE PRESIDENT. The Assistant Vice President or
Vice Presidents of the Corporation shall have such authority and perform
such duties as may be assigned to them by the Board of Directors, the
Executive Committee, or the President of the Corporation.
Section 12. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The
Assistant Secretary or Secretaries and the Assistant Treasurer or Treasurers
shall perform the duties of the Secretary and of the Treasurer respectively,
in the absence of those Officers and shall have such further powers and
perform such other duties as may be assigned to them respectively by the
Board of Directors or the Executive Committee or by the President.
Section 13. SALARIES. The salaries of the Officers shall be fixed
from time to time by the Board of Directors. No Officer shall be prevented
from receiving such salary by reason of the fact that he is also a Director
of the Corporation.
ARTICLE V
SHARES AND THEIR TRANSFER
Section 1. CERTIFICATES. If issued, share certificates shall be
signed by the Chairman, the President, or any Vice President and
countersigned by the Treasurer or Secretary or any Assistant Treasurer or
Assistant Secretary. The signatures may be either manual or facsimile
signatures and the seal may be either facsimile or any other form of Seal.
Certificates for shares for which the Corporation has appointed a Transfer
Agent and Registrar shall not be valid unless countersigned by such Transfer
Agent and registered by such Registrar. In case any Officer who has signed
any certificate ceases to be an Officer of the Corporation before the
certificate is issued, the certificate may nevertheless be issued by the
Corporation with the same effect as if the Officer had not ceased to be such
Officer as of the date of its issuance. Share certificates shall be in such
form not inconsistent with law and these By-Laws as may be determined by the
Board of Directors.
Section 2. TRANSFER OF SHARES. Shares shall be transferable on the
books of the Corporation by the holder thereof in person or by duly
authorized attorney upon surrender of the certificate representing the
shares to be transferred properly endorsed.
Section 3. CLOSING OF TRANSFER BOOKS AND FIXING RECORD DATE. The
Board of Directors may fix in advance a date as the record date for the
purpose of determining Shareholders entitled to notice of or to vote at any
Meeting of Shareholders or Shareholders to receive payment of any dividend.
Such date shall in any case not be more than 90 days and in case of a
Meeting of Shareholders not less than l0 days prior to the date on which the
particular action requiring such determination of Shareholders is to be
taken. Only Shareholders of record on the record date shall be entitled to
notice of and to vote at such meeting or to receive such dividends or
rights, as the case may be.
Section 4. LOST, DESTROYED OR MUTILATED CERTIFICATES. In case any
Share certificate is lost, mutilated or destroyed the Board of Directors may
issue a new certificate in place thereof upon indemnity to the relevant
Series or Class against loss and upon such other terms and conditions as the
Board may deem advisable.
Section 5. TRANSFER AGENT AND REGISTRAR: REGULATIONS. The Board of
Directors shall have power and authority to make all such rules and
regulations as they may deem expedient concerning the issuance, transfer and
registration of Share certificates and may appoint a Transfer Agent and/or
Registrar of Share certificates of each Series or Class.
ARTICLE VI
AGREEMENTS, CHECKS, DRAFTS, ENDORSEMENTS, ETC.
Section 1. AGREEMENTS, ETC. The Board of Directors or the Executive
Committee may authorize any Officer or Officers, or Agent or Agents of the
Corporation to enter into any Agreement or execute and deliver any
instrument in the name of the Corporation and such authority may be general
or confined to specific instances; and, unless so authorized by the Board of
Directors or by the Executive Committee or by these By-Laws, no Officer,
Agent or Employee shall have any power or authority to bind the Corporation
by any Agreement or engagement or to pledge its credit or to render it
liable for any purpose or for any amount.
Section 2. CHECKS, DRAFTS, ETC. All checks, drafts, or orders for the
payment of money, notes and other evidences of indebtedness shall be signed
by such Officer or Officers, Employee or Employees, or Agent or Agents as
shall be from time to time designated by the Board of Directors or the
Executive Committee, or as may be specified in or pursuant to the agreement
between the Corporation on behalf of any Series or Class and the Bank or
Trust Company appointed as custodian.
Section 3. ENDORSEMENTS, ASSIGNMENTS AND TRANSFER OF SECURITIES. All
endorsements, assignments, stock powers or other instruments of transfer of
securities standing in the name of the Corporation or its nominee or
directions for the transfer of securities belonging to the Corporation shall
be made by such Officer or Officers, Employee or Employees, or Agent or
Agents as may be authorized by the Board of Directors or the Executive
Committee.
ARTICLE VII
BOOKS AND RECORDS
Section 1. LOCATION. The books and records of the Corporation,
including the Stock ledger or ledgers, may be kept in or outside the State
of Maryland at such office or agency of the Corporation as may be from time
to time determined by the Board of Directors.
ARTICLE VIII
FISCAL YEAR
Section 1. FISCAL YEAR. The Fiscal Year of the Corporation shall be
designated from time to time by the Board of Directors.
ARTICLE IX
INDEMNIFICATION
Section 1. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The Corporation
shall indemnify its directors to the fullest extent that indemnification of
directors is permitted by the Maryland General Corporation Law. The
Corporation shall indemnify its officers to the same extent as its directors
and to such further extent as is consistent with law. The Corporation shall
indemnify its directors and officers who while serving as directors or
officers also serve at the request of the Corporation as a director,
officer, partner, trustee, employee, agent or fiduciary of another
corporation, partnership, joint venture, trust, other enterprise or employee
benefit plan to the fullest extent consistent with law. The indemnification
and other rights provided by this Article shall continue as to a person who
has ceased to be a director of officer and shall inure to the benefit of the
heirs, executors and administrators of such a person. This Article shall
not protect any such person against any liability to the Corporation or any
Shareholder thereof to which such person would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office ("disabling
conduct").
Section 2. ADVANCES. Any current or former director or officer of the
Corporation seeking indemnification within the scope of this Article shall
be entitled to advances from the Corporation for payment of the reasonable
expenses incurred by him in connection with the matter as to which he is
seeking indemnification in the manner and to the fullest extent permissible
under the Maryland General Corporation Law. The person seeking
indemnification shall provide to the Corporation a written affirmation of
his good faith belief that the standard of conduct necessary for
indemnification by the Corporation has been met and a written undertaking to
repay any such advance if it should ultimately be determined that the
standard of conduct has not been met. In addition, at least one of the
following additional conditions shall be met: (a) the person seeking
indemnification shall provide security in form and amount acceptable to the
Corporation for his undertaking; (b) the Corporation is insured against
losses arising by reason of the advance, or (c) a majority of a quorum of
directors of the Corporation who are neither 'interested persons' as defined
in Section 2(a)(19) of the Investment Company Act of 1940, as amended, nor
parties to the proceeding ("disinterested non-party directors"), or
independent legal counsel, in a written opinion, shall have determined,
based on a review of facts readily available to the Corporation at the time
the advance is proposed to be made, that there is reason to believe that the
person seeking indemnification will ultimately be found to be entitled to
indemnification.
Section 3. PROCEDURE. At the request of any person claiming
indemnification under this Article, the Board of Directors shall determine,
or cause to be determined, in a manner consistent with the Maryland General
Corporation Law, whether the standards required by this Article have been
met. Indemnification shall be made only following: (a) a final decision on
the merits by a court or other body before whom the proceeding was brought
that the person to be indemnified was not liable by reason of disabling
conduct or (b) in the absence of such a decision, a reasonable
determination, based upon a review of the facts, that the person to be
indemnified was not liable by reason of disabling conduct by (i) the vote of
a majority of a quorum of disinterested non-party directors or (ii) an
independent legal counsel in a written opinion.
Section 4. INDEMNIFICATION OF EMPLOYEES AND AGENTS. Employees and
agents who are not officers or directors of the Corporation may be
indemnified, and reasonable expenses may be advanced to such employees or
agents, as may be provided by action of the Board of Directors or by
contract, subject to any limitations imposed by applicable law.
Section 5. OTHER RIGHTS. The Board of Directors may make further
provisions consistent with law for indemnification and advancement of
expenses to directors, officers, employees and agents by resolution,
agreement or otherwise. The indemnification provided by this Article shall
not be deemed exclusive of any other right, with respect to indemnification
or otherwise, to which those seeking indemnification may be entitled under
any insurance or other agreement or resolution of Shareholders or
disinterested non-party directors or otherwise.
Section 6. AMENDMENTS. References in this Article are to the Maryland
General Corporation Law and to the Investment Company Act of 1940 as from
time to time amended. No amendment of these By-Laws shall affect any right
of any person under this Article based on any event, omission or proceeding
prior to the amendment.
ARTICLE X
AMENDMENTS
Section 1. The Board of Directors shall have the power to alter, amend
EXHIBIT 5 UNDER FORM N-1A
EXHIBIT 10 UNDER ITEM 601/REG. S-K
MARKETVEST FUNDS, INC.
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, Inc., a Maryland corporation having its principal place of
business in Pittsburgh, Pennsylvania (the "Corporation").
WHEREAS the Corporation 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 of rendering investment
advisory and management services.
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. The Corporation hereby appoints Adviser as Investment Adviser for
each of the portfolios ("Funds") of the Corporation which executes an exhibit
to this Contract, and Adviser accepts the appointments. Subject to the
supervision of the Directors of the Corporation, 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 Directors.
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 Articles of Incorporation and By-
Laws of the Corporation 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 Corporation expenses, including, without limitation,
the expenses of organizing the Corporation and continuing its existence; fees
and expenses of Directors and officers of the Corporation; 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 Corporation, 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 Directors 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 Corporation 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 Corporation to indemnify its officers and
Directors 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: (a) such continuation shall be
specifically approved at least annually by the vote of a majority of the
Directors of the Corporation, including a majority of the Directors 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 Corporation.
If a Fund is added after the first approval by the Directors 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 Directors 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 Directors of the Corporation or by a vote of the shareholders of that Fund
on sixty (60) days' written notice to Adviser.
9. The Corporation shall deliver to the Adviser, from time-to-time as
available, copies of the Corporation's Form N-8A, N-1A, prospectus, statement
of additional information, Board resolutions approving this Contract, Articles
of Incorporation, 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 Directors 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
Directors, 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 Corporation recognizes that the Adviser may serve in an
investment advisory capacity with respect to entities in addition to the Fund,
and the Corporation 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 Corporation 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 Directors of the Corporation, including a majority of the Directors who
are not parties to this Contract or interested persons of any such party to
this Contract (other than as Directors of the Corporation) 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 Corporation) are subject to strict regulatory
oversight. The Adviser agrees to submit any proposed sales literature for the
Corporation (or any Fund) or for itself or its affiliates which mentions the
Corporation (or any Fund) to the Corporation'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 Corporation (or any Fund). The Corporation
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
Corporation.
16. This Contract shall be construed in accordance with and governed by
the laws of the Commonwealth of Pennsylvania.
17. This Contract will become binding on the parties hereto upon their
execution of the attached exhibits to this Contract.
EXHIBIT A
to the
Investment Advisory Contract
MARKETVEST EQUITY FUND
The following provisions are hereby incorporated and made part of the
Investment Advisory Contract dated January 1, 1996 between Marketvest Funds,
Inc. and Dauphin Deposit Bank and Trust Company.
For all services rendered by Adviser hereunder, the above-named Fund of
the Corporation shall pay to Adviser and Adviser agrees to accept as full
compensation for all services rendered hereunder, an annual investment
advisory fee equal to 1.00 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 1.00 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, Inc. and
Dauphin Deposit Bank and Trust Company, Marketvest Funds, Inc. 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
By:
Secretary Executive Vice President
Attest: MARKETVEST FUNDS, INC.
By:
Assistant Secretary Vice President
EXHIBIT B
to the
Investment Advisory Contract
MARKETVEST INTERMEDIATE U.S. GOVERNMENT BOND FUND
The following provisions are hereby incorporated and made part of the
Investment Advisory Contract dated January 1, 1996 between Marketvest Funds,
Inc. and Dauphin Deposit Bank and Trust Company.
For all services rendered by Adviser hereunder, the above-named Fund of
the Corporation 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, Inc. and
Dauphin Deposit Bank and Trust Company, Marketvest Funds, Inc. 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
By:
Secretary Executive Vice President
Attest: MARKETVEST FUNDS, INC.
By:
Secretary Vice President
EXHIBIT C
to the
Investment Advisory Contract
MARKETVEST SHORT-TERM BOND FUND
The following provisions are hereby incorporated and made part of the
Investment Advisory Contract dated January 1, 1996 between Marketvest Funds,
Inc. and Dauphin Deposit Bank and Trust Company.
For all services rendered by Adviser hereunder, the above-named Fund of
the Corporation 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, Inc. and
Dauphin Deposit Bank and Trust Company, Marketvest Funds, Inc. 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
By:
Secretary Executive Vice President
Attest: MARKETVEST FUNDS, INC.
By:
EXHIBIT 6 UNDER FORM N-1A
EXHIBIT 1 UNDER ITEM 601/REG. S-K
MARKETVEST FUNDS, INC.
DISTRIBUTOR'S CONTRACT
AGREEMENT made this 1st day of January, 1996 by and between Marketvest
Funds, Inc. (the "Corporation"), a Maryland corporation, 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 Corporation hereby appoints ESI as its agent to sell and distribute
shares of the Corporation 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 Corporation.
ESI hereby accepts such appointment and agrees to provide such other
services for the Corporation, if any, and accept such compensation from
the Corporation, 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 Corporation it is in its best interest to do so.
3. Neither ESI nor any other person is authorized by the Corporation 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 Corporation. 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 Corporation. ESI agrees
that in offering or selling Shares as agent of the Corporation, 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 Corporation copies of all sales literature before
using the same and will not use such sales literature if disapproved by
the Corporation.
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 Directors of the Corporation
including a majority of the members of the Board of Directors of the
Corporation who are not interested persons of the Corporation and have
no direct or indirect financial interest in the operation of any
Distribution Plan relating to the Corporation or in any related
documents to such Plan ("Disinterested Directors") cast in person at a
meeting called for that purpose. If a Class is added after the first
annual approval by the Directors 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 Directors 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 Directors 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
Corporation.
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 Corporation 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 Directors of the Corporation including a majority of
the Disinterested Directors of the Corporation 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 Corporation 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 Corporation 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
Corporation pursuant to the foregoing paragraph, ESI shall
promptly notify the Corporation in writing of the institution of
such action and the Corporation shall assume the defense of such
action, including the employment of counsel selected by the
Corporation 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 Corporation in connection with the defense of such action
or the Corporation 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 Corporation. Anything in this
paragraph to the contrary notwithstanding, the Corporation shall
not be liable for any settlement of any such claim of action
effected without its written consent. The Corporation agrees
promptly to notify ESI of the commencement of any litigation or
proceedings against the Corporation or any of its officers or
Directors 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 Corporation, each of
its Directors, each of its officers who have signed the
Registration Statement and each other person, if any, who controls
the Corporation 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 thereof in reliance upon, and in
conformity with, information furnished to the Corporation 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
Corporation or any other person so indemnified based on the
Registration Statement or any Prospectus, SAI, or any amendment or
supplement thereof, and with respect to which indemnity may be
sought against ESI, ESI shall have the rights and duties given to
the Corporation, and the Corporation 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 Corporation 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 Directors, officers, ESI and controlling persons of
the Corporation by the Corporation pursuant to this Agreement, the
Corporation 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 Corporation 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 Directors, 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 Corporation 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, Director, ESI or controlling person of the Corporation
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 Corporation is insured against losses
arising by reason of any lawful advances; or (iii) a majority of a
quorum of non-party Disinterested Directors 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. 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.
12. This Agreement will become binding on the parties hereto upon the
execution of the attached exhibits to the Agreement.
Exhibit A
to the
Distributor's Contract
MARKETVEST FUNDS, INC.
MARKETVEST EQUITY FUND
The following provisions are hereby incorporated and made part of the
Distributor's Contract dated January 1, 1996, between Marketvest Funds,
Inc. and Edgewood Services, Inc. ("ESI") with respect to the Class of
shares set forth above.
1. The Corporation 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 Corporation.
2. During the term of this Agreement, the Corporation 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 Corporation,
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 Directors of the Corporation
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,
Inc. and ESI, Marketvest Funds, Inc. executes and delivers this Exhibit
on behalf of the Marketvest 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, 1996.
ATTEST: MARKETVEST FUNDS, INC.
By:
Secretary Vice President
(SEAL)
ATTEST: EDGEWOOD SERVICES, INC.
By:
Secretary Executive Vice President
(SEAL)
Exhibit B
to the
Distributor's Contract
MARKETVEST FUNDS, INC.
MARKETVEST INTERMEDIATE U.S. GOVERNMENT BOND FUND
The following provisions are hereby incorporated and made part of the
Distributor's Contract dated January 1, 1996, between Marketvest Funds,
Inc. and Edgewood Services, Inc. ("ESI") with respect to the Class of
shares set forth above.
1. The Corporation 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 Corporation.
2. During the term of this Agreement, the Corporation 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 Corporation,
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 Directors of the Corporation
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,
Inc. and ESI, Marketvest Funds, Inc. executes and delivers this Exhibit
on behalf of the Marketvest Intermediate U.S. Government 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, INC.
By:
Secretary Vice President
(SEAL)
ATTEST: EDGEWOOD SERVICES, INC.
By:
Secretary Executive Vice President
(SEAL)
Exhibit C
to the
Distributor's Contract
MARKETVEST FUNDS, INC.
MARKETVEST SHORT-TERM BOND FUND
The following provisions are hereby incorporated and made part of the
Distributor's Contract dated January 1, 1996, between Marketvest Funds,
Inc. and Edgewood Services, Inc. ("ESI") with respect to the Class of
shares set forth above.
1. The Corporation 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 Corporation.
2. During the term of this Agreement, the Corporation 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 Corporation,
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 Directors of the Corporation
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,
Inc. and ESI, Marketvest Funds, Inc. executes and delivers this Exhibit
on behalf of the Marketvest Short-Term 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, INC.
By:
Secretary Vice President
(SEAL)
ATTEST: EDGEWOOD SERVICES, INC.
By:
Secretary Executive Vice President
EXHIBIT 8 UNDER FORM N-1A
EXHIBIT 10 UNDER ITEM 601/REG. S-K
CUSTODIAN CONTRACT
BETWEEN
MARKETVEST FUNDS, INC.,
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
CUSTODIAN CONTRACT
This Contract between Marketvest Funds, Inc., (the "Corporation"), a
Maryland corporation, on behalf of the portfolios (hereinafter collectively
called the "Funds" and individually referred to as a "Fund") of the
Corporation, organized and existing under the laws of the State of Maryland,
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 Corporation hereby employs the Custodian as the custodian of the assets
of each of the Funds of the Corporation. 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 Corporation 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 capital stock 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 Corporation 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 Corporation 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 Corporation;
(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 Corporation, (b)
certificated securities of a description specified by the Corporation,
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
Corporation, 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 Corporation 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 Corporation 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 Executive Committee of the Corporation on behalf of a Fund signed
by an officer of the Corporation 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 Corporation 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 Directors ("Board")
of the Corporation. 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 Corporation, the
Custodian shall furnish the Corporation, 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 Corporation.
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 Corporation 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
Corporation 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 Corporation 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 Corporation. The Custodian will have no duty or
responsibility in connection therewith, other than to provide the
Corporation with such information or data as may be necessary to assist
the Corporation in arranging for the timely delivery to the Custodian
of the income to which each Fund is properly entitled.
(2) The Corporation 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
Corporation 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 Corporation has furnished the necessary claim
documentation to the Custodian, the Custodian will then initiate a
claim on behalf of the Corporation. The Custodian will furnish the
Corporation 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 Corporation 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
Corporation 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 Corporation;
(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 Corporation on behalf of a Fund signed by an officer
of the Corporation 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
Corporation 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
Corporation/Articles of Incorporation and any applicable votes of the Board
of the Corporation 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 Corporation at its request. Upon request, the Custodian shall
furnish the Corporation 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 Corporation 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 Corporation 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 Corporation 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
Corporation, 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 Corporation, 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 Corporation 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 Corporation 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 Corporation 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 Corporation and the investment adviser of
the Corporation 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 Corporation and the investment
adviser of the Corporation 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 Corporation or the investment adviser of the Corporation desires to
take action with respect to any tender offer, exchange offer or any other
similar transaction, the Corporation 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 Corporation.
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 Corporation 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 Corporation 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 Corporation:
(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
Corporation 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 Corporation.
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 Corporation 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 Corporation/Articles of Incorporation 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 Corporation by Custodian Regarding Cash Movement. The
Custodian will provide timely notification to the Corporation of any
receipt of cash, income or payments to the Corporation and the release of
cash or payment by the Corporation.
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 Corporation 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 Corporation 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 Corporation or destroyed in accordance with Proper Instructions. All such
records shall be the property of the Corporation 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 Corporation and employees and
agents of the SEC. In the event of termination of this Contract, the
Custodian will deliver all such records to the Corporation, to a successor
Custodian, or to such other person as the Corporation may direct. The
Custodian shall supply daily to the Corporation a tabulation of securities
owned by a Fund and held by the Custodian and shall, when requested to do so
by the Corporation and for such compensation as shall be agreed upon between
the Corporation and the Custodian, include certificate numbers in such
tabulations. In addition, the Custodian shall electronically transmit daily
to the Corporation 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 Corporation 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 Corporation by Independent Public Accountants.
The Custodian shall provide the Corporation, at such times as the
Corporation 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 Corporation, 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
Corporation 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 Corporation) 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. The Custodian shall be kept indemnified by the Corporation 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 Corporation may
be asked to indemnify or save the Custodian harmless, the Corporation 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 Corporation promptly concerning any
situation which presents or appears likely to present the probability of such
a claim for indemnification. The Corporation 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 Corporation so elects it will so
notify the Custodian and thereupon the Corporation 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 Custodian shall in no case confess any claim or make any
compromise in any case in which the Corporation will be asked to indemnify the
Custodian except with the Corporation'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 Corporation.
If the Corporation 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 Corporation, 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.
The Corporation 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 Corporation 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 Corporation or the Fund's investment adviser. Should the
Corporation 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 Corporation 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
Corporation 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 Corporation 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 Corporation 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 Corporation shall not amend or terminate
this Contract in contravention of any applicable federal or state regulations,
or any provision of the Articles of Incorporation, and further provided, that
the Corporation 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 Corporation 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
Corporation, 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
Corporation, 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 Corporation 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
Corporation 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 Articles of Incorporation. 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 Corporation 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 Trust and Financial
Services, or to such other address as the Corporation 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.
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, INC.
By
- ---------------------
Typed Name; Typed Name:
Secretary Title:
ATTEST: DAUPHIN DEPOSIT BANK AND TRUST
COMPANY
By
- -------------------------
(Assistant) Secretary Typed Name:
Exhibit 9 (i) under Form N-1A
Exhibit 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 "Corporation"), on behalf of the portfolios
(individually referred to herein as a "Fund" and collectively as "Funds") of
the Corporation, 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 Corporation 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 Corporation 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 Corporation 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 Corporation 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 Corporation 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 Corporation 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 Corporation 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 Corporation's Board of
Directors ("Board"), the Company will assist the Corporation with regard to
fund accounting for the Corporation, 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 40 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 Corporation, 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 Corporation
are the property of the Corporation and further agrees to surrender
promptly to the Corporation such records upon the Corporation'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
Corporation.
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 Directors of
the Corporation; 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 Corporation, 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 Corporation 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 Corporation, 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
Corporation 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 Corporation, 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 Corporation, 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 Corporation 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 Corporation, 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
Corporation 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 CORPORATION.
A. Compliance
As required by law the Corporation 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 Corporation 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
Corporation and shall bear the seal of the Corporation or facsimile
thereof; and notwithstanding the death, resignation or removal of any
officer of the Corporation 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
Corporation.
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 Corporation 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 Corporation 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 Corporation
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 Corporation 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 Corporation 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 Corporation
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 Corporation 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 Corporation subcontract for
the performance hereof with an Agent selected by the Corporation, other
than BFDS or a provider of services selected by Company, as described
in (2) above; provided, however, that the Company have no more or less
responsibility or liability to the Corporation or any of the Funds on
account of any action or omissions of any Agent so employed than any
such Agent has to the Company.
SECTION THREE: CUSTODY SERVICES PROCUREMENT.
ARTICLE 9. APPOINTMENT.
The Corporation 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 Corporation as
Custodian of the Corporation'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 Corporation, with the Corporation 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 Corporation (i) written reports on the
activities and services of the Custodians; (ii) the nature and amount
of disbursement made on account of the Corporation 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 Corporation 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 Corporation
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 Corporation 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 Corporation 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 Corporation shall file with the Company the following documents:
(1) A copy of the Charter and By-Laws of the Corporation and all
amendments thereto;
(2) A copy of the resolution of the Board of the Corporation
authorizing this Agreement;
(3) Specimens of all forms of outstanding Share certificates of the
Corporation or the Funds in the forms approved by the Board of the
Corporation with a certificate of the Secretary of the Corporation
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 Corporation 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 Corporation;
(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 Corporation that:
(1) It is a business trust duly organized and existing and in good
standing under the laws of the State of Pennsylvania.
(2) It is duly qualified to carry on its business in the State of
Delaware.
(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 Corporation
The Corporation 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 Corporation 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
Corporation) 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 Corporation
The Company shall not be responsible for and the Corporation 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 Corporation 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 Corporation 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
Corporation.
(3) The reliance on, or the carrying out by the Company or its agents
or subcontractors of Proper Instructions of the Corporation 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 Corporation 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
Corporation 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 Corporation 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 Corporation exercise its
rights to terminate, all out-of-pocket expenses associated with the movement
of records and materials will be borne by the Corporation 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
Corporation 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 Corporation 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 Corporation 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 DIRECTORS AND SHAREHOLDERS OF
THE CORPORATION.
The execution and delivery of this Agreement have been authorized by the
Directors of the Corporation and signed by an authorized officer of the
Corporation, acting as such, and neither such authorization by such Directors
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 Directors or Shareholders of the Corporation, but bind only the
appropriate property of the Fund, or Class, as provided in the Articles of
Incorporation.
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 Corporation 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 Corporation shall be appointed by the
Corporation, the Company shall upon termination of this Agreement deliver to
such successor agent at the office of the Company all properties of the
Corporation 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: By:
-
Jeannette Fisher-Garber James J. Dolan
Secretary President
ATTEST: MARKETVEST FUNDS, INC.
By: By:
Name: Name:
Its: Secretary Its: Vice President
EXHIBIT 1
01/01/96 MARKETVEST FUNDS, INC.
01/01/96 Marketvest Equity Fund
01/01/96 Marketvest Intermediate U.S. Government Bond Fund
01/01/96 Marketvest Short-Term Bond Fund
FEDERATED SERVICES COMPANY provides the following services:
Fund Accounting
Exhibit 9 (ii) under 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
SERVICES COMPANY on behalf of itself and its subsidiaries ("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 (as hereafter defined) of
mutual funds for which Federated or its affiliates act as transfer agent; and
administrator, distributor or adviser ("the Funds");
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 Certificate of Authorized Persons. Institution shall
provide a certificate signed by two authorized officers of Institution,
setting forth the name and specimen signature of each Authorized Person (the
"Certificate"). Institution shall promptly notify Federated if any such
present Authorized Person ceases to be an Authorized Person and shall send to
Federated a new Certificate in similar form in the event that other or
additional Authorized Persons are elected or appointed. Until Federated
receives any such new Certificate, Federated may rely upon Instructions
received from or reasonably believed to be received from the present
Authorized Persons as set forth in the Certificate or in any subsequently
issued Certificate.
SECTION 2.3 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 2.4 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 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 2.5 Reconciling to Fund Records. The book entry records of the
shareholder recordkeeping agent for each Fund shall be determinative with
respect to each Account. 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 2.6 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 under the Transfer Agency Agreement 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 corporation duly organized in its state of
incorporation and has the power and authority to conduct its business.
Institution is a bank chartered under the laws of the Commonwealth of
Pennsylvania. 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 such authorization or notification will inform the Shareholder
of all material facts relating to Federated's electronic
communication and recordkeeping systems, including (i) that
Institution is the agent of the Shareholder and that errors by
Institution in providing Instructions or in the use of Federated's
electronic communication and recordkeeping systems are the
responsibility of Institution, and not the Funds or Federated; (ii)
that only Institution is liable to the Shareholder for actions
taken or initiated by Institution; and (iii) that Institution, the
Funds, and Federated are not liable to the Shareholder for any loss
resulting from an erroneous transaction if the Shareholder does not
challenge the transaction within 30 days after a confirmation of
the transaction is sent to the Shareholder;
4.3.3 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;
4.3.4 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
4.3.5 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 SERVICES COMPANY AND ITS
SUBSIDIARY FEDERATED SERVICES COMPANY
SECTION 5.1 Organization and Authority. Federated Services Company
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 Services Company of this
Agreement has been duly authorized by all necessary corporate action of
Federated Services Company. This Agreement, when executed and delivered,
will constitute the legal, valid and binding obligation of Federated Services
Company, enforceable against it in accordance with its terms.
SECTION 5.2 Proper Registration. Federated Services Company 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 Services Company warrant
and represent that they have adequate facilities, equipment, procedures,
controls and skilled personnel to responsibly perform their duties and
obligations hereunder.
SECTION 5.4 Confidentiality. Federated Services Company 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 Institution's action or inaction relating to any duties, functions,
procedures or responsibilities undertaken by Institution pursuant to this
Agreement or otherwise, including that which may arise out of the malfunction
of equipment, systems, programs and telephone lines; (f) the failure by
Institution to obtain written authorization from a Shareholder to facilitate
any transaction through Federated's electronic communication and
recordkeeping systems; and (g) Federated's reasonable acceptance of and
reliance on any Instruction without supporting documentation. Institution
shall make all payments hereunder promptly upon presentation by an
Indemnified Fund Party of an invoice therefor, which invoice relates to 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. 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. In no event shall Institution be
liable for demands, damages, liabilities and losses arising out of failure of
its equipment or force majeure.
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,
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 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 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 Institution Parties, Federated shall
provide for an appropriate defense against 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 Federated 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.
SECTION 6.3 Contribution, Cooperation, Good Faith. The parties
recognize that certain circumstances will arise where 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. Federated and 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 of 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 SERVICES COMPANY
By:
Name:
Title:
Attest: By:
Name:
Title:
DAUPHIN DEPOSIT BANK AND TRUST COMPANY
By:
Name:
Title:
Attest: By:
Name:
Title:
SCHEDULE A
CERTIFICATE OF AUTHORIZED INDIVIDUALS
January 1, 1996
NAME, TITLE SIGNATURE, FACSIMILE SIGNATURE
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 Services Company this designation to be effective
as of 1st day of January, 1996.
By:
Name:
Title:
By:
Name:
EXHIBIT 9 (III) UNDER FORM N-1A
EXHIBIT 10 UNDER ITEM 601/REG. S-K
MARKETVEST FUNDS, INC.
ADMINISTRATIVE SERVICES AGREEMENT
This Administrative Services Agreement is made as of this 1st
day of January, 1996, between Marketvest Funds, Inc., a Maryland
corporation (herein called the "Fund"), and Federated
Administrative Services, a Delaware business trust (herein called
"FAS").
WHEREAS, the Fund is a Maryland corporation 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 Directors 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 Articles of
Incorporation (which has already been prepared and filed),
the By-laws and minutes of meetings of Directors 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 Directors 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 Directors; and
(l) consult with the Fund and its Board of Directors 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
Directors or officers of the Fund. The Fund shall be responsible
for all other 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 Directors 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, Director, 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. 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, Inc. (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.
10. 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.
11. 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, Inc.
By:
[Title]
Attest:
Secretary
Federated Administrative Services
By:
[Title]
Attest:
EXHIBIT 10 UNDER FORM N-1A
EXHIBIT 5 UNDER ITEM 601/REG. S-K
FEDERATED ADMINISTRATIVE SERVICES
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
412-288-1900
January 3, 1996
The Board of Directors of
Marketvest Funds, Inc.
Federated Investors Tower
Pittsburgh, PA 15222-3779
Gentlemen:
Marketvest Funds, Inc. ("Corporation") proposes to offer and sell shares of
its common stock in a separate series known as Marketvest Equity Fund,
Marketvest Intermediate U.S. Government Bond Fund, and Marketvest Short-Term
Bond Fund ("Shares") pursuant to the Corporation's registration statement filed
with the Securities and Exchange Commission under the Securities Act of 1933, as
amended.
As counsel I have participated in the preparation and filing of the
Corporation's amended Registration Statement under the Securities Act of 1933
and the Investment Company Act of 1940. Further, I have examined and am familiar
with the provisions of the Corporation's Articles of Incorporation dated October
23, 1995, as amended ("Articles of Incorporation"), its Bylaws and other such
documents and records deemed relevant. I have also reviewed questions of law and
consulted with counsel thereon as deemed necessary or appropriate by me for the
purposes of this opinion.
Based on the foregoing, it is my opinion that:
1. The Corporation is duly organized and validly existing under the laws
of the State of Maryland.
2. The Corporation is authorized to issue 5,000,000,000 shares of common
stock of a par value of .0001 per share.
3. The Shares which are currently being registered by the Registration
Statement referred to above may be legally and validly issued from time to time
in accordance with the Articles of Incorporation upon receipt of consideration
sufficient to comply with the provisions of the Articles of Incorporation and
subject to compliance with the Securities Act of 1933, as amended, the
Investment Company Act of 1940, as amended, and applicable state laws regulating
the sale of securities. Such Shares, when so issued, will be fully paid and non-
assessable by the Corporation.
I hereby consent to the filing of this opinion as an exhibit to the
Corporation's Registration Statement referred to above and to any application or
registration statement filed under the securities laws of the States of the
United States.
The foregoing opinion is limited to the Federal laws of the United States
and the laws of the State of Maryland, and I am expressing no opinion as to the
effect of the laws of any other jurisdiction.
Very truly yours,
/s/ Victor R. Siclari
Victor R. Siclari
Exhibit 13 under Form N-1A
Exhibit 99 under Item 601/Reg. S-K
FEDERATED ADMINISTRATIVE SERVICES
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
(412) 288-1900
December 27, 1995
Marketvest Funds, Inc.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Gentlemen:
Federated Administrative Services agrees to purchase 10,000 shares of
Marketvest Intermediate U.S. Government Bond Fund (a portfolio of Marketvest
Funds, Inc.) at the cost of $10.00 each. These shares are purchased for
investment purposes and Federated Administrative Services has no present
intention of redeeming these shares.
Very truly yours,
/s/ S. Elliott Cohan
S. Elliott Cohan
Senior Vice President and
Assistant Secretary,
Federated Administrative Services
EXHIBIT 15 (I) UNDER FORM N-1A
EXHIBIT 1 UNDER ITEM 601/REG. S-K
MARKETVEST FUNDS, INC.
DISTRIBUTION PLAN
This Distribution Plan ("Plan") is adopted as of January 1, 1996, by
the Board of Directors of Marketvest Funds, Inc. (the "Corporation"), a
Maryland corporation with respect to certain classes of shares
("Classes") of the portfolios of the Corporation (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 Corporation
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 Corporation 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 Directors of the Corporation, and
the Board of Directors 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 Corporation's Board of
Directors; (b) the members of the Board of the Corporation who are not
interested persons of the Corporation and have no direct or indirect
financial interest in the operation of the Corporation's Plan or in any
related documents to the Plan ("Disinterested Directors"), 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 Corporation's Board of Directors and a majority of the
Disinterested Directors, 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 Directors 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 Directors 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 Directors of the Corporation and of the Disinterested
Directors, 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 Directors; 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; or (c) by
ESI on 60 days' notice to the Corporation.
11. While this Plan shall be in effect, the selection and nomination of
Disinterested Directors of the Corporation shall be committed to the
discretion of the Disinterested Directors 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, INC.
MARKETVEST EQUITY FUND
The following provisions are incorporated and made part of the
Distribution Plan dated January 1, 1996 of Marketvest Funds, Inc. with
respect to the Class of Shares set forth above.
This Distribution Plan is adopted by Marketvest Funds, Inc. with
respect to the Class of Shares of the portfolio of the Corporation 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 Equity
Fund held during the month.
Witness the due execution hereof this 1st day of January, 1996.
MARKETVEST FUNDS, INC.
By:/s/ Jeffrey W. Sterling
Vice President
EXHIBIT B
to the
Distribution Plan
MARKETVEST FUNDS, INC.
MARKETVEST INTERMEDIATE U.S. GOVERNMENT BOND FUND
The following provisions are incorporated and made part of the
Distribution Plan dated January 1, 1996 of Marketvest Funds, Inc. with
respect to the Class of Shares set forth above.
This Distribution Plan is adopted by Marketvest Funds, Inc. with
respect to the Class of Shares of the portfolio of the Corporation 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
Intermediate U.S. Government Bond Fund held during the month.
Witness the due execution hereof this 1st day of January, 1996.
MARKETVEST FUNDS, INC.
By:/s/ Jeffrey W. Sterling
Vice President
EXHIBIT C
to the
Distribution Plan
MARKETVEST FUNDS, INC.
MARKETVEST SHORT-TERM BOND FUND
The following provisions are incorporated and made part of the
Distribution Plan dated January 1, 1996 of Marketvest Funds, Inc. with
respect to the Class of Shares set forth above.
This Distribution Plan is adopted by Marketvest Funds, Inc. with
respect to the Class of Shares of the portfolio of the Corporation 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 Short-
Term Bond Fund held during the month.
Witness the due execution hereof this 1st day of January, 1996.
MARKETVEST FUNDS, INC.
By:/s/ Jeffrey W. Sterling
Exhibit 15 (ii) under 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.
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
2
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 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;
3
(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.
13. This Agreement shall be construed in accordance with the Laws of the
Commonwealth of Pennsylvania.
4
[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
By:
------------------------------
President
MARKETVEST FUNDS, INC.
5
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
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
6
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.
Exhibit 19 under Form N-1A
Exhibit 24 under Item 601/Reg. S-K
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
the Secretary and Assistant Secretary of ***SEE BELOW*** and the Deputy
General Counsel of Federated Investors, and each of them, their true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution for them and in their names, place and stead, in any and all
capacities, to sign any and all documents to be filed with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, the Securities
Exchange Act of 1934 and the Investment Company Act of 1940, by means of the
Securities and Exchange Commission's electronic disclosure system known as
EDGAR; and to file the same, with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to sign and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as each of them might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or
their or his substitute or substitutes, may lawfully do or cause to be done by
virtue thereof.
SIGNATURES TITLE DATE
/s/ Edward C. Gonzales Chairman and TreasurerSeptember 27, 1995
Edward C. Gonzales (Chief Executive Officer and
Principal Financial and
Accounting Officer)
and Trustee/Director and
President
/s/ George D. McKeon Trustee/Director September 27, 1995
George D. McKeon
/s/ Gary Mozenter Trustee/Director September 27, 1995
Gary Mozenter
/s/ Richard Seidel Trustee/Director September 27, 1995
Richard Seidel
***MARKETVEST FUNDS/MARKETVEST FUNDS, INC.
Sworn to and subscribed before me this 27th day of September , 1995.
- -- -----
(SEAL)
/s/ Marie M. Hamm
--------------------------------------------
Notarial Seal
Marie M. Hamm, Notary Public
Plum Boro, Allegheny County
My Commission Expires September 16, 1996
